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, 1996 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.)
SUITE 36-5000, 200 PUBLIC SQUARE, CLEVELAND, OHIO 44114-2304
(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. [ ]
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, 1997:
$1,044,538,914.00.
Common Shares outstanding as of February 18, 1997:
50,644,311.
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 20, 1997, 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, 1996, 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 1996 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, 1996, the end of the
Registrant's last fiscal year.
PART I
ITEM 1. BUSINESS
(a) Acquisitions and Dispositions
In March 1996, the Registrant acquired Victor
International Plastics, Ltd., a leading producer of
color masterbatch in the United Kingdom, from Rexam,
Plc. Victor International Plastics serves the
injection and blow molding end markets from its two
operations in Manchester and Coventry, England.
On July 2, 1996, the Registrant announced that it
had completed the sale of the molding operations of
CIMCO, Inc. to InteSys Technologies, Inc. The molding
operations and Compounding Technology, Inc. were part
of CIMCO, Inc., which was acquired by the Registrant in
January 1996. The compounding operations are being
retained by the Registrant and operated under the name
Compounding Technology, Inc. ("CTi"), with plants in
Jurong, Singapore, Corona, California, Charlotte, North
Carolina and Saint Etienne, France.
In November 1996, the Registrant announced its
acquisition of Chase Elastomer's U.S.-based custom
rubber compounding operations. With annual sales of
$22 million, Chase Elastomer has domestic operations in
Dallas and Chicago.
On February 6, 1997, the Registrant announced the
construction of a manufacturing plant to produce color
and additive concentrates in the Pu Dong district of
Shanghai, China. The new plant will operate as Hanna
Wilson Polymer (Shanghai) Limited, a wholly-owned
subsidiary of the Registrant. Previously the Registrant
also had announced an agreement for the formation of
Hanna Su Xing Plastics Compounding (Suzhou) Co., Ltd.,
a joint venture to produce plastics compounds in
Suzhou, China, which is about 60 miles from the color
facility in the Pu Dong district.
On February 11, 1997, the Registrant announced the
sale of its 50 percent interest in IOC Ore Sales
Company, a partnership that serves as sales agent for
the Iron Ore Company of Canada ("IOC"). The sale
marked the end of the Registrant's relationship with
IOC, which extended back to 1949.
(b) See the financial information regarding the
Registrant's business segments set forth at page 29 of
the Registrant's Annual Report distributed to
stockholders for the fiscal year ended December 31,
1996, which page is incorporated herein by this
reference.
(c)
(1) (i)
Formulated Polymers
(a) Processing
The Registrant, through its plastic compounding
businesses, Th. Bergmann, Compounding Technology, Inc.
(CTi), M. A. Hanna Engineered Materials, M. A. Hanna
Thermoplastic Elastomers, MACH-1 and Southwest Chemical
Services business units, engages in the custom
compounding of plastic materials to the specifications
of manufacturers of molded plastic products for
customers located throughout North America, Europe and
Asia. Through its rubber compounding business, M. A.
Hanna Rubber Compounding, Registrant engages in the
custom compounding of rubber materials to the
specifications of manufacturers of rubber products
throughout North America.
Through its color businesses, M. A. Hanna Color,
Hanna Polimeros, Victor International Plastics and
Wilson Color, 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 North
America, Europe, South America and Asia. M. A. Hanna
Color also produces specialty colorants and additives
for the automobile, vinyl building products and textile
industries and M. A. Hanna Color and Wilson Color also
produce specialty colorants and additives for the wire
and cable industry worldwide.
(b) Distribution
Through its M. A. Hanna Resin Distribution
business unit, the Registrant distributes thermoplastic
and thermoset resins and fiberglass materials in North
America for major resin producers.
Through its Cadillac Plastic business unit,
Registrant engages in the worldwide distribution of
engineered 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.
Other Operations
Through its Diversified Polymer Products business
unit, Registrant manufactures molded sponge automotive
parts for customers located throughout the United
States and Canada.
Registrant also engages in the management of
marine terminals.
Net sales and operating revenues from Registrant's
operations outside the polymers industry do not
individually constitute 10 percent or more of
Registrant's consolidated revenues.
(1) (iii) In Registrant's plastic and rubber compounding
businesses the primary raw materials required are
natural and synthetic rubbers, resins, and chemicals,
all of which are available in adequate supply. The
primary raw materials required by Registrant's color
businesses are resins, chemicals, and organic and
inorganic pigments, all of which are available in
adequate supply.
(1) (iv) Registrant's processing business units own
numerous patents and trademarks, which are important in
that they protect the Registrant's corresponding
inventions and product names against infringement by
others and thereby enhance Registrant's position in the
marketplace. The patents vary in duration from 1 year
to 20 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,
price and service to customers being principal factors
affecting competition. Registrant believes it is the
largest independent custom compounder of rubber and a
leading compounder of plastics in North America in
terms of pounds produced.
The manufacture of custom-formulated color and
additive concentrates for the plastics industry is
highly competitive with product quality, price and
service to customers being principal factors affecting
competition. Registrant believes it is one of the
leading producers of custom formulated color and
additive concentrates in the United States and Europe.
The distribution of engineered plastic sheet, rod,
tube, film products, and polymer resins is highly
competitive with product quality, price and service to
customers being principal factors affecting
competition. Registrant believes it is one of the
leading distributors of engineered shapes in the world
and one of the leading distributors of plastic resins
in North America.
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 among the leading suppliers of such
parts 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 6,068 persons at its
consolidated operations (5,695 in 1995).
(d) (1) See information regarding Registrant's
international operations at page 29 of Registrant's
Annual Report distributed to stockholders for the
fiscal year ended December 31, 1996, 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 business units.
For properties which are leased, the date of expiration of the
current term of the lease is indicated. Properties which are
shown as owned are owned in fee simple. Some properties may be
subject to minor encumbrances of a nature which do not materially
affect the Registrant's operations.
In addition, Registrant's Cadillac Plastic and M. A. Hanna
Resin Distribution business units 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's Cadillac Plastic business unit also leases
space for regional branches in various locations outside the
United States, including Australia, Belgium, Canada, France,
Germany, Hong Kong, Korea, Malaysia, Mexico, Netherlands, New
Zealand, Singapore, Spain, Sweden, Taiwan and Vietnam.
Location Facility Owned/Leased Approximate
Size (sq.
ft.)
Burton, M. A. Hanna Rubber Owned 160,000
Ohio Compounding
Macedonia, MACH-1 Compounding Owned 87,000
Ohio
Tillsonburg, M. A. Hanna Rubber Owned 60,000
Ontario Compounding
Jonesboro, M. A. Hanna Rubber Owned 69,000
Tennessee Compounding
DeForest, M. A. Hanna Rubber Owned 130,000
Wisconsin Compounding
Santa Fe Springs, M. A. Hanna Rubber Leased 13,231
California Compounding 1998
Chicago, M. A. Hanna Rubber Leased 31,000
Illinois (Chase Elastomer) 2001
Kennedale, M. A. Hanna Rubber Owned 80,000
Texas (Chase Elastomer)
Broadview Heights, M. A. Hanna Color Owned 61,000
Ohio
Phoenix, M. A. Hanna Color Owned 20,500
Arizona
Vonore, M. A. Hanna Color Owned 47,000
Tennessee
North Kansas City, M. A. Hanna Color Leased 44,000
Missouri 1998
San Fernando, M. A. Hanna Color Leased 45,000
California 1998
Vancouver, M. A. Hanna Color Leased 35,000
Washington 2002
Troy, Cadillac Plastic Leased 29,175
Michigan (headquarters) 1998
Coppell, Cadillac Plastic Leased 101,016
Texas (area distribution 2006
center)
Fresno, Cadillac Plastic Leased 50,960
California (area distribution 2007
center)
Lemont, M. A. Hanna Resin Leased 103,000
Illinois Distribution 2008
(headquarters)
Seattle, M. A. Hanna Resin Leased 44,520
Washington Distribution 2005
Kingstree, Southwest Chemical Owned 156,174
South Carolina Services
Dyersburg, M. A. Hanna Owned 862,399
Tennessee Engineered
Materials, M. A.
Hanna Rubber
Compounding and
Diversified
Polymer Products
Bethlehem, M. A. Hanna Leased
Pennsylvania Engineered 2004 82,000
Materials 1999 25,400
Suwanee, M. A. Hanna Color Owned 20,000
Georgia (headquarters)
Suwanee, M. A. Hanna Color Owned 44,022
Georgia (technical center)
Somerset, M. A. Hanna Color Owned 44,300
New Jersey
Florence, M. A. Hanna Color Owned 30,000
Kentucky
Gastonia, M. A. Hanna Color Owned 43,992
North Carolina
Elk Grove Village, M. A. Hanna Color Owned 51,870
Illinois
St. Peters, M. A. Hanna Color Owned 32,480
Missouri
Fort Worth, M. A. Hanna Color Owned 75,080
Texas
Norwalk, M. A. Hanna Color Owned 94,000
Ohio
Gardena, M. A. Hanna Color Owned 46,652
California
Carolina, M. A. Hanna Color Leased 12,600
Puerto Rico 1999
Buford, M. A. Hanna Color Leased 73,300
Georgia 1997
Neshanic Station M. A. Hanna Color Leased 123,000
New Jersey 1997(closing
1997)
Bethlehem, M. A. Hanna Color Owned 58,672
Pennsylvania (opening
1997)
Milford, M. A. Hanna Color Leased 20,600
New Hampshire 2001
Toluca, Hanna Polimeros Owned 22,000
Mexico
LaPorte, Southwest Chemical Owned 200,000
Texas Services
Ayer, M. A. Hanna Resin Leased 53,250
Massachusetts Distribution 2002
Houston, M. A. Hanna Leased
Texas Engineered 1997 88,000
Materials 1998 44,120
Statesville, M. A. Hanna Resin Leased 48,240
North Carolina Distribution 2002
North Ridgeville, M. A. Hanna Leased 40,750
Ohio Thermoplastic 1999
Elastomers
Assesse, Wilson Color Owned 120,976
Belgium
Tossiat, Wilson Color Owned 87,188
France
Bendorf, Wilson Color Owned 72,086
Germany
Angered, Wilson Color Owned 22,259
Sweden
Saint Ouen, Wilson Color Owned 46,285
(Paris)
France
Coventry, Victor Leased 52,750
England International 2000
Manchester, Victor Owned 58,890
England International
Gaggenau, Th. Bergmann Owned 241,114
Germany
Barbastro, Polibasa Owned 71,042
Spain (Bergmann)
Corona, Compounding Leased 32,000
California Technology, Inc. 2001
Charlotte, Compounding Leased 20,100
North Carolina Technology, Inc. 1997
Jurong, Compounding Leased 43,000
Singapore Technology, Inc. 1999
Saint Etienne, Compounding Owned 35,000
France Technology, Inc.
Pu Dong Hanna Wilson Owned 30,400
(Shanghai), Polymer (opening
China 1997)
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 716 million pounds of compounded rubber products,
921 million pounds of compounded plastic products and
approximately 251 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 processing segment.
Registrant's 50 percent-owned partnership, DH Compounding
Company, owns and operates an engineering plastics compounding
plant in Clinton, Tennessee. The 150,000 square foot plant has
an annual design capacity of 110 million pounds.
ITEM 3. LEGAL PROCEEDINGS
Registrant, directly and indirectly through a wholly-owned
subsidiary, is obligated for costs of environmental remediation
measures taken and to be taken in connection with certain
operations that have been sold or discontinued. These include
the clean-up of a Superfund site 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 these anticipated
liabilities for environmental remediation, which do not reflect
potential insurance recoveries and which management believes are
adequate to cover Registrant's ultimate exposure. Registrant
believes that these liabilities will not have a material adverse
effect on the Registrant's liquidity, results of operations or
financial position.
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 1, 1997,
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. Chairman and Chief
Age - 64 Executive Officer, September 1986
to December 31, 1996; Chairman,
January 1, 1997 to date.
D. J. McGregor President and Chief Executive
Age - 56 Officer. President and Chief
Operating Officer, May 1989 to
December 31, 1996; President and
Chief Executive Officer January
1, 1997 to date.
L. L. Beach Vice President, Human Resources.
Age - 52 Vice President, Human Resources
of Kraft USA (1989-1991) and of
Kraft Foods International
(manufacturer and distributor of
consumer products) 1991 to April
1995. Vice President, Human
Resources of the Registrant,
April 1995 to present.
M. S. Duffey Vice President and Chief
Age - 42 Financial Officer. Vice President
and Treasurer, Outboard Marine
Corporation (manufacturer of
recreational boats and marine
engines), 1986-1992; Vice
President and Treasurer, Foote,
Cone & Belding Communications,
Inc. (advertising agency) 1992 -
July 1994. Treasurer of the
Registrant, July 1994 - April
1995; Vice President, Chief
Financial Officer and Treasurer
of Registrant, April 1995 to
August, 1996. Vice President and
Chief Financial Officer August
1996 to date.
G. W. Henry Vice President, International
Age - 51 Operations. Vice President -
Marine Services and Special
Projects, 1990 - 1992; Vice
President - Operations, 1992 -
1994; Vice President,
International Operations, 1994 to
date.
J. S. Pyke, Jr. Vice President, General Counsel
Age - 58 and Secretary. Secretary, 1973
to date; Vice President, 1979 to
date.
D. R. Schrank Vice President, North American
Age - 48 Plastics Operations. 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 -
April 1995; Vice President, North
American Plastics Operations,
April 1995 to date.
C. R. Sachs Treasurer. Treasurer Outboard
Age - 44 Marine Corporation (manufacturer
of recreational boats and marine
engines) 1992-1996. Treasurer of
the Registrant, August 1996 to
date.
T. E. Lindsey Controller. July 1990 to date.
Age - 46
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 34 and Shareowner Information at the bottom of
page 35 of Registrant's Annual Report distributed to
stockholders for the fiscal year ended December 31,
1996, which tables and information are incorporated
herein by this reference.
ITEM 6. SELECTED FINANCIAL DATA
See Selected Financial Data at page 35 of Registrant's
Annual Report distributed to stockholders for the
fiscal year ended December 31, 1996, 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 36 through 37 of Registrant's Annual Report
distributed to stockholders for the fiscal year ended
December 31, 1995, which pages are incorporated herein
by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages 21 through 34 and page 38 of Registrant's
Annual Report distributed to stockholders for the
fiscal year ended December 31, 1996, which pages 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 20, 1997, 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.
Section 16(a) Beneficial Ownership Reporting Compliance
See the paragraph bearing the foregoing caption on page
5 of Registrant's definitive proxy statement
distributed to stockholders dated March 20, 1997, which
paragraph is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
See the section captioned "Executive Compensation" at
pages 5 through 14 of Registrant's definitive proxy
statement distributed to stockholders dated March 20,
1997, filed with the Commission pursuant to Regulation
14A, which section is 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 page 5 of Registrant's
definitive proxy statement distributed to stockholders
dated March 20, 1997 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
20, 1997 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
None.
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 amended and
restated as of May 1, 1996, and currently in effect), filed
herewith.
(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) Indenture dated November 9, 1996, between the
Registrant and NBD Bank, as trustee, governing Registrant's
Medium Term Notes, a form of which was filed as Exhibit 4.1
to Registrant's Form S-3 filed on June 12, 1996 and
incorporated herein by this reference.
(b) Credit and Guarantee Agreement, dated January 31, 1997
between the Registrant, Bank of America, N.T. & 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
$150,000,000 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% Senior 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) 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, 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 1994 Amendment to the Plan, filed as Exhibit
A to Registrant's definitive proxy statement distributed to
stockholders dated March 17, 1994 and incorporated herein by
this reference.
*(b) Form of Supplemental Deferred Compensation agreement in
which any of the five most highly compensated executive
officers of the Registrant participates, filed as Exhibit
10(e) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, and incorporated
herein by this reference.
*(c) Form of Supplemental Death Benefits agreement in which
any of the five most highly compensated executive officers
of the Registrant participates, filed as Exhibit 10(f) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, and incorporated herein by this
reference.
*(d) 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 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 (ii) Employment Agreement dated March 1,
1993 between D. J. McGregor and Registrant, filed as Exhibit
10(g) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, and incorporated herein
by this reference.
*(e) Description of Directors' compensation and retirement
plan, set forth in the section captioned "Directors'
Compensation" on pages 12 through 13 of Registrant's
definitive proxy statement dated March 20, 1996, as
distributed to stockholders and filed with the Commission
pursuant to Regulation 14A, which section is incorporated
herein by this reference. Also, 1995 Amendments to
Directors' Deferred Fee Plan, filed as Exhibit B to
Registrant's definitive proxy statement distributed to
stockholders dated March 20, 1995 filed with the Commission
pursuant to Regulation 14A, which Exhibit B is incorporated
herein by this reference.
*(f) 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.
*(g) 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.
*(h) Voluntary Non-Qualified Deferred Compensation Plan in
which any of the five most highly compensated executive
officers of the Registrant participates, filed as Exhibit A
to the Registrant's definitive proxy statement distributed
to stockholders dated March 20, 1995 filed with the
Commission pursuant to Regulation 14A, which Exhibit A is
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, 1996, filed herewith.
(21) Subsidiaries of the Registrant, filed herewith.
(23) Consents of Independent Accountants, filed herewith.
(24) Powers of Attorney of certain Directors of Registrant, filed
herewith.
(27) Financial Data Schedule, filed herewith.
(ii) Other exhibits:
Financial statements (and consent of independent
accountants) pursuant to Form 11-K and Rule 15D-21 for the year
ended December 31, 1996, 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-K/A amendment not later than June 30, 1997.
(b) Since September 30, 1996, 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 20, 1997 By /s/J. S. Pyke, Jr.
J. S. Pyke, Jr.
Vice President, General Counsel
and Secretary
Pursuant to the requirements of the Securities and 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 20, 1997 By /s/D. J. McGregor
D. J. McGregor
President and Chief Executive
Officer (Principal Executive
Officer) and Director
Date: March 20, 1997 By /s/M. S. Duffey
M. S. Duffey
Vice President and Chief
Financial Officer
(Principal Financial Officer)
Date: March 20, 1997 By /s/T. E. Lindsey
T. E. Lindsey
Controller
(Principal Accounting Officer)
B. C. Ames, Director
C. A. Cartwright, Director
W. R. Embry, Director
J. T. Eyton, Director
By /s/T. E. Lindsey
T. E. Lindsey G. D. Kirkham, Director
Attorney-In Fact
M. L. Mann, Director
R. W. Pogue, Director
Date: March 20, 1997
M. D. Walker, 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, 1996, are incorporated herein by
reference in Item 8:
Summary of accounting policies
Consolidated balance sheets - December 31, 1996 and 1995
Consolidated statements of income, stockholders' equity
and cash flows - years ended Decmber 31, 1996, 1995
and 1994
Notes to financial statements
The following consolidated financial information, together
with the report of the independent accountants, are included
in Item 14(d):
Schedule II - Valuation and qualifying accounts
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 Accountants on
Financial Statement Schedule
January 29, 1997
To the Board of Directors of M.A. Hanna Company
Our audits of the consolidated financial statements referred
to in our report dated January 29, 1997 appearing in the 1996
Annual Report to Shareholders of M.A. Hanna Company (which
report and consolidated financial statements are incorporated
by reference in this Annual Report on Form 10-K) also
included an audit of the Financial Statement Schedule as of
December 31, 1996 and 1995 and for the years then ended
listed in Item 14(a) of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in
conjunction with the related consolidated financial
statements.
/s/ Price Waterhouse LLP
F-2
Report of Independent Auditors
Board of Directors
M.A. Hanna Company
We have audited the consolidated statements of income,
stockholders' equity, and cash flows of M.A. Hanna Company
and subsidiaries for the year ended December 31, 1994 listed
in the Index of Item 14(a)(1) and (2). Our audit also
included the financial statement schedule listed in the Index
at Item 14(a)(1) and (2). These financial statements and
schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these
financial statements and schedule based on our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated results of operations and cash flows of M.A.
Hanna Company and subsidiaries for the year ended December
31, 1994, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cleveland, Ohio
January 31, 1995
F-3
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
ADDITIONS
(1) (2)
Balance at Beginning Charged to Costs Charged to Other
DESCRIPTION of Period and Expenses Accounts - Describe Deductions - Describe
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $11,034,000 $3,362,000 $934,000 (a) $7,758,000 (b)
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts $11,346,000 $2,480,000 $2,792,000 (b)
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts $ 9,993,000 $3,250,000 $531,000 (a) $2,428,000 (b)
COL. A COL. E
Balance at End
DESCRIPTION of Period
<S> <C>
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $ 7,572,000
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts $11,034,000
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts $11,346,000
(a) Reserves of companies acquired.
(b) Uncollectible amounts written off.
</TABLE>
F-4
EXHIBIT 3(i)
CERTIFICATE OF INCORPORATION
OF
M. A. HANNA COMPANY
As restated and amended to and including May 1, 1996
FIRST: The name of this Corporation is M. A. Hanna Company.
SECOND: The principal office and place of business of the
Corporation in the State of Delaware is and shall be located at
Number 1209 Orange Street in the City of Wilmington, County of
New Castle, and the name and address of its Resident Agent is The
Corporation Trust Company, Number 1209 Orange Street, Wilmington,
Delaware 19801.
THIRD: The nature of the business and the objects and purposes
to be transacted, promoted or carried on by this Corporation are
to do any or all the things herein mentioned as fully and to the
same extent as natural persons might or could do, and in any part
of the world, viz.:
(a) To engage in exploring for, mining, quarrying,
milling, concentrating, converting, smelting, treating, preparing
for market, manufacturing, buying, selling, exchanging and
otherwise producing and dealing in all kinds of ores, metals and
minerals, and the products and by-products thereof of every kind
and description and by whatsoever process the same can be or may
hereafter be produced, and generally and without limit as to
amount, to buy, sell, exchange, lease, acquire and deal in lands,
mines and mineral rights and claims, and to conduct all business
appertaining thereto.
(b) To engage in a general transportation and
navigation business and a general import and export business, and
in connection therewith to construct, purchase, charter, lease or
otherwise acquire, own, manage, operate and maintain, and to
sell, charter, lease, mortgage or, otherwise dispose of or
encumber, steam and motor ships, vessels and water craft of all
kinds, surface transportation facilities of all kinds, and
interests therein, and yards, docks, wharves and wharfage
facilities, and all kinds of loading and unloading equipment and
facilities.
(c) To purchase, generate, create or otherwise
acquire, use, sell or otherwise dispose of electric current and
electric, steam and water power of every kind and description.
(d) To acquire all or any part of the good will,
rights, property and business of any person, firm, trust,
association or corporation, heretofore or hereafter created, to
pay for the same in cash or in stock or bonds of this Corporation
or otherwise, hold, utilize and in any manner dispose of the
whole or any part of the rights and property so acquired, assume
in connection therewith any liabilities of any such person, firm,
trust, association or corporation and conduct in any lawful
manner the whole or any part of the business thus acquired.
(e) To aid by loan, guaranty, subsidy or in any other
manner whatsoever, in so far as may be permitted by law, any
corporation or corporations, organized under the laws of the
State of Delaware or of any other state, or of any country,
nation or government, any shares of the capital stock, or voting
trust certificates for shares of the capital stock or bonds, or
other securities or evidences of indebtedness of which shall be
held by or for the Corporation, or in which, or, in the welfare
of which, the Corporation shall have any interest, and to do any
acts or things designed to protect, preserve, improve or enhance
the value of any such shares, voting trust certificates, bonds or
other securities or evidences of indebtedness, and to do any and
all acts designed to accomplish any such purpose.
(f) To guarantee the payments of dividends upon, or
any sinking fund payments in respect of, any shares of the
capital stock, or the payment of the principal of, or interest
on, or sinking fund payments in respect of, any bonds or other
securities or evidences of indebtedness, or the performance of
any contract, of any other corporation, trust or association in
so far as and to the extent that a guaranty in respect thereof by
the Corporation may be permitted by law.
(g) To adopt, apply for, obtain, register, purchase,
take on lease or otherwise acquire, and to maintain, protect,
hold, use, own, exercise, develop, operate, and introduce, and to
sell, grant licenses or other rights in respect of, assign,
pledge or otherwise dispose of or turn to account any trademarks,
trade names, patents, patent rights, copyrights and distinctive
marks and rights analogous thereto, and inventions, improvements,
processes, formulas and the like, including such thereof as may
be covered by, used in connection with, or secured or received
under, Letters Patent of the United States of America or
elsewhere, or otherwise, which may be deemed capable of use in
connection with any of the purposes of the Corporation herein
stated; and to acquire, use, exercise or otherwise turn to
account licenses in respect of any such trademarks, trade names,
patents, patent rights, copyrights, inventions, improvements,
processes, formulas and the like.
(h) To enter into, make and perform contracts of every
sort and description with any person, firm, trust, association,
corporation, municipality, body politic, county, state or
government or colony or dependency thereof.
(i) To borrow or raise moneys for any of the purposes
of the Corporation without limit as to amount; from time to time
to draw, make, accept, endorse, execute and issue promissory
notes, drafts, bills of exchange, and warrants, and to issue
bonds, debentures, notes, or other obligations, negotiable or non-
negotiable, secured or unsecured, of the Corporation for moneys
so borrowed, or in payment for property acquired, or for any of
the other objects or purposes of the Corporation or in connection
with its business; to secure such bonds, debentures, notes and
other obligations by mortgage or mortgages, or deed or deeds of
trust, or pledge or other lien upon any or all of the property,
rights, privileges or franchises of the Corporation wheresoever
situated, acquired or to be acquired, and to pledge, sell or
otherwise dispose of any or all of such bonds, debentures, notes
and other obligations of the Corporation for its corporate
purposes.
(j) To manufacture, purchase or otherwise acquire,
own, mortgage, pledge, sell, assign and transfer, or otherwise
dispose of, to invest, trade, deal in and deal with goods, wares
and merchandise and real and personal property of every class and
description, and in any part of the world.
(k) In general, to carry on any business not contrary
to the laws of the State of Delaware.
(l) To conduct its business, without restriction or
limit as to amount, in all or any of its branches in the State of
Delaware and in any or all other states, territories,
possessions, colonies, and dependencies of the United States of
America, and in the District of Columbia, and in any or all
foreign countries (provided, always, that the Corporation shall
not construct, maintain or operate any public utility within the
State of Delaware); to have one or more offices within and
outside the State of Delaware; and to purchase, take on lease or
otherwise acquire, own, hold, develop, operate, lease, mortgage
or pledge, sell, assign, transfer, exchange, or otherwise dispose
of or turn to account, and convey real and personal property of
every class and description or any interest therein, including
without limitation developed or undeveloped mineral properties
and any and all types of interests therein anywhere in the world.
(m) To carry out all or any part of the foregoing
objects and purposes as principal, agent, contractor, or
otherwise, either alone or in conjunction with any person, firm,
trust, association or other corporation, and in any part of the
world; and, in carrying on its business and for the purpose of
attaining or furthering any of its objects or purposes, to make
and perform contracts of any kind and description, to do such
acts and things, and to exercise any and all such powers, as a
natural person could lawfully make, perform, do or exercise,
provided that the same be not inconsistent with the laws of the
State of Delaware.
(n) To do any and all necessary, suitable, convenient
or proper for, or in connection with, or incidental to, the
accomplishment of any of the purposes, or the attainment of any
one or more of the objects herein enumerated, or designed
directly or indirectly to promote the interests of the
Corporation, or to enhance the value of any of its properties;
and in general to do any and all things and exercise any and all
powers which it may now or hereafter be lawful for the
Corporation to do or to exercise under the laws of the State of
Delaware that may now or hereafter be applicable to the
Corporation.
It is the intention that, except where otherwise expressed in
this Article THIRD, the objects and purposes specified in any of
the foregoing clauses of this Article shall not in anywise be
limited or restricted by reference to, or inference from, the
terms of any other clause of this Article or of any other Article
of this Certificate of Incorporation, but that the objects and
purposes specified in each of the clauses of this Article shall
be regarded as independent objects and purposes.
It is also the intention that said clauses be construed as powers
as well as objects and purposes; and, generally, that the
Corporation shall be authorized to exercise and enjoy all other
powers, rights and privileges granted by the laws of the State of
Delaware to corporations organized thereunder, and the
enumeration herein of certain powers is not intended as exclusive
of, or a waiver of, any of the powers, rights or privileges
granted or conferred by said laws now or hereafter in force;
provided, however, that the Corporation shall not carry on the
business of constructing, maintaining and operating public
utilities in the State of Delaware, nor carry on any business or
exercise any powers in any state, district, territory, possession
or country which a corporation organized under the laws of such
state, district, territory, possession or country could not carry
on or exercise, except to the extent permitted or authorized by
the laws of such state, district, territory, possession or
country.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 105,000,000,
consisting of 5,000,000 shares of Preferred Stock without par
value (hereinafter called "Serial Preference Stock") and
100,000,000 shares of Common Stock, par value $1 each
(hereinafter called "Common Shares").
The express terms of the shares of each class are as follows:
Division A
Express Terms of the Serial Preference Stock
Section 1. Serial Preference Stock may be issued from time to
time in one or more series. All shares of Serial Preference
Stock shall be of equal rank, and except in respect of the
matters that may be fixed by the Board of Directors as
hereinafter provided, shall be identical, and each share of each
series shall be identical with all other shares of such series,
except as to the date from which dividends are cumulative.
Subject to the provisions of this Division, which shall apply to
all Serial Preference Stock, the Board of Directors hereby is
authorized to provide for the issuance of shares of Serial
Preference Stock in series, and by filing a certificate pursuant
to the applicable law of the State of Delaware, to establish from
time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and
rights of the shares of each such series and the qualifications,
limitations and restrictions thereof.
The authority of the Board of Directors with respect to each
series shall include, but not limited to, determination of the
following:
(a) The designation of the series which may be by
distinguishing number, letter and title.
(b) The number of shares of the series, which number the
Board of Directors may thereafter (except where otherwise
provided in the creation of the series) increase or decrease (but
not below the number of shares thereof then outstanding).
(c) The quarterly dividend rate of the series.
(d) The dates at which dividends, if declared, shall
be payable, and the dates from which dividends shall be
cumulative.
(e) The redemption rights and price or prices, if any,
for shares of the series.
(f) The terms and amount of any sinking fund provided
for the Purchase or redemption of shares of the series.
(g) The amounts payable on shares of the series in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation.
(h) Whether the shares of the series shall be
convertible into shares of any other class or series of shares of
the Corporation, and, if so, the specification of such other
class or series, the conversion price or prices or rate or rates,
any adjustments thereof, the date or dates as of which such
shares shall be convertible and all other terms and conditions
upon which such conversion may be made.
(i) Restrictions (in addition to those set forth in
Section 6(b)of this Division)on the issuance of shares of the
same series or of any other class or series.
(j) The voting rights, if any, of the holders of such
series in respect of matters other than those of which voting
rights are specifically provided in Section 6 of this Division.
Section 2. The holders of Serial Preference Stock of each series,
in preference to the holders of Common Shares, shall be entitled
to receive out of any funds legally available and when and as
declared by the Board of Directors dividends in cash at the rate
for such series fixed in accordance with the provisions of
Section 1 of this Division and no more, payable quarterly on the
dividend payment dates fixed for such series. Such dividends
shall be cumulative, in the case of shares of each particular
series, from and after the date or dates fixed with respect to
such series. No dividends may be paid upon or set apart for any
of the Serial Preference Stock for any quarterly dividend period
unless (i) all dividends payable upon any then outstanding Serial
Preference Stock on any dividend payment date occurring prior to
such time shall have been paid or funds therefor set apart, and
(ii) at the same time a like dividend, ratably in proportion to
the respective quarterly dividend rates, shall be paid upon all
shares of Serial Preference Stock then outstanding and entitled
to receive such dividend or funds therefor set apart.
Section 3. In no event, so long as any Serial Preference Stock
shall be outstanding, shall any dividends, except a dividend
payable in Common Shares, be paid or declared or any distribution
be made on the Common Shares, nor shall any Common Shares be
purchased, retired or otherwise acquired by the Corporation
(except out of the proceeds of the sale of Common Shares received
by the Corporation on or subsequent to the date on which shares
of Serial Preference Stock are first issued), unless (i) all
accrued dividends upon all Serial Preference Stock then
outstanding payable on all dividend payment dates occurring on or
prior to the date of such action shall have been paid or funds
therefor set apart, and (ii) at the date of such action there
shall be no arrearages with respect to the redemption of Serial
Preference Stock of any series from any sinking fund provided for
shares of such series in accordance with the provisions of
Section 1 of this Division.
Section 4. (a) Subject to the express terms of each series, the
Corporation may from time to time redeem all or any part of the
Serial Preference Stock of any series at the time outstanding (i)
at the option of the Board of Directors at the applicable
redemption price for such series fixed in accordance with the
provisions of Section I of this Division, or (ii) in fulfillment
of the requirements of any sinking fund provided for shares of
such series at the applicable sinking fund redemption price fixed
in accordance with the provisions of Section I of this Division,
together in each case with (I) all the then unpaid dividends upon
such shares payable on all dividend payment dates for such series
occurring on or prior to the redemption date plus (II) if the
redemption date is not a dividend payment date for such series, a
proportionate dividend, based on the number of elapsed days, for
the period from the day following the most recent such dividend
payment date through the redemption date.
(b) Notice of every such redemption shall be mailed,
postage prepaid, to the holders of record of the Serial
Preference Stock to be redeemed at their respective addresses
then appearing on the books of the Corporation, not fewer than 30
days nor more than 60 days prior to the date fixed for such
redemption. At any time before or after notice has been given as
above provided, the Corporation may deposit the aggregate
redemption price of the shares of Serial Preference Stock to be
redeemed, together with an amount equal to the aggregate amount
of dividends payable upon such redemption, with any bank in
Cleveland, Ohio, or New York, New York, having capital and
surplus of more than $5,000,000, named in such notice, and direct
that such deposited amount be paid to the respective holders of
the shares of Serial Preference Stock so to be redeemed upon
surrender of the stock certificate or certificates held by such
holders. Upon the giving of such notice and the making of such
deposit, such holders shall cease to be stockholders with respect
to such shares and shall have no interest in or claim against the
Corporation with respect to such shares except only the right to
receive such money from such bank without interest or to
exercise, before the redemption date, any unexpired privileges of
conversion.
(c) In case fewer than all of the outstanding shares
of any series of Serial Preference Stock are to be redeemed, the
Corporation shall select pro rata or by lot the shares so to be
redeemed in such manner as shall be prescribed by its Board of
Directors.
(d) If the holders of shares of Serial Preference
Stock which shall have been called for redemption shall not,
within six years after the notice prescribed in Section 4(b)
above has been given, claim the amount deposited for the
redemption thereof, any such bank shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank
and the Corporation shall be relieved of all responsibility in
respect thereof and to such holders.
(e) Any shares of Serial Preference Stock which are
(i) redeemed by the Corporation pursuant to the provisions of
this Section 4, (ii) purchased and delivered in satisfaction of
any sinking fund requirements provided for shares of any series
of Serial Preference Stock, (iii) converted in accordance with
the express terms of any such series, or (iv) otherwise acquired,
shall resume the status of authorized and unissued shares of
Serial Preference Stock without serial designation.
Section 5. (a) The holders of Serial Preference Stock of any
series shall, in case of liquidation, dissolution or winding up
of the affairs of the Corporation, be entitled to receive in full
out of the assets of the Corporation, including its capital,
before any amount shall be paid or distributed among the holders
of the Common Shares, the amount fixed with respect to shares of
such series in accordance with the provisions of Section I of
this Division, plus an amount equal to (i) all then unpaid
dividends upon such shares payable on all dividend payment dates
for such series occurring on or prior to the date of payment of
the amount due pursuant to such liquidation, dissolution or
winding up, plus (ii) if such date is not a dividend payment date
for such series, a proportionate dividend, based on the number of
elapsed days, for the period from the day following the most
recent such dividend payment date through such date of payment of
the amount due pursuant to such liquidation, dissolution or
winding up. In case the net assets of the Corporation legally
available therefor are insufficient to permit the payment upon
all outstanding shares of Serial Preference Stock of the full
preferential amount to which they are respectively entitled, then
such net assets shall be distributed ratably upon outstanding
shares of Serial Preference Stock in proportion to the full
preferential amount to which each such share is entitled.
After payment to holders of Serial Preference Stock of the full
preferential amounts as aforesaid, holders of Serial Preference
Stock as such shall have no right or claim to any of the
remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation
into or with any other corporation, or the merger of any other
corporation into it, or the sale, lease or conveyance of all or
substantially all the property or business of the Corporation,
shall not be deemed to be a dissolution, liquidation or winding
up for the purposes of this Division.
Section 6. (a) Except as specifically provided in this
Division or by statute and except as may be provided by the Board
of Directors in the express terms of any series of the Serial
Preference Stock, the holders of outstanding Serial Preference
Stock shall not be entitled to vote.
If, and so often as, the Corporation shall be in default in the
payment of dividends on any series of Serial Preference Stock at
the time outstanding in an amount equivalent to six quarterly
dividends on such series of Serial Preference Stock, whether or
not earned or declared, the holders of Serial Preference Stock of
all series voting separately as a class and in addition to any
other rights which the shares of any series may have to vote for
Directors, shall thereafter be able to elect, as hereinafter
provided, two Directors of the Corporation who shall serve,
except as hereinafter provided, until the next annual meeting of
the stockholders and until their successors have been elected and
qualified. When the special class voting rights provided for
herein shall have become vested, they shall remain so vested
until all accrued and unpaid dividends on the Serial Preference
Stock of all series then outstanding shall have been paid or
funds therefor set apart, whereupon the terms of Directors
elected by the holders of Serial Preference Stock shall
automatically terminate and the holders of Serial Preference
Stock shall be divested of their special class voting rights in
respect of subsequent elections of Directors, subject to the
revesting of such special class voting rights in the event
hereinabove specified in this paragraph.
In the event of default entitling the holders of Serial
Preference Stock to elect two Directors as above specified, a
special meeting of the holders of Serial Preference Stock for the
purpose of electing such Directors shall be called by the
Secretary of the Corporation upon written request of, or upon
prior written notice to the Secretary of the Corporation may be
called by, the holders of record of at least 10% of the shares of
Serial Preference Stock of all series at the time outstanding,
and notice thereof shall be given in the same manner as that
required for the annual meeting of stockholders; provided,
however, that the Corporation shall not be required, and the
holders of Serial Preference Stock shall not be entitled, to call
such special meeting if the annual meeting of stockholders shall
be held within 90 days after the date of receipt by the Secretary
of the Corporation of the foregoing written request or notice
from the holders of Serial Preference Stock. At any annual
meeting of stockholders or special meeting called for such
purpose at which the holders of Serial Preference Stock shall be
entitled to elect Directors, the holders of 35% of the then
outstanding shares of Serial Preference Stock of all series,
present in person or by proxy, shall be sufficient to constitute
a quorum for such purpose, and the vote of the holders of a
majority of such shares so present at any such meeting at which
there shall be a quorum shall be necessary and sufficient to
elect the members of the Board of Directors which the holders of
Serial Preference Stock are entitled to elect as hereinabove
provided. If at any such meeting there shall be less than a
quorum for such purpose present, the holders of a majority of the
shares of Serial Preference Stock so present may adjourn the
meeting for such purpose only from time to time without notice
other than announcement at the meeting until a quorum shall
attend.
The two Directors who may be elected by the holders of Serial
Preference Stock pursuant to the foregoing provisions shall be in
addition to the whole authorized number of Directors of the
Corporation fixed in the By-laws, and nothing in such provisions
shall prevent any change otherwise permitted in such whole
authorized number of Directors of the Corporation or require the
resignation of any Director elected otherwise than pursuant to
such provisions.
(b) Except as hereinafter provided, the affirmative vote of
the holders of at least two-thirds of the shares of Serial
Preference Stock at the time outstanding, given in person or by
proxy at a meeting called for the purpose at which the holders of
Serial Preference Stock shall vote separately as a class, shall
be necessary to effectuate or validate:
(i) Any amendment, alteration or repeal of any
provision of the Amended Certificate of Incorporation,
or of the By-laws, of the Corporation, which affects
adversely the voting powers, rights or preferences of
the holders of Serial Preference Stock or reduces the
time for any notice to which the holders of Serial
Preference Stock may be entitled; provided, however,
that if such amendment, alteration or repeal affects
adversely the rights or preferences of one or more but
not all series of Serial Preference Stock at the time
outstanding, only the affirmative vote of the holders
of at least two-thirds of each series so affected
shall be required; and provided, further, that the
amendment of the provisions of the Amended Certificate
of Incorporation so as to authorize or to increase or
decrease the authorized amount of any stock ranking
junior to the Serial Preference Stock shall not be
deemed to affect adversely the voting powers, rights
or preferences of the holders of Serial Preference
Stock; for the purpose of this subsection the
reference to stock "ranking junior to the Serial
Preference Stock" means and includes all stock of the
Corporation in respect of which the rights of the
holders thereof both as to the payment of dividends
and as to distributions in the event of a voluntary or
involuntary liquidation, dissolution or winding up of
the Corporation are junior and subordinate to the
rights of the holders of the Serial Preference Stock;
(ii) Any increase in the authorized amount of Serial
Preference Stock or the authorization or creation, or
any increase in the authorized amount, of any stock of
any class or any security convertible into stock of
any class, ranking prior to or on a parity with the
Serial Preference Stock;
(iii) The voluntary dissolution, liquidation or
winding up of the affairs of the Corporation;
(iv) The sale, lease or conveyance by the Corporation
of all or substantially all its property or assets; or
(v) The merger or consolidation of the Corporation
with or into any other corporation, unless the
corporation resulting from such merger or consolidation
will have after such merger or consolidation no class
of stock and no other securities either authorized or
outstanding ranking prior to or on a parity with Serial
Preference Stock, except the same number of shares of
stock and the same amount of other securities with the
same rights and preferences as the stock and securities
of the Corporation respectively authorized and
outstanding immediately preceding such merger or
consolidation, and each holder of Serial Preference
Stock immediately preceding such merger or
consolidation shall receive the same number of shares,
with substantially the same rights and preferences, of
the resulting corporation; provided, however, that no
such consent of the holders of Serial Preference Stock
shall be required if, at or prior to the time when such
amendment, alteration or repeal is to take effect or
when the issuance of any such stock or convertible
security ranking prior to or on a parity with, or any
such additional shares of, the Serial Preference Stock
is to be made, or when such consolidation or merger,
voluntary dissolution, liquidation or winding up, sale,
lease or conveyance, merger or consolidation is to take
effect, as the case may be, provision is to be made for
the redemption of all shares of Serial Preference Stock
at the time outstanding or, in the case of any such
amendment, alteration or repeal, as to which the
consent of less than all series of Serial Preference
Stock would otherwise be required, for the redemption
of all shares of such series of Serial Preference Stock
the affirmative vote of which otherwise would be
required.
Section 7. The holders of Serial Preference Stock shall have
no preemptive right to purchase, or have offered to them for
purchase, any shares or other securities of the Corporation,
whether now or hereafter authorized.
Section 8. If and to the extent that there are created series
of Serial Preference Stock which are convertible (hereinafter
called "convertible series") into Common Shares or into shares of
any other class or series of the Corporation (hereinafter
collectively called "conversion shares"), the following terms and
provisions shall be applicable to all convertible series, except
as may be otherwise expressly provided in the terms of any such
series.
(a) The holder of each share of a convertible series
may exercise the conversion privilege in respect thereof by
delivering to any transfer agent for the respective series the
certificate for the share to be converted and written notice that
the holder elects to convert such share. Conversion shall be
deemed to have been effected immediately prior to the close of
business on the date when such delivery is made, and such date is
referred to in this Section as the "conversion date". On the
conversion date or as promptly thereafter as practicable the
Corporation shall deliver to the holder of the stock surrendered
for conversion, or as otherwise directed by him in writing, a
certificate for the number of full conversion shares deliverable
upon the conversion of such stock and a check or cash in respect
of any fraction of a share as provided in subsection (b) of this
Section. The person in whose name the stock certificate is to be
registered shall be deemed to have become a holder of the
conversion shares of record on the conversion date. No
adjustment shall be made for any dividends on shares of stock
surrendered for conversion or for dividends on the conversion
shares delivered on conversion.
(b) The Corporation shall not be required to deliver
fractional shares upon conversion of shares of a convertible
series. If more than one share shall be surrendered for
conversion at one time by the same holder, the number of full
conversion shares delivered upon conversion thereof shall be
computed on the basis of the aggregate number of shares so
surrendered. If any fractional interest in a conversion share
would otherwise be deliverable upon the conversion, the
Corporation shall in lieu of delivering a fractional share
therefor make an adjustment therefor in cash at the current
market value thereof, computed (to the nearest cent) on the basis
of the closing price of the conversion share on the last business
day before the conversion date.
For the purpose of this Section, the "closing price of the
conversion share" on any business day shall be the last reported
sales price regular way per share on such day, or, in case no
such reported sales takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case
on the New York Stock Exchange, or, if the conversion shares are
not listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the conversion
shares are listed or admitted to trading as determined by the
Board of Directors, which determination shall be conclusive, or,
if not listed or admitted to trading on any national securities
exchange, the mean between the average bid and asked prices per
conversion share in the over-the-counter market as furnished by
any member of the National Association of Securities Dealers
selected from time to time by the Board of Directors for that
purpose; and "business day" shall be each day on which the New
York Stock Exchange or other national securities exchange or over-
the-counter market used for purposes of the above calculation is
open for trading.
(c) Upon conversion of any convertible series the
stated capital of the conversion shares delivered upon such
conversion shall be the aggregate par value of the shares so
delivered having par value, or, in the case of shares without par
value, shall be an amount equal to the stated capital represented
by each such share outstanding at the time of such conversion.
The stated capital of the Corporation shall be correspondingly
increased or reduced to reflect the difference between the stated
capital of the shares of the convertible series so converted and
the stated capital of the shares delivered upon such conversion.
(d) In case of any reclassification or change of
outstanding conversion shares (except a split or combination, or
a change in par value, or a change from par value to no par
value, or a change from no par value to par value), provision
shall be made as part of the terms of such reclassification or
change that the holder of each share of each convertible series
then outstanding shall have the right to receive upon the
conversion of such share, at the conversion rate, or price which
otherwise would be in effect at the time of conversion, with
substantially the same protection against dilution as is
provided in the terms of such convertible series, the same kind
and amount of stock and other securities and property as he
would have owned or have been entitled to receive upon the
happening of any of the events described above had such share
been converted immediately prior to the happening of the event.
(e) In case the Corporation shall be consolidated with
or shall merge into any other corporation, provision shall be
made as a part of the terms of such consolidation or merger
whereby the holder of each share of each convertible series
outstanding immediately prior to such event shall thereafter be
entitled to such conversion rights with respect to securities of
the corporation resulting from such consolidation or merger as
shall be substantially equivalent to the conversion rights
specified in the terms of such convertible series; provided,
however, that the provisions of this subsection (e) shall be
deemed to be satisfied if such consolidation or merger shall be
approved by the holders of Serial Preference Stock in accordance
with the provisions of Section 6(b) of this Division.
(f) The issue of stock certificates on conversions of
shares of each convertible series shall be without charge to the
converting stockholder for any tax in respect of the issue
thereof. The Corporation shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved
in the registration of shares in any name other than that of the
holder of the shares converted, and the Corporation shall not be
required to deliver any such stock certificate unless and until
the person or persons requesting the delivery thereof shall have
paid to the Corporation the amount of such tax or shall have
established to the satisfaction of the Corporation that such tax
has been paid.
(g) The Corporation hereby reserves and shall at all
times reserve and keep available, free from preemptive rights,
out of its authorized but unissued shares or treasury shares, for
the purpose of delivery upon conversion of shares as shall from
time to time be sufficient to permit the conversion of all
outstanding shares of all convertible series of Serial Preference
Stock.
Section 9. For the purpose of this Division, whenever
reference is made to stock "ranking prior to the Serial
Preference Stock," such reference shall mean and include all
stock of the Corporation in respect of which the rights of the
holders thereof either as to the payment of dividends or as to
distributions in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation are
given preference over the rights of the holders of Serial
Preference Stock; and whenever reference is made to stock "on a
parity with the Serial Preference Stock," such reference shall
mean and include all stock of the Corporation in respect of which
the rights of the holders thereof (i) are not given preference
over the rights of the holders of Serial Preference Stock either
as to the payment of dividends or as to distributions in the
event of a voluntary or involuntary liquidation, dissolution or
winding up of the Corporation and (ii) either as to the payment
of dividends or as to distributions in the event of a voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation, or as to both, rank on an equality (except as to the
amounts fixed therefor) with the rights of the holders of Serial
Preference Stock.
Division B
Express Terms of the Common Shares
The Common Shares shall be subject to the express terms of the
Serial Preference Stock and any series thereof. Each Common
Share shall be equal to each other Common Share. The holders of
Common Shares shall be entitled to one vote for each such share
upon all questions presented to the stockholders.
FIFTH: [omitted]
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatever.
EIGHTH: In the absence of fraud, no contract or transaction
between the Corporation and any other corporation, association or
firm, and no act of the Corporation, shall in any way be affected
or invalidated by the fact that any of the directors or officers
of the Corporation is in anywise, pecuniarily or otherwise,
interested in, or is a shareholder, director, officer or member
of, or is otherwise connected with, such other corporation,
association or firm. A director or officer of the Corporation
shall not be disqualified by his office from dealing or
contracting with the Corporation, either as vendor, purchaser or
otherwise; and any director or officer of the Corporation, or any
firm, corporation or association of which any director or officer
is a member, shareholder, director or officer or with which he is
otherwise connected, may, in the absence of fraud, be a party to,
or pecuniarily or otherwise interested in, any contract or
transaction of the Corporation; nor shall any such director or
officer, in the absence of fraud, be liable to account to the
Corporation for any profits realized by, from, through or as a
result of any such contract or transaction.
NINTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them
and/or between this Corporation and its stockholders or any class
of them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this
Corporation under the provisions of Title 8, Section 291 of the
Revised Code of 1953 of said State, or on the application of
trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of the
General Corporation Law of the State of Delaware, order a meeting
of the creditors or class of creditors and/or of the stockholders
or class of stockholders, of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If
a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or
class of stockholders, of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization
of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the
said application has been made, be binding on all the creditors
or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also
on this Corporation.
TENTH: The following provisions are hereby adopted for the
regulation and management of the business and the conduct of the
affairs of the Corporation and for the purpose of creating,
limiting, defining and regulating the rights and powers of the
directors and of the stockholders, viz.:
(a) The Board of Directors shall have the power to
make, alter, amend and repeal the By-laws of the Corporation,
subject to the right of the stockholders entitled to vote with
respect thereto to alter and repeal By-laws made by the Board of
Directors.
(b) The Board of Directors shall have power to fix,
from time to time, the amount of the accumulated profits of the
Corporation to be reserved as working capital or for any other
lawful purpose.
(c) The Board of Directors shall have the power to
determine, from time to time, whether and to what extent and at
which times and places and under what conditions and regulations
the accounts and books of the Corporation, or any of them, shall
be open to the inspection of the stockholders; and no stockholder
shall have any right to inspect any account or book or document
of the Corporation, except as conferred by the laws of the State
of Delaware, unless and until authorized so to do by resolution
of the Board of Directors or stockholders of the Corporation.
(d) The Board of Directors shall have power, without
the assent or vote of the stockholders, to authorize and to cause
to be executed mortgages and liens upon the real and personal
property of the Corporation, including after-acquired property.
(e) Shares of capital stock of the Corporation of any
class or classes hereby or hereafter authorized, and any rights
or options entitling the holders thereof to purchase from the
Corporation any shares of its capital stock of any class or
classes or of any series of any class or classes, may be issued
by the Corporation from time to time for such consideration not
less than the par value thereof or, if they are without par
value, for such consideration as may be determined from time to
time by the Board of Directors. The Board of Directors shall
have authority, as provided by statute, to determine that only a
part of the consideration which shall be received by the
Corporation for any of the shares of its capital stock which it
shall issue from time to time shall be capital.
(f) In addition to the powers and authorities
hereinbefore or by statute expressly conferred upon them, the
Board of Directors may exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation;
subject, nevertheless, to the provisions of the laws of the State
of Delaware, of this Certificate and of the By-laws of the
Corporation.
ELEVENTH: The Corporation reserves the right to amend, alter,
change or repeal any provisions contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
TWELFTH: No holder of any stock of this Corporation shall be
entitled as a right to purchase or subscribe for any part of any
additional issue of shares of capital stock of the Corporation
authorized herein, or of any issue of any securities convertible
into any of such shares, and such shares may be issued or
disposed of by the Board of Directors to such persons, firms,
corporations or associations, and upon such terms and conditions
as the Board of Directors, in their discretion, may determine,
without offering any thereof on the same terms or on any terms to
the stockholders then of record or to any class of stockholders.
THIRTEENTH: To the full extent permitted by the General
Corporation Law of the State of Delaware or any other applicable
laws as presently or hereafter in affect, no Director of the
Corporation shall be personally liable to the Corporation or its
stockholders for or with respect to any acts or omissions in the
performance of his or her duties as a Director of the
Corporation. No amendment to or repeal of this Article
THIRTEENTH shall apply to or have any effect on the liability or
alleged liability of any Director of the Corporation for or with
respect to any acts or omissions of such Director occurring prior
to such amendment.
FOURTEENTH: Each person who is or was or had agreed to become
a Director or officer of the Corporation, or each such person who
is or was serving or had agreed to serve at the request of the
Board of Directors or an officer of the Corporation as an
employee or agent of the Corporation or as a Director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including the heirs,
executors, administrators or estate of such person), shall be
indemnified by the Corporation to the full extent permitted by
the General Corporation Law of the State of Delaware or any other
applicable laws as presently or hereafter in effect. Without
limiting the generality or effect of the foregoing, the
Corporation may enter into one or more agreements with any person
which provide for indemnification greater or, different than that
provided in this Article. No amendment to or repeal of this
Article FOURTEENTH shall apply to or have hereunder for or with
respect to claims asserted before or after such amendment or
repeal arising from acts or omissions occurring in whole or in
part before the effective date of such amendment or repeal.
[End]
<TABLE>
EXHIBIT 11
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Year Ended December 31
1996 1995 1994
(Dollars in thousands except per share data)
<S> <C> <C> <C>
Primary
Income from continuing operations
before extraordinary charge $ 59,162 $ 56,702 $ 37,004
Income(loss) from discontinued operations - 45,337 9,970
Extraordinary charge (5,352) - (3,680)
Net income $ 53,810 $ 102,039 $ 43,294
Average common shares outstanding 45,789,136 46,511,966 46,298,663
Net effect of dilutive stock options
and stock warrants - based on treasury
stock method using average market price - * - * - *
Total 45,789,136 46,511,966 46,298,663
Income(loss) per share
Continuing operations $ 1.29 $ 1.22 $ .80
Discontinued operations - .97 .21
Extraordinary charge (.11) - (.08)
Net income $ 1.18 $ 2.19 $ .93
Fully diluted
Income from continuing operations
before extraordinary charge $ 59,162 $ 56,702 $ 37,004
Income(loss) from discontinued operations - 45,337 9,970
Extraordinary charge (5,352) - (3,680)
Net income $ 53,810 $ 102,039 $ 43,294
Average common shares outstanding 45,789,136 46,511,966 46,298,663
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 1,147,177 1,030,605 898,413
Total 46,936,313 47,542,571 47,197,076
Income(loss) per share
Continuing operations $ 1.26 $ 1.19 $ .79
Discontinued operations - .95 .21
Extraordinary charge (.11) - (.08)
$ 1.15 $ 2.14 $ .92
* Not significant in 1996, 1995 and 1994.
</TABLE>
<TABLE>
EXHIBIT 13
CONSOLIDATED STATEMENTS OF INCOME
M.A. Hanna Company and Consolidated Subsidiaries
<CAPTION>
Year Ended December 31
Dollars in thousands except per share data 1996 1995 1994
<S> <C> <C> <C>
Net Sales $2,066,248 $1,901,954 $1,719,356
Costs and Expenses
Cost of goods sold 1,685,167 1,552,643 1,393,036
Selling, general and administrative 243,505 218,823 213,318
Interest on debt 20,033 26,278 28,549
Amortization of intangibles 14,313 13,969 12,458
Other - net 339 (8,580) 5,773
1,963,357 1,803,133 1,653,134
Income from Continuing Operations Before
Income Taxes and Extraordinary Charge 102,891 98,821 66,222
Income taxes 43,729 42,119 29,218
Income from Continuing Operations
Before Extraordinary Charge 59,162 56,702 37,004
Income from discontinued operations - 45,337 9,970
Extraordinary charge (5,352) - (3,680)
Net Income $ 53,810 $ 102,039 $ 43,294
Net Income Per Share
Primary
Continuing operations $ 1.29 $ 1.22 $ .80
Discontinued operations - .97 .21
Extraordinary charge (.11) - (.08)
Net income $ 1.18 $ 2.19 $ .93
Fully diluted
Continuing operations $ 1.26 $ 1.19 $ .79
Discontinued operations - .95 .21
Extraordinary charge (.11) - (.08)
Net income $ 1.15 $ 2.14 $ .92
See summary of accounting policies and notes to consolidated financial statements
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
M. A. Hanna Company and Consolidated Subsidiaries
<TABLE>
<CAPTION>
Year Ended December 31
Dollars in thousands 1996 1995 1994
<S> <C> <C> <C>
Cash Provided from (Used for) Operating Activities
Net income $ 53,810 $102,039 $ 43,294
Discontinued operations - 4,797 13,910
Depreciation and amortization 50,116 47,241 41,904
Companies carried at equity:
Income (6,058) (6,459) (6,112)
Dividends received 7,104 8,213 7,033
Changes in operating assets and liabilities:
Receivables 3,743 (23,212) (40,103)
Inventories 3,197 (10,934) (31,145)
Prepaid expenses (2,450) (2,031) 725
Trade payables and accrued expenses (1,978) 4,066 74,895
Gain from sales of assets - (84,427) -
Restructuring payments (13,157) (17,289) (10,540)
Other 8,248 11,911 12,664
Extraordinary charge 8,774 - 6,034
Net operating activities 111,349 33,915 112,559
Cash Provided from (Used for) Investing
Activities
Capital expenditures (49,532) (55,885) (46,982)
Acquisitions of businesses, less cash acquired (58,439) - (53,331)
Acquisition payments (1,805) (2,969) (4,106)
Sales of assets 11,928 223,500 13,874
Investments in associated and other companies (2,862) (4,775) -
Return of cash from associated and other companies 8,170 1,367 8,805
Purchase of short-term securities - (69,703) -
Sale of short-term securities - 69,703 5,061
Other 7 (7,211) 445
Net investing activities (92,533) 154,027 (76,234)
Cash Provided from (Used for) Financing
Activities
Cash dividends paid (18,291) (16,962) (15,688)
Proceeds from the sale of common stock 8,027 1,996 14,165
Purchase of shares for treasury (28,830) (24,969) (1,472)
Increase in debt 110,872 57,458 131,649
Reduction in debt (172,218) (118,622) (179,879)
Net financing activities (100,440) (101,099) (51,225)
Effect of exchange rate changes on cash 417 1,287 360
Cash and Cash Equivalents
Increase(decrease) (81,207) 88,130 (14,540)
Beginning of year 111,235 23,105 37,645
End of year $ 30,028 $111,235 $ 23,105
Cash Paid During Year
Interest $ 22,938 $ 26,724 $ 30,114
Income taxes 31,731 85,830 19,927
See summary of accounting policies and notes to consolidated financial statements
</TABLE>
CONSOLIDATED BALANCE SHEETS
M. A. Hanna Company and Consolidated Subsidiaries
<TABLE>
<CAPTION>
December 31
Dollars in thousands 1996 1995
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 30,028 $ 111,235
Receivables
Trade (less allowance of $7,572 in 1996
and $11,034 in 1995) 284,132 258,274
Other 9,493 9,742
293,625 268,016
Inventories
Finished products 134,655 126,411
Raw materials and supplies 44,509 40,390
179,164 166,801
Prepaid expenses 7,679 5,693
Deferred income taxes 23,043 22,867
Total current assets 533,539 574,612
Property, Plant and Equipment
Land 18,040 14,655
Buildings 108,322 95,941
Machinery and equipment 326,306 282,718
452,668 393,314
Less allowances for depreciation 198,261 166,293
254,407 227,021
Other Assets
Goodwill and other intangibles 355,538 321,778
Investments and other assets 70,678 73,067
Deferred income taxes 36,617 35,118
462,833 429,963
Total assets $1,250,779 $1,231,596
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $ 2,304 $ 1,328
Trade payables and accrued expenses 348,608 333,176
Current portion of long-term debt 1,027 747
Total current liabilities 351,939 335,251
Other Liabilities 182,852 179,580
Long-Term Debt
Senior notes 124,960 227,270
Other 82,745 4,717
207,705 231,987
Stockholders' Equity
Preferred stock, without par value:
authorized 5,000,000 shares:
issued and outstanding 0 shares in 1996 and 1995
Common stock, par value $1.00 per share:
authorized 100,000,000 shares (50,000,000 shares in 1995);
issued 65,261,907 shares in 1996 and 43,274,273
shares in 1995 65,262 43,274
Capital surplus 329,543 324,273
Retained earnings 417,228 381,709
Associates ownership trust (5,997,347
shares in 1996 and 4,301,006 shares in 1995) (134,704) (121,363)
Cost of treasury stock (14,272,092 shares
in 1996 and 8,631,355 shares in 1995) (165,675) (137,181)
Minimum pension liability adjustment (5,018) (7,522)
Accumulated translation adjustment 1,647 1,588
Total stockholders' equity 508,283 484,778
Total liabilities and stockholders' equity $1,250,779 $1,231,596
See summary of accounting policies and notes to consolidated financial statements
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
M. A. Hanna Company and Consolidated Subsidiaries
<CAPTION>
Dollars in thousands except per share data
Associates
Preferred Common Capital Retained Ownership
Stock Stock Surplus Earnings Trust
<S> <C> <C> <C> <C> <C>
Balance January 1, 1994 $ - $28,606 $299,389 $269,026 $(115,214)
Net income 43,294
Cash dividends - $.34 per share (15,688)
Exercise of stock options 61 1,335
Purchase of shares for treasury
Sale of common stock (25,383 shares) 25 706
Payment of incentive compensation awards
and associate benefits 3,115 13,246
Three-for-two common stock split 14,323 (14,323)
Adjustment to market value 9,503 (9,503)
Minimum pension adjustment
Translation adjustment
Balance December 31, 1994 - 43,015 299,725 296,632 (111,471)
Net income 102,039
Cash dividends - $.367 per share (16,962)
Exercise of stock options 228 4,678
Purchase of shares for treasury
Sale of common stock (30,502 shares) 31 755
Payment of incentive compensation awards
and associate benefits 595 8,628
Adjustment to market value 18,520 (18,520)
Minimum pension adjustment
Translation adjustment
Balance December 31, 1995 - 43,274 324,273 381,709 (121,363)
Net income 53,810
Cash dividends - $.402 per share (18,291)
Exercise of stock options 309 4,532
Purchase of shares for treasury
Sale of common stock (193,058 shares) 42 2,005 4,041
Payment of incentive compensation awards
and associate benefits 866 2,122
Three-for-two common stock split 21,637 (21,637)
Adjustment to market value 19,504 (19,504)
Minimum pension adjustment
Translation adjustment
Balance December 31, 1996 $ - $65,262 $329,543 $417,228 $(134,704)
Minimum
Pension Accumulated Total
Treasury Liability Translation Stockholders'
Stock Adjustment Adjustment Equity
<S> <C> <C> <C> <C>
Balance January 1, 1994 $(102,794) $(8,577) $(4,980) $365,456
Net income 43,294
Cash dividends - $.34 per share (15,688)
Exercise of stock options (38) 1,358
Purchase of shares for treasury (1,472) (1,472)
Sale of common stock (25,383 shares) 731
Payment of incentive compensation awards
and associate benefits 573 16,934
Three-for-two common stock split -
Adjustment to market value -
Minimum pension adjustment 1,315 1,315
Translation adjustment 2,984 2,984
Balance December 31, 1994 (103,731) (7,262) (1,996) 414,912
Net income 102,039
Cash dividends - $.367 per share (16,962)
Exercise of stock options (1,483) 3,423
Purchase of shares for treasury (33,008) (33,008)
Sale of common stock (30,502 shares) 786
Payment of incentive compensation awards
and associate benefits 1,041 10,264
Adjustment to market value -
Minimum pension adjustment (260) (260)
Translation adjustment 3,584 3,584
Balance December 31, 1995 (137,181) (7,522) 1,588 484,778
Net income 53,810
Cash dividends - $.402 per share (18,291)
Exercise of stock options (817) 3,286
Purchase of shares for treasury (28,830) (28,830)
Sale of common stock (193,058 shares) 6,088
Payment of incentive compensation awards
and associate benefits 1,153 4,879
Three-for-two common stock split -
Adjustment to market value -
Minimum pension adjustment 2,504 2,504
Translation adjustment 59 59
Balance December 31, 1996 $(165,675) $(5,018) $1,647 $508,283
See summary of accounting policies and notes to consolidated financial statements
</TABLE>
SUMMARY OF ACCOUNTING POLICIES
Dollars in thousands except per share data
PRINCIPLES OF CONSOLIDATION
Majority-owned subsidiaries are consolidated in the
financial statements and all significant intercompany
accounts and transactions have been eliminated.
Investments in less than majority-owned companies are
carried at cost adjusted for undistributed earnings and
losses since acquisition, or at cost.
REVENUE RECOGNITION
Revenues are recognized when a product is shipped or a
service is performed.
NET INCOME PER SHARE
Primary net income per share is computed by dividing net
income 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
when the shares are released from the AOT to fund
obligations under certain associate compensation and benefit
plans. The effect of assuming the exercise of stock options
(common stock equivalents) was not significant.
For fully-diluted net income per share, the number of shares
used for primary net income per share are increased by the
common stock equivalents which would arise from the exercise
of stock options. Weighted average shares outstanding
(fully diluted) for the years ended December 31, 1996, 1995
and 1994, restated for the June 1996 three-for-two stock
split, were 46,936,313, 47,542,571 and 47,197,076,
respectively.
CASH EQUIVALENTS AND SHORT-TERM SECURITIES
Cash equivalents are highly liquid investments with an
original purchased maturity of three months or less. Both
cash equivalents and short-term securities are stated at
cost, which approximates fair value.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company
to credit risk are trade accounts receivable and foreign
exchange contracts. Concentration of credit risk with
respect to trade accounts receivable is limited due to the
large number of customers comprising the Company's customer
base and their break down among many different industries
and geographical locations. The Company is exposed to
credit risk with respect to foreign exchange contracts in
the event of nonperformance by the counterparties to these
financial instruments, which are major financial
institutions. Management believes the risk of incurring
material losses related to this credit risk is remote.
INVENTORIES
Inventories are stated at the lower of cost or market.
Domestic inventories of $124,551 are valued principally by
the last-in, first-out (LIFO) cost method. Inventories of
international subsidiaries are valued by the first-in, first-
out (FIFO) method. The excess of current cost over LIFO
cost was $11,690 at December 31, 1996 and $13,469 at
December 31, 1995.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost.
Depreciation is computed principally by the straight-line
method. Estimated asset lives are:
Building and improvements 20 - 40 years
Machinery and equipment 5 - 10 years
Property items retired or otherwise disposed of are removed
from the property and related allowance for depreciation
accounts, and any gain or loss is included in operations.
GOODWILL AND INTANGIBLES
Goodwill is being amortized over 40 years by the straight-
line method. Other intangibles, net, of $16,007 and $21,174
at December 31, 1996 and 1995, respectively, are being
amortized on a straight-line basis over 4 to 40 years.
Accumulated amortization at December 31, 1996 and 1995 was
$99,505 and $85,845, respectively.
The carrying value of goodwill and other intangibles is
evaluated if circumstances indicate a possible impairment in
value. If undiscounted cash flows over the remaining
amortization period indicate that goodwill and other
intangibles may not be recoverable, the carrying value of
goodwill and other intangibles will be reduced by the
estimated shortfall of cash flows on a discounted basis.
INCOME TAXES
Deferred tax liabilities and assets are determined based on
the differences between financial reporting and tax basis 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
reported financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
FOREIGN CURRENCY TRANSLATIONS
Assets and liabilities of international affiliates are
translated at current exchange rates. Related translation
adjustments are reported as a component of stockholders'
equity. Revenues and expenses are translated at the average
rates in effect during the period.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
M. A. Hanna Company and Consolidated Subsidiaries
ACQUISITIONS
In January 1996, the Company announced the successful
completion of its tender offer for the outstanding stock of
CIMCO, Inc., a producer of thermoplastic compounds and
plastic components. Consistent with its strategy as an
intermediary between the polymer producer and the end product
manufacturer, the Company announced that it would sell
CIMCO's plastic components business. Accordingly, the assets
of the plastic components business were recorded at net
realizable value and future operating losses were recorded
within the purchase price accounting. The sale of the
plastic components business was consummated in June 1996.
In March 1996, the Company acquired Victor International
Plastics Limited, a leading producer of color masterbatch in
the United Kingdom. In addition, the Company acquired the
United States based custom rubber mixing operations of Chase
Elastomer in November 1996. These acquisitions were
accounted for using the purchase method of accounting. Had
the acquisitions been made at the beginning of 1995, reported
pro forma results of operations for 1996 and 1995 would not
be materially different.
DISCONTINUED OPERATIONS
In December 1994, the Company adopted a plan to sell its Day
International printing and textile business. The business
consists of the manufacturing of printing blankets and other
consumable supplies for the printing industry and the
manufacturing of engineered consumable supplies for the
textile industry. In April 1995, the Company announced it
had entered into an agreement to sell the business to
American Industrial Partners Capital Fund. The sale
consummated on June 6, 1995 with the Company realizing an
after-tax gain of $40,254.
Summary operating results of this discontinued business are
as follows:
1995 1994
Net sales $55,454 $120,083
Income from operations
before income taxes $ 9,075 $ 18,891
Income taxes 3,992 7,806
5,083 11,085
Gain(loss) net of income taxes
on sale 40,254 (1,115)
$45,337 $ 9,970
INCOME TAXES
Income taxes from continuing operations consist of the
following:
1996 1995 1994
Current:
Federal $24,613 $26,311 $20,740
State 4,022 4,541 4,664
Foreign 8,505 6,311 4,809
37,140 37,163 30,213
Deferred:
Federal 4,055 3,704 110
State 759 497 (1,023)
Foreign 1,775 755 (82)
6,589 4,956 (995)
$43,729 $42,119 $29,218
The provision for income taxes from continuing operations
differs from the amount computed by applying the U.S.
statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
1996 1995 1994
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Provision at statutory tax rate $36,012 35.0% $34,587 35.0% $23,178 35.0%
State income taxes 3,108 3.0 3,274 3.3 2,367 3.6
Goodwill amortization 2,811 2.7 2,613 2.6 2,784 4.2
Utilization of capital loss
and tax credit carryforwards - - - - (1,820) (2.7)
Other - net 1,798 1.8 1,645 1.7 2,709 4.0
$43,729 42.5% $42,119 42.6% $29,218 44.1%
</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 international
subsidiaries and joint ventures as these earnings are
considered indefinitely reinvested. The Company may
consider repatriating these earnings, if at some future time
the distribution results in no incremental tax cost.
Significant components of the Company's deferred tax assets
(liabilities) are as follows:
1996 1995
Basis differences from purchase accounting $(5,481) $(9,359)
Property, plant and equipment (13,769) (14,186)
Other postretirement benefits 32,956 32,640
Associate benefits 17,121 21,152
Restructuring and plant closedown costs 4,611 4,483
Environmental costs 7,079 6,816
Inventory and receivable allowances 3,830 6,256
Other 13,313 10,183
$59,660 $57,985
Income from continuing operations before income taxes
includes $26,980, $17,577 and $12,624 in 1996, 1995, and
1994, respectively, from international operations.
LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
1996 1995
9% Senior notes due 1998 $ 37,185 $109,245
9.375% Senior notes due 2003 87,775 118,025
6.875% Medium-term notes due 2004 20,000 -
Bank borrowings 55,148 -
Other 8,624 5,464
208,732 232,734
Less current portion 1,027 747
$207,705 $231,987
Annual maturities of long-term debt for the next five years
are: 1997--$1,027; 1998--$40,481; 1999--$694; 2000--$707 and
2001--$721.
In June 1996, the Company filed a shelf registration
statement with the Securities and Exchange Commission to sell
up to $300 million of debt securities. On December 6, 1996,
the Company issued $20 million of notes due in December 2004
at a rate of 6.875%. Interest is paid semi-annually.
Subsequent to December 31, 1996, the Company entered into a
new revolving credit agreement with a group of financial
institutions replacing an existing facility which would have
expired in June 1998. The new agreement provides for
borrowings up to $200 million through January 2002 with
interest rates determined at the time of the borrowing based
on a choice of formulas specified in the agreement. There
were no borrowings under these agreements at December 31,
1996 and 1995. At December 31, 1996, the Company had
$55,148 of borrowings from uncommitted bank lines at interest
rates ranging from 5.70% to 7.70% and a weighted average
interest rate of 6.49%.
Other debt at December 31, 1996 and 1995 consists primarily
of mortgages, industrial revenue bonds, and notes. These
obligations mature in various installments through September
2005 and are at interest rates ranging from 3.50% to 9.50%.
The Company also had $2,304 and $1,328 of outstanding notes
payable to banks at December 31, 1996 and 1995 at weighted
average interest rates of 9.75% and 8.37%, respectively.
In 1996, 1995 and 1994, the Company repurchased $102,310,
$8,500 and $64,230, respectively, principal amount of Senior
Notes in the open market, resulting in an extraordinary
charge of $8,774 in 1996 and $6,034 in 1994 ($5,352 and
$3,680 after tax, respectively).
The Senior Note agreements contain certain restrictions and
conditions among which are limitations on cash dividends and
other payments. Under the most restrictive of these
agreements, approximately $199,049 of retained earnings was
free of such limitations at December 31, 1996.
STOCKHOLDERS' EQUITY
In June 1996, the Company issued 21,636,612 shares of common
stock to effect a three-for-two stock split. The par value
($1 per share) of the additional shares issued was charged to
capital surplus. All share and per share amounts have been
retroactively restated for the three-for-two stock split in
1996.
The Associates Ownership Trust (AOT) acquired shares of
common stock from the Company in 1991 for a promissory note
in the amount of $100,049. The shares acquired are to fund a
portion of the Company's obligations under certain of its
associate compensation and associate benefit plans for the 15-
year term of the AOT. Such shares are adjusted at each
balance sheet date to their respective market value with an
offsetting adjustment to capital surplus.
Under the Company's Stock Purchase Rights Plan each Right
entitles the holder of common stock to buy from the Company
one one-hundredth of a share of Cumulative Series A Preferred
Stock, without par value for $95, 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.
The Company's 1988 Long-Term Incentive Plan provides for the
granting of options, including options to nonassociate
directors, up to 4,942,913 shares. The exercise price of
each option equals the market price of the Company's stock on
the date of grant; options have a life of ten years. Options
vest according to a graded vesting schedule of one-third one
year from the date of grant, one-third two years from the
date of grant and one-third three years from the date of
grant.
The Company applies the intrinsic value based method of
accounting prescribed by APB Opinion No. 25 for this plan.
Accordingly, no compensation expense has been recognized for
its fixed stock option plan as options are granted at fair
market value. Had compensation expense for the Company's
stock based compensation plan been determined based on the
fair value at the grant dates for awards under that plan
consistent with the method of FAS No. 123, the Company's 1996
net income, primary earnings per share and fully diluted
earnings per share amounts would have been reduced to
$53,065, $1.16 and $1.13, respectively. The effect on 1995
net income and earnings per share amounts was not material.
The imputed fair value of each option grant is estimated on
the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions used
for grants in 1996 and 1995, respectively: dividend yield of
2.08% and 2.56%; expected volatility of 22.6% and 27.4%; risk-
free interest rate of 6.25% for all years and expected life
of ten years for all years.
The following table summarizes the changes in the outstanding
options for the three years ended December 31, 1996:
<TABLE>
<CAPTION>
1996 1995 1994
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 2,821,484 $12.39 2,762,360 $11.05 2,369,471 $10.04
Granted 456,521 21.15 422,198 17.33 514,370 14.97
Exercised (309,131) 8.39 (342,416) 7.60 (115,980) 7.61
Canceled or expired (17,640) 15.49 (20,658) 14.23 (5,501) 13.39
Outstanding at
end of year 2,951,234 14.14 2,821,484 12.39 2,762,360 11.05
Options exercisable
at end of year 1,862,317 1,713,188 1,648,689
Weighted-average
fair value of
options granted during
the year $7.54 $6.82
</TABLE>
The following table summarizes information about options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted Average Weighted Weighted
Range of Options Remaining Average Options Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
<S> <C> <C> <C> <C> <C>
$ 5.963 to $ 8.500 367,256 1.8 years $ 7.70 367,256 $ 7.70
9.778 to 13.667 1,233,663 4.7 years 12.07 1,106,420 11.89
14.750 to 16.945 485,807 7.0 years 14.92 244,328 14.94
17.333 to 23.083 864,508 9.4 years 19.38 144,313 17.35
2,951,234 1,862,317
At December 31, 1996, 589,111 shares were available for grants.
</TABLE>
BUSINESS SEGMENTS
The Company operates principally in the formulated polymers
industry which consists of two major segments - processing
and distribution. Processing includes production of custom
plastic and rubber compounds and custom formulated colorants
for the plastics industry. Distribution includes
distributors of thermoplastic and thermoset resins and
fiberglass materials and distributors of engineered plastic
shapes. Sales are made through the Company's organization,
distributors and representatives.
Other operations include the Company's diversified polymer
products business, its marine and insurance operations and
management fees. The Company was the Managing Agent for Iron
Ore Company of Canada (IOC) through December 1996 and through
May 1995 owned approximately 8% of IOC's common stock. The
sale of the Company's investment in IOC resulted in a pre-tax
gain of $9,334 in 1995. IOC incurred management expense of
$3,061 in 1996 ($3,162 in 1995 and $3,064 in 1994) payable to
the Company and commission expense of $6,035 in 1996 ($5,169
in 1995 and $4,302 in 1994) payable to 50% owned companies
carried at equity.
Net sales, operating profit and identifiable assets by
geographic area are as follows:
1996 1995 1994
Net sales
Domestic $1,637,252 $1,579,424 $1,475,277
International
Europe 234,263 187,790 130,461
Other 194,733 134,740 113,618
$2,066,248 $1,901,954 $1,719,356
Operating profit
Domestic $ 116,091 $ 112,919 $ 104,484
International
Europe 16,154 13,982 10,565
Other 15,450 10,274 6,764
$ 147,695 $ 137,175 $ 121,813
Identifiable assets
Domestic $ 950,441 $ 991,667 $ 868,201
International
Europe 201,364 175,767 180,842
Other 98,974 64,162 62,902
Discontinued operations - - 103,215
$1,250,779 $1,231,596 $1,215,160
<TABLE>
<CAPTION>
Depreciation
Operating and Capital Identifiable
Net Sales Profit Amortization Expenditures Assets
<S> <C> <C> <C> <C> <C>
1996
Processing $1,129,962 $ 96,691 $42,660 $42,778 $ 758,314
Distribution 926,230 40,497 5,909 6,140 360,564
Other 32,473 10,507 746 157 7,926
Intersegment activity (22,417) - - - -
Corporate - (24,771) 801 457 123,975
$2,066,248 $122,924 $50,116 $49,532 $1,250,779
1995
Processing $1,023,672 $ 92,404 $39,745 $49,542 $ 656,655
Distribution 862,077 35,509 5,991 3,804 354,599
Other 33,421 9,262 890 250 16,323
Intersegment activity (17,216) - - - -
Corporate - (12,076)(1) 615 760 204,019
Discontinued operations - - - 1,529 -
$1,901,954 $125,099 $47,241 $55,885 $1,231,596
1994
Processing $ 942,999 $ 88,175 $34,254 $36,193 $ 615,715
Distribution 766,711 24,086 6,368 3,363 345,929
Other 32,129 9,552 823 - 16,751
Intersegment activity (22,483) - - - -
Corporate - (27,042) 459 3,862 133,550
Discontinued operations - - - 3,564 103,215
$1,719,356 $ 94,771 $41,904 $46,982 $1,215,160
(1) Includes $9,334 gain from sale of assets.
</TABLE>
PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company has noncontributory 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 (including stock of the
Company), 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 pension cost for the
defined benefit plans and the total contributions charged to
expense for the defined contribution plans follows:
1996 1995 1994
Defined benefit plans
Service cost $ 430 $ 306 $ 743
Interest cost on projected
benefit obligation 5,911 6,161 5,838
Return on plan assets (6,933) (6,215) (5,073)
Net amortization and deferral 1,735 1,869 930
Net pension cost 1,143 2,121 2,438
Defined contribution plans 5,213 5,006 3,785
$6,356 $7,127 $6,223
The Company has 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
intangible assets recognized may not exceed the amount of
unrecognized prior service cost plus unrecognized
obligations at transition that remain at December 31 each
year, the balance of the liability at the end of 1996 and
1995 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
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations
including vested benefits of
$75,799 in 1996 and $80,996 in 1995 $46,155 $48,369 $31,540 $34,442
Projected benefit obligation $47,494 $49,617 $31,873 $34,966
Plan assets at fair value 44,455 37,804 42,251 41,198
Projected benefits in excess of
(less than) plan assets 3,039 11,813 (10,378) (6,232)
Consisting of:
Unrecognized net transition obligation 797 994 150 143
Unrecognized net actuarial (gains) or losses 10,244 14,507 (5,861) (3,411)
Adjustment to recognize minimum liability 9,870 14,334 - -
Accrued(prepaid) pension cost
recognized in balance sheet $ 1,868 $10,646 $(4,667) $(2,964)
</TABLE>
The projected benefit obligation was determined using an
assumed discount rate of 7.75% (7.25% in 1995) and an
assumed long-term rate of increase in compensation of 5%.
The assumed long-term rate of return on plan assets is 8.5%.
The 1996 change in the discount rate caused the accumulated
benefit obligation to decrease approximately $3,605.
In addition to providing pension benefits, the Company
provides certain contributory and noncontributory health
care and life insurance benefits for certain retired
associates. Certain associates of the Company may become
eligible for these postretirement benefits if they reach
retirement age while working for the Company.
The status of the Company's plans, which are unfunded, at
December 31, 1996 and 1995 is as follows:
1996 1995
Accumulated postretirement benefit obligation
Retirees $49,128 $53,924
Fully eligible active plan participants 4,931 4,421
Other active plan participants 9,425 10,528
63,484 68,873
Unrecognized actuarial gain 21,019 14,819
Accrued postretirement benefit obligation $84,503 $83,692
Net periodic postretirement benefit cost includes the
following components:
1996 1995 1994
Service cost $1,060 $ 915 $1,069
Interest cost 4,863 5,196 5,605
Amortization of unrecognized actuarial gain (425) (799) -
Net periodic postretirement benefit cost $5,498 $5,312 $6,674
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 9.0% at December 31, 1996 and
11.5% at December 31, 1995 and decreasing gradually to 5.25%
in 2005 (5.25% in 2009 in 1995) 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 $9,377 at December 31,
1996 and the aggregate service and interest costs components
of net periodic postretirement benefit costs for 1996 by
$1,076.
A discount rate of 7.75% (7.25% in 1995) was used in
determining the accumulated benefit obligation. The change
in the actuarial assumptions caused the accumulated benefit
obligation to decrease approximately $5,900.
FINANCIAL INSTRUMENTS
The Company conducts business in various foreign currencies.
As a result, it is subject to transaction exposures that
arise from foreign exchange movements between the date that
the foreign currency transaction is recorded and the date it
is consummated. These foreign exchange contracts do not
subject the Company's results to risk due to exchange rate
movements because gains and losses on these contracts
generally offset gains or losses on the assets and
liabilities being hedged. The Company has a policy of
entering into firm intercompany lending transactions and
hedging the foreign exchange exposure through foreign
exchange contracts. The Company has entered into such cross-
currency foreign exchange contracts with maturities of up to
three years to protect the Company from the risk that the
future intercompany cash flows will be adversely affected by
changes in exchange rates. Gains and losses on these
positions are deferred and included in the basis of the
transaction when it is completed. The Company does not hold
or issue financial instruments for trading purposes.
The table below summarizes by currency the contractual
amounts of the Company's foreign exchange contracts at
December 31, 1996. Foreign currency amounts are translated
at exchange rates as of December 31, 1996. The "Buy" amounts
represent the U.S. dollar equivalent of commitments to
purchase foreign currencies, and the "Sell" amounts represent
the U.S. dollar equivalent of commitments to sell foreign
currencies.
Buy Sell
Currency
German deutschmark $ - $44,312
French franc - 10,646
Australian dollar 3,833 -
Belgian franc 3,370 -
British pound sterling - 2,907
Other 2,902 993
$10,105 $58,858
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 amounts reported in the balance sheet approximate
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 and Medium-term Notes is
based on quoted market prices. The carrying amount of the
Company's borrowings under its variable interest rate long-
term revolving credit agreements and other long-term
borrowings approximates fair value.
Foreign Exchange Contracts: The fair value of short-term
foreign exchange contracts is based on exchange rates at
December 31, 1996. The fair value of long-term foreign
exchange contracts is based on quoted market prices.
The carrying amounts and fair values of the Company's
financial instruments at December 31, 1996 and 1995 are as
follows:
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and cash equivalents $30,028 $30,028 $111,235 $111,235
Notes payable to banks 2,304 2,304 1,328 1,328
Long-term debt
9% Senior Notes 37,185 38,784 109,245 117,471
9.375% Senior Notes 87,775 98,958 118,025 138,951
6.875% Medium-Term Notes 20,000 19,762 - -
Bank borrowings 55,148 55,148 - -
Other 8,624 8,624 5,464 5,464
Foreign exchange contracts - 1,025 - (2,372)
LEASE COMMITMENTS
Rental expense under operating leases for certain
manufacturing facilities, warehouses, transportation
equipment and data processing and office equipment was
$18,646 in 1996, $17,843 in 1995 and $16,890 in 1994.
Certain of the Company's leases have options to renew, and
there are no significant contingent rentals.
At December 31, 1996, future minimum lease commitments for
noncancelable operating leases are $13,644 in 1997, $10,629
in 1998, $8,227 in 1999, $5,573 in 2000, $4,559 in 2001 and
$13,525 thereafter.
CONTINGENCIES
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
anticipated in the determination of the reserves. In
management's opinion, the aforementioned claims will be
resolved without material adverse effect on the financial
position, results of operations or cash flows of the Company.
LITIGATION
The Company is engaged in legal proceedings arising in the
ordinary course of business. The Company believes that the
ultimate outcome of these proceedings will not have material
adverse impact on the Company's financial position, results
of operations or cash flows.
OTHER - NET
Other - net includes the following:
1996 1995 1994
Interest and dividends $(1,578) $(4,809) $(3,025)
Gain on sale of assets - (9,334) -
Expenses of closed facilities 4,160 4,854 5,930
Restructuring costs - - 865
Other (2,243) 709 2,003
$ 339 $(8,580) $ 5,773
DETAIL OF CURRENT AND OTHER LIABILITIES
Trade payables and accrued expenses and other liabilities at
December 31 are comprised of the following items. Associate
benefit accruals include employee health, life and disability
insurance, profit sharing and incentive compensation, pension
expense, workers' compensation costs and vacation pay.
1996 1995
Trade payables and accrued expenses:
Trade payables $217,142 $188,265
Salaries and wages 14,760 16,288
Associate benefits 37,510 35,124
Restructuring and acquisition costs 11,803 13,540
Other postretirement benefits 4,970 4,532
Other liabilities:
Plant closedown costs 12,933 11,864
Environmental costs 16,097 14,217
Associate benefits 28,036 32,891
Other postretirement benefits 79,533 79,160
SUPPLEMENTAL CASH FLOW DATA
The following is a summary of noncash investing and financing
activities.
1996 1995 1994
Acquisition of businesses
Assets acquired $130,712 $70,456
Liabilities assumed 68,574 13,752
Cash paid 62,138 56,704
Less cash acquired 3,699 3,373
$ 58,439 $53,331
Debt of companies acquired $ 19,106 $ 4,692
Payment of incentive compensation
awards with treasury stock $ 2,019 $ 1,636 $ 990
Payment of stock options exercised
with shares of common stock $ 817 $ 1,483 $ 38
Release of common stock held by
Associates Ownership Trust $ 2,122 $ 8,628 $13,246
Transfer of common stock released
from Associates Ownership Trust
to treasury stock $(8,039)
Quarterly Financial and Stock Price Data
M.A. Hanna Company and Consolidated Subsidiaries
<TABLE>
Summarized unaudited quarterly financial and stock price data for 1996 and 1995 are as follows:
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1996
Net sales $497,451 $537,348 $531,928 $499,521
Gross margin 91,456 98,595 95,777 95,253
Income
Continuing operations 13,353 15,658 15,442 14,709
Extraordinary charge (1,575) (3,777) - -
Net income 11,778 11,881 15,442 14,709
Income per common share (fully diluted)
Continuing operations .28 .33 .33 .32
Extraordinary charge (.03) (.08) - -
Net income .25 .25 .33 .32
Price range
High 23.58 24.08 22.88 23.13
Low 17.75 20.13 18.38 20.75
Cash dividends paid .097 .10 .10 .105
1995
Net sales $492,772 $483,295 $464,078 $461,809
Gross margin 90,504 90,077 85,032 83,698
Income
Continuing operations 12,014 19,360 13,311 12,017
Discontinued operations 2,931 42,406 - -
Net income 14,945 61,766 13,311 12,017
Income per common share (fully diluted)
Continuing operations .25 .41 .28 .26
Discontinued operations .06 .89 - -
Net income .31 1.30 .28 .26
Price range
High 17.25 18.33 20.00 18.67
Low 15.33 16.00 17.17 15.67
Cash dividends paid .09 .09 .09 .097
Income per share calculations for each of the quarters are based on the weighted average number
of shares outstanding for each quarter, and the sum of the quarters may not necessarily be equal
to the full year income per share amount.
</TABLE>
SELECTED FINANCIAL DATA
M. A. Hanna Company and Consolidated Subsidiaries
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Summary of Operations
Net sales $ 2,066,248 $ 1,901,954 $ 1,719,356 $ 1,412,071 $ 1,188,541 $ 1,006,638
Cost of goods sold 1,685,167 1,552,643 1,393,036 1,146,191 961,925 797,892
Selling, general and administrative 243,505 218,823 213,318 179,228 152,366 147,998
Amortization of intangibles 14,313 13,969 12,458 12,006 11,069 10,146
Interest on debt 20,033 26,278 28,549 32,258 32,509 23,221
Income(loss) from continuing operations before
income taxes, extraordinary charge and cumulative
effect of changes in accounting principles 102,891 98,821 66,222 37,654 27,005 (16,195)
Income taxes 43,729 42,119 29,218 16,357 8,819 8,225
Income(loss) from continuing operations before
extraordinary charge and cumulative effect
of changes in accounting principles 59,162 56,702 37,004 21,297 18,186 (24,420)
Net income 53,810 102,039 43,294 2,018 19,025 1,875
Per share of common stock
Income(loss) from continuing operations 1.29 1.22 .80 .46 .42 (.48)
Net income 1.18 2.19 .93 .05 .44 .01
Dividends paid .40 .37 .34 .32 .29 .28
Cash dividends paid on
Common stock 18,291 16,962 15,688 14,003 12,630 15,267
Preferred stock - - - - - 1,031
Balance Sheet
Current assets $ 533,539 $ 574,612 $ 565,615 $ 405,782 $ 416,739 $ 275,060
Current liabilities 351,939 335,251 337,491 259,680 229,327 195,610
Working capital 181,600 239,361 228,124 146,102 187,412 79,450
Property, plant and equipment - net 254,407 227,021 204,135 184,296 195,117 184,877
Other assets 462,833 429,963 445,410 438,628 440,873 443,702
Net long-term assets of discontinued operations - - - 94,904 99,836 121,374
Other liabilities (182,852) (179,580) (173,888) (176,422) (174,558) (118,082)
Long-term debt (207,705) (231,987) (288,869) (322,052) (350,737) (330,863)
Total stockholders' equity $ 508,283 $ 484,778 $ 414,912 $ 365,456 $ 397,943 $ 380,458
Shares of common stock outstanding 50,989,815 51,964,377 53,541,141 53,417,283 52,650,162 51,367,613
Average fully diluted shares outstanding 46,936,313 47,542,571 47,197,076 46,757,985 44,494,047 54,479,369
Book value per share of common stock $ 9.97 $ 9.33 $ 7.75 $ 6.84 $ 7.56 $ 7.41
1990 1989 1988
<S> <C> <C> <C>
Summary of Operations
Net sales $ 960,228 $ 918,276 $ 797,563
Cost of goods sold 749,071 718,636 614,465
Selling, general and administrative 137,674 135,741 128,573
Amortization of intangibles 9,704 8,886 6,456
Interest on debt 18,301 21,128 23,622
Income(loss) from continuing operations before
income taxes, extraordinary charge and cumulative
effect of changes in accounting principles 44,023 44,797 28,554
Income taxes 12,830 7,608 4,107
Income(loss) from continuing operations before
extraordinary charge and cumulative effect
of changes in accounting principles 31,193 37,189 24,447
Net income 55,871 86,920 83,223
Per share of common stock
Income(loss) from continuing operations .50 .61 .33
Net income .90 1.49 1.55
Dividends paid .25 .20 .15
Cash dividends paid on
Common stock 15,175 11,812 7,169
Preferred stock - 2,125 8,501
Balance Sheet
Current assets $ 276,711 $ 264,772 $ 240,029
Current liabilities 181,471 167,272 166,185
Working capital 95,240 97,500 73,844
Property, plant and equipment - net 183,536 173,477 154,477
Other assets 458,394 444,479 406,426
Net long-term assets of discontinued operations 129,869 137,304 141,552
Other liabilities (161,674) (175,310) (169,470)
Long-term debt (137,691) (134,834) (137,725)
Total stockholders' equity $ 567,674 $ 542,616 $ 469,104
Shares of common stock outstanding 59,906,358 62,524,211 48,496,907
Average fully diluted shares outstanding 63,121,700 63,498,519 62,772,741
Book value per share of common stock $ 9.47 $ 8.68 $ 7.61
Shareowner Information
M.A. Hanna Company common stock is listed on the New York and Chicago stock exchanges under the symbol MAH.
At December 31, 1996, the number of shareowners of record of the Company's common stock was 4,484.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues in 1996 exceeded $2 billion and established a new
record for your Company. The revenue increase of 8.6% in
1996 was leveraged into a 16.0% increase in earnings from
continuing operations. Significant strategic objectives
were also reached in 1996. Your Company consummated three
acquisitions which expanded its product portfolio and
increased its international presence. Your Company opened a
new rubber compounding facility and currently has three
additional facilities under construction - a domestic
colorant facility and two facilities in China - one
dedicated to colorants and one dedicated to plastic
compounding.
1996 Compared with 1995
Net sales were a record $2,066.2 million, an increase of
8.6% over 1995. Sales from processing businesses increased
from $1,023.7 million in 1995 to $1.130.0 million in 1996 or
an increase of 10.4%. Excluding acquisitions, sales from
processing businesses were $1,015.0 million, down .8% from
1995 due to lower volumes, particularly in rubber
compounding which experienced a decline in spot tire and
toll compounding. Distribution revenues increased 7.4% to
$926.2 million in 1996 compared with $862.1 million in 1995
based on higher volumes, partially offset by lower pricing.
Sales from other operations were comparable with 1995
levels. Included in other operations are $4.9 million in
revenues from the management of Iron Ore Company of Canada
and our ownership interest in a related sales agency. No
revenues will be earned in 1997 from these activities due to
the expiration of our management contract and the sale of
our ownership interest in the sales agency, which will close
in the first half of 1997.
Cost of goods sold increased $132.5 million to $1,685.2
million in 1996 corresponding with the increase in sales.
Gross margins in both years were 18.4%. Impacting gross
margins was a reduction in LIFO reserves of $1.8 million in
1996 compared with a LIFO charge of $3.3 million in 1995.
In addition, acquisitions in 1996 had a negative impact on
gross margins of .5% points.
Selling, general and administrative expenses increased $24.7
million in 1996 to $243.5 million. The increase is
attributable to the higher level of sales, acquisitions made
in 1996, increased costs associated with the development of
HannaLinkTM, the Company's information system, and higher
costs associated with the Company's incentive compensation
programs. Selling, general and administrative expenses as a
percentage of sales were 11.8% in 1996 compared with 11.5%
in 1995.
Interest on debt decreased from $26.3 million in 1995 to
$20.0 million in 1996 due to lower average borrowings
outstanding. During 1996, the Company repurchased $102.3
million of its Senior Notes in the open market, resulting in
an extraordinary charge of $8.8 million ($5.4 million after-
tax). Funds to repurchase the Senior Notes were obtained
from existing cash flows as well as borrowings under
uncommitted bank lines, which carry a lower rate of
interest.
Other income in 1995 includes a gain of $9.3 million from
the sale of the Company's remaining interest in IOC and
higher levels of interest income due to the funds invested
from the sale of IOC and Day International.
1995 Compared with 1994
Sales from processing businesses increased $80.7 million
from 1994 levels due to acquisitions consummated in 1994 and
higher pricing partially offset by lower unit volumes.
Distribution sales increased $95.4 million to $862.1 million
in 1995 due to higher pricing and higher unit volumes.
Sales from other operations were comparable with 1994
levels.
Cost of goods sold increased from $1,393.0 million in 1994
to $1,552.6 million in 1995 due to higher raw material
costs, partially offset by lower unit volumes. Gross
margins were 18.4% in 1995 and 19.0% in 1994. The
deterioration in gross margin is due in part to the mix of
sales between processing and distribution businesses.
Distribution businesses, which carry a lower gross margin,
had a higher overall growth rate in sales than the
processing businesses. In addition, although the Company
was able to pass through most raw material price increases,
it was not able to maintain the comparable historical gross
margin relationship.
Selling, general and administrative expenses, as a
percentage of sales, were 11.5% in 1995 compared with 12.4%
in 1994. Selling, general and administrative costs
increased 2.6% or $5.5 million from 1994 levels due to a
higher level of sales and acquisitions consummated in 1994,
partially offset by lower costs associated with the
Company's incentive compensation programs.
Other - net in 1995 includes a gain of $9.3 million from the
sale of the Company's remaining interest in IOC and higher
levels of interest income due to the funds invested from the
sale of IOC and Day International. Other - net in 1994
includes a $2.6 million charge related to the relocation of
the Company's technical center and costs associated with the
combination of the Company's resin distribution businesses.
Interest on debt decreased $2.3 million to $26.3 million in
1995. During 1994, the Company repurchased $64.2 million of
its Senior Notes in the open market. An additional $8.5
million of its Senior Notes were repurchased in 1995 and the
financing for the 1994 acquisition of Th. Bergmann was
repaid in 1995.
The Company's effective tax rate was 42.6% in 1995 and 44.1%
in 1994. The tax rate in 1995 was favorably impacted by 1.6%
points due to the relationship of the level of nondeductible
goodwill to pre-tax income.
In December 1994, the Company adopted a plan to sell its Day
International printing and textile business and, accordingly,
the operating results of that business were reclassified as
discontinued operations. The sale of the Day business was
consummated in June 1995 with the Company recognizing a gain
of $40.3 million.
LIQUIDITY AND SOURCES OF CAPITAL
Operating activities generated cash flows of $111.3 million
in 1996. Working capital provided $2.5 million in 1996
reflecting higher inventory turns and days payable
outstanding, partially offset by higher day sales
outstanding. Payments of obligations related to prior
restructurings used $13.2 million. Excluding the payments
on the restructuring obligations, operating activities
provided $124.5 million, more than two times earnings from
continuing operations of $59.2 million. Investment
activities used $92.5 million and include $49.5 million for
capital expenditures and $58.4 million for acquisitions,
partially offset by $11.5 million from the sale of the
molding operations of CIMCO which were acquired in 1996.
Financing activities utilized $100.4 million and include
$18.3 million for the payment of dividends, $28.8 million
for the purchase of shares for treasury which represents 1.4
million shares, and $61.3 million in the net reduction of
debt, partially offset by $8.0 million from the sale of
common stock. During 1996, the Company repurchased $102.3
million of its Senior Notes in the open market. Funds to
repurchase the Senior Notes were obtained from existing cash
flows and borrowings under uncommitted bank lines, which
carry a lower rate of interest.
During 1996, the Company filed a shelf registration
statement with the Securities and Exchange Commission to
sell up to $300 million in debt securities. It is
anticipated that the net proceeds from the sale would be
used for general corporate purposes, which could include
repayment of indebtedness, repurchase of common stock,
working capital, capital expenditures or acquisitions. At
December 31, 1996 the Company had issued $20 million of
medium-term notes.
Subsequent to December 31, 1996, the Company entered into
a new revolving credit facility, replacing an existing
credit facility that would have expired in June 1998. The
new facility provides for borrowings up to $200 million
and expires in January 2002. The agreement provides for
interest rates to be determined at the time of borrowing
based on a choice of formulas specified in the agreement.
The current ratio was 1.5:1 at December 31, 1996 compared
with 1.7:1 at December 31, 1995. Debt to total capital was
29.0% at December 31, 1996 and 32.4% at December 31, 1995.
The Company believes that its existing cash balances, its
ability to generate cash flows from operations and the
availability of funds under existing credit facilities will
be sufficient to fund the cost of acquisitions, to meet
anticipated capital expenditure programs, payment of
obligations from prior restructurings, dividends and other
planned financial commitments in 1997 and throughout the terms 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
releases of hazardous materials into the environment as well
as to the remediation of identified existing environmental
concerns.
Claims have been made against a subsidiary of the Company
for 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 anticipated in the determination of
reserves. While it is not possible to predict with
certainty, management believes that the aforementioned
claims will be resolved without material adverse effect on
the financial position, liquidity or results of operations
of the Company.
OUTLOOK
Any forward looking statements included in this annual
report are based on current expectations. Any statements in
this annual report that are not historical in nature are
forward looking statements. Actual results may differ
materially depending on the business conditions and growth
in the plastics and rubber industries and general economy,
foreign, political and economic developments, availability
and pricing of raw materials, changes in product mix, shifts
in market demand and changes in prevailing interest rates.
On behalf of M.A. Hanna Management,
/s/ Michael S. Duffey
Michael S. Duffey
Vice President and Chief Financial Officer
Report of Independent Accountants
To the Board of Directors and Stockholders of M.A. Hanna Company
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of income, of stockholders'
equity and of cash flows present fairly, in all material
respects, the financial position of M.A. Hanna Company and its
subsidiaries at December 31, 1996 and 1995, and the results of
their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted
auditing standards which 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, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above. The consolidated financial statements
of M.A. Hanna Company for the year ended December 31, 1994 were
audited by other independent auditors whose report dated January
31, 1995 expressed an unqualified opinion on those statements.
/s/ Price Waterhouse LLP
Cleveland, Ohio
January 29, 1997
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT:
Where
Incorporated
Name (or formed)
Burton Rubber Compounding, L.P. Delaware
(a limited partnership)
Burton Rubber Processing, Ltd. Ontario
Cadillac Plastic Group, Inc. Michigan
CIMCO, Inc., Delaware
DH Compounding Company Delaware
(a general partnership)
Erieview Insurance Company Limited Bermuda
Enviro Care Compounds AS Norway
Global Processing Company California
Hanna France SARL France
Hanna Hamilton Holdings Company Delaware
Hanna International Corporation Delaware
Hanna Polimeros, S.A. de C.V. Mexico
Hanna Su Xing Plastics Compounding (Suzhou)
Company Limited China
M. A. Hanna Export Services Company Barbados
M. A. Hanna International Financial
Services Company Ireland
M. A. Hanna de Mexico, S.A. de C.V. Mexico
M. A. Hanna Resin Distribution Company Delaware
M. A. Hanna Company Thermoplastic Elastomers Delaware
MAH Plastics Company Delaware
Monmouth Plastics Company Delaware
Poliamidas Barbastro, S.A. Spain
Texapol Corporation Pennsylvania
The Ohio & Western Pennsylvania
Dock Company Ohio
The Pennsylvania Tidewater
Dock Company Delaware
Theodor Bergmann GmbH & Co.
Kunststoffwerk KG Germany
Victor International Plastics, Ltd. England
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.
EXHIBIT 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements
on Form S-3 and the Registration Statements on Form S-8
(appearing on Exhibit 1) of M.A. Hanna Company of our
report dated January 29, 1997 appearing on page 38 of the
Annual Report to Shareholders which is incorporated in this
Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial
Statement Schedule, which appears on page F-2 of this Form 10-K.
/s/ Price Waterhouse LLP
Cleveland, Ohio
March 20, 1997
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the
Registration Statements (Exhibit 1) of M.A. Hanna Company of
our report dated January 31, 1995, with respect to the
consolidated financial statements and schedule of M.A. Hanna
Company for the year ended December 31, 1994 included in the
Annual Report (Form 10-K) of M.A. Hanna Company for the year
ended December 31, 1996.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cleveland, Ohio
March 20, 1997
Consent of Independent Auditors
Exhibit 1
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. 33-38938 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. 33-66128 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 Francisco, CA and Vancouver,
WA Operations, formerly the Avecor, Inc. Savings and
Retirement Plan.
Form S-8 No. 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.
Form S-8 No. 33-53093 pertaining to the M.A. Hanna Company
Directors' Deferred Fee Plan.
Form S-8 No. 33-57021 pertaining to 401(k) Savings and
Retirement Plan for Polymer Associates.
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 M. S. Duffey, 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, 1996, 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 5, 1997
B. C. Ames Company
POWER OF ATTORNEY
The undersigned, Director of the corporation named herein
opposite her signature, hereby appoints T. E. Lindsey,
J. S. Pyke, Jr., and M. S. Duffey, or any of them, her 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, 1996, 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/ C. A. Cartwright Director of M. A. Hanna March 5, 1997
C. A. Cartwright 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 M. S. Duffey, 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, 1996, 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 5, 1997
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 M. S. Duffey, 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, 1996, 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 5, 1997
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 M. S. Duffey, 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, 1996, 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 5, 1997
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 M. S. Duffey, 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, 1996, 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 5, 1997
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 M. S. Duffey, 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, 1996, 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 5, 1997
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 M. S. Duffey, 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, 1996, 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 5, 1997
D. J. McGregor Company
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