<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended May 31, 1995
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Commission File Number 0-3183
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LeaRonal, Inc.
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(Exact name of registrant as specified in its charter)
New York 11-1717548
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(State or other jurisdiction of (I.R.S.Employer
Incorporation or organization) Identification No.)
272 Buffalo Avenue, Freeport, New York 11520
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(Address of principal executive offices)
(516) 868-8800
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report).
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
--- ---
As of July 10, 1995, 8,810,741 shares of the registrant's Common Stock, $1 par
value, were outstanding.
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FORM 10-Q
LeaRonal, Inc. and Subsidiaries
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
May 31, 1995 (Unaudited) and February 28, 1995 3
Consolidated Condensed Statements of Income for the
Three Months Ended May 31, 1995 and 1994 (Unaudited) 4
Consolidated Condensed Statements of Cash Flows for the Three Months
Ended May 31, 1995 and 1994 (Unaudited) 5
Notes to Consolidated Condensed Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
</TABLE>
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<PAGE> 3
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, 1995 Feb. 28, 1995
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(Unaudited) (Note)
ASSETS (in thousands)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 16,493 $ 14,761
Investments available-for-sale 11,420 11,010
Investments held-to-maturity 11,140 9,695
Receivables, less allowances 35,931 28,873
Inventories 22,379 21,592
Deferred income taxes 801 847
Other current assets 3,244 2,816
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TOTAL CURRENT ASSETS 101,408 89,594
Investments in unconsolidated affiliates 13,118 11,565
Property, plant and equipment 38,914 38,608
Less allowance for depreciation ( 20,947 ) ( 20,826 )
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17,967 17,782
Patents at cost, less amortization 526 507
Other assets 3,723 3,234
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TOTAL ASSETS $ 136,742 $ 122,682
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Dividend payable $ 1,365 $ --
Accounts payable 11,701 5,963
Accrued expenses and other liabilities 5,562 5,257
Income taxes 4,081 2,642
Current portion of long-term debt 230 257
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TOTAL CURRENT LIABILITIES 22,939 14,119
Long-term debt, less current portion 499 523
Deferred income taxes 1,740 1,814
Minority interests 4,466 4,437
Stockholders' Equity
Common stock, par value $1 per share - authorized
15,000,000 shares, issued 9,361,550 shares
including 552,049 shares at May 31, 1995 and
558,874 shares at February 28, 1995 held in treasury 9,362 9,362
Additional paid-in capital 9,570 9,609
Retained earnings 84,012 81,675
Unrealized holding losses on investments
available-for-sale, net of income tax ( 9 ) ( 229 )
Cost of common stock in treasury ( 8,299 ) ( 8,402 )
Foreign currency translation adjustment 12,462 9,774
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TOTAL STOCKHOLDERS' EQUITY 107,098 101,789
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 136,742 $ 122,682
========== ==========
</TABLE>
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Note: The balance sheet at February 28, 1995 has been taken from the audited
financial statements at that date, and condensed. See notes to consolidated
condensed financial statements (unaudited).
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<PAGE> 4
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 31
--------------------------------
1995 1994
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(in thousands-except share data)
<S> <C> <C>
Net sales $ 51,682 $ 40,980
Interest income 482 337
Other income - net 697 743
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52,861 42,060
Costs and expenses:
Cost of sales 37,622 30,838
Selling, general and administrative 8,229 6,596
Research and development 771 694
Interest expense 22 26
Minority interests 345 266
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Total costs and expenses 46,989 38,420
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Income before income taxes 5,872 3,640
Income taxes 2,170 936
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NET INCOME $ 3,702 $ 2,704
========== ==========
Weighted average number of shares
and common share equivalents outstanding 8,927,046 8,864,487
Net income per common share $ .41 $ .31
========== ==========
</TABLE>
See notes to consolidated condensed financial statements (unaudited).
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<PAGE> 5
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 31
----------------------------
1995 1994
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(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,702 $ 2,704
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 870 776
Provision for bad debts 293 78
Equity in earnings of unconsolidated affiliates ( 158 ) ( 234 )
Deferred income taxes ( 60 ) ( 36 )
Minority interests 345 266
Loss (gain) on sale of investments available-for-sale 13 ( 32 )
Changes in operating assets and liabilities:
Receivables ( 6,970 ) ( 826 )
Inventories ( 706 ) ( 204 )
Other current assets ( 385 ) ( 196 )
Other receivables 60 122
Accounts payable 5,661 ( 1,009 )
Accrued expenses and other liabilities 6 ( 166 )
Income taxes payable 1,295 706
Other ( 362 ) ( 148 )
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NET CASH PROVIDED BY OPERATING ACTIVITIES 3,604 1,801
INVESTING ACTIVITIES
Purchases of property, plant and equipment (net)
and patents ( 855 ) ( 485 )
Proceeds from sales of investments available-for-sale 66 470
Purchases of investments available-for-sale ( 41 ) ( 245 )
Purchases of investments held-to-maturity ( 6,043 ) ( 3,365 )
Redemption of investments held-to-maturity 5,180 2,103
Purchases of minority interests ( 358 )
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NET CASH USED IN INVESTING ACTIVITIES ( 2,051 ) ( 1,522 )
</TABLE>
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<PAGE> 6
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Three Months Ended
May 31
-----------------------------
1995 1994
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(in thousands)
<S> <C> <C>
FINANCING ACTIVITIES
Dividends paid $( 1,143 )
Dividends paid to minority shareholders $( 63 )
Payments on debt ( 64 ) ( 58 )
Proceeds from exercise of stock options 64 2
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NET CASH USED IN FINANCING ACTIVITIES ( 63 ) ( 1,199 )
Effect of exchange rate changes on cash and
cash equivalents 242 157
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,732 ( 763 )
Cash and cash equivalents at beginning of the year 14,761 14,616
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CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $ 16,493 $ 13,853
========== ==========
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest $ 17 $ 53
Income taxes 927 202
</TABLE>
See notes to consolidated condensed financial statements (unaudited)
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<PAGE> 7
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and with the instructions of
Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position, results of operations and cash
flows at May 31, 1995 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
February 28, 1995 annual report to shareholders. The results of operations
for the period ended May 31, 1995 are not necessarily indicative of the
operating results for the full year.
NOTE B - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
May 31, 1995 Feb. 28, 1995
------------ -------------
<S> <C> <C>
Raw materials $14,539,000 $13,483,000
Finished goods 7,840,000 8,109,000
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$22,379,000 $21,592,000
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</TABLE>
Domestic gold and silver inventories as of May 31, 1995 and 1994 are carried
at the lower of cost (last-in, first out [LIFO] method) or market. All other
inventories are carried at the lower of cost (first-in, first-out [FIFO]
method) or market. If the FIFO method of accounting had been used by the
Company, domestic gold and silver inventories at May 31, 1995 and February
28, 1995 would have been $4,256,000 and $4,058,000 higher, respectively.
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<PAGE> 8
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
NOTE C - STOCKHOLDERS' EQUITY
The following information pertains to cash dividends for the three months ended
May 31:
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Dividends declared May May
Dividends paid June June
Dividends per common share $0.155 $0.14
Number of outstanding shares
on which dividend was declared 8,809,510 8,796,556
Amount of dividends $1,365,000 $1,232,000
</TABLE>
NOTE D - OTHER INCOME
Other income consists of the following for the three months ended May 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Royalty income $ 531,000 $ 415,000
Equity in earnings of
unconsolidated affiliates 158,000 234,000
Foreign currency gains (losses) ( 33,000 ) 2,000
Investment income and other 41,000 92,000
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$ 697,000 $ 743,000
========== ==========
</TABLE>
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<PAGE> 9
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three months ended May 31, 1995 and May 31, 1994
Net sales increased $10,702,000 or 26% to $51,682,000 in the May 1995
quarter. Net sales consists of sales of proprietary and patented specialty
electronic and imaging chemicals, referred to as "process sales," the precious
metal content of its electroplating processes, and sales of other products.
Process sales increased $6,008,000 or 34% to $23,890,000 in the May 1995
quarter. Process sales increased primarily in Europe and Asia and to a lesser
extent in the United States. Precious metal content and other sales increased
$4,694,000 to $27,792,000 in the May 1995 quarter due to increased precious
metal content sales volume in the United Kingdom and the United States. The
average gold price per troy ounce for the May 1995 and May 1994 quarters were
$386 and $381, respectively.
The decline of the U.S. dollar against certain foreign currencies had the
impact of increasing the U.S. dollar reported sales amounts, resulting from
translating the subsidiaries' foreign currency sales into U.S. dollars. Process
sales increased $1,135,000 and precious metal and other sales increased
$1,400,000 due to the effect of currency rate changes on translated amounts.
Cost of sales increased $6,784,000 or 22% in the May 1995 quarter. The
increase was due to increased process sales in all locations and increased
precious metal content sales from increased sales volume in the United Kingdom
and the United States. The May 1995 quarter reflects increased gross profits of
$3,918,000 or 39%, as well as an increase in the Company's overall gross profit
percentage principally due to the increase in process sales, which have a higher
gross margin, as a percentage of total sales.
Selling, general, and administrative expenses increased $1,633,000 or 25% in
the May 1995 quarter. The increase occurred principally in Europe and Southeast
Asia as a result of additional sales and technical service specialists needed to
meet customer requirements. During the May 1995 quarter, the average exchange
rates used to translate expenses from the subsidiaries' functional currency into
U.S. dollars resulted in an increase of approximately $400,000 in reported
selling, general, and administrative expenses.
Other income includes royalty income, earnings of unconsolidated affiliates,
foreign currency gains and losses, and investment income. Other income
decreased $46,000 in the May 1995 quarter. Increased royalty income was offset
by decreased earnings of unconsolidated affiliates and investment income and
foreign currency losses.
The effective income tax rate increased from 26% in the May 1994 quarter to
37% in the May 1995 quarter. In the May 1994 period, the
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<PAGE> 10
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Company's Swiss subsidiary reported lower effective tax rates due to a change in
Swiss tax laws, the benefit of which was fully realized as of February 28, 1995.
Net income increased $998,000 or 37% in the May 1995 quarter, primarily due
to increased gross profit from increased sales, increased interest income,
partially offset by increased selling, general, and administrative expenses,
higher effective income tax rates, and decreased other income.
The results of operations continues to reflect the importance of the
Company's foreign subsidiaries and unconsolidated affiliates. The effect of
translating the foreign operations financial statements from functional
currencies into U.S. dollars impacts the reported results of operations. Net
income for the May 1995 quarter increased by $313,000 or 12% from the prior year
due to the increase in the average exchange rates to translate the European
subsidiaries' income statements from their functional currencies into U.S.
dollars.
At May 31, 1995, the Company had working capital of $78,469,000 and current
assets of $101,408,000, including $39,053,000 in cash, cash equivalents, and
short term investments. The Company's immediate capital expansion requirements
will be funded by working capital and cash flow from operations. The Company
has sufficient lines of credit available with banks, should any additional funds
be required.
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<PAGE> 11
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
The independent auditors are not examining this Form 10-Q prior to
submission by the Registrant.
b) There were no reports on Form 8-K filed for the three months ended May
31, 1995.
SIGNATURES
Pursuant to the requirements 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.
LeaRonal, Inc.
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(Registrant)
/s/ Ronald Ostrow
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Ronald Ostrow
President and
Chief Executive Officer
/s/ David Rosenthal
----------------------------
David Rosenthal
Vice President - Finance
and Treasurer
Dated: July 12, 1995
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<PAGE> 12
EXHIBIT INDEX
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Exhibit
No. Description
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27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Learonal Inc.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> MAR-01-1995
<PERIOD-END> MAY-31-1995
<EXCHANGE-RATE> 1
<CASH> 16493
<SECURITIES> 22560
<RECEIVABLES> 35931
<ALLOWANCES> 0
<INVENTORY> 22379
<CURRENT-ASSETS> 101408
<PP&E> 38914
<DEPRECIATION> 20947
<TOTAL-ASSETS> 136742
<CURRENT-LIABILITIES> 22939
<BONDS> 0
<COMMON> 9362
0
0
<OTHER-SE> 97736
<TOTAL-LIABILITY-AND-EQUITY> 136742
<SALES> 51682
<TOTAL-REVENUES> 52861
<CGS> 37622
<TOTAL-COSTS> 46622
<OTHER-EXPENSES> 345
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> 5872
<INCOME-TAX> 2170
<INCOME-CONTINUING> 3702
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3702
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
