<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-7608
LOCTITE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELWARE 06-0701067
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
10 COLUMBUS BOULEVARD, HARTFORD, CONNECTICUT 06106
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(860) 520-5000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of common stock outstanding as of September 30, 1996,
was 32,028,716, $.01 par value.
- --------------------------------------------------------------------------------
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<PAGE> 2
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 3
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C> <C>
PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Earnings and Retained Earnings for
the three-month periods and the nine-month periods ended
September 30, 1996 and 1995................................. 2
Consolidated Statement of Cash Flows for the nine-month
periods ended September 30, 1996 and 1995................... 3
Consolidated Balance Sheet at September 30, 1996 and December
31, 1995.................................................... 4
Notes to Consolidated Financial Statements.................... 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Changes in Financial Condition.......................... 7
PART II.
OTHER INFORMATION
Item 6. Listing of Exhibits and Reports on Form 8-K................... 12
Signatures.................................................................
13
</TABLE>
1
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LOCTITE CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
AND RETAINED EARNINGS
(Unaudited)
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
--------------------- ---------------------
Net sales....................................... $201,824 $195,751 $602,336 $593,709
Cost of sales................................... 76,330 76,939 229,493 226,085
-------- -------- -------- --------
Gross margin.................................... 125,494 118,812 372,843 367,624
-------- -------- -------- --------
Research & development expense.................. 7,579 7,604 21,905 22,327
Selling, general and administrative expenses.... 84,297 86,282 253,365 254,077
-------- -------- -------- --------
91,876 93,886 275,270 276,404
-------- -------- -------- --------
Earnings from operations........................ 33,618 24,926 97,573 91,220
Investment income............................... 1,012 1,488 3,429 4,340
Interest expense................................ (3,346) (2,011) (9,340) (5,858)
Other income (expense).......................... (239) (198) (395) 147
Foreign exchange gain (loss).................... 311 -- 599 (202)
-------- -------- -------- --------
Earnings before income taxes.................... 31,356 24,205 91,866 89,647
Provisions for income taxes..................... 8,152 4,827 23,885 21,515
-------- -------- -------- --------
Net earnings.................................... $ 23,204 $ 19,378 67,981 68,132
======== ========
Retained earnings, beginning of period.......... 351,487 389,514
Less:
Cash dividends declared (1996 -- $.85 and
1995 -- $.71)................................. 27,291 25,120
Stock repurchases............................... 86,581 30,729
-------- --------
Retained earnings, end of period................ $305,596 $401,797
======== ========
Earnings per share.............................. $ 0.72 $ 0.55 $ 2.10 $ 1.93
======== ======== ======== ========
Average number of shares outstanding............ 32,026 35,237 32,364 35,317
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
LOCTITE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
<S> <C> <C>
---------------------
Cash flows from operating activities:
Net earnings......................................................... $ 67,981 $ 68,132
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization..................................... 24,382 23,318
Deferred income taxes............................................. (1,712) 101
Provision for losses -- accounts receivable....................... 2,563 1,489
Change in:
Trade and other receivables....................................... (20,573) (19,140)
Inventory......................................................... (3,397) (6,192)
Prepaid and other current assets.................................. 2,185 (3,575)
Accounts payable and accrued expenses............................. 5,829 (8,476)
Interest payable.................................................. 1,075 410
Taxes payable..................................................... 850 (2,940)
Other................................................................ 2,153 5,478
-------- --------
Cash provided by operating activities.................................. 81,336 58,605
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment........................... (22,840) (23,625)
Dispositions of property, plant and equipment........................ 958 685
Goodwill & intangible portion of acquisitions........................ (7,563) (7,473)
Decrease in short-term investments................................... 20,080 4,278
Decrease in long-term investments.................................... 72 572
-------- --------
Cash used in investing activities...................................... (9,293) (25,563)
-------- --------
Cash flows from financing activities:
Stock repurchases.................................................... (89,285) (18,185)
Issuances of common stock............................................ 4,895 3,407
Dividends paid....................................................... (26,193) (23,706)
Increase in short-term debt.......................................... 35,664 11,163
Payments of long-term debt........................................... (1,249) (328)
Payments under capital lease obligations............................. (713) (1,143)
-------- --------
Cash used in financing activities...................................... (76,881) (28,792)
-------- --------
Effect of exchange rate changes on cash................................ (472) 10
-------- --------
(Decrease) increase in cash and cash equivalents....................... (5,310) 4,260
Cash and cash equivalents:
Beginning of period.................................................. 60,333 33,264
-------- --------
End of period........................................................ $ 55,023 $ 37,524
======== ========
Interest paid.......................................................... $ 8,026 $ 5,242
Taxes paid (net of refunds)............................................ $ 27,850 $ 25,949
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
LOCTITE CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
A S S E T S
Current assets:
Cash and cash equivalents........................................ $ 55,023 $ 60,333
Time and certificates of deposit................................. 67 20,344
Marketable securities............................................ 118 126
Accounts and notes receivable (less allowances of $7,779 and
$6,651)....................................................... 160,957 147,743
Other receivables................................................ 18,740 17,068
Inventories:
Finished goods................................................ 56,200 54,686
Work in process............................................... 21,023 20,063
Raw materials................................................. 23,036 23,028
-------- --------
100,259 97,777
Deferred income tax benefit...................................... 16,824 15,149
Prepaid expenses and other current assets........................ 17,090 19,395
-------- --------
Total current assets............................................... 369,078 377,935
-------- --------
Venture capital and other long-term investments.................... 4,077 4,149
Property, plant and equipment:
Land and land improvements....................................... 22,248 22,359
Buildings........................................................ 124,242 124,443
Machinery and equipment.......................................... 223,742 210,538
Construction in progress......................................... 7,055 5,357
-------- --------
377,287 362,697
Less -- accumulated depreciation................................. 169,763 153,613
-------- --------
207,524 209,084
Deferred income tax benefit........................................ 9,204 8,863
Goodwill (net of amortization of $23,730 and $21,190).............. 101,553 97,840
Other intangibles (net of amortization of $11,056 and $10,128)..... 11,923 12,256
Other assets....................................................... 5,484 5,501
-------- --------
Total assets....................................................... $ 708,843 $715,628
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 7
<TABLE>
<CAPTION>
DECEMBER 31,
1995
SEPTEMBER 30, ------------
1996
-------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt.................................................. $ 120,989 $ 85,356
Long-term debt -- current maturities............................. 167 406
Accounts payable................................................. 39,650 36,003
Accrued salaries, wages and other compensation................... 20,452 22,164
Accrued taxes, other than income taxes........................... 6,033 7,059
Accrued income taxes............................................. 23,198 21,242
Dividends payable................................................ 9,608 8,510
Accrued pension and retirement benefits.......................... 2,432 1,819
Accrued insurance................................................ 6,306 7,457
Accrued liabilities -- other..................................... 23,139 21,670
--------
Total current liabilities.......................................... 251,974 211,686
--------
Long-term liabilities:
Long-term debt................................................... 75,943 77,238
Capital lease obligations........................................ 1,499 2,161
Retirement and postretirement obligations........................ 19,790 17,262
Other............................................................ 10,098 10,483
--------
107,330 107,144
--------
Stockholders' equity:
Common stock, $.01 par value:.................................... 49,680 47,489
Authorized 300,000,000 shares; issued 32,028,716 shares at
September 30, 1996 and 33,603,019 shares at December 31, 1995
Retained earnings................................................ 305,596 351,487
Foreign currency translation adjustment.......................... (5,311) (1,752)
Adjustment for minimum pension liability......................... (426) (426)
--------
Total stockholders' equity......................................... 349,539 396,798
--------
Total liabilities and stockholders' equity......................... $ 708,843 $715,628
========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 8
LOCTITE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, certain information and footnotes required by
generally accepted accounting principles for complete financial statements are
not included herein. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included in the accompanying
unaudited financial statements and are of a normal recurring nature. The results
of operations for the nine months ended September 30, 1996 are not necessarily
indicative of the results to be expected for the fiscal year ending December 31,
1996.
The consolidated financial statements and the notes to the consolidated
financial statements contained in Loctite Corporation's December 31, 1995 Annual
Report on Form 10-K should be read in conjunction with the consolidated
financial statements and notes to consolidated financial statements contained
herein.
Certain reclassifications have been made to the 1995 amounts to conform to
the 1996 presentation.
NOTE 2 -- ACQUISITIONS
In February 1996, the Company acquired the remaining forty-nine percent
interest in its Loctite Taiwan Co., Ltd. subsidiary, which brought the Company's
percent of voting stock owned to 100%. In September 1996, the Company acquired
the pre-applied threadlocker businesses of TAWI Industri AB of Sweden and TAWI
BV of the Netherlands. These businesses will be integrated into the Company's
existing subsidiaries in Sweden and the Netherlands. The cost of these
acquisitions is not material to the Company for purposes of proforma
presentation.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
CHANGES IN FINANCIAL CONDITION
OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1996 VERSUS QUARTER ENDED SEPTEMBER 30, 1995
Management measures the results of the Company based on businesses and
regions. Trade sales between regions are reflected as sales of the region
servicing the customer.
The Company achieved record sales of $201.8 million for the third quarter
of 1996 compared to sales of $195.8 million for the comparable prior year
quarter. A summary of sales by region and business is as follows (in millions):
<TABLE>
<CAPTION>
QUARTER QUARTER LOCAL
ENDED ENDED DOLLAR CURRENCY
9/30/96 9/30/95 % GROWTH % GROWTH
------- ------- -------- --------
<S> <C> <C> <C> <C>
Sales:
European Region.................................... $ 78.7 $ 77.8 1% 2%
North American Region.............................. 75.8 71.3 6 7
Latin American Region.............................. 24.3 20.4 19 23
Asian/Pacific Region............................... 23.0 23.5 (2) 4
------ ------ --- ---
Total Sales from Ongoing Operations................ 201.8 193.0 5 6
Luminescent Systems................................ -- 2.8 n/m n/m
------ ------ --- ---
Total Sales..................................... $ 201.8 $ 195.8 3% 5%
====== ====== === ===
Industrial Business:
European Region.................................... $ 42.2 $ 41.1 3% 5%
North American Region.............................. 42.0 37.7 11 12
Latin American Region.............................. 7.0 5.9 20 24
Asian/Pacific Region............................... 19.4 20.7 (7) (1)
------ ------ --- ---
Total Sales from Ongoing Operations................ 110.6 105.4 5 8
Luminescent Systems................................ -- 2.8 n/m n/m
------ ------ --- ---
Total Industrial Business Sales................. $ 110.6 $ 108.2 2% 5%
====== ====== === ===
Automotive Aftermarket Business:
European Region.................................... $ 11.9 $ 11.4 5% 6%
North American Region.............................. 22.5 21.0 7 7
Latin American Region.............................. 2.8 2.9 (2) 3
Asian/Pacific Region............................... 2.6 2.3 18 18
------ ------ --- ---
Total Automotive Aftermarket Business Sales..... $ 39.8 $ 37.6 6% 7%
====== ====== === ===
Retail Business:
European Region.................................... $ 24.6 $ 25.3 (3)% (3)%
North American Region.............................. 11.3 12.6 (10) (10)
Latin American Region.............................. 14.5 11.6 25 26
Asian/Pacific Region............................... 1.0 0.5 n/m n/m
------ ------ --- ---
Total Retail Business Sales..................... $ 51.4 $ 50.0 3% 3%
====== ====== === ===
</TABLE>
n/m = not meaningful.
Certain prior period amounts were reclassified between businesses to conform
with the 1996 presentation.
- ---------------
Average net prices changed as a result of changes in list price, changes in
product mix, changes in customers, and changes in foreign exchange rates. Such
factors are not readily quantifiable individually due to the diversity of
markets, product formulations, and product packages.
7
<PAGE> 10
In the European region, sales for the quarter increased 1% in U.S. dollars
and 2% in local currency. Sales of the major countries in the region, excluding
France, grew by 4% in U.S. dollars and in local currency. Expansion within
Central and Eastern European countries contributed 1% to the region's local
currency growth. The industrial and automotive aftermarket businesses recorded
local currency growth of 5% and 6%, respectively. Continued poor economic
conditions in France, the Company's largest European market, had a significant
impact on the region's retail business which reported a sales decrease of 3% in
U.S. dollars and in local currency.
The North American region achieved greater sales growth in the quarter
ending September 30, 1996 than in the first two quarters of 1996. For the
quarter, sales grew 6% in U.S. dollars and 7% in local currency. The largest
growth occurred in the industrial business where the Company benefited from an
increase in North American automotive production. Sales in the automotive
aftermarket business grew 7% for the quarter due to volume increases and sales
of a new gasketing product introduced at the end of 1995.
Sales in Latin America continued to grow at a rapid pace, increasing 19% in
U.S. dollars compared to the third quarter of 1995. Significant volume increases
were seen in major product lines throughout the industrial and retail
businesses. Brazil, which has the most significant retail business in the Latin
American region, reported retail sales growth of 34% in U.S. dollars. Automotive
aftermarket sales in the region decreased slightly in U.S. dollars due primarily
to worsening economic conditions in certain parts of the region.
The Asian/Pacific region recorded local currency sales growth of 4%, which
was reduced to a 2% decline in U.S. dollars due primarily to the weakness of the
Japanese yen in relation to the U.S. dollar. Major countries, excluding Japan,
reported average local currency sales growth of 6%. Further penetration into the
automotive aftermarket and retail businesses throughout the region was partially
offset by a decline in industrial business sales of 1% in local currency and 7%
in U.S. dollars. Efforts by certain customers in the electronics industry to
reduce inventory levels resulted in the lower industrial business sales.
Gross margins as a percent of sales increased from 60.7% for the third
quarter of 1995 to 62.2% for the 1996 quarter. This improvement is attributed to
higher margins in the North American region and the sale of the low margin
Luminescent Systems business in the fourth quarter of 1995. North American
margins increased as a result of cost efficiencies created by higher production
volumes during the quarter and a change in channel mix within the region.
Operating expenses were $2.0 million lower than the prior year quarter. In
the third quarter of 1995 the Company recorded a $5.5 million charge to realign
North American operations. Operating expenses as a percentage to sales,
excluding the realignment change, were substantially unchanged, increasing
slightly from 45.2% in 1995 to 45.5% in 1996.
Interest expense for the quarter ended September 30, 1996 was $1.3 million
higher than the prior year quarter due in large part to higher average debt
levels in the U.S. See "Financial Condition" discussion and analysis for further
information.
Income taxes, as a percentage of earnings before taxes, were 26% for the
three month period ended September 30, 1996 and 20% for the three month period
ended September 30, 1995. The rate for the 1995 period reflects a reduction in
the effective tax rate to 24% for the nine month period ended September 30,
1995. This reduction was the result of lower earnings in the United States,
where the effective tax rate is substantially higher than the Company's overall
effective tax rate.
The Company reported net earnings of $23.2 million, or $0.72 per share, for
the quarter compared to earnings of $19.4 million, or $0.55 per share (after a
loss of $0.10 per share for the realignment charge related to the North American
business), for the prior year period. Excluding the effect of the realignment
charge, earnings per share increased 11% from $0.65 in 1995 to $0.72 in 1996.
8
<PAGE> 11
NINE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1995
Net sales for the nine months ended September 30, 1996 and September 30,
1995 were $602.3 million and $593.7 million, respectively. A summary (in
millions) is as follows:
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS LOCAL
ENDED ENDED DOLLAR CURRENCY
9/30/96 9/30/95 % GROWTH % GROWTH
----------- ----------- -------- --------
<S> <C> <C> <C> <C>
Sales:
European Region................................... $ 245.7 $ 242.7 1% 2%
North American Region............................. 218.9 213.7 2 3
Latin American Region............................. 71.1 62.1 15 18
Asian/Pacific Region.............................. 66.6 66.5 -- 7
------ ------ --- ---
Total Sales from Ongoing Operations............... 602.3 585.0 3 4
Luminescent Systems............................... -- 8.7 n/m n/m
------ ------ --- ---
Total Sales.................................... $ 602.3 $ 593.7 1% 3%
====== ====== === ===
Industrial Business:
European Region................................... $ 136.1 $ 131.9 3% 5%
North American Region............................. 125.4 121.6 3 4
Latin American Region............................. 19.4 18.9 3 6
Asian/Pacific Region.............................. 56.6 59.4 (5) 2
------ ------ --- ---
Total Sales from Ongoing Operations............... 337.5 331.8 2 4
Luminescent Systems............................... -- 8.7 n/m n/m
------ ------ --- ---
Total Industrial Business Sales................ $ 337.5 $ 340.5 (1)% 1%
====== ====== === ===
Automotive Aftermarket Business:
European Region................................... $ 36.7 $ 35.4 4% 4%
North American Region............................. 60.8 57.4 6 6
Latin American Region............................. 8.9 8.4 7 12
Asian/Pacific Region.............................. 7.4 5.9 27 26
------ ------ --- ---
Total Automotive Aftermarket Business Sales.... $ 113.8 $ 107.1 6% 7%
====== ====== === ===
Retail Business:
European Region................................... $ 72.9 $ 75.4 (3)% (4)%
North American Region............................. 32.7 34.7 (6) (6)
Latin American Region............................. 42.8 34.8 23 25
Asian/Pacific Region.............................. 2.6 1.2 n/m n/m
------ ------ --- ---
Total Retail Business Sales.................... $ 151.0 $ 146.1 3% 3%
====== ====== === ===
</TABLE>
n/m = not meaningful.
Certain prior period amounts were reclassified between businesses to conform
with the 1996 presentation.
- ---------------
In the European region, local currency sales grew by 2% and sales in U.S.
dollars grew by 1%. Local currency sales of major countries in the region grew
1% compared to the first nine months of 1995. Central and European countries
contributed 1% to the region's local currency growth. Local currency growth in
the industrial and automotive aftermarket businesses of 5% and 4%, respectively,
was partially offset by a reduction in retail business sales of 4%. All lines of
business were unfavorably impacted by the slow economy in parts of Western
Europe, although the most significant impact was on the retail business.
Sales in the North American region grew 2% in U.S. dollars and 3% in local
currency for the first nine months of 1996. U.S. dollar sales in the industrial
business grew by 3% due to volume increases. Sales growth of 6% in the
automotive aftermarket business is attributable in part to the introduction of a
new heavy-duty gasketing product. Retail business sales decreased 6% in U.S.
dollars as the Company was impacted by temporarily reduced purchasing activity
of some major customers in an effort to lower their inventory levels.
9
<PAGE> 12
Latin American sales increased 15% in U.S. dollars compared to the first
nine months of 1995. The largest growth was achieved in the retail business,
which grew by 23% in U.S. dollars, benefiting from substantial advertising and
marketing campaigns in Brazil.
The Asian/Pacific region's local currency sales grew by 7% but were flat in
U.S. dollars due primarily to a weaker Japanese yen in relation to the U.S.
dollar. Local currency sales in Japan are down 2% from the prior year due to a
sluggish industrial economic climate and the movement of some customers'
production facilities to other countries. Other major countries in the region
reported an average local currency sales growth of 12%. Efforts to increase
penetration in the automotive aftermarket and the retail businesses in the
region led to a large percentage growth in these markets, although industrial
sales, which grew 2% in local currency, still account for the majority of the
region's sales for the nine months ended September 30, 1996.
Operating expenses decreased $1.1 million compared to the prior year
period. Excluding a $5.5 million charge to realign the Company's North American
operations taken during the third quarter of 1995, operating expenses as a
percentage to sales were unchanged from the prior year period.
Interest expense increased by $3.5 million during the period due primarily
to higher average debt levels in the U.S. See "Financial Condition" discussion
and analysis for further information.
Income taxes, as a percent of earnings before taxes, were 26% for the nine
month period ended September 30, 1996 and 24% for the comparable period ended
September 30, 1995. The higher rate for 1996 is due primarily to higher earnings
in the United States.
The Company reported earnings of $68.0 million, or $2.10 per share, for the
nine months ended September 30, 1996 versus earnings of $68.1 million, or $1.93
per share (after a loss of $0.10 per share for the realignment charge related to
the North American business), for the prior year period. Excluding the effect of
the realignment charge, earnings per share increased 3% from $2.03 in 1995 to
$2.10 in 1996.
FINANCIAL CONDITION
Management relies on cash provided from operations and the strength of the
Company's balance sheet, within prudent limits, to fund growth in operations and
provide an appropriate return to stockholders. The Company's liquidity is
assessed in terms of its overall ability to generate cash and to access the
credit markets on terms favorable to the Company. Of particular importance in
the management of liquidity are cash flows generated from operating activities,
capital expenditure levels, dividends paid, stock repurchases, acquisitions, and
adequate bank lines of credit.
As more fully discussed below, the following table highlights some of the
significant factors which affect consolidated cash flow along with their
correlated effect on the net debt position of the Company.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1996 1995
------------- ------------
<S> <C> <C>
(Dollars in thousands)
Net cash flows from operating activities................... $ 81,336 $ 58,605
Capital expenditures....................................... $ 22,840 $ 23,625
Common stock repurchases................................... $ 89,285 $ 18,185
Dividends paid............................................. $ 26,193 $ 23,706
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
(Dollars in thousands)
Cash and short-term investments*........................... $ 55,208 $ 80,803
Total debt................................................. 199,703 166,338
-------- --------
Net debt................................................... $ 144,495 $ 85,535
======== ========
</TABLE>
* Includes cash and cash equivalents, time and certificates of deposit, and
short-term marketable securities
The Company completed a 3.35 million share stock repurchase program by
repurchasing 1.58 million shares of Company stock for $82.1 million during 1996.
The total cost of the 3.35 million share repurchase program was $166.5 million.
Additional expenditures were made in connection with the systematic repurchase
of Company stock for certain of the Company's employee benefit plans.
Dividends paid to stockholders were $26.2 million for the first nine months
of 1996 compared to $23.7 million for the 1995 period. This increase reflects
the net impact of a 20% increase in dividends per share from $0.71 in the 1995
period to $0.85 in the 1996 period, partially offset by the reduction in
outstanding shares of Company stock resulting from the above mentioned stock
repurchase program.
ACQUISITIONS
In February of 1996, the Company acquired the remaining forty-nine percent
interest in its Loctite Taiwan Co., Ltd. subsidiary, which brought the Company's
percent of voting stock owned to 100%. In September of 1996, the Company
acquired the pre-applied threadlocker businesses of TAWI Industri AB of Sweden
and TAWI BV of the Netherlands. These businesses will be integrated into the
Company's existing subsidiaries in Sweden and the Netherlands. The cost of these
acquisitions is not material to the Company for purposes of proforma
presentation.
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, competitive position,
or liquidity. As previously reported in its 1995 Annual Report on Form 10-K, the
Company has been investigating a soil and groundwater contamination problem at
its Newington, Connecticut facility. The Company spent approximately $.2 million
in 1993 and approximately $.5 million in 1994 in continuing subsurface
investigation. The Company spent approximately $.9 million in 1995 to complete
the investigative phase of the work and for additional professional consulting
services. The Connecticut Department of Environmental Protection (DEP) approved
the final site remediation plan during the second quarter of 1996 and will
oversee implementation of the plan. The Company estimates that it will spend
$1.4 million in 1996 for engineering fees and construction costs necessary to
implement the site remediation plan. Thereafter, the Company expects to spend
approximately $.1 million annually to operate, maintain and monitor the
remediation equipment. The Company does not anticipate any further significant
expenditures in connection with site remediation.
11
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter -- None
12
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOCTITE CORPORATION
(Registrant)
<TABLE>
<S> <C>
Date: November 12, 1996 By: /s/ DAVID FREEMAN
-------------------------------------------
David Freeman
Chairman, President and Chief Executive
Officer
Date: November 12, 1996 By: /s/ KEITH B. HALL
-------------------------------------------
Keith B. Hall
Vice President and Chief Financial Officer
(Principal Financial and Accounting
Officer)
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 55,023
<SECURITIES> 118
<RECEIVABLES> 168,736
<ALLOWANCES> 7,779
<INVENTORY> 100,259
<CURRENT-ASSETS> 369,078
<PP&E> 377,287
<DEPRECIATION> 169,763
<TOTAL-ASSETS> 708,843
<CURRENT-LIABILITIES> 251,974
<BONDS> 77,442
0
0
<COMMON> 49,680
<OTHER-SE> 299,859
<TOTAL-LIABILITY-AND-EQUITY> 708,843
<SALES> 602,336
<TOTAL-REVENUES> 602,336
<CGS> 229,493
<TOTAL-COSTS> 229,493
<OTHER-EXPENSES> 272,707
<LOSS-PROVISION> 2,563
<INTEREST-EXPENSE> 9,340
<INCOME-PRETAX> 91,866
<INCOME-TAX> 23,885
<INCOME-CONTINUING> 67,981
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67,981
<EPS-PRIMARY> 2.10
<EPS-DILUTED> 2.10
</TABLE>
