<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 August 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)
<TABLE>
<S> <C>
New York 11-1717548
- ---------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
</TABLE>
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)
- -------------------------------------------------------------------------------
(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 October 6, 1995, 8,821,210 shares of the registrant's Common Stock, $1
par value, were outstanding.
<PAGE> 2
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
August 31, 1995 (Unaudited) and February 28, 1995 3
Consolidated Condensed Statements of Income for the
Three Months and Six Months Ended August 31, 1995 and 1994
(Unaudited) 4
Consolidated Condensed Statements of Cash Flows for the Six Months
Ended August 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 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
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<PAGE> 3
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
Aug. 31, 1995 Feb. 28, 1995
------------- -------------
(Unaudited) (Note)
ASSETS (in thousands)
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 17,766 $ 14,761
Investments available-for-sale 11,386 11,010
Investments held-to-maturity 9,151 9,695
Receivables, less allowances 36,525 28,873
Inventories 22,766 21,592
Deferred income taxes 823 847
Other current assets 3,418 2,816
---------- ----------
TOTAL CURRENT ASSETS 101,835 89,594
Investments in unconsolidated affiliates 11,010 11,565
Property, plant and equipment 40,757 38,608
Less allowance for depreciation (21,315) (20,826)
---------- ----------
19,442 17,782
Patents at cost, less amortization 588 507
Other assets 4,145 3,234
---------- ----------
TOTAL ASSETS $137,020 $122,682
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 12,117 $ 5,963
Accrued expenses and other liabilities 6,856 5,257
Income taxes 3,720 2,642
Current portion of long-term debt 198 257
---------- ----------
TOTAL CURRENT LIABILITIES 22,891 14,119
Long-term debt, less current portion 462 523
Deferred income taxes 1,737 1,814
Minority interests 4,793 4,437
Stockholders' Equity
Common stock, par value $1 per share - authorized
15,000,000 shares, issued 9,361,550 shares
including 540,940 shares at August 31, 1995 and
558,874 shares at February 28, 1995 held in treasury 9,362 9,362
Additional paid-in capital 9,508 9,609
Retained earnings 86,486 81,675
Unrealized holding gains (losses) on investments
available-for-sale, net of income tax 82 (229)
Cost of common stock in treasury (8,124) (8,402)
Foreign currency translation adjustment 9,823 9,774
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 107,137 101,789
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $137,020 $122,682
========== ==========
</TABLE>
- ------------------------------------------------------------
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>
Six Months Ended Three Months Ended
August 31 August 31
-------------------- ------------------------
1995 1994 1995 1994
---- ---- ---- ----
(in thousands - except share data)
<S> <C> <C> <C> <C>
Net sales $105,451 $84,410 $53,769 $43,430
Interest Income 939 696 457 359
Other income - net 1,342 1,458 645 715
--------- -------- -------- -------
107,732 86,564 54,871 44,504
Costs and expenses:
Cost of sales 76,969 63,558 39,347 32,720
Selling, general and administrative 16,582 13,156 8,353 6,560
Research and development 1,594 1,394 823 700
Interest expense 69 47 47 21
Minority interests 730 589 385 323
--------- ------- ------- -------
Total costs and expenses 95,944 78,744 48,955 40,324
--------- -------- -------- -------
Income before income taxes 11,788 7,820 5,916 4,180
Income taxes 4,245 2,074 2,075 1,138
--------- -------- -------- --------
NET INCOME $ 7,543 $ 5,746 $ 3,841 $ 3,042
========= ======== ======== ========
Weighted average number of shares of
common stock and common stock
equivalents outstanding 8,957,440 8,876,494 8,962,347 8,877,073
Net income per common share $ .84 $ .65 $ .43 $ .34
====== ===== ===== =====
</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>
Six Months Ended
August 31
--------------------------------
1995 1994
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(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,543 $ 5,746
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,734 1,529
Provision for bad debts 602 190
Dividends received in excess of earnings
of unconsolidated affiliates 560
Equity in earnings of unconsolidated affiliates
net of of dividends received (358)
Deferred income taxes (72) (131)
Minority interests 730 589
Loss on sales of investments available-for-sale 77 19
Changes in operating assets and liabilities:
Receivables (11,510) (367)
Inventories (1,301) 231
Other current assets (596) (197)
Other receivables 110 256
Accounts payable 9,421 (563)
Accrued expenses and other liabilities 1,596 28
Income taxes payable 1,014 649
Other (840) (988)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 9,068 6,633
INVESTING ACTIVITIES
Purchases of property, plant and equipment
and patents (3,504) (1,282)
Proceeds from sales of investments available-for-sale 339 512
Purchases of investments available-for-sale (321) (203)
Purchase of investments held-to-maturity (8,596) (5,699)
Redemptions of investments held-to-maturity 9,456 4,346
Purchase of minority interest (552)
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NET CASH USED IN INVESTING ACTIVITIES (3,178) (2,326)
</TABLE>
See notes to consolidated condensed financial statements (unaudited)
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<PAGE> 6
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Six Months Ended
August 31
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1995 1994
(in thousands)
<S> <C> <C>
FINANCING ACTIVITIES
Dividends paid $(2,732) $(3,607)
Dividends paid to minority shareholders (64)
Payments on debt (130) (121)
Proceeds from exercise of stock options 177 19
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NET CASH USED IN FINANCING ACTIVITIES (2,749) (3,709)
Effect of exchange rate changes on cash and
cash equivalents (136) 524
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INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 3,005 1,122
Cash and cash equivalents at beginning of the year 14,761 14,615
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CASH AND CASH EQUIVALENTS
AT END OF THE PERIOD $17,766 $ 15,737
======== ========
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest $ 55 $ 105
Income taxes 2,941 1,639
</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 August 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 August
31, 1995 are not necessarily indicative of the operating results for
the full year.
NOTE B - INVENTORIES
Inventories consist of the following:
<TABLE>
August 31, 1995 Feb. 28, 1995
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<S> <C> <C>
Raw materials $14,698,000 $13,483,000
Finished goods 8,068,000 8,109,000
----------- -----------
$22,766,000 $21,592,000
=========== ===========
</TABLE>
Domestic gold and silver inventories as of August 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 August 31, 1995 and February 28, 1995 would have been
$4,247,000 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 D - STOCKHOLDERS' EQUITY
The following information pertains to cash dividends for the six months ended
August 31:
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Dividends declared May May
Dividends paid June June
Dividends declared July July
Dividends paid August August
Dividends per common share:
Quarter ended May 31 $0.155 $0.14
Quarter ended August 31 $0.155 $0.14
Number of outstanding shares
on which dividend was declared:
Quarter ended May 31 8,809,510 8,796,556
Quarter ended August 31 8,819,491 8,798,271
Amount of dividends:
Quarter ended May 31 $1,365,000 $1,232,000
Quarter ended August 31 1,367,000 1,232,000
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$2,732,000 $2,464,000
========== ==========
</TABLE>
NOTE D - OTHER INCOME
Other income consists of the following:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
August 31 August 31
---------------------- -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Royalty income $ 982,000 $ 841,000 $ 451,000 $ 426,000
Equity in earnings of
unconsolidated affiliates 344,000 509,000 186,000 275,000
Foreign currency gains (losses) (71,000) 10,000 (38,000) 7,000
Investment income and other 87,000 98,000 46,000 7,000
---------- --------- --------- ---------
$1,342,000 $1,458,000 $ 645,000 $ 715,000
========== ========== ========== =========
</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
Six months ended August 31, 1995 and August 31, 1994
Net sales increased $21,041,000 or 25% to $105,451,000 in the August
1995 period. 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 $11,714,000 or 32% to $48,571,000 in the August 1995
period. Process sales increased primarily in Europe and Asia and to a lesser
extent in the United States. Precious metal content sales increased $9,276,000
to $54,624,000 in the August 1995 period due to increased precious metal
content sales volume in the United States and the United Kingdom. The average
gold price per troy ounce for the August 1995 and August 1994 periods were $386
and $382, 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 $1,727,000 and precious metal and other sales increased
$2,900,000 due to the effect of currency rate changes on translated amounts.
Cost of sales increased $13,411,000 or 21% in the August 1995 period.
The increase was due to increased process sales in all locations and increased
precious metal content sales from increased sales volume in the United States
and the United Kingdom. The August 1995 period reflects increased gross
profits of $7,630,000 or 37%, 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 $3,426,000 or
26% in the August 1995 period. 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 August 1995
period, the average exchange rates used to translate expenses from the
subsidiaries' functional currency into U.S. dollars resulted in an increase of
approximately $724,000 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 $116,000 in the August 1995 period. 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 27% in the August 1994
period to 36% in the August 1995 period. In the August 1994 period, the
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. In addition, the August 1995 period includes additional income taxes
attributable to a change in U.S. tax law which makes undistributed earnings of
certain foreign subsidiaries subject to U.S. income tax rates.
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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)
Net income increased $1,797,000 or 31% in the August 1995 period,
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 their functional
currencies into U.S. dollars impacts the reported results of operations. Net
income for the August 1995 period increased by $539,000 or 9% from the prior
year due principally to the increase in the average exchange rates to translate
the European subsidiaries' income statements from their functional currencies
into U.S. dollars.
At August 31, 1995, the Company had working capital of $78,944,000 and
current assets of $101,835,000 including $38,303,000 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
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quarter ended August 31, 1995 and August 31, 1994
Net sales increased $10,339,000 or 24% to $53,769,000 in the August
1995 quarter. Process sales increased $5,706,000 or 30% to $24,681,000 in the
1995 quarter. Process sales increased approximately 50% in Asia, approximately
37% in Europe, and approximately 9% in the United States. Precious metal
content sales increased $4,299,000 in the August 1995 quarter due to increased
sales volume in the United States. The average gold price per troy ounce for
the August 1995 and August 1994 quarters were $386 and $384, respectively.
Cost of sales increased $6,627,000 or 20% in the August 1995 quarter.
The increase was due principally to increased process sales in all locations
and increased precious metal content sales from increased sales volume in the
United States. Gross profits increased $3,712,000 or 35% in the August 1995
quarter and the Company's overall gross profit percentage increased in the
August 1995 quarter, principally due to the increase in process sales as a
percentage of total sales.
Selling, general, and administrative expenses increased $1,793,000 or
27% in the August 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.
Other income decreased $70,000 in the August 1995 quarter, principally
due to decreased earnings of unconsolidated affiliates.
The effective income tax rate increased from 27% in the August 1994
quarter to 35% in the August 1995 quarter. The August 1994 quarter includes a
reduction in effective income tax rates related to changes in Swiss tax laws,
the benefit of which were fully realized as of February 28, 1995.
The effect of translating foreign operations financial statements from
their functional currency into U.S. dollars impacts the results of operations.
During the August 1995 quarter, the U.S. dollar weakened against the currencies
of the Company's Swiss and German subsidiaries and Japanese unconsolidated
affiliate. The impact was to increase net income in the August 1995 quarter by
$206,000.
Net income increased $799,000 or 26% in the August 1995 quarter,
primarily due to increased gross profit from increased sales, increased
interest income, and the effect of currencies on translated results of foreign
operations, partially offset by increased selling, general, and administrative
expenses and decreased other income and higher effective income tax rates.
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<PAGE> 12
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Annual Meeting of Stockholders of the Registrant was held
on July 18, 1995.
b) Nine (9) directors, constituting the entire Board of
Directors, were elected for a term of one year, and until the
election and qualification of their successors. The following
nominees were elected by the Stockholders.
<TABLE>
<CAPTION>
Name First became a Director
---- -----------------------
<S> <C>
Barnet D. Ostrow (Chairman) 1953
Fred I. Nobel 1953
Sol Berg 1972
Ronald F. Ostrow 1975
Irwin Lieber 1980
Arthur M. Winston 1980
Kenneth L. Stein 1987
Richard Kessler 1987
Carl N. Graf 1992
</TABLE>
c) The Stockholders approved the employment of Ernst & Young as
auditors of the Corporation for the current fiscal year by a
vote of 7,816,235 in favor, 7,740 against, and 5,735 withheld.
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 August 31, 1995.
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<PAGE> 13
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
PART II - OTHER INFORMATION
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.
-----------------
(Registrant)
/s/ Ronald Ostrow
------------------------------
Ronald Ostrow
President and
Chief Executive Officer
/s/ David Rosenthal
------------------------------
David Rosenthal
Vice President - Finance
and Treasurer
Dated: October 11, 1995
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<PAGE> 14
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FORM 10Q AS OF AUGUST 31, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 17,766
<SECURITIES> 20,537
<RECEIVABLES> 36,525
<ALLOWANCES> 0
<INVENTORY> 22,766
<CURRENT-ASSETS> 101,835
<PP&E> 40,757
<DEPRECIATION> 21,315
<TOTAL-ASSETS> 137,020
<CURRENT-LIABILITIES> 22,891
<BONDS> 0
<COMMON> 9,362
0
0
<OTHER-SE> 97,775
<TOTAL-LIABILITY-AND-EQUITY> 137,020
<SALES> 105,451
<TOTAL-REVENUES> 107,732
<CGS> 76,969
<TOTAL-COSTS> 95,145
<OTHER-EXPENSES> 730
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69
<INCOME-PRETAX> 11,788
<INCOME-TAX> 4,245
<INCOME-CONTINUING> 7,543
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,543
<EPS-PRIMARY> .84
<EPS-DILUTED> .84
</TABLE>
