UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 0-15899
WELLMAN, INC.
-------------
(Exact name of registrant as specified in its charter)
Delaware 04-1671740
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1040 Broad Street, Shrewsbury, NJ 07702
---------------------------------------
(Address of principal executive offices)
(908) 542-7300
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
As of May 5, 1997, there were 31,113,143 shares of the registrant's
common stock, $.001 par value, outstanding and no shares of Class B common
stock outstanding.
<PAGE>
WELLMAN, INC.
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Condensed Consolidated Statements of Income -
For the three months ended March 31, 1997 and 1996. . . . 3
Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996. . . . . . . . . . . 4
Condensed Consolidated Statements of Stockholders' Equity -
For the three months ended March 31, 1997 and the
year ended December 31, 1996. . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows -
For the three months ended March 31, 1997 and 1996. . . . 6
Notes to Condensed Consolidated Financial Statements . . . . . 7 - 8
ITEM 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . 9 - 13
PART II - OTHER INFORMATION
ITEM 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2
<PAGE>
<TABLE>
WELLMAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------
1997 1996
---- ----
<S> <C> <C>
Net sales $255,148 $301,001
Cost of sales 215,209 256,354
-------- --------
Gross profit 39,939 44,647
Selling, general and administrative
expenses 21,353 21,953
-------- --------
Operating income 18,586 22,694
Interest expense, net 3,275 3,938
-------- --------
Earnings before income taxes 15,311 18,756
Income taxes 6,584 7,047
-------- --------
Net earnings $ 8,727 $ 11,709
======== ========
Net earnings per common share $ 0.28 $ 0.35
======== ========
Weighted average common shares 31,146 33,663
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
WELLMAN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,034 $ 2,120
Accounts receivable, less allowance of $ 3,771
in 1997 and $ 2,661 in 1996 130,601 132,296
Inventories 150,135 158,685
Prepaid expenses and other current assets 2,811 3,947
---------- ----------
Total current assets 284,581 297,048
Property, plant and equipment, at cost:
Land, buildings and improvements 122,915 122,047
Machinery and equipment 800,986 771,624
---------- ----------
923,901 893,671
Less accumulated depreciation 307,271 296,043
---------- ----------
Property, plant and equipment, net 616,630 597,628
Cost in excess of net assets acquired, net 286,802 290,450
Other assets, net 18,153 18,823
---------- ----------
$1,206,166 $1,203,949
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 59,703 $ 64,019
Accrued liabilities 34,822 41,320
Current portion of long-term debt 159 159
---------- ----------
Total current liabilities 94,684 105,498
Long-term debt 326,596 319,407
Deferred income taxes and other liabilities 158,149 155,116
---------- ----------
Total liabilities 579,429 580,021
Stockholders' equity:
Common stock, $0.001 par value; 55,000,000
shares authorized, 33,612,464 shares issued
in 1997, 33,612,464 in 1996 34 34
Class B common stock, $0.001 par value; 5,500,000
shares authorized; no shares issued -- --
Paid-in capital 233,665 233,665
Foreign currency translation adjustments 6,422 9,853
Retained earnings 436,140 429,900
Less common stock in treasury at cost:
2,500,000 shares at March 31, 1997 (49,524) (49,524)
---------- ----------
Total stockholders' equity 626,737 623,928
---------- ----------
$1,206,166 $1,203,949
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
WELLMAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except per share data)
<CAPTION>
COMMON STOCK ISSUED CURRENCY
--------------- PAID-IN TRANSLATION RETAINED TREASURY
SHARES AMOUNT CAPITAL ADJUSTMENTS EARNINGS STOCK TOTAL
------ ------ ------- ----------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 33,441 $33 $230,008 $6,849 $413,456 $ --- $650,346
Net earnings 26,529 26,529
Cash dividends ($0.31 per share) (10,085) (10,085)
Exercise of stock options 49 861 861
Issuance of common stock to
employee benefit plans 121 1 2,669 2,670
Issuance of restricted stock 1 26 26
Tax effect of exercise of
stock options 101 101
Currency translation adjustments 3,004 3,004
Purchase of treasury stock (49,524) (49,524)
------ --- --------- ------ --------- ------- --------
Balance at December 31, 1996 33,612 34 233,665 9,853 429,900 (49,524) 623,928
Net earnings 8,727 8,727
Cash dividends ($0.08 per share) (2,487) (2,487)
Currency translation adjustments (3,431) (3,431)
------ --- -------- ------ -------- -------- --------
Balance at March 31, 1997 33,612 $34 $233,665 $6,422 $436,140 $(49,524) $626,737
====== === ======== ====== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
<TABLE>
WELLMAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(In thousands)
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 8,727 $ 11,709
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 13,767 14,088
Amortization 2,805 2,878
Deferred income taxes 2,868 2,482
Common stock issued for stock plans -- 1,792
Changes in assets and liabilities 139 2,693
------- --------
Net cash provided by operating activities 28,306 35,642
------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (35,575) (30,397)
Decrease in restricted cash 132 311
Proceeds from divestitures -- 4,185
------- --------
Net cash used in investing activities (35,443) (25,901)
------- --------
Cash flows from financing activities:
Net borrowings of long-term debt 8,717 9,463
Decrease in line of credit with bank -- (6,216)
Dividends paid on common stock (2,487) (2,346)
Exercise of stock options -- 530
------- --------
Net cash provided by financing activities 6,230 1,431
------- --------
Effect of exchange rate changes on cash
and cash equivalents (179) 690
------- --------
Increase (decrease) in cash and cash equivalents (1,086) 11,862
Cash and cash equivalents at beginning of period 2,120 3,893
------- --------
Cash and cash equivalents at end of period $ 1,034 $ 15,755
======= ========
Supplemental cash flow data:
Cash paid (received)during the period for:
Interest (net of amounts capitalized) $ 2,381 $ 1,582
Income taxes $ 4,932 $(8,970)
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
WELLMAN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information for the three months ended
March 31, 1997 and 1996 is unaudited)
(In thousands)
1. BASIS OF PRESENTATION
The results of operations for the three month periods are not
necessarily indicative of those for the full year.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements are presented on a basis consistent with
the audited statements, and all adjustments, which consist only of normal
recurring adjustments necessary to present fairly the financial position and
the results of operations for the periods indicated, have been reflected.
2. NET EARNINGS PER COMMON SHARE
Net earnings per common share is based on the weighted average number of
of common and common equivalent shares (i.e., stock options) outstanding
during the period. In February 1997, the Financial Accounting Standards
Board issued Statement No. 128, "Earnings per Share," which is required to
be adopted on December 31, 1997. At that time, the Company will be required
to change the method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact is not expected to result in any change in primary
earnings per share as reported herein for the quarters ended March 31,
1997 and 1996.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
<S> <C> <C>
Raw materials $ 54,279 $ 65,552
Finished and semi-finished goods 81,284 78,280
Supplies 14,572 14,853
-------- --------
$150,135 $158,685
======== ========
</TABLE>
4. ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive laws and regulations
governing air emissions, wastewater discharges and solid and hazardous
waste management activities. The Company's policy is to accrue
environmental remediation costs when it is both probable that a liability
has been incurred and the amount can be reasonably estimated. While it is
often difficult to reasonably quantify future environmental-related
expenditures, the Company currently estimates its future non-capital
expenditures related to environmental matters to range between $12,900 and
$29,000. In connection with these expenditures, the Company has accrued
an amount at March 31, 1997 representing management's best estimate of
7
<PAGE>
probable non-capital environmental expenditures. In addition, future
capital expenditures aggregating approximately $7,800 to $27,700 may be
required related to environmental matters. These non-capital and capital
expenditures are estimated to be incurred over the next 10 to 20 years. The
Company believes that it is entitled to recover a portion of these
expenditures under indemnification and escrow agreements.
5. CONTINGENCIES
In connection with the Netherlands-based PET resins business, the
Company entered into a contract to purchase PET resin under a take or pay
arrangement. The contract requires that 134,000 pounds be purchased on a
declining basis during the period from 1997 to 2000. The Company purchased
16,400 pounds in the first three months of 1997. The purchase price of
these volumes is essentially the cost of the raw materials to produce the
product plus a processing fee. During the first quarter of 1997, the
Company incurred operating losses with respect to this contract and has
accrued approximately $3,000 as its best estimate of probable future losses
with respect to this contract in the six month period from April through
September of 1997. The Company cannot reasonably estimate losses, if any,
beyond that period. It is reasonably possible that the Company's estimate
of future losses with respect to this contract will change in the near term.
8
<PAGE>
WELLMAN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The primary business of Wellman, Inc. is the manufacture and marketing of high-
quality polyester products, including Fortrel brand polyester textile fibers,
polyester fibers made from recycled raw materials and PermaClear brand PET
(polyethylene terephthalate) packaging resin. In the first quarter, the Company
had annual capacity to manufacture approximately 1.1 billion pounds of fiber and
over 400 million pounds of resin worldwide at five major production facilities
in the United States and Europe. The Company commenced operation of an
additional 200 million pounds per year of solid-stated resins production
capacity in April 1997. The Company is also the world's largest plastics
recycler, utilizing a significant amount of recycled raw materials in its
manufacturing operations.
The Fibers Group produces Fortrel textile fibers, which represent approximately
60% of the Company's fiber production. These fibers are used in apparel and
home furnishings and produced from two chemical raw materials, purified
terephthalic acid (PTA) and monoethylene glycol (MEG). The other 40% of fiber
production, primarily fiberfill and carpet fibers, is manufactured by the
Recycled Products Group from recycled raw materials, including producer wastes
and postconsumer PET soft drink bottles. The Company's PET resins, produced by
the Packaging Products Group from PTA and MEG, are primarily used in the
manufacture of clear plastic soft drink bottles and other food and beverage
packaging.
The Company's markets are highly competitive. It competes in these markets
primarily on the basis of product quality, customer service, brand identity and
price. It believes it is the second-largest polyester staple and third-largest
POY producer in the United States and the fourth-largest PET resin producer in
North America. Several of the Company's competitors are substantially larger
than the Company and have substantially greater economic resources.
Demand for polyester fiber historically has been cyclical, as it is subject to
changes in consumer preferences and spending, retail sales patterns, and fiber
or textile product imports, all of which are driven primarily by general
economic conditions. Global PET resin demand continues to grow, driven by new
product applications for PET and conversion from other packaging materials to
PET.
Several factors significantly affect the Company's profitability: raw material
margins, or the difference (or spread) between product selling prices and raw
material costs; supply and demand for its products; the prices of competing
materials, such as cotton and aluminum, which can affect demand for its
products; and economic and market conditions in the United States, Europe and
other regions of the world. Prices of PTA and MEG, primary determinants of
polyester fiber and PET resin selling prices, are cyclical. Changes in PTA and
MEG prices are driven by worldwide supply and demand.
Raw material margins for the chemical-based fiber and PET resin businesses have
generally been influenced by supply and demand factors. Despite growing demand
for PET resin, worldwide supply is currently undergoing significant expansion
which has adversely affected profitability, and is expected to continue to do
so. Both fiber and resin margins experience increases or decreases due to
timing of price changes and market conditions.
9
<PAGE>
Raw material margins for the recycled fiber operation tend to be more variable
than those for the chemical-based businesses, primarily because recycled raw
material costs do not cause changes in fiber prices. Recycled raw material
costs are primarily dependent upon worldwide supply and demand for waste
materials.
The Company's sales are neither materially dependent upon a single customer
nor seasonal in nature. Demand, prices and raw material costs for both
fibers and PET resins may be affected by global economic conditions, supply
and demand balances and export activity.
By the year 2000, the Company plans to substantially increase its polyester
fiber and PET resin production capacity through the expansion of existing
facilities and construction of a new, state-of-the-art production facility in
Mississippi. Most of the expansion will be in PET resin capacity. As a
result, the Company's production mix is expected to be approximately 50%
fibers and 50% PET resins.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1996
Net sales for the three months ended March 31, 1997 decreased 15.2% to $255.1
million from $301.0 million for the three months ended March 31, 1996. This was
primarily the result of significantly lower selling prices which more than
offset higher sales volume. Sales for the Fibers Group decreased 7.2% to
$105.4 million in the 1997 period from $113.6 million in the 1996 period due to
lower polyester fiber selling prices more than offsetting slightly higher
sales volume. Sales for the Recycled Products Group (RPG) decreased 11.8% to
$94.7 million in the 1997 period from $107.4 million in the year-ago period as a
result of continued worldwide declines in polyester fiber selling prices which
outpaced modest improvement in sales volumes, and the disposition of certain
businesses which had sales of $3.3 million in the first quarter of 1996. Sales
for the Packaging Products Group (PPG) decreased 31.3% to $55.0 million in 1997
from $80.1 million in 1996 primarily as a result of significantly lower
worldwide PET resin selling prices which were partially offset by substantially
higher sales volumes at the Netherlands-based PET resins business.
Gross profit for the three months ended March 31, 1997 decreased 10.5% to $39.9
million from $44.6 million for the comparable period in 1996. The gross profit
margin was 15.7% for the 1997 period compared to 14.8% for the 1996 period.
Gross profit for the Fibers Group increased primarily as a result of lower
overall costs which more than offset lower polyester fiber selling prices.
The first quarter of 1996 was negatively impacted by higher production costs
associated with a curtailed production line. Gross profit for the RPG also
increased in the first quarter of 1997 versus the same period in 1996 as a
direct result of significantly lower raw material costs and slightly higher
sales volume. Gross profit for PPG decreased significantly in the first three
months of 1997 versus the same period in 1996 as continued weak global market
conditions caused lower worldwide PET resin selling prices which outpaced lower
raw material costs.
Selling, general and administrative expenses amounted to $21.4 million, or 8.4%
of sales, for 1997 compared to $21.9 million, or 7.3% of sales, for 1996.
As a result of the foregoing, operating income was $18.6 million for the first
three months of 1997 compared to $22.7 million for the first three months of
1996.
10
<PAGE>
Net interest expense was $3.3 million in 1997 compared to $3.9 million in 1996.
Interest expense decreased due to higher interest capitalization resulting from
the Company's ongoing capacity expansions.
The effective tax rate was 43.0% in the first quarter of 1997 compared to 37.5%
in the comparable 1996 period. The increase resulted from lower total projected
earnings in 1997. The businesses where the decrease in projected earnings had
the greatest impact were the Irish manufacturing operation and the European PET
resin business.
As a result of the foregoing, net earnings in the first three months of 1997
were $8.7 million, or $0.28 per share, compared to $11.7 million, or $0.35 per
share, for the first three months of 1996. During the second half of 1996, the
Company repurchased 2.5 million shares of its common stock in the open market.
This repurchase had no material impact on earnings per share as reported for the
1997 period.
OUTLOOK
Demand for polyester fibers and PET resins is currently strong and expected to
improve overall in 1997 compared to 1996. However, previously announced
industry capacity expansions, including the Company's, are expected to exceed
the higher demand. In April 1997, the Company started-up an additional 200
million pounds per year PET resin production line at the Darlington, S.C. plant.
The higher sales volumes anticipated in 1997 are not expected to contribute
materially to the Company's net earnings. Current global capacity oversupply
and expected industry capacity expansions continue to exert downward pressure
on polyester fiber selling prices. Worldwide PET resins selling prices are
expected to improve in the near term; however, continued operating losses are
expected in the Netherlands-based PET resins business in 1997. The higher sales
volumes and selling price changes are not expected to materially affect the
Company's profit margins.
The statements above are forward looking statements subject to the
qualifications set forth below in "Forward Looking Statements."
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operations of $28.3 million for the three months
ended March 31, 1997 compared to $35.6 million for the three months ended March
31, 1996. The decrease in cash from operations was primarily the result of
lower net earnings and changes in working capital items.
Net cash used in investing activities amounted to $35.4 million in 1997 compared
to $25.9 million in 1996. Capital spending amounted to $35.6 million in 1997
compared to $30.4 million in 1996 reflecting the Company's ongoing capacity
expansions.
Net cash provided by financing activities amounted to $6.2 million in 1997
compared to $1.4 million in 1996. In 1997, there were net borrowings (line of
credit with bank and long-term debt) totaling $8.7 million compared to $3.2
million in 1996.
With the completion of a domestic PET resins capacity expansion in April 1997,
the remainder of the Company's ongoing capital investment program primarily
includes the construction of a new domestic polyester production facility in
Mississippi expected to be operational in phases beginning in late 1998. The
Company estimates that its capital expenditures over the next three years could
aggregate approximately $350 million. To receive certain incentives provided by
11
<PAGE>
the state of Mississippi, the Company expects to issue Rural Economic
Development Bonds. The Company believes these bonds, coupled with internally
generated funds, its bank facility and other long-term financing are expected to
provide adequate liquidity in the future.
The Company's planned capital expenditures in 1997 are approximately $200 to
$220 million. The exact amount and timing of the capital spending is difficult
to predict since certain projects may extend into 1998 or beyond depending upon
equipment delivery and construction schedules.
The Company's financing agreements contain normal financial and restrictive
covenants. The Company believes that the financial resources available to it,
including $225.0 million available at March 31, 1997 under its $330 million
revolving credit facility, unused short-term uncommitted lines of credit
aggregating $110.0 million, internally generated funds, and other credit
arrangements will be sufficient to meet its foreseeable working capital, capital
expenditure and dividend payment requirements.
The Company has entered into forward interest rate swaps to reduce (hedge) the
impact of interest rate changes for variable rate borrowings associated with
planned capital expenditures over the next four years. The agreements include
an aggregate notional amount of $200 million at March 31, 1997, forward starting
dates ranging from June 1997 to May 1998 and maturity dates of at least 5 years
thereafter. The Company will pay fixed rates of interest ranging from 6.10% to
6.20%. The Company estimates it would have received approximately $4.8 million
if it had to terminate these agreements at March 31, 1997.
The Company has entered into forward foreign currency contracts to exchange
Dutch guilders for U.S. dollars with an aggregate notional amount of $45.8
million at March 31, 1997 in order to reduce the related impact of foreign
currency translation adjustments. This has the effect of converting a portion
of U.S. debt to local currency (guilder) debt. The Company has designated these
contracts as a hedge of a net investment in a foreign entity. At March 31,
1997, the Company estimates it would receive approximately $2.6 million if these
contracts were terminated.
The Company has also entered into forward foreign currency contracts to exchange
U.S. dollars for German marks with an aggregate notional amount of $23.7 million
at March 31, 1997. These contracts are designed to reduce (hedge) the impact of
foreign currency fluctuations relative to fixed asset purchase commitments and
have maturity dates ranging from April 1997 through November 1998. At March 31,
1997, the Company would have had to pay approximately $.8 million to terminate
these contracts.
The Company's European businesses utilize foreign currency debt and forward
currency contracts to hedge certain of their accounts receivable and accounts
payable denominated in other foreign currencies. At March 31, 1997, the
notional amount of such contracts was $16.1 million and the cost to terminate
these contracts was immaterial.
The Company's estimates with respect to the values of its derivative instruments
are based on readily available dealer quotes.
12
<PAGE>
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share," which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact is not expected to result in any
change in primary earnings per share as reported herein for the quarters ended
March 31, 1997 and 1996.
FORWARD LOOKING STATEMENTS
Statements contained in this Form 10-Q that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The Company cautions that
a number of important factors could cause actual results for 1997 and beyond
to differ materially from those expressed in any forward-looking statements
made by or on behalf of the Company. Such statements contain a number of
risks and uncertainties, including, but not limited to, demand and competition
for polyester fiber and PET resins, availability and cost of raw materials,
levels of production capacity and announced changes thereto, changes in interest
rates and foreign currency exchange rates, work stoppages, natural disasters,
U.S., European and global economic conditions and changes in laws and
regulations, prices of competing products, such as cotton and aluminum, and the
Company's ability to complete expansions and other capital projects on time and
budget and to maintain the operations of its existing production facilities.
The Company cannot assure that it will be able to anticipate or respond timely
to changes which could adversely affect its operating results in one or more
fiscal quarters. Results of operations in any past period should not be
considered indicative of results to be expected in future periods. Fluctuations
in operating results may result in fluctuations in the price of the Company's
common stock.
13
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
4(a) Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the
registrant has not filed herewith any instrument with respect
to long-term debt which does not exceed 10% of the total
assets of the registrant and its subsidiaries on a
consolidated basis. The registrant hereby agrees to furnish a
copy of any such instrument to the Securities and Exchange
Commission upon request.
10(a) Third Amendment to Employment Agreement dated as of January 1,
1997 between the Company and Thomas M. Duff.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
14
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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.
WELLMAN, INC.
Dated May 12, 1997 By /s/ Keith R. Phillips
-------------- ------------------------
Keith R. Phillips
Vice President, Chief Financial
Officer and Treasurer (Principal
Financial Officer)
Dated May 12, 1997 By /s/ Mark J. Rosenblum
------------- ------------------------
Mark J. Rosenblum
Vice President, Chief Accounting
Officer and Controller
(Principal Accounting Officer)
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS for first quarter 1997 10-q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,034
<SECURITIES> 0
<RECEIVABLES> 134,372
<ALLOWANCES> 3,771
<INVENTORY> 150,135
<CURRENT-ASSETS> 284,581
<PP&E> 923,901
<DEPRECIATION> 307,271
<TOTAL-ASSETS> 1,206,166
<CURRENT-LIABILITIES> 94,684
<BONDS> 326,596
<COMMON> 34
0
0
<OTHER-SE> 626,703
<TOTAL-LIABILITY-AND-EQUITY> 1,206,166
<SALES> 255,148
<TOTAL-REVENUES> 255,148
<CGS> 215,209
<TOTAL-COSTS> 215,209
<OTHER-EXPENSES> 21,353
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,275
<INCOME-PRETAX> 15,311
<INCOME-TAX> 6,584
<INCOME-CONTINUING> 8,727
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,727
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
EXHIBIT 10(a)
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Third Amendment to Employment Agreement (the "Agreement") made as of
the 1st day of January, 1997 by and between WELLMAN, INC., a Delaware
corporation (the "Company"), and THOMAS M. DUFF (the "Executive").
W I T N E S S E T H:
WHEREAS, the parties hereto entered into an Employment Agreement dated as
of January 1, 1990, as amended by a First Amendment thereto dated as of
January 1, 1993 and further amended by a Second Amendment thereto dated as of
January 1, 1995 (collectively, the "Original Employment Agreement"), pursuant
to which the Company agreed to continue to employ the Executive, and the
Executive agreed to remain in the employ of the Company; and
WHEREAS, the parties have agreed to certain modifications to the Original
Employment Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
set forth herein, and for good and valuable other consideration, receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Defined Terms. All capitalized terms not defined herein shall
have the same meaning ascribed to such terms in the Original Employment
Agreement.
Section 2. Amendments to Original Employment Agreement. (a) Effective
as of the date hereof, Section 1(b) of the Original Employment Agreement is
amended in its entirety to read as follows:
"(b) Subject to earlier termination as provided in Section 4 herein,
the "Employment Period" shall be the period commencing on
January 1, 1997 and continuing until the date either the
Company or the Executive shall notify the other, in writing,
that such party desires to terminate the Executive's employment
under this Agreement. Notwithstanding the foregoing, unless
the Employment Period has already terminated, the Employment
Period shall be automatically extended upon a Change in Control
so as to terminate three years from the Effective Date (such
three year period of the Employment Period being hereinafter
referred to as the "Change in Control Employment Period")."
(b) Effective as of the date hereof, clause (i) of Section 4(e) of the
Original Employment Agreement is amended in its entirety to read as follows:
"(i) if the Executive's employment is terminated by the Company
(other than for Cause or Disability) or by the Executive, the
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Date of Termination shall be the date on which the Company or
the Executive, as the case may be, notifies the other of such
termination and"
(c) Effective as of the date hereof, Section 5(d) of the Original
Employment Agreement is amended in its entirety to read as follows:
"(d) Termination Other than for Cause or Disability Prior to the
Effective Date. If, during the Employment Period but prior to the Effective
Date, the Company shall terminate the Executive's employment other than for
Cause or Disability.
(i) the Company shall pay to the Executive:
(A) an amount equal to the Annual Base Salary, such amount to
be paid in twelve substantially equal monthly
installments; and
(B) an amount equal to the Highest Annual Bonus, such amount
to be paid in twelve substantially equal monthly
installments; and
(C) any compensation previously deferred by the Executive
(together with any accrued interest therein) and not yet
paid by the Company, such amount to be paid in a lump sum
within 30 days following the Date of Termination.
(ii) for a period of twelve (12) months following the Date of
Termination, the Company shall continue benefits to the
Executive and/or the Executive's family equal to those which
would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 3(b)(v)
of this Agreement in effect as of the Date of Termination if
the Executive's employment had not been terminated. For
purposes of determining eligibility of the Executive for
retiree benefits pursuant to such plans, practices, programs
and policies, the Executive shall be considered to have
remained employed until the end of such twelve (12) month
period and to have retired on the last day of such period."
(d) Effective as of the date hereof, the address for the Executive and
the Company set forth in Section 11(b) of the Original Employment Agreement
are amended to read as follows:
"If to the Executive:
Thomas M. Duff
105 Rumson Road
Rumson, NJ 07760
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If to the Company:
James E. Rogers, Chairman
Compensation Committee of the Board
of Directors of Wellman, Inc.
SCI Investors, Inc.
101 Shockoe Slip, Suite 0
Richmond, VA 23219-4144
with a copy to:
David K. Duffell, Esquire
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903"
Section 3. Ratification. Each party hereto hereby ratifies and confirms
all of its obligations, covenants, duties and agreements set forth in the
Original Employment Agreement, as amended by the terms hereof. All
references to the "Employment Agreement" or the "Agreement" or any other
defined term amended hereby contained in the Original Employment Agreement,
shall be deemed to be amended to refer to the Original Employment Agreement,
as amended by the terms hereof or to such amended defined term, as the case
may be.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused
these presents to be executed in its name on its behalf, all as of the day
and year first above written.
/s/ Thomas M. Duff
---------------------------------
Thomas M. Duff
WELLMAN, INC.
By: /s/ Clifford J. Christenson
------------------------------
Title: Executive Vice President
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