<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, 1996
Commission File Number 0-3183
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
(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 July 9, 1996, 8,829,085 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
Condensed Consolidated Balance Sheets at
May 31, 1996 (Unaudited) and February 29, 1996 3
Condensed Consolidated Statements of Income for the
Three Months Ended May 31, 1996 and 1995 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended May 31, 1996 and 1995 (Unaudited) 5
Notes to Condensed Consolidated 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
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, 1996 Feb. 29, 1996
------------ -------------
(Unaudited) (Note)
ASSETS (in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 24,391 $ 26,711
Investments available-for-sale 8,972 9,450
Investments held-to-maturity 4,802 1,664
Receivables, less allowances 34,604 36,173
Inventories 26,510 24,293
Deferred income taxes 868 845
Other current assets 3,529 2,168
-------- --------
TOTAL CURRENT ASSETS 103,676 101,304
Investments in unconsolidated affiliates 10,664 10,801
Property, plant and equipment 52,614 51,903
Less allowance for depreciation (22,891) (22,843)
-------- --------
29,723 29,060
Patents at cost, less amortization 516 498
Other assets 4,508 4,035
-------- --------
TOTAL ASSETS $149,087 $145,698
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Dividend payable $ 1,589 $ --
Accounts payable 11,746 11,485
Accrued expenses and other liabilities 7,517 7,197
Income taxes 5,486 4,664
Current portion of long-term debt 771 842
-------- --------
TOTAL CURRENT LIABILITIES 27,109 24,188
Long-term debt, less current portion 2,844 3,066
Deferred income taxes 1,705 1,719
Minority interests 4,764 5,058
Stockholders' Equity:
Common stock, par value $1 per share - authorized
15,000,000 shares, issued 9,361,550 shares
including 533,065 shares at May 31, 1996 and
548,033 shares at February 29, 1996 held in treasury 9,362 9,362
Additional paid-in capital 9,449 9,480
Retained earnings 93,496 91,804
Unrealized holding gains on investments
available-for-sale, net of income tax 170 192
Cost of common stock in treasury (8,157) (8,364)
Foreign currency translation adjustment 8,345 9,193
-------- --------
TOTAL STOCKHOLDERS' EQUITY 112,665 111,667
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $149,087 $145,698
======== ========
</TABLE>
- ------------------------------------------------------------
Note: The balance sheet at February 29, 1996 has been taken from the audited
financial statements at that date, and condensed. See notes to condensed
consolidated financial statements (unaudited).
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FORM 10-Q
LeaRonal, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 31
------------------
1996 1995
---- ----
(in thousands - except share data)
<S> <C> <C>
Net sales $ 51,783 $ 51,682
Interest income 360 482
Other income - net 668 697
---------- ----------
52,811 52,861
Costs and expenses:
Cost of sales 37,399 37,622
Selling, general and administrative 9,204 8,229
Research and development 948 771
Interest expense 97 22
Minority interests 276 345
---------- ----------
Total costs and expenses 47,924 46,989
Income before income taxes 4,887 5,872
Income taxes 1,606 2,170
---------- ----------
NET INCOME $ 3,281 $ 3,702
========== ==========
Weighted average number of shares
and common share equivalents outstanding 9,017,707 8,927,046
Net income per common share $ .36 $ .41
========== ==========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
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<PAGE> 5
FORM 10-Q
LeaRonal, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 31
------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $3,281 $3,702
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,020 870
Provision for bad debts 259 293
Equity in earnings of unconsolidated affiliates (57) (158)
Deferred income taxes (30) (60)
Minority interests 276 345
Loss (gain) on sale of investments available-for-sale 2 13
Changes in operating assets and liabilities:
Receivables 995 (6,970)
Inventories (2,250) (706)
Other current assets (1,376) (385)
Other receivables (70) 60
Accounts payable 300 5,661
Accrued expenses and other liabilities 408 6
Income taxes payable 907 1,295
Other (106) (362)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 3,559 3,604
INVESTING ACTIVITIES
Purchases of property, plant and equipment (net)
and patents (1,795) (855)
Proceeds from sales of investments available-for-sale 542 66
Purchases of investments available-for-sale (154) (41)
Purchases of investments held-to-maturity (4,090) (6,043)
Redemption of investments held-to-maturity 818 5,180
Purchases of minority interests (741) (358)
Other (72)
------ ------
NET CASH USED IN INVESTING ACTIVITIES (5,492) (2,051)
</TABLE>
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FORM 10-Q
LeaRonal, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Three Months Ended
May 31
------------------
1996 1995
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(in thousands)
<S> <C> <C>
FINANCING ACTIVITIES
Dividends paid to minority shareholders $ (63)
Payments on debt $ (287) (64)
Proceeds from exercise of stock options 176 64
------- -------
NET CASH USED IN FINANCING ACTIVITIES (111) (63)
Effect of exchange rate changes on cash and
cash equivalents (276) 242
------- -------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,320) 1,732
Cash and cash equivalents at beginning of the year 26,711 14,761
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CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $24,391 $16,493
======= =======
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest 114 $ 17
Income taxes 974 927
</TABLE>
See notes to condensed consolidated financial statements (unaudited)
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FORM 10-Q
LeaRonal, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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, 1996 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
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's February 29, 1996 annual report to shareholders. The results of
operations for the period ended May 31, 1996 are not necessarily indicative
of the operating results for the full year.
NOTE B - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
May 31, 1996 Feb. 29, 1996
------------ -------------
<S> <C> <C>
Raw materials $13,606,000 $13,724,000
Finished goods 12,904,000 10,569,000
----------- -----------
$26,510,000 $24,293,000
=========== ===========
</TABLE>
Domestic gold and silver inventories as of May 31, 1996 and 1995 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, 1996 and
February 29, 1996 would have been $4,466,000 and $4,712,000 higher,
respectively.
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FORM 10-Q
LeaRonal, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
NOTE C - STOCKHOLDERS' EQUITY
The following information pertains to cash dividends for the three months ended
May 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Dividends declared May May
Dividends paid June June
Dividends per common share $0.18 $0.155
Number of outstanding shares
on which dividend was declared 8,828,085 8,809,510
Amount of dividends $1,589,000 $1,365,000
</TABLE>
NOTE D - OTHER INCOME
Other income consists of the following for the three months ended May 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Royalty income $417,000 $531,000
Equity in earnings of
unconsolidated affiliates 57,000 158,000
Foreign currency gains (losses) 1,000 (33,000)
Investment income and other 193,000 41,000
------- --------
$668,000 $697,000
======== ========
</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, 1996 and May 31, 1995
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 $2,060,000 or 9% to $25,950,000 in the May 1996 quarter,
from $23,890,000 in the May 1995 quarter. Process sales increased primarily in
Asia and to a lesser extent in the United States and Europe. Precious metal
content and other sales totalled $25,833,000 in the May 1996 quarter, a decrease
of $1,959,000 or 7% from $27,792,000 in the May 1995 quarter due to decreased
precious metal content sales volume in the United Kingdom. The average gold
price per troy ounce for the May 1996 and May 1995 quarters were $394 and $386,
respectively.
The strengthening of the U.S. dollar against certain foreign currencies had
the impact of decreasing the U.S. dollar reported sales amounts, resulting from
translating the subsidiaries' foreign currency sales into U.S. dollars. Process
sales decreased $498,000 and precious metal content and other sales decreased
$668,000 due to the effect of currency rate changes on translated amounts.
Cost of sales decreased $223,000 in the May 1996 quarter. The decrease was
due to decreased precious metal content sales from decreased sales volume in the
United Kingdom, partially offset by increased process sales. The May 1996
quarter reflects increased gross profits of $324,000 or 2%, as well as an
increase in the Company's overall gross profit percentage from 27.2% to 27.8%,
principally due to the increase in process sales, which have a higher gross
margin, as a percentage of total sales. However, pricing pressures have
decreased process sales margins in the May 1996 quarter.
Selling, general, and administrative expenses increased $975,000 or 12% in
the May 1996 quarter. The increase occurred principally in Europe and Asia.
LeaRonal Asia (formerly LeaRonal Southeast Asia) incurred increased occupancy
costs as it continues to lease space while renovating its new facility for
occupancy in August 1996. Selling, general, and administrative expenses
increased in all locations due to the addition of sales and technical service
people to meet customer requirements.
Other income includes royalty income, earnings of unconsolidated
affiliates, foreign currency gains and losses, and investment income. Earnings
of unconsolidated subsidiaries decreased $101,000 in the May 1996 quarter,
principally due to losses at the Company's United Kingdom subsidiary's 50% owned
jewelry manufacturing affiliate. Royalty income decreased $114,000, principally
due to the strengthening of the U.S. dollar against the Japanese yen which
decreased the reported royalty income from its unconsolidated Japanese
affiliate. Investment income increased by $152,000 during the May 1996 quarter.
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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 decreased in the May 1996 quarter to 33% from
37% in the May 1995 quarter. This is due principally to an increase in foreign
earnings as a percentage of total earnings which are taxed at lower rates.
Net income decreased $421,000 or 11% in the May 1996 quarter, primarily due
to increased selling, general, and administrative expenses, increased research
and development expenses, decreased interest income, and decreased other income
partially offset by increased gross margins and lower 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 financial statements of the Company's foreign operations from
functional currencies into U.S. dollars impacts the reported results of
operations. Net income for the May 1996 quarter decreased by $149,000 or 4% from
the prior year due to the decrease in the average exchange rates to translate
the European subsidiaries' income statements from their functional currencies
into U.S. dollars.
At May 31, 1996, the Company had working capital of $75,567,000 and current
assets of $103,676,000 including $38,165,000 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, 1996.
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/ Richard Kessler
-----------------------------
Richard Kessler
Executive Vice President and
Chief Operating Officer
/s/ David Rosenthal
-----------------------------
David Rosenthal
Vice President - Finance
and Treasurer
Dated: July 12, 1996
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<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> MAY-31-1996
<EXCHANGE-RATE> 1
<CASH> 24391
<SECURITIES> 13774
<RECEIVABLES> 34604
<ALLOWANCES> 0
<INVENTORY> 26510
<CURRENT-ASSETS> 103676
<PP&E> 52614
<DEPRECIATION> 22891
<TOTAL-ASSETS> 149087
<CURRENT-LIABILITIES> 27109
<BONDS> 2844
0
0
<COMMON> 9362
<OTHER-SE> 103303
<TOTAL-LIABILITY-AND-EQUITY> 149087
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<CGS> 37399
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<NET-INCOME> 3281
<EPS-PRIMARY> .36
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