<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
/X/ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _______________________ TO ______________________
COMMISSION FILE NUMBER 1-7558
LAWTER INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 36-1370818
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
990 SKOKIE BOULEVARD, NORTHBROOK, ILLINOIS 60062
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (708) 498-4700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ----------------------------- -----------------------------
<S> <C>
COMMON STOCK, $1.00 PAR
VALUE PER SHARE NEW YORK STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
(TITLE OF CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES _X_ NO ____
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. / /
AS OF FEBRUARY 14, 1994, 44,815,251 COMMON SHARES WERE OUTSTANDING. THE
AGGREGATE MARKET VALUE OF THE COMMON SHARES (BASED UPON THE FEBRUARY 14, 1994
CLOSING PRICE OF THESE SHARES ON THE NEW YORK STOCK EXCHANGE) OF LAWTER
INTERNATIONAL, INC. HELD BY NON-AFFILIATES WAS APPROXIMATELY $345 MILLION.
DOCUMENTS INCORPORATED BY REFERENCE
ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1993 -- PARTS I,
II AND IV.
PROXY STATEMENT TO STOCKHOLDERS FOR THE 1994 ANNUAL MEETING -- PART III.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
FORM 10-K
ITEM NO. NAME OF ITEM PAGE
- ---------- -------------------------------------------------------------------------------------------- -----
<S> <C> <C>
Part I
Item 1. Business.................................................................................... 2
Item 2. Properties.................................................................................. 4
Item 3. Legal Proceedings........................................................................... 5
Item 4. Submission of Matters to a Vote of Security Holders......................................... 5
Item 4A. Executive Officers of the Registrant........................................................ 5
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters................... 5
Item 6. Selected Financial Data..................................................................... 5
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....... 5
Item 8. Financial Statements and Supplementary Data................................................. 5
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........ 6
Part III
Item 10. Directors and Executive Officers of the Registrant.......................................... 6
Item 11. Executive Compensation...................................................................... 6
Item 12. Security Ownership of Certain Beneficial Owners and Management.............................. 6
Item 13. Certain Relationships and Related Transactions.............................................. 6
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................. 6
Report of Independent Public Accountants on Schedules and Consent of
Independent Public Accountants........................................................................ 9
Signatures.............................................................................................. 12
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS--
INDUSTRY SEGMENTS.
The Company is engaged predominantly in a single industry--specialty
chemicals. Reference is made to Note 8 in the Company's 1993 Annual Report to
Stockholders (hereby incorporated by reference) for information on the amounts
of revenue, operating profit and identifiable assets for the industry segment.
NARRATIVE DESCRIPTION OF BUSINESS--
PRINCIPAL PRODUCTS.
Reference is made to the General Nature and Scope of Business on page 4 in
the Company's 1993 Annual Report to Stockholders (hereby incorporated by
reference) for information on the description of the principal products.
The Company manufactures and warehouses its products in seven plants in the
United States and in ten plants in foreign countries, i.e. Belgium, Canada,
China, Denmark, England, France, Germany, Ireland, Singapore and Spain. Products
are sold primarily by Company employed salesmen.
Reference is made to the Sales by Product Group on page 4 in the Company's
1993 Annual Report to Stockholders (hereby incorporated by reference) for
information with respect to the approximate percentages of total sales of the
Company during the three fiscal years ended December 31, 1993, attributable to
each principal product category.
RAW MATERIALS.
The basic ingredients of the Company's products are purchased from others,
including larger chemical firms. Such ingredients are in adequate supply and are
expected to remain so. A portion of the Company's resin production is used by it
in the manufacture of ink vehicles.
PATENTS.
The Company owns certain patents on its products, but no single patent is
considered to be materially important to its business.
SEASONAL INFLUENCES.
The business of the Company is not in any material respect subject to
seasonal influences.
BACKLOG.
Since the Company generally fills orders for its products out of current
inventories, there is no significant backlog of orders at any time.
CUSTOMERS.
The Company sells its products to both large and small ink companies. Lawter
is a major supplier of printing ink vehicles and resins for printing inks and,
therefore, sells substantial quantities to the larger ink companies around the
world. The Company believes the five largest ink companies are, in alphabetical
order, BASF, Coates/Lorilleux, Dianippon Ink and Chemicals, Sicpa and Toyo.
Lawter sells a variety of specialized products to each of their numerous
companies, subsidiaries or branches in various countries, where the purchasing
decisions normally are made. Dianippon Ink and Chemicals is Lawter's largest
multilocation customer with eighteen percent of consolidated net sales for the
most recently completed fiscal year.
2
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COMPETITION.
The Company encounters keen competition in the conduct of its business.
Industry data indicating the relative ranking of competitive companies is not
available. The Company competes with several other independent producers of
printing ink vehicles and slip additives. The larger printing ink manufacturers
produce some of the vehicles required in their own operations, although
generally they do not sell vehicles in competition with the Company. The Company
is considered to be one of the medium sized to smaller producers of synthetic
and hydrocarbon resins. Several other producers of synthetic and hydrocarbon
resins are large chemical companies with much greater total sales and resources
than those of the Company. The Company is one of several manufacturers of
fluorescent pigments and one of numerous manufacturers of fluorescent coatings
which compete in the world market with numerous large and small producers of
organic pigments and coatings. In the sale of thermographic products and
rota-matic machines, the Company encounters competition from producers of all
types of printing equipment, from engravers and from other producers of
thermographic and rota-matic equipment and printing supplies.
In the sale of its principal products, printing ink vehicles, slip
additives, and synthetic and hydrocarbon resins, the Company's principal methods
of meeting competition are in the areas of product performance and service. The
Company specializes in products prepared primarily for specific end uses such as
vehicles used in printing inks having particular characteristics, including fast
setting and mar resistant inks, and ink systems designed to reduce air pollution
and resins used in the production of specialty inks, plastics and protective
coatings. The Company is capable of fulfilling the requirements of customers
either from inventories or from production runs on relatively short notice.
The Company has approximately 150 competitors in the sale of its line of
printing ink vehicles and slip additives, and approximately 70 competitors in
the sale of its synthetic and hydrocarbon resins.
RESEARCH.
During the fiscal years ended December 31, 1993, 1992 and 1991, the Company
spent approximately $4,423,000, $4,093,000 and $3,883,000, respectively, on
research activities relating to the development of new products and the
improvement of existing products.
ENVIRONMENTAL MATTERS.
Environmental laws regulate the discharge of materials into the environment
and may require the Company to remove or minimize the environmental effects of
the disposal of waste. Environmental expenditures are expensed or capitalized
depending upon their future economic benefit. Expenditures that relate to an
existing condition caused by past operations and that have no future economic
benefits are expensed. Liabilities are recorded when environmental assessment
and/or remediation is probable and the costs can be reasonably estimated.
During 1993, the Company expensed $3,405,000 for voluntary waste disposal
and $3,145,000 for refurbishing and cleaning waste water treatment facilities.
Expenditures for environmental matters during the fiscal years ended December
31, 1992 and 1991 were not material to the consolidated financial statements of
the Company.
It has been and is the Company's policy voluntarily to install equipment
deemed necessary to control the discharge of pollutants into the environment.
The Company has recently voluntarily installed or is in the process of
installing numerous in-line incinerators/after-burners at its major
manufacturing facilities in order to minimize the generation of vapor, liquid or
solid waste. The Company believes that its facilities and products comply in all
material respects with applicable environmental regulations and standards.
The Company believes that compliance with the environmental, Federal, state
and local laws has had no material effect upon the capital expenditures or
competitive position of the Company. Environmental capital expenditures in 1994
are not anticipated to be material. The Company does not believe, based on
information available at this time, that the level of future expenditures for
environmental matters will have a material effect on its consolidated financial
position.
3
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EMPLOYEES.
At December 31, 1993, the Company had 537 employees.
FOREIGN SALES--
Reference is made to Note 8 in the Company's 1993 Annual Report to
Stockholders (hereby incorporated by reference) for this information.
ITEM 2. PROPERTIES.
Information with respect to the principal properties, all of which are of
masonry and metal clad construction, in which the Company's operations are
conducted is as follows:
<TABLE>
<CAPTION>
APPROXIMATE
FLOOR AREA
(SQUARE PRINCIPAL PRODUCTS OWNED OR
LOCATION FEET) OR ACTIVITIES LEASED
- --------------------------------------- ------------ ----------------------------------------------- ---------
<S> <C> <C> <C>
Northbrook, Illinois 16,000 Corporate headquarters Owned
Bell, California 15,000 Printing ink vehicles Leased
Warehouse
La Vergne, Tennessee 27,000 Printing ink vehicles Owned
Warehouse
South Kearny, New Jersey 42,000 Printing ink vehicles Owned
Warehouse
Pleasant Prairie, Wisconsin (2) 232,000 Printing ink vehicles and slip additives Owned
Synthetic resins
Research facilities
Warehouse
Moundville, Alabama 250,000 Synthetic and hydrocarbon resins (1)
Warehouse
Skokie, Illinois 66,000 Fluorescent pigments and coatings Owned
Slip additives
Thermographic compounds
Research facilities
Warehouse
Plainfield, New Jersey 30,000 Thermographic and rota-matic equipment Owned
Warehouse
Lokeren, Belgium 109,000 Printing ink vehicles and slip additives Owned
Synthetic resins
Research facilities
Warehouse
Rexdale, Ontario, Canada 66,000 Printing ink vehicles and slip additives Owned
Synthetic resins
Warehouse
Tanggu, Peoples Republic of China 40,000 Printing ink vehicles Owned
Synthetic resins
Warehouse
Koge, Denmark 14,000 Printing ink vehicles Owned
Warehouse
Bicester, Oxon, England 38,000 Printing ink vehicles Owned
Fluorescent pigments
Warehouse
Orly, France 16,000 Printing ink vehicles Leased
Warehouse
Frechen, Germany 17,000 Printing ink vehicles Leased
Warehouse
Waterford, Ireland 97,000 Synthetic resins Owned
Jurong Town, Singapore 10,000 Printing ink vehicles Owned
Warehouse
Barcelona, Spain 12,000 Printing ink vehicles Leased
Warehouse
<FN>
- ------------------------
(1) The Moundville, Alabama plant is leased as described in Note 7 in the
Company's 1993 Annual Report to Stockholders (hereby incorporated by
reference).
(2) The Pleasant Prairie, Wisconsin plant includes 116,000 square feet for the
new resin facility expected to be operational in the second quarter of
1994.
</TABLE>
4
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
Reference is made to Note 9 in the Company's 1993 Annual Report to
Stockholders (hereby incorporated by reference) for this information.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders in the fourth
quarter of the year ended December 31, 1993.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to the executive officers of the Company, all of
whose terms will expire at the annual meeting of the Board of Directors in April
1994, is as follows:
<TABLE>
<CAPTION>
YEAR
NAME POSITION AGE ELECTED
- ------------------------------------------------ ------------------------------- --- -------
<S> <C> <C> <C>
Daniel J. Terra................................. Chairman of the Board and Chief
Executive Officer 82 1958
Richard D. Nordman.............................. President and
Chief Operating Officer 47 1986
Richard A. Hacker............................... Vice President 58 1974
Ludwig P. Horn.................................. Vice President 64 1980
John P. Jilek................................... Vice President 42 1989
Hermann Mueller................................. Vice President 52 1980
John P. O'Mahoney............................... Vice President 37 1993
William S. Russell.............................. Vice President, 1987
Treasurer and 1982
Secretary 45 1986
</TABLE>
Mr. Jilek served as European General Manager with the Company from
1985-1989. Mr. O'Mahoney served as European General Manager from 1990-1993 and
European Controller prior to 1990.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Reference is made to the Market Price and Quarterly Dividend Statistics for
Common Stock on page 1 in the Company's 1993 Annual Report to Stockholders
(hereby incorporated by reference) for this information.
ITEM 6. SELECTED FINANCIAL DATA.
Reference is made to the Ten Year Financial Summary (1984-1993) on pages 8
and 9 in the Company's 1993 Annual Report to Stockholders (hereby incorporated
by reference) for information on selected financial data. This referenced
section should be read in conjunction with the Consolidated Financial Statements
and Notes (hereby incorporated by reference) in the Company's 1993 Annual Report
to Stockholders, pages 10 to 19.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Reference is made to the Management's Discussion and Analysis on pages 6 and
7 in the Company's 1993 Annual Report to Stockholders (hereby incorporated by
reference) for this information.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and supplementary data are included in this Form 10-K
Annual Report as indicated in Item 14 on pages 6 and 7. Those portions of the
Lawter International, Inc. and Subsidiaries' 1993 Annual Report to Stockholders
listed under the caption "Consolidated Financial Statements" in
5
<PAGE>
Item 14 are hereby incorporated by reference. Reference is also made to the
Operating Results by Quarters on page 7 in the Company's 1993 Annual Report to
Stockholders (hereby incorporated by reference) for this information.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no changes in or disagreements with independent auditors on
accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Reference is made to the Company's 1994 Proxy Statement under the heading
"ELECTION OF DIRECTORS" (hereby incorporated by reference) and Item 4A
"Executive Officers of the Registrant" in Part I of this Form 10-K for this
information.
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the Company's 1994 Proxy Statement under the heading
"Executive Compensation" (hereby incorporated by reference) for this
information.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the Company's 1994 Proxy Statement under the headings
"Principal Holders of Common Stock" and "Security Ownership of Management"
(hereby incorporated by reference) for this information.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the Company's 1994 Proxy Statement under the heading
"Indebtedness of Management" (hereby incorporated by reference) for this
information.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)1. Consolidated Financial Statements--
<TABLE>
<CAPTION>
PAGE
NUMBER
---------
<S> <C>
Balance Sheets as of December 31, 1993 and 1992.................................................. *
Statements of Earnings for the years ended December 31, 1993, 1992 and 1991...................... *
Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991.................... *
Statements of Stockholders' Equity for the years ended December 31, 1993, 1992 and 1991.......... *
Notes to the Consolidated Financial Statements--December 31, 1993, 1992 and 1991................. *
Report of Independent Public Accountants......................................................... *
<FN>
- ------------------------
* These Consolidated Financial Statements, related Notes and Report of
Independent Public Accountants appearing in the Company's 1993 Annual Report to
Stockholders, pages 10 to 20, which is filed as an exhibit to this Form 10-K,
are incorporated herein by reference.
</TABLE>
6
<PAGE>
(a)2. Financial Statement Schedules--
<TABLE>
<CAPTION>
PAGE NUMBER
-------------
<C> <S> <C>
Report of Independent Public Accountants on Schedules............................................... 9
I. Marketable Securities.................................................................... 10
II. Amounts Receivable from Related Parties.................................................. 10
VIII. Valuation and Qualifying Accounts........................................................ 11
IX. Short-Term Borrowings.................................................................... 11
X. Supplementary Income Statement Information............................................... 11
</TABLE>
All other schedules are not submitted because they are not applicable, not
required or the required information is included in the consolidated financial
statements or notes thereto.
(a)3. Exhibits--
<TABLE>
<S> <C>
(3)(a) Certificate of Incorporation, as amended through April 27, 1993 (incorporated by
reference to Exhibit I of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993) (File No. 1-7558).
(b) Bylaws of the Company, as amended through April 28, 1988 (incorporated by
reference to Exhibit II of the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1988) (File No. 1-7558).
(10)(a) Lawter International, Inc. Growth Sharing Plan for Salaried and Office Clerical
Hourly Employees, as amended through January 1, 1989 (incorporated by reference
to Exhibit (10)(a) of the Company's Annual Report on Form 10-K for the year
ended December 31, 1989) (File No. 1-7558).*
(b) 1983 Incentive Stock Option Plan (incorporated by reference to Exhibit 2 of
Registration Statement No. 2-84421).*
(c) Amended and restated Non-Qualified Stock Option Plan (incorporated by reference
to Exhibit A of the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1987) (File No. 1-7558).*
(d) 1992 Non-Qualified Stock Option Plan (incorporated by reference to Exhibit
(10)(d) of the Company's Annual Report on Form 10-K for the year ended December
31, 1992) (File No. 1-7558).*
(e) Employment Agreement, dated February 1, 1992, between the Company and Ludwig P.
Horn (incorporated by reference to Exhibit (10)(e) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1992) (File No. 1-7558).*
(f) Employment Agreement, dated September 26, 1987, between the Company and Richard
D. Nordman (incorporated by reference to Exhibit (10)(g) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1987) (File No. 1-7558).*
(g) Form of Employment Agreements, dated September 26, 1987, between the Company and
Richard A. Hacker, John P. Jilek, Hermann Mueller and William S. Russell
(incorporated by reference to Exhibit (10)(h) of the Company's Annual Report on
Form 10-K for the year ended December 31, 1987) (File No. 1-7558).*
(13) Lawter International, Inc. and Subsidiaries' 1993 Annual Report to Stockholders
(which, except for those portions thereof incorporated by reference in this Form
10-K Annual Report, is furnished for the information of the Commission, but is
not deemed to be "filed" as part of this report).
</TABLE>
* These documents constitute all of the management contracts, compensatory plans
or arrangements in which any director or executive officer participates.
7
<PAGE>
<TABLE>
<S> <C>
(21) Subsidiaries of the Company. Reference is made to the Directory on the inside
back cover of the Company's 1993 Annual Report to Stockholders (hereby
incorporated by reference) for a listing of significant subsidiaries.
(23) Consent of Independent Public Accountants (included in this Form 10-K on page
9).
</TABLE>
(b) On November 15, 1993, the Company filed an 8-K to report the termination of
the Agreement and Plan of Merger between Lawter International, Inc., Hach
Company and LHM Corporation, a wholly owned subsidiary of Lawter
International, Inc., dated as of August 3, 1993.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The foregoing undertaking is made in compliance with Form S-8, as amended as
of July 13, 1990, and shall be incorporated by this reference into each Form S-8
of the registrant, including Registration Statements Nos. 33-24859, 33-61506 and
2-84421.
8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULES
To Lawter International, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Lawter International, Inc. and
Subsidiaries' 1993 Annual Report to Stockholders incorporated by reference in
this Form 10-K and have issued our report thereon dated February 10, 1994. Our
audit was made for the purpose of forming an opinion on those consolidated
financial statements taken as a whole. The schedules listed in the index on page
7 are the responsibility of the Company's management and are presented for
purposes of complying with the Securities and Exchange Commission rules and are
not part of the basic financial statements. These schedules have been subjected
to the auditing procedures applied in our audit of the basic consolidated
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
February 10, 1994
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated February 10, 1994, included (or incorporated by
reference) in this Annual Report of Lawter International, Inc. and Subsidiaries
on Form 10-K for the year ended December 31, 1993, into the Company's previously
filed Registration Statements on Forms S-3 (File No. 33-24165), S-8 (File No.
33-24859), S-8 (File No. 33-61506) and S-8 (File No. 2-84421).
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
March 25, 1994
9
<PAGE>
LAWTER INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE I--MARKETABLE SECURITIES
AS OF DECEMBER 31, 1993
(in thousands)
<TABLE>
<CAPTION>
AMOUNT CARRIED
NAME OF ISSUER AND NUMBER OF IN THE
TITLE OF ISSUE SHARES COST MARKET VALUE BALANCE SHEET
- -------------------------------------------------------------- ----------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
Hach Company Common Stock(2).................................. 2,526 $ 7,999 $ 53,041(1) $ 18,077
Other Marketable Securities................................... 155 6,104 5,591 5,591
-------
$ 23,668
-------
-------
<FN>
- ------------------------
(1) Based on the closing market price per share as quoted by NASDAQ on
December 31, 1993.
(2) Reference is made to Note 6 in the Company's 1993 Annual Report to
Stockholders (hereby incorporated by reference) for additional information
on the investment in Hach Company Common Stock.
</TABLE>
LAWTER INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(in thousands)
<TABLE>
<CAPTION>
DEDUCTIONS
BALANCE AT -------------------------- BALANCE AT END OF YEAR
BEGINNING OF AMOUNTS AMOUNTS --------------------------
NAME OF DEBTOR YEAR ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
- ---------------------------------------- ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1993:
Richard D. Nordman(1)................... $ 2,903 $ 436 $ -- $ -- $ 3,339 $ --
December 31, 1992:
Richard D. Nordman(1)................... $ 242 $ 2,922 $ 261 $ -- $ 2,903 $ --
December 31, 1991:
Richard D. Nordman(1)................... $ 169 $ 73 $ -- $ -- $ 242 $ --
Daniel J. Terra(2)...................... -- 353 353 -- -- --
<FN>
- ------------------------
(1) These amounts represent notes receivable (including interest at the
Company's effective rate to borrow funds) reflected in stockholders'
equity which are due within eighteen months after issuance. The Company
holds Common Stock of the Company purchased by Mr. Nordman through the
exercise of stock options as collateral for these notes.
(2) Mr. Terra was authorized to receive, but waived cash compensation of
$450,000. On January 7, 1991, the Board of Directors authorized a loan of
$350,000, at the prime rate of interest, to Mr. Terra which was
subsequently repaid on February 13, 1991.
</TABLE>
10
<PAGE>
LAWTER INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(in thousands)
<TABLE>
<CAPTION>
ALLOWANCES FOR DOUBTFUL ACCOUNTS 1993 1992 1991
- ------------------------------------------------------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year.............................................................. $ 632 $ 237 $ 162
Additions (credited)/charged to earnings................................................ 66 436 (29)
Additions/(deductions) for accounts written off, net of recoveries...................... (379) (41) 104
--------- --------- ---------
Balance at end of year.................................................................... $ 319 $ 632 $ 237
--------- --------- ---------
--------- --------- ---------
</TABLE>
LAWTER INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(in thousands)
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
BALANCE AT AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE END OF INTEREST DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD (1) PERIOD (2)
- -------------------------------------------------- ----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
December 31, 1993:
Bank Borrowings................................... $ 20,044 3.82% $ 20,513 $ 5,442 3.78%
December 31, 1992:
Bank Borrowings................................... $ 8,011 3.92% $ 13,681 $ 5,355 4.96%
December 31, 1991:
Bank Borrowings................................... $ 10,457 5.65% $ 10,457 $ 3,171 5.81%
The Company borrows against a $25,000,000 open line of credit.
<FN>
- ------------------------
(1) Based on the daily average outstanding principal during the period.
(2) Computed by dividing total interest expensed for the period by the average
principal outstanding for the period.
</TABLE>
LAWTER INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(in thousands)
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
-------------------------------
ITEM 1993 1992 1991
- ------------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Maintenance and repairs.............................................................. $ 2,770 $ 2,707 $ 2,829
--------- --------- ---------
--------- --------- ---------
<FN>
- ------------------------
NOTE: Amortization of intangible assets, taxes other than payroll and income
taxes, royalties and advertising costs charged to costs and expenses
during the years 1993, 1992 and 1991 did not exceed one percent of total
sales.
</TABLE>
11
<PAGE>
SIGNATURES
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.
______LAWTER INTERNATIONAL, INC.______
(Registrant)
/s/ Daniel J. Terra
--------------------------------------
Daniel J. Terra
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ William S. Russell
--------------------------------------
William S. Russell
Vice President, Treasurer and
Secretary
(Principal Financial and Accounting
Officer)
Date: March 25, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/ Leonard P. Judy
--------------------------------------
Leonard P. Judy, March 25, 1994
Director
/s/ Richard D. Nordman
--------------------------------------
Richard D. Nordman, March 25, 1994
Director
/s/ Fred G. Steingraber
--------------------------------------
Fred G. Steingraber, March 25, 1994
Director
/s/ Daniel J. Terra
--------------------------------------
Daniel J. Terra, March 25, 1994
Director
Registrant's 1993 Annual Report
to Stockholders, some portions
of which have been incorporated
by reference in this Form 10-K,
has been previously sent to
each stockholder and was
included with this report to
the Securities and Exchange
Commission.
12
<PAGE>
Exhibit 13
Lawter International, Inc. and Subsidiaries' 1993 Annual Report to Stockholders
Market Price and Quarterly Dividend Statistics for Common Stock
MARKET PRICE DIVIDENDS
(per share) 1993 1992 1993 1992
High Low High Low
First Quarter $14 1/8 $12 1/8 $14 $12 1/4 $.10 $.10
Second Quarter 15 1/2 12 5/8 14 7/8 12 1/2 .10 .10
Third Quarter 14 5/8 12 7/8 13 3/8 11 7/8 .10 .10
Fourth Quarter 14 1/2 12 5/8 14 3/8 12 3/4 .10 .10
Total Year $.40 $.40
The common stock of Lawter International, Inc. is traded on the New York Stock
Exchange (symbol, LAW). The continuation of dividend payments is expected. The
approximate number of holders of record of Lawter's common stock as of March 4,
1994 was 3,600.
-1-
<PAGE>
General Nature and Scope of Business
Lawter is engaged predominantly in a single industry - specialty chemicals. The
primary products produced and marketed by the Company within this industry
consist of:(1) printing ink vehicles and slip additives; (2) synthetic and
hydrocarbon resins; and (3) fluorescent pigments and coatings, and thermographic
compounds. In addition, the Company produces thermographic and rota-matic
machines.
Printing ink vehicles are fluid and gelled compositions which provide to
lithographic and letterpress printing inks the ability to carry color onto a
variety of printing surfaces. They influence printing quality, gloss, drying
speed, adhesion, rub resistance and press speed. Slip additives are used in
printing inks to provide additional surface slip and rub resistance to the ink
film. These products are sold to printing ink manufacturers.
Synthetic and hydrocarbon resins are used in the production of adhesives, liquid
printing inks and printing ink vehicles, rubber compounds, paints and various
coatings to improve durability, chemical resistance, appearance, adhesion and
speed of drying.
Fluorescent pigments and coatings are used in the manufacture of paints,
printing inks, paper coatings, plastic products, rubber compounds, textile inks
and other products where striking color properties are desired. Such fluorescent
products are used for greater visibility in safety marking applications. They
are also used in display advertising and in the plastic industry in toys and
bottles.
Thermographic machines and compounds are used in the production of thermographic
printing, a process which produces raised printing. Rota-matic machines are used
to cut, score or perforate paper products. The thermographic printing process
and rota-matic machines are used in the manufacture of greeting cards, specialty
printing, business cards, stationery and advertising material.
No material part of the business of the Company is dependent upon a single
product for any customer or a small group of customers.
Sales by Product Group
(percent of net sales) 1993 1992 1991
Printing Ink Vehicles and Slip Additives 47.0 49.4 45.7
Synthetic and Hydrocarbon Resins 46.7 44.1 45.0
Other 6.3 6.5 9.3
-2-
<PAGE>
Management's Discussion and Analysis
Liquidity and Capital Resources
Lawter's cash and equivalents, net of short-term borrowings, decreased
$7,500,000 from $64,900,000 at December 31, 1992 to $57,400,000 at December 31,
1993. The decrease was due primarily to expenditures for the new U.S. resin
facility and the purchase of marketable securities. The Company generally relies
upon internally generated funds from operations to satisfy working capital
requirements and to fund capital expenditures. However, in certain
circumstances, the Company finds it is more advantageous to borrow funds on a
short-term basis to satisfy U.S. working capital requirements. Lawter
anticipates maintaining a strong liquid position.
In 1993 and 1991, Lawter used external short-term bank financing in connection
with the new U.S. manufacturing and research and development facilities. In
1992, the majority of the Company's capital expansion program was financed with
internally generated funds. Capital expenditures for 1993 were originally
budgeted at $11,000,000. Actual expenditures were approximately seventeen
percent higher than budgeted due primarily to various equipment additions and
replacements made which were not included in the original budget. Lawter's
capital expenditures for 1994 are estimated at $10,000,000. These expenditures
include the beginning of a two year project for a new synthetic resin and
printing ink vehicle facility in Europe, and completion of the new U.S. resin
facility, as well as additions to and modernization of existing facilities
elsewhere. The Company currently anticipates using internally generated funds
for the majority of these capital expenditures.
Results of Operations
Net Sales. The Company's consolidated net sales increased 3% in 1993 when
compared to 1992. Domestic sales volume increased 3% while average selling
prices decreased 1%, due primarily to product mix, resulting in a 2% increase in
domestic net sales. While European sales volume increased 14%, net reportable
European net sales increased 1% as a result of an 11% decrease caused by adverse
exchange rate fluctuations and a 1% decrease in average selling prices.
Consolidated net sales increased 10% in 1992 when compared to 1991. Sales volume
domestically increased 13% of which 4% was attributable to the acquisition of
the business of Ampac, Inc. that was effective September 6, 1991. Partially
offsetting this increase was a 5% decrease in average selling prices caused
primarily by lower sales volume of fluorescent products which have a higher unit
selling price. This resulted in a 7% increase in domestic net sales. European
net sales increased 17% due to a 14% increase in sales volume and a 4 % increase
in average exchange rates, partially offset by a 1% decrease in average selling
prices.
Gross Margins. Gross margins as a percent of sales were 25.4%, 30.7% and 31.7%
for 1993, 1992 and 1991, respectively. The 1993 gross margin was lower than 1992
due mainly to charges associated with: 1) voluntary waste disposal--$3,405,000;
2) refurbishing and cleaning waste water treatment facilities--$3,145,000; 3)
inventory obsolescence--$1,000,000; 4) disputed utility charges--$865,000; and
5) other smaller items--$350,000. There should be no material beneficial or
adverse effect on future operations as a result of these charges. The 1992 gross
margin was lower than 1991 due mainly to costs associated with closing three
manufacturing facilities in the Midwest and integrating these operations into
the new U.S. manufacturing facility in Pleasant Prairie, Wisconsin, lower
fluorescent sales which have a higher gross margin and slightly higher raw
material costs for certain products, offset somewhat by the improved
manufacturing efficiencies of the new U.S. facility.
-3-
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses include foreign transaction exchange gains/(losses) of
$411,000 in 1993, $(839,000) in 1992 and $(371,000) in 1991. These transaction
gains and losses result mainly from the effect of the foreign exchange rate
fluctuations on transactions of the foreign subsidiaries that are denominated in
currencies other than the subsidiaries' functional currencies. Excluding these
transaction gains and losses, selling, general and administrative expenses as a
percent of sales were 11.1%, 11.5% and 11.7% in 1993, 1992 and 1991,
respectively. The decreased percentage in 1993 when compared to 1992 and 1991
was due primarily to an $840,000 gain on the sale of two properties due to the
consolidation of U.S. manufacturing facilities and lower selling and
administrative costs, offset somewhat by $400,000 of expenses incurred with the
terminated Hach merger and other smaller charges.
Investment Income. Investment income decreased in 1993 when compared to 1992 due
primarily to $929,000 in realized gains on the sales of marketable securities
offset by a $513,000 write down of marketable securities to market in 1993
versus $775,000 in realized gains on the sales of marketable securities in 1992
along with lower interest rates and decreased funds available for investment in
1993. The decrease in 1992 when compared to 1991 was due primarily to $775,000
in realized gains on the sales of marketable securities in 1992 versus
$1,238,000 in realized gains on the sales of marketable securities and a
$159,000 write up of marketable securities to cost in 1991 along with lower
interest rates, offset somewhat by increased funds available for investment and
increased equity earnings from the investment in Hach Company in 1992.
Income Taxes. The effective tax rates for 1993, 1992 and 1991 were 96.6%, 26.1%
and 27.2%, respectively. The 1993 tax provision includes an additional U.S. tax
provision of $21,600,000 for future repatriation of foreign earnings as more
fully described in Note 4 to the consolidated financial statements. Excluding
this additional provision, the 1993 effective tax rate would have been 23.3%.
This rate was lower than the 1992 rate primarily as a result of lower domestic
earnings (caused by the charges mentioned above) which have a higher tax rate
and higher foreign earnings with a lower tax rate, partially offset by an
increase in the U.S. statutory tax rate. The lower rate in 1992 when compared to
1991 was primarily the result of the lower taxes due to foreign operations.
Cumulative Effect of Change in Accounting for Income Taxes. Effective January 1,
1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes." The adoption of SFAS No. 109 changes the
Company's method of accounting for income taxes from the deferred method to the
asset and liability method. Under the deferred method, deferred income taxes
were recorded at the rate in effect when the deferred income taxes arose,
whereas, with the asset and liability method deferred income taxes are required
to be recorded at the rate that will be in effect when the deferred income taxes
are expected to be paid. Prior years' financial statements have not been
restated.
Effects of Inflation. The Company attempts to minimize the effects of inflation
on sales and earnings by appropriately increasing selling prices and pursuing
ongoing cost control programs and productivity improvements. The effects of
inflation were minimized through increased manufacturing efficiencies and cost
controls in 1993 and 1992.
-4-
<PAGE>
Operating Results By Quarters (Unaudited)
(in thousands, except per share figures)
Earnings/(Loss) Before
Cumulative Effect of
Accounting Change Net Earnings/(Loss)
Gross -------------------- ------------------
1992 Net Sales Profit Amount Per Share Amount Per Share
March 31 $ 41,315 $12,966 $ 7,065 $0.16 $ 7,065 $0.16
June 30 40,757 12,399 6,925 0.16 6,925 0.16
September 30 42,988 13,251 6,442 0.15 6,442 0.15
December 31 42,508 12,779 6,583 0.15 6,583 0.15
$167,568 $51,395 $27,015 $0.62 $27,015 $0.62
1993
March 31 $42,070 $13,299 $ 7,600 $0.17 $11,625(1) $0.26
June 30 42,080 12,839 7,665 0.17 7,665 0.17
September 30 43,625 13,482 7,415 0.17 7,415 0.17
December 31(2) 44,474 4,213 (21,678) (0.49) (21,678) (0.49)
$172,249 $43,833 $ 1,002 $0.02 $5,027(1) $0.11
(1) Includes $4,025,000 or $.09 per share for cumulative effect of change in
accounting for income taxes. See Note 4 to the consolidated financial
statements.
(2) Fourth quarter 1993 earnings were reduced primarily by a tax provision for
repatriation of foreign earnings - $21,600,000 (See Note 4 to the consolidated
financial statements) and other charges as follows: voluntary waste disposal,
refurbishing and cleaning waste water treatment facilities, write down of
marketable securities to market, inventory obsolescence, certain disputed
utility charges, costs incurred with the terminated Hach merger, and other
smaller items. The after tax effect of these other charges was $6,400,000.
-5-
<PAGE>
<TABLE>
<CAPTION>
Ten Year Financial Summary
(in thousands, except per share figures)
Years Ended December 31 1993(1) 1992(1) 1991(1) 1990 1989
<S> <C> <C> <C> <C> <C>
Net Sales $172,249 $167,568 $152,893 $150,005 $136,006
Gross Profit 43,833 51,395 48,396 46,362 38,624
Selling, General and Administrative Expenses 18,700 20,103 18,254 18,682 16,122
Operating Income 25,133 31,292 30,142 27,680 22,502
Investment Income 4,318 5,271 6,221 4,963 3,929
Earnings Before Income Taxes and Cumulative Effect of
Accounting Change 29,451 36,563 36,363 32,643 26,431
Provision for Income Taxes 28,449(6) 9,548 9,893 9,223 6,963
Earnings (Loss) Before Cumulative Effect of Accounting Change 1,002 27,015 26,470 23,420 19,468
Cumulative Effect of Change in Accounting for
Income Taxes 4,025(5) --- --- --- ---
Net Earnings (Loss) $ 5,027 $ 27,015 $ 26,470 $ 23,420 $ 19,468
Depreciation and Amortization $ 4,291 $ 4,179 $ 3,900 $ 3,521 $ 3,550
Cash Provided by Operating Activities 23,811 34,440 23,192 34,240 20,388
Cash Dividends 17,909 17,556 14,947 12,582 12,561
Capital Expenditures, net 12,940 7,548 8,902 6,198 3,073
Gross Property, Plant and Equipment 87,856 78,491 74,022 66,271 57,421
Net Working Capital 84,249 93,079 86,448 82,560 70,200
Total Assets 209,477 187,334 178,218 153,500 133,988
Long-Term Obligations 4,206 4,858 5,238 5,137 5,083
Stockholders' Equity 110,751 126,656 116,688 105,090 87,752
Average Shares Outstanding(2) 44,772 43,913 43,318 43,011 42,940
Earnings (Loss) per Share(2):
Earnings (Loss) Before Cumulative Effect of
Accounting Change $ .02 $ .62 $ .61 $ .54 $ .45
Cumulative Effect of Change in Accounting for
Income Taxes .09(5) --- --- --- ---
Net Earnings (Loss) .11 .62 .61 .54 .45
Cash Dividends per Share(2) .40 .40 .35 .29 .29
Stockholders' Equity per Share(2) 2.47 2.88 2.69 2.44 2.04
Cash Dividends to Net Earnings 356.3% 65.0% 56.5% 53.7% 64.5%
Net Earnings to Year End Equity 4.5% 21.3% 22.7% 22.3% 22.2%
<FN>
* Not applicable due to net loss.
(1) See Management's Discussion and Analysis for analysis of changes between
years.
(2) Average shares outstanding and per share amounts are adjusted to reflect the
four-for-three stock splits in 1991, 1990 and 1988.
(3) Includes additional tax provision of $14 million for future repatriation of
foreign earnings.
(4) Restated to reflect the effects of SFAS No. 95 which was adopted in 1988.
(5) Represents cumulative effect on prior years' earnings of adopting
SFAS No. 109 which was adopted January 1, 1993. See Note 4 to the
consolidated financial statements.
(6) Includes additional tax provision of $21.6 million for future repatriation
of foreign earnings. See Note 4 to the consolidated financial statements.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Ten Year Financial Summary
(in thousands, except per share figures)
Years Ended December 31 1988 1987 1986 1985 1984
<S> <C> <C> <C> <C> <C>
Net Sales $125,818 $112,018 $103,515 $96,769 $98,404
Gross Profit 38,949 34,556 30,332 24,221 30,697
Selling, General and Administrative Expenses 14,751 11,960 10,631 11,000 9,351
Operating Income 24,198 22,596 19,701 13,221 21,346
Investment Income 3,173 1,952 1,175 1,547 1,978
Earnings Before Income Taxes and Cumulative Effect of
Accounting Change 27,371 24,548 20,876 14,768 23,324
Provision for Income Taxes 6,520 7,847 7,931 20,181(3) 8,462
Earnings (Loss) Before Cumulative Effect of Accounting Change 20,851 16,701 12,945 (5,413) 14,862
Cumulative Effect of Change in Accounting for
Income Taxes --- --- --- --- ---
Net Earnings (Loss) $ 20,851 $ 16,701 $ 12,945 $(5,413) $14,862
Depreciation and Amortization $ 3,410 $ 3,193 $ 2,908 $ 2,763 $ 2,603
Cash Provided by Operating Activities 15,796 22,726(4) 19,701(4) 10,411 17,877
Cash Dividends 12,403 9,820 9,791 9,758 9,621
Capital Expenditures, net 4,524 1,405(4) 1,581(4) 3,179 3,339
Gross Property, Plant and Equipment 54,282 49,503 45,560 42,534 37,582
Net Working Capital 62,807 59,719 45,087 37,687 44,168
Total Assets 125,210 109,917 93,392 84,039 77,877
Long-Term Obligations 4,810 4,682 4,738 4,794 4,848
Stockholders' Equity 79,521 69,458 55,191 47,588 58,370
Average Shares Outstanding(2) 42,267 41,673 41,444 41,301 41,195
Earnings (Loss) per Share(2):
Earnings (Loss) Before Cumulative Effect of
Accounting Change $ .49 $ .40 $ .31 $ (.13) $ .36
Cumulative Effect of Change in Accounting for
Income Taxes --- --- --- --- ---
Net Earnings (Loss) .49 .40 .31 (.13) .36
Cash Dividends per Share(2) .29 .24 .24 .24 .23
Stockholders' Equity per Share(2) 1.88 1.67 1.33 1.15 1.42
Cash Dividends to Net Earnings 59.5% 58.8% 75.6% * 64.7%
Net Earnings to Year End Equity 26.2% 24.0% 23.5% * 25.5%
<FN>
* Not applicable due to net loss.
(1) See Management's Discussion and Analysis of changes between years.
(2) Average shares outstanding and per share amounts are adjusted to reflect the
four-for-three stock splits in 1991, 1990 and 1988.
(3) Includes additional tax provision of $14 million for future repatriation of
foreign earnings.
(4) Restated to reflect the effects of SFAS No. 95 which was adopted in 1988.
(5) Represents cumulative effect on prior years' earnings of adopting SFAS No.
109 which was adopted January 1, 1993. See Note 4 to the consolidated
financial statements.
(6) Includes additional tax provision of $21.6 million for future repatriation
of foreign earnings. See Note 4 to the consolidated
financial statements.
</TABLE>
-7-
<PAGE>
Consolidated Balance Sheets
Assets
(in thousands, except share and per share figures)
December 31 1993 1992
Current Assets:
Cash $ 6,701 $ 4,811
Time Deposits, Interest Bearing 70,787 68,092
Marketable Securities (Note 1) 5,591 430
Accounts Receivable - less allowance for
possible losses of $319 in 1993 and $632 in 1992 31,317 27,645
Inventories (Note 1) 26,253 27,404
Prepaid Expenses 1,662 1,161
Total Current Assets 142,311 129,543
Property, Plant and Equipment (Notes 1 and 7):
Land 2,060 2,230
Buildings 19,449 19,831
Machinery and Equipment 56,159 53,247
Construction in Progress 10,188 3,183
87,856 78,491
Less Accumulated Depreciation 43,661 41,904
Net Property, Plant and Equipment 44,195 36,587
Equity Investment (Note 6) 18,077 16,079
Other Assets (Note 1) 4,894 5,125
Total $209,477 $187,334
Liabilities and Stockholders' Equity
(in thousands, except share and per share figures)
December 31 1993 1992
Current Liabilities:
Accounts Payable and Accrued Expenses (Note 5) $ 29,822 $ 18,660
Short-Term Borrowings (Note 9) 20,044 8,011
Income Taxes Payable 8,196 8,262
Deferred Income Taxes (Note 4) --- 1,531
Total Current Liabilities 58,062 36,464
Long-Term Obligations (Note 7) 4,206 4,858
Deferred Income Taxes (Note 4) 36,458 19,356
Total Liabilities 98,726 60,678
Stockholders' Equity (Note 3):
Preferred Stock - no par value, authorized 500,000
shares; none issued --- ---
Common Stock - $1.00 par value, authorized 120,000,000
shares; issued 44,811,180 shares 44,811 44,682
Additional Paid-in Capital 6,260 5,394
Retained Earnings (Note 1) 69,475 82,357
Cumulative Translation Adjustments (Note 1) (6,456) (2,837)
Other (3,339) (2,940)
Total Stockholders' Equity 110,751 126,656
Total $209,477 $187,334
The accompanying notes to the consolidated financial statements are an integral
part of these balance sheets.
-8-
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Earnings
(in thousands, except per share figures)
Years Ended December 31 1993 1992 1991
<S> <C> <C> <C>
Net Sales $172,249 $167,568 $152,893
Cost of Products Sold 128,416 116,173 104,497
Gross Profit 43,833 51,395 48,396
Selling, General and Administrative Expenses 18,700 20,103 18,254
Operating Income 25,133 31,292 30,142
Investment Income 4,318 5,271 6,221
Earnings Before Income Taxes and Cumulative
Effect of Accounting Change 29,451 36,563 36,363
Provision for Income Taxes (Notes 1 and 4) 28,449 9,548 9,893
Earnings Before Cumulative Effect of
Accounting Change 1,002 27,015 26,470
Cumulative Effect of Change in
Accounting for Income Taxes (Note 4) 4,025 --- ---
Net Earnings $ 5,027 $ 27,015 $ 26,470
Earnings per Share(Note 1):
Earnings Before Cumulative Effect of
Accounting Change $ 0.02 $ 0.62 $ 0.61
Cumulative Effect of Change in
Accounting for Income Taxes (Note 4) 0.09 --- ---
Net Earnings $ 0.11 $ 0.62 $ 0.61
<FN>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
(in thousands)
Years Ended December 31 1993 1992 1991
<S> <C> <C> <C>
Cash Flow from Operating Activities:
Net Earnings $ 5,027 $27,015 $26,470
Adjustments to Reconcile Net Earnings
to Net Cash Provided by Operating Activities-
Depreciation and Amortization 4,291 4,179 3,900
Deferred Income Taxes 17,118 1,153 497
Undistributed Equity Income (1,998) (2,031) (1,615)
Deferred Exchange Gain (Loss) (524) 675 (1,488)
Purchase of Marketable Securities (14,214) (8,434) (3,156)
Proceeds from Sales of Marketable Securities 9,469 11,136 4,530
Net Gain from Marketable Securities (416) (775) (1,397)
(Increase) Decrease in Current Assets-
Accounts Receivable (5,145) (1,527) (802)
Inventories 184 1,230 (4,926)
Prepaid Expenses (616) 186 17
Increase (Decrease) in Current Liabilities-
Accounts Payable and Accrued Expenses 11,795 (1,943) 1,875
Income Taxes Payable 371 3,564 (677)
Deferred Income Taxes (1,531) 12 (36)
Net Cash Provided by Operating Activities 23,811 34,440 23,192
Cash Flow from Investing Activities:
Expenditures for Property, Plant and Equipment, net (12,940) (7,548) (8,902)
Purchase of Business, net of cash --- --- (4,278)
Loans to Officers (436) (3,038) (91)
Repayment of Officers' Loans 37 400 114
Net Cash Used for Investing Activities (13,339) (10,186) (13,157)
Cash Flow from Financing Activities:
Exercise of Stock Options 995 7,264 2,801
Principal Payments on Long-Term Obligations (4,656) (323) (51)
Proceeds from Long-Term Borrowings 4,000 --- 51
Payment of Short-Term Borrowings --- (2,446) ---
Proceeds from Short-Term Borrowings 12,033 --- 10,457
Cash Dividends Paid (17,909) (17,556) (14,947)
Purchase of Treasury Stock --- --- (17)
Net Cash Used for Financing Activities (5,537) (13,061) (1,706)
Effect of Exchange Rate Changes on Cash (350) (616) (821)
Increase in Cash and Equivalents 4,585 10,577 7,508
Cash and Equivalents, Beginning of Year 72,903 62,326 54,818
Cash and Equivalents, End of Year $77,488 $72,903 $62,326
<FN>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
(in thousands, except per share figures)
Common Additional Retained Cumulative Treasury Other
Years Ended December 31, Stock Paid-in Earnings Translation Stock
1991, 1992 and 1993 $1 Par Value Capital Adjustments
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1991 $33,098 $ 44 $71,247 $4,011 $(2,985) $ (325)
Add (deduct):
Net Earnings --- --- 26,470 --- --- ---
Cash Dividends Declared
$0.35 per share --- --- (14,947) --- --- ---
Exercise of Stock Options --- 1,502 --- --- 1,299 ---
Loans to Officers (Note 3) --- --- --- --- --- 23
Foreign Currency
Translation Adjustments --- --- --- (2,731) --- ---
Four-for-Three Stock Split
in 1991 11,032 (1,161) (9,872) --- (17) ---
Balance, December 31, 1991 44,130 385 72,898 1,280 (1,703) (302)
Add (deduct):
Net Earnings --- --- 27,015 --- --- ---
Cash Dividends Declared
$0.40 per share --- --- (17,556) --- --- ---
Exercise of Stock Options 552 5,009 --- --- 1,703 ---
Loans to Officers (Note 3) --- --- --- --- --- (2,638)
Foreign Currency
Translation Adjustments --- --- --- (4,117) --- ---
Balance, December 31, 1992 44,682 5,394 82,357 (2,837) --- (2,940)
Add (deduct):
Net Earnings --- --- 5,027 --- --- ---
Cash Dividends Declared
$0.40 per share --- --- (17,909) --- --- ---
Exercise of Stock Options 129 866 --- --- --- ---
Loans to Officers (Note 3) --- --- --- --- --- (399)
Foreign Currency
Translation Adjustments --- --- --- (3,619) --- ---
Balance, December 31, 1993 $44,811 $6,260 $69,475 $(6,456) $ --- $(3,339)
<FN>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
</TABLE>
-11-
<PAGE>
Notes to the Consolidated Financial Statements
Note 1 - Statement of Accounting Policies
Principles of Consolidation
The consolidated financial statements of the Company include all of its wholly
owned subsidiaries. All material intercompany balances and transactions have
been eliminated in consolidation. The equity method is used for any investment
where ownership is from 20% to 50%.
Foreign Currency Translation
All assets and liabilities of operations denominated in foreign currencies are
translated at the rates of exchange in effect at the close of the year. Revenue
and expense accounts are translated at the average exchange rates which were in
effect during the year. Translation gains and losses are reported as a separate
component of stockholders' equity and are not included in net earnings.
Foreign currency transaction gains and losses continue to be an element in
determining net earnings for the period. Foreign currency transaction gains
(losses), included in selling, general and administrative expenses, were
$411,000 in 1993, $(839,000) in 1992 and $(371,000) in 1991. Revenues and
expenses are also affected by fluctuations of currency rates from year to year.
The effect of these rate fluctuations in 1993 when compared to 1992 resulted in
an unfavorable impact on operating results in addition to the transaction gains
or losses reflected in net earnings. For 1992, the effect of rate changes when
compared to 1991 resulted in a favorable impact.
Property
Property, plant and equipment is stated at cost. Depreciation, computed using
the straight-line method for financial statement purposes, is provided over the
useful lives of the various classes of property, plant and equipment.
Research and Development
Research and development costs ($4,423,000 in 1993, $4,093,000 in 1992 and
$3,883,000 in 1991) are charged to expense as incurred.
Earnings per Share
Earnings per share of common stock are computed on the weighted average shares
outstanding during the respective years (44,772,000 shares in 1993, 43,913,000
shares in 1992 and 43,318,000 shares in 1991). Net earnings per share would not
be materially different from reported earnings per share if all outstanding
stock options were exercised.
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Inventories
The majority of the Company's domestic inventories are valued at last-in, first-
out (LIFO) cost which is not in excess of net realizable value. The Company
believes the LIFO method more fairly presents its results of operations by
reducing the effect of inflationary cost increases in inventory and thus matches
current costs with current revenues. The Company's other inventories aggregating
$14,324,000 and $14,448,000 at December 31, 1993 and 1992, respectively, are
valued at the lower of first-in, first-out (FIFO) cost or market. The finished
goods inventories include the cost of raw materials and manufacturing labor and
overhead. Inventories are summarized as follows:
(in thousands) 1993 1992
Finished Goods $15,102 $16,993
Raw Materials 11,151 10,411
$26,253 $27,404
If the first-in, first-out (FIFO) inventory valuation method had been used for
all inventories, they would have been $3,369,000 and $3,166,000 higher than
reported at December 31, 1993 and 1992, respectively.
Income Taxes
The Company provides U.S. income taxes on earnings of those foreign subsidiaries
which are intended to be remitted to the parent company. In the fourth quarter
of 1993, U.S. income taxes were provided on all undistributed earnings of
foreign subsidiaries (See Note 4). At December 31, 1992, $58,889,000 of
undistributed earnings were considered reinvested indefinitely in foreign
subsidiaries.
Investments
Marketable securities are adjusted to fair market value.
Intangible Assets
The excess of cost over equity in net assets of acquisitions is being amortized
over periods not exceeding 40 years.
Consolidated Statement of Cash Flows
The Company considers time deposits, which are highly liquid with an original
maturity of three months or less, to be cash equivalents for purposes of the
consolidated statements of cash flows. The Company paid interest of $925,000 in
1993, $903,000 in 1992 and $750,000 in 1991.
Note 2 - Retirement Plans
The Company has contributory profit sharing plans and a non-contributory money
purchase pension plan. The majority of domestic and Canadian employees are
covered by one of these plans.
Company contributions to these plans charged to operations were $514,000 in
1993, $516,000 in 1992 and $545,000 in 1991 and are funded on a current basis.
There is no past service liability under these plans.
The Company has no material postretirement or postemployment benefit
obligations.
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Note 3 - Common Stock
Currently, the Company issues common stock when stock options are exercised. At
the time of exercise, officers may borrow funds from the Company in order to
exercise their stock options. These loans bear interest at the Company's
effective rate to borrow and are repayable within eighteen months. The unpaid
portion of the options exercised, evidenced by a note, has been deducted from
Stockholders' Equity in the accompanying Consolidated Balance Sheets. The par
value of the shares issued is credited to the common stock account and the
excess of the purchase price over the par value is credited to additional paid-
in capital.
Options may be granted at prices not less than the fair market value at the date
of grant. Options expire five or ten years from the date of grant and are
exercisable one or two years after the date of grant. A summary of changes in
the stock options is shown below:
Shares
------------------------------------------
Reserved Granted Available
Balance,
January 1, 1992 1,812,997 1,807,697 5,300
Authorized 2,500,000 --- 2,500,000
Granted --- 64,250 (64,250)
Exercised (1,111,682) (1,111,682) ---
Cancelled or expired (9,491) (27,178) 17,687
Balance,
December 31, 1992 3,191,824 733,087 2,458,737
Granted --- 342,050 (342,050)
Exercised (129,642) (129,642) ---
Cancelled or expired (7,316) (46,829) 39,513
Balance,
December 31, 1993 3,054,866 898,666 2,156,200
Exercisable,
December 31, 1993 545,366
Additional information under the stock option plans is shown below:
Option Price
--------------------------
Number of Per
Shares Share Total
Options outstanding 898,666 $ 6.62 to $9,545,663
December 31, 1993 14.38
Exercised 1992 1,111,682 6.18 to 7,262,981
10.41
Exercised 1993 129,642 6.18 to 994,931
10.69
Became exercisable 1992 416,997 9.29 to 4,337,402
10.69
Became exercisable 1993 12,250 12.38 to 156,719
13.25
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Note 4 - Provision for Income Tax
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes," as required by the
Financial Accounting Standards Board which resulted in a benefit of $4,025,000.
The adoption of SFAS No. 109 changes the Company's method of accounting for
income taxes from the deferred method to the asset and liability method. Prior
years' financial statements have not been restated. The effect of adopting SFAS
No. 109 on "Earnings Before Cumulative Effect of Accounting Change" in 1993, was
a $419,000 charge, which resulted from the increase in the U.S. Federal
statutory tax rate from 34% to 35%.
The Company also provided taxes for past undistributed earnings of foreign
subsidiaries. The Company had, through the end of 1993, accumulated $70,500,000
of foreign earnings which were deemed permanently reinvested abroad. These
earnings have been exempt from local taxes or taxed at rates lower than the U.S.
tax rate and no additional tax provision had been required.
At a meeting held on January 7, 1994, the Board of Directors discussed this
issue at length and determined that it was now in the best interest of the
Company to make these funds available to the U.S. parent for working capital,
capital expenditures and potential U.S. acquisitions. As a result, the Company
reported an additional charge of $21.6 million for U.S. taxes in 1993. This
charge was equivalent to 48 cents per share. The Company is not required to pay
these taxes until the funds are actually remitted to the U.S. parent.
The Company's earnings from the manufacturing operation in Waterford, Ireland
were tax exempt until 1990 and will have a 10% tax rate through 2010.
The provisions (benefits) for income taxes were as follows:
(in thousands) 1993 1992 1991
Currently payable:
United States:
Federal $ 4,976 $5,064 $6,537
State 344 1,189 784
Foreign 2,103 2,129 2,114
Total Current 7,423 8,382 9,435
Deferred (principally U.S.):
Excess of tax over
book depreciation 300 459 (90)
Undistributed earnings
of the equity investment 721 712 589
Undistributed earnings of
foreign subsidiaries 21,600 --- ---
Environmental expenditures (1,330) --- ---
Other (265) (5) (41)
Total Deferred 21,026 1,166 458
$28,449 $9,548 $9,893
Temporary differences that gave rise to the deferred tax liability at December
31, 1993 were as follows:
(in thousands)
Undistributed earnings of foreign subsidiaries $33,062
Undistributed earnings of the equity investment 3,718
Excess of tax over book depreciation 2,912
Environmental expenditures (1,728)
Other (1,506)
$36,458
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<PAGE>
Pre-tax earnings were as follows:
(in thousands) 1993 1992 1991
United States $12,629 $20,809 $20,450
Foreign 16,822 15,754 15,913
$29,451 $36,563 $36,363
Income taxes paid during 1993, 1992 and 1991 amounted to $8,497,000, $4,927,000
and $9,418,000, respectively.
The total "Provision for Income Taxes" represents an effective tax rate of 96.6%
for 1993, 26.1% for 1992 and 27.2% for 1991. The differences from the U.S.
statutory rate for 1993, 1992 and 1991 were as follows:
(in thousands) 1993 1992 1991
Computed tax provision at 35% in 1993
and 34% in 1992 and 1991 $10,308 $12,431 $12,364
Increase (decrease) in tax provision
resulting from:
Waterford, Ireland operation (2,627) (2,314) (2,357)
Inclusion of state & local income taxes
(net of Federal income taxes) 193 714 532
Other foreign operations (533) (605) (356)
Undistributed earnings of foreign
subsidiaries 21,600 --- ---
Other (492) (678) (290)
Provision for Income Taxes $28,449 $ 9,548 $ 9,893
Note 5 - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses were as follows:
(in thousands) 1993 1992
Trade Accounts Payable $19,976 $14,808
Accrued Environmental Expenditures* 5,405 937
Accrued Compensation and Benefits 1,317 1,156
Accrued Taxes, Other 1,353 910
Other Accrued Liabilities 1,771 849
$29,822 $18,660
*Accrued environmental expenditures are primarily for refurbishing and cleaning
waste water treatment facilities.
Note 6 - Equity Investment
At December 31, 1993, the Company owned 2,525,779 shares, representing
approximately 27% of the outstanding shares, of the Common Stock of Hach Company
(Hach). The closing price on NASDAQ at December 31, 1993 was $21.00 per share.
The investment in Hach is accounted for under the equity method. Income and
other transactions in this investment were not material to the consolidated
financial statements of the Company.
Hach is a leading international manufacturer of instruments and test kits that
analyze the chemical content and other properties of water and other aqueous
solutions. In addition, Hach sells analytical reagents which are used in
connection with the instruments and test kits.
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<PAGE>
Note 7 - Long-Term Obligations
Long-term obligations were as follows:
(in thousands) 1993 1992
Series 1993-LI IDB Bond $4,000 $ ---
Series 1983-LI IDB Bond --- 4,000
Series 1978-A IDB Bond 250 300
Less - Current portion in
accounts payable (50) (50)
Net long-term bonds payable 4,200 4,250
Other long-term obligations 6 608
Total long-term obligations $4,206 $4,858
During 1993, the Industrial Development Board of the Town of Moundville (IDB)
issued a $4,000,000, 6 3/4% Industrial Revenue Bond, Series 1993-LI. Interest is
payable semi-annually. Principal is due in six annual installments of various
amounts beginning December 1, 2006 with the final payment due December 1, 2011.
As required, the proceeds from this bond were used to prepay a $4,000,000,
10 5/8% Industrial Revenue Bond, Series 1983-LI that was issued in 1983 by the
IDB.
The Series 1978-A Industrial Revenue Bond was originally issued in 1978 by the
IDB for $1,000,000. Interest is payable semi-annually at 7 1/4%. Principal of
$50,000 is payable annually through 1997 with the final payment due September 1,
2003.
In connection with the issuance of these Industrial Revenue Bonds by the IDB,
the Company entered into capital lease agreements with the IDB with future
minimum lease payments sufficient to amortize the principal and interest on each
series of the Industrial Revenue Bonds.
Costs capitalized under these leases were $8,500,000 as of December 31, 1993 and
1992. The capitalized costs are being depreciated over the estimated useful
lives of the individual assets.
At December 31, 1993, the future lease payments under the capitalized leases
relating to the Industrial Revenue Bonds are as follows:
(in thousands)
1994 $ 361
1995 334
1996 331
1997 327
1998 270
Later years 6,940
Total minimum
lease payments 8,563
Less interest (4,313)
Present value of minimum
lease payments $4,250
Operating leases are not significant.
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<PAGE>
Note 8 - Segment Information
A dominant portion of Lawter's operations is in a single industry--specialty
chemicals. Within this industry, Lawter is principally engaged in the production
and marketing of printing ink vehicles, slip additives, synthetic and
hydrocarbon resins, thermographic compounds, and fluorescent pigments and
coatings.
Lawter's total business is broken down into three geographical areas: Domestic,
Europe and Other Foreign. Other Foreign includes the Company's operations in
Australia, Canada, China, Japan, Singapore and Taiwan which, individually, are
not considered to be significant as defined by FASB Statement No. 14. The
Company sells its products to both large and small ink companies. Lawter is a
major supplier of printing ink vehicles and resins for printing inks and,
therefore, sells substantial quantities to larger ink companies around the
world. One customer approximated eighteen percent of sales in 1993 and fifteen
percent of sales in 1992, whose purchases are made for a wide variety of
specialized products at multiple locations through numerous companies in various
countries.
Transfers between geographic areas are not material. Corporate earnings before
tax is the net of investment income and corporate expenses. Identifiable assets
are those assets used exclusively in the operations of each geographic area.
Corporate assets are principally comprised of time deposits, the equity
investment and other assets. The contribution of European operations to net
earnings is greater than their contribution to earnings before tax principally
due to the Waterford, Ireland operation discussed in Note 4.
Information about the Company's operations for the years ended December 31,
1993, 1992 and 1991 is shown in the table below.
(in thousands) 1993 1992 1991
Net Sales:
Domestic $ 93,649 $ 92,078 $ 86,725
Europe 64,008 63,501 54,406
Other Foreign 14,592 11,989 11,762
Total 172,249 167,568 152,893
Earnings Before Tax:
Domestic 12,142 20,046 19,513
Europe 12,460 11,478 10,686
Other Foreign 2,260 1,749 1,855
Corporate 2,589 3,290 4,309
Total 29,451 36,563 36,363
Identifiable Assets:
Domestic 53,782 46,490 45,954
Europe 40,078 39,243 41,564
Other Foreign 15,833 12,295 11,825
Corporate 99,784 89,306 78,875
Total $209,477 $187,334 $178,218
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Note 9 - Commitments and Contingencies
The Company has an unsecured line of credit for bank borrowings of $25,000,000
at December 31, 1993. During 1993, average borrowings were $5,442,000 against
this line of credit and the weighted average interest rate was 3.78%. In 1992,
average borrowings were $5,355,000 and the weighted average interest rate was
4.96%. In 1991, average borrowings were $3,171,000 and the weighted average
interest rate was 5.81%. There are no commitment fees or compensating balance
requirements relating to this line of credit.
Lawter has made a review of product liability insurance and, due to the
excessive premium cost in the U.S. in relation to coverage provided, management,
with the Board of Directors' concurrence, has elected to handle U.S. product
liability claims on a self-insured basis.
The Company from time to time is subject to claims brought on behalf of both
private persons and governmental agencies. Management and the Company's general
counsel are not aware of any claim where the disposition of such claim will have
a material adverse effect upon the Company's consolidated financial position.
Report of Independent Public Accountants
To the Board of Directors and Shareholders of Lawter International, Inc.:
We have audited the accompanying consolidated balance sheets of Lawter
International, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1993 and 1992, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lawter
International, Inc. and subsidiaries as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles.
As explained in Note 4 to the consolidated financial statements, the Company
changed its method of accounting for income taxes.
/s/ Arthur Andersen & Co.
Arthur Andersen & Co.
Chicago, Illinois,
February 10, 1994.
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<PAGE>
Directory
International Headquarters
Lawter International, Inc.
990 Skokie Boulevard, Northbrook, Illinois 60062
(708) 498-4700, Telex RCA 210013 (LAWT UR), Facsimile (708) 498-0066
Principal Companies and Locations (Incorporated In)
Lawter International, Inc. (Delaware)
Bell, California
Norcross, Georgia
Northbrook, Illinois
Skokie, Illinois
South Kearny, New Jersey
Cincinnati, Ohio
La Vergne, Tennessee
Pleasant Prairie, Wisconsin
Ampac Products and
Dyall Products Division
Skokie, Illinois
Pleasant Prairie, Wisconsin
Krumbhaar Division and
Southern Resins Division
Moundville, Alabama
Japanese Branch
Tokyo, Japan
Taiwanese Branch
Taipei, Taiwan, R.O.C.
Ecovar, Inc. (Delaware)
La Vergne, Tennessee
Virkotype Corporation (Delaware)
Skokie, Illinois
Plainfield, New Jersey
Lawter International FSC,
Limited (Jamaica)
Kingston, Jamaica
Lawter International (Australasia)
Pty. Limited (Australia)
Melbourne, Australia
Lawter International, N.V. (Belgium)
Lokeren, Belgium
Lawter International (Canada) Inc. (Canada)
Rexdale, Ontario, Canada
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<PAGE>
Directory (Continued)
Lawter International, Ltd.
(Tianjin) P.R.C. (Peoples Republic of China)
Tanggu, Peoples Republic of China
Lawter International, A.p.S. (Denmark)
Koge, Denmark
Lawter International, Sarl (France)
Orly, France
Lawter International, GmbH (Germany)
Frechen, Germany
Lawter International, Limited (Great Britain)
Bicester, Oxon, England
Lawter International (Italia), Srl (Italy)
Milan, Italy
Lawter International, B.V. (Netherlands)
Waterford, Ireland
Lawter Antilles, N.V. (Netherlands Antilles)
Curacao, Netherlands Antilles
Lawter International Products
Pte. Ltd. (Singapore)
Jurong Town, Singapore
Lawter International (Proprietary)
Limited (South Africa)
Cape Town, South Africa
Lawter International, S.A. (Spain)
Barcelona, Spain
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