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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, 1995
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)
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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (847) 498-4700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ------------------- ________________________
COMMON STOCK, $1.00 PAR
VALUE PER SHARE NEW YORK STOCK EXCHANGE
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 15, 1996, 45,070,386 COMMON SHARES WERE OUTSTANDING. THE
AGGREGATE MARKET VALUE OF THE COMMON SHARES (BASED UPON THE FEBRUARY 15, 1996
CLOSING PRICE OF THESE SHARES ON THE NEW YORK STOCK EXCHANGE) OF LAWTER
INTERNATIONAL, INC. HELD BY NON-AFFILIATES WAS APPROXIMATELY $307 MILLION.
DOCUMENTS INCORPORATED BY REFERENCE
ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1995 _ PARTS I, II
AND IV.
PROXY STATEMENT TO STOCKHOLDERS FOR THE 1996 ANNUAL MEETING _ PART III.
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<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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 Schedule and Consent of
Independent Public Accountants............................................................................. 8
Signatures................................................................................................... 10
</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 9 in the Company's 1995 Annual Report to
Stockholders (hereby incorporated by reference) for information on the amounts
of revenue, opera ting 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 1995 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, Germany, Ireland, Italy, Singapore and Spain. Products
are sold primarily by Company employed salesmen.
Reference is made to the Sales by Product Group on page 5 in the
Company's 1995 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, 1995, 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 normally in
adequate supply. A portion of the Company's resin production is used by it in
the manufacture of printing 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, Coates/Lorilleux, Dianippon Ink and Chemicals, Flint Ink,
Sakata 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
<PAGE>
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 product s 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 100 competitors in
the sale of its synthetic and hydrocarbon resins.
RESEARCH.
During the fiscal years ended December 31, 1995, 1994 and 1993, the
Company spent approximately $5,320,000, $4,821,000 and $4,423,000, 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.
Expenditures for environmental matters during the fiscal years ended
December 31, 1995 and 1994 were not material to the consolidated financial
statements of the Company. During 1993, the Company expensed $3,405,000 for
voluntary waste disposal and $3,145,000 for refurbishing and cleaning waste
water treatment facilities. Reference is made to the Gross Margin section under
Results of Operations in Management's Discussion and Analysis on Page 6 in the
Company's 1995 Annual Report to Stock holders (hereby incorporated by
reference).
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 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 Federal, state and local
environmental laws has had no material effect upon the capital expenditures or
competitive position of the Company. Environmental capital expenditures in 1996
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
<PAGE>
EMPLOYEES.
At December 31, 1995, the Company had 552 employees.
FOREIGN SALES--
Reference is made to Note 9 in the Company's 1995 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 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
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
Frechen, Germany 17,000 Printing ink vehicles Leased
Warehouse
Waterford, Ireland 97,000 Synthetic resins Owned
Cremona, Italy 72,000 Printing ink vehicles Owned
Synthetic resins
Warehouse
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 1995 Annual Report to Stockholders (hereby incorporated by
reference).
</TABLE>
4
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
On September 25, 1995, the U.S. EPA filed an administrative complaint
alleging record keeping violations under the Toxic Substance Control Act (TSCA).
Simultaneously, Lawter and the U.S. EPA entered into a consent order fully
settling the complaint. Pursuant to the consent order, and without admitting any
liability, the Company has paid $280,000 to the U.S. EPA and will conduct a TSCA
compliance audit. The Company decided to settle this matter in order to avoid
protracted litigation and the related costs. The outcome of this compliance
audit has not been determined.
Reference is made to Note 10 in the Company's 1995 Annual Report to
Stockholders (hereby incorporated by reference) for additional 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, 1995.
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 1996, is as follows:
<TABLE>
<CAPTION>
YEAR
NAME POSITION AGE ELECTED
- ------------------------- -------------------------------------------------------------- ------ ----------
<S> <C> <C> <C>
Daniel J. Terra Chairman of the Board 84 1958
John P. O'Mahoney Vice Chairman of the Board and Chief Executive Officer 39 1996
John P. Jilek President and Chief Operating Officer 44 1996
Ludwig P. Horn Vice President 66 1980
William S. Russell Vice President, 1987
Treasurer and 1982
Secretary 47 1986
</TABLE>
Mr. O'Mahoney served as Vice President, 1993-1995 and as European
General Manager, 1990-1993 of the Company. Mr. Jilek served as Vice President of
the Company, 1989-1995.
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 1995 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 (1986-1995) on pages
8 and 9 in the Company's 1995 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 1995 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 1995 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' 1995 Annual Report to
Stockholders listed under the caption "Consolidated Financial Statements" in
Item 14 are hereby incorporated by reference. Reference is also made to the
Operating Results by Quarters on page 4 in the Company's 1995 Annual Report to
Stockholders (hereby incorporated by reference) for this information.
5
<PAGE>
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 1996 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 1996 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 1996 Proxy Statement under the
headings "Security Ownership of Certain Beneficial Owners" 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 1996 Proxy Statement under the
headings "Indebtedness of Management" and "Certain Relationships and Related
Transactions" (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, 1995 and 1994.................................................... *
Statements of Earnings for the years ended December 31, 1995, 1994 and 1993........................ *
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993...................... *
Statements of Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993............ *
Notes to the Consolidated Financial Statements--December 31, 1995, 1994 and 1993................... *
Report of Independent Public Accountants........................................................... *
<FN>
- --------------------------
* These Consolidated Financial Statements, related Notes and Report of
Independent Public Accountants appearing in the Company's 1995 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>
(a)2. Financial Statement Schedules--
PAGE
NUMBER
------
Report of Independent Public Accountants on Schedule........... 8
II. Valuation and Qualifying Accounts....................... 9
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.
6
<PAGE>
(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 November 9, 1995.
(4) Private Shelf Agreement between Lawter International, Inc. and The Prudential
Insurance Company of America (incorporated by reference to Exhibit 99.2 of the
Company's Form 8-K dated January 9, 1996) (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) The 1994 Amendment to the 1992 Non-Qualified Stock Option Plan (incorporated by
reference to Appendix A of the Company's Definitive Proxy Statement dated April
28, 1994) (File No. 1-7558).*
(f) The 1995 Amendment to the 1992 Non-Qualified Stock Option Plan (incorporated by
reference to the Company's Definitive Proxy Statement dated April 24, 1995)
(File No. 1-7558).*
(g) 1995 Non-Qualified Stock Option Plan for Non-Employee Directors (incorporated by
reference to Appendix A of the Company's Definitive Proxy Statement dated April
24, 1995) (File No. 1-7558).*
(h) 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).*
(i) Form of Employment Agreements, dated September 26, 1987, between the Company and
John P. Jilek 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).*
(j) Consulting Agreement, effective January 1, 1996, between the Company and Richard
D. Nordman.*
(k) Put Option Agreement, dated January 9, 1996, between the Company and Daniel J.
Terra.
(13) Lawter International, Inc. and Subsidiaries' 1995 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).
(21) Subsidiaries of the Company. Reference is made to the Directory on the inside
back cover of the Company's 1995 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 8).
<FN>
* These documents constitute all of the management contracts, compensatory
plans or arrangements in which any director or executive officer participates.
</TABLE>
7
<PAGE>
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 2-8 4421.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULE
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' 1995 Annual Report to Stockholders
incorporated by reference in this Form 10-K and have issued our report thereon
dated February 8, 1996. Our audit was made for the purpose of forming an
opinion on those consolidated financial statements taken as a whole. The
schedule listed in the index on page 6 is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in our
audit of the basic consolidated financial statements and, in our opinion,
fairly states 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 LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois,
February 8, 1996
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our reports dated February 8, 1996, 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, 1995, 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 LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois,
March 27, 1996
8
<PAGE>
LAWTER INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in thousands)
<TABLE>
<CAPTION>
ALLOWANCES FOR DOUBTFUL ACCOUNTS 1995 1994 1993
- -------------------------------- ------ ------ ------
<S> <C> <C> <C>
Balance at beginning of year.................................................. $ 415 $ 319 $ 632
Additions (credited)/charged to earnings................................... 327 (30) 66
Additions/(deductions) for accounts written off, net of recoveries......... (106) 126(1) (379)
----- ----- -----
Balance at end of year........................................................ $ 636 $ 415 $ 319
===== ===== =====
<FN>
- --------------------------------
(1) Includes approximately $179,000 of Cremona Resine allowance for doubtful
accounts which was acquired June 30, 1994.
</TABLE>
9
<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/ JOHN P. O'MAHONEY
-----------------------------------
John P. O'Mahoney
Vice 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 27, 1996
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/ WILLIAM P. CLARK /s/ RICHARD D. NORDMAN
- ----------------------------------- -----------------------------------
William P. Clark, March 27, 1996 Richard D. Nordman, March 27, 1996
Director Director
/s/ ARTHUR A. HARTMAN /s/ JOHN P. O'MAHONEY
- ---------------------------------- -----------------------------------
Arthur A. Hartman, March 27, 1996 John P. O'Mahoney, March 27, 1996
Director Director
/s/ JOHN P. JILEK /s/ FRED G. STEINGRABER
- --------------------------------- -----------------------------------
John P. Jilek, March 27, 1996 Fred G. Steingraber, March 27, 1996
Director Director
/s/ LEORNARD P. JUDY /s/ DANIEL J. TERRA
- --------------------------------- -----------------------------------
Leonard P. Judy, March 27, 1996 Daniel J. Terra, March 27, 1996
Director Director
Registrant's 1995 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.
10
BY-LAWS
OF
LAWTER INTERNATIONAL, INC.
a Delaware corporation
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
SECTION 2. OTHER OFFICES. The Corporation may have other offices, either
within or outside of the State or Delaware, at such place or places as the Board
of Directors may from time to time appoint or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. The annual meeting of stockholders shall be
held within the metropolitan area of the City of Chicago, State of Illinois, at
the place therein determined by the directors and set forth in the notice
thereof, but other meetings of the stockholders may be held at such place or
places as shall be fixed by the directors and stated in the notice of the
meeting.
SECTION 2. ANNUAL ELECTION OF DIRECTORS. The annual meeting of
stockholders for the election of directors and the transaction of other business
shall be held, in each year, commencing in 1966, on such day and at such time
during the month of April or May as shall be fixed by the directors and set
forth in the notice of the meeting.
If this date shall fall upon a legal holiday, the meeting shall be held on
the next succeeding business day. At each annual meeting the stockholders
entitled to vote shall elect a Board of Directors and they may transact such
other corporate business as shall be stated in the notice of the meeting.
SECTION 3. VOTING. Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless such Proxy provides
for a longer period. After the first election of directors, except where the
transfer books of the corporation shall have been closed or a date shall have
been fixed as the record date for the
<PAGE>
determination of its stockholders entitled to vote, no share of stock shall be
voted on at any election for directors which shall have been transferred on the
books of the corporation within twenty days next preceding such election. Upon
the demand of any stockholder, the vote for directors and the vote upon any
question before the meeting, shall be by ballot. All elections for directors
shall be decided by plurality vote; all other questions shall be decided by
majority vote of the shares present in person or by proxy except as otherwise
provided by the Certificate of Incorporation or the laws of the State of
Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the residence of each, and the
number of voting shares held by each, shall be prepared by the Secretary and
filed in the office where t he election is to be held, at least ten days before
every election, and shall at all times during the usual hours for business, and
during the whole time of said election, be open to examination of any
stockholder.
SECTION 4. QUORUM. Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, an y business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof .
SECTION 5. SPECIAL MEETINGS. Special meetings of the stockholders for any
purpose or purposes may be called by the Chief Executive Officer or Secretary,
and shall be called upon a requisition in writing therefor, stating the purpose
or purposes thereof, delivered to the Chief Executive Officer or Secretary,
signed by a majority of the directors or by twenty-five per cent in interest of
the stockholders entitled to vote, or by resolution of the directors.
SECTION 6. NOTICE OF MEETINGS. Written notice of a meeting, annual or
special, stating the place, date and hour of the meeting, and in the case of a
special meeting stating the purpose or purposes for which the meeting is called,
shall be given to each stockholder entitled to vote at such meeting, not less
than ten nor more than sixty days, or if a vote of stockholders on a merger or
consolidation is one of the stated purposes of the meeting, not less than twenty
nor more than sixty days before the date of the meeting.
No business other than that stated in the notice shall be transacted at any
meeting without the unanimous consent of all the stockholders entitled to vote
thereat.
SECTION 7. ACTION WITHOUT MEETING. Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of the statutes or of the Certificate of
Incorporation or of these By-Laws, the meeting and vote of stockholders may be
dispensed with, if all the stockholders who would have
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<PAGE>
been entitled to vote upon the action if such meeting were held, shall consent
in writing to such corporate action being taken.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER, QUALIFICATIONS AND TERM. The number of directors shall
be not less than three nor more than nine. The first board shall consist of
three directors. Thereafter, within the limits above specified, the number of
directors shall be determined by resolution of the Board of Directors.
Directors who are elected at an annual meeting of stockholders and directors who
are elected in the interim to fill vacancies and newly created directorships
shall hold office until the next annual meeting of stockholders and until their
successors are elected and qualified or until their earlier resignation. No
person who has attained the age of seventy years, other than Daniel J. Terra,
the founder of the corporation, shall be qualified to serve as a director, and
no officer or employee of the corporation who has attained the age of sixty-five
years, other than Mr. Terra, shall be so qualified. Notwithstanding the
foregoing, (i) a person who is otherwise disqualified from serving as a director
because of his or her attained age shall be qualified to serve during a
specified term with the approval of a majority of the Board of Directors; and
(ii) a director who during his or her term of office attains the age of seventy
years, or the age of sixty-five years if an officer or employee of the
corporation, shall be qualified to continue to serve as a director until the
next annual meeting of stockholders and until his or her successor is elected
and qualified.
SECTION 2. RESIGNATIONS. Any director, member of a committee or other
officer may resign at any time. Such resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum, by a majority vote, may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.
SECTION 4. REMOVAL. Any director or directors may be removed either for
or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stock holders called for the purpose.
SECTION 5. INCREASE OF NUMBER. Newly created directorships resulting from
any increase in the authorized number or directors may be filled by a majority
vote of the directors then in office, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify.
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SECTION 6. POWERS. The Board of Directors shall exercise all of the
powers of the corporation except such as are by law, or by the Certificate of
Incorporation of the corporation, or by these By-Laws conferred upon or reserved
to the stockholders.
SECTION 7. COMMITTEES. The Board of Directors may, by resolution or
resolutions, passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation, which, to the extent provided in said resolution or resolutions or
in these By-Laws, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the corporation, and
may have power to authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the By-Laws of the corporation ; and,
unless the resolution or the Certificate of Incorporation expressly so provides,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
stated in these By-Laws or as may be determined from time to time by resolution
adopted by the Board of Directors. The committees shall keep regular minutes of
their proceedings an d report the same to the board when required.
SECTION 8. MEETINGS. The newly elected directors may hold their first
meeting for the purpose of organization and the transaction of business, if a
quorum be present, immediately after the annual meeting of the stockholders; or
the time and place o f such meeting may be fixed by consent in writing of all
the directors.
Regular meetings of the directors may be held without notice at such places
and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the board may be called by the Chairman, the Chief
Executive Officer or by the Secretary on the written request of any two
directors on at least two days' notice to each director and shall be held at
such place or places as may be determined by the directors, or as shall be
stated in the call of the meeting.
SECTION 9. QUORUM. A majority of the directors shall constitute a quorum
for the transaction of business. If at any meeting of the board there shall be
less than a quorum present, a majority of those present may adjourn the meeting
from time to time until a quorum is obtained, and no further notice thereof need
be given other than by announcement at the meeting which shall be so adjourned.
SECTION 10. COMPENSATION. Directors shall not receive any stated salary
for their services as directors or as members of committees, but by resolution
of the board a fixed fee and expenses of attendance may be allowed for
attendance at such meeting . Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
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ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a Chairman,
a Vice Chairman, a Chief Executive Officer, a President, one or more Vice
Presidents, a Treasurer, a Controller and a Secretary, and such Assistant
Treasurers and Assistant Secretaries as the Board of Directors may deem proper.
All of such officers shall be elected by the Board of Directors. None of the
officers, except the Chairman and Vice Chairman of the Board of Directors, need
be directors. The officers shall be elected at the first meeting of the Board
of Directors after each annual meeting. Any number of offices may be held by
the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. The Chairman of the Board of Directors shall preside
at all meetings of stockholders and directors, if present thereat. Except where
by law the signature of another officer is required, he shall have the power to
execute all certificates, bonds, mortgages, contracts and other instruments in
behalf of the corporation which may be authorized by the Board of Directors and
may cause the seal to be affixed to any instrument requiring it and when so
affixed, the seal shall be attested by the signature of the Secretary or
Treasurer of the corporation.
SECTION 4. VICE CHAIRMAN. The Vice Chairman, in the absence of the
Chairman of the Board of Directors, shall preside at all meetings of
stockholders and directors, and shall possess the same power as the Chairman of
the Board to sign all certificates, bonds, mortgages, contracts and other
instruments of the corporation which may be authorized by the Board of
Directors. During the absence or disability of the Chairman of the Board of
Directors, he shall exercise all the power and discharge all the duties of the
Chairman and shall perform all such other duties as are incident to his office
or are properly required of him by the Board of Directors.
SECTION 5. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
have general powers and duties of supervision, direction, control and management
of the business and affairs of the corporation and shall possess the power to
sign all certificates, bonds, mortgages, contracts and other instruments of the
corporation which may be authorized by the Board of Directors and, in the
absence of the Chairman and Vice Chairman of the Board of Directors, shall
preside at all meetings of stockholders and directors. During the absence or
disability of the Chairman and Vice Chairman of the Board of Directors, he shall
exercise all the power and discharge all the duties of the Chairman and Vice
Chairman and shall make reports to the Board of Directors and stockholders and
shall perform all such other duties as are incident to his office or are
properly required of him by the Board of Directors.
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SECTION 6. PRESIDENT. The President shall have such powers and shall
perform such duties as shall be assigned to him by the Directors, and shall
possess the power to sign all certificates, bonds, mortgages, contracts and
other instruments of the corporation which may be authorized by the Board of
Directors.
SECTION 7. VICE PRESIDENT. Each Vice President shall have such powers and
shall perform such duties as shall be assigned to him by the directors.
SECTION 8. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be ordered
by the Board of Directors, or the Chief Executive Officer, taking proper
vouchers for such disbursements. He shall render to the Chief Executive Officer
and Board of Directors at the regular meetings of the Board of Directors, or
whenever they may request it, an account of all his transactions as Treasurer
and of the financial condition of the corporation. If required by the Board of
Directors, he shall give the corporation a bond for the faithful discharge of
his duties in such amount and with such surety as the board shall prescribe.
SECTION 9. CONTROLLER. The Controller shall be the principal officer in
charge of the accounts of the corporation and shall perform such duties as may
be assigned to him from time to time by the Treasurer or by the Board of
Directors.
SECTION 10. SECRETARY. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by law or by these By-Laws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the Chief Executive Officer, or by the directors, or stockholders, upon whose
requisition the meeting is called as provided in these By-Laws. He shall record
all the proceedings of the meetings of the corporation and of the directors in a
book to be kept for that purpose, and shall perform such other duties as may be
assigned to him by the directors or the Chief Executive Officer. He shall have
the custody of the seal of the corporation and shall affix the same to all
instruments requiring it, when authorized by the directors or the Chief
Executive Officer, and attest the same.
SECTION 11. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
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<PAGE>
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. Certificates of stock, numbered and
with the seal of the corporation affixed, signed by the Chairman of the Board,
the Chief Executive Officer, the President or a Vice President, and the
Treasurer or an Assistant Treasurer, or Secretary or an Assistant Secretary,
shall be issued to each stockholder certifying the number of shares owned by him
in the corporation. When such certificates are signed by a transfer agent or an
assistant transfer agent or by a transfer clerk acting on behalf of the
corporation and a registrar, the signatures of such officers may be facsimiles.
SECTION 2. LOST CERTIFICATES. A new certificate of stock may be issued in
the place of any certificate theretofore issued by the corporation, alleged to
have been lost or destroyed, and the directors may, in their discretion, require
the owner of t he lost or destroyed certificate, or his legal representatives,
to give the corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock, to indemnify the corporation against any claim
that may be made against it on account of the alleged loss of any such
certificate, or the issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the corporation
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the old certificates shall be surrendered to the corporation by the delivery
thereof to the person in charge of the stock and transfer books and ledgers, or
to such other person as the directors may designate, by whom they shall be
canceled, and new certificates shall thereupon be issued. A record shall be
made of each transfer, and a duplicate thereof mailed to the Delaware office,
and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer.
SECTION 4. CLOSING OF TRANSFER BOOKS. The Board of Directors shall have
power to close the stock transfer books of the corporation for a period not
exceeding sixty days preceding the date of any meeting of stockholders or the
date for payment of an y dividend or the date for the allotment of rights or the
date when any change or conversion or exchange of capital stock shall go into
effect; provided, however, that in lieu of closing the stock transfer books, as
aforesaid, the Board of Directors may fix in advance a date, not exceeding sixty
days preceding the date of any meeting of stockholders or the date for the
payment of any dividend or the date for the allotment of rights or the date when
any change or conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the stockholders entitled to notice of, and
to vote at, any such meeting, or entitled to receive payment of any such
dividends or to any such allotment of rights or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in such
case such stockholders only as shall be stockholders of record on the date so
fixed shall be entitled to such notice of, and to vote at, such meeting, or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be, notwithstanding any transfer of any
stock on the books of the corporation after any such record date fixed as
aforesaid.
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SECTION 5. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper for working capita l or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 6. SEAL. The corporate seal shall be circular in form and shall
contain the name of the corporation, the year of its creation and the words
"CORPORATE SEAL DELAWARE". Said seal may be used by causing it or a facsimile
thereof to be impress ed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR. The fiscal year of the corporation shall be the
calendar year.
SECTION 8. CHECKS. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 9. CONTRACTS IN WHICH A DIRECTOR HAS MATERIAL INTEREST. No
contract to which the corporation is proposed to be a party in which a director
of the corporation has a direct or indirect material interest shall be submitted
for approval to the Board of Directors or the stockholders unless disclosure of
such interest to the Board of Directors or to the stockholders, as the case may
be is made.
SECTION 10. NOTICE AND WAIVER OF NOTICE.--Whenever any notice is required
by these By-Laws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in a post office box in a sealed post-paid wrapper,
addressed to the person entitled thereto to his last known post office address,
and such notice shall be deemed to have been given on the day of such mailing.
Stockholders not entitled to vote shall not be entitled to receive notice of any
meetings except as otherwise provided by statute.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
corporation or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
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ARTICLE VI
SECTION 1. BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS. The
corporation shall not be governed by the provisions of Section 203 of the
General Corporation Law of the State of Delaware.
ARTICLE VII
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any
annual meeting of the stockholders or at any special meeting thereof if notice
of the proposed alteration or repeal of By-Law or By-Laws to be made be
contained in the notice of such special meeting, by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat, or by
the affirmative vote of a majority of the Board of Directors, at any regular
meeting of the Board of Directors, or at any special meeting of the Board of
Directors, if notice of the proposed alteration or repeal, of By-Law or By-Laws
to be made, be contained in the notice of such special meeting.
9
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is effective January 1, 1996 by
and between LAWTER INTERNATIONAL, INC. (the "Company") and RICHARD D. NORDMAN
(the "Consultant").
WHEREAS, the Consultant has been employed by the Company as President and
Chief Operating Officer and has served as a director of the Company; and
WHEREAS, Consultant desires to resign as an employee of the Company as of
December 31, 1995 and to enter into a consulting relationship with the Company;
and
WHEREAS, the Company desires to have continued access to Consultant's
expertise concerning certain matters; and
WHEREAS, the Consultant desires to provide the services set forth under the
terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
1. Consultant's Status
The Consultant hereby confirms that his status as an employee of the
Company will terminate as of December 31, 1995. The Company agrees to use its
best efforts to cause the Consultant to be elected a director of the Company
during the term of this Agreement.
The Consultant acknowledges that he is an Independent Contractor and is not
an agent or employee of the Company, and that Consultant shall be solely
responsible for all social security, tax, withholding or other similar payments
required in connection with Consultant's performance of services hereunder. The
Consultant is not authorized to act on behalf of the Company and may not enter
into any contracts or make any promises or commitments of any kind whatsoever
<PAGE>
on behalf of the Company without authorization from any of the Chairman, the
Vice Chairman or Chief Executive Officer of the Company to do so.
2. Term.
The term of this Agreement shall be for two years from its effective date.
3. Scope of Work.
The Consultant shall, upon request by the Company, provide information,
advice, and assistance concerning operating, financial and administrative
matters as requested by the Board of Directors of the Company or the Chief
Executive Officer of the Comp any. The Consultant shall be available to provide
services averaging one and one-half days a week.
The Company shall make available to the Consultant office space and
secretarial and other support services as may be reasonably required in
connection with the Consultant's performance of services hereunder.
4. Compensation; Benefits.
The Consultant shall be paid $100,000 annually, payable in monthly
installments on the first day of each month beginning January 1, 1996 and ending
upon termination of this Agreement.
5. Reimbursement for Reasonable Expenses.
The Consultant shall be reimbursed for reasonable expenses incurred in
performing the work contemplated by this Agreement upon the submission of an
itemized statement of expenses supported by receipts for any such expenses.
6. Stock Options.
It is understood and agreed by the parties that options to purchase common
stock of the Company previously granted to Consultant under the Company's 1984
and 1992 Non-Qualified
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Stock Option Plans (the "Plans") shall remain outstanding, and continue t o
vest, in accordance with their terms so long as Consultant remains a director of
the Company, and the Compensation Committee of the Company's Board of Directors
has determined that such treatment is in accordance with the provisions of the
Plans. Consultant acknowledges and agrees that he has no other expectation or
entitlement to future option grants from the Company.
7. Non-Disclosure of Confidential and Proprietary
Information; Return of Company Property.
During the term of this Agreement and in the course of Consultant's
performance hereunder, the Consultant may receive and otherwise be exposed to
the Company's confidential and proprietary information. Such confidential and
proprietary information includes, but is not limited to, the Company's marketing
and customer support strategies, the Company's financial information, including
sales, costs, profits, and pricing methods, the Company's internal organization,
employee lists, and customer list s, and any enhancements to any of the above
which were created or developed by the Consultant under this Agreement
(collectively referred to as "Information"). Such Information may or may not
contain legends or other written notice that it is of a confidential and
proprietary nature. The Consultant acknowledges and agrees that the existing
confidentiality or non-disclosure agreements between Consultant and the Company
shall remain in full force and effect.
In addition, the Consultant hereby also acknowledges the confidential and
secret character of the Information, and agrees that the Information is the
sole, exclusive, and extremely valuable property of the Company. Accordingly,
the Consultant agrees not to use the Information except in the performance of
this Agreement, and not to divulge all or any part of the Information in any
form to any third party, either during or after the term of this Agreement.
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<PAGE>
Upon termination of this Agreement for any reason, including the expiration of
the term and upon request of the Company, the Consultant agrees to cease using
and to return to the Company all whole and partial copies and derivations of the
Company's Information, whether in Consultant's possession or under the
Consultant's direct or indirect control. This Section 7 shall survive the
termination of this Agreement for any reason, including expiration of the term.
The Consultant shall return to the Company on request all Company documents
(including any and all copies) and other Company property in his possession or
under his control. The Consultant hereby agrees that, upon request, he shall
keep no Company documents of any kind whatsoever, and agrees that he shall
promptly return any such documents that may come into his possession.
8. Ownership of Work Product.
The Consultant agrees that any and all ideas, strategies, concepts,
slogans, marketing ideas and promotions, improvements, and inventions conceived,
created, or first reduced to practice in the performance of work under this
Agreement shall be the sole and exclusive property of the Company.
The Consultant further agrees that the Company is and shall be vested with
all rights, title, and interest including patent, copyright, trade secret, and
trademark rights in the Consultant's work product under this Agreement.
The Consultant shall execute all papers including patent applications,
invention assignments, and copyright assignments, and otherwise shall assist the
Company at the Company's expense and as reasonably shall be required to perfect
in the Company the rights, title, and other interests in the Consultant's work
product expressly granted to the Company under this Agreement.
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<PAGE>
9. Non-Competition and Non-Solicitation
of the Company's Employees.
The Consultant agrees that during the term of this Agreement, and for one
year after the date of termination of this Agreement, the Consultant shall not
engage, either on his own behalf or as owner, manager, stockholder, consultant,
director, officer , or employee of any business, in any business or activity in
the United States that is competitive with the business of the Company or any of
its subsidiaries or affiliates.
The Consultant agrees further that he shall not, without the prior written
consent of the Company, during the term of this Agreement hire or attempt to
hire any present employee(s) of the Company or of any subsidiary or affiliate of
the Company or induce any such employee(s) to terminate their employment
relationship with the Company or any of its subsidiaries or affiliates;
provided, however, that the Consultant shall be permitted to hire any former
employee of the Company or of any subsidiary or affiliate of the Company if he
did not induce such employee to terminate his or her employment relationship
with the Company or its subsidiary or affiliate, and so long as at least one
year has elapsed since the termination of the employment relationship between
the Company or its subsidiary or affiliate and such former employee.
10. Termination of Change in Control Agreement.
Consultant agrees that the Change in Control Agreement dated September 26,
1987 between the Company and Consultant is hereby terminated, and the Company
shall have no obligations to Consultant under such agreement.
11. Remedies for Breach by the Consultant.
The parties intend this Agreement to be governed by the laws of the State
of Illinois. If the scope of any provision contained herein is too broad to
permit enforcement of such provision
5
<PAGE>
to its full extent, then such provision shall be enforced to the maximum extent
permitted by law and Consultant hereby consents and agrees that such scope may
be judicially modified in any proceeding brought with respect to the enforcement
of such provision. Except as otherwise provided in the previous sentence, if
any provision of this Agreement shall be construed to be illegal or invalid, the
legality or validity of any other provision hereof shall not be affected
thereby, and any illegal or invalid provision of this Agreement shall be
severable, and all other provisions shall remain in full force and effect. The
Consultant recognizes that money damages alone would not adequately compensate
the Company in the event of any breach by him of this Agreement, and he
therefore agrees that, in addition t o all other remedies available to the
Company at law or in equity, the Company shall be entitled to injunctive relief
for the enforcement hereof. All payments to be made to the Consultant in
accordance with the terms of this Agreement, and the performance by the Company
of its other obligations hereunder, shall be conditioned on the Consultant's
continued cooperation and performance of his obligations hereunder.
12. Amendment.
This Agreement, and each section thereof, may be amended only in writing,
signed by the party against whom enforcement of any such amended provision is
sought.
13. Captions.
Any captions of sections of this Agreement are solely for the convenience
of the parties and are not a part of this Agreement nor are they to be used in
its interpretation.
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14. Counterparts.
This Agreement may be executed in several counterparts; each such
counterpart shall be considered as an original agreement and all such executed
counterparts shall constitute one Agreement.
15. Notices
Any notice, request, instruction, or other document required to be given
under this Agreement by either party to the other shall be in writing and
delivered in person or by courier, or by facsimile transmission or mailed by
certified mail, postage prepaid, return receipt requested (such mailed notice to
be effective on the date such receipt is acknowledged) as follows:
To the Company:
Chief Executive Officer
Lawter International, Inc.
990 Skokie Boulevard
Northbrook, Illinois 60062
To the Consultant:
Richard D. Nordman
2323 North Brighton Place
Arlington Heights, Illinois 60004
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement.
LAWTER INTERNATIONAL, INC. CONSULTANT
By: /s/ Daniel J. Terra /s/Richard D. Nordman
------------------- ---------------------
Title: Chairman Richard D. Nordman
8
AGREEMENT
This Agreement is made on January 9, 1996, by and between Daniel J.
Terra; 990 Skokie Boulevard; Northbrook, Illinois 60062 ("Terra") and Lawter
International, Inc.; 990 Skokie Boulevard; Northbrook, Illinois 60062
("Lawter").
Lawter desires to receive a "put" option from Terra and Terra is willing
to offer to Lawter a "put" for Idexx Laboratories, Inc. ("Idexx") common stock,
$.10 par value, under the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and the payment of ten dollars ($10.00) in hand paid to Terra, it is
hereby agreed as follows:
1. Lawter intends to purchase in the open market sufficient shares of Idexx
stock to total approximately $10,000,000.
2. Terra hereby grants to Lawter an option ("option" or "put") pursuant to
which Lawter may sell the Idexx shares, referred to in item 1 above, to
Terra at a price one dollar per share lower than Lawter's average purchase
price per share net of commission of Idexx. This option may be exercised
by Lawter in whole between December 10 and December 20, 1996 by giving
twenty (20) days prior written notice to Terra specifying a date and a
place for the closing of such purchase exercise which is not to be later
than December 26, 1996.
3. In order to induce Terra to enter into this Agreement, Lawter agrees and
warrants to Terra as follows:
(a) This Agreement has been duly authorized, executed and delivered
by Lawter in accordance with its terms and pursuant to the authorization
of the Board of Directors given on January 9, 1996.
(b) Neither the execution and delivery of this Agreement, the
consummation of the transaction contemplated above nor compliance with the
terms, conditions and provisions hereof will conflict with or result in a
breach of or violation of any of the terms, conditions, or provisions of
Lawter's Certificate of Incorporation or By-Laws or any material Agreement
or instrument to which Lawter is a party.
4. This Agreement is binding upon Terra, his heirs, executor assigns and
successors.
IN WITNESS WHEREOF Lawter and Terra have executed this Agreement on
January 9, 1996
LAWTER INTERNATIONAL, INC.
ATTEST:
By: /s/ William S. Russell By: /s/ John O'Mahoney
----------------------- --------------
Its: V.P. Finance Its: CEO
/s/ Daniel J. Terra
----------------
Daniel J. Terra
<PAGE>
Market Price and Quarterly Dividend Statistics for Common Stock
MARKET PRICE DIVIDENDS
(per share) 1995 1994 1995 1994
High Low High Low
First Quarter $13 3/8 $11 1/2 $13 3/4 $11 1/4 $.10 $.10
Second Quarter 14 3/8 11 3/4 12 1/4 10 3/4 .10 .10
Third Quarter 12 1/8 10 7/8 13 1/4 10 7/8 .10 .10
Fourth Quarter 12 10 1/4 13 1/4 11 .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 February
15, 1996 was 3,000.
-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.
Operating Results By Quarters (Unaudited)
(in thousands, except per share figures)
Gross Net Earnings/(Loss)
1994 Net Sales Profit Amount Per Share
March 31 $ 42,614 $12,873 $ 6,725 $0.15
June 30 44,415 13,671 7,025 0.16
September 30 48,844 14,522 7,655 0.17
December 31 55,183 15,096 8,000 0.18
$191,056 $56,162 $29,405 $0.66
1995
March 31 $ 52,489 $14,997 $ 8,090 $0.18
June 30 50,009 13,319 7,050 0.16
September 30 50,971 13,172 7,155 0.16
December 31(1) 51,366 705 (6,017) (0.14)
$204,835 $42,193 $16,278 $0.36
(1) Fourth quarter earnings were reduced by restructuring and other charges. See
Note 5 to the consolidated financial statements and Management's Discussion and
Analysis.
-4-
<PAGE>
Sales by Product Group
(percent of net sales) 1995 1994 1993
Printing Ink Vehicles and Slip Additives 44.7 47.5 47.0
Synthetic and Hydrocarbon Resins 50.2 46.7 46.7
Other 5.1 5.8 6.3
-5-
<PAGE>
Management's Discussion and Analysis
Liquidity and Capital Resources
Lawter's cash and equivalents, net of short-term borrowings, decreased
$24,600,000 from $48,300,000 at December 31, 1994 to $23,700,000 at December 31,
1995. The decrease was due primarily to expenditures for the new synthetic resin
and printing ink vehicle facility in Europe along with an increase in inventory
of some important raw materials due to a tightening of their supply. 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 these requirements. Lawter anticipates
maintaining a strong liquid position.
In 1995, the Company used external financing in connection with the new
manufacturing facility in Europe. In 1994, the majority of Lawter's capital
expansion program was financed with internally generated funds. In 1993, the
Company used external financing in connection with the new U.S. manufacturing
facility. Capital expenditures for 1995 were budgeted at $17,000,000. Actual
expenditures were fifty-three percent higher than budgeted due primarily to the
new manufacturing facility in Europe being constructed faster than anticipated
along with various equipment additions and replacements made which were required
during the year and not included in the original budget. Lawter's capital
expenditures for 1996 are estimated at $21,500,000. These expenditures include
the completion of a multi-year project for the new polymer facility in Europe as
well as additions to and modernization of existing facilities elsewhere. The
Company currently anticipates using externally generated funds for the majority
of these capital expenditures since it is more cost effective than using
internally generated funds.
Results of Operations
Net Sales. The Company's consolidated net sales increased 7% in 1995 when
compared to 1994. Domestic average selling prices increased 3%, while sales
volume decreased 7%, resulting in a 4% decrease in domestic net sales.
Reportable European net sales increased 25% as a result of a 5% increase from
the sales of Cremona Resine during the first six months of 1995 (the acquisition
took place on June 30, 1994), a 5% increase in sales volume, an 8% increase
caused by higher exchange rates and a 6% increase in average selling prices.
Consolidated net sales increased 11% in 1994 when compared to 1993. Domestic
net sales increased 6% due entirely to higher sales volume. Reportable European
net sales, which included the sales of Cremona Resine since the date of its
acquisition on June 30, 1994, increased 16% as a result of a 20% increase in
sales volume and a 2% increase in average exchange rates, partially offset by a
5% decrease in average selling prices due to product mix. Excluding Cremona
Resine sales, the European sales volume would have shown an increase of 13% and
average selling prices a decrease of 3% due to product mix.
Gross Margins. Gross margins as a percent of sales were 20.6%, 29.4% and 25.4%
for 1995, 1994 and 1993, respectively. The 1995 gross margin was decreased by
$5,658,000 in restructuring charges and $4,303,000 in other charges. During the
fourth quarter of 1995, the Company made a detailed review of all of its
manufacturing facilities and determined that certain facilities would be closed
and others would have their production reduced because of the Company's new
manufacturing facilities. As a result, a restructuring charge was recorded for
the consolidating of manufacturing facilities, primarily in Europe, which will
be incurred in conjunction with the completion of the new manufacturing facility
in Europe in 1996. This restructuring charge should result in reduced
manufacturing costs in the future. Other charges include: 1) Write down of
inventory to net realizable value - $1,368,000. This charge was the result of a
review made during the fourth quarter of 1995 which disclosed that certain
inventory would have to be reprocessed or sold at a price below the recorded
book value. 2) Write off of the book value of a previously decomissioned
manufacturing facility - $1,235,000. During the fourth quarter of 1995, the
Company determined it may not be able to sell this property and therefore its
book value was written off. 3) Disputed charges on a raw material - $1,100,000.
This represents disputed charges on a specific raw material which the Company
determined, in the fourth quarter of 1995, it may be responsible for. 4) Other
smaller items - $600,000. Excluding the above charges, the gross margin for 1995
would have been 25.5%. The lower gross margin for 1995 when compared to 1994,
excluding the above charges, was caused principally by higher raw material costs
not fully offset by selling price increases, LIFO inventory adjustments and the
startup costs associated with the new U.S. resin plant. The 1993 gross margin
was lower than 1994 due mainly to the following charges. 1) Voluntary waste
disposal - $3,405,000. These charges were due to the Company evaluating its
current onsite incineration cost and efficiency versus the cost of offsite waste
disposal. During the fourth quarter of 1993, a decision was made to transition
waste disposal to an approved offsite landfill. 2) Refurbishing and cleaning
waste water treatment facilities - $3,145,000. These charges were due to a
detailed review made of these facilities during the fourth quarter of 1993 which
disclosed that they were not as effective as desired. At that time, a decision
was made to refurbish and clean these facilities. 3) Inventory obsolescence -
$1,000,000. These charges were due to a review made during the fourth quarter of
1993 which disclosed that certain inventory was not reworkable and would have
to be disposed. 4) Disputed utility charges -$865,000.
-6-
<PAGE>
This was due to a dispute on utility meter readings at one location. 5) Other
smaller items -$350,000. There was no material beneficial or adverse effect to
future operations as a result of these charges. Excluding the above charges, the
gross margin for 1993 would have been 30.5%. The lower gross margin in 1994 when
compared to 1993, excluding the above charges, was caused primarily by higher
raw material costs not fully offset by selling price increases.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses include foreign transaction exchange gains/(losses) of
$169,000 in 1995, $(85,000) in 1994 and $411,000 in 1993. 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 12.4%, 10.9% and 11.1% in 1995, 1994 and 1993,
respectively. Also included in the 1995 selling, general and administrative
expenses are restructuring costs of $2,791,000 and various other charges of
$900,000 which include employees relocation costs, adjustments to the allowance
for doubtful accounts receivable and other smaller items. The restructuring
costs are for personnel redundancy, primarily in Europe, which is part of the
restructuring plan implemented in the fourth quarter of 1995 to streamline
operations with consolidation of the European facilities. These charges should
result in reduced operating costs in the future. Excluding these charges,
selling, general and administrative expenses as a percent of sales would have
been 10.6%. When compared to 1994 and 1993, the lower percentage in 1995
excluding these charges resulted primarily from sales increasing at a higher
rate than general and administrative expenses.
Investment Income. Investment income increased in 1995 when compared to 1994 due
primarily to $2,002,000 in net gains on marketable securities in 1995 compared
to $349,000 in net losses in 1994 along with increased equity earnings in Hach
Company, partially offset by increased interest expense from borrowings to
finance the new plant in Europe and to satisfy U.S. working capital
requirements. Investment income in 1994 increased slightly when compared to
1993 principally as a result of higher interest rates and increased equity
earnings from the investment in Hach Company offset by $349,000 in net losses on
the sales of marketable securities in 1994 versus $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.
Income Taxes. The effective tax rates for 1995, 1994 and 1993 were 29.9%, 25.9%
and 96.6%, respectively. The higher effective tax rate in 1995 when compared to
1994 was primarily the result of lower foreign earnings, caused by the charges
mentioned above, which are taxed at a lower rate. 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 1994 rate primarily
as a result of lower domestic earnings, caused by the charges mentioned above,
which have a higher tax rate and also higher foreign earnings which have a lower
tax rate.
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 changed the
Company's method of accounting for income taxes from the deferred method to the
asset and liability method.
Other Matters. In July 1994, there was an explosion/fire in the warehouse at the
new U.S. resin facility. This new resin plant was designed to include the
production of a group of new synthetic resins. The accident delayed the
introduction of these new products. The Company is adequately insured and,
therefore, no significant costs related to the accident were reflected in
earnings. This facility continues to increase its production rate in line with
expectations.
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. During 1994 and 1995, there was a tightening of supply of some
important raw materials and their prices increased. These increases have been
difficult to fully pass on, in a timely fashion, to Lawter customers. It is felt
by management that, as in the past, the Company's new concepts and new products
should help stabilize the conditions that have been experienced.
Looking Forward. Lawter management believes that prospects for the Company's
growth of future sales and earnings are promising. While our markets continue
to be highly competitive, continued emphasis on research and development, and
cost effective utilization of our new production facilities, combined with the
present program of streamlining operations, will position the Company for both
medium and long-term gains in our strategic markets.
-7-
<PAGE>
<TABLE>
<CAPTION>
Ten Year Financial Summary
(in thousands, except per share figures)
Years Ended December 31 1995(1) 1994(1) 1993(1) 1992 1991
<S> <C> <C> <C> <C> <C>
Net Sales $204,835 $191,056 $172,249 $167,568 $152,893
Gross Profit 42,193 56,162 43,833 51,395 48,396
Selling, General and Administrative Expenses 25,154 20,970 18,700 20,103 18,254
Operating Income 17,039 35,192 25,133 31,292 30,142
Investment Income 6,170 4,470 4,318 5,271 6,221
Earnings Before Income Taxes and Cumulative Effect of
Accounting Change 23,209 39,662 29,451 36,563 36,363
Provision for Income Taxes 6,931 10,257 28,449(5) 9,548 9,893
Earnings Before Cumulative Effect of Accounting Change 16,278 29,405 1,002 27,015 26,470
Cumulative Effect of Change in Accounting for
Income Taxes --- --- 4,025(4) --- ---
Net Earnings $ 16,278 $ 29,405 $ 5,027 $ 27,015 $ 26,470
Depreciation and Amortization $ 5,447 $ 4,344 $ 4,291 $ 4,179 $ 3,900
Cash Provided by Operating Activities 13,766 23,047 23,811 34,440 23,192
Cash Dividends 17,989 17,951 17,909 17,556 14,947
Capital Expenditures, net 21,928 10,613 12,940 7,548 8,902
Gross Property, Plant and Equipment 126,406 102,788 87,856 78,491 74,022
Net Working Capital 67,894 85,601 84,249 93,079 86,448
Total Assets 261,474 231,827 209,477 187,334 178,218
Long-Term Obligations 4,100 4,152 4,206 4,858 5,238
Stockholders' Equity 129,361 127,793 110,751 126,656 116,688
Average Shares Outstanding(2) 45,018 44,874 44,772 43,913 43,318
Earnings per Share(2):
Earnings Before Cumulative Effect of
Accounting Change $ .36 $ .66 $ .02 $ .62 $ .61
Cumulative Effect of Change in Accounting for
Income Taxes --- --- .09(4) --- ---
Net Earnings .36 .66 .11 .62 .61
Cash Dividends per Share(2) .40 .40 .40 .40 .35
Stockholders' Equity per Share(2) 2.87 2.85 2.47 2.88 2.69
Cash Dividends to Net Earnings 110.5% 61.0% 356.3% 65.0% 56.5%
Net Earnings to Year End Equity 12.6% 23.0% 4.5% 21.3% 22.7%
<FN>
(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) Restated to reflect the effects of SFAS No. 95 which was adopted in 1988.
(4) 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.
(5) Includes additional tax provision of $21.6 million for future repatriation of foreign earnings. See Note 4 to the consolidated
financial statements.
</TABLE>
-8-
<PAGE>
<TABLE>
Ten Year Financial Summary
(in thousands, except per share figures)
Years Ended December 31 1990 1989 1988 1987 1986
<S> <S> <S> <S> <S> <S>
Net Sales $150,005 $136,006 $125,818 $112,018 $103,515
Gross Profit 46,362 38,624 38,949 34,556 30,332
Selling, General and Administrative Expenses 18,682 16,122 14,751 11,960 10,631
Operating Income 27,680 22,502 24,198 22,596 19,701
Investment Income 4,963 3,929 3,173 1,952 1,175
Earnings Before Income Taxes and Cumulative Effect of
Accounting Change 32,643 26,431 27,371 24,548 20,876
Provision for Income Taxes 9,223 6,963 6,520 7,847 7,931
Earnings Before Cumulative Effect of Accounting Change 23,420 19,468 20,851 16,701 12,945
Cumulative Effect of Change in Accounting for
Income Taxes --- --- --- --- ---
Net Earnings $ 23,420 $ 19,468 $ 20,851 $ 16,701 $ 12,945
Depreciation and Amortization $ 3,521 $ 3,550 $ 3,410 $ 3,193 $ 2,908
Cash Provided by Operating Activities 34,240 20,388 15,796 22,726(3) 19,701(3)
Cash Dividends 12,582 12,561 12,403 9,820 9,791
Capital Expenditures, net 6,198 3,073 4,524 1,405(3) 1,581(3)
Gross Property, Plant and Equipment 66,271 57,421 54,282 49,503 45,560
Net Working Capital 82,560 70,200 62,807 59,719 45,087
Total Assets 153,500 133,988 125,210 109,917 93,392
Long-Term Obligations 5,137 5,083 4,810 4,682 4,738
Stockholders' Equity 105,090 87,752 79,521 69,458 55,191
Average Shares Outstanding(2) 43,011 42,940 42,267 41,673 41,444
Earnings per Share(2):
Earnings Before Cumulative Effect of
Accounting Change $ .54 $ .45 $ .49 $ .40 $ .31
Cumulative Effect of Change in Accounting for
Income Taxes --- --- --- --- ---
Net Earnings .54 .45 .49 .40 .31
Cash Dividends per Share(2) .29 .29 .29 .24 .24
Stockholders' Equity per Share(2) 2.44 2.04 1.88 1.67 1.33
Cash Dividends to Net Earnings 53.7% 64.5% 59.5% 58.8% 75.6%
Net Earnings to Year End Equity 22.3% 22.2% 26.2% 24.0% 23.5%
<FN>
(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) Restated to reflect the effects of SFAS No. 95 which was adopted in 1988.
(4) 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.
(5) Includes additional tax provision of $21.6 million for future repatriation of foreign earnings. See Note 4 to the consolidated
financial statements.
</TABLE>
-9-
<PAGE>
Consolidated Balance Sheets
Assets
(in thousands, except share and per share figures)
December 31 1995 1994
Current Assets:
Cash (Note 1) $ 9,865 $ 8,063
Time Deposits, Interest Bearing (Note 1) 53,815 58,724
Marketable Securities (Note 1) 6,481 4,473
Accounts Receivable - less allowance for
possible losses of $636 in 1995 and $415 in 1994 42,557 43,327
Inventories (Note 1) 45,177 32,803
Prepaid Expenses 2,222 2,739
Total Current Assets 160,117 150,129
Property, Plant and Equipment (Notes 1 and 7):
Land 7,639 2,943
Buildings 26,085 20,466
Machinery and Equipment 79,661 66,159
Construction in Progress 13,021 13,220
126,406 102,788
Less Accumulated Depreciation 55,505 50,323
Net Property, Plant and Equipment 70,901 52,465
Equity Investment (Note 6) 22,312 20,139
Other Assets (Note 1) 8,144 9,094
Total $261,474 $231,827
The accompanying notes to the consolidated financial statements are an integral
part of these balance sheets.
-10-
<PAGE>
Liabilities and Stockholders' Equity
(in thousands, except share and per share figures)
December 31 1995 1994
Current Liabilities:
Accounts Payable and Accrued Expenses (Note 8) $ 44,025 $ 33,217
Short-Term Borrowings (Note 10) 39,983 18,504
Income Taxes Payable 8,215 12,807
Total Current Liabilities 92,223 64,528
Long-Term Obligations (Note 7) 4,100 4,152
Deferred Income Taxes (Note 4) 35,790 35,354
Total Liabilities 132,113 104,034
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 45,066,386 shares 45,066 44,924
Additional Paid-in Capital 8,036 6,955
Retained Earnings (Note 1) 79,218 80,929
Cumulative Translation Adjustments (Note 1) (2,914) (5,015)
Other (45) ---
Total Stockholders' Equity 129,361 127,793
Total $261,474 $231,827
The accompanying notes to the consolidated financial statements are and
integral part of these balance sheets.
-11-
<PAGE>
Consolidated Statements of Earnings
(in thousands, except per share figures)
Years Ended December 31 1995 1994 1993
Net Sales $204,835 $191,056 $172,249
Cost of Products Sold 162,642 134,894 128,416
Gross Profit 42,193 56,162 43,833
Selling, General and Administrative Expenses 25,154 20,970 18,700
Operating Income 17,039 35,192 25,133
Investment Income 6,170 4,470 4,318
Earnings Before Income Taxes and Cumulative
Effect of Accounting Change 23,209 39,662 29,451
Provision for Income Taxes (Notes 1 and 4) 6,931 10,257 28,449
Earnings Before Cumulative Effect of
Accounting Change 16,278 29,405 1,002
Cumulative Effect of Change in
Accounting for Income Taxes (Note 4) --- --- 4,025
Net Earnings $ 16,278 $ 29,405 $ 5,027
Earnings per Share (Note 1):
Earnings Before Cumulative Effect of
Accounting Change $ 0.36 $ 0.66 $ 0.02
Cumulative Effect of Change in
Accounting for Income Taxes (Note 4) --- --- 0.09
Net Earnings $ 0.36 $ 0.66 $ 0.11
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
-12-
<PAGE>
Consolidated Statements of Cash Flows
(in thousands)
Years Ended December 31 1995 1994 1993
Cash Flow from Operating Activities:
Net Earnings $16,278 $29,405 $ 5,027
Adjustments to Reconcile Net Earnings
to Net Cash Provided by Operating Activities-
Depreciation and Amortization 5,447 4,344 4,291
Deferred Income Taxes 425 (1,130) 17,118
Undistributed Equity Income (2,236) (2,125) (1,998)
Deferred Exchange Gain (Loss) (575) (145) (524)
Purchase of Marketable Securities (3,179) (2,299) (14,214)
Proceeds from Sales of Marketable Securities 3,173 3,069 9,469
Net (Gain) Loss from Marketable Securities (2,002) 349 (416)
(Increase) Decrease in Current Assets-
Accounts Receivable 1,733 (7,658) (5,145)
Inventories (11,484) (4,345) 184
Prepaid Expenses 585 (1,112) (616)
Increase (Decrease) in Current Liabilities-
Accounts Payable and Accrued Expenses 10,180 257 11,795
Income Taxes Payable (4,579) 4,437 371
Deferred Income Taxes --- --- (1,531)
Net Cash Provided by Operating Activities 13,766 23,047 23,811
Cash Flow from Investing Activities:
Expenditures for Property, Plant
and Equipment, net (21,928) (10,613) (12,940)
Purchase of Business, net of cash --- (6,344) ---
Loans to Officers (200) (83) (436)
Repayment of Officers' Loans 155 3,422 37
Net Cash Used for Investing Activities (21,973) (13,618) (13,339)
Cash Flow from Financing Activities:
Exercise of Stock Options 1,223 808 995
Principal Payments on Long-Term Obligations (52) (54) (4,656)
Proceeds from Long-Term Borrowings --- --- 4,000
Payment of Short-Term Borrowings (1,055) (3,328) ---
Proceeds from Short-Term Borrowings 22,468 --- 12,033
Cash Dividends Paid (17,989) (17,951) (17,909)
Net Cash Provided by
(Used for) Financing Activities 4,595 (20,525) (5,537)
Effect of Exchange Rate Changes on Cash 505 395 (350)
Increase (Decrease) in Cash and Equivalents (3,107) (10,701) 4,585
Cash and Equivalents, Beginning of Year 66,787 77,488 72,903
Cash and Equivalents, End of Year $63,680 $66,787 $77,488
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
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<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
(in thousands, except per share figures)
Common Additional Retained Cumulative Other
Years Ended December 31, Stock Paid-in Earnings Translation
1993, 1994 and 1995 $1 Par Value Capital Adjustments
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 $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)
Add (deduct):
Net Earnings --- --- 29,405 --- ---
Cash Dividends Declared
$0.40 per share --- --- (17,951) --- ---
Exercise of Stock Options 113 695 --- --- ---
Loans to Officers (Note 3) --- --- --- --- 3,339
Foreign Currency
Translation Adjustments --- --- --- 1,441 ---
Balance, December 31, 1994 44,924 6,955 80,929 (5,015) ---
Add (deduct):
Net Earnings --- --- 16,278 --- ---
Cash Dividends Declared
$0.40 per share --- --- (17,989) --- ---
Exercise of Stock Options 142 1,081 --- --- ---
Loans to Officers (Note 3) --- --- --- --- (45)
Foreign Currency
Translation Adjustments --- --- --- 2,101 ---
Balance, December 31, 1995 $45,066 $8,036 $79,218 $(2,914) $ (45)
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
-14-
<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
$169,000 in 1995, $(85,000) in 1994 and $411,000 in 1993. Revenues and expenses
are also affected by fluctuations of currency rates from year to year. The
effect of these rate fluctuations in 1995 when compared to 1994 resulted in a
favorable impact on operating results in addition to the transaction gains or
losses reflected in net earnings. For 1994, the effect of rate changes when
compared to 1993 resulted in no significant impact.
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 carrying amount of cash and time
deposits approximates fair market value. The Company paid interest of $2,154,000
in 1995, $990,000 in 1994 and $925,000 in 1993.
Earnings per Share
Earnings per share of common stock are computed on the weighted average shares
outstanding during the respective years (45,018,000 shares in 1995, 44,874,000
shares in 1994 and 44,772,000 shares in 1993). Net earnings per share would not
be materially different from reported earnings per share if all outstanding
stock options were exercised.
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's
other inventories aggregating $24,511,000 and $19,658,000 at December 31, 1995
and 1994, 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) 1995 1994
Finished Goods $22,362 $18,437
Raw Materials 22,815 14,366
$45,177 $32,803
If the FIFO inventory valuation method had been used for all inventories, they
would have been $6,019,000 and $4,191,000 higher than reported at December 31,
1995 and 1994, respectively.
Research and Development
Research and development costs ($5,320,000 in 1995, $4,821,000 in 1994 and
$4,423,000 in 1993) are charged to expense as incurred.
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). undistributed earnings reinvested
indefinitely in foreign subsidiaries totaled $19,174,000 at December 31, 1995.
Income taxes paid during 1995, 1994 and 1993 amounted to $9,419,000, $7,220,000
and $8,497,000, respectively.
Investments
Effective January 1, 1994, Lawter adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." At December 31, 1995 and 1994, all of Lawter's marketable
securities were classified as trading securities. Trading securities are
reported at fair value, with changes in fair value included in earnings. For the
purpose of determining realized gains and losses, the cost of securities sold is
based upon specific identification. In 1995, the net unrealized holding gain
included in income was $2,206,000. The change in net unrealized holding gain or
loss during 1994 was not material.
-15-
<PAGE>
Intangible Assets
The excess of cost over equity in net assets of acquisitions is being amortized
on a straight line basis over periods not exceeding 40 years. Subsequent to its
acquisition, the Company continually evaluates whether later events and
circumstances have occurred that indicate the remaining estimated useful life of
goodwill may warrant revision or that the remaining balance of goodwill may not
be recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, the Company uses an estimate of the related business
segment's undiscounted net income over the remaining life of the goodwill in
measuring whether the goodwill is recoverable.
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.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions. The
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the amount of
revenues and expenses reported during the period are affected by these
assumptions and estimates. Actual results could differ from these estimates.
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 $530,000 in
1995, $545,000 in 1994 and $514,000 in 1993 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.
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 year after the date of grant. A summary of changes in the stock
options is shown in the table below.
Shares
-------------------------------------
Reserved Granted Available
Balance,
January 1, 1994 3,054,866 898,666 2,156,200
Granted --- 1,101,500 (1,101,500)
Exercised (112,549) (112,549) ---
Cancelled or expired (1,286) (17,286) 16,000
Balance,
December 31, 1994 2,941,031 1,870,331 1,070,700
Authorized 300,000 --- 300,000
Granted --- 388,500 (388,500)
Exercised (142,657) (142,657) ---
Cancelled or expired (2,361) (95,861) 93,500
Balance,
December 31, 1995 3,096,013 2,020,313 1,075,700
Exercisable,
December 31, 1995 1,631,813
Additional information under the stock option plans is shown below:
Option Price
--------------------------
Number of Per
Shares Share Total
Options outstanding 2,020,313 $ 9.29 to $23,930,933
December 31, 1995 14.38
Exercised 1994 112,549 6.62 to 857,533
10.41
Exercised 1995 142,657 6.62 to 1,223,682
12.25
Became exercisable 1994 31,500 12.38 to 414,750
13.75
Became exercisable 1995 1,358,050 11.13 to 16,672,644
14.38
-16-
<PAGE>
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 changed the Company's method of accounting for
income taxes from the deferred method to the asset and liability method.
In 1993, the Company 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 be en 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.
Pre-tax earnings were as follows:
(in thousands) 1995 1994 1993
United States $13,393 $20,188 $12,629
Foreign 9,816 19,474 16,822
$23,209 $39,662 $29,451
The provisions (benefits) for income taxes were as follows:
(in thousands) 1995 1994 1993
Currently payable:
United States:
Federal $4,082 $ 7,655 $ 4,976
State 1,060 1,083 344
Foreign 1,353 2,622 2,103
Total Current 6,495 11,360 7,423
Deferred (principally U.S.):
Excess of tax over
book depreciation 442 220 300
Undistributed earnings
of the equity investment 782 744 721
Undistributed earnings of
foreign subsidiaries (1,485) (2,917) 21,600
Environmental expenditures 138 486 (1,330)
Other 559 364 (265)
Total Deferred 436 (1,103) 21,026
$6,931 $10,257 $28,449
Temporary differences that gave rise to the deferred tax liability at December
31, 1995 were as follows:
(in thousands)
Undistributed earnings of foreign subsidiaries $28,661
Undistributed earnings of the equity investment 5,244
Excess of tax over book depreciation 3,574
Environmental expenditures (1,104)
Other (585)
$35,790
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 total "Provision for Income Taxes" represents an effective tax rate of 29.9%
for 1995, 25.9% for 1994 and 96.6% for 1993. The differences from the U.S.
statutory rate for 1995, 1994 and 1993 were as follows:
(in thousands) 1995 1994 1993
Computed tax provision at 35% $8,123 $13,882 $10,308
Increase (decrease) in tax provision
resulting from:
Waterford, Ireland operation (1,947) (2,604) (2,627)
Inclusion of state & local income taxes
(net of Federal income taxes) 689 679 193
Other foreign operations 1,009 (581) (533)
Undistributed earnings of foreign subsidiaries --- --- 21,600
Other (943) (1,119) (492)
Provision for Income Taxes $6,931 $10,257 $28,449
-17-
<PAGE>
Notes to the Consolidated Financial Statements Continued
Note 5-Restructuring Charges
In December 1995, the Company implemented a restructuring plan that resulted in
a fourth quarter pretax charge of $8,449,000, of which $5,658,000 was included
in Cost of Products Sold and $2,791,000 was included in Selling, General and
Administrative Expenses. The charge was taken to cover the one-time costs of
consolidating manufacturing facilities (primarily in Europe), reduction of
personnel and disposal of certain assets. Personnel reductions have already
become effective at certain location s and should ultimately approximate 20% of
the total work force. As of December 31, 1995, $275,000 of these charges were
utilized in connection with the personnel reductions. The restructuring actions
are expected to be completed by the end of 1996. These actions are intended to
streamline operations, reduce costs and position the Company for increased
growth and profitability in the future.
Note 6-Equity Investment
At December 31, 1995, the Company owned 3,157,223 shares, representing
approximately 27% of the outstanding shares, of the Common Stock of Hach Company
(Hach). The closing price on NASDAQ at December 31, 1995 was $17.25 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.
Note 7-Long-Term Obligations
Long-term obligations were as follows:
(in thousands) 1995 1994
Series 1993-LI IDB Bond $4,000 $4,000
Series 1978-A IDB Bond 150 200
Less - Current portion in
accounts payable (50) (50)
Net long-term bonds payable 4,100 4,150
Other long-term obligations --- 2
Total long-term obligations $4,100 $4,152
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosures about the Fair Value of Financial
Instruments." SFAS No. 107 requires disclosure of the fair value of significant
financial instruments, including long-term obligations. At December 31, 1995,
the fair value of Lawter's long-term obligations was not materially different
than cost.
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.
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, 1995 and
1994. The capitalized costs are being depreciated over the estimated useful
lives of the individual assets.
At December 31, 1995, the future lease payments under the capitalized leases
relating to the Industrial Revenue Bonds are as follows:
(in thousands)
1996 $ 331
1997 327
1998 270
1999 270
2000 270
Later years 6,400
Total minimum
lease payments 7,868
Less interest (3,718)
Present value of minimum
lease payments $4,150
Operating leases are not significant.
-18-
<PAGE>
Notes to the Consolidated Financial Statements Continued
Note 8-Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses were as follows:
(in thousands) 1995 1994
Trade Accounts Payable $24,105 $19,972
Accrued Environmental Expenditures 4,313 4,838
Accrued Compensation and Benefits 4,755 2,867
Accrued Taxes, Other 2,903 1,920
Other Accrued Liabilities 7,949 3,620
$44,025 $33,217
Note 9-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, Hong Kong, Japan, Singapore and Taiwan which,
individually, are not considered to be significant as defined by SFAS 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 whose purchases are made for a wide variety of specialized
products at multiple locations through numerous companies in various countries
approximated eighteen percent of sales in 1995, nineteen percent of sales in
1994 and eighteen percent of sales in 1993.
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, marketable
securities, 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,
1995, 1994 and 1993 is shown in the table below.
(in thousands) 1995 1994 1993
Net Sales:
Domestic $94,657 $98,628 $93,649
Europe 94,071 74,974 64,008
Other Foreign 16,107 17,454 14,592
Total 204,835 191,056 172,249
Earnings Before Tax:
Domestic 12,206 20,263 12,142
Europe 4,687 13,887 12,460
Other Foreign 1,959 2,746 2,260
Corporate 4,357 2,766 2,589
Total 23,209 39,662 29,451
Identifiable Assets:
Domestic 69,176 62,724 53,782
Europe 83,812 58,514 40,078
Other Foreign 17,091 17,675 15,833
Corporate 91,395 92,914 99,784
Total $261,474 $231,827 $209,477
Note 10-Commitments and Contingencies
The Company has unsecured lines of credit for borrowings of $225,000,000 at
December 31, 1995. During 1995, average borrowings were $30,765,000 against
these lines of credit and the weighted average interest rate was 6.23%. In 1994,
average borrowing s were $20,536,000 and the weighted average interest rate was
4.77%. In 1993, average borrowings were $5,442,000 and the weighted average
interest rate was 3.78%. There are no commitment fees or compensating balance
requirements relating to these lines of credit.
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.
-19-
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Stockholders 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,
1995 and 1994, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statement s 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, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As explained in Note 4 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Chicago, Illinois,
February 8, 1996.
-20-
<PAGE>
Directory
International Headquarters
Lawter International, Inc.
990 Skokie Boulevard, Northbrook, Illinois 60062
(847) 498-4700, Facsimile (847) 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
Saitama, 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
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)
Charenton-le-Pont, France
Lawter International, GmbH (Germany)
Frechen, Germany
Lawter International (Hong Kong) Ltd. (Hong Kong)
Hong Kong, Hong Kong
Lawter International, Limited (Great Britain)
Bicester, Oxon, England
Lawter International (Italia), Srl (Italy)
Cremona Resine Division
Cremona, 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)
Ndabeni, South Africa
Lawter International, S.A. (Spain)
Barcelona, Spain
-21-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 63,680
<SECURITIES> 6,481
<RECEIVABLES> 42,557
<ALLOWANCES> 0
<INVENTORY> 45,177
<CURRENT-ASSETS> 160,117
<PP&E> 126,406
<DEPRECIATION> 55,505
<TOTAL-ASSETS> 261,474
<CURRENT-LIABILITIES> 92,223
<BONDS> 4,100
0
0
<COMMON> 45,066
<OTHER-SE> 84,295
<TOTAL-LIABILITY-AND-EQUITY> 261,474
<SALES> 204,835
<TOTAL-REVENUES> 204,835
<CGS> 162,642
<TOTAL-COSTS> 162,642
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 23,209
<INCOME-TAX> 6,931
<INCOME-CONTINUING> 16,278
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,278
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
