<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
[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, 1995
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: 1-7665
----------------
LYDALL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 06-0865505
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE COLONIAL ROAD, MANCHESTER, 06045-0151
CONNECTICUT (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (860) 646-1233
----------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, $.10 par value New York Stock Exchange
----------------
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 [_]
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 THE 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. [X]
On March 18, 1996, the aggregate market value of the Registrant's voting
stock held by nonaffiliates was $356,743,387.
On March 18, 1996, there were 17,393,626 shares of Common Stock outstanding,
exclusive of treasury shares.
----------------
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II incorporate certain information by reference from the Annual
Report to Stockholders for the year ended December 31, 1995. Part III
incorporates information by reference from the definitive Proxy Statement to
be distributed in connection with the Registrant's Annual Meeting of
Stockholders to be held on May 15, 1996.
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<PAGE>
PART I
ITEM 1. BUSINESS.
Lydall, Inc. (hereafter referred to as "Lydall" or the "Company") is a
manufacturer of technologically advanced engineered materials for demanding
specialty applications.
Lydall develops and manufactures engineered fiber materials and composites
in both roll and sheet form; fiber-based as well as combination-metal-and-
fiber heat shields; and fabricates certain medical filtration and automotive
thermal barrier components. All of Lydall's products are supplied to customers
who in turn incorporate them into finished products. Utilizing a broad
spectrum of available fibers, materials, binders, resins, etc. combined with
both dry-laid or wet-laid forming capabilities, the Company has been able to
develop a broad range of high-performance materials.
The Company serves a number of market niches. Lydall's products are
primarily sold directly to the customer (or fabricator), through an internal
sales force and are distributed through common carrier, ocean cargo, or the
Company's trucking operation. Within each market niche there are typically
several competitors. The Company primarily competes through high-quality
products and customer service. Lydall has a number of domestic and foreign
competitors for its products, most of whom are either privately owned or
divisions of large companies, making it difficult to determine the Company's
market share.
Lydall's products fall into five basic categories: thermal barriers, air and
liquid filtration media, materials handling systems, electrical insulation,
and other products and services.
MAJOR PRODUCTS
Thermal Barriers
Lydall manufactures a broad range of materials which serve as heat or
thermal barriers. The Cryotherm(R) and Lytherm(R) product lines include an
assortment of composites using distinctive materials, in both rigid and
flexible forms, manufactured by a variety of processes. Lydall's thermal
barrier products in differing forms are capable of withstanding temperatures
ranging from -459 degrees F to +3,000 degrees F.
At the highest temperature requirements, Lytherm thermal barrier products
are used as linings for ovens, kilns, and furnaces and in glass and metal
manufacturing.
At mid-range temperatures Lytherm nonwovens are patented layered composites
of either organic and inorganic fibers or fiber- and-metal-foil combinations
which are used as thermal barriers in medium- and light-duty trucks, vans,
sport utility vehicles, and cars. An acquisition made in early 1994
contributed to the growth of thermal barrier sales. This acquisition also
expanded the Company's product offerings to include all-metal and metal-and-
fiber-combination automotive heat shields.
Also, in mid-range temperatures, Manninglas(R) nonwovens are employed in
consumer appliances and heat ventilation and air conditioning ducting and
insulation.
At the very coldest temperatures (approaching absolute zero), Cryotherm(R)
cryogenic insulation materials are used for super-insulating applications.
These include tanker trucks which transport liquid gases; stationary and
portable cryogenic storage vessels; gas tanks for vehicles fueled by liquid
natural gas; and supercolliders. These nonwovens are composed of 100-percent
inorganic fibers.
Lydall also manufactures custom-designed media employed in automotive air-
bag pyrotechnic inflators. Although these sales are classified as thermal
barriers by the Company, this specialty product performs both a filtration and
heat-reduction function.
2
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Sales of thermal barriers approximated 36 percent of the Company's sales for
1995, 34 percent of sales for 1994, and 24 percent of sales for 1993. Thermal
barrier sales increased 27 percent in 1995 over 1994 activity. Increases can
be primarily attributable to new products including battery covers and all-
metal shields, as well as a full year of activity at the Columbus Operation
which was acquired during 1994.
Filtration Media
The Company manufactures high-efficiency air filtration media, marketed
under the Lydair(R) name. Lydair filtration media are used for applications
where clean air is vital, such as in semiconductor manufacturing clean rooms,
industrial clean rooms, and biotechnology laboratories.
Lydall manufactures Lydair media in six filtration classes in over 100
grades with filtering efficiencies from 10 percent at 0.3 micron particle size
to 99.999999 percent at 0.1 micron particle size.
Lydall filtration media are primarily used in air filters for capital goods
rather than consumables and last approximately five years. A replacement
market exists as facilities using these filters upgrade clean room technology.
The Company's HEPA filtration media are also used in home air-purification
units.
Lydall's line of fabricated medical filter components are sold under the
trademark Lypore(R) and are widely used in blood filtration devices, such as
cardiotomy reservoirs which filter the blood supply of an open-heart surgery
patient during the operation, and autotransfusion filters used to filter blood
collected from a patient before surgery or from an injured patient. This
product line also includes a leukocyte filtration media used in devices that
separate blood components.
In addition, Lydall produces liquid filtration media used primarily in high-
efficiency hydraulic oil and lubrication oil elements for off-road vehicles,
trucks, and heavy equipment. These products are also sold under the Lypore
trademark.
Sales of filtration media increased to 22 percent of sales for 1995 compared
with 20 percent and 24 percent of sales for 1994 and 1993, respectively. The
overall sales of filtration media increased 27 percent in 1995 from that of
1994. This increase was fueled by new construction of clean-room facilities
for a growing number of applications and Lydall's capability to successfully
transfer production of certain grades to the Axohm Division. Management
expects sales of filtration media to continue to grow with additional
production transfer to Axohm and strong market demand for the product.
Materials Handling
Lydall produces slipsheets, separator sheets, and protective sheets. The Ly-
Pak(R) slipsheets are used to ship a growing number of products such as food,
pharmaceuticals, and chemicals. Ly-Pak slipsheet systems are used to replace
wooden pallets, providing significant cost and space reductions for a shipper.
Ly-Pak separator sheets are supplied to the glass and polyethylene
terephthalate (PET) bottle industry and are manufactured to meet industry
specifications for bulk palletizing. Ly-Pak protective sheets are used as
pallet pads, protective top caps, and stabilizing sheets. These products are
custom-made from plies of virgin kraft linerboard and laminated with a special
moisture-resistant adhesive. The Company also sells a complete line of dunnage
products.
Sales of these products approximated 15 percent of 1995 total sales as
compared with 14 percent and 15 percent of 1994 and 1993 total sales,
respectively. Total materials-handling sales continued to increase, growing by
29 percent in 1995. This exceptional growth is attributable to a full year's
sales at the Jacksonville plant, which was acquired in 1994, as well as a
torrid sales pace for the first half of the year. It is expected this business
will continue to grow; however, it is not expected to represent an increasing
percentage of Lydall's total sales, absent any acquisition activity.
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Electrical Insulation
Lydall's electrical insulation material, sold under the SE/duroid(R), Sep-R-
Max(R), and Voltex(R) trademarks are found in a broad range of applications
such as computers, consumer appliances, utility power transformers, electric
motors and other wiring devices. These materials are manufactured to
electrical resistance, flame retardancy, formability, thermal aging, and
moisture resistance specifications.
The Company's electrical insulation products also include battery separator
materials primarily used in European automotive batteries. These products are
manufactured at the Company's European location. Lydall also manufactures
Actipore(R) separators used in sealed lead acid batteries which power
emergency standby energy systems.
A significiant portion of the 1995 electrical insulation sales were derived
from foreign operations. There are no anticipated operating risks related to
foreign investment law, expropriation, inflation effects or availability of
material, labor and energy. The Company's foreign and domestic operations
limit currency and foreign exchange transaction risks by completing
transactions primarily in their functional currencies.
Sales of electrical insulation products were approximately 7 percent of
total sales in 1995, 8 percent in 1994, and 10 percent in 1993. Actual sales
increased in 1995 by 4 percent over 1994 levels. The dynamic growth of the
thermal barrier and filtration businesses in 1995 accounts for the decline of
sales of electrical products as a percent of total sales. The gradual decline
in this market results from lower demand for automotive battery separator
materials and a shift in the battery separator technology, favoring different
materials than those used by the Company. As Lydall has expected, these
changes have had an impact on European separator sales. The Company has
successfully been replacing electrical products with new products in air
filtration at the foreign facility.
Other Products and Services
Lydall maintains a transportation operation which brokers and/or hauls
freight for and between Lydall plants as well as for outside customers. In
addition, the Company manufactures paperboard products used in games and
packaging, specialty gasketing materials, and fiberboard shoe insole
materials. Lydall also produces a wood replacement material made from recycled
newsprint and cardboard which is currently being made into writing
instruments. Sales of all other products and services approximated 20 percent
of the Company's sales in 1995, and 24 percent in 1994, and 27 percent in
1993.
GENERAL BUSINESS INFORMATION
Lydall operates ten manufacturing facilities in the United States which are
located in Rochester, New Hampshire; Green Island, New York; Hoosick Falls,
New York; Manchester, Connecticut; Richmond, Virginia; Hamptonville, North
Carolina; Rockwell, North Carolina; Columbus, Ohio; Jacksonville, Florida and
Covington, Tennessee. Lydall has one manufacturing facility in Saint-Rivalain
en Melrand, France.
Lydall holds a number of patents, trademarks, and licenses. While no single
patent, trademark or license by itself is critical to the success of Lydall,
together these intangible assets are of considerable value to the Company's
operations.
The working capital requirements of the Company are financed primarily from
operations. No significant portion of Lydall's business is seasonal. Lydall
maintains levels of inventory and grants credit terms which are normal within
the industries it serves. The Company uses a wide range of raw materials in
the manufacturing of its products and was able to obtain all the raw materials
needed during 1995. The majority of these materials are available from a
variety of suppliers who can be substituted if necessary.
Thirty-three percent of Lydall's total sales in 1995 were to the world-wide
automotive market compared to thirty-one percent in 1994. Lydall's automotive
sales are sold to various customers including parts suppliers,
4
<PAGE>
thermal insulation fabricators, air-bag manufacturers and original equipment
manufacturers for use in a variety of models and applications. Sales to Ford
Motor Company represented 13.7 percent of Lydall's total sales in 1995, and no
other single customer accounted for more than 10 percent of total sales.
Lydall invested $6.2 million in 1995, $5.5 million in 1994, and $4.8 million
in 1993, respectively, on activities to develop new products and special
manufacturing processes or to improve existing products. Most of Lydall's
investment in research and development is application specific; very little is
pure research. There were no significant customer-sponsored research and
development activities during the past three years.
Lydall's backlog was $28.0 million at December 31, 1995, $24.5 million at
December 31, 1994 and $13.7 million at December 31, 1993. Lydall expects to
fill its backlog of 1995 orders during the first quarter of 1996. Backlog at
February 29, 1996 was $29.7 million. The increased backlog over prior year
levels is primarily due to increased demand for both filtration and thermal
barrier products. There are no seasonal aspects to this backlog.
No material portion of Lydall's business is subject to renegotiation of
profits or termination of contracts or subcontracts at the election of the
government.
Lydall believes that its plants and equipment are in substantial compliance
with applicable federal, state and local provisions that have been enacted or
adopted regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment. Additional measures
to maintain compliance with presently enacted laws and regulations are not
expected to have a substantial adverse effect on the capital expenditures,
earnings and competitive position of the Company and its subsidiaries. For
information relating to certain environmental proceedings involving the
Company, please refer to Item 3 below.
As of March 1, 1996, Lydall and its subsidiaries had 1,233 employees,
including foreign employees. Approximately 179 of the domestic employees are
represented by eight unions under contracts expiring between November 1997 and
November 1999. Lydall considers its employee relationships to be satisfactory,
and there have not been any actual or threatened work stoppages due to union
related activities. All employees at the Company's facility in France are
covered under a National Collective Bargaining Agreement.
Foreign and export sales were 22 percent of total sales in 1995 and 21
percent in 1994 and 1993. Export sales are concentrated primarily in Europe,
the Far East, Mexico, and Canada and were $38.9 million, $30.7 million, and
$21.7 million in 1995, 1994 and 1993, respectively.
Foreign sales were $17.0 million, $14.4 million and $12.3 million for the
years ended December 31, 1995, 1994, and 1993, respectively. For the year
ended December 31, 1995, the foreign facility earned $127 thousand excluding
the effect of a statutory tax rate increase on deferred tax balances which
negatively impacted income by $292 thousand. For the years ended December 31,
1994 and 1993, net income was $192 thousand and $57 thousand, respectively.
Total foreign assets were $20.4 million and $19.5 million at December 31, 1995
and 1994, respectively.
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ITEM 2. PROPERTIES
The principal properties of the Company and its subsidiaries are situated at
the following locations and have the following characteristics:
<TABLE>
<CAPTION>
APPROXIMATE AREA
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GENERAL LAND BUILDINGS
LOCATION DESCRIPTION (ACRES) (SQ. FEET)
-------- ----------- ------- ----------
<C> <C> <S> <C> <C>
1 Manchester, Warehouse Facilities...... 2.0 25,000
Connecticut
2 Manchester, Paperboard Manufacturing.. 11.6 70,500
Connecticut
3 Covington, Composite Materials
Tennessee Manufacturing............. 26.0 155,000
4 Richmond, Laminated Kraft
Virginia Manufacturing............. 5.0 104,000
5 Rochester, Specialty Paper
New Hampshire Manufacturing............. 18.0 131,000
6 Hoosick Falls, Composite Materials
New York Manufacturing............. 11.0 129,000
7 Hamptonville, Nonwoven Materials
North Carolina Manufacturing............. 35.2 85,000
8 Green Island, Specialty Paper
New York Manufacturing &
Warehouse................. 6.3 270,000
9 Manchester, Corporate Office and
Connecticut Computer Center........... 4.5 20,000
10 Rockwell, Fabricating Facility...... 11.5 51,000
North Carolina
11 Saint-Rivalain en Melrand, Specialty Paper
France Manufacturing............. 14.3 156,000
12 Columbus, Fabricating Facility...... 9.0 80,000
Ohio
13 Jacksonville, Laminated Kraft
Florida Manufacturing............. -- 52,000
</TABLE>
Properties numbered 4, 10, 12, and 13, are being leased; all others are
owned. For information with respect to obligations for lease rentals and owned
property, see the Notes to the Consolidated Financial Statements of the
Company included in the 1995 Annual Report to Stockholders, which are
incorporated herein by reference. Lydall considers its properties to be
suitable and adequate for its present needs. The properties are being fully
utilized. In addition to the properties listed above, the Company has several
additional leases for sales offices and warehouses in the United States and
overseas.
ITEM 3. LEGAL PROCEEDINGS
In the mid-1980's, the United States Environmental Protection Agency ("EPA")
notified a former subsidiary of the Company that it and other entities may be
potentially responsible in connection with the release of hazardous substances
at a landfill and property located adjacent to a landfill located in Michigan
City, Indiana. The two sites have been combined and are viewed by the EPA as
one site. The preliminary indication, based on the Site Steering Committee's
volumetric analysis, is that the alleged contribution to the waste volume at
the site of the plant once owned by a former subsidiary is approximately 0.434
percent of the total volume. The portion of the 0.434 percent specifically
attributable to the former subsidiary by the current operator of the plant is
approximately 0.286 percent.
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There are over 800 potentially responsible parties ("prp") which have been
identified by the Site Steering Committee. Of these, 38, not including the
Company's former subsidiary, are estimated to have contributed over 80 percent
of the total waste volume at the site. These prp's include Fortune 500
companies, public utilities, and the State of Indiana. The Company believes
that, in general, these parties are financially solvent and should be able to
meet their obligations at the site. The Company has reviewed the financial
statements and Dun and Bradstreet reports on several of these prp's, and based
on these financial reports, does not believe Lydall will have any material
additional volume attributed to it for reparation of this site due to
insolvency of other PRP's.
During the quarter ended September 30, 1994, the Company learned that the
EPA had completed its Record of Decision ("ROD") for the Michigan site and has
estimated the total cost of remediation to be between $17 million and $22
million. Based on the alleged volumetric contribution of its former subsidiary
to the site, and on the EPA's estimated remediation costs, Lydall's alleged
total exposure would be less than $100 thousand, which has been accrued. In
June of 1995, the Company and its former subsidiary were sued in the Northern
District of Indiana by the insurer of the current operator of the former
subsidiary's plant seeking contribution. No demand has been formally made in
this matter, however, the Company believes it has several defenses to the
action.
Management believes the ultimate disposition of this matter will not have a
material adverse effect upon the Company's consolidated financial position or
results of operations.
On March 19, 1996, patent litigation brought by ATD Corporation ("ATD")
against Lydall in the United States District Court for the Eastern District of
Michigan Southern Division was concluded with all of ATD's claims for damages
being denied. An eight-member jury decided in favor of Lydall in the lawsuit
filed by ATD alleging patent infringement of two ATD patents for all-metal
insulators by Lydall's all-metal automotive heat shields.
In June 1995, ATD filed an amended complaint against Lydall, Inc. alleging
that the Company willfully infringed ATD's patents, both literally and under
the Doctrine of Equivalents. ATD sought as relief for Lydall's alleged
infringement both an injunction and damages. Lydall vigorously contested this
action and filed a counterclaim to invalidate ATD's patents.
On January 9, 1996, a decision on the parties' cross motions for summary
judgment was entered. The Court ruled that Lydall's all-metal shield products
did not literally infringe ATD's patents and gave the issue of equivalency,
i.e., the degree to which Lydall's products are different from ATD's products,
to a jury to decide. The Court also gave the issue of validity of ATD's
patents to the jury. Shortly before trial began, the Court ruled that Lydall
did not willfully infringe.
The trial began on February 21, 1996 and concluded on March 19, 1996. The
jury decided in favor of Lydall on the issue of infringement of the patents
involved in the suit on all but one claim of one of the two patents. With
respect to that claim, the jury had voted seven to one for noninfringement,
but because a unanimous vote was required, the judge declared the jury
deadlocked. The jury found that key claims which formed the basis of both of
ATD's patents to be invalid. In view of the jury's decisions in Lydall's
favor, ATD's claim for damages was denied.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the
fourth quarter of 1995.
EXECUTIVE OFFICERS AND OTHER SIGNIFICANT EMPLOYEES OF THE REGISTRANT:
The name, age, current position, and other business experience since January
1, 1991 of each executive officer of the Company are listed on the following
page. Leonard R. Jaskol, John E. Hanley, Carole F. Butenas, Alan J. Gnann and
Mary Adamowicz are elected annually at the organizational meeting of the Board
of Directors. All others are appointed by the President and Chief Executive
Officer for an indefinite period. There are no family relationships among
executive officers or other significant employees.
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<TABLE>
<CAPTION>
OTHER BUSINESS
EXPERIENCE SINCE
NAME AGE TITLE 1991
---- --- ----- ----------------
<S> <C> <C> <C>
Leonard R. Jaskol 59 Chairman of the Board (since N/A
1991) President and Chief
Executive Officer (since 1988)
John E. Hanley 39 Vice President--Finance and Lydall, Inc. Treasurer and
Treasurer (since 1992) Controller
Carole F. Butenas 53 Vice-President--Investor N/A
Relations (since 1991) Director
(1995)
Alan J. Gnann 46 Vice President--Corporate President--Manning Nonwovens
Development (since 1993) Division
Mary Adamowicz 35 General Counsel and Secretary N/A
(since 1991)
Raymond S. Lanzi 57 Division President (since 1979) N/A
Elliott F. Whitely 52 Division President (since 1987) N/A
James P. Carolan 53 Division President (since 1993) President--Lydall
Director (1994) International
William J. Rankin 42 Division President (since 1992) General Manager--Lydall
Director (1995) Express
Christopher R. 42 Division President (since 1990) N/A
Skomorowski Director (1994)
John J. Worthington 47 Division President (since 1996) General Manager, W. R. Grace
and Specialty Paperboard,
Inc.
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information regarding the common stock of the Company and recent market
prices of such stock, the cash dividend policy, and the approximate number of
holders of common stock, is incorporated herein by reference to pages 22, 31,
32 and 41 of the 1995 Annual Report to Stockholders.
ITEM 6. SELECTED FINANCIAL DATA.
Information regarding selected financial data of the Company is incorporated
herein by reference to the inside front cover of the 1995 Annual Report to
Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and results of
operations is incorporated herein by reference to the President's Letter, the
Analysis of Results and Key Financial Items on pages 3 through 7 and 14
through 22 of the 1995 Annual Report to Stockholders.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of Lydall, Inc. and its subsidiaries
and the supplementary quarterly financial information are incorporated by
reference to pages 23 through 27 and 34 of the 1995 Annual Report to
Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements with the Company's independent public
accountants on accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding the directors of Lydall is incorporated by reference
to the definitive Proxy Statement of Lydall to be filed with the Commission
relating to its Annual Meeting of stockholders to be held on May 15, 1996.
Information regarding the executive officers and other significant employees
of the Company is contained on pages 7 and 8 of this report.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding the compensation of Lydall's directors and executive
officers is incorporated by reference to the definitive Proxy Statement of
Lydall to be filed with the Commission relating to its Annual Meeting of
stockholders to be held on May 15, 1996, excluding the Compensation and Stock
Option Committee Report to Stockholders found on pages 10 through 13, and the
comparative performance graph located on page 14, therein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding beneficial ownership of the common stock by certain
beneficial owners and by management of the Company is incorporated by
reference to the definitive Proxy Statement of Lydall to be filed with the
Commission relating to its Annual Meeting of stockholders to be held on May
15, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding certain relationships and related transactions with
management is incorporated by reference to the definitive Proxy Statement of
Lydall to be filed with the Commission relating to its Annual Meeting of
stockholders to be held on May 15, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
a) 1) The following consolidated financial statements of Lydall, Inc. and
its subsidiaries are found in and are incorporated by reference to the Annual
Report to Stockholders for the year ended December 31, 1995:
<TABLE>
<CAPTION>
ANNUAL
REPORT
PAGES
------
<S> <C>
Consolidated Income Statements--Years ended December 31, 1995, 1994,
and 1993.............................................................. 23
Consolidated Balance Sheets--December 31, 1995 and 1994................ 24-25
Consolidated Statements of Cash Flows--Years ended December 31, 1995,
1994, and 1993........................................................ 26
Consolidated Statements of Changes in Stockholders' Equity--Years ended
December 31, 1995, 1994, and 1993..................................... 27
Notes to Consolidated Financial Statements............................. 28-38
Report of Independent Accountants...................................... 39
</TABLE>
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a) 2) Financial Statement Schedule:
<TABLE>
<CAPTION>
10-K
PAGES
-----
<S> <C>
Report and Consent of Independent Accountants........................... 13-14
Schedule II--Valuation and Qualifying Accounts--Years ended December 31,
1995, 1994, and 1993................................................... 15
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, are inapplicable, or are presented in the notes to
financial statements, and therefore have been omitted.
With the exception of the consolidated financial statements and the
accountants' report thereon listed in the above index, the information
referred to in Items 2, 5, 6 and 7 and the supplementary quarterly financial
information referred to in Item 8, all of which is included in the 1995 Annual
Report to Stockholders of the Company and incorporated by reference into this
Form 10-K Annual Report, the 1995 Annual Report to Stockholders is not to be
deemed "filed" as part of this report.
a) 3) Exhibits included herein:
<TABLE>
<CAPTION>
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the registrant dated August
14, 1995, (filed as Exhibit 4.1 to the registrants Quarterly Report on Form 10-Q
dated November 9, 1995 and incorporated herein by this reference).
3.2 Bylaws of the registrant (filed as Exhibit 3.2 to the registrant's Registration
Statement on Form 8-B dated October 16, 1987, and incorporated herein by this
reference).
4.1 Certain long-term debt instruments, each representing indebtedness in an amount
equal to less than 10 percent of the registrant's total consolidated assets, have
not been filed as exhibits to this Annual Report on Form 10-K. The registrant
hereby undertakes to file these instruments with the Commission upon request.
10.1* Lydall, Inc. 1978 Long-Term Incentive Compensation Plan (filed as Exhibit 4.4 to
the registrant's Registration Statement on Form S-8 dated March 18, 1988 (Reg. No.
33-20777), and incorporated herein by this reference).
10.2* Amended and restated, Lydall, Inc. 1982 Stock Incentive Compensation Plan, amended
through May 14, 1991 (filed as Exhibit 10.6 to the registrant's Annual Report on
Form 10-K dated March 26, 1992 and incorporated herein by this reference).
10.3* Amended and restated, 1992 Stock Incentive Compensation Plan, dated May 14, 1992,
amended through May 11, 1994, (filed as Exhibit 10.3 to the registrant's Annual
Report on Form 10-K dated March 27, 1995, and incorporated hereby by this
reference).
10.4* Lydall, Inc. Senior Management Annual Incentive Compensation Plan (filed as Exhibit
3.5 to the registrant's Registration Statement on Form 8-B dated October 16, 1987,
and incorporated herein by this reference).
10.5* Lydall, Inc. Management Annual Incentive Compensation Plan (filed as Exhibit 3.6 to
the registrant's Registration Statement on Form 8-B dated October 16, 1987, and
incorporated herein by this reference).
10.6* Employment Agreement with Leonard R. Jaskol dated March 1, 1995, (filed as Exhibit
10.6 to the registrant's Annual Report on Form 10-K dated March 20, 1995, and
incorporated hereby by this reference).
10.7* Employment Agreement with John E. Hanley dated March 10, 1995, (filed as Exhibit
10.1 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and
incorporated herein by this reference).
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
10.8* Employment Agreement with James P. Carolan dated March 10, 1995 (filed as Exhibit
10.2 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and
incorporated herein by this reference).
10.9* Employment Agreement with Elliott F. Whitely dated March 10, 1995 (filed as Exhibit
10.3 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and
incorporated herein by this reference).
10.10* Employment Agreement with Alan J. Gnann dated March 10, 1995 (filed as Exhibit 10.4
to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and
incorporated herein by this reference).
10.11* Employment Agreement with Raymond J. Lanzi dated March 10, 1995 (filed as Exhibit
10.5 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and
incorporated herein by this reference).
10.12* Employment Agreement with Christopher R. Skomorowski dated March 10, 1995 (filed as
Exhibit 10.6 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995
and incorporated herein by this reference).
10.13* Employment Agreement with William J. Rankin dated March 10, 1995 (filed as Exhibit
10.7 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and
incorporated herein by this reference).
10.14* Employment Agreement with Carole F. Butenas dated March 10, 1995 (filed as Exhibit
10.8 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and
incorporated herein by this reference).
10.15* Employment Agreement with Mona G. Estey dated March 10, 1995 (filed as Exhibit 10.9
to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and
incorporated herein by this reference).
10.16* Employment Agreement with Mary Adamowicz dated March 10, 1995 (filed as Exhibit
10.10 to the registrant's Quarterly Report on Form 10-Q dated May 9, 1995 and
incorporated herein by this reference).
10.17* Lydall, Inc. Board of Directors Deferred Compensation Plan effective January 1,
1991, (filed as Exhibit 10.17 to the registrant's Annual Report on Form 10-K dated
March 26, 1991 and incorporated herein by this reference).
10.18 Asset Purchase Agreement between Lydall Central, Inc. and Standard Packaging, Inc.
(filed as Exhibit 2.1 to the registrant's Current Report on Form 8-K dated February
28, 1994 and incorporated herein by this reference).
10.19 Asset Purchase Agreement between Lydall Eastern, Inc. and Riverwood International
Georgia, Inc. (filed as Exhibit 10.1 to the registrant's Quarterly Report on Form
10-Q dated August 10, 1994 and incorporated herein by this reference).
10.20* Lydall, Inc. Supplemental Executive Retirement Plan effective January 1, 1994,
filed herewith.
11.1 Schedule of Computation of Weighted Average Common Shares and Equivalents
Outstanding, filed herewith.
13.1 Annual Report to Stockholders for the year ended December 31, 1995, filed herewith.
21.1 List of subsidiaries of the registrant, filed herewith.
23.1 Consent of Independent Public Accountants, filed herewith.
24.1 Power of Attorney, dated March 13, 1996, authorizing Leonard R. Jaskol and/or John
E. Hanley to sign this report on behalf of each member of the Board of Directors
indicated therein, filed herewith.
27.1 Financial Data Schedule, filed herewith.
</TABLE>
- --------
* Management contract or compensatory plan.
b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter, 1995.
11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, LYDALL, INC. HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
LYDALL, INC.
/s/ Leonard R. Jaskol
Date: March 27, 1996 By __________________________________
LEONARD R. JASKOL
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF LYDALL, INC. IN
THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Leonard R. Jaskol Chairman, Chief March 27, 1996
- ------------------------------------- Executive Officer
LEONARD R. JASKOL and Director
/s/ John E. Hanley Vice President--Finance March 27, 1996
- ------------------------------------- and Treasurer
JOHN E. HANLEY (Principal Financial
and Accounting Officer)
/s/ John E. Hanley March 27, 1996
- -------------------------------------
JOHN E. HANLEY
ATTORNEY-IN-FACT FOR:
/s/ Lee A. Asseo Director* March 27, 1996
- -------------------------------------
LEE A. ASSEO
/s/ Paul S. Buddenhagen Director* March 27, 1996
- -------------------------------------
PAUL S. BUDDENHAGEN
/s/ Carole F. Butenas Director* March 27, 1996
- -------------------------------------
CAROLE F. BUTENAS
/s/ Samuel P. Cooley Director* March 27, 1996
- -------------------------------------
SAMUEL P. COOLEY
/s/ W. Leslie Duffy Director* March 27, 1996
- -------------------------------------
W. LESLIE DUFFY
/s/ William P. Lyons Director* March 27, 1996
- -------------------------------------
WILLIAM P. LYONS
/s/ William J. Rankin Director* March 27, 1996
- -------------------------------------
WILLIAM J. RANKIN
/s/ Joel Schiavone Director* March 27, 1996
- -------------------------------------
JOEL SCHIAVONE
/s/ Roger M. Widmann Director* March 27, 1996
- -------------------------------------
ROGER M. WIDMANN
/s/ Albert E. Wolf Director* March 27, 1996
- -------------------------------------
ALBERT E. WOLF
*(constituting in excess of a majority of the full Board of Directors)
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Lydall, Inc.:
Our report on the consolidated financial statements of Lydall, Inc. and
Subsidiaries has been incorporated by reference in this Form 10-K from page 39
of the 1995 Annual Report to Stockholders of Lydall, Inc. In connection with
our audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 10 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
Hartford, Connecticut
February 9, 1996 except for
the Subsequent Event footnote,
for which the date is
March 19, 1996
13
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Lydall, Inc. on Form S-8 (File No. 33-93768) of our reports dated February
9, 1996, except as to the information presented in the Subsequent Event
footnote, for which the date is March 19, 1996, on our audits of the
consolidated financial statements and financial statement schedule of Lydall,
Inc., and Subsidiaries as of December 31, 1995 and 1994, and for the years
ended December 31, 1995, 1994 and 1993, which reports are incorporated by
reference from the Annual Report to Stockholders, and included, respectively,
in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Hartford, Connecticut
March 27, 1996
14
<PAGE>
SCHEDULE II
LYDALL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
$ THOUSANDS ADDITIONS
- ----------- ---------------------
CHARGED TO
CHARGED TO OTHER
BALANCE AT COSTS AND ACCOUNTS-- DEDUCTIONS-- BALANCE AT
DESCRIPTION JANUARY 1 EXPENSES DESCRIBE DESCRIBE DECEMBER 31
----------- ---------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1995
Allowance for doubtful
receivables............ $1,724 $ 565 $-- $ (351)(1) $1,938
Accumulated amortization
of intangible assets... 7,524 923 -- (1)(4) 8,446
Accrued reorganization.. 157 4 -- (24)(2) 137
Accrued environmental... 1,002 -- 83 (4) (13)(2) 1,072
Accumulated amortization
of goodwill............ 516 587 -- -- 1,103
1994
Allowance for doubtful
receivables............ $1,126 $1,345 $-- $ (747)(1) $1,724
Accumulated amortization
of intangible assets... 6,733 921 -- (130)(3) 7,524
Accrued reorganization.. 95 72 -- (10)(2) 157
Accrued environmental... 954 -- 90 (4) (42)(2) 1,002
Accumulated amortization
of goodwill............ 34 482 -- -- 516
1993
Allowance for doubtful
receivables............ $ 808 $ 340 $-- $ (22)(1) $1,126
Accumulated amortization
of intangible
assets(5).............. 5,822 911 -- -- 6,733
Accrued reorganization.. 56 42 -- (3)(2) 95
Accrued environmental... 1,003 67 (59)(4) (57)(2) 954
Accumulated amortization
of goodwill(5)......... 21 13 -- -- 34
</TABLE>
Notes(1): Uncollected receivables written off.
(2): Disbursements of amounts previously accrued.
(3): Write off of fully amortized asset.
(4): Record foreign currency translation adjustments.
(5): Prior year amounts have been adjusted to separately identify
goodwill amortization from other intangibles.
15
<PAGE>
SCHEDULE X
INDEX TO EXHIBITS
-----------------
Page in
Exhibit Sequentially
Number Description of Document Numbered Copy
- ------- ----------------------- -------------
3.1 Amended and Restated Certificate of Incorporation
of the registrant dated August 14, 1995, (filed as
Exhibit 4.1 to the registrants Quarterly Report on
Form 10-Q dated November 9, 1995 and incorporated
herein by this reference).
3.2 Bylaws of the registrant (filed as Exhibit 3.2 to
the registrant's Registration Statement on Form 8-B
dated October 16, 1987, and incorporated herein by
this reference).
4.1 Certain long-term debt instruments, each
representing indebtedness in an amount equal to
less than 10 percent of the registrant's total
consolidated assets, have not been filed as
exhibits to this Annual Report on Form 10-K. The
registrant hereby undertakes to file these
instruments with the Commission upon request.
10.1 Lydall, Inc. 1978 Long-Term Incentive Compensation
Plan (filed as Exhibit 4.4 to the registrant's
Registration Statement on Form S-8 dated March 18,
1988 (Reg. No. 33-20777), and incorporated herein by
this reference).
10.2 Amended and restated, Lydall, Inc. 1982 Stock
Incentive Compensation Plan, amended through May
14, 1991, (filed as Exhibit 10.6 to the registrant's
Annual Report on Form 10-K dated March 26, 1992
amended through May 14, 1991, by this reference).
10.3 Amended and restated 1992 Stock Incentive
Compensation Plan, dated May 14, 1992 amended
through May 11, 1994, filed as exhibit 10.3 to the
registrant's Annual Report on Form 10-K dated March
27, 1995, and incorporated herein by this
reference).
10.4 Lydall, Inc. Senior Management Annual Incentive
Compensation Plan (filed as Exhibit 3.5 to the
registrant's Registration Statement on Form 8-B
dated October 16, 1987, and incorporated herein by
this reference).
10.5 Lydall, Inc. Management Annual Incentive
Compensation Plan (filed as Exhibit 3.6 to the
registrant's Registration Statement on Form 8-B
dated October 16, 1987, and incorporated herein by
this reference).
<PAGE>
INDEX TO EXHIBITS (continued)
-----------------------------
Page in
Exhibit Sequentially
Number Description of Document Numbered Copy
- ------- ----------------------- -------------
10.6 Employment Agreement with Leonard R. Jaskol dated
March 1, 1995, (filed as exhibit 10.6 to the
registrant's Annual Report on Form 10-K dated March
20, 1995, and incorporated herein by this
reference).
10.7 Employment Agreement with John E. Hanley dated
March 10, 1995, (filed as Exhibit 10.1 to the
registrant's Quarterly Report on Form 10-Q dated
May 9, 1995 and incorporated herein by this
reference).
10.8 Employment Agreement with James P. Carolan dated
March 10, 1995 (filed as Exhibit 10.2 to the
registrant's Quarterly report on Form 10-Q dated
May 9, 1995 and incorporated herein by this
reference).
10.9 Employment Agreement with Elliott F. Whitely dated
March 10, 1995 (filed as Exhibit 10.3 to the
registrant's Quarterly report on Form 10-Q dated
May 9, 1995 and incorporated herein by this
reference).
10.10 Employment Agreement with Alan J. Gnann dated March
10, 1995 (filed as Exhibit 10.4 to the registrant's
Quarterly report on Form 10-Q dated May 9, 1995 and
incorporated herein by this reference).
10.11 Employment Agreement with Raymond J. Lanzi dated
March 10, 1995 (filed as Exhibit 10.5 to the
registrant's Quarterly report on Form 10-Q dated
May 9, 1995 and incorporated herein by this
reference).
10.12 Employment Agreement with Christopher R.
Skomorowski dated March 10, 1995 (filed as Exhibit
10.6 to the registrant's Quarterly report on Form
10-Q dated May 9, 1995 and incorporated herein by
this reference).
10.13 Employment Agreement with William J. Rankin dated
March 10, 1995 (filed as Exhibit 10.7 to the
registrant's Quarterly report on Form 10-Q dated
May 9, 1995 and incorporated herein by this
reference).
10.14 Employment Agreement with Carole F. Butenas dated
March 10, 1995 (filed as Exhibit 10.8 to the
registrant's Quarterly report on Form 10-Q dated
May 9, 1995 and incorporated herein by this
reference).
<PAGE>
INDEX TO EXHIBITS (continued)
-----------------------------
Page in
Exhibit Sequentially
Number Description of Document Numbered Copy
- ------- ----------------------- -------------
10.15 Employment Agreement with Mona G. Estey dated March
10, 1995 (filed as Exhibit 10.9 to the registrant's
Quarterly report on Form 10-Q dated May 9, 1995 and
incorporated herein by this reference).
10.16 Employment Agreement with Mary Adamowicz dated
March 10, 1995 (filed as Exhibit 10.10 to the
registrant's Quarterly report on Form 10-Q dated
May 9, 1995 and incorporated herein by this
reference).
10.17 Lydall, Inc. Board of Directors Deferred
Compensation Plan effective January 1, 1991, (filed
as Exhibit 10.17 to the registrant's Annual Report
on Form 10-K dated March 26, 1991 and incorporated
herein by this reference).
10.18 Asset Purchase Agreement between Lydall Central,
Inc. and Standard Packaging, Inc. (filed as Exhibit
2.1 to the registrant's Current Report on Form 8-K
dated February 28, 1994 and incorporated herein by
this reference).
10.19 Asset Purchase Agreement between Lydall Eastern,
Inc. and Riverwood International Georgia, Inc.
filed as Exhibit 10.1 to the registrant's Quarterly
Report on Form 10-Q dated August 10, 1994 and
incorporated herein by this reference).
10.20 Lydall, Inc. Supplemental Executive Retirement Plan
effective January 1, 1994, filed herewith. 19-34
11.1 Schedule of Computation of Weighted Average Common
Shares and Equivalents Outstanding, filed herewith. 35
13.1 Annual Report to Stockholders for the year ended
December 31, 1995, filed herewith. P
21.1 List of subsidiaries of the registrant, filed
herewith. 36
23.1 Consent of Independent Public Accountants, filed
herewith. 37
24.1 Power of Attorney, dated March 13, 1996,
authorizing Leonard R. Jaskol and/or John E. Hanley
to sign this report on behalf of each member of the
Board of Directors indicated therein, filed
herewith. 38-39
27.1 Financial Data Schedule, filed herewith. 40
<PAGE>
AMENDMENT NO. 1
TO THE
LYDALL, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Lydall, Inc. Supplemental Executive Retirement Plan ("SERP") is hereby
amended effective March 1, 1995 pursuant to Section 5.05 thereof as follows:
I.
Section 1.04 of the SERP is deleted in its entirety and the following new
Section 1.04 is substituted therefor:
1.04 "Cause" shall mean (i) conviction of a crime involving moral
-----
turpitude, or (ii) material and unexcused breach by Executive of his obligations
under this SERP or any employment contract between the Company and/or any of its
subsidiaries and Executive, which results in material harm to the Company and
which is not cured within the period set forth below; provided, however, that
"Cause" shall not exist unless such conviction or breach is detailed in a
written notice of intent to terminate by the Board providing for sixty (60) days
from receipt by Executive to cure the breach prior to termination of Executive;
except such notice shall not be required if, in the Board's discretion, it
determines that the Company would be immediately harmed.
II.
Section 1.05 of the SERP is amended by adding the following at the end of
paragraph (i) thereof "/or", by adding the following at the end of paragraph
(ii) thereof "and/or" and by adding the following new paragraph (iii) after
paragraph (ii) thereof:
(iii) the election or appointment to the Board of any director or
directors whose appointment or election or nomination for election
was not approved by a vote of at least a majority of the directors
then still in office who were either directors on the date hereof or
whose election, appointment or nomination for election was
previously so approved.
-1-
<PAGE>
AMENDMENT No. 1 executed at Manchester, Connecticut this 8th day of
-----
December, 1995.
LYDALL, INC.
By Leonard R. Jaskol
-----------------
Its Chairman and Chief Executive Officer
-2-
<PAGE>
LYDALL, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
January, 1994
<PAGE>
LYDALL, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
A number of executives are employed by Lydall, Inc. (the "Company") and/or
its subsidiaries and have performed their duties in a capable and efficient
manner resulting in substantial benefit to the Company. These executives may not
receive the full retirement benefits to which they would otherwise be entitled
under the various qualified employee benefit plans maintained by the Company due
to various limitations contained in the Internal Revenue Code of 1986, as
amended. In recognition of their past service, and in consideration of their
future service to the Company, the Company has created the Lydall, Inc.
Supplemental Executive Retirement Plan ("SERP") effective January 1, 1994 for
the benefit of those executives following their retirement from service with the
Company, and to provide supplemental retirement income to their survivors. The
SERP is intended to be an unfunded plan maintained solely for the purpose of
providing benefits to a select group of management and highly compensated
employees.
<PAGE>
SECTION 1
DEFINITIONS
-----------
For purposes of this SERP:
1.01. "Actuarial Equivalent" shall mean, with respect to a benefit, the
--------------------
equivalent in value of such benefit when computed on the table of mortality and
at the rate of interest stated in the Pension Plan.
1.02. "Age" shall mean the Executive's actual age as of a specified date
---
expressed in years, months and days.
1.03. "Board" shall mean the Board of Directors of Lydall, Inc. or an
-----
appropriate committee of the Board of Directors appointed by the Board of
Directors for purposes of administering this SERP.
1.04. "Cause" shall mean conviction of a felony or other crime involving
-----
moral turpitude, material breach by Executive of his obligations under this SERP
or any employment contract between the Company and/or any of its subsidiaries
and Executive, the bankruptcy or insolvency of the Executive, his refusal to
follow reasonable orders or directions of the President and Chief Executive
Officer of the Company or any other act or action which constitutes a material
violation by Executive of his fiduciary duty owed to the Company and/or whatever
subsidiary thereof actually employs Executive.
1.05 "Change of Control" shall mean:
-----------------
(i) an acquisition of the Company by means of a merger or
consolidation or purchase of substantially all of its assets
- 2 -
<PAGE>
if and when incident thereto (a) the composition of the Board or its successor
changes so that a majority of the Board is not comprised of individuals who were
members of the Board immediately prior to such merger, consolidation or purchase
of assets or (b) the stockholders of the Company acquire a right to receive, in
exchange for or upon surrender of their stock, cash or other securities or a
combination of the two, and,
(ii) the acquisition by a Person (as that term is hereafter defined) of
the voting rights with respect to 25 percent or more of the outstanding common
stock of the Company if such Person was not an officer or director of the
Company on December 31, 1993.
The word "Person", as used in the preceding sentence, shall mean an
individual, corporation, trust, or other legal or commercial entity and include
two or more persons acting as a partnership, limited partnership, syndicate or
other group for the purpose of acquiring, holding or disposing of securities of
the Company.
1.06. "Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
any regulations promulgated thereunder and interpretations thereof as such may
affect this SERP.
1.07. "Compensation" shall mean the Executive's base salary rate for a
------------
calendar year plus cash bonuses paid during such calendar year (without regard
to the limitations imposed under Section 401(a)(17) of the Code).
- 3 -
<PAGE>
1.08. "Early Retirement Date" shall mean the first day of the month
---------------------
coincident with or next following the Executive's retirement on or after age 55
but before age 65 after being vested pursuant to Section 3.02.
1.09. "Executive" shall mean all officers of Lydall, Inc., Presidents of
---------
Divisions of Lydall, Inc. (whether or not operated as a subsidiary) and the Vice
President of Sales of the Southern Products Division plus any other executive
employee of the Company whom the Board determines shall be eligible to
participate in this SERP.
1.10. "Final Average Compensation" shall mean the average of the
--------------------------
Executive's annual Compensation over the last sixty calendar months immediately
preceding or coinciding with Executive's last day of employment with the
Company.
1.11. "Normal Retirement Date" shall mean the first day of the month
----------------------
coincident with or next following the date the Executive attains age 65.
1.12. "Participant" shall mean an Executive who is participating in this
-----------
SERP.
1.13. "Pension Plan" shall mean the Lydall, Inc. Pension Plan No. 1A as
------------
amended from time to time.
1.14. "Profit Sharing Plan" shall mean the Lydall, Inc. Profit Sharing Plan
-------------------
No. 1 as amended from time to time.
1.15. "401(k) Plan" shall mean the Lydall, Inc. 401(k) Plan as amended from
-----------
time to time.
- 4 -
<PAGE>
1.16. "Plans" shall mean collectively the Pension Plan, Profit Sharing Plan
-----
and 401(k) Plan.
1.17. "Service" shall mean the Executive's full or partial years of service
-------
with the Company as recognized under the Pension Plan.
1.18. The terms used in this SERP shall have the same meaning as those used
in the Pension Plan unless such terms are defined in the SERP or unless
otherwise provided in this SERP.
SECTION 2
PARTICIPATION
-------------
2.01. Participation. All Executives shall be eligible to participate in
-------------
this SERP, provided, however, that an Executive shall not be deemed a
Participant in this SERP unless his benefits under the Plans are otherwise
restricted due to the imposition of some or all of the limitations imposed under
the Code.
SECTION 3
RETIREMENT BENEFITS
-------------------
3.01. Normal Retirement Benefit. Upon the Executive's retirement on or
-------------------------
after his Normal Retirement Date the Company shall pay to Executive an annual
supplemental retirement benefit equal to the lesser benefit of (a) or (b) below;
provided, however, that no benefits shall be payable hereunder if (c) exceeds
the lesser of (A)(a)(i) or (B) the sum of (b)(1)(i),
- 5 -
<PAGE>
(b)(2)(i), (b)(3)(i) and (b)(4)(i) for each calendar year of the Executive's
Service until the Executive's retirement:
(a)(i) 60% of the Executive's Final Average Compensation less (ii) the
benefit determined und er (c) below;
(b) The Actuarial Equivalent of the sum for each calendar year of the
Executive's Service until the Executive's retirement of:
(1)(i) the Actuarial Equivalent of the Accrued Benefit that the
Executive would have earned under the Pension Plan for such calendar year based
on his Compensation assuming the limitations imposed under Sections 401(a)(17)
and 415 of the Code did not exist, less (ii) such Executive's Accrued Benefit
for such calendar year under the Pension Plan.
(2)(i) The contribution which would be made to the Executive's
account in the Profit Sharing Plan based on his Compensation assuming the
limitations imposed under Sections 401(a)(17) and 415 of the Code did not exist,
less (ii) the actual contributions made to the Executive's account in the Profit
Sharing for such calendar year.
(3)(i) If the Executive made the maximum permissible contributions to
the 401(k) Plan for a calendar year, the employer matching contribution which
would be made to the Executive's account in the 401(k) Plan based on his
Compensation assuming the limitations imposed under Sections 401(a)(17) and 415
of the Code did not exist, less (ii) the actual contribution
- 6 -
<PAGE>
made to the Executive's account in the 401(k) Plan for such calendar year.
(4)(i) Earnings attributable to accumulated amounts under (b)(2)(i)
and (b)(3)(i) above as of the last day of each calendar year based on the actual
rate of earnings earned by such Executive in the Profit Sharing Plan or 401(k)
Plan, whichever is applicable, for such Plan Year less (ii) the actual rate of
earnings attributable to accumulated amounts under (b)(2)(ii) and (b)(3)(ii)
above as of the last day of each calendar year earned by such Executive in the
Profit Sharing Plan or 401(k) Plan, whichever is applicable, for such Plan Year.
(c) The sum of:
(1) The Executive's annual normal retirement benefit payable to him
under the Pension Plan (determined without regard to any optional method of
benefit payment selected).
(2) The annual benefit Actuarial Equivalent of the Executive's
account balance in the Profit Sharing Plan.
(3) The annual benefit Actuarial Equivalent of the Executive's
account balance under the 401(k) Plan but only based on the portion of such
account balance attributable to the matching contributions made by the Company
to the Plan plus the actual earnings attributable to the Company's matching
contributions.
3.02. Vesting.
-------
(a) An Executive shall be 100% vested in his benefits under this SERP
if the Executive has attained age 55 and the sum of his
- 7 -
<PAGE>
Age and Service equal or exceed 70. In addition, an Executive shall be 100%
vested in his benefits under this SERP determined as of the date of a Change in
Control in the event of a Change of Control. No benefits will be payable to or
on behalf of an Executive unless he is vested pursuant to this Section 3.02.
(b) Notwithstanding anything contained in this SERP to the contrary,
an Executive shall forfeit all benefits not yet paid to the Executive from this
SERP in the event of his termination by the Company for Cause or his breach of
the non-competition provisions specified in Section 3.02(c) during his Service
or while receiving benefits under this SERP.
(c) Executive will not compete directly or indirectly with the Company
or be directly or indirectly interested in any business competing with the
business being conducted by the Company. Ownership of less than one (1%)
percent of the issued and outstanding capital stock of any corporation the stock
of which is listed upon a national securities exchange or regularly quoted by
the National Association of Security Dealers Automated Quotation (NASDAQ) shall
not be deemed to create a material conflict of interest as contemplated
hereunder. Executive shall regard and preserve as confidential and not use,
communicate or disclose to any person, orally, in writing or by a publication,
any secret or confidential information of the Company, regardless of where or
when or how acquired by the Company, which the Company is obligated to maintain
in confidence until such
- 8 -
<PAGE>
information becomes a matter of public knowledge through no act of Executive.
3.03. Early Retirement Benefit. Upon the Executive's retirement on his
------------------------
Early Retirement Date the Company shall pay to Executive an annual supplemental
retirement benefit equal to the retirement benefit as calculated in Section 3.01
but reduced in the same manner as under the Pension Plan.
3.04. Survivor Benefits. In the event of the Executive's death while
-----------------
employed by the Company on or after becoming vested pursuant to Section 3.02,
the Company shall pay an annual supplemental retirement benefit to his surviving
spouse equal to the supplemental retirement benefit to which the Executive would
have been entitled had he retired on the date of his death and received benefits
in the form of a 100% joint and survivor annuity; provided, however, that if
such death benefit commences prior to the date the Participant would have
attained age 65, the benefit shall be reduced in the same manner as provided
under the Pension Plan. In the event of the Executive's death after benefit
payments have commenced, the Company shall continue such payments to the
Executive's surviving spouse.
3.05. Benefit Payments. All benefits due under this Section 3 shall be paid
----------------
in equal monthly payments commencing as of the first day of the month coincident
with or next following the Executive's retirement or death, whichever is
applicable, and shall be made as of the first day of each calendar month by the
Company thereafter. Benefits pursuant to Section 3.01 or 3.03
- 9 -
<PAGE>
shall continue for 15 years. Payments pursuant to Section 3.04 shall continue
for the lesser of the spouse's life or 15 years or, if payments have already
commenced pursuant to Sections 3.01 or 3.03, until the earlier of the spouse's
life or 15 years after payments commenced under Section 3.01 or 3.03, whichever
is applicable.
- 10 -
<PAGE>
SECTION 4
PLAN ADMINISTRATION
-------------------
4.01. Named Fiduciary. The Company shall be the named fiduciary under the
---------------
SERP.
4.02. Plan Administrator. The Company shall be the plan administrator of
------------------
the SERP. The Company, as plan administrator, shall have powers which include,
but are not limited to, the following:
(a) To make and enforce such rules and regulations as it deems necessary
or proper for the administration of the SERP, including the establishment of any
claims procedures that may be necessary;
(b) To interpret and construe all provisions of the SERP, which
interpretation shall be final and conclusive;
(c) To decide all questions concerning the SERP and the eligibility of
any person to participate in the SERP;
(d) To appoint such agents, counsel, accountants, consultants and other
persons as may be necessary to carry out its duties hereunder; and
(e) To allocate and delegate its responsibilities under the SERP and to
designate other persons to carry out any of its responsibilities under the SERP,
any such allocation, delegation or designation to be in writing.
- 11 -
<PAGE>
SECTION 5
MISCELLANEOUS
-------------
5.01. The Company's Liability. The benefits payable hereunder shall
-----------------------
constitute an unsecured liability of the Company to Executive and his
Beneficiary, any such payment shall be made from the general funds of the
Company, the Company shall be under no obligation to segregate any of its assets
for this purpose, and neither the Executive nor his Beneficiary shall have an
interest in any particular asset of the Company by virtue of this SERP.
5.02. Leave of Absence. The Company may grant the Executive one or more
----------------
leaves of absence during which time the Executive shall be considered to be in
the employ of the Company for purposes of this SERP.
5.03. Nonassignability. No Participant or Beneficiary shall have power to
----------------
subject any right to receive payments under this SERP to assignment, pledge,
sale, attachment, garnishment or any other transfer, alienation or encumbrance,
nor shall such rights be subject to the Participant's or Beneficiary's debts or
to seizure for satisfaction of judgments, alimony or separate maintenance
obligations.
5.04. Continuation as Employee. Neither this SERP nor the payment of any
------------------------
benefits hereunder shall be construed as giving the Executive any right to be
retained as an employee of the Company.
- 12 -
<PAGE>
5.05. Amendment and Termination. The Board may from time to time amend,
-------------------------
suspend or terminate the SERP in whole or in part; provided, however, that any
such amendment, suspension or termination cannot reduce any Participant's
benefits accrued under the SERP up to the date of such amendment, suspension or
termination except to the extent such benefits are reduced due to the increase
of the Participant's benefits under the Pension Plan. Such amendment, suspension
or termination shall not be effective until made in writing and shall be
communicated in writing to all Participants.
5.06. Governing Law. The law of the State of Connecticut shall govern the
-------------
interpretation, application and operation of this SERP.
5.07. Successors and Assigns. The rights and obligations of the Company
----------------------
under this SERP shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company, including, without limitation, any
corporation, individual or other person or entity which may acquire all or
substantially all of the assets and business of the Company.
- 13 -
<PAGE>
LYDALL, INC.
Exhibit 11.1
Schedule of Computation of Weighted Average Shares Outstanding
<TABLE>
<CAPTION>
December 31,
----------------------------
In thousands 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Primary
- -------
Weighted average number of
common shares 17,263 16,637 16,439
Additional shares assuming
conversion of stock options
and warrants 1,050 1,315 1,143
------ ------ ------
Weighted average common shares
and equivalents outstanding 18,313 17,952 17,582
------ ------ ------
Fully Diluted
- -------------
Weighted average number of
common shares 17,263 16,637 16,439
Additional shares assuming
conversion of stock options
and warrants 1,071 1,335 1,146
------ ------ ------
Weighted average common shares
and eqivalents outstanding 18,334 17,972 17,585
------ ------ ------
</TABLE>
1994 and 1993 have been restated to reflect a two-for-one stock split
distributed in 1995.
<PAGE>
LYDALL, INC.
Exhibit 21.1
List of Subsidiaries
Lydall, Inc. - Incorporated in the State of Delaware
Logistics Management, Inc. - Incorporated in the State of Connecticut
Lydall Distribution Services, Inc. - Incorporated in the State of Connecticut
Lydall Express, Inc. - Incorporated in the State of Connecticut
Lydall Transport, Ltd. - Incorporated in the State of Virginia
Lydall Eastern, Inc. - Incorporated in State of Connecticut
DBA: Lydall Composite Materials, Covington Operation
Lydall Southern Products, Richmond Operation
Lydall Southern Products, Jacksonville Operation
Lydall Technical Papers
Lydall & Foulds
Lydall New York, Inc. - Incorporated in State of New York
DBA: Lydall Composite Materials, Hoosick Falls Operation
Lydall Manning Nonwovens Division
Lydall Central, Inc. - Incorporated in State of Indiana
DBA: Lydall Westex, Hamptonville Operation
Lydall Westex, Rockwell Operation
Lydall Westex, Columbus Operation
Lydall International, Inc. - Incorporated in State of Delaware
Lydall FSC, Limited - Incorporated in Jamaica
Trident II, Inc. - Incorporated in State of Connecticut
Sopatex, S.A. - Organized under the laws of France
Axohm Industries, S.A. - Organized under the laws of France
DBA: Lydall Axohm
Axohm S.A. Operations
Axohm U.K. - Organized under the laws of Great Britain
28
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in the registration
statement of Lydall, Inc. on Form S-8 (File No. 33-03768) on our
reports dated February 9, 1996, except as to the information
presented in the Subsequent Event footnote, for which the date is
March 19, 1996, on our audits of the consolidated financial
statements and financial statements schedule of Lydall, Inc., and
Subsidiaries as of December 31, 1995 and 1994, and for the years
ended December 31, 1995, 1994 and 1993, which reports are
incorporated by reference from the Annual Report to Stockholders,
and included, respectively, in this Annual Report on Form 10-K
COOPER & LYBRAND L.L.P.
Hartford, Connecticut
March 27, 1996
22
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and
officers of Lydall, Inc. (the "Corporation"), does hereby constitute and appoint
Leonard R. Jaskol and John E. Hanley, and each of them singly, as his agent and
attorney-in-fact to do any and all things and acts in his name and in the
capacities indicated below and to execute any and all instruments for him and in
his name in the capacities indicated below which said Leonard R. Jaskol and John
E. Hanley, or either of them, may deem necessary or advisable to enable the
Corporation to comply with the Securities Exchange Act of 1934, as amended, and
any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with the preparation and filing of the Corporation's
Annual Report on Form 10-K (the "Annual Report") respecting the fiscal year
ended December 31, 1995, including specifically, but not limited to, power and
authority to sign for him in his name in the capacities indicated below the
Annual Report and any and all amendments thereto, and each of the undersigned
does hereby ratify and confirm all that said Leonard R. Jaskol and John E.
Hanley, or either of them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated opposite his or her name.
Leonard R. Jaskol Chairman of the March 13, 1996
- ----------------- Board and Chief
Leonard R. Jaskol Executive Officer
Lee A. Asseo Director March 13, 1996
- ------------
Lee A. Asseo
Paul S. Buddenhagen Director March 13, 1996
- -------------------
Paul S. Buddenhagen
Carole F. Butenas Director March 13, 1996
- -----------------
Carole F. Butenas
Samuel P. Cooley Director March 13, 1996
- ----------------
Samuel P. Cooley
<PAGE>
W. Leslie Duffy Director March 13, 1996
- ---------------
W. Leslie Duffy
William P. Lyons Director March 13, 1996
- ----------------
William P. Lyons
William J. Rankin Director March 13, 1996
- -----------------
William J. Rankin
Joel Schiavone Director March 13, 1996
- --------------
Joel Schiavone
Roger M. Widmann Director March 13, 1996
- ----------------
Roger M. Widmann
A. E. Wolf Director March 13, 1996
- ----------
A. E. Wolf
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 27,820
<SECURITIES> 913
<RECEIVABLES> 34,849
<ALLOWANCES> 1,938
<INVENTORY> 14,124
<CURRENT-ASSETS> 82,469
<PP&E> 105,467
<DEPRECIATION> 45,393
<TOTAL-ASSETS> 158,072
<CURRENT-LIABILITIES> 29,739
<BONDS> 10,621
0
0
<COMMON> 2,089
<OTHER-SE> 99,722
<TOTAL-LIABILITY-AND-EQUITY> 158,072
<SALES> 252,128
<TOTAL-REVENUES> 252,128
<CGS> 174,430
<TOTAL-COSTS> 174,430
<OTHER-EXPENSES> 155
<LOSS-PROVISION> 503
<INTEREST-EXPENSE> 778
<INCOME-PRETAX> 36,875
<INCOME-TAX> 14,437
<INCOME-CONTINUING> 22,438
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,438
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
</TABLE>
