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 the quarter ended August 31, 1994
Commission file number 0-6953
LILLY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-0471010
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
733 SOUTH WEST STREET
INDIANAPOLIS, INDIANA 46225
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(317) 687-6700
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 periods 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
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date.
Number of shares outstanding at September 30, 1994:
Class A Common 22,377,000
Class B Common 325,000
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
August 31 August 31
1994 1993
______________________
<S> <C> <C>
Net sales $86,639 $82,807
Costs and expenses:
Cost of products sold 55,691 56,076
Selling, administrative and general 15,247 14,866
Research and development 3,199 3,374
------- -------
74,137 74,316
------- -------
OPERATING INCOME 12,502 8,491
Other income (expense):
Interest income and sundry 117 99
Interest expense (769) (657)
------- -------
(652) (558)
------- -------
INCOME BEFORE INCOME TAXES 11,850 7,933
Income Taxes 4,877 3,332
------- -------
NET INCOME $ 6,973 $ 4,601
======= =======
Cash dividends per share--Note B $ 0.070 $ 0.060
======= =======
Average number of shares and equivalent shares
of capital stock outstanding--Note B 23,250 23,025
======= =======
Net income per share--Note B $ 0.30 $ 0.20
======= =======
<PAGE>
<FN>
See notes to consolidated condensed financial statements.
</TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
August 31 August 31
1994 1993
______________________
<S> <C> <C>
Net sales $245,131 $203,156
Costs and expenses:
Cost of products sold 160,218 135,176
Selling, administrative and general 45,953 38,974
Research and development 9,821 8,952
------- -------
215,992 183,102
------- -------
OPERATING INCOME 29,139 20,054
Other income (expense):
Interest income and sundry 205 248
Interest expense (2,102) (1,344)
------- -------
(1,897) (1,096)
------- -------
INCOME BEFORE INCOME TAXES 27,242 18,958
Income Taxes 11,342 7,963
------- -------
NET INCOME $15,900 $10,995
======= =======
Cash dividends per share--Note B $ 0.197 $ 0.178
======= =======
Average number of shares and equivalent shares
of capital stock outstanding--Note B 23,250 22,950
======= =======
Net income per share--Note B $ 0.68 $ 0.48
======= =======
<FN>
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands)
<TABLE>
<CAPTION>
August 31 November 30
1994 1993
________________________
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 24,255 $ 7,384
Short-term investments 75 75
Accounts receivable, less allowances
for doubtful accounts (8/31/94, $1,802;
11/30/93, $1,353) 42,901 $ 39,936
Inventories--Note C 22,578 22,727
Prepaid expenses 319 99
-------- --------
TOTAL CURRENT ASSETS 90,128 70,221
OTHER ASSETS 7,327 7,576
INTANGIBLE ASSETS 52,051 55,471
PROPERTY AND EQUIPMENT
Land 4,045 3,910
Buildings and equipment 70,484 65,895
Allowances for depreciation (deduction) (39,183) (36,029)
-------- --------
35,346 33,776
-------- --------
$184,852 $167,044
======== ========
<FN>
See notes to consolidated condensed financial statements.
</TABLE>
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands)
<TABLE>
<CAPTION>
August 31 November 30
1994 1993
________________________
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 27,102 $ 24,872
Salaries, wages, commissions and
related items 8,219 7,341
State and local taxes 1,105 273
Federal income taxes 3,346 985
Current portion of long-term debt 11,441 3,480
-------- --------
TOTAL CURRENT LIABILITIES 51,213 36,951
LONG TERM DEBT 30,802 40,621
OTHER LIABILITIES 9,489 8,344
SHAREHOLDERS' EQUITY
Capital stock:
Class A (limited voting) 14,818 14,705
Class B (voting) 300 300
Additional capital 71,634 70,635
Retained earnings 32,411 20,970
Currency translation adjustments 169 105
Cost of capital stock in treasury
(deduction) (25,984) (25,587)
-------- --------
93,348 81,128
-------- --------
$184,852 $167,044
======== ========
<FN>
See notes to consolidated condensed financial statements
</TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
August 31 August 31
1994 1993
________________________
<S> <C> <C>
<PAGE>
OPERATING ACTIVITIES
Net income $15,900 $10,995
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,627 2,973
Amortization of intangibles 3,254 2,304
Deferred income taxes (139) (546)
Changes in operating assets and liabilities
net of effects from acquired business:
Accounts receivable (2,965) (13,837)
Inventories 149 516
Prepaid expenses (220) (41)
Accounts payable and accrued expenses 3,940 10,593
Income taxes 2,361 (363)
Sundry 624 (1,235)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 26,531 11,359
INVESTING ACTIVITIES
Purchases of property and equipment (5,367) (3,814)
Payment for acquired business 0 (37,500)
Proceeds from maturities of short-term investments 0 2,417
Sundry 2,033 (499)
------- -------
NET CASH USED BY INVESTING ACTIVITIES (3,334) (39,396)
FINANCING ACTIVITIES
Cash dividends paid (4,459) (3,978)
Proceeds from short-term and long-term borrowings 0 39,000
Principal payments on short-term and
long-term borrowings (1,867) (6,286)
------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (6,326) 28,736
------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 16,871 699
Cash and cash equivalents at beginning of year 7,384 8,334
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $24,255 $ 9,033
======= ========
<FN>
See notes to consolidated condensed financial statements.
</TABLE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
AUGUST 31, 1994
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of
<PAGE>
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. For further information, refer to the
consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended
November 30, 1993.
NOTE B--SHARE AND PER SHARE AMOUNTS
Share and per share amounts have been adjusted to reflect the
three-for-two stock split distributed June 1, 1994. Equivalent
shares of capital stock represent additional shares assumed
issued upon exercise of stock options.
NOTE C--INVENTORIES
The principal inventory classifications are summarized as follows
(in thousands):
August 31 November 30
1994 1993
Finished products $ 13,162 $ 12,971
Raw materials 17,879 17,619
-------- --------
31,041 30,590
Less adjustment of certain
inventories to last in,
first out (LIFO) basis 8,463 7,863
-------- --------
$ 22,578 $ 22,727
======== ========
The Company uses the LIFO method in inventory valuation for
approximately 85% of inventories where an actual valuation can be
made only at the end of each year based on the inventory levels
and costs at that time. Accordingly, interim LIFO calculations
must necessarily be based on management's estimates of expected
year-end inventory levels and costs. Since these are subject to
many forces beyond management's control, interim results are
subject to the final year-end LIFO inventory valuation. The
Company estimates the annual adjustment for LIFO and allocates it
to quarters based on actual inflation experienced in a quarter as
it relates to anticipated inflation for the year.
NOTE D--ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
NO. 106
During the first quarter of fiscal 1994, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions". SFAS No. 106 requires accrual accounting for the
expected cost of providing postretirement health care benefits to
retirees. Prior to fiscal 1994, the Company recognized the cost
of these benefits as claims were paid. Expense recognized under
SFAS No. 106 is not materially different from expense recognized
prior to 1994 using the cash basis.
The Company provides health care benefits to retirees meeting
certain eligibility requirements. Eligibility is based on age
and years of service. Retirees participate in the cost of these
benefits through contributions and other cost sharing features
such as deductibles and coinsurance, which are subject to
periodic adjustment by the Company. Funding of benefits is
provided by the Company and retiree contributions.
The accumulated postretirement benefit obligation resulting from
the adoption of SFAS No. 106 is $4.8 million ($2.8 million net of
tax) and is being amortized over 20 years. The accumulated
postretirement benefit obligation was determined using a discount
rate of 8.5%.
The health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 12% in 1994 and is assumed
to decrease gradually to 6% in the year 2000 and finally to 5.5%
in the year 2019 and thereafter. A one percent increase in the
health care cost trend rate would increase the accumulated
postretirement benefit obligation by approximately 3%.
NOTE E--ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
NO. 109
During the first quarter of fiscal 1994, the Company adopted
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". The effect of adopting this accounting
standard was not material.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Financial results for the third fiscal quarter ended August 31,
1994 were all-time records in sales and earnings and marked the
twelfth consecutive quarter of improved results over the prior
year. Quarterly sales increased to $86.6 million compared to
$82.8 million for last year's same quarter. Net income for the
third quarter was up by 52% to $7.0 million, at 30 cents per
share, over last year's $4.6 million and 20 cents per share.
Sales and earnings for the nine months ended August 31, 1994 were
also at all-time record high levels with sales at $245.1 million,
up 21% over last year's $203.2 million. Net income for the nine-
month period was up 45% to $15.9 million, at 68 cents per share,
compared with $11.0 million and 48 cents per share for last year.
Sales to our major markets continue to grow reflecting strong
industrial output resulting from an improving economy. Profit
margins have also improved due mainly to increased business
volume and effective expense control.
In order to support our growing major markets in the midwestern
and southeastern United States, Lilly is exploring various
potential manufacturing sites in Kentucky and Tennessee. The new
manufacturing location is necessary to support Lilly's growth and
expanding customer base in these markets and enable Lilly to
deliver product more responsively and at lower costs.
The Board of Directors approved the 223rd consecutive quarterly
cash dividend on September 30, 1994. The 7 cents per share
dividend will be paid January 2, 1995 to shareholders of record
on December 12, 1994.
We expect our financial performance to show continued improvement
during the fourth quarter. Therefore, our outlook for fiscal
1994 is for a record high year.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibit is included herein:
EXHIBIT 11 Computation of Earnings Per Share
EXHIBIT 27 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the
three months ended August 31, 1994.
Note: All other item numbers under this section are not
applicable.
<PAGE>
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.
LILLY INDUSTRIES, INC.
(Registrant)
October 13, 1994
/s/ Douglas W. Huemme
Douglas W. Huemme
Chairman, President and
Chief Executive Officer
PRINCIPAL FINANCIAL OFFICER
October 13, 1994
/s/ Roman J. Klusas
Roman J. Klusas
Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT 11
<TABLE>
<CAPTION>
COMPUTATION OF EARNINGS PER SHARE
LILLY INDUSTRIES, INC.
(In thousands, except per share data)
Three Months Ended Nine Months Ended
August 31 August 31 August 31 August 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding--
Note A 22,690 22,430 22,650 22,350
Net income $ 6,973 $ 4,601 $15,900 $10,995
Net income per common share--
Note A $ 0.31 $ 0.21 $ 0.70 $ 0.49
======= ======= ======= =======
Average shares outstanding--
Note A 22,690 22,430 22,650 22,350
Dilutive stock options based
on treasury stock method
using average market
price--Note A 560 595 600 560
------- ------- ------- -------
23,250 23,025 23,250 22,910
Net income $ 6,973 $ 4,601 $15,900 $10,995
Net income per common
and common equivalent
share--Note A $ 0.30 $ 0.20 $ 0.68 $ 0.48
======= ======= ======= =======
Fully diluted:
Average shares outstanding--
Note A 22,690 22,430 22,650 22,350
Dilutive stock options based
on the treasury stock
method using the higher
of quarter end or average
market price--Note A 560 595 600 600
------- ------- ------- -------
23,250 23,025 23,250 22,950
Net income $ 6,973 $ 4,601 $15,900 $10,995
Net income per common
and common equivalent
share--Note A $ 0.30 $ 0.20 $ 0.68 $ 0.48
======= ======= ======= =======
<PAGE>
<FN>
Note A--Share and per share amounts have been adjusted to reflect the
three-for-two stock split distributed June 1, 1994.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CAPTION>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED CONDENSED BALANCE SHEET OF LILLY INDUSTRIES, INC. AS AT AUGUST
31, 1994 AND THE CONSOLIDATED CONDENSED STATEMENT OF INCOME OF LILLY
INDUSTRIES, INC. FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-END> AUG-31-1994
<CASH> 24,255
<SECURITIES> 75
<RECEIVABLES> 44,703
<ALLOWANCES> ( 1,802)
<INVENTORY> 22,578
<CURRENT-ASSETS> 90,128
<PP&E> 74,529
<DEPRECIATION> ( 39,183)
<TOTAL-ASSETS> 184,852
<CURRENT-LIABILITIES> 51,213
<BONDS> 0
0
0
<COMMON> 86,752
<OTHER-SE> 6,596
<TOTAL-LIABILITY-AND-EQUITY> 184,852
<SALES> 245,131
<TOTAL-REVENUES> 245,131
<CGS> 160,218
<TOTAL-COSTS> 215,992
<OTHER-EXPENSES> ( 205)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,102
<INCOME-PRETAX> 27,242
<INCOME-TAX> 11,342
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,900
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
</TABLE>
