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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 1-7608
LOCTITE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 06-0701067
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
10 COLUMBUS BOULEVARD, HARTFORD, CT 06106
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 520-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
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Common Stock, $.01 Par Value New York Stock Exchange
Pacific Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
---
The aggregate market value of voting stock held by non-affiliates of the
registrant at March 11, 1994 was $1,477,015,844. On that date, there were
35,377,625 outstanding shares of the registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the 1994 Annual Meeting of Stockholders
are incorporated by reference into Part III of this Report.
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LOCTITE CORPORATION
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INDEX TO ANNUAL REPORT
ON FORM 10-K
YEAR ENDED DECEMBER 31, 1993
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PAGE
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PART I
Item 1. Business................................................................... 1
Item 2. Properties................................................................. 4
Item 3. Legal Proceedings.......................................................... 5
Item 4. Submission of Matters to a Vote of Security Holders........................ 5
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...... 6
Item 6. Selected Financial Data.................................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 10
Item 8. Financial Statements and Supplementary Data................................ 16
Item 9. Disagreements on Accounting and Financial Disclosure....................... 38
PART III
Item 10. Directors and Executive Officers of Registrant............................. 39
Item 11. Executive Compensation..................................................... 39
Item 12. Security Ownership of Certain Beneficial Owners and Management............. 39
Item 13. Certain Relationships and Related Transactions............................. 39
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........... 40
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PART I
ITEM 1. BUSINESS
General Development of Business
Loctite Corporation (the "Company") was organized as a Connecticut
corporation in 1953 to manufacture and sell industrial adhesives and sealants.
The Company reincorporated in Delaware in 1988. Its current line of such
industrial products is sold in essentially all industrialized countries, in most
cases through wholly owned subsidiaries.
The Company expanded its activities to encompass the manufacture and sale
of adhesives, sealants, and related products through automotive aftermarket and
consumer channels, primarily by the acquisition of Permatex Company, Inc. in
1972 and Woodhill Chemical Company in 1974. The domestic businesses of these two
companies were consolidated in 1976, and in 1980 were merged into a single
division to conduct business as Loctite Corporation, Automotive and Consumer
Group.
During 1992, the Company moved ahead with its decision to consolidate the
industrial, consumer, and automotive aftermarket divisions into the North
American Region. The North American Region includes all of the Company's U.S.,
Canadian, Mexican, and Caribbean business activities, except for its
electroluminescent lamp business. All of the Company's remaining operations are
managed by its three other primary worldwide marketing regions.
Financial Information About Industry Segments
Loctite operates in one dominant segment: "adhesives, sealants, and related
products". Applicable segment information is contained in Note 3 of the Notes to
Consolidated Financial Statements.
Description of Business
The majority of the Company's adhesives, sealants, and related products are
manufactured from raw materials at the Company's plants. Selected other products
are purchased in bulk form and packaged for resale. A limited number of products
are purchased in final packaged form. The principal materials and supplies used
by the Company in the manufacture and packaging of products are generally
commercially available from several sources in both the United States and
Western Europe. While certain raw materials used by the Company, principally of
petrochemical origin, have from time to time in the past been subject to supply
shortages and price increases, the Company anticipates that adequate supplies of
such raw materials will be available over the next several years.
The basic monomer resins used in the compounding of the Company's sealants
and adhesives are manufactured in Sabana Grande, Puerto Rico; Dublin, Ireland;
and Greater Sao Paulo, Brazil. The compounding of these products and the
manufacturing of the Company's consumer and automotive aftermarket sealants and
adhesives are done at Sabana Grande, Puerto Rico; Dublin, Ireland; Kansas City,
Kansas; Warrensville Heights, Ohio; and at smaller facilities in several other
countries.
The Company manufactures and sells a broad range of chemical sealants and
adhesives having different chemical properties designed to suit a wide variety
of applications. Special and standard equipment for the application of sealants
and adhesives is also marketed by the Company, along with a variety of specialty
chemical items which complement the sealants and adhesives line. The principal
products are anaerobic sealants and adhesives and cyanoacrylate adhesives.
Anaerobics. Anaerobic sealants and adhesives remain liquid in the presence
of air but cure in the absence of air. These liquids are used to replace or
augment mechanical means for locking, sealing, retaining and structurally
bonding machine elements, providing extra strength and reliability to these
assemblies, and increasing resistance to loosening or damage caused by shock or
vibration. Anaerobic sealants and adhesives can be used without solvent removal
processes, and in many cases permit the relaxation of machining
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tolerances. The net result is less complexity in manufacture and assembly
operations for the user, frequently providing substantial overall cost savings.
Anaerobic sealants and adhesives have an indefinite shelf life and are
produced with a wide variety of chemical and physical properties to meet the
demands of their numerous industrial applications. They are used primarily on
metal surfaces in equipment such as vehicles, household appliances, electronic
equipment, and numerous other mechanical subassemblies.
Cyanoacrylates. Cyanoacrylate adhesives, known commonly as superglues,
differ from anaerobic sealants and adhesives in that they cure upon exposure to
moisture, which is present in trace amounts on the surfaces to be bonded. They
cure in times ranging from a few seconds to several minutes to form thin,
transparent bonds. Because of the speed and strength of cyanoacrylate bonds,
these materials require care in handling and use.
In general, cyanoacrylates have a shelf life in excess of one year and do
not require extensive surface preparation prior to use. Cyanoacrylate adhesives
may be used to bond metal, plastics, rubber, glass, ceramic, or wood, either
together or in combination. Typical uses include the assembly of certain rubber
and vinyl products, glass containers, auto accessories, electronic components,
and office equipment, especially where speed of cure is an important
consideration.
Other Sealants, Adhesives and Related Products. The Company manufactures
and sells other engineering adhesives, principally silicone sealants and
adhesives, as well as epoxies and modified acrylic adhesives; ultraviolet light
and primer cured sealants and coatings used in a wide variety of industrial
applications; a line of home and auto-care products for consumer use, including
high viscosity, noncuring sealants which are used principally to coat
conventional gaskets and rust converters; and other related specialty chemicals,
principally lubricating, and cleaning compounds.
Other Products. The Company manufactures and sells various amounts of
other products, primarily for household use, including metal-care products and
cleaners for tile, porcelain, wood, metal, and fiberglass surfaces, as well as
hand cleaners.
The Company began in 1985 to manufacture and sell electroluminescent lamps,
a new and versatile type of lighting device. This business expanded following
the acquisition in November, 1986 of Luminescent Systems, Inc. of Lebanon, New
Hampshire. In 1987, the Company merged its subsidiary, Loctite EL Systems, Inc.
with Luminescent Systems, Inc., which created Loctite Luminescent Systems, Inc.
Marketing
The Company sells its products in essentially all industrialized countries
of the world. Sales in North America and in Europe for the year ended December
31, 1993 accounted for approximately 44% and 36%, respectively, of consolidated
net sales. Sales in the balance of the world accounted for approximately 20% of
consolidated net sales.
The Company has three principal user markets for its products: the
industrial market, the consumer market, and the automotive aftermarket. The
Company reaches user markets through its four regional marketing organizations:
North American; European; Latin American; and Asia/Pacific. Each marketing
organization has the responsibility for developing marketing strategies and
techniques for its area of operation within the framework of overall corporate
marketing plans.
In the North American Region, sales are made under the Loctite,(R) Duro,(R)
and Permatex(R) trademarks through a network of nonexclusive distributors,
jobbers, and sales agents, some of which also sell adhesives and sealants made
by others. In addition, sales are made through a direct sales force maintained
by the Company. The Company provides close and continuing contact with its major
end users, distributors, and sales agents to provide optimum technical
assistance and support for the use of its products. The Company's consumer
products are marketed primarily through the hardware, automotive, food, and
building supply channels.
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Internationally, most sales are made primarily through subsidiaries, most
of which are wholly owned by the Company. The Company supports these
subsidiaries with marketing and/or technical assistance and support from its
offices in Greater Milan, Italy; Munich, Germany; Hong Kong; Greater Sao Paulo,
Brazil; Newington, Connecticut; Sabana Grande, Puerto Rico; and Dublin, Ireland.
The Company's business, on a consolidated basis, has not been subject to
significant seasonal trends. However, individual market channels do show some
degree of seasonality, particularly with the increasing trend toward the
practice of summer plant shutdowns.
The backlog of firm orders as of December 31, 1993 was $19,018,000 versus
$19,737,000 as of December 31, 1992. The current backlog is expected to be
substantially filled within the current fiscal year.
Government contracts and purchases do not contribute materially to the
Company's consolidated net sales and net earnings.
No single customer of the Company accounted for 10 percent or more of
consolidated net sales.
Research and Development
Research and development expenditures were $26,700,000 for the year ended
December 31, 1993, $26,152,000 for the year ended December 31, 1992, and
$22,498,000 for the year ended December 31, 1991.
Competition
Competitive products, including anaerobic sealants and adhesives and
cyanoacrylate adhesives, are being marketed in countries where the Company
conducts business. The Company has patent protection on various aspects of its
sealants and adhesives in the United States and, to a lesser extent, in a number
of foreign countries. Nearly all competitive anaerobic sealants and adhesives
are sold at lower prices than the Company's products and, in some instances, at
substantially lower prices. Although the Company has selectively reduced prices
to meet competition from time to time, it believes that attention to a superior
quality of product, technical service and customer needs has generally enabled
it to maintain its market position without significant price reductions.
Other liquid sealants and adhesives are available, many of which are
produced by companies which are larger and have substantially greater financial
resources than the Company. Alternatives to liquid sealants and adhesives, such
as gaskets, lock washers, and self-locking nuts, are also available and compete
with the Company's products.
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 report on Form 10-K, the Company is
presently 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 historically poor 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 of the contamination and its parameters. The Company
spent approximately $170,000 in fiscal 1993 in continuing evaluation and initial
remediation efforts. Approximately $200,000 is expected to be spent in 1994.
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
currently discussing with the EPA 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
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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. Due to the
potential differences in remediation approaches which could emerge between the
EPA and the DEP, the Company does not intend to begin a remediation program
until the question of jurisdiction has been resolved. Consequently, it is not
possible at this time to predict accurately total remediation expense.
Employees
At December 31, 1993, the Company had approximately 4,000 employees. The
Company has had no significant strikes or work stoppages and considers employee
relations to be satisfactory. Approximately 6% of the Company's employees are
covered by collective bargaining agreements, specifically at the Company's
plants in Kansas City, Kansas and Dublin, Ireland. There are no significant
seasonal fluctuations in employment.
Patents
The Company owns a number of unexpired United States patents relating to
anaerobic sealants and adhesives, and certain other sealants and adhesives,
including cyanoacrylate adhesives, or on related products, uses, or
manufacturing processes. These patents expire on various dates from 1994 to
2011. The Company also owns a substantial number of pending patent applications.
The Company also has obtained patents, and regularly files new patent
applications, in foreign countries, particularly the industrialized countries of
Western Europe, Australia, Canada, and Japan. Because all applications have not
been filed in all foreign countries and because of the varying degrees of
protection afforded by foreign patent laws, the Company has somewhat less patent
protection abroad than in the United States.
The Company has obtained protection for major trademarks in essentially all
countries where the trademarks are of commercial importance and regularly files
new trademark applications on a worldwide basis.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The information required is contained in Note 3 of the Notes to
Consolidated Financial Statements.
ITEM 2. PROPERTIES
The Company owns and leases properties located around the world. These
properties are deemed adequate to meet the needs of the Company at present
levels. The Company's properties are in good condition, well maintained, and
modernized as required. Substantially all of the properties are in regular use.
Listed below are the approximate square footage numbers by region.
-- The North American Region consists of 1,100,000 square feet, of which
220,000 square feet are leased. Major locations include warehouses in
Solon, Ohio (180,000 square feet) and Aurora, Illinois (140,000 square
feet) for distribution of North American products; the Company's former
Automotive and Consumer Group Headquarters in Warrensville Heights, Ohio
(166,000 square feet), which includes manufacturing, administrative, and
research activities; the North American Region Headquarters in
Newington, Connecticut (141,000 square feet), which includes marketing,
administrative, research, and warehousing; and a manufacturing,
warehousing, and administrative facility in Sabana Grande, Puerto Rico
(113,000 square feet). In the second half of 1994, the consolidated
North American sales, marketing, and administrative functions, and
research and development facilities will be housed in a new 200,000
square foot building on 57 acres in Rocky Hill, Connecticut. U.S.
manufacturing, packaging, warehousing, and distribution will be
centralized in existing facilities in Warrensville Heights and Solon,
Ohio. The Company's operations in Newington, Connecticut and Aurora,
Illinois will be phased out.
-- The European Region consists of 532,000 square feet, of which 279,000
square feet are leased. The largest facility is in Dublin, Ireland
(167,000 square feet) where manufacturing, warehousing, research
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and development, and administrative activities take place. Other major
facilities are in France (103,000 square feet), Italy (82,000 square
feet), Germany (70,000 square feet), and the U.K. (41,000 square feet),
which include warehousing, marketing, and administrative functions.
-- The Latin American Region consists of 227,000 square feet, of which
37,000 square feet are leased. The largest facilities are in Brazil
(126,000 square feet) and Costa Rica (64,000 square feet), which are
used for manufacturing, marketing, warehousing, and administrative
functions.
-- The Asia/Pacific Region consists of 261,000 square feet, of which
100,000 square feet are leased. Major facilities are in Japan (76,000
square feet) and Australia (60,000 square feet) where manufacturing,
marketing, warehousing and administrative activities take place.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are not a party to any pending legal
proceedings in which an adverse decision, in the opinion of the Company, would
have a material adverse effect upon the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1993.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded on the New York and Pacific Stock
Exchanges. The number of stockholders of record of the Company's Common Stock as
of the close of business on March 11, 1994 was 3,116. Information regarding
quarterly market prices and dividends declared for the Company's Common Stock is
shown below. Market prices are those quoted on the New York Stock Exchange, the
principal exchange market for the Company's Common Stock. The Company currently
expects that comparable dividends will continue to be paid in the future.
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YEAR ENDED DECEMBER 31, 1993
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1ST QTR 2ND QTR 3RD QTR 4TH QTR
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Market price of Loctite stock
--High............................................... $ 45 5/8 $ 42 3/8 $ 41 1/2 $ 38 7/8
--Low................................................ $ 38 $ 35 7/8 $ 35 1/8 $ 34 3/4
Dividends per share.................................... $ .19 $ .20 $ .20 $ .20
</TABLE>
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YEAR ENDED DECEMBER 31, 1992
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1ST QTR 2ND QTR 3RD QTR 4TH QTR
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Market price of Loctite stock
--High............................................... $ 50 7/8 $ 47 5/8 $ 45 3/8 $ 47 3/4
--Low................................................ $ 44 1/4 $ 40 1/2 $ 39 5/8 $ 40 5/8
Dividends per share.................................... $ .17 $ .19 $ .19 $ .19
</TABLE>
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YEAR ENDED DECEMBER 31, 1991
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1ST QTR 2ND QTR 3RD QTR 4TH QTR
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Market price of Loctite stock
--High............................................... $ 35 1/4 $ 35 1/8 $ 42 3/8 $ 50 1/8
--Low................................................ $ 28 $ 29 3/4 $ 32 3/4 $ 38 1/4
Dividends per share.................................... $ .17 $ .17 $ .17 $ .17
</TABLE>
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ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes information with respect to the operations
of the Company.
TEN-YEAR FINANCIAL REVIEW
(dollars in millions, except per share amounts and as noted)
SELECTED FINANCIAL DATA
RESTATED TO A CALENDAR YEAR BASIS
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DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1992 1991 1990
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OPERATING RESULTS
Net sales.................................... $612.6 $608.0 $561.2 $555.2
Percentage increase (decrease).......... 1% 8% 1% 17%
Sales by region:
North America........................... 44% 42% 42% 40%
Europe.................................. 36% 40% 39% 40%
Latin America........................... 8% 8% 8% 9%
Asia/Pacific............................ 10% 8% 8% 8%
Luminescent Systems and Other........... 2% 2% 3% 3%
Gross margin as a percentage of sales........ 61% 62% 61% 61%
Pretax earnings as a percentage of sales..... 15% 16% 17% 16%
Effective tax rate........................... 25% 24% 27% 27%
Net earnings................................. $ 68.3 $ 72.1 $ 69.6 $ 66.3
Percentage increase (decrease).......... (5%) 4% 5% 14%
Net earnings as a percentage of sales........ 11% 12% 12% 12%
Return on average stockholders' equity....... 19% 19% 21% 23%
Net earnings per share....................... $ 1.92 $ 1.98 $ 1.91 $ 1.82
Dividends per share.......................... $ .79 $ .74 $ .68 $ .59
Dividends declared as a percentage of
earnings................................... 41% 37% 36% 32%
FINANCIAL POSITION
Current ratio................................ 1.5 2.2 2.3 2.8
Working capital.............................. $112.8 $167.2 $168.0 $209.2
Net property, plant and equipment............ $164.5 $139.0 $120.6 $104.0
Capital expenditures......................... $ 44.5 $ 40.2 $ 33.5 $ 29.4
Depreciation................................. $ 17.5 $ 16.8 $ 14.7 $ 11.5
Total assets................................. $603.2 $553.5 $526.6 $486.8
Long-term liabilities........................ $ 28.6 $ 36.4 $ 40.3 $ 49.1
Debt as a percentage of net worth............ 33% 13% 12% 18%
Stockholders' equity......................... $358.5 $379.7 $357.7 $319.0
OTHER DATA
Number of employees at year end.............. 3,953 3,689 3,587 3,680
Average shares outstanding (in thousands).... 35,606 36,375 36,387 36,402
</TABLE>
Financial statements for 1992, 1991, and 1990 have been restated for the
adoption of Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes."
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DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1989 1988 1987 1986 1985 1984
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OPERATING RESULTS
Net sales.................................... $473.9 $438.9 $383.4 $292.4 $239.9 $243.8
Percentage increase (decrease).......... 8% 14% 31% 22% (2%) 7%
Sales by region:
North America........................... 41% 41% 41% 47% 58% 63%
Europe.................................. 39% 41% 40% 36% 29% 26%
Latin America........................... 8% 7% 8% 7% 7% 5%
Asia/Pacific............................ 8% 8% 7% 8% 6% 6%
Luminescent Systems and Other........... 4% 3% 4% 2% -- --
Gross margin as a percentage of sales........ 62% 62% 60% 58% 59% 60%
Pretax earnings as a percentage of sales..... 17% 16% 14% 13% 12% 17%
Effective tax rate........................... 29% 30% 31% 35% 34% 36%
Net earnings................................. $ 58.2 $ 47.6 $ 36.7 $ 25.3 $ 19.1 $ 25.7
Percentage increase (decrease).......... 22% 30% 45% 32% (26%) 16%
Net earnings as a percentage of sales........ 12% 11% 10% 9% 8% 11%
Return on average stockholders' equity....... 25% 23% 20% 17% 15% 20%
Net earnings per share....................... $ 1.62 $ 1.33 $ 1.01 $ .70 $ .53 $ .68
Dividends per share.......................... $ .53 $ .37 $ .27 $ .22 $ .20 $ .19
Dividends declared as a percentage of
earnings................................... 33% 28% 27% 31% 38% 28%
FINANCIAL POSITION
Current ratio................................ 3.0 2.8 2.4 2.0 2.0 1.7
Working capital.............................. $187.3 $163.3 $141.5 $ 87.0 $ 85.7 $ 60.0
Net property, plant and equipment............ $ 82.2 $ 70.1 $ 77.1 $ 62.9 $ 53.8 $ 47.7
Capital expenditures......................... $ 23.6 $ 15.0 $ 16.8 $ 10.6 $ 9.2 $ 10.2
Depreciation................................. $ 11.3 $ 9.3 $ 9.2 $ 7.5 $ 6.5 $ 5.8
Total assets................................. $402.0 $357.0 $352.7 $270.4 $240.3 $225.6
Long-term liabilities........................ $ 46.4 $ 44.8 $ 49.6 $ 19.2 $ 17.3 $ 17.8
Debt as a percentage of net worth............ 17% 20% 32% 24% 25% 43%
Stockholders' equity......................... $259.7 $223.3 $201.7 $164.6 $139.0 $118.2
OTHER DATA
Number of employees at year end.............. 3,497 3,327 3,237 2,884 2,631 2,507
Average shares outstanding (in thousands).... 35,978 35,900 36,242 36,260 36,100 38,010
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OPERATIONS
YEAR ENDED DECEMBER 31, 1993 VERSUS YEAR ENDED DECEMBER 31, 1992
For the year ended December 31, 1993, net sales were $612.6 million, an
increase of $4.6 million or 1% over the prior year. Loctite management measures
the results of the Company based on individual business units. Units are
consolidated into businesses or regions. Trade sales between regions are
reflected as sales of the region servicing the customer. A summary of sales
activity (in millions) is as follows:
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LOCAL
DOLLAR CURRENCY
1993 1992 % GROWTH % GROWTH
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North American Industrial.......................... $154.4 $141.8 9 10
U.S. AAM & Retail (Consumer)....................... 116.2 111.8 4 4
Europe............................................. 219.7 244.2 (10) 2
Latin America...................................... 51.8 49.9 4 4
Asia/Pacific....................................... 60.0 47.2 27 20
Luminescent Systems................................ 10.5 13.1 (20) (19)
------ ------ --- ---
Total......................................... $612.6 $608.0 1% 6%
------ ------ --- ---
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</TABLE>
Price changes contributed to the growth in sales for the Company. Average
net prices changed as a result of changes in list price, changes in product mix,
and changes in customers. Such factors are not quantifiable individually due to
the wide variety of markets, product formulations, and product packages.
North American sales increased by 7% in both local currency and U.S.
dollars when compared to 1992. The North American Industrial business grew 10%
on a local currency basis and 9% on a dollar basis as a result of a focus on the
maintenance market, as well as a general upturn in industrial output in the U.S.
economy. U.S. Automotive Aftermarket (AAM) sales were flat while the Retail
(Consumer) business reported an 8% sales gain, for a combined growth of 4%.
Volume increases contributed to the growth.
Poor economic conditions in Europe held sales growth in local currency to
2% over the prior year. This figure translated to a decline of 10% when
converted to dollars because of the impact of the relatively stronger dollar
compared to last year. There was a wide range of local currency sales growth
reported within the region as each country is affected by different economic
conditions. Of the five major countries in Europe (in terms of Loctite sales),
France's local currency sales were flat with the prior year, Italy was up 11%,
the U.K. was up 6%, Germany was down 9% and Spain had local currency growth of
1%. With respect to products, volume decreases in major industrial products were
offset by growth in other products and channel mix.
Latin American sales growth in 1993 was 4%. Although Costa Rica, Colombia,
and Chile experienced double digit percentage sales growth, Brazil's sales were
down slightly. In Brazil, prices are changed monthly to keep up with the effects
of inflation (see paragraph under Inflation and Changing Prices). Excluding the
effects of inflation, Brazil reported a 5% decrease in sales vs. 1992. Unstable
economic conditions were a contributing factor.
Local currency sales in the Asia/Pacific region increased by 20% vs. the
prior year. This translated into a 27% increase when converted to dollars. All
countries except Japan reported strong local currency growth. Although Japan's
local currency sales decreased by 7% when compared to 1992, in dollars the
growth was 6% due to the strength of the yen relative to the U.S. dollar.
Included in this year's results are those of new subsidiaries operating in
Malaysia, Singapore, China, and India which resulted in $7.9 million of
additional sales.
Luminescent Systems sales decreased by 19% in local currency and 20% in
U.S. dollars when compared to 1992. Sales continued to suffer in response to the
decline in the defense and airline industries.
10
<PAGE> 13
Gross margin decreased from 62% of sales in 1992 to 61% of sales in 1993.
The decrease was caused by lower margins in Europe and North America as well as
geographic mix.
As a percentage of sales, operating expenses were 45% in 1993 and 44% in
1992. In total, expenses increased $8.8 million or 3% over the prior year.
Expenses in the Company's new subsidiaries operating in Malaysia, Singapore,
India, China, Czech Republic, Slovakia, Hungary, Poland, Slovenia, and Norway
accounted for $5.8 million of the increase. Included in administrative expenses
is a $1.2 million charge related to the closing of a manufacturing facility of
Loctite Luminescent Systems, a small subsidiary which has seen its market
shrink. The closing of this Rocky Hill, Connecticut, facility will allow all
manufacturing for this business to be concentrated in New Hampshire, adjacent to
its management function. Additional monies were spent in the Asia/Pacific area
to strengthen our industrial and automotive aftermarket selling skills and in
Brazil where we are upgrading our manufacturing, technical, and selling skills
to take advantage of an underpenetrated industrial market. North America
reported expense increases of 8% primarily to support higher sales levels. In
local currencies, European expenses increased by 6% vs. the prior year, but when
translated into dollars, current year expenses decreased by 7% when compared to
the prior year.
Investment income was $0.9 million lower in 1993 than in 1992 primarily as
a result of lower average interest rates on deposits in foreign locations
translated into dollars at comparatively weaker average exchange rates.
Interest expense decreased by $0.2 million year-to-year as the effects of
significant increases in average short-term debt levels in the U.S. were offset
by benefits derived from the refinancing of maturing long-term debt, the
capitalization of certain interest costs associated with the financing of
construction-in-progress, and lower average short-term debt levels in Brazil.
Net foreign exchange losses decreased by $0.8 million for the 12 month
period over the comparable 1992 period due primarily to favorable transaction
related exchange results in Ireland.
Income taxes, as a percentage of earnings before taxes, were 25% for the
year ended December 31, 1993. For further discussion of income taxes, see Notes
to Consolidated Financial Statements, Note 6, Income Taxes.
YEAR ENDED DECEMBER 31, 1992 VERSUS YEAR ENDED DECEMBER 31, 1991
For the year ended December 31, 1992, net sales were $608.0 million, an
increase of $46.8 million or 8% over the prior year. A summary of sales activity
(in millions) is as follows:
<TABLE>
<CAPTION>
LOCAL
DOLLAR CURRENCY
1992 1991 % GROWTH % GROWTH
------ ------ -------- --------
<S> <C> <C> <C> <C>
North American Industrial.................. $141.8 $127.8 11 12
U.S. AAM & Retail (Consumer)............... 111.8 104.8 7 7
Europe..................................... 244.2 220.0 11 7
Latin America.............................. 49.9 45.6 10 10
Asia/Pacific............................... 47.2 47.0 -- (2)
Luminescent Systems........................ 13.1 16.0 (18) (18)
------ ------ --- ---
Total............................ $608.0 $561.2 8% 7%
------ ------ --- ---
------ ------ --- ---
</TABLE>
Price changes contributed to the growth in sales for the Company. Average
net prices changed as a result of changes in list price, changes in product mix,
and changes in customers. Such factors are not quantifiable individually due to
the wide variety of markets, product formulations, and product packages.
Our North American Industrial business reported strong growth considering
the sluggish economic environment in the United States. Major product lines
(anaerobics, cyanoacrylates, silicones, and hand cleaners) had both volume
increases and price changes which contributed to the positive results.
11
<PAGE> 14
In the U.S. Automotive Aftermarket (AAM) and Retail (Consumer) business,
hand cleaner sales increased by double digits with silicones and cyanoacrylates
reporting modest growth over the prior year. Both volume and price increases
were factors.
In Europe, the impact of a comparatively weaker dollar increased European
sales by approximately four percentage points when compared to the prior year.
On a local currency basis, sales of most products increased with volume
increases being a larger factor than price changes. Hand cleaners were
introduced to the European product line in 1992 and resulted in 10% of the
dollar sales growth over the prior year. It is anticipated that hand cleaners
will contribute to additional sales growth in the future.
Latin America reported a sales increase of 10%. Much of the increase was
due to price increases in the region. In Brazil, prices are changed monthly to
keep up with the effects of inflation (see paragraph under Inflation and
Changing Prices). Most volumes in the region declined from year to year.
Sales in the Asia/Pacific region were flat in dollars vs. the prior year.
On a local currency basis, the region's sales decreased 2% with Japan the
primary factor. The Japanese original equipment manufacturing industries to
which we sell are in a recession, which has affected our sales volume.
Current year sales of electroluminescent lamps were disappointing and
decreased primarily due to the sluggishness of the U.S. economy.
Gross margin increased from 61% of sales in 1991 to 62% of sales in 1992.
As a percentage of sales, operating expenses (excluding restructuring
charges) were 44% in both 1992 and 1991. The Company has invested in research
and development and sales and marketing expenses. Expense growth in these
categories was 16% and 12%, respectively, vs. the prior year. Administrative
expenses were down 2%. In total, expenses increased 9% over 1991.
In the second quarter of 1992, the Company recorded a pretax charge of
$12.7 million for restructuring its North American operations. The restructuring
charge is the result of a strategic decision to combine the Company's two major
businesses in the U.S., the Industrial Group and the Automotive and Consumer
Group, to accelerate market penetration and reduce operating expenses, along
with the provision of new, centralized research and development facilities. The
restructuring charge includes provisions for employee relocations and
redundancies of $7.4 million and facilities disposal costs of $5.3 million.
Investment income for 1992 was $4.2 million lower than 1991. Lower average
deposit levels in foreign locations (due to the acquisition of FRAMET (now
Loctite France) in the fourth quarter of 1991) was a significant contributing
factor in the year to year decline.
The foreign exchange loss for the year was $2.4 million greater than in
1991 primarily due to the translation effects of higher average rates of
Cruzeiro devaluation on the Company's Brazilian operations.
Income taxes, as a percentage of earnings before taxes, were 24% for the
year ended December 31, 1992.
YEAR ENDED DECEMBER 31, 1991 VERSUS YEAR ENDED DECEMBER 31, 1990
For the calendar year ended December 31, 1991, net sales were $561.2
million, an increase of $6.0 million or 1% over the prior calendar year. Sales
growth in the Automotive and Consumer Group was $5.8 million or 6%, while the
Asia/Pacific Region also had a strong growth of $5.3 million or 13%. Sales in
the North American Industrial markets were up slightly, while Europe and Latin
America experienced declines of $2.7 million and $2.8 million, respectively. The
impact of the comparatively stronger dollar decreased sales by approximately one
percentage point when compared to the prior year. Volume growth, sales mix and
price changes all contributed to the sales growth over the prior year.
Gross margin was 61% of sales for the twelve month periods ended December
31, 1991 and 1990.
As a percentage of sales, operating expenses were 44% in both 1991 and
1990. In dollars, there was no change year to year as continued expense
management throughout the year kept expenses level.
12
<PAGE> 15
In the first quarter of 1991, the Company recorded a charge of $4.4 million
for the restructuring of certain activities in a number of countries to reduce
ongoing costs and expenses.
Pretax investment income for 1991 was $2.4 million higher than 1990. Higher
average deposit levels and gains from limited partnership activity contributed
to the increase.
Pretax interest expense decreased by $1.3 million year to year due to the
capitalization of certain interest costs associated with the financing of
construction-in-progress and due to lower interest rates, on average, on
borrowings in the United States and Brazil.
Decreased translation losses in Brazil, the result of reduced rates of
currency devaluation, was the primary factor in the $1.2 million decrease in net
foreign exchange losses.
Income taxes, as a percentage of earnings before taxes, were 27.5% for the
calendar year ended December 31, 1991.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1993, the Company had $44.6 million in cash and cash
equivalents, an increase of $14.7 million from the previous year's balance. The
increase was due primarily to cash provided by operating activities plus the
increase in short-term debt partially offset by the cash outflow for the stock
repurchase mentioned below, additions to property, plant and equipment,
dividends paid, increased trade receivables, and acquisitions.
The Company has significant financial resources available for future
growth. Capital expenditures and dividend payments are expected to increase in
the next few years. Time and certificates of deposit of $51.5 million, cash from
operations, and existing unused credit lines at December 31, 1993 will provide
additional financing flexibility.
During the first quarter of 1993, the Company purchased 1,000,000 shares of
its common stock. The cost of this repurchase, $42.6 million, was funded through
U.S. short-term borrowings. The stock repurchase reduced retained earnings by
$41.4 million and common stock by $1.2 million.
The increase in accounts and notes receivable from $111.6 million at
December 31, 1992, to $119.3 million at December 31, 1993, was due to an
increase in trade receivables in the Company's U.S. Industrial, Automotive and
Retail (Consumer) businesses, as well as receivables recorded by the new
subsidiaries operating in 1993. The U.S. businesses reported fourth quarter
sales that were $5.5 million higher than the comparable 1992 fourth quarter,
which resulted in higher receivables at year end.
Net property, plant and equipment increased $25.5 million from 1992 to 1993
with a large part resulting from construction-in-progress recorded for the
Company's new facility in Rocky Hill, Connecticut. Through December 31, 1993,
$25.2 million had been spent on land and buildings, $17.6 million of which was
spent in 1993. The 200,000 square foot facility is being built on 57 acres and
will house consolidated North American sales, marketing, administrative, and
research and development functions. The facility is expected to cost
approximately $40.0 million and is expected to be completed in the second half
of 1994. Approximately $4.0 million was spent in 1993 to expand our Solon, Ohio
warehouse facility. This project is also expected to be completed in 1994.
Property recorded by the Company's new subsidiaries operating in 1993 also
contributed to the increase in net property, plant and equipment.
While not a capital intensive business, the Company's practice is to ensure
that sufficient operating capacity is available to meet its customers' needs. In
the year ended December 31, 1993, capital expenditures were $44.5 million.
The level of capital expenditures for calendar 1994 and the next two years
is expected to be approximately $40-$50 million per year. Except for the $14.8
million which will be spent to complete the Rocky Hill facility, the projected
capital expenditures are not firm commitments but are subject to final
management approval depending on the needs of the individual businesses and the
business conditions at the time of the expenditure. Approximately 55% of the
expected capital expenditures will be to support increased product sales and
13
<PAGE> 16
product maintenance. Approximately 30% will be for new product developments and
research and development, with the remaining expenditures for building
improvements, computer equipment and office furniture. There are no planned
projects that represent a material commitment for the Company.
Short-term debt increased from $23.5 million at December 31, 1992 to $103.0
million at December 31, 1993, primarily due to the funding of the stock
repurchase noted above. Other contributory factors were construction-in-progress
on the Rocky Hill facility, additional investments in subsidiaries, and the
refinancing of the current portion of long-term debt.
In 1992, the Company recorded a pretax charge of $12.7 million for
restructuring its North American operations. At December 31, 1992, approximately
$1.4 million had been spent. During 1993, an additional $3.5 million was spent
resulting in $7.8 million remaining as liabilities. $5.4 million is recorded as
a long-term liability and $2.4 million is recorded in short-term liabilities.
Projects to be completed include the relocation of research and development
employees to Rocky Hill and the closing of the Company's plants in Aurora,
Illinois and Newington, Connecticut.
The $5.0 million decrease in accrued salaries, wages, and other
compensation resulted from reduced bonus accruals and payments made against the
restructuring accruals mentioned above.
Long-term debt declined by $11.1 million due to the reclassification of
this debt to current debt because scheduled long-term promissory note payments
will be made during 1994 (see Note 9 of the Notes to Consolidated Financial
Statements).
The unrealized foreign currency translation adjustment included in
stockholders' equity changed from a loss of $3.4 million at December 31, 1992 to
a loss of $21.9 million at December 31, 1993 due to the impact of a
comparatively stronger U.S. dollar on the Company's net asset position at
December 31 in its foreign subsidiaries.
Since a substantial portion of our business is transacted in foreign
locations and currencies, the Company's financial statements are affected by
fluctuations in foreign exchange rates. A stronger U.S. dollar decreases the
translated results of foreign subsidiaries, while a weaker U.S. dollar increases
the translated results. For the year ended December 31, 1993, the effect of a
comparatively stronger dollar decreased sales by approximately five percentage
points when compared to the prior year. For the year ended December 31, 1992,
the effects of a comparatively weaker dollar increased sales by approximately
one percentage point when compared to the prior year. For the year ended
December 31, 1991, the effect of a comparatively stronger dollar decreased sales
by approximately one percentage point when compared to the prior year.
ACQUISITIONS
During the first quarter of 1993, the Company acquired certain assets from
its distributor in Malaysia and Singapore and now operates wholly owned
subsidiaries in those countries. Loctite acquired a majority interest in its
joint ventures in China and India in the second quarter of 1993 and in Norway in
the third quarter of 1993. The cost of these acquisitions was approximately $6.5
million and is not considered material to the Company.
During the first quarter of 1994, the Company announced the acquisition of
Plastic Padding Holdings Limited, a market leader in automotive aftermarket
chemical products with strong brand presence and established distribution
networks in the U.K., Ireland, and Scandinavia. The cost of this acquisition was
not material to the Company.
INFLATION AND CHANGING PRICES
The Company prices its products according to value in each of its markets.
The Company attempts to offset the effects of inflation in its pricing.
Due to the wide variety of pricing situations, currency factors, and
inflation rates in the numerous countries in which the Company does business, a
meaningful estimate of the effect of price increases is not
14
<PAGE> 17
practical. However, in management's judgment, except for the reasons indicated
in the paragraph below, such increases have not been significant to the
Company's reported results.
The Company's Brazilian subsidiary was subject to a rate of inflation in
excess of two thousand percent in 1993, in excess of one thousand percent in
1992, and in excess of four hundred percent in 1991. If the Company excluded the
effects of inflation from the Brazilian sales value, Brazilian sales would have
been reduced by $8.1 million (1993), $7.0 million (1992), and $4.8 million
(1991) from the net sales amounts reported for Latin America. Similarly,
Brazilian operating profit would have been reduced by $7.1 million (1993), $5.6
million (1992), and $3.9 million (1991) from the operating profit amounts
reported for Latin America.
ACCOUNTING CHANGES
INCOME TAXES
During the first quarter of 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No.
109). The statement requires that deferred taxes be recorded under the liability
method rather than the income statement approach previously used by the Company
under Accounting Principles Board Opinion No. 11 (APB No. 11). The Company has
adopted SFAS No. 109 by restating the financial statements of 1992, 1991, and
1990. For further discussion, see Note 6 of the Notes to Consolidated Financial
Statements.
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
During the first quarter of 1993, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" (SFAS No. 106). The statement
requires that annual postretirement benefit costs be accrued during an
employee's years of active service. In prior years, the Company expensed the
cost of such benefits when paid. For further discussion, see Note 12 of the
Notes to Consolidated Financial Statements.
PROSPECTIVE ACCOUNTING CHANGE
POSTEMPLOYMENT BENEFITS
In November 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (SFAS No. 112). This statement must be adopted by the
Company no later than calendar year 1994 but earlier adoption is permitted. The
statement requires the recognition of the cost of postemployment benefits (after
employment but before retirement) on an accrual basis. The Company will adopt
SFAS No. 112 in 1994. The new standard is not expected to have a significant
effect on the Company's annual benefits expense or liabilities.
15
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
PAGE NO. IN
FORM 10-K
------------
<S> <C>
FINANCIAL STATEMENTS:
Ten-Year Financial Review........................................................ 8-9
Report of Independent Accountants................................................ 17
Consolidated Statement of Earnings for the years ended
December 31, 1993, 1992, and 1991.............................................. 18
Consolidated Statement of Cash Flows for the years ended
December 31, 1993, 1992, and 1991.............................................. 19
Consolidated Balance Sheet at December 31, 1993 and 1992......................... 20-21
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1993, 1992, and 1991.............................................. 22
Notes to Consolidated Financial Statements....................................... 23-38
FINANCIAL STATEMENT SCHEDULES:
V -- Property, Plant and Equipment for the years ended December 31, 1993, 1992,
and 1991................................................................ 45
VI -- Accumulated Depreciation Property, Plant and Equipment for the years ended
December 31, 1993, 1992, and 1991....................................... 46
VIII -- Valuation and Qualifying Accounts for the years ended December 31, 1993,
1992, and 1991.......................................................... 47
IX -- Short-Term Bank Debt for the years ended December 31, 1993, 1992, and
1991.................................................................... 48
</TABLE>
The individual financial statements of Registrant's subsidiaries have been
omitted since Registrant is primarily an operating Company and all subsidiaries
included in the consolidated financial statements being filed, in the aggregate,
do not have minority equity interests and/or indebtedness to any person other
than Registrant or its consolidated subsidiaries in amounts which together
exceed five percent of total consolidated assets at December 31, 1993, excepting
indebtedness incurred in the ordinary course of business which is not overdue
and which matures within one year from the date of its creation.
All other schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or the
Notes thereto.
16
<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Loctite Corporation
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Loctite Corporation and its subsidiaries at December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Corporation's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the Corporation
adopted Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," effective
January 1, 1993.
/s/ PRICE WATERHOUSE
Price Waterhouse [LOGO]
One Financial Plaza
Hartford, Connecticut
January 25, 1994
17
<PAGE> 20
CONSOLIDATED STATEMENT OF EARNINGS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Net sales..................................................... $612,612 $607,967 $561,218
Cost of sales................................................. 241,818 229,175 217,501
-------- -------- --------
Gross margin.................................................. 370,794 378,792 343,717
-------- -------- --------
Research and development expense.............................. 26,700 26,152 22,498
Selling, general, and administrative expenses................. 247,912 239,640 222,240
Restructuring charges......................................... -- 12,740 4,434
-------- -------- --------
274,612 278,532 249,172
-------- -------- --------
Earnings from operations...................................... 96,182 100,260 94,545
Investment income............................................. 8,321 9,173 13,365
Interest expense.............................................. (5,409) (5,593) (5,477)
Other expense................................................. (246) (94) (346)
Foreign exchange loss......................................... (7,844) (8,601) (6,202)
-------- -------- --------
Earnings before income taxes.................................. 91,004 95,145 95,885
Provisions for income taxes................................... 22,751 23,064 26,327
-------- -------- --------
Net earnings.................................................. $ 68,253 $ 72,081 $ 69,558
-------- -------- --------
-------- -------- --------
Earnings per share............................................ $ 1.92 $ 1.98 $ 1.91
-------- -------- --------
-------- -------- --------
Average number of shares outstanding........................... 35,606,000 36,375,000 36,387,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
18
<PAGE> 21
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings................................................ $68,253 $72,081 $69,558
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization............................... 22,229 21,694 19,108
Deferred income taxes....................................... 178 (4,293) 2,396
(Gain) loss on sale of fixed assets......................... (114) 229 260
Provision for losses -- accounts receivable................. 2,024 832 1,566
Undistributed (earnings) losses of affiliates............... 425 (330) (226)
Change in:
Trade and other receivables................................. (17,040) (11,445) (2,865)
Inventory................................................... (4,686) (13,964) 4,236
Prepaid and other current assets............................ (1,000) (2,098) 681
Accounts payable and accrued expenses....................... 2,820 9,611 4,743
Interest payable............................................ 652 (395) (7)
Taxes payable............................................... 1,428 (6,743) 3,251
Other............................................................ 2,468 1,011 3,213
------- ------- -------
Cash provided by operating activities............................ 77,637 66,190 105,914
------- ------- -------
Cash flows from investing activities:
Additions to property, plant and equipment.................. (46,306) (40,178) (33,514)
Dispositions of property, plant and equipment............... 1,407 1,096 1,552
Goodwill portion of acquisitions............................ (5,944) -- (54,781)
Change in short-term investments............................ (7,207) (6,775) 20,874
Purchases of long-term investments.......................... (860) (835) (18)
Maturities of long-term investments......................... 28 508 4
Sales of long-term investments.............................. 519 862 487
------- ------- -------
Cash used in investing activities................................ (58,363) (45,322) (65,396)
------- ------- -------
Cash flows from financing activities:
Stock repurchase............................................ (48,328) (10,295) (8,076)
Issuance of common stock.................................... 5,371 7,130 5,872
Dividends paid.............................................. (27,980) (26,194) (24,035)
Increase (decrease) in short-term debt...................... 79,823 16,324 (2,872)
Borrowings of long-term debt................................ 88 -- 1,466
Payments of long-term debt.................................. (11,390) (11,181) (11,077)
------- ------- -------
Cash used in financing activities................................ (2,416) (24,216) (38,722)
------- ------- -------
Effect of exchange rate changes on cash.......................... (2,195) (2,292) (2,059)
------- ------- -------
Increase (decrease) in cash and cash equivalents................. 14,663 (5,640) (263)
Cash and cash equivalents:
Beginning of period......................................... 29,889 35,529 35,792
------- ------- -------
End of period............................................... $44,552 $29,889 $35,529
------- ------- -------
------- ------- -------
Interest paid.................................................... $ 5,638 $ 6,223 $ 6,260
Taxes paid (net of refunds)...................................... $22,410 $33,732 $23,101
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
19
<PAGE> 22
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 44,552 $ 29,889
Time and certificates of deposit............................. 51,499 51,409
Marketable securities (approximates market).................. 79 141
Accounts and notes receivable (less allowances of $4,659 and
$4,740)..................................................... 119,316 111,582
Other receivables............................................ 12,874 14,073
Inventories:
Finished goods.......................................... 43,248 38,711
Work in process......................................... 18,413 20,204
Raw materials........................................... 22,020 22,501
------------ ------------
83,681 81,416
Deferred income tax benefit.................................. 5,473 5,281
Prepaid expenses and other current assets.................... 11,406 10,709
------------ ------------
Total current assets.............................................. 328,880 304,500
------------ ------------
Investments:
Marketable securities (approximates market).................. 126 131
Venture capital investments.................................. 4,978 4,767
------------ ------------
5,104 4,898
------------ ------------
Property, plant and equipment:
Land and land improvements................................... 12,674 11,903
Buildings.................................................... 84,096 75,911
Machinery and equipment...................................... 157,593 147,387
Construction in progress..................................... 26,227 8,329
------------ ------------
280,590 243,530
Less--accumulated depreciation............................... 116,077 104,532
------------ ------------
164,513 138,998
Deferred income tax benefit....................................... 7,429 6,937
Other assets...................................................... 17,205 19,923
Excess of purchase price over fair value of net assets of acquired
companies (net of amortization of $14,638 and $11,890).......... 80,096 78,202
------------ ------------
Total assets...................................................... $603,227 $553,458
------------ ------------
------------ ------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
20
<PAGE> 23
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt.............................................. $103,047 $ 23,547
Long-term debt - current maturities.......................... 11,732 11,167
Accounts payable............................................. 32,776 28,725
Accrued salaries, wages, and other compensation.............. 16,309 21,266
Accrued taxes, other than income taxes....................... 5,886 5,185
Accrued income taxes......................................... 13,798 13,890
Dividends payable............................................ 7,079 6,929
Accrued pension and retirement benefits...................... 6,620 7,848
Accrued insurance............................................ 5,936 6,312
Accrued liabilities - other.................................. 12,917 12,456
------------ ------------
Total current liabilities......................................... 216,100 137,325
------------ ------------
Long-term liabilities:
Long-term debt............................................... 3,028 14,145
Other........................................................ 25,618 22,302
------------ ------------
28,646 36,447
------------ ------------
Stockholders' equity:
Common stock, $.01 par value:................................ 39,922 35,864
Authorized 100,000,000 shares; issued 35,369,657 shares
at December 31, 1993 and 36,370,122 shares at December
31, 1992
Retained earnings....................................... 342,441 348,938
Foreign currency translation adjustment................. (21,892) (3,444)
Investment valuation allowance.......................... (660) (571)
Adjustment for minimum pension liability................ (1,330) (1,101)
------------ ------------
Total stockholders' equity........................................ 358,481 379,686
------------ ------------
Total liabilities and stockholders' equity........................ $603,227 $553,458
------------ ------------
------------ ------------
</TABLE>
21
<PAGE> 24
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, DECEMBER 31, 1992, AND DECEMBER 31, 1991
(dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------------- RETAINED STOCKHOLDERS'
SHARES VALUE EARNINGS OTHER EQUITY
---------- ------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1990................... 36,387,832 $24,272 $277,103 $ 17,639 $ 319,014
---------- ------- -------- -------- -------------
Net earnings................................... 69,558 69,558
Cash dividends declared........................ (24,764) (24,764)
Stock options exercised........................ 143,686 1,313 1,313
Restricted Stock Plan awards (net of
cancellations)............................... 37,350 1,587 1,587
Thrift Investment Plan contributions........... 50,283 1,716 1,716
Common stock cancellations..................... (49) (2) (2)
U.S. tax benefit from stock options and
restricted
stock........................................ 922 922
Decrease in unearned portion of Restricted
Stock Plan awards............................ 335 335
Repurchase of Company stock.................... (235,063) (1,150) (7,360) (8,510)
Translation adjustment......................... (3,693) (3,693)
Decrease in investment valuation allowance..... 321 321
Adjustment for minimum pension liability....... (78) (78)
---------- ------- -------- -------- -------------
Balance at December 31, 1991................... 36,384,039 $28,993 $314,537 $ 14,189 $ 357,719
---------- ------- -------- -------- -------------
Net earnings................................... 72,081 72,081
Cash dividends declared........................ (26,937) (26,937)
Stock options exercised........................ 164,788 1,846 1,846
Restricted Stock Plan awards (net of
cancellations)............................... 24,200 1,204 1,204
Thrift Investment Plan contributions........... 43,813 1,822 1,822
Common stock awards............................ 2,400 107 107
Common stock cancellations..................... (5,918) (271) (271)
U.S. tax benefit from stock options and
restricted
stock........................................ 2,001 2,001
Decrease in unearned portion of Restricted
Stock Plan awards............................ 412 412
Repurchase of Company stock.................... (243,200) (250) (10,743) (10,993)
Translation adjustment......................... (18,516) (18,516)
Increase in investment valuation allowance..... (416) (416)
Adjustment for minimum pension liability....... (373) (373)
---------- ------- -------- -------- -------------
Balance at December 31, 1992................... 36,370,122 $35,864 $348,938 $ (5,116) $ 379,686
---------- ------- -------- -------- -------------
Net earnings................................... 68,253 68,253
Cash dividends declared........................ (28,130) (28,130)
Stock options exercised........................ 77,570 1,046 1,046
Restricted Stock Plan awards (net of
cancellations)............................... 4,700 473 473
Thrift Investment Plan contributions........... 53,965 2,293 2,293
Common stock awards............................ 1,600 67 67
U.S. tax benefit from stock options and
restricted
stock........................................ 722 722
Decrease in unearned portion of Restricted
Stock Plan awards............................ 770 770
Repurchase of Company stock.................... (1,138,300) (1,313) (46,620) (47,933)
Translation adjustment......................... (18,448) (18,448)
Increase in investment valuation allowance..... (89) (89)
Adjustment for minimum pension liability....... (229) (229)
---------- ------- -------- -------- -------------
Balance at December 31, 1993................... 35,369,657 $39,922 $342,441 $(23,882) $ 358,481
---------- ------- -------- -------- -------------
---------- ------- -------- -------- -------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
22
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of Loctite
Corporation and all majority owned subsidiaries. Intercompany balances and
transactions have been eliminated. The minority interest income of consolidated
subsidiaries that are not 100% owned is included in other expense on the
consolidated statement of earnings and in other long-term liabilities on the
consolidated balance sheet. Investments in which the Company owns 20% to 50% of
the voting stock are accounted for under the equity method.
Cash Flows
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with a maturity of three months or less
at the time of purchase to be cash equivalents. Cash flows from forward exchange
contracts and other hedges of identifiable transactions or events are classified
in the same category as the cash flows from the items being hedged.
Marketable Securities
Marketable securities held as current assets are carried at the lower of
aggregate cost or market value. Marketable securities held as investments are
carried at cost, less provisions for anticipated losses when market value is
below cost and the decline is considered to be other than temporary.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Long-Term Venture Capital Investments
The Company has investments in seven venture capital limited partnerships.
The partnerships invest in and assist growth oriented businesses. The
investments are carried at cost. Provisions for anticipated losses are recorded
as a reduction of earnings when the aggregate current value, as internally
determined by the respective partnerships, is below cost and the decline is
considered to be other than temporary. When the aggregate current value is below
cost and the decline is considered to be temporary, a charge to stockholders'
equity is recorded.
Property and Depreciation
Property, plant and equipment is recorded at cost. Ordinary maintenance and
repairs are expensed; replacements and betterments are capitalized. The cost and
related accumulated depreciation of disposed assets are removed from the
accounts; any resulting gain or loss is reflected in earnings.
Plant and equipment is depreciated using both straight-line and accelerated
methods. Estimated lives used to compute depreciation are: land improvements, 3
to 25 years; buildings and improvements, 3 to 40 years; and machinery and
equipment, 3 to 10 years.
Other Intangibles
The cost of other intangibles is amortized on the straight-line basis over
the estimated useful life of the intangible. Patents and trademarks are expensed
when paid.
Business Acquisitions
The excess of the purchase price over the fair value of net assets of
acquired companies is being amortized on the straight-line method up to 40
years.
23
<PAGE> 26
Income Taxes
In 1993, the Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," under which provision is made for
deferred income taxes and future income tax benefits applicable to temporary
differences between income tax and financial statement accounting.
Earnings Per Share
Earnings per share are computed by dividing net earnings by the average
number of shares of common stock outstanding during the period. Stock options
granted and shares to be issued under restricted stock plans would result in no
material dilution of earnings.
Translation of Foreign Currencies
Foreign subsidiaries' assets and liabilities are translated at exchange
rates prevailing on the balance sheet date, revenues and expenses are translated
at average exchange rates prevailing during the period, and elements of
stockholders' equity are translated at historical rates. Any resulting
translation gains and losses are reported separately in stockholders' equity.
For the Company's subsidiaries operating in countries with very high inflation
rates, the translation is the same except that inventories, cost of sales,
property, plant and equipment, and depreciation are translated at historical
rates. Resulting translation gains and losses for these subsidiaries are
included in income.
Forward Foreign Exchange Contracts
The Company enters into forward foreign exchange contracts in the normal
course of business to hedge identifiable exposures related to foreign currency
transactions. The gains and losses on these contracts are recognized in the same
period in which gains and losses from the transaction being hedged are
recognized. Additionally, forward foreign exchange contracts are used to hedge
firm foreign currency commitments. Gains and losses on these contracts are
deferred and included in the measurement of the related foreign currency
transaction.
Interest Rate Swap Agreements
The Company enters into interest rate swap agreements as a means of
managing interest rate exposure associated with the Company's underlying
borrowings. The interest differential to be paid or received under these swap
agreements is recorded on an accrual basis as an adjustment to interest expense.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires the disclosure of the fair value
of financial instruments for which it is practicable to estimate that value. The
following methods and assumptions were used by the Company to estimate the fair
value of each class of financial instruments:
Cash and Cash Equivalents -- The carrying amounts are a reasonable
approximation of fair value due to the short-term maturity of these
instruments.
Marketable Securities -- The fair value of marketable securities is
based on quoted market prices.
Long-Term Venture Capital Investments -- It is not practicable to
estimate the fair value of the Company's investments in limited
partnerships as there is no liquid market for these investments and thus no
readily available source of market quotes.
Short-Term Debt -- The carrying amounts are a reasonable approximation
of fair value due to the short-term maturity of these instruments.
Long-Term Debt -- The fair value of long-term debt is estimated based
on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining
maturities.
Forward Foreign Exchange Contracts -- The fair value of forward
foreign exchange contracts is estimated by obtaining quoted market prices.
24
<PAGE> 27
Interest Rate Swap Agreements -- The fair value of interest rate swap
agreements is estimated from quotes obtained from dealers. This value
represents the estimated amount the Company would receive or pay to
terminate the agreements, taking into consideration current interest rates.
Accounting Changes
During 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," and Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions." For further discussion, see Notes 6 and 12, respectively,
of the Notes to Consolidated Financial Statements.
NOTE 2 COMMON STOCK SPLIT
The Company declared a two-for-one stock split effective March 19, 1991.
All references in the financial statements to the number of shares, earnings and
dividend amounts per share, stock option data, and other per share amounts have
been restated to give effect to the stock split.
NOTE 3 SEGMENT REPORTING
The Company operates in one dominant industry segment, "adhesives,
sealants, and related products." Sales of this dominant segment account for
approximately 90% of consolidated revenues, operating profit, and operating
assets. The Company has no customer which accounts for 10% or more of net sales.
Export sales in each of the segments were below 10% in each of the years
reported.
The Company's management measures results based on individual business
units. Units are consolidated into businesses or regions. As a result,
interdependencies exist among the Company's business units. Trade sales and
operating expenses between regions are reflected as those of the region
servicing the customer. The Company has restated the data presented below to a
business unit basis.
North America includes the Company's operations in the United States,
Puerto Rico, Canada, and Mexico. Europe includes the Company's operations in
Europe and Africa. Latin America includes the Company's operations in South and
Central America. Asia/Pacific includes the Company's operations in Asia and the
Pacific Rim. Luminescent Systems includes the Company's business in
electroluminescent lamps.
New Business Development (NBD) encompasses the efforts of the major
laboratories of the Company. This includes the majority of research and
development expenses of the Company. Some selling, general, and administrative
expenses are also reported in this business.
25
<PAGE> 28
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
(dollars in thousands)
Net sales:
North America............................................ $270,585 $253,611 $232,602
Europe................................................... 219,652 244,159 219,994
Latin America............................................ 51,832 49,916 45,590
Asia/Pacific............................................. 60,031 47,177 47,007
Luminescent Systems & Other.............................. 10,512 13,104 16,025
-------- -------- --------
Net sales..................................................... $612,612 $607,967 $561,218
-------- -------- --------
-------- -------- --------
Earnings from operations:
North America *.......................................... $ 59,290 $ 46,369 $ 44,644
Europe................................................... 61,464 78,121 67,448
Latin America............................................ 11,681 13,479 13,196
Asia/Pacific............................................. 8,777 5,743 9,599
Luminescent Systems & Other **........................... (3,977) (2,308) (1,758)
Corporate expenses....................................... (14,990) (15,361) (16,548)
New Business Development expenses........................ (26,063) (25,783) (22,036)
-------- -------- --------
Earnings from operations...................................... $ 96,182 $100,260 $ 94,545
-------- -------- --------
-------- -------- --------
Identifiable assets:
North America............................................ $210,465 $175,503 $153,585
Europe................................................... 240,640 244,253 254,282
Latin America............................................ 28,209 35,528 31,949
Asia/Pacific............................................. 73,118 57,682 43,907
Luminescent Systems & Other.............................. 13,469 16,316 16,238
Corporate................................................ 37,326 24,176 26,598
-------- -------- --------
Total assets.................................................. $603,227 $553,458 $526,559
-------- -------- --------
-------- -------- --------
</TABLE>
* North American expenses included $12.7 million in restructuring charges in
the year ended December 31, 1992, and $2.3 million in restructuring charges
in the year ended December 31, 1991.
** Luminescent Systems expenses included $1.2 million in manufacturing
consolidation charges in the year ended December 31, 1993.
Net sales represents sales to unaffiliated customers. Earnings from
operations includes gross margin less selling, general, administrative, and
research and development expenses. Investment income, interest expense, foreign
exchange gains and losses, intercompany expenses, miscellaneous non-operating
expenses, and income taxes are not included in operating profit.
Identifiable assets do not include intercompany receivables and
intercompany profit-in-inventory. Assets pertaining to NBD are included in the
assets of the business unit where the NBD facilities are physically located.
Accordingly, Newington and Cleveland NBD facilities are included with North
American assets, Irish and German NBD facilities are included with European
assets, and the Japanese NBD facility is included with Asia/Pacific assets.
Goodwill is included in the business or region's identifiable assets. Corporate
assets include cash, investments, property, prepaid assets, and investments in
joint ventures as well as the cash and investments of certain holding companies
whose records are maintained at Corporate Headquarters.
Since a substantial portion of our business is transacted in foreign
locations and currencies, the Company's financial statements are affected by
fluctuations in foreign exchange rates. A stronger U.S. dollar decreases the
translated results of foreign subsidiaries, while a weaker U.S. dollar increases
the translated results.
26
<PAGE> 29
Foreign subsidiaries' assets and liabilities are translated at exchange
rates prevailing on the balance sheet date. Revenues and expenses are translated
at average exchange rates prevailing during the period, and elements of
stockholders' equity are translated at historical rates. Any resulting
translation gains and losses are reported separately in stockholders' equity.
For the Company's subsidiaries operating in countries with very high inflation
rates (primarily in Latin America), the translation is the same except that
inventories, cost of sales, property, plant and equipment, and depreciation are
translated at historical rates. Resulting translation gains and losses for these
subsidiaries are included in income.
The Company's Brazilian subsidiary was subject to a rate of inflation in
excess of two thousand percent in 1993, in excess of one thousand percent in
1992, and in excess of four hundred percent in 1991. If the Company excluded the
effects of inflation from the Brazilian sales value, Brazilian sales would have
been reduced by $8.1 million (1993), $7.0 million (1992), and $4.8 million
(1991) from the net sales amounts reported above for Latin America. Similarly,
Brazilian operating profit would have been reduced by $7.1 million (1993), $5.6
million (1992), and $3.9 million (1991) from the operating profit amounts
reported for Latin America.
Certain of the Company's foreign subsidiaries are subject to the effects of
import and export restrictions, exchange controls, and other restrictive
regulations.
NOTE 4 SUPPLEMENTARY INFORMATION TO THE CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
(dollars in thousands)
Maintenance and repairs............................... $ 8,550 $ 8,214 $ 7,018
Rents................................................. $10,993 $ 8,786 $ 8,171
Advertising costs..................................... $34,161 $31,845 $27,177
Depreciation.......................................... $17,461 $16,769 $14,739
</TABLE>
NOTE 5 SHORT-TERM DEBT
Short-term debt and bank lines of credit are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
(dollars in thousands)
Short-term debt:
Domestic bank debt................................................. $ 96,829 $ 10,000
Foreign bank debt.................................................. 3,537 8,763
Other.............................................................. 2,681 4,784
------------ ------------
Total short-term debt................................................ $103,047 $ 23,547
------------ ------------
------------ ------------
Total available bank lines of credit:
Amount available to foreign subsidiaries........................... $ 28,228 $ 31,482
Amount available to parent Company and domestic subsidiaries....... 225,000 123,000
------------ ------------
Total available bank lines of credit................................. $253,228 $154,482
------------ ------------
------------ ------------
Amounts outstanding under above bank lines of credit................. $ 99,963 $ 14,099
Average aggregate short-term bank debt............................... $ 79,396 $ 20,193
Maximum bank debt outstanding at any month end....................... $101,767 $ 33,572
Average interest rate on short-term bank debt during the period*..... 5% 10%
Average interest rate on short-term bank debt at end of period*...... 4% 10%
</TABLE>
* Average and period ending interest rates on consolidated short-term bank debt
include the effects of local currency borrowings in highly inflationary
environments, where interest rates obtained on borrowings reflect the
underlying levels of local inflation. The exception to this is Brazil, where,
because of the potential for significant distortion, the inflation components
of interest expense, amounting to $6.7 million in 1993 and $7.6 million in
1992, have been reported in the translation component of foreign exchange
loss. Substan-
27
<PAGE> 30
tially offsetting these amounts are exchange gains arising from the
translation of the short-term bank debt as the Brazilian currency devalues
against the U.S. dollar, at a pace generally in line with the pace of local
inflation.
Substantially all of the Company's bank lines of credit are of an
uncommitted or informal nature. As such, the lines of credit may generally be
cancelled at any time either by the Company or the bank. Borrowings under these
lines are on such terms and conditions as may be mutually agreed upon.
There were no significant compensating balance requirements at December 31,
1993.
NOTE 6 INCOME TAXES
During 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). Under SFAS No.
109, deferred taxes are recorded under the liability method rather than the
income statement approach previously used by the Company under Accounting
Principles Board Opinion No. 11 (APB No. 11).
Two methods of recognizing the cumulative effect of the adoption of SFAS
No. 109 were available to the Company: (1) restating the financial statements of
one or more prior year(s), or (2) recognizing the effect in the current year
results of operations. The Company elected to restate the financial statements
for 1992, 1991, and 1990 rather than reflecting the cumulative adjustment in
1993 earnings.
The cumulative adjustment resulting from the adoption of SFAS No. 109
reduced the Company's retained earnings as of December 31, 1992, 1991, and 1990
by $3.7 million, $3.5 million, and $1.2 million, respectively. The effect of
restating the financial statements for 1992, 1991, and 1990 may be summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1992 1991 1990
------------ ------------ ------------
<S> <C> <C> <C>
(dollars in thousands, except per share amounts)
Net earnings as previously reported............ $ 72,311 $ 71,914 $ 67,423
SFAS No. 109 adjustment........................ (230) (2,356) (1,152)
------------ ------------ ------------
Restated net earnings.......................... $ 72,081 $ 69,558 $ 66,271
------------ ------------ ------------
------------ ------------ ------------
Earnings per share as previously reported...... $ 1.99 $ 1.98 $ 1.86
SFAS No. 109 adjustment........................ (.01) (.07) (.04)
------------ ------------ ------------
Restated earnings per share.................... $ 1.98 $ 1.91 $ 1.82
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
In addition to restating the financial statements for 1992, 1991, and 1990,
the unaudited quarterly information in Note 14, Quarterly Financial Data, and
the selected financial data presented in the Ten-Year Financial Review were also
restated for those years to reflect a SFAS No. 109 basis.
28
<PAGE> 31
The Company's consolidated effective tax rates have been less than the
United States Federal statutory tax rates for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
U.S. Federal statutory rate.................... 35.0% 34.0% 34.0%
Decrease resulting from operations of Irish
subsidiaries................................. (9.3%) (11.0%) (7.5%)
Decrease resulting from operations of Puerto
Rican subsidiary............................. (5.2%) (4.9%) (4.0%)
Increase resulting from higher taxed foreign
earnings and foreign operating losses with no
current or deferred tax benefit.............. 1.8% 3.0% 1.0%
Benefit realized from amended 1986 and 1987
Federal returns.............................. -- (0.1%) (2.6%)
Net Federal and foreign taxes on repatriated
foreign earnings............................. 0.9% 1.8% 3.7%
Effect of SFAS No. 109 restatement............. -- 0.2% 2.5%
All other (individual items less than 5% of
U.S. Federal statutory rate)................. 1.8% 1.2% 0.4%
----- ------ -----
Effective tax rate............................. 25.0% 24.2% 27.5%
----- ------ -----
----- ------ -----
</TABLE>
A significant portion of the Company's earnings is derived from operations
located in Ireland and Puerto Rico. Substantially all of the earnings of the
Company's manufacturing subsidiary in Ireland are subject to a 10% income tax.
This reduced tax rate is provided under an industrial relief incentive provided
by Irish tax law and is effective through December 31, 2010.
Prior to 1994, the earnings of the Company's subsidiary in Puerto Rico were
exempt from U.S. tax and could be remitted as dividends without the imposition
of U.S. regular income tax. However, such dividends were subject to the U.S.
alternative minimum tax and to Puerto Rican withholding taxes equal to 7% of the
remitted earnings. The cumulative undistributed earnings of the Puerto Rican
subsidiary on which no "tollgate" withholding taxes have been provided total
$32.8 million and are indefinitely reinvested in Puerto Rico. Beginning in 1994,
a portion of the Puerto Rican subsidiary's earnings will be subject to U.S. tax
due to tax law changes passed during 1993.
The Company's subsidiary in Puerto Rico currently operates under a grant of
partial tax exemption which extends to June 30, 2002. Under the terms of the
grant, 10% of this subsidiary's manufacturing income is subject to Puerto Rican
corporate income tax. All appropriate Puerto Rican corporate income tax has been
provided.
At December 31, 1993, applicable U.S. income and foreign withholding taxes
have not been provided on $180.2 million of accumulated earnings of foreign
subsidiaries because it is the Company's intention to indefinitely reinvest
these earnings overseas, or to repatriate these earnings only when it is tax
effective to do so. It is not practicable to accurately estimate the amount of
unrecognized deferred U.S. tax liability on these undistributed earnings.
In January 1992, the Internal Revenue Service commenced an audit of fiscal
years 1986 through 1989. The Company anticipates completion of this audit during
1994 and expects no charge to income to result from the audit.
29
<PAGE> 32
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
DOMESTIC FOREIGN TOTAL
(dollars in thousands) TAXES TAXES TAXES
-------- ------- -------
<S> <C> <C> <C>
Year Ended December 31, 1993
Current.................................................. $ 5,726 $17,015 $22,741
Deferred................................................. 599 (589) 10
-------- ------- -------
$ 6,325 $16,426 $22,751
-------- ------- -------
-------- ------- -------
Year Ended December 31, 1992
Current.................................................. $ 5,763 $21,713 $27,476
Deferred (Restated under SFAS No. 109)................... (4,779) 367 (4,412)
-------- ------- -------
$ 984 $22,080 $23,064
-------- ------- -------
-------- ------- -------
Year Ended December 31, 1991
Current.................................................. $ (669) $24,474 $23,805
Deferred (Restated under SFAS No. 109)................... 3,316 (794) 2,522
-------- ------- -------
$ 2,647 $23,680 $26,327
-------- ------- -------
-------- ------- -------
</TABLE>
Deferred taxes reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. If it is more likely than not that
a deferred tax asset, in whole or in part, will not be realized, a valuation
allowance is established which reduces the asset to its realizable value.
The following is a summary of the tax effects of the significant temporary
differences which comprise the Company's deferred tax assets and liabilities as
of December 31, 1993 and December 31, 1992:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
(dollars in thousands) 1993 1992
------------ ------------
<S> <C> <C>
Deferred tax assets:
Inventory reserves........................................ $ 1,780 --
Self-insurance reserves................................... 2,318 $ 2,525
Bad debt reserves......................................... 1,087 --
Restricted compensation................................... 1,083 942
Restructuring/reorganization costs........................ 3,000 3,933
Depreciation.............................................. -- (883)
Severance reserves........................................ 858 882
Profit in inventory....................................... 2,350 2,622
Foreign tax credits....................................... 2,940 --
Net operating losses...................................... 6,575 4,310
APB 23 dividends.......................................... (6,307) --
Interest income/expense................................... (1,118) (803)
Other..................................................... 4,871 3,576
Valuation allowance....................................... (6,535) (4,886)
------------ ------------
Total assets...................................... $ 12,902 $ 12,218
------------ ------------
------------ ------------
Deferred tax liabilities:
Depreciation.............................................. $ 1,240 $ 1,500
Bad debt reserves......................................... -- (1,155)
ABP 23 dividends.......................................... -- 6,014
Inventory reserves........................................ -- (1,277)
Foreign tax credits....................................... -- (3,509)
Other..................................................... 551 (327)
Valuation allowance....................................... -- 303
------------ ------------
Total liabilities................................. $ 1,791 $ 1,549
------------ ------------
------------ ------------
</TABLE>
30
<PAGE> 33
As of December 31, 1993, the Company has net operating loss (NOL)
carryforwards and U.S. tax credit carryforwards which will expire, if unused, as
follows:
(dollars in thousands)
<TABLE>
<CAPTION>
FOREIGN U.S. STATE FOREIGN TAX R&D
YEAR OF EXPIRATION NOL NOL CREDIT CREDIT
----------------------------------------- ------- ---------- ----------- ------
<S> <C> <C> <C> <C>
1994-1998................................ $17,638 $1,250 $ 2,497 --
After 1998............................... 1,212 272 -- $283
Indefinite............................... 1,640 -- -- --
------- ---------- ----------- ------
Total.......................... $20,490 $1,522 $ 2,497 $283
------- ---------- ----------- ------
------- ---------- ----------- ------
</TABLE>
The net operating losses shown above may generate tax benefits of $6.6
million of which only $.5 million have been recognized in the Company's
financial statements to date. The balance of $6.1 million has been offset by a
valuation allowance because of the uncertainty of ultimate realization.
The Company's total valuation allowance increased by $1.3 million during
the year principally due to additional foreign net operating losses. During
1993, no changes occurred in the conclusions regarding the need for a valuation
allowance in any tax jurisdiction.
NOTE 7 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK
Off-Balance Sheet Risk
The Company enters into forward foreign exchange contracts primarily to
hedge intercompany receivables and intercompany lending activity. These
contracts are not used for speculative purposes and do not subject the Company
to risk due to exchange rate movements because gains and losses on these
contracts offset gains and losses on the transactions being hedged.
Additionally, forward foreign exchange contracts are used to hedge firm foreign
currency commitments. In general, the maturities of the contracts coincide with
the underlying exposure positions they are intended to hedge, usually less than
six months. At December 31, 1993, the fair value of the Company's forward
foreign exchange contracts approximated carrying value.
The Company has entered into a series of interest rate swap agreements
which have effectively fixed interest rates on a portion of its floating rate
debt. Under these agreements the Company will pay the counterparties interest at
a fixed rate and receive in return interest at a variable rate based on the
London Interbank Offered Rate (LIBOR). At December 31, 1993, the Company had
contracts in place which served to fix the interest rate on $40.0 million of
underlying short-term bank debt. These contracts have final maturities ranging
from 1996 to 2003 and carry a weighted average fixed rate payable approximating
5 1/2%. At December 31, 1993, the estimated amount that the Company would
receive or pay to terminate the agreements was not significant.
The counterparties to the Company's forward foreign exchange contracts and
interest rate swap agreements consist of a number of major international
financial institutions. The Company monitors its position with, and the credit
quality of, these financial institutions and does not anticipate any losses as a
result of counterparty non-performance.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash investments and trade
receivables.
The Company's cash investments are with major international financial
institutions, with limitations established as to the maximum amount of credit
exposure to any one financial institution. Concentrations of credit risk with
respect to trade receivables are limited due to the large number of customers
comprising the Company's customer base and their dispersion across different
businesses and geographic areas.
As of December 31, 1993, the Company had no significant concentrations of
credit risk.
31
<PAGE> 34
NOTE 8 COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries have entered into long-term lease
agreements for real property and equipment. The following information reflects
rental commitments under noncancellable operating leases in effect at December
31, 1993:
<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
1994................................................. $6,134
1995................................................. $4,104
1996................................................. $2,534
1997................................................. $1,301
1998................................................. $1,120
1999 and thereafter.................................. $1,149
</TABLE>
The outstanding amount of receivables sold to financial institutions with
recourse was $0.8 million at December 31, 1993, and $1.1 million at December 31,
1992. Proceeds from these transactions were $10.6 million for the year ended
December 31, 1993, $14.4 million for the year ended December 31, 1992, and $15.4
million for the year ended December 31, 1991.
NOTE 9 LONG-TERM DEBT
Long-term debt outstanding is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
(dollars in thousands)
Unsecured domestic promissory note --
fixed interest rate of 8.5% -- final payment of $1,000 -- August
1994............................................................... $ 1,000 $ 2,000
Unsecured domestic promissory note --
fixed interest rate of 9.15% -- final payment of $10,000 -- July
1994............................................................... 10,000 20,000
Other................................................................ 3,760 3,312
------------ ------------
14,760 25,312
Less -- current portion.............................................. 11,732 11,167
------------ ------------
$ 3,028 $ 14,145
------------ ------------
------------ ------------
</TABLE>
Under the terms of the unsecured domestic promissory notes, the Company
must, among other things, maintain a specified level of working capital and
limit debt to a percentage of net tangible assets. At December 31, 1993, the
fair value of the long-term debt approximates the carrying value due to the near
term final maturity of the domestic promissory notes.
Long-term debt at December 31, 1993 matures during the following years:
<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
1994................................................. $ 11,732
1995................................................. $ 472
1996................................................. $ 387
1997................................................. $ 388
1998................................................. $ 392
1999 and thereafter.................................. $ 1,389
</TABLE>
32
<PAGE> 35
NOTE 10 EMPLOYEE STOCK PLANS
STOCK OPTION PLANS
Under the Company's stock option plans, options have been granted for
periods of ten years at prices equal to the market price on the date of grant.
Options are exercisable cumulatively at the rate of 20% per year with 20%
exercisable at the end of the first year and 20% at the beginning of each
succeeding year. Through December 31, 1993, 3,450,000 shares were reserved for
the program. Information regarding transactions under these plans is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
Option shares:
Outstanding at beginning of period................... 542,880 647,268 618,954
Granted.............................................. 56,000 64,000 174,800
Exercised............................................ (77,570) (164,788) (143,686)
Cancelled............................................ (6,360) (3,600) (2,800)
--------- --------- --------
Outstanding at end of period......................... 514,950 542,880 647,268
--------- --------- --------
--------- --------- --------
Exercisable at end of period......................... 351,590 347,960 398,228
Shares reserved for future grants.................... 1,073,240 1,122,880 183,280
Price range of outstanding options at end of period:
Low............................................. $ 7.00 $ 7.00 $ 4.88
Average......................................... $28.98 $25.59 $19.88
High............................................ $47.75 $47.75 $39.00
Average price of exercised options during the
period............................................. $13.47 $10.82 $ 9.68
</TABLE>
RESTRICTED STOCK PLAN
Under the Company's restricted stock plan, awards are issued without any
payment of cash consideration by the participant. The restricted shares become
available to the employee at the rate of 50% on the third anniversary of the
grant and the remaining 50% on the sixth anniversary of the grant. Expense
associated with these shares is amortized over the life of the grant.
Compensation expense was $1.2 million for 1993, $1.6 million for 1992, and $2.0
million for 1991. Through December 31, 1993, 900,000 shares were reserved for
the program. Information regarding transactions under this plan is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1993 1992 1991
------- -------- -------
<S> <C> <C> <C>
Outstanding at beginning of period...................... 251,500 335,100 344,500
Awarded................................................. 22,500 31,200 53,650
Vested.................................................. (41,000) (107,800) (46,750)
Cancelled............................................... (17,800) (7,000) (16,300)
------- -------- -------
Outstanding at end of period............................ 215,200 251,500 335,100
------- -------- -------
------- -------- -------
Shares reserved for future awards....................... 348,300 370,800 402,000
</TABLE>
THRIFT INVESTMENT PLAN
Under the Company's thrift investment plan, eligible employees may save, by
payroll deductions, a portion of their salaries. Up to 25% of the amount saved
may be invested in Company stock. In addition, the Company matches, in Company
stock, one half of the first 6% saved by the employee. The cost of the Company
match was $1.4 million in 1993, $1.2 million in 1992, and $1.0 million in 1991.
The average market price of the stock on a monthly basis is used in determining
employee purchases and the Company's matching contribution. Vesting of Company
contributions takes place after five years of service or after two years of
participation in the Plan, whichever is more favorable to the employee. Shares
issued under the Plan were 53,965 in 1993, 43,813 in 1992, and 50,283 in 1991.
The average issue price was $42.48, $44.32, and $34.13, respectively.
33
<PAGE> 36
NOTE 11 PENSION PLANS
On July 1, 1988, the Company revised its United States pension plan to a
non-contributory defined benefit plan. Under this cash balance plan, each
employee retained the value of his account as of June 30, 1988 and will receive
future credits annually based on salary and length of service. Plan assets are
invested primarily in guaranteed investment contracts and equity securities.
This plan covers all eligible employees in the United States.
The Company maintains a nonqualified retirement plan to supplement benefits
for designated employees whose pension plan benefits are limited by the
provisions of the Internal Revenue Code. The Company also has a pension plan for
outside directors and a Supplemental Retirement Agreement with its Chairman and
former Chief Executive Officer. Amounts related to these plans are included in
the disclosures below.
Certain of the Company's international subsidiaries provide retirement
benefits to eligible employees under defined benefit plans. The benefits are
based on salary and length of service. Plan assets for these plans are invested
primarily in equity securities and fixed income securities.
It is the Company's policy to make contributions to these plans sufficient
to meet the minimum funding requirements of applicable laws and regulations.
The Company accounts for the cost of its defined benefit plans in
accordance with Statement of Financial Accounting Standards No. 87, "Employers'
Accounting for Pensions" (SFAS No. 87). In accordance with the provisions of
SFAS No. 87, the Company has recorded an additional minimum liability at the end
of each year representing the excess of the accumulated benefit obligations over
the fair value of plan assets and accrued pension liabilities. The liabilities
have been offset by intangible assets to the extent possible. Because the asset
recognized may not exceed the amount of unrecognized prior service cost, the
balance of the liability at the end of the period is reported as a separate
reduction of stockholders' equity, net of tax benefits.
Amounts are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
(dollars in thousands)
Additional minimum liability................................. $3,463 $2,023
------------ ------------
------------ ------------
Intangible assets............................................ $1,303 $ 316
Reduction of stockholders' equity............................ $1,330 $1,101
Tax benefits................................................. $ 830 $ 606
</TABLE>
UNITED STATES PLANS
Net U.S. periodic pension cost is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
(dollars in thousands)
Service cost for benefits earned during the year............. $3,170 $3,303 $2,986
Interest cost on projected benefit obligation................ 1,721 1,794 1,545
Actual return on assets...................................... (2,032) (1,300) (2,695)
Net amortization and deferral................................ 100 (508) 1,224
------ ------ ------
Net periodic pension cost.................................... $2,959 $3,289 $3,060
------ ------ ------
------ ------ ------
</TABLE>
34
<PAGE> 37
The following table sets forth the U.S. plans' funded status and amounts
recognized in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
(dollars in thousands) 1993 1992
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.............................. $ 28,189 $ 23,681
Non-vested benefit obligation.......................... 2,119 1,865
------------ ------------
Accumulated benefit obligation......................... 30,308 25,546
Effect of proposed compensation increases.............. 196 492
------------ ------------
Projected benefit obligation................................ 30,504 26,038
Plan assets at fair value................................... 27,108 22,456
------------ ------------
Deficiency of plan assets over projected benefit
obligation................................................ (3,396) (3,582)
Unrecognized net loss....................................... 2,761 2,690
Unrecognized net transition asset........................... (261) (176)
Adjustment to recognize minimum liability................... (2,304) (2,023)
------------ ------------
Accrued pension cost recognized in the consolidated balance
sheet..................................................... $ (3,200) $ (3,091)
------------ ------------
------------ ------------
</TABLE>
The projected benefit obligation for the U.S. plans was determined using
the following assumptions:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
Weighted average discount rate.............................. 7.0% 7.0%
Rate of increase in compensation levels..................... 5.0% 5.0%
Expected long-term rate of return on assets................. 9.0% 9.0%
</TABLE>
INTERNATIONAL PLANS
Net international periodic pension cost is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
(dollars in thousands) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Service cost for benefits earned during the year........ $ 1,639 $ 1,578 $ 1,544
Interest cost on projected benefit obligation........... 1,905 1,880 1,670
Actual (return) loss on assets.......................... (4,893) 662 (2,875)
Net amortization and deferral........................... 3,781 (2,017) 1,916
------- ------- -------
Net periodic pension cost............................... $ 2,432 $ 2,103 $ 2,255
------- ------- -------
------- ------- -------
</TABLE>
35
<PAGE> 38
The following table sets forth the international plans' funded status and
amounts recognized in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
-------------------------- --------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
(dollars in thousands) BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................. $ 3,660 $11,365 $ 4,047 $ 7,464
Non-vested benefit obligation............. -- 2,280 -- 3,008
----------- ----------- ----------- -----------
Accumulated benefit obligation............ 3,660 13,645 4,047 10,472
Effect of proposed compensation
increases............................... 529 7,405 590 7,619
----------- ----------- ----------- -----------
Projected benefit obligation................... 4,189 21,050 4,637 18,091
Plan assets at fair value...................... 6,258 13,438 5,728 11,065
----------- ----------- ----------- -----------
Excess (deficiency) of plan assets over
projected benefit obligation................. 2,069 (7,612) 1,091 (7,026)
Unrecognized plan amendments................... 488 2,010 617 2,474
Unrecognized net (gain) loss................... (985) (884) 324 18
Unrecognized net transition (asset)
liability.................................... (1,402) 2,281 (1,797) 1,037
Adjustment to recognize minimum liability...... -- (1,165) -- --
----------- ----------- ----------- -----------
Prepaid (accrued) pension cost recognized in
the consolidated balance sheet............... $ 170 $(5,370) $ 235 $(3,497)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The projected benefit obligation for the international plans was determined
using the following assumptions:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
Weighted average discount rate............................... 7.0 - 15.0 % 7.0 - 15.4 %
Rate of increase in compensation levels...................... 4.0 - 13.0 % 5.0 - 13.0 %
Expected long-term rate of return on assets.................. 4.75 - 15.0 % 4.75 - 15.0 %
</TABLE>
Certain of the Company's international subsidiaries provide retirement
benefits to eligible employees under defined contribution plans. Contributions
are determined under various formulas. Certain other international subsidiaries
have pension and severance benefits that are not covered under formal pension
plans, including those accruing to employees under foreign government
regulations. Expenses are determined in accordance with local law. Pension
expense for these international subsidiaries amounted to $1.6 million in the
year ended December 31, 1993, $2.5 million in the year ended December 31, 1992,
and $1.9 million in the year ended December 31, 1991.
NOTE 12 POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
The Company provides postretirement health care and life insurance benefits
for all eligible employees in the United States and Puerto Rico. The benefit
plan is contributory based upon years of service and age at retirement. Health
care benefits are also extended to spouses of eligible employees and are fully
paid by retiree contributions.
During the first quarter of 1993, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" (SFAS No. 106). The statement
requires that annual postretirement benefit costs be accrued during an
employee's years of active service. In prior years, the Company expensed the
cost of such benefits when paid. In accordance with SFAS No. 106, the transition
obligation, representing the unfunded and unrecognized accumulated past service
benefit obligation for all plan participants, may be recognized as an expense in
the year of adoption or may be
36
<PAGE> 39
amortized on a straight-line basis over a period of up to twenty years. The
Company has adopted SFAS No. 106 by electing to amortize the transition
obligation of $13.3 million over twenty years.
Postretirement benefit cost was $2.6 million in 1993, $0.1 million in 1992,
and $0.1 million in 1991. Costs recorded in 1992 and 1991 were on a
pay-as-you-go basis. The Company continues to fund medical and life insurance
benefit costs on a pay-as-you-go basis.
Net periodic postretirement benefit cost in 1993 is summarized as follows:
<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
Service cost for benefits earned during the year.................. $ 795
Interest cost on accumulated postretirement obligation............ 1,127
Amortization of transition obligation............................. 666
-------
Net periodic postretirement benefit cost.......................... $2,588
-------
-------
</TABLE>
The following table sets forth the funded status and amounts recognized in
the Company's consolidated balance sheet at December 31, 1993:
<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
Accumulated postretirement benefit obligation:
Retirees........................................................ $ (4,302)
Employees fully eligible........................................ (4,042)
Other active participants....................................... (7,119)
----------
Total accumulated postretirement benefit obligation............... (15,463)
Unrecognized transition obligation................................ 12,637
Unrecognized loss................................................. 341
----------
Accrued postretirement benefit cost recognized in the consolidated
balance sheet................................................... $ (2,485)
----------
----------
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation at December 31, 1993 was 7.5%. The rate of
increase in compensation levels was 5%. The medical inflation rate used was 12%
in 1994, decreasing by 1% per year to 6% in 2000, and 5.5% for all years
thereafter.
The effect of a one percentage point increase in the assumed health care
cost trend rate would increase the accumulated postretirement benefit obligation
as of December 31, 1993 by approximately $2.3 million and increase the aggregate
of the service and interest cost components of the net periodic postretirement
benefit cost by approximately $0.3 million in 1993.
NOTE 13 POSTEMPLOYMENT BENEFITS
In November 1992, the FASB issued Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits" (SFAS No.
112). This statement must be adopted by the Company no later than calendar year
1994 but earlier adoption is permitted. The statement requires the recognition
of the cost of postemployment benefits (after employment but before retirement)
on an accrual basis. The Company will adopt SFAS No. 112 in 1994. The new
standard is not expected to have a significant effect on the Company's annual
benefits expense or liabilities.
37
<PAGE> 40
NOTE 14 QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-----------------------------------------
1ST QTR 2ND QTR 3RD QTR 4TH QTR
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(dollars in thousands, except per share amounts)
Net sales............................................. $149,101 $158,125 $153,385 $152,001
Gross margin.......................................... $ 90,985 $ 94,512 $ 92,787 $ 92,510
Net earnings.......................................... $ 19,664 $ 17,444 $ 16,314 $ 14,831
Net earnings per share................................ $ .54 $ .50 $ .46 $ .42
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
-----------------------------------------
1ST QTR 2ND QTR 3RD QTR 4TH QTR
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................................. $147,464 $154,152 $159,643 $146,708
Gross margin.......................................... $ 93,073 $ 95,714 $ 99,105 $ 90,900
Net earnings.......................................... $ 19,651 $ 11,605 $ 21,604 $ 19,221
Net earnings per share................................ $ .54 $ .32 $ .59 $ .53
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1991
-----------------------------------------
1ST QTR 2ND QTR 3RD QTR 4TH QTR
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................................. $138,344 $141,011 $140,345 $141,518
Gross margin.......................................... $ 84,900 $ 85,734 $ 85,402 $ 87,681
Net earnings.......................................... $ 15,266 $ 18,178 $ 18,621 $ 17,493
Net earnings per share................................ $ .42 $ .50 $ .51 $ .48
</TABLE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements between Registrant and its independent
accountants on accounting and financial disclosure during the year ended
December 31, 1993.
38
<PAGE> 41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Executive Officers of the Registrant*
<TABLE>
<CAPTION>
POSITION OR OFFICE WITH
THE COMPANY AND BUSINESS
SERVED AS EXPERIENCE DURING PAST
NAME AGE OFFICER SINCE FIVE (5) YEAR PERIOD
- ------------------------------ --- -------------- --------------------------------------------
<S> <C> <C> <C>
David Freeman................. 49 October 1984 President and Chief Executive Officer, 1993;
President and Chief Operating Officer,
1991; Executive Vice President and Chief
Operating Officer, 1990; Senior Vice
President and President -- North American
and Pacific Operations, 1988.
Robert L. Aller............... 59 July 1979 Senior Vice President and Chief Financial
Officer, 1990; Vice President, Chief
Financial Officer and Treasurer, 1985.
Louis J. Baccei............... 53 February 1992 Senior Vice President and President, New
Business Development, 1991; Vice
President, Research and Development,
Bausch and Lomb, Inc., Rochester, New
York, 1985 to 1990.
Gerardus B.E.M. Briels........ 57 December 1988 Vice President and President -- North
American Region, 1991; Vice President and
President -- North American Automotive &
Consumer Group, 1989; Regional Manager,
Latin American Operations, 1984.
Robert M. Kimball............. 38 July 1993 Treasurer, 1993; Assistant Treasurer, 1986.
Eugene F. Miller.............. 51 October 1986 Vice President, Secretary and General
Counsel, 1986.
</TABLE>
*All officers are elected to serve a one year term and until their successors
are elected and qualified.
The information contained in the Company's 1994 Proxy Statement on pages
2-4, under the headings "ELECTION OF DIRECTORS -- Nominees for Election as
Directors" and on page 19 under the heading "ELECTION OF DIRECTORS -- Executive
Compensation and Other Information -- Section 16 Reports" is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the Company's 1994 Proxy Statement under the
heading "ELECTION OF DIRECTORS -- Board of Directors, Committee Meetings and
Director Compensation" on pages 6-7, "ELECTION OF DIRECTORS -- Executive
Compensation and Other Information -- Summary Compensation Table" and
"-- Options" on pages 9-11 and "ELECTION OF DIRECTORS -- Executive Compensation
and Other Information -- Pension Benefits" and "-- Executive and Consulting
Agreements" on pages 16-18, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in the Company's 1994 Proxy Statement, on pages 5
and 19, under the headings "ELECTION OF DIRECTORS -- Stock Ownership of
Management" and "ELECTION OF DIRECTORS -- Ownership of the Company's Securities"
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None reportable in the year ended December 31, 1993.
39
<PAGE> 42
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE NO. IN
FORM 10-K
-----------
<S> <C>
(a) The following documents are filed as part of this report:
(1) FINANCIAL STATEMENTS:
See detailed index under Item 8.
(2) FINANCIAL STATEMENT SCHEDULES:
See detailed index under Item 8.
(3) CONSENT OF INDEPENDENT ACCOUNTANTS..................................... 44
(b) Reports on Form 8-K
</TABLE>
No reports on Form 8-K were filed by Registrant during the fourth quarter
ended December 31, 1993.
(c) Exhibits
<TABLE>
<S> <C>
(3) Articles of Incorporation and By-Laws of Loctite Corporation (filed as Exhibit 3
to Loctite Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 and incorporated herein by reference).
(10)a* 1976 Stock Option Plan, as amended (filed as Exhibit A to Loctite Corporation's
definitive Proxy Statement for the 1979 Annual Meeting of Stockholders, dated
October 2, 1979, and incorporated herein by reference).
(10)b* 1989 Restricted Stock Plan (filed as Exhibit A to Loctite Corporation's definitive
Proxy Statement for the 1989 Annual Meeting of Stockholders, dated October 6,
1989, and incorporated herein by reference).
(10)c* 1992 Stock Option Plan (filed as Exhibit A to Loctite Corporation's definitive
Proxy Statement for the 1992 Annual Meeting of Stockholders, dated March 17, 1992,
and incorporated herein by reference).
(10)d* Deferred Compensation Plan and form of Deferred Compensation Agreement (filed as
Exhibit 5.1 to Loctite Corporation's Annual Report on Form 10-K for the fiscal
year ended June 30, 1979, and incorporated herein by reference).
(10)e* Management Incentive Compensation Plan of 1983 (filed as Exhibit (10)e to Loctite
Corporation's Annual Report on Form 10-K for the fiscal year ended June 30, 1983,
and incorporated herein by reference).
(10)f* Employee Thrift Investment Plan, as amended (filed as Exhibit (10)f to Loctite
Corporation's Annual Report on Form 10-K for the fiscal year ended June 30, 1983,
and incorporated herein by reference).
(10)g National Union Fire Insurance Company of Pittsburgh, Pennsylvania, Policy No. 435
04 35 -- Directors and Officers Insurance and Company Reimbursement Policy
effective June 30, 1989 (filed as Exhibit (10)g to Loctite Corporation's Annual
Report on Form 10-K for the fiscal year ended June 30, 1989, and incorporated
herein by reference).
(10)h Agreement dated May 23, 1985 between Henkel of America, Inc. and Loctite
Corporation (filed as Exhibit (10)f to Loctite Corporation's Annual Report on Form
10-K for the fiscal year ended June 30, 1985, and incorporated herein by
reference).
</TABLE>
40
<PAGE> 43
<TABLE>
<S> <C>
(10)i* Retirement Plan for Non-Employee Directors (filed as Exhibit (10)i to Loctite
Corporation's Annual Report on Form 10-K for the fiscal year ended June 30, 1990,
and incorporated herein by reference).
(10)j* Supplemental Retirement Agreement for Chairman and former Chief Executive Officer
(filed as Exhibit (10)j to Loctite Corporation's Annual Report on Form 10-K for
the fiscal year ended June 30, 1990 and incorporated herein by reference).
(10)k* Non-Qualified Retirement Plan of Loctite Corporation (filed as Exhibit (10)l to
Loctite Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, and incorporated herein by reference).
(21) Subsidiaries of Registrant.
(99.1) Annual Report on Form 11-K of the Retirement and Savings Plan of Loctite Puerto
Rico, Inc. for the fiscal year ended June 30, 1993 and incorporated by reference
to Exhibit 99.1 to the Company's Form 10-K/A for the fiscal year ended December
31, 1992 as filed with the Securities and Exchange Commission on December 23,
1993.
</TABLE>
* Management contracts or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(c) of this Report.
41
<PAGE> 44
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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
By /s/ DAVID FREEMAN
----------------------------------
DAVID FREEMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: February 22, 1994
POWER OF ATTORNEY
EACH OF THE UNDERSIGNED HEREBY APPOINTS EUGENE F. MILLER AND WILLIAM V.
GRICKIS, JR., AND EACH OF THEM SEVERALLY, HIS TRUE AND LAWFUL ATTORNEYS TO
EXECUTE ON BEHALF OF THE UNDERSIGNED ANY AND ALL AMENDMENTS TO THIS ANNUAL
REPORT ON FORM 10-K AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION.
EACH SUCH ATTORNEY WILL HAVE THE POWER TO ACT HEREUNDER WITH OR WITHOUT THE
OTHERS. EACH OF THE UNDERSIGNED HEREBY RATIFIES AND CONFIRMS ALL THAT SUCH
ATTORNEYS, OR ANY OF THEM, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
------------------------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<C> <S> <C>
/s/ DAVID FREEMAN Director, President and February 22, 1994
- ------------------------------------------- Chief Executive Officer
DAVID FREEMAN (Principal Executive
Officer)
/s/ KENNETH W. BUTTERWORTH Director, Chairman February 22, 1994
- -------------------------------------------
KENNETH W. BUTTERWORTH
/s/ JACK H. SCHOFIELD Director February 22, 1994
- -------------------------------------------
JACK H. SCHOFIELD
/s/ JOHN K. ARMSTRONG Director February 22, 1994
- -------------------------------------------
JOHN K. ARMSTRONG
/s/ ROBERT E. IX Director February 22, 1994
- -------------------------------------------
ROBERT E. IX
/s/ FREDERICK B. KRIEBLE Director February 22, 1994
- -------------------------------------------
FREDERICK B. KRIEBLE
/s/ DR. ROMAN DOHR Director February 22, 1994
- -------------------------------------------
DR. ROMAN DOHR
</TABLE>
42
<PAGE> 45
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<C> <S> <C>
/s/ DR. JURGEN MANCHOT Director February 22, 1994
- ------------------------------------------
DR. JURGEN MANCHOT
/s/ STEPHEN J. TRACHTENBERG Director February 22, 1994
- ------------------------------------------
STEPHEN J. TRACHTENBERG
/s/ WALLACE BARNES Director February 22, 1994
- ------------------------------------------
WALLACE BARNES
/s/ ROBERT L. ALLER Senior Vice President and February 22, 1994
- ------------------------------------------ Chief Financial Officer
ROBERT L. ALLER (Principal Financial and
Accounting Officer)
</TABLE>
43
<PAGE> 46
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Post-Effective Amendments to the Registration
Statements on Form S-8 (Nos. 2-74537, 2-65775, 2-57724, 2-49684, 33-34061,
33-35125, and 33-32379) of Loctite Corporation of our report dated January 25,
1994 appearing on page 17 of Loctite Corporation's Annual Report on Form 10-K
for the year ended December 31, 1993. We also consent to the reference to us
under the heading "Experts" in such Prospectuses.
/s/ PRICE WATERHOUSE
PRICE WATERHOUSE
One Financial Plaza
Hartford, Connecticut
March 16, 1994
44
<PAGE> 47
SCHEDULE V
LOCTITE CORPORATION
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
BALANCE AT RETIREMENTS, FOREIGN BALANCE
BEGINNING ADDITIONS SALES OR CURRENCY AT END
CLASSIFICATION OF PERIOD AT COST TRANSFERS TRANSLATION OTHER OF PERIOD
- ----------------------------- ------------ ----------- ----------- ----------- ---------- ------------
YEAR ENDED DECEMBER 31, 1993
<S> <C> <C> <C> <C> <C> <C>
Land and land improvements... $ 11,903,000 $ 266,000 $ 2,000 $ 507,000 $ -- $ 12,674,000
Buildings.................... 75,911,000 8,018,000 867,000 314,000 720,000* 84,096,000
Machinery and equipment...... 147,387,000 18,327,000 3,573,000 (6,048,000) 1,500,000* 157,593,000
Construction in progress..... 8,329,000 19,050,000 1,152,000 -- -- 26,227,000
------------ ----------- ----------- ----------- ---------- ------------
Total............... $243,530,000 $45,661,000 $ 5,594,000 $(5,227,000) $2,220,000 $280,590,000
------------ ----------- ----------- ----------- ---------- ------------
------------ ----------- ----------- ----------- ---------- ------------
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
<S> <C> <C> <C> <C> <C> <C>
Land and land improvements... $ 10,515,000 $ 1,475,000 $ 1,000 $ (86,000) $ -- $ 11,903,000
Buildings.................... 62,848,000 14,776,000 85,000 (1,616,000) (12,000) 75,911,000
Machinery and equipment...... 132,131,000 25,306,000 4,928,000 (5,134,000) 12,000 147,387,000
Construction in progress..... 9,689,000 10,325,000 11,704,000 19,000 -- 8,329,000
------------ ----------- ----------- ----------- ---------- ------------
Total............... $215,183,000 $51,882,000 $16,718,000 $(6,817,000) $ -- $243,530,000
------------ ----------- ----------- ----------- ---------- ------------
------------ ----------- ----------- ----------- ---------- ------------
<CAPTION>
YEAR ENDED DECEMBER 31, 1991
<S> <C> <C> <C> <C> <C> <C>
Land and land improvements... $ 7,229,000 $ 3,173,000 $ -- $ 113,000 $ -- $ 10,515,000
Buildings.................... 58,236,000 5,197,000 648,000 63,000 -- 62,848,000
Machinery and equipment...... 121,532,000 15,455,000 4,183,000 (673,000) -- 132,131,000
Construction in progress..... -- 9,689,000 -- -- -- 9,689,000
------------ ----------- ----------- ----------- ---------- ------------
Total............... $186,997,000 $33,514,000 $ 4,831,000 $ (497,000) $ -- $215,183,000
------------ ----------- ----------- ----------- ---------- ------------
------------ ----------- ----------- ----------- ---------- ------------
</TABLE>
* Primarily the plant and equipment of companies acquired in 1993.
45
<PAGE> 48
SCHEDULE VI
LOCTITE CORPORATION
ACCUMULATED DEPRECIATION
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO FOREIGN BALANCE
BEGINNING COSTS AND RETIREMENTS CURRENCY AT END
CLASSIFICATION OF PERIOD EXPENSES OR SALES TRANSLATION OTHER OF PERIOD
- --------------------------- ------------ ----------- ---------- ----------- -------- ------------
YEAR ENDED DECEMBER 31, 1993
<S> <C> <C> <C> <C> <C> <C>
Land improvements.......... $ 997,000 $ 277,000 $ 2,000 $ 23,000 $ -- $ 1,295,000
Buildings.................. 21,912,000 2,436,000 500,000 (154,000) 52,000* 23,746,000
Machinery and equipment.... 81,623,000 14,748,000 2,647,000 (3,056,000) 368,000* 91,036,000
------------ ----------- ---------- ----------- -------- ------------
Total............. $104,532,000 $17,461,000 $3,149,000 $(3,187,000) $420,000 $116,077,000
------------ ----------- ---------- ----------- -------- ------------
------------ ----------- ---------- ----------- -------- ------------
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
<S> <C> <C> <C> <C> <C> <C>
Land improvements.......... $ 1,225,000 $ 211,000 $ 1,000 $ (431,000) $ (7,000) $ 997,000
Buildings.................. 19,787,000 2,640,000 67,000 (406,000) (42,000) 21,912,000
Machinery and equipment.... 73,566,000 13,918,000 3,621,000 (2,338,000) 98,000 81,623,000
------------ ----------- ---------- ----------- -------- ------------
Total............. $ 94,578,000 $16,769,000 $3,689,000 $(3,175,000) $ 49,000 $104,532,000
------------ ----------- ---------- ----------- -------- ------------
------------ ----------- ---------- ----------- -------- ------------
<CAPTION>
YEAR ENDED DECEMBER 31, 1991
<S> <C> <C> <C> <C> <C> <C>
Land improvements.......... $ 1,157,000 $ 68,000 $ -- $ -- $ -- $ 1,225,000
Buildings.................. 17,908,000 2,270,000 197,000 (194,000) -- 19,787,000
Machinery and equipment.... 63,916,000 12,401,000 2,670,000 (81,000) -- 73,566,000
------------ ----------- ---------- ----------- -------- ------------
Total............. $ 82,981,000 $14,739,000 $2,867,000 $ (275,000) $ -- $ 94,578,000
------------ ----------- ---------- ----------- -------- ------------
------------ ----------- ---------- ----------- -------- ------------
</TABLE>
* Primarily the depreciation of companies acquired in 1993.
46
<PAGE> 49
SCHEDULE VIII
LOCTITE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCES FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT ACCOUNTS
BEGINNING CHARGED TO WRITTEN OFF BALANCE AT
PERIOD OF PERIOD EXPENSES AND OTHER END OF PERIOD
- ----------------------------------------------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1993................... $ 4,740,000 $ 2,028,000 $ 2,109,000 $ 4,659,000
Year Ended December 31, 1992................... $ 5,190,000 $ 1,274,000 $ 1,724,000 $ 4,740,000
Year Ended December 31, 1991................... $ 4,611,000 $ 1,977,000 $ 1,398,000 $ 5,190,000
</TABLE>
47
<PAGE> 50
SCHEDULE IX
LOCTITE CORPORATION
SHORT-TERM BANK DEBT
<TABLE>
<CAPTION>
WEIGHTED AVERAGE MAXIMUM AMOUNT AVERAGE AMOUNT WEIGHTED AVERAGE
BALANCE AT INTEREST RATE AT OUTSTANDING DURING OUTSTANDING DURING INTEREST RATE DURING
PERIOD END OF PERIOD END OF PERIOD* THE PERIOD** THE PERIOD** THE PERIOD*
- --------------------------- ------------- ---------------- ------------------ ------------------ --------------------
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1993........ $ 100,366,000 4% $101,767,000 $ 79,396,000 5%
Year Ended
December 31, 1992........ $ 18,763,000 10% $ 33,572,000 $ 20,193,000 10%
Year Ended
December 31, 1991........ $ 5,227,000 11% $ 20,516,000 $ 15,151,000 12%
</TABLE>
* Weighted Average Interest Rates were influenced by the magnitude and duration
of local currency borrowings in highly inflationary environments, where
interest rates obtained on borrowings reflect the underlying levels of local
inflation. The exception to this is Brazil, where, because of the potential
for significant distortion, the inflation components of interest expense have
been reported in the translation component of foreign exchange loss.
** Using monthly balances.
48
<PAGE> 51
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Exhibits Page
- ------- -------- ------------
<S> <C> <C>
21 Subsidiaries of the Registrant
</TABLE>
<PAGE> 1
EXHIBIT (21)
SCHEDULE A
SUBSIDIARIES OF LOCTITE CORPORATION
Listed below are Loctite Corporation's subsidiaries, other than inactive
and minor subsidiaries which, considered in the aggregate, are not significant,
together with their jurisdictions of incorporation, all of which are included in
the consolidated financial statements of Loctite Corporation.
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY AND JURISDICTION PERCENT OF VOTING STOCK
IN WHICH INCORPORATED OR ORGANIZED OWNED BY REGISTRANT
- ------------------------------------------------------------------------- -----------------------
<S> <C>
Loctite Argentina S.A., Argentina........................................ 100%
Loctite (Asia) Ltd., Hong Kong........................................... 100%
Loctite Australia Pty. Ltd., Australia................................... 100%
Loctite Belgium N.V., Belgium............................................ 100%
Loctite Brasil Ltda., Brazil............................................. 100%
Loctite Canada Inc., Canada.............................................. 100%
Loctite Corp. Chile Ltda., Chile......................................... 100%
Loctite (China) Company, Ltd., People's Republic of China................ 75%
Loctite Colombia S.A., Colombia.......................................... 100%
Loctite de Costa Rica S.A., Costa Rica................................... 100%
Loctite CZ s.r.o., Czech Republic........................................ 100%
Loctite Deutschland G.m.b.H., Germany.................................... 100%
Loctite Espana, S.A., Spain.............................................. 100%
Loctite (Europa) B.V., Netherlands....................................... 100%
Loctite Europa Ges.m.b.H., Austria....................................... 100%
Loctite FAS S.p.A., Italy................................................ 100%
Loctite France S.A., France.............................................. 100%
Loctite F.S.C. (V.I.), Inc., U.S. Virgin Islands......................... 100%
Loctite Holdings Limited, United Kingdom................................. 100%
Loctite Holdings SCA, France............................................. 100%
Loctite Hungary Ltd., Hungary............................................ 100%
Loctite (India) Pvt. Ltd., India......................................... 51%
Loctite International B.V., Netherlands.................................. 100%
Loctite International Services, Ltd., Delaware........................... 100%
Loctite (Ireland) Limited, Ireland....................................... 100%
Loctite (Ireland) Investments, Ireland................................... 100%
Loctite Italia S.p.A., Italy............................................. 100%
Loctite (Japan) Corporation, Japan....................................... 100%
Loctite Korea, Inc., Republic of Korea................................... 100%
Loctite Luminescent Systems, Inc., New Hampshire......................... 100%
Loctite (Malaysia) Sdn. Bhd., Malaysia................................... 100%
Loctite Company de Mexico, S.A. de C.V., Mexico.......................... 100%
Loctite Nederland B.V., Netherlands...................................... 100%
Loctite Norge A/S, Norway................................................ 100%
Loctite (Overseas) Ltd., Ireland......................................... 100%
Loctite Polska Sp.z.o.o., Poland......................................... 100%
Loctite Puerto Rico, Inc., Connecticut (doing business in Puerto Rico)... 100%
Loctite SA (Pty.) Ltd., South Africa..................................... 100%
Loctite (Singapore) Pte. Ltd., Singapore................................. 100%
Loctite SK spol.s.r.o., Slovak Republic.................................. 100%
Loctite Slovenija d.o.o., Slovenia....................................... 100%
</TABLE>
49
<PAGE> 2
EXHIBIT (21)
(CONTINUED)
SCHEDULE A
SUBSIDIARIES OF LOCTITE CORPORATION
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY AND JURISDICTION PERCENT OF VOTING STOCK
IN WHICH INCORPORATED OR ORGANIZED OWNED BY REGISTRANT
- ------------------------------------------------------------------------- -----------------------
<S> <C>
Loctite (Taiwan) Co., Ltd., Taiwan....................................... 51%
Loctite (Thailand) Ltd., Thailand........................................ 51%
Loctite de Venezuela C.A., Venezuela..................................... 51%
Loctite VSI, Inc., New York.............................................. 100%
Notex Limited, Ireland................................................... 100%
A/S Plastic Padding, Denmark............................................. 100%
Plastic Padding (Ireland) Limited, Ireland............................... 100%
Plastic Padding Sweden AB, Sweden........................................ 100%
</TABLE>
50
