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, 1997 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. [ X ]
Aggregate market value of the voting stock held by
nonaffiliates of the Registrant, computed by reference to the
price at which the stock was sold as of February 13, 1998:
$1,142,373,047.
Common Shares outstanding as of February 13, 1998:
50,352,531.
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 16, 1998, 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, 1997, 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 1997 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, 1997, the end of the
Registrant's last fiscal year.
PART I
ITEM 1. BUSINESS
(a) Acquisitions and Dispositions
In February 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.
In February 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"). In the fourth
quarter of 1997, the Registrant also sold its 50
percent interest in Hollinger-Hanna Limited, the holder
of a royalty paid by IOC.
In April 1997, the Registrant announced the
acquisition of Enviro Care Compounds (ECC) of Norway,
which produces halogen-free flame-retardant plastic
compounds for the wire and cable market. It also
announced it had acquired from Borealis A/S of Denmark
the right to manufacture a line of plastic compounds
for insulation and jacketing applications in
telecommunications.
In May 1997, the Registrant announced the
acquisition of the former Sadolin Masterbatch plastic
color and additive business from Akzo Nobel Inks A/S.
Included in the acquisition was a Glostrup, Denmark
manufacturing facility, which the Registrant continues
to operate.
In August 1997, the Registrant announced it would
acquire the manufacturing business of Harwick Chemical
Corporation. The company supplies specialty colorants
and other specialty products for the rubber industry,
and specialty color pigment dispersions and dry
colorants for plastics, from plants in Akron, Ohio and
Wynne, Arkansas.
In November 1997, the Registrant announced the
formation of a joint venture with Techmer PM to produce
color and additive concentrates principally for the
film and fiber markets. Doing business as Techmer PM,
LLC, a limited liability company in which Registrant
has a 51% interest, the company is headquartered in
Clinton, Tennessee and has manufacturing plants in
Clinton, Tennessee, Buford, Georgia and Rancho
Dominguez, California.
In February 1998, the Registrant announced the
completion of its previously announced acquisition of
Melos Carl Bosch GmbH & Co., a German rubber and
plastic compounder. With a plant in Melle, Germany,
the company produces rubber and thermoplastic elastomer
compounds for the wire and cable, sport and recreation
and automotive markets.
In March 1998, the Registrant announced that it
had acquired Exxon Chemical's business in halogen-free,
flame retardant plastic compounds for the wire and
cable industry. Exxon's sales of these flame retardant
compounds totalled about $5 million in 1997.
(b) See the financial information regarding the
Registrant's business segments set forth at pages 30
through 31 of the Registrant's Annual Report
distributed to stockholders for the fiscal year ended
December 31, 1997, which information is incorporated
herein by this reference.
(c)
(1) (i)
Formulated Polymers
(a) Processing
The Registrant, through its custom plastic
compounding businesses, Th. Bergmann, Compounding
Technology, DH Compounding Company, Enviro Care
Compounds, M.A. Hanna Engineered Materials, 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 and additives businesses, M.A. Hanna
Rubber Compounding, Melos Carl Bosch and Harwick
Chemical Manufacturing, Registrant engages in the
custom compounding of rubber materials to the
specifications of manufacturers of rubber products
throughout North America and Europe and the manufacture
of additives for the rubber industry worldwide.
Through its custom formulated color and additives
businesses, M.A. Hanna Color, Hanna Polimeros, Victor
International Plastics, Wilson Color, Hanna Wilson
Polymer (Shanghai) Limited and Techmer PM, LLC, 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, Wilson Color and Hanna Wilson Polymer
(Shanghai) Limited also produce specialty colorants and
additives for the wire and cable industry worldwide.
(b) Distribution
Through its M.A. Hanna Resin Distribution and
Hanna de Mexico business units, 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.
(c) Other
Through its Diversified Polymer Products business
unit, Registrant manufactures molded sponge automotive
parts for customers located throughout the United
States and Canada.
(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 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 and the manufacture of rubber additives are
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
independent compounder of plastics in North America and
Europe.
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 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.
The distribution and fabrication 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.
(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 7,016 persons at its
consolidated operations (6,068 in 1996).
(d) (1) See information regarding Registrant's
international operations at page 31 of Registrant's
Annual Report distributed to stockholders for the
fiscal year ended December 31, 1997, which page is
incorporated herein by this reference.
(2) The international operations owned directly by
Registrant and in which the Registrant and its
subsidiaries have equity interests, 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, M.A. Hanna Resin
Distribution and Hanna de Mexico business units lease floor space
at various locations within North America. They are used 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 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 2001
Kennedale, M.A. Hanna Rubber Owned 80,000
Texas
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 34,655
Michigan (headquarters and 2007
call center)
Coppell, Cadillac Plastic Leased 101,016
Texas (area distribution 2006
and call center)
Naperville, Cadillac Plastic Leased 88,910
Illinois (area distribution 2007
center)
Austell, Cadillac Plastic Leased 88,500
Georgia (area distribution 2008
center)
Fresno, Cadillac Plastic Leased 50,960
California (area distribution 2007
center)
Middletown, Cadillac Plastic Leased 61,620
Pennsylvania (area distribution 2008
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, M.A. Hanna Rubber Owned 156,174
South Carolina Compounding and
Southwest Chemical
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
Norcross M.A. Hanna Leased 27,814
Georgia Engineered 2002
Materials
(headquarters and
technical center)
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
Eagan, M.A. Hanna Color Leased 51,600
Minnesota and Resin 2002
Distribution
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
Carolina, M.A. Hanna Color Leased 12,600
Puerto Rico 1999
Bethlehem, M.A. Hanna Color Owned 58,672
Pennsylvania
Milford, M.A. Hanna Color Leased 20,600
New Hampshire 2001
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 2002 88,000
Materials 2002 44,120
Statesville, M.A. Hanna Resin Leased 48,240
North Carolina Distribution 2002
Corona, Compounding Leased 32,000
California Technology, Inc. 2001
Clinton, Techmer PM, LLC Owned 151,000
Tennessee
Rancho Dominguez, Techmer PM, LLC Leased 119,000
California 1999
Gainesville, Techmer PM, LLC Leased 36,374
Georgia 2005
Wynne, Harwick Chemical Owned 119,000
Arkansas Manufacturing
Corporation
Toluca, Hanna Polimeros Owned 22,000
Mexico
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,(Paris) Wilson Color Owned 46,285
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)
Jurong, Compounding Leased 43,000
Singapore Technology, 1999
Pte. Ltd.
Saint Etienne, Compounding Owned 35,000
France Technology Euro,
S.A.
Pu Dong Hanna Wilson Owned 30,400
(Shanghai), Polymer
China
Glostrup, Wilson Color Owned 7,545
Denmark
Melle, Melos Carl Bosch Owned 69,225
Germany
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 766 million pounds of compounded rubber products,
962 million pounds of compounded plastic products and
approximately 311 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 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 closed. 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
results of operations, financial position or cash flows.
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, 1998,
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:
D. J. McGregor Chairman and Chief Executive
Age - 57 Officer, July 1, 1997 to date.
President and Chief Operating
Officer, May 1989 to December 31,
1996. President and Chief Executive
Officer January 1, 1997 to June 30,
1997.
L. L. Beach Vice President, Human Resources,
Age - 53 April 1995 to date. Vice President,
Human Resources of Kraft Foods
International (manufacturer and
distributor of consumer products)
1991 to April 1995.
K. J. Darragh Senior Vice President, Operations,
Age - 49 May 1997 to date. President -
Cadillac Plastic, February 1995 to
May 1997. Vice President Operations
- Cadillac Plastic, February 1991 to
January 1995.
M. S. Duffey Vice President and Chief Financial
Age - 43 Officer, August 1996 to date. 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.
J. R. Gwinnell Vice President Strategy and
Age 42 Development, February 4, 1998 to
date. Senior Engagement Manager,
McKinsey & Company, Inc., 1989 to
1996. Vice President, Strategy,
Westinghouse Electric Corporation,
1996 to February 1998.
G. W. Henry Senior Vice President, International
Age - 52 Operations, May 1997 to date. Vice
President - Operations, 1992 - 1994;
Vice President, International
Operations, 1994 - May 1997.
J. S. Pyke, Jr. Vice President, General Counsel and
Age - 59 Secretary, 1979 to date.
D. R. Schrank Senior Vice President, Operations,
Age - 49 May 1997 to date. 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 May 1997.
C. R. Sachs Treasurer, August 1996 to date.
Age - 45 Treasurer Outboard Marine
Corporation (manufacturer of
recreational boats and marine
engines) 1992-1996.
T. E. Lindsey Controller, July 1990 to date.
Age - 47
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 36 and Shareholder Information at the bottom of
page 37 of Registrant's Annual Report distributed to
stockholders for the fiscal year ended December 31,
1997, which tables and information are incorporated
herein by this reference.
ITEM 6. SELECTED FINANCIAL DATA
See Selected Financial Data at page 37 of Registrant's
Annual Report distributed to stockholders for the
fiscal year ended December 31, 1997, 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 38 through 39 of Registrant's Annual Report
distributed to stockholders for the fiscal year ended
December 31, 1997, which pages are incorporated herein
by this reference.
ITEM 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages 23 through 36 and page 40 of Registrant's
Annual Report distributed to stockholders for the
fiscal year ended December 31, 1997, 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 16, 1998, 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 16, 1998, filed
with the Commission pursuant to Regulation 14A, which
paragraph is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
See the section captioned "Executive Compensation" at
pages 5 through 13 of Registrant's definitive proxy
statement distributed to stockholders dated March 16,
1998, 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 16, 1998 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 16, 1998 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
as Exhibit 3(a) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 and incorporated
herein by this reference.
(b) Registrant's by-laws (as adopted as of November 5, 1997
and currently in effect), filed as Exhibit 3(ii) to
Registrant's Current Report on Form 8-K dated November 10,
1997, 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. Also forms of Stock Option Agreement,
Performance Share Award Agreement and Restricted Stock
Agreement entered into by all participants in the Plan,
filed herewith.
*(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.
*(e) Description of Directors' compensation and retirement
benefit, set forth in the section captioned "Directors'
Compensation" on page 14 of Registrant's definitive proxy
statement dated March 16, 1998, as distributed to
stockholders and filed with the Commission pursuant to
Regulation 14A, which section 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, 1997, filed herewith.
(21) Subsidiaries of the Registrant, filed herewith.
(23) Consent 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, 1997, 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 29, 1998.
(b) Since September 30, 1997, Registrant has filed two reports
on Form 8-K, one filed on November 10, 1997 filing the
Registrant's by-laws as adopted as of November 5, 1997 and
one filed on February 19, 1998 filing a revised Exhibit 12.1
(Computation of Ratio of Earnings to Fixed Charges) to
Registration Statement #333-5763.
(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 19, 1998 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 19, 1998 By /s/D. J. McGregor
D. J. McGregor
Chairman and Chief
Executive Officer (Principal
Executive Officer) and
Director
Date: March 19, 1998 By /s/M. S. Duffey
M. S. Duffey
Vice President and Chief
Financial Officer
(Principal Financial Officer)
Date: March 19, 1998 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 G. D. Harnett, Director
T. E. Lindsey
Attorney-In Fact
G. D. Kirkham, Director
Date: March 19, 1998
D. B. Lewis, Director
M. L. Mann, Director
R. W. Pogue, Director
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, 1997, are incorporated herein by
reference in Item 8:
Summary of accounting policies
Consolidated balance sheets - December 31, 1997 and 1996
Consolidated statements of income, stockholders' equity
and cash flows - years ended December 31, 1997, 1996 and 1995
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
To the Board of Directors of M.A. Hanna Company
Our audits of the consolidated financial statements referred
to in our report dated January 28, 1998 appearing in the
1997 Annual Report to Stockholders 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 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
Cleveland, Ohio
January 28, 1998
F-2
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
M. A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
<CAPTION>
COL. A COL. B COL. C
ADDITIONS
(1) (2)
Balance at Beginning Charged to Costs Charged to Other
DESCRIPTION of Period and Expenses Accounts - Describe
<S> <C> <C> <C>
Year ended December 31, 1997:
Deducted from asset accounts:
Allowance for doubtful accounts $ 7,572,000 $4,073,000 $ 84,000 (a)
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $11,034,000 $3,362,000 $934,000 (a)
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts $11,346,000 $2,480,000
COL. A COL. D COL. E
Balance at End
DESCRIPTION Deductions - Describe of Period
<S> <C> <C>
Year ended December 31, 1997:
Deducted from asset accounts:
Allowance for doubtful accounts $3,080,000 (b) $ 8,649,000
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $7,758,000 (b) $ 7,572,000
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts $2,792,000 (b) $11,034,000
(a) Reserves of companies acquired.
(b) Uncollectible amounts written off.
</TABLE>
F-3
1995
STOCK OPTION AGREEMENT
Pursuant to the M. A. Hanna Company (the "Company") 1988
Long-Term Incentive Plan as amended (the "Plan"), stock options
may be granted to you (hereinafter called "Associate") from time
to time under the terms and conditions described below and in the
Plan.
1. The Associate may be granted an option under this
Agreement in the form of an incentive stock option within the
meaning of Section 422 of the Code or a non-qualified stock
option, or both, as determined at the time of grant by the
Compensation Committee of the Board of Directors of the
Corporation (the "Compensation Committee". (Both such options
shall be referred to collectively herein as "options" and
individually as an "option", unless the context requires a
different interpretation.)
2. Except as provided in Section 3 hereof, the options
granted under this Agreement (until terminated as hereinafter
provided) shall be exercisable only to the extent of one-third of
the shares specified in the grant after the Associate shall have
been in the continuous employ of the Company or any Subsidiary
for one full year from the date of such grant and to the extent
of an additional one-third of such shares on each of the next two
successive anniversary dates of this grant thereafter during
which the Associate shall have been in the continuous employ of
the Company or any Subsidiary. In the case of an option intended
to be an incentive stock option, the aggregate fair market value,
determined as of the date of grant, of the shares as to which
such option is exercisable for the first time by the Associate
shall be limited to $100,000 per calendar year. Non-qualified
stock options are exercisable by the Associate without regard to
the foregoing limitation. The number of shares of Common Stock
as to which an option may be exercised shall be determined on the
last date on which the Associate shall have been in the
continuous employ of the Company or any Subsidiary except that
options may be exercised as to all the shares subject to such
options under the circumstances set forth in Section 3 hereof.
Any portion of an incentive stock option in excess of the fair
market value limitation on exercisability set forth above which
becomes fully exercisable as provided in Section 3, shall be
converted into a non-qualified stock option and exercisable in
accordance with its terms. For the purposes of this Section,
leaves of absence approved by the Chief Executive Officer of the
Company or approved by the Compensation Committee in the case of
a leave of absence involving the Chief Executive Officer of the
Company, for illness, military or governmental service, or other
cause, shall be considered as employment. To the extent
exercisable, the options granted under this Agreement may be
exercised in whole or in part from time to time only by written
notice delivered to and received by the Company, which notice
shall be signed by the Associate and shall state the election to
exercise an incentive stock option or a non-qualified stock
option and the number of whole shares of Common Stock with
respect to which the option is being exercised. Such notice may
be accompanied by (i) cash, (ii) a check payable to the Company,
or (iii) a certificate or certificates for shares of Common Stock
of the Company (that have been owned by the Associate for at
least 6 months) in a form for transfer acceptable to the Company,
or a combination thereof, in payment of the full option price for
the number of shares purchased. The Associate may exercise an
option and sell the shares acquired upon the exercise of such
option, pursuant to a brokerage arrangement consistent with
practices approved by the Company, and use the proceeds from such
sale as payment of all or a portion of the option price or any
taxes which the Company is required by law to withhold or is
requested by the Associate to withhold by reason of such
exercise. The Associate may elect to pay any such taxes by
directing the Company to withhold shares of Common Stock
otherwise deliverable as a result of an option exercise in an
amount up to his or her estimated marginal tax rate. As soon as
practicable after it receives such notice and payment, and
following receipt from the Associate of payment for any such
taxes, the Company will deliver to the Associate or designee a
certificate or certificates for the shares of Common Stock so
purchased.
3. Notwithstanding any provision in this Agreement to the
contrary, the options granted under this Agreement (until
terminated as hereinafter provided) shall become exercisable to
the full extent of the shares specified in such grant if there is
a Change in Control of the Company, as hereinafter defined. For
purposes of this Agreement, a "Change in Control" shall have
occurred if any of the following events shall have occurred:
(a) The Company enters into an agreement to merge,
consolidate or reorganize into or with another corporation
or other legal person, and as a result of such merger,
consolidation or reorganization less than 75% of the
combined voting power of the then-outstanding securities of
such corporation or person immediately after such
transaction will be held in the aggregate by the holders of
Voting Stock (as that term is defined in Subsection (c)) of
the Company immediately prior to such transaction;
(b) The Company enters into an agreement to sell or
otherwise transfer all or substantially all of its assets to
any other corporation or other legal person, and as a result
of such sale or transfer less than 75% of the combined
voting power of the then-outstanding securities of such
corporation or person immediately after such sale or
transfer will be held in the aggregate by the holders of
Voting Stock of the Company immediately prior to such sale
or transfer;
(c) The filing on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any person (as the
term "person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) has become the beneficial
owner (as the term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation promulgated under
the Exchange Act) of securities representing 15% or more of
the combined voting power of the then-outstanding securities
entitled to vote generally in the election of directors of
the Company ("Voting Stock");
(d) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange
Act disclosing in response to Form 8-K or Schedule 14A (or
any successor schedule, form or report or item therein) that
a change in control of the Company has or may have occurred
or will or may occur in the future pursuant to the any
then-existing contract or transaction;
(e) During any period of two consecutive years, individuals
who constituted the Directors of the Company at the
beginning of any such period cease for any reason to
constitute at least a majority thereof, unless the election,
or the nomination for election by the Company's
stockholders, of each new Director was approved by a vote of
at least two-thirds of the Directors of the Company then
still in office who were directors of the Company at the
beginning of such period; or
(f) Three or more new directors, separately or together,
are elected to the Board of Directors in spite of
publicly-stated opposition to such election by at least a
majority of the Board of Directors of the Company.
Notwithstanding the foregoing provisions of Sections 3(c) or (d)
hereof, a Change in Control shall not be deemed to have occurred
for purposes of this Agreement solely because (i) the Company,
(ii) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting securities, or (iii)
the Company's Associates Ownership Trust, any Company-sponsored
employee stock ownership plan or any other employee benefit plan
of the Company, either files or becomes obligated to file a
report or proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Exchange Act,
disclosing beneficial ownership by it of shares of Voting Stock,
whether in excess of 15% or otherwise, or because the Company
reports that a Change in Control of the Company has or may have
occurred or will or may occur in the future by reason of such
beneficial ownership.
In the event that any such agreement to merge, consolidate,
reorganize or sell or otherwise transfer assets referred to in
Sections 3(a) or (b) is terminated without such merger,
consolidation, reorganization or sale or transfer having been
consummated, or the person filing the Schedule 13D or Schedule
14D-1 referred to in Section 3(c) files an amendment to any such
Schedule disclosing that it no longer is the beneficial owner of
securities representing 15% or more of the Voting Stock of the
Company, or the Company reports that the Change in Control which
it reported in the filing referred to in Section 3(d) will not in
fact occur, the operation of this Section 3 may be nullified by
notice from the Board of Directors or the Compensation Committee
to the Associate and the provisions of Section 2 hereof may be
reinstated for accrual of exercise rights in installments, but
without prejudice to any exercise of the options granted under
this Agreement that may have occurred prior to such
nullification.
4. The options granted under this Agreement shall
terminate and cease to be exercisable on the earliest of the
following dates:
(a) On the date Associate ceases to be an employee of the
Company or a Subsidiary by reason of termination for Cause,
as defined below;
(b) Thirty days after the Associate ceases to be an
employee of the Company or a Subsidiary, unless Associate
ceases to be an employee by reason of termination for Cause,
as defined below, or by reason of death, permanent
disability or retirement as described in (c) or (d) below;
(c) Sixty months after the Associate ceases to be an
employee of the Company or a Subsidiary by reason of total
and permanent disability or retirement with consent of the
Company;
(d) Twelve months after the death of the Associate;
(e) On the date Associate becomes an employee of a
competitor of the Company or a Subsidiary without the
consent of the Board of Directors or Compensation Committee
of the Company; or
(f) Ten years from the date the option was granted
hereunder.
As used herein, termination for "Cause" shall mean the
determination by the Board of Directors or Compensation Committee
that Associate (i) engaged in improper conduct or acts involving
moral turpitude, (ii) failed to perform or negligently performed
his or her duties, or (iii) acted so as to substantially
prejudice the business or reputation of the Company or any of its
Subsidiaries. In the event the Associate shall intentionally
commit an act materially inimical to the interests of the Company
or a Subsidiary (including, without limitation, engaging in any
conduct that is competitive with the Company or a Subsidiary),
and the Board of Directors or Compensation Committee shall so
find, the options granted under this Agreement shall terminate at
the time of such act, notwithstanding any other provision of this
Agreement to the contrary. Nothing contained in this Agreement
shall limit whatever right the Company or a Subsidiary might
otherwise have to terminate the employment of the Associate.
5. Except as otherwise set forth herein, the options
granted under this Agreement are not transferable by the
Associate otherwise than by will or the laws of descent and
distribution, and are exercisable, during the lifetime of the
Associate, only by him or by his guardian or legal
representative. The Compensation Committee may approve transfers
of non-qualified options granted under this Agreement to members
of the Associate's family or to a trust to benefit the Associate
or members of the Associate's family.
6. The options granted under this Agreement shall not be
exercisable if such exercise would violate any applicable
securities laws. The Company agrees to make reasonable efforts to
effect and maintain all necessary registrations under such laws
so as to permit exercise of the options granted under this
Agreement unless the Compensation Committee shall determine that
such registrations would impose undue hardship on the Company.
7. The Compensation Committee shall make such adjustments
in the option price and in the number or kind of shares of Common
Stock or other securities covered by options granted under this
Agreement as the Compensation Committee in its sole discretion,
exercised in good faith, may determine is equitably required to
prevent dilution or enlargement of the rights of the Associate
that otherwise would result from (a) any stock dividend, stock
split, combination of shares, issuance of stock purchase rights,
recapitalization or other change in the capital structure of the
Company, or (b) any merger, consolidation, spin-off,
reorganization or partial or complete liquidation, or (c) any
other corporate transaction or event having an effect similar to
any of the foregoing. No adjustment provided for in this Section
6 shall require the Company to sell any fractional share.
8. For purposes of this Agreement, the continuous employ
of the Associate with the Company or a Subsidiary shall not be
deemed interrupted, and the Associate shall not be deemed to have
ceased to be an employee of the Company or any Subsidiary, by
reason of the transfer of such employee among the Company and its
Subsidiaries.
9. Terms not otherwise defined herein shall have the same
meaning as set forth in the Plan.
10. If Associate, either during employment by the Company
or a Subsidiary or within six (6) months after termination of
such employment for any reason, shall become an employee of a
competitor of the Company or a Subsidiary or shall engage in any
other conduct that is competitive with the Company or a
Subsidiary, unless the Board of Directors or Compensation
Committee of the Company shall determine otherwise, Associate
shall (a) return to the Company, in exchange for payment by the
Company of the option price paid therefor, all shares of Common
Stock that Associate has not disposed of that were purchased
pursuant to this Agreement within a period of one (1) year prior
to the date of the commencement of such employment by a
competitor or other competitive conduct, and (b) with respect to
any shares so purchased that the Associate has disposed of, pay
to the Company in cash the difference between (i) the option
price paid therefor by Associate pursuant to this Agreement, and
(ii) the closing price of the Common Stock on the New York Stock
Exchange on the date of such purchase (or on the last trading day
prior to such purchase, if there was no trading on the purchase
date). To the extent that such amounts are not paid to the
Company, the Company may set off the amounts so payable to it
against any amounts that may be owing from time to time by the
Company or a Subsidiary to Associate, whether as wages, deferred
compensation or vacation pay or in the form of any other benefit
or for any other reason.
EXECUTED in two original counterparts at Cleveland, Ohio on
Date Signed.
M. A. HANNA COMPANY
By________________________________
Company Officer
Title
The undersigned Associate hereby acknowledges receipt of an
executed original of this 1995 Stock Option Agreement.
_________________________________
Associate
M.A. HANNA COMPANY
1988 LONG-TERM INCENTIVE PLAN
PERFORMANCE SHARE AGREEMENT
Dated as of December 6, 1995
AGREEMENT between M. A. Hanna Company (the "Company") and the
executive named at the end of this Agreement ("Executive")
pursuant to the Company's 1988 Long-Term Incentive Plan, as
amended (the "Plan"), providing for one or more awards which may
be granted to the Executive under the terms and conditions
described below and in the Plan.
1. Definitions. The following terms shall have the
meanings as defined herein. Terms not otherwise defined herein
shall have the meaning as set forth in the Plan:
(a) "Performance Share Award" means an amount equal to
the number of Performance Shares granted to the
Executive multiplied by the Market Value of one share
of M.A. Hanna Company Common Stock on the date of
grant.
(b) "Determination Date" has the meaning provided in
Section 4 of this Agreement.
(c) "EPS" means earnings per share of Common Stock on
a fully diluted basis.
(d) "Grant of Performance Shares" means the document
evidencing each grant made under the Plan which is
subject to the terms and conditions of this Agreement.
(e) "Management Objectives" means the targets as set
forth in Section 2 of this Agreement.
(f) "Market Value" means the closing sale price of
M.A. Hanna Company Common Stock on the New York Stock
Exchange.
(g) "Payment Value" means the value of the Performance
Shares at the Determination Date calculated as provided
in Section 3 of this Agreement.
(h) "Performance Period" means the three consecutive
calendar years identified in the Grant of the
Performance Shares.
(i) "Performance Share" means one LTIP Unit granted to
the Executive pursuant to the Grant of Performance
Shares, this Agreement and the Plan and expressed by
reference to one share of Common Stock of the Company.
(j) "Profit Growth" means the compound annual
percentage growth in profit of the Company or a
business unit of the Company, as the case may be, for
the Performance Period.
(k) "ROE" means the average annual return on
stockholders' equity for the Performance Period
expressed as a percentage.
(l) "ROIC" means the average annual return on invested
capital of a business unit of the Company for the
Performance Period expressed as a percentage.
2. Management Objectives. Management Objectives are set
forth on Annex A to each Grant of Performance Shares.
3. Payment Value. Payment Value shall be calculated by
multiplying the number of Performance Shares by the level of
achievement of Management Objectives expressed as a percentage,
as determined by the intersect of the applicable coordinates for
Management Objectives as set forth on Annex A to the respective
Grant of Performance Shares, and further multiplied by the
average Market Value of the Company's Common Stock for the last
ten (10) trading days of the Performance Period.
An example of this calculation would be as follows: The
grant was 100 Performance Shares. The Market Value of the
Company's Common Stock on the date of grant was $25.00.
Therefore, the Performance Share Value for the Grant of
Performance Shares was 100 x $25.00 = $2,500. The level of
achievement of the Management Objectives for the Performance
Period was 150% of the performance targets as determined from the
intersect of the applicable coordinates for performance measures
as set forth on the applicable Annex A. The number of
Performance Shares is multiplied by 150% = 150 Performance
Shares. The average Market Value of the Company's Common Stock
for the last ten(10) trading days of the Performance Period was
$35.00. The Payment Value to the Executive would be 150
Performance Shares x $35.00 = $5,250.
If the level of achievement of the Management Objectives
does not reach the minimum performance threshold, as set forth on
such Annex A, the percentage of Performance Shares achieved will
be 0%. If the level of achievement of the Management Objectives
equals or exceeds the minimum performance threshold, the
percentage of the Performance Shares achieved will range from 0%
to 200% as set forth on such Annex A. However, in no event will
the amount of Performance Shares exceed 200% of the Performance
Share Award.
4. Timing of Payment. The Compensation Committee of the Board
of Directors of the Company (the "Compensation Committee") shall,
on a date (the "Determination Date") within a reasonable time
after necessary financial and other information for the
Performance Period becomes available, determine the extent to
which the Payment Value has been earned by the Executive through
achievement of the Management Objectives. Not later than fifteen
days after the Determination Date, the Compensation Committee
shall notify the Executive in writing of the determination and
shall cause the Payment Value to be paid to the Executive in
cash, shares of Common Stock or any combination thereof, as
determined by the Compensation Committee. For the purposes of
the immediately preceding sentence, shares of Common Stock shall
be valued at the Market Value on the Determination Date.
5. Termination of Employment. If the Executive's
employment should terminate because of death, total and permanent
disability or retirement with the consent of the Company prior to
the end of the Performance Period, the extent to which the
Payment Value shall be deemed to have been earned, as calculated
at the end of the Performance Period, shall be determined as if
the Executive's employment had not terminated and the Payment
Value shall be multiplied by a fraction, the numerator of which
is the number of days the Executive was employed during the
Performance Period and the denominator of which is the total
number of days in the Performance Period. If the Executive's
employment terminates for any reason other than as described in
the preceding sentence, the Executive shall be deemed not to have
earned any portion of the Payment Value, which shall be
forfeited, unless the Compensation Committee, in its sole
discretion, determines otherwise.
6. Transfers. For purposes of this Agreement and any
grant hereunder, the Executive's continuous employment with the
Company or a Subsidiary shall not be deemed interrupted, and the
Executive shall not be deemed to have ceased to be an employee of
the Company or a Subsidiary, by reason of a transfer among the
Company and its Subsidiaries.
7. No Shareholder Rights. A Grant of Performance Shares
shall not entitle the Executive to any dividend or voting rights
or any other rights as a stockholder with respect to such award.
8. Tax Withholding. The Company has the right to deduct
from the portion of the Payment Value made in cash or Common
Stock an amount equal to any taxes required by law to be
withheld, including, any taxes required to be withheld with
respect to the portion of the Payment Value paid in Common Stock.
9. Applicability of Plan. This Agreement and any Grant of
Performance Shares hereunder is subject to all terms and
conditions of the Plan. In the event of any inconsistencies
between this Agreement and the Plan, the plan shall govern.
EXECUTED in two original counterparts at Cleveland, Ohio
effective as of the ____ of _______________________.
M. A. HANNA COMPANY EXECUTIVE
By:________________________________ _________________________
[Company Officer]
GRANT OF
PERFORMANCE SHARES
Name: 1
Date: December 6, 1995
Award: 2 Performance Shares
Business Unit:
Performance Period: January 1, 1996 through December 31, 1998
Performance Target: See attached Performance Grid
M.A. HANNA COMPANY
___________________________________
By: Vice President, Human Resources
The undersigned accepts the foregoing Grant of Performance Shares
under the terms and conditions contained in the M.A. Hanna
Company 1988 Long-Term Incentive Plan and the Performance Share
Agreement dated as of December 6, 1995.
_____________________________________ _____________________
1 Date
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT, made and entered into as of the
PayoutDate, by and between M. A. Hanna Company (the "Company") and
Name ("Recipient").
W I T N E S S E T H
WHEREAS, the Compensation Committee of the Board of Directors of M.
A. Hanna Company ("Compensation Committee") has authorized the
payment of the LTIP Units granted on Award Date ("LTIP Units") to
be made in a combination of cash and shares of Common Stock; and
WHEREAS, the Compensation Committee has authorized an additional
payment of shares of Common Stock subject to certain restrictions,
as an incentive to Recipient to hold the Common Stock issued as
partial payment of the LTIP Units.
NOW THEREFORE, in consideration of the premises and the covenants
contained herein, the sufficiency of which is hereby acknowledged,
the Company and the Recipient agree to amend the Grant of LTIP Units
dated Award Date as follows:
1. The Company shall issue to Recipient Common shares of Common
Stock in partial payment of the LTIP Units ("Award Stock") and
Restricted shares of Common Stock which shall be subject to the
following restrictions ("Restricted Stock"):
(a) During a period ending on the earlier of four (4) years
from the date of issuance of the Award Stock and the Restricted
Stock or the death of the Recipient (the "Restricted Period"),
the Recipient (executor) shall not sell or otherwise dispose of
the Restricted Stock;
(b) The Recipient may sell or otherwise dispose of the Award
Stock at any time; provided however, that if the Award Stock is
sold or otherwise disposed of during the Restricted Period, all
of the Restricted Stock shall be forfeited and canceled upon
such sale or disposition;
(c) The Restricted Stock shall be forfeited and canceled in
the event that the Recipient ceases to be an employee of the
Company or any subsidiary of the Company, except by reason of
permanent disability or retirement under a retirement plan of
the Company or a subsidiary; and
(d) All taxes which the Company is required to collect from
the Recipient as a result of the lapse of restrictions on
transfer of the Restricted Stock must be paid before the stock
certificate evidencing on the Restricted Stock is issued
without restrictions and released to the Recipient or before
the shares of Restricted Stock are transferred by the Company
or its transfer agent.
2. During the Restricted Period the certificate evidencing
Restricted Stock shall be held in escrow by the Company.
3. The certificate evidencing the Restricted Stock shall bear a
notation or legend to the effect that such shares are subject to the
restrictions contained in this Agreement and that they may not be
sold or otherwise disposed of and that no transfer thereof will be
made by the Company or the transfer agent except in accordance with
this Agreement.
4. Other than as restricted herein, the Recipient shall be
entitled to all rights as a stockholder in respect of the Award
Stock and the Restricted Stock including, but not limited to, all
dividends declared and paid on such stock, so long as the Recipient
remains a stockholder of record. After the Restricted Period, the
Recipient or the Recipient's executor, as the case may be, may sell
or otherwise dispose of the Award Stock and the Restricted Stock
without restrictions.
5. Recipient (executor) may pay for taxes imposed at the time of
the lapse of the restrictions on the Restricted Stock by cash or
check. The Company reserves the right to withhold monies otherwise
due Recipient and apply such monies to the payment of taxes. If
Recipient does not pay the taxes due within 90 days of the lapse of
the restriction, the Company may have the certificate evidencing the
Restricted Stock canceled and withhold from the Restricted Stock
such number of shares equal in value to the taxes required to be
paid. The Recipient shall receive a replacement certificate
evidencing the remaining shares without any restriction.
IN WITNESS WHEREOF, the parties have executed duplicate originals of
this Agreement as of the day and year first above written.
M. A. HANNA COMPANY
________________________ ____________________________
Company Officer Name
Title
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
(Dollars in thousands except per share data)
<S> <C> <C> <C>
Basic
Income from continuing operations
before extraordinary charge $ 64,601 $ 59,162 $ 56,702
Income(loss) from discontinued operations - - 45,337
Extraordinary charge - (5,352) -
Net income $ 64,601 $ 53,810 $ 102,039
Average common shares outstanding 45,167,937 45,789,136 46,511,966
Income(loss) per share
Continuing operations $ 1.43 $ 1.29 $ 1.22
Discontinued operations - - .97
Extraordinary charge - (.11) -
Net income $ 1.43 $ 1.18 $ 2.19
Diluted
Income from continuing operations
before extraordinary charge $ 64,601 $ 59,162 $ 56,702
Income(loss) from discontinued operations - - 45,337
Extraordinary charge - (5,352) -
Net income $ 64,601 $ 53,810 $ 102,039
Average common shares outstanding 45,167,937 45,789,136 46,511,966
Effect of dilutive stock options 1,103,920 1,034,365 900,331
Total 46,271,857 46,823,501 47,412,297
Income(loss) per share
Continuing operations $ 1.40 $ 1.26 $ 1.19
Discontinued operations - - .95
Extraordinary charge - (.11) -
$ 1.40 $ 1.15 $ 2.14
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
M.A. Hanna Company and Consolidated Subsidiaries
<CAPTION>
Year Ended December 31
Dollars in thousands except per share data 1997 1996 1995
<S> <C> <C> <C>
Net Sales $2,200,345 $2,066,248 $1,901,954
Costs and Expenses
Cost of goods sold 1,781,736 1,685,167 1,552,643
Selling, general and administrative 271,894 243,505 218,823
Interest on debt 23,751 20,033 26,278
Amortization of intangibles 14,204 14,313 13,969
Other - net (1,669) 339 (8,580)
2,089,916 1,963,357 1,803,133
Income from Continuing Operations Before
Income Taxes and Extraordinary Charge 110,429 102,891 98,821
Income taxes 45,828 43,729 42,119
Income from Continuing Operations
Before Extraordinary Charge 64,601 59,162 56,702
Income from discontinued operations - - 45,337
Extraordinary charge - (5,352) -
Net Income $ 64,601 $ 53,810 $ 102,039
Net Income Per Share
Basic
Continuing operations $ 1.43 $ 1.29 $ 1.22
Discontinued operations - - .97
Extraordinary charge - (.11) -
Net income $ 1.43 $ 1.18 $ 2.19
Diluted
Continuing operations $ 1.40 $ 1.26 $ 1.19
Discontinued operations - - .95
Extraordinary charge - (.11) -
Net income $ 1.40 $ 1.15 $ 2.14
See summary of accounting policies and notes to consolidated financial statements
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
M. A. Hanna Company and Consolidated Subsidiaries
<CAPTION>
Year Ended December 31
Dollars in thousands 1997 1996 1995
<S> <C> <C> <C>
Cash Provided from (Used for) Operating Activities
Net income $ 64,601 $ 53,810 $102,039
Discontinued operations - - 4,797
Depreciation and amortization 52,639 50,116 47,241
Companies carried at equity:
Income (4,546) (6,058) (6,459)
Dividends received 5,420 7,104 8,213
Changes in operating assets and liabilities:
Receivables (37,153) 3,743 (23,212)
Inventories (30,746) 3,197 (10,934)
Prepaid expenses (3,193) (2,450) (2,031)
Trade payables and accrued expenses 43,380 (1,978) 4,066
Gain from sales of assets (6,340) - (84,427)
Restructuring payments (8,239) (13,157) (17,289)
Restructuring charges 6,140 - -
Other 7,487 8,248 11,911
Extraordinary charge - 8,774 -
Net operating activities 89,450 111,349 33,915
Cash Provided from (Used for) Investing
Activities
Capital expenditures (52,604) (49,532) (55,885)
Acquisitions of businesses, less cash acquired (96,512) (58,439) -
Acquisition payments (14,965) (1,805) (2,969)
Sales of assets 13,048 11,928 223,500
Investments in associated and other companies (22,071) (2,862) (4,775)
Return of cash from associated and other companies 851 8,170 1,367
Purchase of short-term securities - - (69,703)
Sale of short-term securities - - 69,703
Other 2,468 7 (7,211)
Net investing activities (169,785) (92,533) 154,027
Cash Provided from (Used for) Financing Activities
Cash dividends paid (19,176) (18,291) (16,962)
Proceeds from the sale of common stock 4,333 8,027 1,996
Purchase of shares for treasury (17,972) (28,830) (24,969)
Increase in debt 227,523 110,872 57,458
Reduction in debt (99,161) (172,218) (118,622)
Net financing activities 95,547 (100,440) (101,099)
Effect of exchange rate changes on cash (3,810) 417 1,287
Cash and Cash Equivalents
Increase(decrease) 11,402 (81,207) 88,130
Beginning of year 30,028 111,235 23,105
End of year $ 41,430 $ 30,028 $111,235
Cash Paid During Year
Interest $ 22,836 $ 22,938 $ 26,724
Income taxes 36,992 31,731 85,830
See summary of accounting policies and notes to consolidated financial statements
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
M. A. Hanna Company and Consolidated Subsidiaries
<CAPTION>
December 31
Dollars in thousands 1997 1996
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 41,430 $ 30,028
Receivables
Trade (less allowance of $8,649 in 1997
and $7,572 in 1996) 322,975 284,132
Other 9,372 9,493
332,347 293,625
Inventories
Finished products 161,731 134,655
Raw materials and supplies 65,430 44,509
227,161 179,164
Prepaid expenses 10,976 7,679
Deferred income taxes 31,005 23,043
Total current assets 642,919 533,539
Property, Plant and Equipment
Land 19,285 18,040
Buildings 118,413 108,322
Machinery and equipment 385,571 326,306
523,269 452,668
Less accumulated depreciation 234,956 198,261
288,313 254,407
Other Assets
Goodwill and other intangibles 420,696 355,538
Investments and other assets 87,608 70,678
Deferred income taxes 29,469 36,617
537,773 462,833
Total assets $1,469,005 $1,250,779
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $ 2,919 $ 2,304
Trade payables and accrued expenses 393,925 348,608
Current portion of long-term debt 2,149 1,027
Total current liabilities 398,993 351,939
Other Liabilities 205,480 182,852
Long-Term Debt
Senior notes 124,960 124,960
Medium-term notes 120,000 20,000
Other 80,267 62,745
325,227 207,705
Stockholders' Equity
Preferred stock, without par value:
authorized 5,000,000 shares:
issued and outstanding 0 shares in 1997 and 1996 - -
Common stock, par value $1.00 per share:
authorized 100,000,000 shares; issued 65,749,570 shares
in 1997 and 65,261,907 shares in 1996 65,750 65,262
Capital surplus 358,145 329,543
Retained earnings 462,653 417,228
Associates ownership trust (5,545,273
shares in 1997 and 5,997,347 shares in 1996) (144,213) (134,704)
Cost of treasury stock (15,272,602 shares
in 1997 and 14,272,092 shares in 1996) (191,066) (165,675)
Minimum pension liability adjustment - (5,018)
Accumulated translation adjustment (11,964) 1,647
Total stockholders' equity 539,305 508,283
Total liabilities and stockholders' equity $1,469,005 $1,250,779
See summary of accounting policies and notes to consolidated financial statements
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
M. A. Hanna Company and Consolidated Subsidiaries
<TABLE>
Dollars in thousands except per share data
<CAPTION>
Minimum
Associates Pension
Preferred Common Capital Retained Ownership Treasury Liability
Stock Stock Surplus Earnings Trust Stock Adjustment
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1995 $ - $43,015 $299,725 $296,632 $(111,471) $(103,731) $(7,262)
Net income 102,039
Cash dividends - $.367 per share (16,962)
Exercise of stock options 228 4,678 (1,483)
Purchase of shares for treasury (24,969)
Sale of common stock (30,502 shares) 31 755
Transfer of shares (241,520) 8,039 (8,039)
Payment of incentive compensation awards
and associate benefits 595 589 1,041
Adjustment to market value 18,520 (18,520)
Minimum pension adjustment (260)
Translation adjustment
Balance December 31, 1995 - 43,274 324,273 381,709 (121,363) (137,181) (7,522)
Net income 53,810
Cash dividends - $.402 per share (18,291)
Exercise of stock options 309 4,532 (817)
Purchase of shares for treasury (28,830)
Sale of common stock (193,058 shares) 42 2,005 4,041
Payment of incentive compensation awards
and associate benefits 866 2,122 1,153
Three-for-two common stock split 21,637 (21,637)
Adjustment to market value 19,504 (19,504)
Minimum pension adjustment 2,504
Translation adjustment
Balance December 31, 1996 - 65,262 329,543 417,228 (134,704) (165,675) (5,018)
Net income 64,601
Cash dividends - $.4275 per share (19,176)
Exercise of stock options 449 7,047 (3,069)
Purchase of shares for treasury (17,972)
Sale of common stock (49,356 shares) 39 976 220
Transfer of shares (300,000 shares) 6,166 (6,166)
Payment of incentive compensation awards
and associate benefits 1,779 2,905 1,816
Adjustment to market value 18,800 (18,800)
Minimum pension adjustment 5,018
Translation adjustment
Balance December 31, 1997 $ - $65,750 $358,145 $462,653 $(144,213) $(191,066) $ -
Accumulated Total
Translation Stockholders'
Adjustment Equity
<S> <C> <C>
Balance January 1, 1995 $(1,996) $414,912
Net income 102,039
Cash dividends - $.367 per share (16,962)
Exercise of stock options 3,423
Purchase of shares for treasury (24,969)
Sale of common stock (30,502 shares) 786
Transfer of shares (241,520) -
Payment of incentive compensation awards
and associate benefits 2,225
Adjustment to market value -
Minimum pension adjustment (260)
Translation adjustment 3,584 3,584
Balance December 31, 1995 1,588 484,778
Net income 53,810
Cash dividends - $.402 per share (18,291)
Exercise of stock options 4,024
Purchase of shares for treasury (28,830)
Sale of common stock (193,058 shares) 6,088
Payment of incentive compensation awards
and associate benefits 4,141
Three-for-two common stock split -
Adjustment to market value -
Minimum pension adjustment 2,504
Translation adjustment 59 59
Balance December 31, 1996 1,647 508,283
Net income 64,601
Cash dividends - $.4275 per share (19,176)
Exercise of stock options 4,427
Purchase of shares for treasury (17,972)
Sale of common stock (49,356 shares) 1,235
Transfer of shares (300,000 shares) -
Payment of incentive compensation awards
and associate benefits 6,500
Adjustment to market value -
Minimum pension adjustment 5,018
Translation adjustment (13,611) (13,611)
Balance December 31, 1997 $(11,964) $539,305
See summary of accounting policies and notes to consolidated financial statements
</TABLE>
SUMMARY OF ACCOUNTING POLICIES
M.A. Hanna Company and Consolidated Subsidiaries
Dollars in thousands except per share data
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts
of M.A. Hanna Company and all majority-owned subsidiaries.
Investments in less than majority-owned companies are
carried at cost adjusted for undistributed earnings and
losses since acquisition, or at cost. All significant
intercompany accounts and transactions have been eliminated.
REVENUE RECOGNITION
Revenues are recognized when a product is shipped or a
service is performed.
NET INCOME PER SHARE
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128 "Earnings Per Share." The Company
adopted this standard in 1997. All per share amounts have
been restated in accordance with the standard resulting in
no changes to previously reported earnings per share.
Basic earnings per share is computed by dividing net income
by the weighted 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. Basic weighted average shares outstanding for the
years ended December 31, 1997, 1996 and 1995 were
45,167,937, 45,789,136 and 46,511,966, respectively.
For diluted earnings per share, the number of shares used
for basic earnings per share are increased by the common
stock equivalents which would arise from the exercise of
stock options. Weighted average shares outstanding
(diluted) for the years ended December 31, 1997, 1996 and
1995, were 46,271,857, 46,823,501, and 47,412,297,
respectively.
CASH EQUIVALENTS
Cash equivalents are highly liquid investments with an
original purchased maturity of three months or less. Cash
equivalents 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 distribution among many different industries
and geographic 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 $164,848 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 $8,794 and $11,690 at December 31, 1997 and 1996,
respectively.
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
Computer software and hardware 5 years
Property items retired or otherwise disposed of are removed
from the property and related accumulated for depreciation
accounts, and any gain or loss is included in operations.
GOODWILL AND OTHER INTANGIBLES
Goodwill is amortized over 40 years on a straight-line
basis. Other intangibles, net, of $10,675 and $16,007 at
December 31, 1997 and 1996, respectively, are amortized on a
straight-line basis over 4 to 40 years. Accumulated
amortization at December 31, 1997 and 1996 was $111,747 and
$99,505, 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 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 the financial reporting and tax
basis of assets and liabilities and are measured using the
enacted tax rate and laws that are currently in effect.
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 TRANSLATION
Assets and liabilities of international affiliates are
translated at the exchange rates as of the balance sheet
date. 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.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company limits its use of derivative financial
instruments to forward exchange contracts to hedge foreign
currency receivables, payables and intercompany lending
transactions. Gains and losses on foreign currency
transaction hedges are recognized in other income or expense
and offset the foreign exchange gains and losses on the
underlying transactions.
PENDING ACCOUNTING CHANGES
In June 1997, the Financial Accounting Standards Board
issued Statement No. 130 "Reporting Comprehensive Income"
and Statement No. 131 "Disclosures about Segments of an
Enterprise and Related Information." The Company is
analyzing the impact of Statements No. 130 and No. 131 and will
adopt these standards in 1998.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
M. A. Hanna Company and Consolidated Subsidiaries
Dollars in thousands except per share data
ACQUISITIONS
In February 1997, the Company purchased Enviro Care
Compounds, a producer of halogen-free flame retardant plastic
compounds based in Norway; in May 1997, the Company purchased
the former Sadolin Masterbatch, a plastic color and additive
concentrate business based in Denmark; and in September 1997,
the Company acquired the manufacturing business of Harwick
Chemical Manufacturing Corporation, a supplier of chemical
dispersions, specialty colorants and other specialty products
for the rubber industry, and specialty color pigment
dispersions and dry colorants for plastics. These
acquisitions were accounted for using the purchase method of
accounting. In November 1997, the Company formed a joint
venture alliance with Techmer PM to produce color and
additive concentrates for the film and fiber markets. The
Company contributed cash and the assets of its fiber colorant
business for a 51% interest in the joint venture. Had the
acquisitions and the formation of the joint venture been made
at the beginning of 1996, reported pro forma results of
operations for 1997 and 1996 would not be materially
different.
On January 8, 1998 the Company announced that it had entered
into an agreement to acquire Melos Carl Bosch GmbH & Co. The
acquisition is subject to governmental approval and is
anticipated to close at the end of February 1998. Melos,
which is based in Germany, produces rubber, thermoplastic
elastomer and plastic compounds.
In January 1996, the Company acquired 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 as
part of 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 1996, reported
pro forma results of operations for 1997 and 1996 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.
Income from discontinued operations in 1995 included income
from operations of $5,083 (net of tax of $3,992) and a gain
on the sale of $40,254.
INCOME TAXES
Income taxes from continuing operations consist of the
following:
1997 1996 1995
Current:
Federal $26,693 $24,613 $26,311
State 5,663 4,022 4,541
Foreign 8,675 8,505 6,311
41,031 37,140 37,163
Deferred:
Federal 2,297 4,055 3,704
State 8 759 497
Foreign 2,492 1,775 755
4,797 6,589 4,956
$45,828 $43,729 $42,119
The provision for income taxes differs from the amount
computed by applying the U.S. statutory federal income tax
rate as follows:
<TABLE>
<CAPTION>
1997 1996 1995
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Provision at statutory tax rate $38,650 35.0% $36,012 35.0% $34,587 35.0%
State income taxes 3,686 3.3 3,108 3.0 3,274 3.3
Goodwill amortization 2,869 2.6 2,811 2.7 2,613 2.6
Other - net 623 .6 1,798 1.8 1,645 1.7
$45,828 41.5% $43,729 42.5% $42,119 42.6%
</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:
1997 1996
Basis differences from purchase accounting $(7,471) $(5,481)
Property, plant and equipment (12,490) (13,769)
Other postretirement benefits 32,948 32,956
Associate benefits 18,012 17,121
Restructuring and plant closedown costs 4,926 4,611
Environmental costs 6,869 7,079
Inventory and receivable allowances 4,082 3,830
Other 7,816 8,937
$54,692 $55,284
Income from continuing operations before income taxes
includes $35,343, $26,980, and $17,577 in 1997, 1996 and
1995, respectively, from international operations.
LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
1997 1996
9% Senior notes due 1998 $ 37,185 $ 37,185
9.375% Senior notes due 2003 87,775 87,775
Medium-term notes 120,000 20,000
Bank borrowings 77,197 55,148
Other 5,219 8,624
327,376 208,732
Less current portion 2,149 1,027
$325,227 $207,705
Annual maturities of long-term debt for the next five years
are: 1998--$39,334; 1999--$521; 2000--$462; 2001--$476 and
2002--$491.
In June 1996, the Company filed a shelf registration
statement with the Securities and Exchange Commission to
issue up to $300 million of debt securities. During 1997 and
1996, the Company issued $100 million and $20 million,
respectively, of medium-term notes. These medium-term notes
are due between 2004 and 2009 and bear interest at rates
ranging from 6.74% to 7.16%. Interest on the notes is paid
semi-annually. The weighted average interest rate of these
notes is 6.93%.
In 1997, the Company entered into a new revolving credit
agreement with a group of financial institutions replacing an
existing facility. The agreement provides for borrowings up
to $200 million through January 2003 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 either agreement at December 31, 1997 or
1996. At December 31, 1997, the Company had $77,197 of
borrowings from uncommitted bank lines at interest rates
ranging from 5.98% to 7.10% and a weighted average interest
rate of 6.39%.
Other debt at December 31, 1997 and 1996 consists primarily
of mortgages, industrial revenue bonds and notes. These
obligations mature in various installments through 2012 and
are at interest rates ranging from 3.50% to 7.00%.
The Company also had $2,919 and $2,304 of outstanding notes
payable to banks at December 31, 1997 and 1996 at weighted
average interest rates of 8.62% and 9.75%, respectively.
In 1996 and 1995, the Company repurchased $102,310 and
$8,500, respectively, principal amount of Senior Notes in the
open market, resulting in an extraordinary charge of $8,774
in 1996 ($5,352 after tax).
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 $239,020 of retained earnings was
free of such limitations at December 31, 1997.
STOCKHOLDERS' EQUITY
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 released
from the AOT on an annual basis 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 and to meet annual principal payments on the
promissory note. Shares remaining in the AOT 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 6,426,038 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 net
income, basic earnings per share and diluted earnings per
share amounts would have been restated as follows for 1997
and 1996. The effect on 1995 net income and earnings per
share amounts was not material.
Proforma 1997 1996
Net income $62,392 $53,065
Basic earnings per share 1.38 1.16
Diluted earnings per share 1.35 1.13
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 1997, 1996 and 1995, respectively: dividend
yield of 2.00%, 2.08% and 2.56%; expected volatility of
25.0%, 22.6% and 27.4%; risk-free interest rate of 5.75% for
1997 and 6.25% for 1996 and 1995 and expected life of eight
years for 1997 and ten years for 1996 and 1995.
The following table summarizes the changes in the outstanding
options for the three years ended December 31, 1997:
<TABLE>
<CAPTION>
1997 1996 1995
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 2,951,234 $14.14 2,821,484 $12.39 2,762,360 $11.05
Granted 470,026 23.92 456,521 21.15 422,198 17.33
Exercised (446,958) 10.31 (309,131) 8.39 (342,416) 7.60
Canceled or expired (68,778) 18.01 (17,640) 15.49 (20,658) 14.23
Outstanding at
end of year 2,905,524 16.21 2,951,234 14.14 2,821,484 12.39
Options exercisable
at end of year 2,177,233 1,862,317 1,713,188
Weighted-average
fair value of
options granted during
the year $7.96 $7.54 $6.82
</TABLE>
<TABLE>
The following table summarizes information about options
outstanding at December 31, 1997:
<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>
$ 7.40 to 12.99 759,125 2.7 years $10.46 759,125 $10.46
13.00 to 17.99 1,264,976 6.2 years 15.14 1,114,793 14.99
18.00 to 26.81 881,423 9.2 years 22.70 303,315 21.35
2,905,524 2,177,233
</TABLE>
At December 31, 1997, 1,562,401 shares were available for
grants.
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 compounds, rubber compounds and additives, and custom
formulated colorants and additives 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. Through
May 1995, the Company 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. In February 1997, the
Company sold its remaining interest in the Iron Ore Company
of Canada sales agency resulting in pre-tax gain of $3,250.
IOC incurred management expense of $3,061 and $3,162 in 1996
and 1995, respectively payable to the Company and commission
expense of $6,035 and $5,169 in 1996 and 1995, respectively,
payable to companies in which M.A. Hanna had a 50% equity
interest.
In the fourth quarter of 1997, the Company sold its equity
interest in Hollinger Hanna, a management service company,
resulting in a pre-tax gain of $3,090.
Net sales, operating profit and identifiable assets by
geographic area are as follows:
1997 1996 1995
Net sales
Domestic $1,722,373 $1,637,252 $1,579,424
International
Europe 251,720 234,263 187,790
Asia/Pacific 154,897 137,407 83,104
Other 71,355 57,326 51,636
$2,200,345 $2,066,248 $1,901,954
Operating profit
Domestic $ 121,606(1) $ 116,091 $ 112,919
International
Europe 21,203 16,154 13,982
Asia/Pacific 11,510 10,056 5,100
Other 6,841 5,394 5,174
Corporate (26,980) (24,771) (12,076)(2)
$ 134,180 $ 122,924 $ 125,099
Identifiable assets
Domestic $1,149,431 $ 950,441 $ 991,667
International
Europe 201,290 201,364 175,767
Asia/Pacific 84,527 73,199 40,407
Other 33,757 25,775 23,755
$1,469,005 $1,250,779 $1,231,596
(1) Includes $6,340 gain from sale of assets and $6,140
restructuring charges
(2) Includes $9,334 gain from sale of assets
<TABLE>
<CAPTION>
Depreciation
Operating and Capital Identifiable
Net Sales Profit Amortization Expenditures Assets
<S> <C> <C> <C> <C> <C>
1997
Processing $1,242,688 $107,841 (3) $44,731 $45,955 $ 942,204
Distribution 968,340 42,767 (4) 6,167 6,022 376,681
Other 21,952 10,552 (5) 825 420 16,471
Intersegment activity (32,635) - - - -
Corporate - (26,980) 916 207 133,649
$2,200,345 $134,180 $52,639 $52,604 $1,469,005
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) (6) 615 760 204,019
Discontinued operations - - - 1,529 -
$1,901,954 $125,099 $47,241 $55,885 $1,231,596
(3) Includes $5,140 of restructuring charges
(4) Includes $1,000 of restructuring charges
(5) Includes $6,340 gain from sale of assets
(6) 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:
1997 1996 1995
Defined benefit plans
Service cost $ 411 $ 430 $ 306
Interest cost on projected
benefit obligation 5,979 5,911 6,161
Return on plan assets (8,941) (6,933) (6,215)
Net amortization and deferral 2,673 1,735 1,869
Net pension cost 122 1,143 2,121
Defined contribution plans 5,464 5,213 5,006
$5,586 $6,356 $7,127
Prior to 1997, the Company had 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 had 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 was
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
<S> <C> <C> <C> <C>
1997 1996 1997 1996
Actuarial present value of benefit obligations
Accumulated benefit obligations
including vested benefits of
$77,217 in 1997 and $75,799 in 1996 $1,223 $46,155 $78,174 $31,540
Projected benefit obligation $1,223 $47,494 $79,786 $31,873
Plan assets at fair value 1,148 44,455 99,563 42,251
Projected benefits in excess of
(less than) plan assets 75 3,039 (19,777) (10,378)
Consisting of
Unrecognized net transition obligation - 797 758 150
Unrecognized net actuarial (gains) losses (19) 10,244 (7,795) (5,861)
Adjustment to recognize minimum liability - 9,870 - -
Accrued (prepaid) pension cost
recognized in balance sheet $ 94 $ 1,868 $(12,740) $(4,667)
</TABLE>
The projected benefit obligation was determined using an
assumed discount rate of 7.50% and 7.75% in 1997 and 1996,
respectively, and an assumed long-term rate of increase in
compensation of 5% for both years. The assumed long-term
rate of return on plan assets is 8.5%. The 1997 change in
the discount rate caused the accumulated benefit obligation
to increase by approximately $1,835.
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, 1997 and 1996 is as follows:
1997 1996
Accumulated postretirement benefit obligation
Retirees $51,579 $49,128
Fully eligible active plan participants 4,564 4,931
Other active plan participants 9,630 9,425
65,773 63,484
Unrecognized actuarial gain 18,677 21,019
Accrued postretirement benefit obligation $84,450 $84,503
Net periodic postretirement benefit cost includes the
following components:
1997 1996 1995
Service cost $ 834 $1,060 $ 915
Interest cost 4,807 4,863 5,196
Amortization of unrecognized actuarial gain (781) (425) (799)
Net periodic postretirement benefit cost $4,860 $5,498 $5,312
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 8.5% and 9.0% at December 31,
1997 and 1996, respectively, and decreasing gradually to
5.25% in 2005 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 $7,792 at December 31, 1997 and the aggregate
service and interest costs components of net periodic
postretirement benefit costs for 1997 by $1,236.
A discount rate of 7.50% and 7.75% in 1997 and 1996,
respectively, was used in determining the accumulated
benefit obligation. The change in the actuarial assumptions
caused the accumulated benefit obligation to increase
approximately $1,558 in 1997.
FINANCIAL INSTRUMENTS
The Company transacts business in various foreign currencies
and is subject to financial exposure from foreign exchange
rate movement between the date a foreign currency transaction
is recorded and the date it is consummated. To mitigate this
risk, the Company enters into foreign exchange contracts.
Gains and losses on these contracts generally offset gains or
losses on the assets and liabilities being hedged and are
recorded as other income or expense. Additionally, the
Company enters into intercompany lending transactions. The
Company also hedges this foreign exchange exposure. Realized
and unrealized gains and losses on these contracts are
recorded as other income or expense. 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, 1997. Foreign currency amounts are translated
at exchange rates as of December 31, 1997. 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
U.S. dollar $62,209 $ -
German deutschmark 824 23,876
French franc - 46,615
Australian dollar 2,067 3,363
Belgian franc 2,367 -
British pound sterling 13,047 10,388
Other 5,294 1,006
$85,808 $85,248
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, 1997. The fair value of long-term foreign
exchange contracts is based on quoted market prices for
contracts with similar maturities.
The carrying amounts and fair values of the Company's
financial instruments at December 31, 1997 and 1996 are as
follows:
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and cash equivalents $41,430 $41,430 $30,028 $30,028
Notes payable to banks 2,919 2,919 2,304 2,304
Long-term debt
9% Senior notes 37,185 37,910 37,185 38,784
9.375% Senior notes 87,775 100,055 87,775 98,958
Medium-term notes 120,000 122,545 20,000 19,762
Bank borrowings 77,197 77,197 55,148 55,148
Other 5,219 5,219 8,624 8,624
Foreign exchange contracts 663 663 1,025 1,025
LEASE COMMITMENTS
Rental expense under operating leases for certain
manufacturing facilities, warehouses, transportation
equipment and data processing and office equipment was
$21,009, $18,646 and $17,843 for the years ending December
31, 1997, 1996 and 1995, respectively. Certain of the
Company's leases have options to renew, and there are no
significant contingent rentals.
At December 31, 1997, future minimum lease commitments for
noncancelable operating leases are $15,010 in 1998, $11,838
in 1999, $8,682 in 2000, $7,365 in 2001, $6,478 in 2002 and
$14,711 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:
1997 1996 1995
Interest and dividends $ (589) $(1,578) $(4,809)
Gain on sale of assets (6,340) - (9,334)
Expenses of closed facilities 3,166 4,160 4,854
Restructuring costs 6,140 - -
Foreign exchange gain (2,800) (2,558) (598)
Other (1,246) 315 1,307
$(1,669) $ 339 $(8,580)
DETAIL OF CURRENT AND OTHER LIABILITIES
Trade payables and accrued expenses and other liabilities at
December 31 are principally 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.
1997 1996
Trade payables and accrued expenses
Trade payables $247,778 $217,142
Salaries and wages 12,466 14,760
Associate benefits 42,847 37,510
Restructuring and acquisition costs 10,164 11,803
Other postretirement benefits 4,763 4,970
Other liabilities
Plant closedown costs 11,420 12,933
Environmental costs 14,641 16,097
Associate benefits 27,544 37,178
Other postretirement benefits 79,687 79,533
Minority interest 25,708 2,457
SUPPLEMENTAL CASH FLOW DATA
The following is a summary of noncash investing and financing
activities.
1997 1996 1995
Acquisition of businesses
Assets acquired $103,369 $130,712
Liabilities assumed 6,520 68,574
Cash paid 96,849 62,138
Less cash acquired 337 3,699
$ 96,512 $ 58,439
Debt of companies acquired $ 19,106
Payment of incentive compensation
awards with treasury stock $ 3,293 $ 2,019 $ 1,636
Payment of stock options exercised
with shares of common stock $ 3,069 $ 817 $ 1,483
Release of common stock held by
Associates Ownership Trust $ 8,134 $ 2,122 $ 8,628
Transfer of common stock released
from Associates Ownership Trust
to treasury stock $ (6,166) - $(8,039)
Quarterly Financial and Stock Price Data
M.A. Hanna Company and Consolidated Subsidiaries
Dollars in thousands except per share data
<TABLE>
Summarized unaudited quarterly financial and stock price data for 1997
and 1996 are as follows:
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1997
Net sales $527,629 $555,382 $561,418 $555,916
Gross margin 101,477 106,020 103,907 107,205
Net income 15,228 17,104 16,631 15,638
Net income per common share (diluted) .33 .37 .36 .34
Price range
High 24.63 30.00 28.75 27.25
Low 19.75 20.38 24.63 23.63
Cash dividends paid .105 .105 .105 .1125
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 (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
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>
<TABLE>
SELECTED FINANCIAL DATA
M. A. Hanna Company and Consolidated Subsidiaries
Dollars in thousands except per share data
<CAPTION>
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Summary of Operations
Net sales $2,200,345 $2,066,248 $1,901,954 $1,719,356 $1,412,071 $1,188,541
Cost of goods sold 1,781,736 1,685,167 1,552,643 1,393,036 1,146,191 961,925
Selling, general and administrative 271,894 243,505 218,823 213,318 179,228 152,366
Amortization of intangibles 14,204 14,313 13,969 12,458 12,006 11,069
Interest on debt 23,751 20,033 26,278 28,549 32,258 32,509
Income(loss) from continuing operations before
income taxes, extraordinary charge and cumulative
effect of changes in accounting principles 110,429 102,891 98,821 66,222 37,654 27,005
Income taxes 45,828 43,729 42,119 29,218 16,357 8,819
Income(loss) from continuing operations before
extraordinary charge and cumulative effect
of changes in accounting principles 64,601 59,162 56,702 37,004 21,297 18,186
Net income 64,601 53,810 102,039 43,294 2,018 19,025
Per share of common stock (basic)
Income(loss) from continuing operations 1.43 1.29 1.22 .80 .46 .42
Net income 1.43 1.18 2.19 .93 .05 .44
Dividends paid .43 .40 .37 .34 .32 .29
Cash dividends paid on
Common stock 19,175 18,291 16,962 15,688 14,003 12,630
Preferred stock - - - - - -
Balance Sheet
Current assets $ 642,919 $ 533,539 $ 574,612 $ 565,615 $ 405,782 $ 416,739
Current liabilities 398,993 351,939 335,251 337,491 259,680 229,327
Working capital 243,926 181,600 239,361 228,124 146,102 187,412
Property, plant and equipment - net 288,313 254,407 227,021 204,135 184,296 195,117
Other assets 537,773 462,833 429,963 445,410 438,628 440,873
Net long-term assets of discontinued operations - - - - 94,904 99,836
Other liabilities (205,480) (182,852) (179,580) (173,888) (176,422) (174,558)
Long-term debt (325,227) (207,705) (231,987) (288,869) (322,052) (350,737)
Total stockholders' equity $ 539,305 $ 508,283 $ 484,778 $ 414,912 $ 365,456 $ 397,943
Shares of common stock outstanding 50,476,968 50,989,815 51,964,377 53,541,141 53,417,283 52,650,162
Average diluted shares outstanding 46,271,857 46,823,501 47,412,297 47,203,412 46,283,262 44,332,720
Book value per share of common stock $ 10.68 $ 9.97 $ 9.33 $ 7.75 $ 6.84 $ 7.56
1991 1990 1989 1988
<S> <C> <C> <C> <C>
Summary of Operations
Net sales $1,006,638 $ 960,228 $ 918,276 $ 797,563
Cost of goods sold 797,892 749,071 718,636 614,465
Selling, general and administrative 147,998 137,674 135,741 128,573
Amortization of intangibles 10,146 9,704 8,886 6,456
Interest on debt 23,221 18,301 21,128 23,622
Income(loss) from continuing operations before
income taxes, extraordinary charge and cumulati
effect of changes in accounting principles (16,195) 44,023 44,797 28,554
Income taxes 8,225 12,830 7,608 4,107
Income(loss) from continuing operations before
extraordinary charge and cumulative effect
of changes in accounting principles (24,420) 31,193 37,189 24,447
Net income 1,875 55,871 86,920 83,223
Per share of common stock (basic)
Income(loss) from continuing operations (.48) .50 .61 .33
Net income .01 .90 1.49 1.55
Dividends paid .28 .25 .20 .15
Cash dividends paid on
Common stock 15,267 15,175 11,812 7,169
Preferred stock 1,031 - 2,125 8,501
Balance Sheet
Current assets $ 275,060 $ 276,711 $ 264,772 $ 240,029
Current liabilities 195,610 181,471 167,272 166,185
Working capital 79,450 95,240 97,500 73,844
Property, plant and equipment - net 184,877 183,536 173,477 154,477
Other assets 443,702 458,394 444,479 406,426
Net long-term assets of discontinued operations 121,374 129,869 137,304 141,552
Other liabilities (118,082) (161,674) (175,310) (169,470)
Long-term debt (330,863) (137,691) (134,834) (137,725)
Total stockholders' equity $ 380,458 $ 567,674 $ 542,616 $ 469,104
Shares of common stock outstanding 51,367,613 59,906,358 62,524,211 48,496,907
Average diluted shares outstanding 54,472,086 63,136,015 63,399,335 62,614,373
Book value per share of common stock $ 7.41 $ 9.47 $ 8.68 $ 7.61
Shareholder Information
M.A. Hanna Company common stock is listed on the New York and Chicago stock
exchanges under the symbol MAH. At December 31, 1997, the number
of shareholders of record of the Company's common stock was 4,658.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues exceeded $2.2 billion in 1997 and established a new
record for the Company. Total revenues increased 6.5% in
1997 and international revenues now comprise 21.7% of total
revenues. Earnings per share grew 11.1% over the prior year
level and net income of $64.6 million also established a new
record for the Company. Within our processing segment, we
had good growth in our domestic rubber and plastic
compounding businesses and international operations. 1997
was a difficult year for our domestic colorants business as
the marketplace migrated to less robust colors which
resulted in lower average selling prices. Within our
distribution segment, resin distribution also had good
growth in 1997. Shapes distribution implemented a hub and
spoke distribution system and opened two call centers which
will reduce costs and improve service levels for customers.
During 1997, significant strategic objectives were advanced.
Three acquisitions were consummated which expanded our
product portfolio and increased our international presence.
We also formed a joint venture, Techmer PM LLC, which
strengthened our market position in domestic colorants. We
opened two facilities during 1997 - a domestic wire and
cable colorants plant in Lehigh Valley, Pennsylvania and a
colorants plant in China. Two additional international
facilities are under construction - a plastic compounding
plant in China and a colorants plant in Hungary that will
come on stream in early 1998. In addition, we recently
announced the pending acquisition of Melos Carl Bosch GmbH &
Co., our first international acquisition in rubber
compounding.
1997 Compared with 1996
Revenues from processing businesses increased 10% over 1996
levels to $1,242.7 million due in part to higher volumes and
acquisitions, partially offset by lower pricing and the
impact of foreign exchange. Distribution revenues increased
from $926.2 million in 1996 to $968.3 million in 1997.
Increases in unit volume and product mix were partially
offset by lower pricing and the stronger U.S. dollar. Sales
from other operations were down $10.5 million from 1996
levels. 1996 revenue included revenues from: the
management of Iron Ore Company of Canada, management of a
bulk unloading facility in Cleveland and our ownership
interest in the IOC sales agency. No revenues were
generated during 1997 from the aforementioned operations due
to the expiration of our management contracts and the sale
of our ownership interest in the sales agency.
Gross margins were 19% in 1997 compared with 18.4% in 1996.
The improvement in gross margin is due in part to the mix of
sales between our processing and distribution businesses.
Our processing businesses, which had a higher overall growth
rate in sales than our distribution businesses, carry higher
gross margins. Margin improvement was also driven by
acquisitions and reductions in LIFO reserves. Acquisitions
generated .2% points improvement in margins while the
reductions in LIFO reserves generated a .1% point
improvement.
Selling, general and administrative expenses increased from
$243.5 million in 1996 to $271.9 million in 1997. The
increase is due to higher levels of sales, acquisitions and
higher costs associated with the development of HannaLinkTM,
the Company's enterprise-wide information system.
Acquisitions accounted for $10.2 million while the
incremental cost of HannaLinkTM was $8.2 million. As a
percent of sales, selling, general and administrative
expenses were 12.4% in 1997 and 11.8% in 1996.
Other - net includes gains of $6.3 million from the sale of
the Company's remaining interest in the Iron Ore Company of
Canada sales agency and its interest in Hollinger Hanna, a
management services company. Additionally, the Company
recorded a $5.1 million charge for plant closings,
facilities rationalization and start up costs for a new
plant within the processing segment and a $1.0 million
charge for the reengineering of its resin distribution
business.
Interest on debt increased $3.7 million in 1997 to $23.8
million. The increase in interest expense resulted from
increased borrowings to fund acquisitions, the formation of
a joint venture and increased working capital levels.
The Company's effective tax rate was 41.5% in 1997 compared
with 42.5% in 1996. We continue to explore tax planning
strategies that will enable us to sustain or lower the
current tax rate in the future.
1996 Compared with 1995
Net sales were $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.
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 was
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
percent 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 carried a lower rate of
interest.
Other - net in 1995 included a gain of $9.3 million from the
sale of the Company's remaining interest in IOC and higher
levels of interest income.
LIQUIDITY AND SOURCES OF CAPITAL
Cash flows from operating activities were $89.5 million in
1997. Working capital used $27.7 million reflecting lower
inventory turns due in part to the roll out of our area
distribution centers in our shapes distribution business.
Payments related to prior restructurings used $8.2 million.
Excluding the restructuring payments, operating activities
generated cash flow of $97.7 million. Investment activities
used $169.8 million including $111.5 million for
acquisitions and acquisition related obligations. Capital
spending was $52.6 million, or approximately 1.4 times
depreciation. Additional investments in associated
companies of $22.1 million primarily relates to the
formation of a joint venture with Techmer PM. Proceeds from
the sale of assets were $13.0 million and included the sale
of our interest in the Iron Ore Sales Partnership and
Hollinger Hanna, a management services company. Financing
activities generated $95.5 million. Dividends used $19.2
million and the repurchase of .8 million shares for treasury
utilized $18.0 million. The Company also issued $100.0
million of medium-term notes during 1997. At December 31,
1997, $180.0 million of additional debt securities could be
issued under a shelf registration statement filed with the
Securities and Exchange Commission during 1996.
The Company has a revolving credit facility which provides
for borrowings up to $200 million and expires in January
2003. 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 1.6:1 at December 31, 1997 compared
with 1.5:1 at December 31, 1996. Debt to total capital was
37.6% and 29.0% at December 31, 1997 and 1996, respectively.
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 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, results of operations or cash flows
of the Company.
Year 2000
The Company is in the process of implementing new enterprise-
wide information technology systems and applications across
our processing and distribution businesses to achieve a Year
2000 date conversion with no impact on our customer base or
disruption to our operations. Management believes that this
process should be substantially completed during 1998. A
significant portion of the implementation costs have already
been incurred and are being amortized or charged to expense
in current operations. The Company does not believe that
future costs will be material to its financial condition,
results of operations or cash flows.
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.
We continue to follow the financial crisis in Asia. We do
not believe we have a significant exposure because in many
instances, our business activities are transacted in U.S.
dollars. Our operations are not concentrated in any one
country and we sell to a diverse customer base.
On behalf of M.A. Hanna Management,
/s/ Michael S. Duffey
Michael S. Duffey
Vice President and Chief Financial Officer
Item 14(c) - Exhibit (i) (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
CI Holding Company Delaware
Compounding Technology, Euro S.A. France
Compounding Technology, Inc. California
Compounding Technology Pte. Ltd. Singapore
DH Compounding Company Delaware
(a general partnership)
Enviro Care Compounds AS Norway
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
Hanna-Wilson Polimer Feldolgozo Kft Hungary
Hanna Wilson Polymer (Shanghai) Limited China
Harwick Chemical Manufacturing Company Delaware
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
MAH Plastics Company Delaware
Melos Carl Bosch GmbH & Co. Germany
Monmouth Plastics Company Delaware
Poliamidas Barbastro, S.A. Spain
Techmer PM, LLC Delaware
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.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statement
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 28, 1998 appearing on page 40 of the Annual
Report to Stockholders 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 19, 1998
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, 1997, 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 4, 1998
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, 1997, 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 4, 1998
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, 1997, 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 4, 1998
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, 1997, 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 4, 1998
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, 1997, 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. Harnett Director of M.A. Hanna March 4, 1998
G. D. Harnett 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, 1997, 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 4, 1998
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, 1997, 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. B. Lewis Director of M.A. Hanna March 4, 1998
D. B. Lewis 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, 1997, 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 4, 1998
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, 1997, 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 4, 1998
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, 1997, 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. D. Walker Director of M.A. Hanna March 4, 1998
M. D. Walker Company
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