<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, 1997
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 7, 1997, 8,524,371 shares of the registrant's Common Stock, $1 par
value, were outstanding.
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FORM 10-Q
LeaRonal, Inc. and Subsidiaries
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
May 31, 1997 (Unaudited) and February 28, 1997 3
Condensed Consolidated Statements of Income for the
Three Months Ended May 31, 1997 and 1996 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended May 31, 1997 and 1996 (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
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FORM 10-Q
LeaRonal, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, 1997 Feb. 28, 1997
------------ -------------
(Unaudited) (Note)
ASSETS (in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 22,928 $ 18,117
Investments available-for-sale 3,468 7,904
Investments held-to-maturity 6,829 6,596
Receivables, less allowances 46,271 40,944
Inventories 26,765 25,622
Deferred income taxes 1,213 1,111
Other current assets 3,618 2,940
-------- --------
TOTAL CURRENT ASSETS 111,092 103,234
Investments in unconsolidated affiliates 9,894 9,372
Property, plant and equipment 61,760 58,823
Less allowance for depreciation (26,482) (25,059)
-------- --------
35,278 33,764
Patents at cost, less amortization 543 521
Other assets 4,329 4,374
-------- --------
TOTAL ASSETS $161,136 $151,265
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Dividend payable $ 1,623 $ --
Accounts payable 17,170 12,541
Accrued expenses and other liabilities 7,886 8,394
Income taxes 7,531 5,621
Current portion of long-term debt 821 855
-------- --------
TOTAL CURRENT LIABILITIES 35,031 27,411
Long-term debt, less current portion 2,954 3,152
Deferred income taxes 1,865 2,157
Minority interests 6,088 5,501
Stockholders' Equity:
Common stock, par value $1 per share - authorized
15,000,000 shares, issued 9,361,550 shares
including 823,679 shares at May 31, 1997 and
726,820 shares at February 28, 1997 held in treasury 9,362 9,362
Additional paid-in capital 9,530 9,527
Retained earnings 105,153 101,997
Unrealized holding gains on investments 339 321
Cost of common stock in treasury (14,790) (12,569)
Foreign currency translation adjustment 5,604 4,406
-------- --------
TOTAL STOCKHOLDERS' EQUITY 115,198 113,044
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $161,136 $151,265
======== ========
</TABLE>
- --------------------------------
Note: The balance sheet at February 28, 1997 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
--------------------
1997 1996
---- ----
(in thousands - except share data)
<S> <C> <C>
Net sales $ 59,741 $ 51,783
Interest income 347 360
Other income - net 723 668
---------- ----------
60,811 52,811
Costs and expenses:
Cost of sales 42,870 37,399
Selling, general and administrative 9,534 9,204
Research and development 936 948
Interest 136 97
Minority interests 519 276
---------- ----------
Total costs and expenses 53,995 47,924
Income before income taxes 6,816 4,887
Income taxes 2,037 1,606
---------- ----------
NET INCOME $ 4,779 $ 3,281
========== ==========
Weighted average number of shares
and common share equivalents outstanding 8,673,038 9,017,707
Net income per common share $ .55 $ .36
========== ==========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
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FORM 10-Q
LeaRonal, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 31
------------------
1997 1996
---- ----
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,779 $ 3,281
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,289 1,020
Provision for bad debts 160 259
Equity in earnings of unconsolidated affiliates (255) (57)
Deferred income taxes (218) (30)
Minority interests 519 276
(Gain) loss on sale of investments available-for-sale (36) 2
Changes in operating assets and liabilities:
Receivables (4,904) 995
Inventories (1,063) (2,250)
Other current assets (621) (1,376)
Other receivables (249) (70)
Accounts payable 4,510 300
Accrued expenses and other liabilities (638) 408
Income taxes payable 1,587 907
Other 292 (106)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,152 3,559
INVESTING ACTIVITIES
Purchases of property, plant and equipment (net)
and patents (2,715) (1,795)
Proceeds from sales of investments available-for-sale 4,653 542
Purchases of investments available-for-sale (74) (154)
Purchases of investments held-to-maturity (4,000) (4,090)
Redemption of investments held-to-maturity 4,000 818
Purchases of minority interests (741)
Other (72)
------- -------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 1,864 (5,492)
</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
-------------------
1997 1996
---- ----
(in thousands)
<S> <C> <C>
FINANCING ACTIVITIES
Purchases of treasury stock $(2,279)
Payments on debt obligations (230) $ (287)
Proceeds from exercise of stock options 62 176
------- -------
NET CASH USED IN FINANCING ACTIVITIES (2,447) (111)
Effect of exchange rate changes on cash and
cash equivalents 242 (276)
------- -------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 4,811 (2,320)
Cash and cash equivalents at beginning of the year 18,117 26,711
------- -------
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $22,928 $24,391
======= =======
SUPPLEMENTAL DISCLOSURES Cash paid during the period for:
Interest $ 115 $ 114
Income taxes 654 974
</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, 1997 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 28, 1997 annual report to shareholders. The results of operations
for the period ended May 31, 1997 are not necessarily indicative of the
operating results for the full year.
NOTE B - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
May 31, 1997 Feb. 28, 1997
------------ -------------
<S> <C> <C>
Raw materials $14,586,000 $13,937,000
Finished goods 12,179,000 11,685,000
----------- -----------
$26,765,000 $25,622,000
=========== ===========
</TABLE>
Domestic gold and silver inventories as of May 31, 1997 and 1996 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, 1997 and February
28, 1997 would have been $3,066,000 and $3,425,000 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>
1997 1996
---- ----
<S> <C> <C>
Dividends declared May May
Dividends paid June June
Dividends per common share $ 0.19 $ 0.18
Number of outstanding shares
on which dividend was declared 8,541,571 8,828,085
Amount of dividends $1,622,898 $1,589,000
</TABLE>
NOTE D - OTHER INCOME
Other income consists of the following for the three months ended May 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Royalty and commission income $ 488,000 $417,000
Equity in earnings of
unconsolidated affiliates 255,000 57,000
Foreign currency (losses) gains (124,000) 1,000
Investment income and other 104,000 193,000
--------- --------
$ 723,000 $668,000
========= ========
</TABLE>
NOTE E - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share," which is required to be adopted on February 28, 1998.
At that time, the Company will be required to change the method currently used
to compute earnings per share and restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement 128 on the calculation
of earnings per share of the Company is not expected to be material.
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FORM 10-Q
LeaRonal, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three months ended May 31, 1997 and May 31, 1996
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 $6,073,000 or 23% to $32,023,000 in the May 1997 quarter, from
$25,950,000 in the May 1996 quarter. Process sales increased primarily in Asia
and the United States. Precious metal content and other sales totaled
$27,718,000 in the May 1997 quarter, an increase of $1,885,000 or 7% from
$25,833,000 in the May 1996 quarter primarily due to increased precious metal
content sales volume in the United States. The average gold price per troy ounce
for the May 1997 and May 1996 quarters were $347 and $394, respectively.
Cost of sales increased $5,471,000 in the May 1997 quarter. The increase was
principally due to increased process sales, and to a lesser extent, increased
precious metal and other sales. The May 1997 quarter reflects increased gross
profits of $2,487,000 or 17%, as well as an increase in the Company's overall
gross profit percentage from 27.8% to 28.2%, 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 $330,000 or 4% in the
May 1997 quarter. The increase occurred in Asia due to increased sales and
technical service costs to support the Company's sales growth.
Other income includes royalty and commission income, earnings of
unconsolidated affiliates, foreign currency gains and losses, and investment
income. Other income increased $55,000 in the May 1997 quarter.
The effective income tax rate decreased in the May 1997 quarter to 30% from
33% in the May 1996 quarter. This is principally due to an increase in earnings
at the Company's Hong Kong and Swiss subsidiaries which are taxed at lower rates
than the Company's other operations.
Net income increased $1,498,000 or 46% in the May 1997 quarter, primarily due
to increased gross profits from increased process sales and lower effective
income tax rates.
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FORM 10-Q
LeaRonal, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
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 1997 quarter decreased by $244,000 or 7% from
the prior year primarily 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, 1997, the Company had working capital of $76,061,000 and current
assets of $111,092,000 including $33,225,000 in cash, cash equivalents, and
short term investments. During the May 1997 quarter, the Company purchased
101,100 shares of its stock at a cost of $2,279,000. The Company believes its
existing working capital and borrowing capacity, coupled with the funds
generated from operations will be sufficient to fund its anticipated capital
expenditures, stock buyback program and cash dividend requirements in fiscal
1998.
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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, 1997.
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: July 11, 1997
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 22928
<SECURITIES> 10297
<RECEIVABLES> 46271
<ALLOWANCES> 0
<INVENTORY> 26765
<CURRENT-ASSETS> 111092
<PP&E> 61760
<DEPRECIATION> 26482
<TOTAL-ASSETS> 161136
<CURRENT-LIABILITIES> 35031
<BONDS> 0
0
0
<COMMON> 9362
<OTHER-SE> 105836
<TOTAL-LIABILITY-AND-EQUITY> 161136
<SALES> 59741
<TOTAL-REVENUES> 60811
<CGS> 42870
<TOTAL-COSTS> 53340
<OTHER-EXPENSES> 519
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136
<INCOME-PRETAX> 6816
<INCOME-TAX> 2037
<INCOME-CONTINUING> 4779
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4779
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
