<PAGE> 1
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
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
- - ----------------------------------------
COMMISSION FILE NUMBER 1-994
- - ----------------------------
PRATT & LAMBERT UNITED, INC.
NEW YORK 16-0594810
- - -------- ----------
75 TONAWANDA STREET, BUFFALO, NY 14207
716-873-6000
*INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
----- -----
NUMBER OF COMMON SHARES, PAR VALUE $.01 PER SHARE OUTSTANDING ON:
SEPTEMBER 30, 1995 10,659,526 SHARES
<PAGE> 2
PRATT & LAMBERT UNITED, INC. AND SUBSIDIARY COMPANIES
-----------------------------------------------------
INDEX
-----
PART I. FINANCIAL INFORMATION Page No.
Consolidated Condensed Balance Sheet - September 30, 1995 and 1994 and
December 31, 1994 2
Consolidated Income Statement - Nine Months Ended September 30, 1995
and 1994 3
Statement of Consolidated Cash Flows - Nine Months Ended September 30,
1995 and 1994 4
Notes to Consolidated Condensed Financial Statements 5
Management's Discussion and Analysis of Financial Condition and Results
of Operations 6-8
Exhibit A - Earnings Per Share Computation 9
Incorporation of Certain Information by Reference 10
Pro Forma Condensed Consolidated Financial Information:
(i) Pro Forma Condensed Consolidated Statements of Operations for the
Three Month and Nine Month Period Ended September 30, 1994
(Unaudited) 11-12
(ii) Notes to the Pro Forma Condensed Consolidated Statements of
Operations for the Three Month and Nine Month Period Ended
September 30, 1994 (Unaudited) 13
PART II. OTHER INFORMATION 14-15
<PAGE> 3
PART I. FINANCIAL INFORMATION
PRATT & LAMBERT UNITED, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
------------ -----------
1995 1994 1994
---- ---- ----
(Thousands of Dollars)
ASSETS
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 2,944 $ 4,058 $ 3,370
Receivables 84,646 83,682 66,644
Less - Allowance for Losses 4,033 3,468 3,470
--------- -------- --------
Receivables - Net 80,613 80,214 63,174
Inventories:
Manufactured Products 35,999 37,854 35,877
Raw Materials 24,464 22,960 24,958
Sundries 1,348 1,331 1,491
--------- -------- --------
Total Inventories 61,811 62,145 62,326
Prepaid Expenses 6,484 6,988 9,459
--------- --------- ---------
Total Current Assets 151,852 153,405 138,329
-------- -------- --------
Property, Plant and Equipment - At Cost 113,152 103,238 104,379
Less - Accumulated Depreciation 62,620 56,289 58,021
--------- -------- --------
Property, Plant and Equipment - Net 50,532 46,949 46,358
-------- ------- -------
Goodwill - Net of Amortization 93,579 96,372 95,395
Other Assets 15,752 9,778 11,461
--------- --------- --------
Total Assets $311,715 $306,504 $291,543
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Dividends Payable $ 1,705 $ 1,589 $ 1,590
Short-Term Debt 20,000 16,900 16,600
Current Maturities of Long-Term Debt 810 844 851
Accounts Payable 42,786 46,002 36,483
United States and Canadian Income Taxes 1,122 14 502
Other Current Liabilities 15,396 18,960 17,173
--------- --------- --------
Total Current Liabilities 81,819 84,309 73,199
--------- --------- --------
Other Liabilities (Current Maturities Included in
Current Liabilities):
Long-Term Debt 75,892 71,147 71,103
Deferred Income Taxes 6,345 6,904 6,845
--------- -------- --------
Total Other Liabilities 82,237 78,051 77,948
--------- -------- --------
Shareholders' Equity:
Common Stock at Par Value 135 134 134
Additional Paid-In Capital 99,193 98,069 98,261
Retained Earnings 76,030 72,472 69,205
Cumulative Translation Adjustments (1,663) (699) (1,372)
--------- --------- ---------
Total 173,695 169,976 166,228
Less - Treasury Stock - At Cost 26,036 25,832 25,832
--------- -------- --------
Total Shareholders' Equity 147,659 144,144 140,396
-------- -------- -------
Total Liabilities and Shareholders' Equity $311,715 $306,504 $291,543
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
-2-
<PAGE> 4
PART I. FINANCIAL INFORMATION
PRATT & LAMBERT UNITED, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED INCOME STATEMENT
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30 September 30
------------ ------------
1995* 1994 1995* 1994
----- ---- ----- ----
(000's omitted except share amounts)
<S> <C> <C> <C> <C>
Net sales $125,765 $ 102,633 $373,391 $228,667
Cost of sales 92,831 71,808 275,784 157,237
------- ------- ------- -------
Gross profit 32,934 30,825 97,607 71,430
Selling, administrative and general
expenses 24,062 23,043 72,037 58,169
-------- ------- ------- -------
Income from operations 8,872 7,782 25,570 13,261
Interest expense 1,841 1,099 5,502 2,003
Interest income 60 44 183 68
Other income - net 191 498 600 759
-------- -------- -------- --------
Income before taxes on income 7,282 7,225 20,851 12,085
Taxes on income 3,191 2,991 9,133 4,891
------- ------- ------- --------
Net income $ 4,091 $ 4,234 $ 11,718 $ 7,194
======== ======= ======= ========
Per common share earnings $.38 $.48 $1.08 $1.06
Per common share earnings -
assuming full dilution $.38 $.48 $1.08 $1.05
Average common shares outstanding 10,648,412 8,742,880 10,632,263 6,650,380
</TABLE>
*Note: The 1995 results include the sales and earnings of United Coatings,
which merged with the company on August 4, 1994. The 1994 results, as
reported above, reflect only Pratt & Lambert's sales and earnings through the
effective date of the merger with United Coatings and the sales and earnings
of the combined companies from August 5, 1994, through the end of the period.
The following pro forma information was prepared under the assumption that the
merger with United Coatings was effective on January 1, 1994.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30 September 30
------------ ------------
1995 1994 1995 1994
---- ---- ---- ----
(000's omitted except share amounts)
<S> <C> <C> <C> <C>
Net sales $125,765 $123,693 $373,391 $360,477
Net income 4,091 4,978 11,718 14,360
Per common share earnings $.38 $.46 $1.08 $1.34
Per common share earnings
assuming full dilution $.38 $.46 $1.08 $1.33
Average common shares outstanding 10,648,412 10,590,702 10,632,263 10,588,100
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
-3-
<PAGE> 5
PRATT & LAMBERT UNITED, INC. AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
SEPTEMBER 30
------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 11,718 $ 7,194
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 5,389 3,928
Amortization of Goodwill and Other Intangibles 1,968 405
Deferred Income Taxes (500) 111
Provision for Losses on Accounts Receivable 553 (391)
Gain on Disposition of Property (257) (180)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Current Assets:
Receivables (17,795) 1,549
Inventories 669 (1,733)
Prepaid Expenses 2,985 (820)
Increase (Decrease) in Current Liabilities:
Accounts Payable 6,221 (4,154)
United States and Canadian Income Taxes 506 611
Other Current Liabilities (2,406) (5,382)
(Increase) Decrease in Other Assets (4,435) 1,905
--------- --------
Net Cash Provided by Operating Activities 4,616 3,043
--------- --------
Cash Flows from Investing Activities:
Additions to Property, Plant and Equipment (9,388) (6,283)
Proceeds from Disposition of Property 827 758
Acquisitions, Net of Cash Acquired 0 (17,851)
--------- --------
Net Cash Used for Investing Activities (8,561) (23,376)
-------- --------
Cash Flows from Financing Activities:
Dividends Paid (4,778) (2,514)
Borrowings of Short-Term Debt 3,400 9,200
Borrowings of Long-Term Debt 5,000 50,000
Payments on Long-Term Debt, Including Capitalized
Leases (852) (34,842)
Proceeds from Exercise of Stock Options 933 106
Purchase of Treasury Stock from Related Parties (204) 0
-------- ----------
Net Cash Provided by Financing Activities 3,499 21,950
-------- --------
Effect of Exchange Rate Changes on Cash 20 (2)
--------- ----------
Net Increase (Decrease) in Cash (426) 1,615
Cash, Beginning of Period 3,370 2,443
-------- ---------
Cash, End of Period $ 2,944 $ 4,058
======== =========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
-4-
<PAGE> 6
PRATT & LAMBERT UNITED, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position
as of September 30, 1995, September 30, 1994 and December 31, 1994 and the
results of operations and cash flows for the nine-month periods ended
September 30, 1995 and 1994.
2. Results of operations for the nine-month periods ended September 30, 1995
and 1994 are not necessarily indicative of the results to be expected for the
full year due to the seasonal nature of the paint industry.
3. On November 6, 1995, the company announced that it had signed a merger
agreement providing for Sherwin-Williams to acquire all of the outstanding
shares of Pratt & Lambert United for a cash price of $35.00 per share.
Sherwin-Williams also entered into an agreement with holders of approximately
40% of Pratt & Lambert United's common stock, who have granted an option to
Sherwin-Williams to purchase their shares for $35.00 per share. Under the
terms of the merger agreement, Sherwin-Williams will promptly commence a cash
tender offer for all outstanding common shares of Pratt & Lambert United.
Shares not purchased in the tender offer will be acquired in a subsequent
merger at $35.00 per share as soon as practicable after the completion of the
tender offer.
-5-
<PAGE> 7
PRATT & LAMBERT UNITED, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Summary of significant income statement changes:
<TABLE>
<CAPTION>
Increase (Decrease) in Comparing
Three Months Ended Nine Months Ended
Sept. 30, 1995 and 1994 Sept. 30, 1995 and 1994
----------------------- -----------------------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Net Sales $23,132 22.5% $144,724 63.3%
Cost of Sales 21,023 29.3 118,547 75.4
Selling, Administrative and General Expenses 1,019 4.4 13,868 23.8
Interest Expense 742 67.5 3,499 174.7
Taxes on Income 200 6.7 4,242 86.7
Net Income (143) (3.4) 4,524 62.9
</TABLE>
RESULTS OF OPERATIONS:
- - ----------------------
On August 4, 1994, the company merged with United Coatings, Inc., a leading
producer of paint for the private label market. Under the terms of the merger
agreement, the company purchased all of United's outstanding stock for
5,000,000 shares of the company's common stock, approximately $17,000,000 in
cash and the assumption of United's debt. As the merger has been recorded
under the purchase method of accounting, United's operations since August 4,
1994, have been included in the company's 1994 financial statements. Goodwill
recorded in the accompanying financial statements is lower than that used in
previous pro forma statements due to the change in the company's stock price
that occurred between the announcement and merger dates.
Consolidated net sales of $125,765,000 in the third quarter of 1995 compares to
$102,633,000 in the third quarter of last year while consolidated sales of
$373,391,000 in the first nine months of 1995 compares with $228,667,000 in the
same period last year. Sales of paint products in the aggregate increased
primarily as the result of the merger with United Coatings while sales of
specialty chemicals declined modestly as a result of softening demand for the
company's industrial coatings and construction adhesives. The increase in cost
of sales, selling, administrative and general expenses and interest expense
were primarily the result of the merger.
Assuming that the merger with United Coatings had occurred prior to January 1,
1994, consolidated sales of $125,765,000 in the 1995 third quarter were 1.7%
above sales of $123,693,000 of a year ago. For the nine months, sales rose
3.6% to $373,391,000, when compared with pro forma sales of $360,477,000 in the
first nine months of 1994. During the 1995 periods, raw material costs
increased at a rate faster than the company could implement selling price
adjustments and higher interest rates negatively impacted the company's
earnings. As a result, net income in the third quarter of 1995 of $4,091,000,
or $.38 per share, compares with the pro forma net income of $4,978,000, or
$.46 per share, in last year's
-6-
<PAGE> 8
quarter. Net income of $11,718,000, or $1.08 per share, in the latest nine
month period compares with pro forma net income of $14,360,000, or $1.34 per
share, a year ago.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 123, "Accounting for Stock-Based Compensation," which
requires adoption no later than fiscal years beginning after December 15, 1995.
The new standard defines a fair value method of accounting for stock options
and similar equity instruments. Under the fair value method, compensation cost
in measured at the grant date based on the fair value of the award and is
recognized over the service period, which is usually the vesting period.
Pursuant to the new standard, companies are encouraged, but not required, to
adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," but would be required to disclose in a note to the
financial statements pro forma net income and, if presented, earnings per share
as if the company had applied the new method of accounting.
The accounting requirements of the new method are effective for all employee
awards granted after the beginning of the fiscal year of adoption. The company
has not yet determined if it will elect to change to the fair value method, nor
has it determined the effect the new standard will have on net income and
earnings per share should it elect to make such a change. Adoption of the new
standard will have no effect on the company's cash flows.
LIQUIDITY AND CAPITAL RESOURCES:
- - --------------------------------
During 1995 the company borrowed under its lines of credit in order to finance
the seasonally higher levels of inventories and accounts receivable required
for its paint business. Historically, the company has increased its borrowings
during the first half of each year and anticipates that such borrowings will be
repaid by year end. During August of 1995, the company refinanced its debt by
entering into a new five-year $100,000,000 revolving credit agreement.
Borrowings under the agreement were $75,000,000 at September 30, 1995.
The company continues to maintain a favorable financial position with a current
ratio of 1.9 to 1 at September 30, 1995. In addition to internal sources, the
company has $35,000,000 in lines of credit to meet its short-term financing
requirements. At September 30, 1995, the company had available $15,000,000 in
unused credit under the above agreements.
At September 30, 1995, the company had an authorization from the Board of
Directors to purchase up to 250,200 shares of the company's common stock.
Although the company did not use the authorization to purchase any of its
common stock during 1994, 1993 or 1992, the company has made such purchases in
prior years. Generally, the company utilizes its bank arrangements to effect
such transactions and, based upon historical cash flow, management does not
envision that the authorized stock repurchase program will interfere with the
funding of future operational needs.
As is common in the chemical industry, the company has been notified that it is
a potentially responsible party with respect to hazardous waste at several
sites. The company has accrued for the estimated cost of its participation in
the clean-up and, based upon current information,
-7-
<PAGE> 9
management believes that there will not be a material future charge to earnings
due to these sites.
Environmental regulations have limited in the past and will likely further
limit in the future the volatile organic content of the company's products.
Based upon the technologies that the company has developed, management believes
that in the aggregate the movement to environmentally compliant products will
have a beneficial impact on the company's future operations.
There were no material commitments for capital expenditures at September 30,
1995. It is anticipated that the majority of 1995 capital expenditure
requirements will be financed from internal sources. Management believes that
the company is well positioned financially, with ample cash flow to meet
general operating needs.
On November 6, 1995, the company announced that it had signed a merger
agreement providing for Sherwin-Williams to acquire all of the outstanding
shares of Pratt & Lambert United for a cash price of $35.00 per share.
Sherwin-Williams also entered into an agreement with holders of approximately
40% of Pratt & Lambert United's common stock, who have granted an option to
Sherwin-Williams to purchase their shares for $35.00 per share.
Under the terms of the merger agreement, Sherwin-Williams will promptly
commence a cash tender offer for all outstanding common shares of Pratt &
Lambert United. Shares not purchased in the tender offer will be acquired in a
subsequent merger at $35.00 per share as soon as practicable after the
completion of the tender offer.
-8-
<PAGE> 10
<TABLE>
PART I - EXHIBIT A
PRATT & LAMBERT UNITED, INC. AND SUBSIDIARY COMPANIES
EARNINGS PER SHARE COMPUTATION
<CAPTION>
LINE THREE MONTHS ENDED NINE MONTHS ENDED
NO. SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
1. Net income $4,091,000 $4,234,000 $11,718,000 $7,194,000
========= ========= ========== =========
EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARES - ASSUMING NO DILUTION:
Shares:
Average number of common shares outstanding 10,648,412 8,742,880 10,632,263 6,650,380
Incremental shares - Dilutive stock options (A) 241,498 128,284 197,952 126,534
----------- --------- ----------- ---------
2. Total 10,889,910 8,871,164 10,830,215 6,776,914
========== ========= ========== =========
3. Decremental shares - Anti-dilutive stock options (A) 0 6,223 0 6,630
============= ========== ============= ==========
4. Earnings per common share and common equivalent
share - Assuming no dilution (1 divided by 2) $.38 $.48 $1.08 $1.06
============ =========== ============ ===========
5. Earnings per common share and common equivalent
share - Assuming no dilution adjusted for anti-dilutive
effect of common stock options 1 divided by (2-3) $.38 $.48 $1.08 $1.06
============ =========== ============ ===========
EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARES - ASSUMING FULL DILUTION:
Shares:
Average number of common shares outstanding 10,648,412 8,742,880 10,632,263 6,650,380
Incremental shares - Dilutive stock options (A) 257,563 170,048 264,256 170,558
----------- --------- ----------- ---------
6. Total 10,905,975 8,912,928 10,896,519 6,820,938
========== ========= ========== =========
7. Decremental shares - Anti-dilutive stock options (A) 0 0 0 0
============= =========== ============= ============
8. Earnings per common share and common equivalent
share - Assuming full dilution adjusted for dilutive
effect of stock options (1 divided by 6) $.38 $.48 $1.08 $1.05
============ =========== ============ ===========
9. Earnings per common share and common equivalent
share - Assuming full dilution adjusted for anti-
dilutive effect of stock options 1 divided by (6-7) $.38 $.48 $1.08 $1.05
============ =========== ============ ===========
<FN>
(A) Detailed computations omitted because of insignificant number of shares and effect on total earnings per share.
</TABLE>
-9-
<PAGE> 11
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents are hereby incorporated into this 10-Q in lieu of
filing Form 8-K:
(1) Pratt & Lambert United's annual report on Form 10-K for the fiscal year
ended December 31, 1994.
(2) Pratt & Lambert's quarterly report on Form 10-Q ended March 31, 1994.
(3) Pratt & Lambert's quarterly report on Form 10-Q ended June 30, 1994.
(4) Pratt & Lambert United's quarterly report on Form 10-Q ended September 30,
1994.
(5) Pratt & Lambert United's quarterly report on Form 10-Q ended March 31,
1995.
(6) Pratt & Lambert United's quarterly report on Form 10-Q ended June 30, 1995.
(7) United Coatings, Inc. audited financial statements on Form S-4 for the
fiscal year ended December 31, 1993.
(8) Pro Forma Condensed Consolidated Financial Information on Form S-4 for the
three months ended March 31, 1994 (unaudited).
-10-
<PAGE> 12
PRO FORMA CONDENSED CONSOLIDATED
--------------------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE THREE MONTH AND NINE MONTH PERIOD ENDED SEPTEMBER 30, 1994
(Unaudited)
The following unaudited pro forma condensed consolidated statements of
operations gives effect to the acquisition of United Coatings by Pratt &
Lambert assuming that the acquisition was consummated as of December 31, 1993
and assumes that the acquisition was accounted for as a purchase. The
unaudited pro forma condensed consolidated statements of operations
consolidates the historical statements of operations of Pratt & Lambert and of
United Coatings for the three month and nine month periods ended September 30,
1994. The pro forma data reflects the acquisition of United Coatings Common
Stock in exchange for 5,000,000 shares of Pratt & Lambert Common Stock and
approximately $17,000,000 of cash which was financed through a new revolving
credit/term loan agreement. The following unaudited pro forma condensed
consolidated statements of operations include pro forma adjustments to the
unaudited consolidated statement of operations for the three month and nine
month periods ended September 30, 1994 contained in this filing, of a recurring
nature which give effect to the consummation on or prior to the closing as if
it had occurred as of December 31, 1993. The pro forma adjustments are
described in the accompanying notes to the pro forma condensed consolidated
statement of operations and should be read in conjunction with such pro forma
condensed consolidated statement of operations. Such pro forma statements
should also be read in conjunction with Pratt & Lambert United's consolidated
financial statements and notes set forth in this filing. The following pro
forma condensed consolidated statements of operations do not purport to be
indicative of the actual results that would have occurred had the transaction
been consummated December 31, 1993 or of the future results of operations which
will be obtained as a result of the consummation of the transaction.
-11-
<PAGE> 13
Pro Forma Condensed Consolidated Statements of Operations
For the Nine Month Period Ended September 30, 1994 - Unaudited
(In thousands of dollars except per share amounts)
<TABLE>
<CAPTION>
Pratt & United Pro Forma
Lambert Coatings Adjustments Pro Forma
------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales $194,888 $165,589 $360,477
Cost of Sales 131,437 126,623 (500) (1) 257,560
-------- -------- ---------- --------
Gross Profit 63,451 38,966 500 102,917
Selling, Administrative
and General Expenses 54,121 19,578 (387) (2) 73,312
--------- --------- ---------- ---------
Income from Operations 9,330 19,388 887 29,605
Interest Expense-Net 1,442 895 1,185 (4) 3,522
Other Income (Expense) 711 (4,350) 4,349 (6) 710
Amortization 0 0 1,984 (3) 1,984
---------- ---------- ---------- -----------
Income Before Taxes 8,599 14,143 2,067 24,809
Provision for Income Taxes 3,362 2,025 5,062 (5) 10,449
---------- ---------- ---------- ----------
Net Income $ 5,237 $ 12,118 $ (2,995) $ 14,360
========= ========= ========= ==========
Earnings per common share and
common equivalent share $ .92 $1.34
Earnings per common share-assuming
full dilution $ .91 $1.33
</TABLE>
See notes to the pro forma condensed consolidated statements of operations
Pro Forma Condensed Consolidated Statements of Operations
For the Three Month Period Ended September 30, 1994 - Unaudited
(In thousands of dollars except per share amounts)
<TABLE>
<CAPTION>
Pratt & United Pro Forma
Lambert Coatings Adjustments Pro Forma
------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 68,854 $ 54,839 $123,693
Cost of Sales 46,008 42,283 88,291
-------- -------- --------
Gross Profit 22,846 12,556 35,402
Selling, Administrative
and General Expenses 18,995 6,339 (31) (2) 25,303
-------- --------- ---------- --------
Income from Operations 3,851 6,217 31 10,099
Interest Expense-Net 562 480 260 (4) 1,302
Other Income (Expense) 450 48 (51) (6) 447
Amortization 0 0 661 (3) 661
---------- ---------- ----------- ----------
Income Before Taxes 3,739 5,785 (941) 8,583
Provision for Income Taxes 1,462 1,825 318 (5) 3,605
--------- ---------- ----------- ----------
Net Income $ 2,277 $ 3,960 $ (1,259) $ 4,978
========= ========= ========= =========
Earnings per common share and
common equivalent share $ .40 $ .46
Earnings per common share-assuming
full dilution $ .40 $ .46
</TABLE>
See notes to the pro forma condensed consolidated statements of operations
-12-
<PAGE> 14
PRATT & LAMBERT UNITED, INC. AND SUBSIDIARIES
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED
---------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
The following adjustments have been made to reflect the pro forma recurring
effect of the transaction directly attributable to the agreement as if the
transaction were consummated on December 31, 1993:
1. To reflect negotiated volume discounts with vendors of its principal
raw materials.
2. To reflect the reduction of United Coatings' legal, accounting and
investment banking fees which would not have been incurred during 1994
had the transaction been consummated on December 31, 1993.
3. To reflect amortization expense for the following as required by
purchase accounting:
<TABLE>
<CAPTION>
Three Month Nine Month
Period Ended Period Ended
September 30, September 30,
------------- -------------
1994 1994
---- ----
<S> <C> <C>
Amortization of goodwill over an estimated life of 40 years $605,000 $1,815,000
Amortization of write up of property over estimated lives of 3 to 8
years 56,000 169,000
---------- -----------
$661,000 $1,984,000
======== ==========
</TABLE>
4. To reflect increased interest expense because of additional long-term
debt levels necessary to consummate the transaction. Interest expense
is calculated using the interest rate (approximately 5.9%) for the
three month period ended September 30, 1994. Interest expense for the
nine month period ended September 30, 1994 includes the interest
rate (approximately 4.7%) used for the three month period ended March
31, 1994. Each 1/8% change in the rate will effect net income by
approximately $60,000 or approximately a half a cent per share.
5. To reflect the income taxes associated with the change of United
Coatings' status from an S to a C corporation as well as the estimated
income tax effects of the recurring transactions described above, as
contemplated in the Merger Agreement.
6. With respect to the three and nine month periods ended September 30,
1994 pro forma statement of operations, to reflect the reversal of
the United Coatings senior executive deferred compensation agreement
expense which would not have been incurred during 1994 had the
transaction been consummated on December 31, 1993.
-13-
<PAGE> 15
PART II. OTHER INFORMATION
- - -----------------------------
ITEM 5. OTHER INFORMATION
Please refer to the incorporation of certain information by reference and the
pro forma financial information in Part I on pages 11 through 13 relating to
the acquisition of United Coatings, Inc. by Pratt & Lambert, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed for the three months ended
September 30, 1995.
-14-
<PAGE> 16
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.
PRATT & LAMBERT UNITED, INC.
-----------------------------------
(Registrant)
Date November 14, 1995 "J. J. CASTIGLIA"
--------------------- -----------------------------------
J. J. Castiglia
President
Date November 14, 1995 "J. R. BOLDT"
--------------------- -----------------------------------
J. R. Boldt
Vice President - Finance
-15-
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