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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-7608
LOCTITE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 06-0701067
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
10 COLUMBUS BOULEVARD, HARTFORD, CONNECTICUT 06106
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(203) 520-5000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 / /
The number of shares of common stock outstanding as of June 30, 1994, was
35,369,670, $.01 par value.
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE NO.
---------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Earnings and Retained Earnings for the
quarters ended June 30, 1994 and 1993, and the six-month periods
ended June 30, 1994 and 1993........................................ 2
Consolidated Statement of Cash Flows for the six-month periods ended
June 30, 1994 and 1993.............................................. 3
Consolidated Balance Sheet at June 30, 1994 and December 31, 1993..... 4-5
Notes to Consolidated Financial Statements............................ 6
Item 2. Management's Discussion and Analysis of Results of Operations and
Changes in Financial Condition...................................... 7-12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders................... 13
Item 6. Listing of Exhibits and Reports on Form 8-K........................... 13
Signatures...................................................................... 14
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LOCTITE CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
AND RETAINED EARNINGS
(Unaudited)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1994 1993 1994 1993
---------------------- ----------------------
<S> <C> <C> <C> <C>
Net sales..................................... $177,808 $158,125 $337,690 $307,226
Cost of sales................................. 69,145 63,613 131,220 121,729
-------- -------- -------- --------
Gross margin.................................. 108,663 94,512 206,470 185,497
-------- -------- -------- --------
Research & development expense................ 6,892 6,749 13,451 13,223
Selling, general and administrative
expenses.................................... 72,566 62,465 136,603 120,688
-------- -------- -------- --------
79,458 69,214 150,054 133,911
-------- -------- -------- --------
Earnings from operations...................... 29,205 25,298 56,416 51,586
Investment income............................. 1,191 2,066 3,409 4,079
Interest expense.............................. (1,473) (1,671) (2,880) (2,169)
Other expense................................. (134) (129) (1,068) (444)
Foreign exchange loss......................... (1,851) (2,305) (4,533) (3,574)
-------- -------- -------- --------
Earnings before income taxes.................. 26,938 23,259 51,344 49,478
Provisions for income taxes................... 6,734 5,815 12,836 12,370
-------- -------- -------- --------
Net earnings.................................. $ 20,204 $ 17,444 38,508 37,108
======== ========
Retained earnings, beginning of period........ 342,441 348,938
Less:
Cash dividends declared (1994 -- $.40 and
1993 -- $.39)............................... 14,156 13,970
Stock repurchases............................. 4,351 43,131
-------- --------
Retained earnings, end of period.............. $362,442 $328,945
======== ========
Earnings per share............................ $ 0.57 $ 0.50 $ 1.09 $ 1.04
======== ======== ======== ========
Average number of shares outstanding (000s)... 35,378 35,374 35,376 35,799
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
2
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LOCTITE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1994 1993
------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings......................................................... $38,508 $37,108
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization................................... 13,917 12,586
Deferred income taxes........................................... 429 206
(Gain) loss on sale of fixed assets............................. 750 (106)
Provision for losses -- accounts receivable..................... 1,282 722
Undistributed earnings of affiliates............................ (2) 182
Change in:
Trade and other receivables..................................... (16,567) (19,868)
Inventory....................................................... 810 (1,302)
Prepaid and other current assets................................ 220 (5,162)
Accounts payable and accrued expenses........................... (10,184) (4,434)
Interest payable................................................ (355) 526
Taxes payable................................................... (6,463) 2,514
Other................................................................ 4,050 4,506
------- -------
Cash provided by operating activities..................................... 26,395 27,478
------- -------
Cash flows from investing activities:
Additions to property, plant and equipment........................... (24,463) (16,576)
Dispositions of property, plant and equipment........................ 438 776
Goodwill & intangible portion of acquisitions........................ (14,943) (5,183)
Change in short-term investments..................................... 16,028 (13,866)
Decrease in long-term investments.................................... 221 14
------- -------
Cash used in investing activities......................................... (22,719) (34,835)
------- -------
Cash flows from financing activities:
Stock repurchases.................................................... (4,289) (45,463)
Issuances of common stock............................................ 3,077 2,253
Dividends paid....................................................... (14,156) (13,823)
Increase (decrease) in short-term debt............................... (7,345) 54,610
Increase (decrease) in long-term debt................................ (97) 1,076
------- -------
Cash used in financing activities......................................... (22,810) (1,347)
------- -------
Effect of exchange rate changes on cash................................... 28 (1,266)
------- -------
Decrease in cash and cash equivalents..................................... (19,106) (9,970)
Cash and cash equivalents:
January 1............................................................ 44,552 29,889
------- -------
June 30.............................................................. $25,446 $19,919
======= =======
Interest paid............................................................. $ 3,741 $ 2,493
Taxes paid (net of refunds)............................................... $17,840 $10,652
</TABLE>
The accompanying notes are an integral part of these statements.
3
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LOCTITE CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
-------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 25,446 $ 44,552
Time and certificates of deposit................................ 38,830 51,499
Marketable securities (approximates market)..................... 86 79
Accounts and notes receivable (less allowances of $5,565 and
$4,659)........................................................ 141,207 119,316
Other receivables............................................... 15,448 12,874
Inventories:
Finished goods............................................. 42,840 43,248
Work in progress........................................... 21,183 18,413
Raw materials.............................................. 21,521 22,020
-------- --------
85,544 83,681
Deferred income tax benefit..................................... 5,040 5,473
Prepaid expenses and other current assets....................... 11,526 11,406
-------- --------
Total current assets................................................. 323,127 328,880
-------- --------
Investments:
Marketable securities (approximates market)..................... 5 126
Venture capital investments..................................... 4,885 4,978
-------- --------
4,890 5,104
-------- --------
Property, plant and equipment:
Land and land improvements...................................... 14,791 12,674
Buildings....................................................... 89,785 84,096
Machinery and equipment......................................... 167,831 157,593
Construction in progress........................................ 36,835 26,227
-------- --------
309,242 280,590
Less -- accumulated depreciation................................ 126,567 116,077
-------- --------
182,675 164,513
Deferred income tax benefit.......................................... 7,497 7,429
Other assets......................................................... 20,208 17,205
Excess of purchase price over fair value of net assets of acquired
companies (net of amortization of $15,999 and $14,638)............. 91,417 80,096
-------- --------
Total assets......................................................... $629,814 $603,227
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
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<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
-------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt................................................. $ 96,121 $103,047
Long-term debt -- current maturities............................ 11,402 11,732
Accounts payable................................................ 29,192 32,776
Accrued salaries, wages and other compensation.................. 16,904 16,309
Accrued taxes, other than income taxes.......................... 6,191 5,886
Accrued income taxes............................................ 7,755 13,798
Dividends payable............................................... 7,079 7,079
Accrued pension and retirement benefits......................... 2,809 6,620
Accrued insurance............................................... 6,475 5,936
Accrued liabilities -- other.................................... 19,794 12,917
-------- --------
Total current liabilities............................................ 203,722 216,100
-------- --------
Long-term liabilities:
Long-term debt.................................................. 3,098 3,028
Retirement and postretirement obligations....................... 12,520 6,222
Other........................................................... 16,161 19,396
-------- --------
31,779 28,646
-------- --------
Stockholders' equity:
Common Stock, $.01 par value:................................... 42,863 39,922
Authorized 100,000,000 shares; issued 35,369,670
shares -- June 30, 1994 and 35,369,657 shares -- December
31, 1993
Retained earnings............................................... 362,442 342,441
Foreign currency translation adjustment......................... (8,806) (21,892)
Investment valuation allowance.................................. (916) (660)
Adjustment for minimum pension liability........................ (1,270) (1,330)
-------- --------
Total stockholders' equity........................................... 394,313 358,481
-------- --------
Total liabilities and stockholders' equity........................... $629,814 $603,227
======== ========
</TABLE>
5
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LOCTITE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated 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 Article
10 of 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 considered
necessary for a fair presentation have been included in the accompanying
unaudited financial statements. All such adjustments are of a normal recurring
nature.
The notes to the consolidated financial statements contained in Loctite
Corporation's December 31, 1993 Annual Report on Form 10-K should be read in
conjunction with the consolidated financial statements and notes to consolidated
financial statements contained herein.
NOTE 2 -- POSTEMPLOYMENT BENEFITS
During the first quarter of 1994, the Company adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (SFAS No. 112). The statement requires the recognition
of the cost of postemployment benefits (after employment but before retirement)
on an accrual basis. In prior years, the Company expensed the cost of such
benefits when paid. The effect of adoption in 1994 for postemployment benefits
under SFAS No. 112 is not material to the Company.
NOTE 3 -- ACQUISITIONS
During the first quarter of 1994, the Company completed the acquisition of
100% of the capital stock of Plastic Padding Holdings Limited, a producer of
automotive aftermarket chemical products with distribution networks in the U.K.,
Ireland, and Scandinavia. The acquisition was accounted for as a purchase with
the results of Plastic Padding included from the effective date of the
acquisition. In April 1994 the Company also completed the purchase of the
remaining 49% interest in its subsidiary in Thailand, bringing the Company's
total ownership to 100%.
The cost of these acquisitions is not material to the Company for purposes
of pro forma presentation.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION
OPERATING RESULTS
QUARTER ENDED JUNE 30, 1994 VERSUS QUARTER ENDED JUNE 30, 1993
Loctite management primarily measures the results of the Company based on
businesses and regions. Trade sales between regions are reflected as sales of
the region servicing the customer.
Net sales for the quarters ended June 30, 1994 and June 30, 1993 were
$177.8 million and $158.1 million, respectively. A summary (in millions of
dollars) is as follows:
<TABLE>
<CAPTION>
QUARTER QUARTER LOCAL
ENDED ENDED DOLLAR CURRENCY
6/30/94 6/30/93 % GROWTH % GROWTH
------- ------- -------- --------
<S> <C> <C> <C> <C>
SALES:
North American Region............................. $ 76.7 $ 70.1 10% 10%
European Region................................... 66.2 56.8 16 22
Asia/Pacific Region............................... 18.3 15.5 17 17
Latin American Region............................. 13.8 12.9 7 9
Luminescent Systems............................... 2.8 2.8 -- 1
------ ------ --- ---
TOTAL SALES.................................. $177.8 $158.1 12% 15%
====== ====== === ===
Industrial Business:
North American Region............................. $ 40.3 $ 36.0 12% 13%
European Region................................... 33.9 29.8 14 18
Asia/Pacific Region............................... 16.1 13.7 18 17
Latin American Region............................. 4.5 4.6 (3) (2)
Luminescent Systems............................... 2.8 2.8 -- 1
------ ------ --- ---
Total Industrial Business Sales.............. $ 97.6 $ 86.9 12% 14%
====== ====== === ===
Automotive Aftermarket Business:
North American Region............................. $ 16.8 $ 16.9 --% 1%
European Region (excluding Plastic Padding
Holdings)....................................... 8.1 7.9 4 8
Plastic Padding Holdings.......................... 3.4 -- -- --
Asia/Pacific Region............................... 1.8 1.3 30 28
Latin American Region............................. 1.9 1.9 3 7
------ ------ --- ---
Total Automotive Aftermarket Business
Sales...................................... $ 32.0 $ 28.0 14% 17%
====== ====== === ===
Retail (Consumer) Business:
North American Region............................. $ 19.6 $ 17.2 14% 14%
European Region (excluding Plastic Padding
Holdings)....................................... 19.5 19.1 2 8
Plastic Padding Holdings.......................... 1.3 -- -- --
Asia/Pacific Region............................... .4 .5 (23) (19)
Latin American Region............................. 7.4 6.4 16 17
------ ------ --- ---
Total Retail (Consumer) Business Sales....... $ 48.2 $ 43.2 11% 14%
====== ====== === ===
</TABLE>
- - ---------------
Plastic Padding Holdings Limited was acquired in the first quarter of 1994.
7
<PAGE> 9
Sales in the North American region in the second quarter of 1994 increased
by 10% in U.S. dollars and local currency compared to the second quarter of
1993. The industrial business grew 12% in U.S. dollars and 13% in local currency
due to volume increases. This growth coupled with the 14% sales growth in the
retail (consumer) business more than counteracted the sluggishness in the
automotive aftermarket to achieve the 10% overall sales growth reported by the
region for the quarter.
Although the U.S. dollar had weakened substantially by June 30, its
relative overall strength for the second quarter as compared to the prior year
period reduced the local currency sales growth of 22% in the European region to
16% in U.S. dollars. Plastic Padding Holdings, acquired in the first quarter of
1994, had a positive impact on European sales of 9% in local currency and 8% in
U.S. dollars. While there was no indication of broad economic recovery in
Europe, there was more stability in the business climate, which along with the
Company's redirection of efforts to the opportunities for growth, contributed to
sales growth. The main strength of the European business came from volume
increases in core industrial products, with higher growth in Germany, Italy, and
Spain.
The Asia/Pacific region continued to report sales gains as in previous
quarters, registering a 17% increase in both local currency and in U.S. dollars.
Major industrial product lines showed increased sales volumes over the
comparable prior year quarter. Japan, for the first time in several quarters,
contributed towards this growth, showing a modest local currency increase. The
decline in China's local currency and U.S. dollar sales partially offset the
sales gains reported by the other countries in the region.
The Latin American region suffered major economic disruption during the
quarter as the Brazilian government implemented its new financial package and
introduced a new currency, and Venezuela experienced major devaluation in its
currency. Despite these problems, however, Latin American sales increased 7% in
U.S. dollars, paced by a strong retail (consumer) performance.
Luminescent Systems' sales were flat for the quarter compared to the second
quarter of 1993.
Gross margin increased from 60% of sales in the quarter ended June 30, 1993
to 61% in the quarter ended June 30, 1994. The major influence was an increase
in the European region's margin, and to a lesser degree increases in the North
American and Asia/Pacific regions' margins, partially offset by a decrease in
the Latin American region.
Operating expenses as a percentage to sales were 45% in the second quarter
of 1994 and 44% in the comparable quarter in 1993. Total operating expenses
increased 15% or $10.2 million. Plastic Padding and the subsidiary which began
operating in Norway in the third quarter of 1993 accounted for $1.8 million of
the increase. Marketing expenses increased $8.5 million or 19% to support sales
growth, with the U.S. business accounting for $3.2 million of the increase.
Administrative expenses increased $1.6 million or 10%, while research and
development expenses increased by 2%.
Investment income for the quarter ended June 30, 1994, was $0.9 million
lower than the comparable prior year period due largely to lower average
interest rates on deposits in foreign locations.
Income taxes, as a percentage of earnings before taxes, remained at 25% for
the comparable three month periods in 1994 and 1993.
8
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SIX MONTHS ENDED JUNE 30, 1994 VERSUS SIX MONTHS ENDED JUNE 30, 1993
Net sales for the six months ended June 30, 1994 and June 30, 1993 were
$337.7 million and $307.2 million, respectively. A summary (in millions of
dollars) is as follows:
<TABLE>
<CAPTION>
6 MONTHS 6 MONTHS LOCAL
ENDED ENDED DOLLAR CURRENCY
6/30/94 6/30/93 % GROWTH % GROWTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SALES:
North American Region............................ $141.1 $132.4 7% 7%
European Region.................................. 129.3 114.9 12 18
Asia/Pacific Region.............................. 33.1 27.9 19 16
Latin American Region............................ 28.7 26.0 10 12
Luminescent Systems.............................. 5.5 6.0 (8) (7)
------ ------ -- --
TOTAL SALES................................. $337.7 $307.2 10% 12%
====== ====== == ==
Industrial Business:
North American Region............................ $ 78.0 $ 70.2 11% 12%
European Region.................................. 67.0 61.1 10 14
Asia/Pacific Region.............................. 29.2 24.5 19 16
Latin American Region............................ 8.7 8.5 3 4
Luminescent Systems.............................. 5.5 6.0 (8) (7)
------ ------ -- --
Total Industrial Business Sales............. $188.4 $170.3 11% 12%
====== ====== == ==
Automotive Aftermarket Business:
North American Region............................ $ 28.5 $ 29.7 (4)% (3)%
European Region (excluding Plastic Padding
Holdings)...................................... 15.4 15.1 2 7
Plastic Padding Holdings......................... 7.0 -- -- --
Asia/Pacific Region.............................. 3.1 2.5 28 25
Latin American Region............................ 4.0 4.0 (1) 2
------ ------ -- --
Total Automotive Aftermarket Business
Sales..................................... $ 58.0 $ 51.3 13% 15%
====== ====== == ==
Retail (Consumer) Business:
North American Region............................ $ 34.6 $ 32.5 6% 7%
European Region (excluding Plastic Padding
Holdings)...................................... 38.7 38.7 -- 7
Plastic Padding Holdings......................... 1.2 -- -- --
Asia/Pacific Region.............................. .8 .9 (8) (6)
Latin American Region............................ 16.0 13.5 18 20
------ ------ -- --
Total Retail (Consumer) Business Sales...... $ 91.3 $ 85.6 7% 10%
====== ====== == ==
</TABLE>
- - ---------------
Plastic Padding Holdings Limited was acquired in the first quarter of 1994.
9
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The North American region reported sales gains of 7% in both U.S. dollars
and local currency for the first six months of 1994 compared to the first six
months of 1993. The strong growth of 11% in U.S. dollars and 12% in local
currency in the industrial business was attributable primarily to volume
increases in core product lines. While the retail (consumer) business exhibited
moderate growth, the automotive aftermarket business reported decreases in
sales.
Total sales in the European region increased by 12% in U.S. dollars and 18%
in local currency in the first half of 1994 compared to the first half of 1993.
The relative strength of the U.S. dollar throughout the first six months of 1994
as compared to 1993 continued to negatively impact sales. Plastic Padding
Holdings' sales accounted for 7% U.S. dollar and 8% local currency growth in the
European region. Strong sales in the industrial business, in part due to
broadening distribution, were primarily responsible for the remaining growth in
the European region.
Sales gains of 19% in U.S. dollars and 16% in local currency were reported
by the Asia/Pacific region. The industrial and automotive aftermarket businesses
showed strong sales gains, while the retail (consumer) business registered a
moderate decline. Most core industrial products reflected solid growth.
Latin America reported sales increases of 10% in U.S. dollars and 12% in
local currency, despite the economic uncertainty and disruption experienced in
Brazil as its government implemented a new financial package and introduced a
new currency. All countries except Venezuela, which experienced a major
devaluation of its currency, reported increased sales. Sales in the consumer
(retail) business grew primarily as a result of volume increase in consumer
cyanoacrylates.
Luminescent Systems' sales for the first half of 1994 decreased by 8% in
U.S. dollars and 7% in local currency over the same prior year period due to the
fact that the sales in the first quarter of 1993 included one time shipments for
the English Channel Tunnel project. Excluding this project, 1994 base line sales
were flat as compared to the first half of 1993.
Gross margin, as a percent of sales, increased from 60% for the first six
months of 1993 to 61% for the comparable 1994 period. The largest component of
this positive change was an increase in the European region's margin, followed
by improvement in the Asia/Pacific region's margin.
Year to date operating expenses as a percentage to sales were 44% for the
first six months of 1994 and 1993. Total operating expenses increased by 12% or
$16.1 million. Plastic Padding Holdings and the new subsidiary operating in
Norway since the third quarter of 1993 accounted for $3.3 million of the
increase. Marketing expenses increased $13.4 million or 15% to support sales
growth. Administrative expenses increased $2.5 million or 8%, while research and
development expenses increased $0.2 million or 2%.
Interest expense increased by $0.7 million in the first six months of 1994
versus the comparable prior year period due primarily to higher average
short-term debt levels in the U.S.
Investment income decreased by $0.7 million in the first six months of 1994
versus the comparable prior year period due largely to lower average interest
rates on deposits in foreign locations.
Net foreign exchange losses for the six month period ended June 30, 1994
were $1.0 million higher than the corresponding prior year period due primarily
to less favorable transaction related exchange results from the Company's Irish
manufacturing operations and, to a lesser extent, to the translation effects on
the Company's operations in Venezuela from the significant devaluation of that
currency.
Other expense for the six months ended June 30, 1994 was $0.6 million
higher than the comparable prior year period due primarily to a loss associated
with the disposition of a small operation, Canton Biomedical Division of Loctite
VSI, Inc., during the first quarter of 1994.
Income taxes, as a percentage of earnings before taxes, were 25% for the
periods ended June 30, 1994 and 1993.
10
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FINANCIAL CONDITION
Cash and cash equivalents were $25.4 million at June 30, 1994, and $44.6
million at December 31, 1993. The decrease was primarily a result of the
acquisition of Plastic Padding Holdings, additions to property, plant and
equipment, dividends paid, and increased trade receivables, partially offset by
net earnings and a reduction in short-term investments.
Accounts and notes receivable increased by $21.9 million, including a $5.1
million currency effect from December 31, 1993 to June 30, 1994. The largest
increases were reported in Europe, resulting from increased sales activity in
the second quarter of 1994 compared to the fourth quarter of 1993.
The $18.2 million increase in net property, plant and equipment including a
$5.8 million currency impact from December 31, 1993 to June 30, 1994 was
primarily a result of the construction of the Company's new facility in Rocky
Hill, Connecticut. Assets acquired in conjunction with the acquisition of
Plastic Padding Holdings also contributed to the increase.
Goodwill increased by $11.3 million from December 31, 1993 to June 30, 1994
primarily due to the acquisition of Plastic Padding Holdings during the first
quarter of 1994.
The reduction in the negative foreign currency translation adjustment in
stockholders' equity from $21.9 million at December 31, 1993 to $8.8 million at
June 30, 1994, was due to the effect of a comparatively weaker U.S. dollar on
the Company's net asset position at June 30 in its foreign subsidiaries.
ACQUISITIONS
During the first quarter of 1994, the Company acquired Plastic Padding
Holdings Limited, a producer of automotive aftermarket chemical products with
strong brand presence and established distribution networks in the U.K.,
Ireland, and Scandinavia.
In April 1994, the Company purchased the remaining 49% interest in its
subsidiary in Thailand, bringing the Company's percent of voting stock owned to
100%.
The cost of these acquisitions was not material to the Company.
SALE OF DIVISION
The Company sold a small operation, Canton Biomedical Division of Loctite
VSI, Inc., to Chemfab Corporation and recorded a loss of $0.8 million in the
first quarter of 1994.
ADOPTION OF ACCOUNTING PRONOUNCEMENT
During the first quarter of 1994, the Company adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (SFAS No. 112). The statement requires the recognition
of the cost of postemployment benefits (after employment but before retirement)
on an accrual basis. In prior years, the Company expensed the cost of such
benefits when paid. The effect of adoption in 1994 for postemployment benefits
under SFAS No. 112 is not material to the Company.
ENVIRONMENTAL MATTERS
Continuing compliance with existing federal, state, and local provisions
dealing with protection of the environment is not expected to have a material
effect upon the Company's capital expenditures, earnings, and competitive
position. As previously reported in its 1992 and 1993 Annual Reports on Form
10-K, the Company has been investigating a soil and groundwater contamination
problem at its Newington, Connecticut, facility which has probably resulted from
the failure of an underground storage tank and/or prior waste handling practices
by Company personnel, or by other prior or concurrent users of the site, and/or
adjacent sites. The tank, which formerly held chlorinated solvents, has been
removed. Consultants hired by the Company have been working closely with
officials of the Connecticut Department of Environmental Protection ("DEP") to
identify the exact source(s) of the contamination and its/their parameters. The
11
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company spent approximately $170,000 in fiscal 1993 in continuing subsurface
investigation and is nearing the completion of the investigative phase of the
work at this site. The Company expects to spend approximately $450,000 in 1994
for capital equipment to be used to implement a site remediation plan developed
by the Company's environmental consultants.
In the future it is possible that the Company may become subject to a
corrective action order under the Resource Conservation and Recovery Act
("RCRA") by the United States Environmental Protection Agency ("EPA"), which
would involve an EPA supervised remediation program. However, the Company is
continuing discussions with the EPA as to whether the EPA has jurisdiction over
the Newington site, since it is the Company's belief that it has never operated
as a treatment, storage or disposal facility for hazardous wastes, but only as a
generator of such wastes. If the EPA agrees with the Company's position, then
remediation of the Newington site would be overseen only by the DEP. If the EPA
does not agree with the Company's position and issues a corrective action order,
it is possible that the Company might have to modify some aspects of its
remediation plan. However, the Company does not believe, based on advice from
its consultants, that the EPA's approach to remediation is likely to differ in
any material way from that now being implemented by the Company. At this point
in time, the Company believes that it will be necessary to spend approximately
$20,000 per year for an indefinite period to operate and maintain the
remediation equipment which will soon be installed on site, and does not
presently anticipate any further expenditures in connection with site
remediation.
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<PAGE> 14
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On April 27, 1994, the Company held an Annual Meeting of Shareholders
(the "Annual Meeting") to elect nine directors to hold office until the next
Annual Meeting and until their successors are elected and qualified and to
confirm the appointment of the Company's independent accountants for the current
fiscal year.
(b) At the Annual Meeting, Messrs. Robert E. Ix, Frederick B. Krieble,
Kenneth W. Butterworth, Dr. Roman Dohr, Dr. Jurgen Manchot, John K. Armstrong,
Stephen J. Trachtenberg, Wallace Barnes, and David Freeman were re-elected as
directors.
(c) Set forth below is a description of each matter voted upon at the
Annual Meeting and the number of votes cast for, against or withheld, as well as
the number of abstentions and broker non-votes as to each such matter.
1. Nine directors were elected to hold office until the next Annual
Meeting and until their successors are elected and qualified. A list of
such directors, including the votes for, withheld and abstentions, and
broker non-votes, is set forth below:
<TABLE>
<CAPTION>
VOTES BROKER
FOR WITHHELD ABSTENTIONS NON-VOTES
---------- -------- ------------ ----------
<S> <C> <C> <C> <C>
Robert E. Ix....................................... 31,685,856 109,456 n/a n/a
Frederick B. Krieble............................... 31,673,431 121,881
Kenneth W. Butterworth............................. 31,686,888 108,424
Dr. Roman Dohr..................................... 31,681,305 114,007
Dr. Jurgen Manchot................................. 31,685,446 109,866
John K. Armstrong.................................. 31,684,860 110,452
Stephen J. Trachtenberg............................ 31,652,380 142,932
Wallace Barnes..................................... 31,682,377 112,935
David Freeman...................................... 31,687,361 107,951
</TABLE>
2. The appointment of Price Waterhouse as the Company's independent
accountants for the current fiscal year was confirmed. There were
31,718,235 votes cast for the proposal, and 30,770 votes against the
proposal, and 46,307 votes abstained. There were no broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -- none
(b) Reports on Form 8-K -- none
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<PAGE> 15
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.
LOCTITE CORPORATION
-------------------
(Registrant)
<TABLE>
<S> <C>
Date: August 12, 1994 By: /s/ DAVID FREEMAN
---------------------------------------------
David Freeman
President and Chief Executive Officer
Date: August 12, 1994 By: /s/ ROBERT L. ALLER
-----------------------------------------------------
Robert L. Aller, Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
</TABLE>
14
