UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-7665
LYDALL, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 06-0865505 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| One Colonial Road, Manchester, Connecticut | 06040 | |
| (Address of principal executive offices) | (zip code) |
Registrant’s telephone number, including area code: (860) 646-1233
None
(Former name, former address and former fiscal year, if changed since last report)
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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
| Common stock $.10 par value per share. |
||
| Total Shares outstanding July 24, 2003 |
16,198,233 | |
INDEX
| Page Number | ||||||
| Part I. |
Financial Information | |||||
| Item 1. | Financial Statements | |||||
| Consolidated Condensed Balance Sheets | 3 | |||||
| Consolidated Condensed Statements of Operations and Comprehensive Income | 4-5 | |||||
| Consolidated Condensed Statements of Cash Flows | 6 | |||||
| Notes to Consolidated Condensed Financial Statements | 7-10 | |||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition |
11-16 | ||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 16 | ||||
| Item 4. | Controls and Procedures | 16 | ||||
| Part II. |
Other Information | |||||
| Item 4. | Submission of Matters to a Vote of Security Holders | 17 | ||||
| Item 6. | Exhibits and Reports on Form 8-K | 18 | ||||
| 19 | ||||||
| 20 | ||||||
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
| June 30, 2003 |
December 31, 2002 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 2,573 | $ | 2,596 | ||||
| Accounts receivable, net |
47,894 | 39,882 | ||||||
| Inventories: |
||||||||
| Raw materials and supplies |
12,127 | 10,619 | ||||||
| Work in process |
14,454 | 11,021 | ||||||
| Finished goods |
10,965 | 11,058 | ||||||
| Total inventories |
37,546 | 32,698 | ||||||
| Income taxes receivable |
1,466 | 2,723 | ||||||
| Prepaid expenses and other current assets |
4,661 | 3,857 | ||||||
| Net investment in discontinued operations |
917 | 1,044 | ||||||
| Deferred tax assets |
3,263 | 2,990 | ||||||
| Total current assets |
98,320 | 85,790 | ||||||
| Property, plant and equipment, at cost |
167,073 | 158,369 | ||||||
| Accumulated depreciation |
(79,340 | ) | (72,568 | ) | ||||
| 87,733 | 85,801 | |||||||
| Other assets, net |
38,529 | 39,297 | ||||||
| Total assets |
$ | 224,582 | $ | 210,888 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Current portion of long-term debt |
$ | 14,060 | $ | 9,686 | ||||
| Accounts payable |
22,051 | 19,434 | ||||||
| Accrued taxes |
999 | 768 | ||||||
| Accrued payroll and other compensation |
3,364 | 4,500 | ||||||
| Other accrued liabilities |
6,345 | 6,481 | ||||||
| Total current liabilities |
46,819 | 40,869 | ||||||
| Long-term debt |
13,168 | 16,228 | ||||||
| Deferred tax liabilities |
12,727 | 10,408 | ||||||
| Other long-term liabilities |
13,612 | 13,315 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock |
— | — | ||||||
| Common stock |
2,219 | 2,218 | ||||||
| Capital in excess of par value |
42,630 | 42,519 | ||||||
| Retained earnings |
162,384 | 156,143 | ||||||
| Accumulated other comprehensive loss |
(7,335 | ) | (9,170 | ) | ||||
| 199,898 | 191,710 | |||||||
| Treasury stock, at cost |
(61,642 | ) | (61,642 | ) | ||||
| Total stockholders’ equity |
138,256 | 130,068 | ||||||
| Total liabilities and stockholders’ equity |
$ | 224,582 | $ | 210,888 | ||||
See accompanying Notes to Consolidated Condensed Financial Statements.
3
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(In Thousands Except Per Share Data)
| Three Months Ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| (Unaudited) | ||||||||
| Net sales |
$ | 74,082 | $ | 66,259 | ||||
| Cost of sales |
54,755 | 47,796 | ||||||
| Gross margin |
19,327 | 18,463 | ||||||
| Selling, product development and administrative expenses |
12,630 | 12,521 | ||||||
| Operating income |
6,697 | 5,942 | ||||||
| Other (income) expense: |
||||||||
| Investment income |
(16 | ) | (9 | ) | ||||
| Interest expense |
284 | 202 | ||||||
| Foreign currency transaction gains, net |
(20 | ) | (61 | ) | ||||
| 248 | 132 | |||||||
| Income before income taxes |
6,449 | 5,810 | ||||||
| Income tax expense |
2,319 | 2,036 | ||||||
| Net income |
$ | 4,130 | $ | 3,774 | ||||
| Basic earnings per common share |
$ | .26 | $ | .24 | ||||
| Diluted earnings per common share |
$ | .26 | $ | .23 | ||||
| Weighted average common shares outstanding |
16,079 | 15,995 | ||||||
| Weighted average common shares and equivalents outstanding |
16,115 | 16,430 | ||||||
| Net income |
$ | 4,130 | $ | 3,774 | ||||
| Other comprehensive income (loss), before tax: |
||||||||
| Foreign currency translation adjustments |
1,782 | 2,731 | ||||||
| Unrealized loss on derivative instruments |
(8 | ) | (42 | ) | ||||
| Other comprehensive income, before tax |
1,774 | 2,689 | ||||||
| Income tax expense related to other comprehensive income |
(621 | ) | (941 | ) | ||||
| Other comprehensive income, net of tax |
1,153 | 1,748 | ||||||
| Comprehensive income |
$ | 5,283 | $ | 5,522 | ||||
See accompanying Notes to Consolidated Condensed Financial Statements.
4
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(In Thousands Except Per Share Data)
| Six Months Ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| (Unaudited) | ||||||||
| Net sales |
$ | 144,449 | $ | 125,944 | ||||
| Cost of sales |
107,935 | 91,107 | ||||||
| Gross margin |
36,514 | 34,837 | ||||||
| Selling, product development and administrative expenses |
26,273 | 23,969 | ||||||
| Operating income |
10,241 | 10,868 | ||||||
| Other (income) expense: |
||||||||
| Investment income |
(27 | ) | (24 | ) | ||||
| Interest expense |
539 | 385 | ||||||
| Foreign currency transaction losses (gains), net |
3 | (54 | ) | |||||
| Other, net |
— | (24 | ) | |||||
| 515 | 283 | |||||||
| Income before income taxes |
9,726 | 10,585 | ||||||
| Income tax expense |
3,482 | 3,712 | ||||||
| Net income |
$ | 6,244 | $ | 6,873 | ||||
| Basic earnings per common share |
$ | .39 | $ | .43 | ||||
| Diluted earnings per common share |
$ | .39 | $ | .42 | ||||
| Weighted average common shares outstanding |
16,079 | 15,990 | ||||||
| Weighted average common shares and equivalents outstanding |
16,124 | 16,327 | ||||||
| Net income |
$ | 6,244 | $ | 6,873 | ||||
| Other comprehensive income (loss), before tax: |
||||||||
| Foreign currency translation adjustments |
2,920 | 2,406 | ||||||
| Unrealized (loss) gain on derivative instruments |
(97 | ) | 8 | |||||
| Other comprehensive income, before tax |
2,823 | 2,414 | ||||||
| Income tax expense related to other comprehensive income |
(988 | ) | (845 | ) | ||||
| Other comprehensive income, net of tax |
1,835 | 1,569 | ||||||
| Comprehensive income |
$ | 8,079 | $ | 8,442 | ||||
See accompanying Notes to Consolidated Condensed Financial Statements.
5
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
| Six Months Ended</ | |||||||