<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 15, 1996
Lydall, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-7665 06-0865505
(Commission File Number) (IRS Employer Identification No.)
One Colonial Road
P. O. Box 151
Manchester, CT 06045-0151
(Address of principal executive offices) (Zip code)
(203) 646-1233
Registrant's telephone number, including area code
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On February 15, 1996, Lydall announced its earnings for the fourth quarter and
year ended December 31, 1995. A copy of the Company's press release is attached
as an exhibit to this report.
Lydall also announced that a competitor, ATD Corporation ("ATD"), has filed a
patent infringement complaint against the Company in the United States District
Court for the Eastern District of Michigan, Southern Division. ATD alleged that
the Company has infringed its product and method patents for an all metal
insulator willfully, literally and under the Doctrine of Equivalence. ATD is
seeking as relief an injunction and damages. The Company strongly believes the
litigation is without merit and will defend it vigorously.
The litigation became more focused following a January 9, 1996 decision on the
parties' cross motions for summary judgment. A copy of the current amended
complaint is filed as an exhibit to this Form 8K. Following the hearing, the
Court ruled that Lydall's patent does not literally infringe the patent of ATD.
The Court so far has not ruled on the issue of willful infringement pending the
review of some additional documentation. The Company strongly believes the
willful infringement claim is particularly without merit and is hopeful that
this issue will be disposed of before trial. The issue of equivalency of the
two inventions, or to what degree they are different, is a factual dispute which
under law must be given to a jury to decide. Trial is expected to begin later
in February, 1996.
ATD has claimed highly inflated lost-profit damages of approximately $33
million, a figure which the Company vigorously disputes. ATD's claim for
damages is premised on the assumption that, if Lydall had not competed with its
own patented all-metal heat shield, ATD would have had 100 percent of the
available business for this product, at exceptionally high margins, through at
least 1999. Under applicable law, if ATD successfully proves that Lydall
committed willful infringement, any damage award could be trebled. However, as
noted above, Lydall believes there is no merit to the willfulness claim.
Management believes, based upon written opinion of patent counsel, that its
products do not infringe ATD's patents and that the Company is likely to
prevail. The Company believes it has strong defenses to the action stemming in
part from the fact that Lydall has its own patent allowed by the same patent
examiner who allowed the ATD patent in question, in obvious belief that the
Lydall invention was substantially different from the ATD patent. Moreover, the
Company believes that if it had not entered the market with its own patented
product, ATD would not have been the only alternative supplier of this type of
product and would not have been able to maintain inflated pricing as ATD
alleges.
Lydall is actively contesting this action and expects to incur significant
additional fees in its defense. Management believes the ultimate disposition of
any claims and resulting legal fees will not have a material adverse effect upon
the consolidated financial position or prospects of the Company.
<PAGE>
SIGNATURE
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 hereunto duly authorized.
LYDALL, INC.
By: /s/ John E. Hanley
----------------------------
s/s John E. Hanley
Vice-President-Finance
and Treasurer
(Principal Financial and
Accounting Officer)
Date: February 15, 1996
<PAGE>
LYDALL, INC.
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Page
- ----------- ----
<S> <C>
99.1 Press Release dated February 15, 1996 5
99.2 Amended Complaint for Patent Infringement 9
</TABLE>
<PAGE>
LYDALL, INC.
EXHIBIT 99.1
PRESS RELEASE
FOR IMMEDIATE RELEASE
LYDALL ANNOUNCES RECORD 1995 FINANCIAL RESULTS
-- SALES UP 18%, EPS UP 43% --
MANCHESTER, CONNECTICUT - February 15, 1996 - LYDALL, INC. (NYSE:LDL) today
announced record results for the fourth quarter and year ended December 31,
1995. Net income for the year increased 45 percent on an 18 percent increase in
sales.
The year ended December 31, 1995 marked Lydall's eleventh consecutive year
of earnings growth. Lydall reported net income of $22.4 million, or $1.23 per
share, in 1995 compared with $15.5 million, or $.86 per share, in 1994 -- a 45
percent increase in net income and a 43 percent gain in per-share income. Sales
for the year increased by 18 percent to $252.1 million from $213.1 million in
1994. Gross margin in 1995 was $77.7 million, or 30.8 percent of sales,
compared with $64.9 million, or 30.5 percent of sales, in 1994. After-tax
return on sales was 8.9 percent compared with 7.3 percent last year.
For the fourth quarter ended December 31, 1995, sales were $62.4 million
compared with $57.0 million for the same quarter last year, a 9.5 percent
increase. Net income was $5.8 million compared with $4.3 million -- up 34
percent. On a per-share basis, the Company earned $.32 in the fourth quarter of
1995 compared with $.24 in the same period last year -- a 33 percent increase.
Gross margin in the quarter was $19.5 million, or 31.3 percent of sales, and
after-tax return on sales was 9.3 percent. For the 1994 period, gross margin
was $17.3 million, or 30.4 percent of sales, and after-tax return on sales was
7.6 percent.
All prior-period per-share figures have been adjusted to reflect a two-for-
one stock split distributed on June 21, 1995.
Commenting on Lydall's results, Leonard R. Jaskol, Chairman and Chief
Executive Officer, stated, "We saw some economic softness during the fourth
quarter, and yet, demand remained strong for our air filtration media, sold to
clean-room filter manufacturers, and for our thermal barriers and heat shields,
found predominantly in light- and medium-duty trucks, vans, and four-wheel drive
vehicles. Sales performance during the quarter was more in line with our
historical fourth-quarter norm. In recent years robust growth from acquisitions
and product introductions have outweighed the effects of holiday closings and
year-end inventory reductions by our customers.
"Areas of softness were primarily in product lines more directly impacted
by general economic conditions. We saw a bit of a slowdown in our materials
handling business at year-end as compared to the torrid pace in the first half
of the year. We also saw some slowing in those businesses outside of our
filtration and thermal barrier concentrations.
"Sales of high-efficiency air filtration media continued to be robust both
domestically and abroad, fueled by the new construction of clean-room facilities
for a growing number of applications, many outside the semiconductor segment.
For instance, a growing amount of precision manufacturing is being done under
clean-room conditions. Other examples include: medical research laboratories,
pharmaceutical houses, and industrial plating and painting operations.
-MORE-
<PAGE>
Lydall, Inc. News Release 2 of 4 February 15, 1996
"In addition to continuing growth from market penetration and new products
within our automotive thermal barrier line, we experienced increased sales of
cryogenic insulation which is used at temperatures approaching absolute zero, as
well as increased demand for our flame barrier and duct lining materials used in
commercial building applications.
"Lydall's financial position continued to strengthen during 1995. We
generated operating cash flow of $45.2 million during the year. We had cash,
cash equivalents and short-term investments of $28.7 million and working capital
of $52.7 million. Our current ratio was 2.77 at the end of 1995, and our total-
debt-to-total-capitalization ratio was 9 percent. Year-end inventory was up
slightly (4 percent) on an 18 percent increase in sales, and inventory turnover
increased to 11.1 times from 10.2 times, marking the fourth consecutive year of
improvement.
"A pending lawsuit alleging patent infringement has been filed by ATD
Corporation, (ATD) , a competitor of Lydall, with respect to our metal heat
shields. ATD has a patent on its shield, and Lydall has a patent on its own
shield; both patents were allowed by the same patent examiner. The Lydall
products manufactured under its patent are only a small portion of our
automotive thermal barrier product line. The court has ruled that Lydall's
patent does not literally infringe on that of ATD; however, the issue of the
equivalency of the two inventions, or to what degree they are different, is a
factual dispute that under the law must be given to a jury to decide. So far,
the court has not ruled on Lydall's motion to dismiss ATD's claim of willful
infringement pending review of additional documentation. The Company adamantly
believes this claim is particularly without merit and is hopeful that this issue
will be disposed of before trial. Trial is expected to begin later this month.
ATD has claimed exaggerated damages of approximately $33 million, a figure which
the Company vigorously disputes. The Company believes the suit and ATD's claim
for damages are completely without merit and, based upon written opinion of
counsel and several experts, expects to prevail in the case. The Company today
filed a current report on Form 8-K with the Securities and Exchange Commission
further detailing the litigation.
"As a whole, we closed 1995 having slightly exceeded sales and earnings
projections made early in the year. We made excellent progress within our
quality program and invested heavily in capital improvements directly tied to
improving efficiency and process control. I'm disappointed, however, that we
did not complete any acquisitions during the year despite extensive efforts
worldwide. Growth by acquisition is an important element of our strategy and
will continue to be a major focus in 1996."
Lydall, Inc. is a manufacturer of technologically advanced engineered
materials for demanding specialty applications.
-MORE
<PAGE>
Lydall, Inc. News Release 3 of 4 February 15, 1996
SUMMARY OF OPERATIONS
In thousands except per-share data
<TABLE>
<CAPTION>
(Unaudited) Fourth Quarter Twelve Months
Ended Dec. 31, Ended Dec. 31,
1995 1994 1995 1994
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net sales $ 62,353 $ 56,954 $ 252,128 $ 213,072
Cost of sales 42,820 39,650 174,430 148,188
---------- --------- --------- ----------
Gross margin 19,533 17,304 77,698 64,884
Selling, new product
development and
administrative expenses 10,306 9,433 40,668 36,211
---------- --------- --------- ----------
Operating income 9,227 7,871 37,030 28,673
---------- --------- --------- ----------
Other (income) expense:
Investment income (395) (168 ) (1,113) (231)
Interest expense 123 580 778 1,335
Other, net 197 12 490 1,033
---------- --------- --------- ----------
(75) 424 155 2,137
---------- --------- --------- ----------
Income before income taxes 9,302 7,447 36,875 26,536
Income tax expense 3,489 3,108 14,437 11,033
---------- --------- --------- ----------
Net income $ 5,813 $ 4,339 $ 22,438 $ 15,503
---------- --------- --------- ----------
Net income per share * $ 0.32 $ 0.24 $ 1.23 $ 0.86
Weighted average shares and
equivalents outstanding * 18,399 18,070 18,313 17,953
</TABLE>
* Prior-period restated to reflect a two-for-one stock split distributed on June
21, 1995.
<PAGE>
<TABLE>
<CAPTION>
Lydall, Inc. News Release 4 of 4 February 15, 1996
FINANCIAL POSITION As of As of
In thousands except ratio data December 31, December 31,
(Unaudited) 1995 1994
------------ ------------
<S> <C> <C>
Cash, cash equivalents, and
short-term investments $28,733 $14,588
Working capital 52,730 30,823
Long-term debt, net of
current maturities 7,750 10,607
Stockholders' equity 101,811 76,227
Total capitalization 112,432 89,677
Current ratio 2.77 1.93
Total debt/total capitalization .09 .15
Common Stock Data *
Fourth quarter ended December 31, 1995 1994
------------ ---------
High $28.500 $18.625
Low 21.500 15.500
Last 22.750 16.250
</TABLE>
1,261,500 shares of Lydall common stock (LDL) were traded on the New York Stock
Exchange during the fourth quarter 1995.
* Prior-period restated to reflect a two-for-one stock split distributed
on June 21, 1995.
###
<PAGE>
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
EXHIBIT 99.2
ATD CORPORATION,
Plaintiff, Civil No. 94 CV 74320 DT
v. Hon. Gerald E. Rosen
LYDALL, INC., Demand For Jury Trial
Defendant.
________________________________
BARRIS, SOTT, DENN & DRIKER, P.L.L.C.
Morley Witus (30895)
211 W. Fort Street, 15th Floor
Detroit, Michigan 48226-3281
(313) 965-9725
BURNS, DOANE, SWECKER & MATHIS
Frederick G. Michaud, Jr.
Ronni S. Jillions
The George Mason Building
Washington & Prince Street
P.O. Box 1404
Alexandria, Virginia 22313-1404
(703) 836-6620
Attorneys for Plaintiff
AMENDED COMPLAINT FOR PATENT INFRINGEMENT
Plaintiff, ATD Corporation, by and through its attorneys, alleges and avers
as follows:
THE PARTIES
1. Plaintiff ATD Corporation (hereinafter "ATD") is a Missouri
corporation with its principal place of business at 1250 Ambassador Boulevard,
St. Louis, Missouri 63132.
<PAGE>
2. Upon information and belief, defendant Lydall, Inc. (hereinafter
"Lydall") is a Delaware corporation with its principal place of business at One
Colonial Road, P.O. Box 151, Manchester, Connecticut.
JURISDICTION
3. This is an action for patent infringement arising under the Patent Laws
of the United States, Title 35, United States Code, including 35 U.S.C.
(S)(S)271, 281-285,and 295. Jurisdiction is conferred on this Court pursuant to
28 U.S.C. (S)1338(a).
COUNT ONE
4. On April 30, 1991, United States Letters Patent No. 5,011,743 entitled
"Pad Including Heat Sink and Thermal Insulation Areas" was duly and legally
issued to ATD, as assignee of the inventors William M. Sheridan and Raymond E.
Ragland. ATD is still the legal owner of United States Letters Patent No.
5,011,743. A copy of United States Letters Patent No. 5,011,743 is attached
hereto as Exhibit A.
5. Upon information and belief, Lydall knowingly and willfully has
infringed, literally and under the doctrine of equivalents, and is presently
infringing, literally and under the doctrine of equivalents, United States
Letters Patent No. 5,011,743 by making, using, or selling within the United
States, and by actively inducing others to use and sell within the United
States, and in this Judicial District, metal heat insulation pads which employ
the invention of United States Letters Patent No. 5,011,743, or articles
including such pads, and will continue to do so unless enjoined by this Court.
6. ATD has been damaged as a result of Lydall's infringing activities and
will continue to be damaged unless such activities are enjoined by this Court.
2
<PAGE>
COUNT TWO
7. On May 12, 1992, United States Letters Patent No. 5,111,577 entitled
"Pad Including Heat Sink And Thermal Insulation Areas" was duly and legally
issued to ATD, as assignee of the inventors William M. Sheridan and Raymond E.
Ragland. ATD is still the legal owner of United States Letters Patent No.
5,111,577. A copy of United States Letters Patent No. 5,111,577 is attached
hereto as Exhibit B.
8. Upon information and belief, Lydall knowingly and willfully has
infringed, literally and under the doctrine of equivalents, and is presently
infringing, literally and under the doctrine of equivalents, United States
Letters Patent No. 5,111,577 by making, using, or selling within the United
States, and by actively inducing others to use and sell within the United
States, and in this Judicial District, metal heat insulation pads made according
to the invention of United States Letters Patent No. 5,111,577, or articles
including such pads, and will continue to do so unless enjoined by this Court.
9. ATD has been damaged as a result of Lydall's infringing activities and
will continue to be damaged unless such activities are enjoined by this Court.
WHEREFORE, ATD demands:
(a) an injunction against Lydall's continued infringement of United States
Letters Patent No. 5,011,743;
(b) an injunction against Lydall's continued infringement of United States
Letters Patent No. 5,111,577;
3
<PAGE>
(c) an accounting for damages resulting from Lydall's infringement of
United States Letters Patents No. 5,011,743 and 5,111,577, and that the damages
so ascertained be trebled because of the knowing and willful nature of Lydall's
conduct;
(d) an assessment of interest on the damages so computed;
(e) an award of ATD's attorneys fees and costs of this action; and
(f) such other and further relief as this Court deems just and appropriate.
Dated: 6/5/95
---------------
BARRIS, SOTT, DENN & DRIKER, P.L.L.C.
By: /s/ Morley Witus
--------------------------
Morley Witus (30895)
Attorney for Plaintiff
211 W. Fort Street, 15th Floor
Detroit, Michigan 48226-3281
(313) 965-9725
Of Counsel:
BURNS, DOANE, SWECKER & MATHIS
/s/ Frederick G. Michaud, Jr.
- -----------------------------
Frederick G. Michaud, Jr.
Ronni S. Jillions
Attorneys for Plaintiff
The George Mason Building
Washington & Prince Street
P.O. Box 1404
Alexandria, Virginia 22313-1404
(703) 836-6620
4
<PAGE>
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
ATD CORPORATION,
Plaintiff, Case No. 94-CV-74320-DT
v Hon. Gerald E. Rosen
LYDALL, INC.,
Defendant,
_________________________________/
CERTIFICATE OF SERVICE
----------------------
On June 5, 1995, copies of ATD'S MOTION FOR LEAVE TO AMEND THE COMPLAINT
UNDER FED.R.CIV.P. 15; MEMORANDUM IN SUPPORT OF ATD'S MOTION FOR LEAVE TO AMEND
THE COMPLAINT UNDER FED.R.CIV.P. 15; along with a copy of the proposed AMENDED
COMPLAINT FOR PATENT INFRINGEMENT; and this Proof of Service, were served via
courier on:
Dennis J. Levasseur
BODMAN, LONGLEY & DAHLING
100 Renaissance Center, 34th Floor
Detroit, Michigan 48243
and via Federal Express on
Fred S. Whisenhunt
GRIFFIN, BUTLER, WHISENHUNT & KURTOSSY
Suite PH-1, 2300 Ninth Street, South
Arlington, Virginia 22204-2396
Robert A. Molan
Raymond L. Sweigart
CUSHMAN DARBY & CUSHMAN, L.L.P.
1100 New York Avenue, N.W., Ninth Floor, East Tower
Washington, D.C. 20005
I declare under penalty of perjury that the foregoing is true and correct.
Executed on: June 5, 1995
------------
/s/ Kathleen Stevens
----------------------------------------------
KATHLEEN STEVENS
