<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 November 30, 1995
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Commission File Number 0-3183
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LeaRonal, Inc.
--------------
(Exact name of registrant as specified in its charter)
New York 11-1717548
----------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
272 Buffalo Avenue, Freeport, New York 11520
---------------------------------------------
(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 January 9, 1996, 8,828,267 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
November 30, 1995 (Unaudited) and February 28, 1995 3
Consolidated Condensed Statements of Income for the
Nine Months and Three Months Ended November 30, 1995 and 1994
(Unaudited) 4
Consolidated Condensed Statements of Cash Flows for the Nine Months
Ended November 30, 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 12
Signatures 13
</TABLE>
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<PAGE> 3
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
Nov 30, 1995 Feb.28,1995
------------ -----------
(Unaudited) (Note)
ASSETS (in thousands)
Current Assets
<S> <C> <C>
Cash and cash equivalents $21,851 $14,761
Investments available-for-sale 11,315 11,010
Investments held-to-maturity 4,254 9,695
Receivables, less allowances 39,175 28,873
Inventories 23,418 21,592
Deferred income taxes 806 847
Other current assets 2,497 2,816
-------- --------
TOTAL CURRENT ASSETS 103,316 89,594
Investments in unconsolidated affiliates 10,883 11,565
Property, plant and equipment 48,342 38,608
Less allowance for depreciation (22,187) (20,826)
-------- --------
26,155 17,782
Patents at cost, less amortization 608 507
Other assets 3,857 3,234
-------- --------
TOTAL ASSETS $144,819 $122,682
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $12,603 $5,963
Accrued expenses and other liabilities 7,767 5,257
Income taxes 3,829 2,642
Current portion of long-term debt 671 257
-------- --------
TOTAL CURRENT LIABILITIES 24,870 14,119
Long-term debt, less current portion 3,334 523
Deferred income taxes 1,712 1,814
Minority interests 4,875 4,437
Stockholders' Equity
Common stock, par value $1 per share - authorized
15,000,000 shares, issued 9,361,550 shares
including 536,065 shares at November 30, 1995 and
558,874 shares at February 28, 1995 held in treasury 9,362 9,362
Additional paid-in capital 9,486 9,609
Retained earnings 89,244 81,675
Unrealized holding gains (losses) on investments
available-for-sale, net of income tax 145 (229)
Cost of common stock in treasury (8,061) (8,402)
Foreign currency translation adjustment 9,852 9,774
-------- --------
TOTAL STOCKHOLDERS' EQUITY 110,028 101,789
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $144,819 $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>
Nine Months Ended Three Months Ended
November 30 November 30
----------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
(in thousands - except share data)
<S> <C> <C> <C> <C>
Net sales $160,402 $132,067 $ 54,951 $ 47,657
Interest Income 1,361 1,092 422 396
Other income - net 2,332 1,943 990 485
------- ------- ------ ------
164,095 135,102 56,363 48,538
Costs and expenses:
Cost of sales 116,855 99,448 39,886 35,890
Selling, general and
administrative expenses 25,716 20,214 9,134 7,058
Research and development 2,431 2,092 837 698
Interest expense 166 74 97 27
Minority interests 1,159 931 429 342
------- ------- ------ ------
Total costs and expenses 146,327 122,759 50,383 44,015
------- ------- ------ ------
Income before income taxes 17,768 12,343 5,980 4,523
Income taxes 6,099 3,243 1,854 1,169
------- ------- ------ ------
NET INCOME $ 11,669 $ 9,100 $ 4,126 $ 3,354
======= ======= ====== ======
Weighted average number of shares of
common stock outstanding 8,997,341 8,877,212 9,006,226 8,878,996
Earnings per share:
Net income per common share $ 1.30 $ 1.03 $ .46 $ .38
======= ======= ====== ======
</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>
Nine Months Ended
November 30
--------------------
1995 1994
---- ----
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $11,669 $9,100
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,679 2,318
Provision for bad debts 872 323
Dividends received in excess of earnings
of unconsolidated affiliates 244
Equity in earnings of unconsolidated affiliates
net of dividends received (554)
Deferred income taxes (130) (161)
Minority interests 1159 931
Loss on sales of investments available-for-sale 57 250
Changes in operating assets and liabilities:
Receivables (12,764) (2,489)
Inventories (1,981) (982)
Other current assets 340 (586)
Other receivables 168 343
Accounts payable 8,226 996
Accrued expenses and other liabilities 2,470 713
Income taxes payable 1,077 682
Other (623) (903)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 13,463 9,981
INVESTING ACTIVITIES
Purchases of property, plant and equipment (net)
and patents (11,170) (2,206)
Proceeds from sales of investments available-for-sale 3,808 557
Purchases of investments available-for-sale (3,507) (397)
Purchase of investments held-to-maturity (8,609) (11,735)
Redemptions of investments held-to-maturity 14,635 8,021
Purchase of minority interest (552)
------ ------
NET CASH USED IN INVESTING ACTIVITIES (5,395) (5,760)
</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>
Nine Months Ended
November 30
-----------------
1995 1994
---- ----
(in thousands)
<S> <C> <C>
FINANCING ACTIVITIES
Dividends paid $(4,099) $(4,839)
Dividends paid to minority shareholders (468) (118)
Payments on debt (196) (178)
Proceeds from exercise of stock options 218 50
Proceeds from loan 3,406
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NET CASH USED IN FINANCING ACTIVITIES (1,139) (5,085)
Effect of exchange rate changes on cash and
cash equivalents 161 466
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INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 7,090 (398)
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 $21,851 $14,218
======= =======
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest $4,859 $2,659
Income taxes 167 145
</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 November 30, 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 November 30, 1995 are not
necessarily indicative of the operating results for the full year.
NOTE B - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
November 30, 1995 Feb. 28, 1995
----------------- -------------
<S> <C> <C>
Raw materials $15,196,000 $13,483,000
Finished goods 8,222,000 8,109,000
---------- -----------
$23,418,000 $21,592,000
=========== ===========
</TABLE>
Domestic gold and silver inventories as of November 30, 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 November
30, 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 C - STOCKHOLDERS' EQUITY
The following information pertains to cash dividends for the nine months ended
November 30:
<TABLE>
<S> <C> <C>
1995 1994
---- ----
Dividends declared May May
Dividends paid June June
Dividends declared July July
Dividends paid August August
Dividends declared September September
Dividends paid October October
Cash dividends per common share:
Quarter ended May 31 $0.155 $0.14
Quarter ended August 31 $0.155 $0.14
Quarter ended November 30 $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
Quarter ended November 30 8,821,660 8,799,196
Amount of dividends
Quarter ended May 31 $1,365,000 $1,232,000
Quarter ended Aug. 31 1,367,000 1,232,000
Quarter ended Nov. 30 1,367,000 1,232,000
--------- ---------
$4,099,000 $3,696,000
========== ==========
</TABLE>
NOTE D - OTHER INCOME
Other income consists of the following:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
November 30 November 30
----------------- ------------------
1995 1994 1995 1994
---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
Royalty income $1,488 $1,313 $506 $472
Equity in earnings of
unconsolidated
affiliates 661 747 317 238
Foreign currency gains
(losses) (71) 2 - (8)
Investment income and
other 254 (119) 167 (217)
--- ---- --- ----
$2,332 $1,943 $990 $485
====== ====== ==== ====
</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
Nine months ended November 30, 1995 and November 30, 1994
Net sales increased $28,335,000 or 21% to $160,402,000 in the November
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 $16,466,000 or 28% to $74,286,000 in the November 1995
period. Process sales increased primarily in Europe and Asia and to a lesser
extent in the United States. Precious metal content sales increased
$10,010,000 to $80,647,000 in the November 1995 period due to increased
precious metal content sales volume in the United States. The average gold
price per troy ounce for the November 1995 and November 1994 periods were $385
and $384, 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' sales from their functional currency into U.S.
dollars. Process sales increased $2,097,000 and precious metal and other sales
increased $2,833,000 due to the effect of currency rate changes on translated
amounts.
Cost of sales increased $17,407,000 or 18% in the November 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.
The November 1995 period reflects increased gross profits of $10,928,000 or
34%, 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 $5,502,000 or 27%
in the November 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 November 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 $936,000 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 increased $389,000 in the November 1995 period. Increased royalty
income, investment income, and other income were partially offset by decreased
earnings of unconsolidated affiliates and foreign currency losses.
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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)
The effective income tax rate increased from 26% in the November 1994
period to 34% in the November 1995 period. In the November 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.
Net income increased $2,569,000 or 28% in the November 1995 period,
primarily due to increased gross profit from increased sales, increased
interest income, increased other income, partially offset by increased selling,
general, and administrative expenses, and higher effective income tax rates.
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 November 1995 period increased by $707,000 or 8% 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 November 30, 1995, the Company had working capital of $78,446,000 and
current assets of $103,316,000 including $37,420,000 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 November 30, 1995 and November 30, 1994
Net sales increased $7,294,000 or 15% to $54,951,000 in the November 1995
quarter. Process sales increased $4,752,000 or 23% to $25,715,000 in the 1995
quarter. Process sales increased approximately 47% in Asia, approximately 36%
in Europe, and approximately 10% in the United States. Precious metal content
sales increased $734,000 in the November 1995 quarter due to increased sales
volume in the United States, which was partially offset by decreases in the
United Kingdom. The average gold price per troy ounce for the November 1995
and November 1994 quarters were $384 and $389, respectively.
Cost of sales increased $3,996,000 or 11% in the November 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 $3,298,000 or 28% in the November 1995
quarter and the Company's overall gross profit percentage increased in the
November 1995 quarter, 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 $2,076,000 or 29%
in the November 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 increased $505,000 in the November 1995 quarter, principally
due to increased investment and other income, increased royalty income, and
increased earnings of unconsolidated affiliates.
The effective income tax rate increased from 26% in the November 1994
quarter to 31% in the November 1995 quarter. The November 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 November 1995 quarter, the U.S. dollar weakened against the currency
of the Company's Swiss subsidiary. The impact was to increase net income in
the November 1995 quarter by $168,000.
Net income increased $772,000 or 23% in the November 1995 quarter,
primarily due to increased gross profit from increased sales, increased other
income, and the effect of currencies on translated results of foreign
operations, partially offset by increased selling, general, and administrative
expenses and higher effective income tax rates.
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<PAGE> 12
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
November 30, 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 F. Ostrow
-----------------------------
Ronald F. Ostrow
President
and Chief Executive Officer
/s/ David Rosenthal
-----------------------------
David Rosenthal
Vice President - Finance
and Treasurer
Dated: January 12, 1996
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<PAGE> 14
EXHIBIT INDEX
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Exhibit No. 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AS OF NOV 30 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 21851
<SECURITIES> 15569
<RECEIVABLES> 39175
<ALLOWANCES> 0
<INVENTORY> 23418
<CURRENT-ASSETS> 103316
<PP&E> 48342
<DEPRECIATION> 22187
<TOTAL-ASSETS> 144819
<CURRENT-LIABILITIES> 24870
<BONDS> 0
0
0
<COMMON> 9362
<OTHER-SE> 100666
<TOTAL-LIABILITY-AND-EQUITY> 144819
<SALES> 160402
<TOTAL-REVENUES> 164095
<CGS> 116855
<TOTAL-COSTS> 145002
<OTHER-EXPENSES> 1159
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166
<INCOME-PRETAX> 17768
<INCOME-TAX> 6099
<INCOME-CONTINUING> 11669
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11669
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.30
</TABLE>
