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 March 31, 2004
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) |
(860) 646-1233
(Registrant’s telephone number, including area code)
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 April 20, 2004 |
16,242,236 | |
LYDALL, INC.
INDEX
| Page Number | ||||||
| Part I. | Financial Information | |||||
| Item 1. Financial Statements | ||||||
| 3 | ||||||
| Condensed Consolidated Statements of Operations and Comprehensive Income |
4 | |||||
| 5 | ||||||
| 6-10 | ||||||
| Item 2.
Management’s Discussion and Analysis of Financial Condition |
11-14 | |||||
| Item 3. Quantitative and Qualitative Disclosures about Market Risk | 14 | |||||
| Item 4. Controls and Procedures | 15 | |||||
| Part II. | Other Information | |||||
| Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 15 | |||||
| Item 4. Submission of Matters to a Vote of Security Holders | 16 | |||||
| Item 6. Exhibits and Reports on Form 8-K | 17 | |||||
| Signature | 18 | |||||
| Exhibit Index | 19 | |||||
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LYDALL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
| March 31, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 5,577 | $ | 3,008 | ||||
| Restricted cash |
— | 2,516 | ||||||
| Accounts receivable, net |
52,220 | 40,804 | ||||||
| Income taxes receivable |
1,277 | 1,157 | ||||||
| Inventories: |
||||||||
| Raw materials |
10,957 | 10,212 | ||||||
| Work in process |
17,093 | 16,237 | ||||||
| Finished goods |
11,441 | 11,278 | ||||||
| Total inventories |
39,491 | 37,727 | ||||||
| Prepaid expenses and other current assets |
4,984 | 4,669 | ||||||
| Deferred tax assets |
3,143 | 3,188 | ||||||
| Total current assets |
106,692 | 93,069 | ||||||
| Property, plant and equipment, at cost |
179,566 | 175,270 | ||||||
| Accumulated depreciation |
(87,017 | ) | (84,242 | ) | ||||
| 92,549 | 91,028 | |||||||
| Other assets, net |
45,435 | 42,135 | ||||||
| Total assets |
$ | 244,676 | $ | 226,232 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Current portion of long-term debt |
$ | 4,351 | $ | 4,951 | ||||
| Accounts payable |
24,494 | 20,692 | ||||||
| Accrued taxes |
1,539 | 364 | ||||||
| Accrued payroll and other compensation |
4,734 | 3,326 | ||||||
| Other accrued liabilities |
9,774 | 8,620 | ||||||
| Total current liabilities |
44,892 | 37,953 | ||||||
| Long-term debt |
25,480 | 21,026 | ||||||
| Deferred tax liabilities |
13,080 | 12,658 | ||||||
| Pension and other long-term liabilities |
18,042 | 10,999 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock |
— | — | ||||||
| Common stock |
2,244 | 2,237 | ||||||
| Capital in excess of par value |
45,302 | 44,687 | ||||||
| Unearned compensation |
(781 | ) | (912 | ) | ||||
| Retained earnings |
164,882 | 163,944 | ||||||
| Accumulated other comprehensive loss |
(5,802 | ) | (4,718 | ) | ||||
| 205,845 | 205,238 | |||||||
| Treasury stock, at cost |
(62,663 | ) | (61,642 | ) | ||||
| Total stockholders’ equity |
143,182 | 143,596 | ||||||
| Total liabilities and stockholders’ equity |
$ | 244,676 | $ | 226,232 | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
3
LYDALL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(In Thousands Except Per Share Data)
| Quarter Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| (Unaudited) | ||||||||
| Net sales |
$ | 72,121 | $ | 70,367 | ||||
| Cost of sales |
56,900 | 53,180 | ||||||
| Gross margin |
15,221 | 17,187 | ||||||
| Selling, product development and administrative expenses |
13,471 | 13,643 | ||||||
| Operating income |
1,750 | 3,544 | ||||||
| Interest expense |
305 | 255 | ||||||
| Other expense (income), net |
2 | 12 | ||||||
| Income before income taxes |
1,443 | 3,277 | ||||||
| Income tax expense |
505 | 1,163 | ||||||
| Net income |
$ | 938 | $ | 2,114 | ||||
| Basic earnings per common share |
$ | .06 | $ | .13 | ||||
| Diluted earnings per common share |
$ | .06 | $ | .13 | ||||
| Weighted average common shares outstanding |
16,151 | 16,079 | ||||||
| Weighted average common shares and equivalents outstanding |
16,237 | 16,156 | ||||||
| Net income |
$ | 938 | $ | 2,114 | ||||
| Other comprehensive (loss) income, before tax: |
||||||||
| Foreign currency translation adjustments |
(1,666 | ) | 1,138 | |||||
| Unrealized loss on derivative instruments |
(2 | ) | (89 | ) | ||||
| Other comprehensive (loss) income, before tax |
(1,668 | ) | 1,049 | |||||
| Income tax benefit (expense) related to other comprehensive (loss) income |
584 | (367 | ) | |||||
| Other comprehensive (loss) income, net of tax |
(1,084 | ) | 682 | |||||
| Comprehensive (loss) income |
($ | 146 | ) | $ | 2,796 | |||
See accompanying Notes to Condensed Consolidated Financial Statements.
4
LYDALL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
| Quarter Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| (Unaudited) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 938 | $ | 2,114 | ||||
| Adjustments to reconcile net income to net cash from operating activities: |
||||||||
| Depreciation and amortization |
4,227 | 3,220 | ||||||
| Deferred income taxes |
550 | 883 | ||||||
| Amortization of unearned compensation |
131 | — | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(11,771 | ) | (7,311 | ) | ||||
| Income taxes receivable |
161 | 93 | ||||||
| Inventories |
(2,132 | ) | (2,269 | ) | ||||
| Prepaid expenses and other assets |
2,697 | 344 | ||||||
| Accounts payable |
3,965 | 124 | ||||||
| Accrued taxes |
959 | (83 | ) | |||||
| Accrued payroll and other compensation |
1,456 | (1,324 | ) | |||||
| Other, net |
1,820 | 203 | ||||||
| Total adjustments |
2,063 | (6,120 | ) | |||||
| Net cash provided by (used for) operating activities |
3,001 | (4,006 | ) | |||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(6,344 | ) | (4,089 | ) | ||||
| Release of restricted cash |
2,516 | — | ||||||
| Proceeds from disposal of discontinued segments |
— | 125 | ||||||
| Net cash used for investing activities |
(3,828 | ) | (3,964 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Debt proceeds |
17,511 | 26,421 | ||||||
| Debt repayments |
(13,232 | ) | (19,991 | ) | ||||
| Common stock issued |
621 | 3 | ||||||
| Common stock repurchased |
(1,021 | ) | — | |||||
| Net cash provided by financing activities |
3,879 | 6,433 | ||||||
| Effect of exchange rate changes on cash |
(483 | ) | 4 | |||||
| Increase (Decrease) in cash and cash equivalents |
2,569 | (1,533 | ) | |||||
| Cash and cash equivalents at beginning of period |
3,008 | 2,596 | ||||||
| Cash and cash equivalents at end of period |
$ | 5,577 | $ | 1,063 | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
5
LYDALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 1. | The accompanying condensed consolidated financial statements include the accounts of Lydall, Inc. and its subsidiaries (collectively, the “Company” or the “Registrant”). All financial information is unaudited for the interim periods reported. All significant intercompany transactions have been eliminated in the condensed consolidated financial statements. The condensed consolidated financial statements have been prepared, in all material respects, in accordance with the same accounting principles followed in the preparation of the Company’s annual financial statements for the year ended December 31, 2003, except as disclosed herein. The year-end condensed consolidated balance sheet was derived from the December 31, 2003 audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Management believes that all adjustments, which include only normal recurring adjustments necessary to fairly present the Company’s consolidated financial position, results of operations and cash flows for the periods reported, have been included. For further information, refer to the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. Certain prior year components of the condensed consolidated financial statements have been reclassified to be consistent with current year presentation. As described in Note 7, the accompanying December 31, 2003 condensed consolidated balance sheet has been restated to reflect the change in accounting for inventory from the last-in, first-out method to the first-in, first-out method. |
During the quarter ended March 31, 2004, the Company recorded a $6.8 million non-cash investing and financing transaction to increase “Other assets, net” and “Pension and other long-term liabilities” on its accompanying condensed consolidated balance sheet as of March 31, 2004 to reflect the construction activities of the new automotive facility in St. Nazaire, France.
| 2. | Basic and diluted earnings per common share are calculated in accordance with the provisions of Statement of Financial Accounting Standards No. 128, “Earnings per Share.” Basic earnings per common share are equal to net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share are equal to net income divided by the weighted average number of common shares outstanding during the period, including the effect of stock options and stock awards, where such effect is dilutive. |
| Quarter Ended March 31, 2004 |
Quarter Ended March 31, 2003 | |||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| In thousands except per share amounts |
Net Income |
Average Shares |
Per Share Amount |
Net Income |
Average Shares |
Per Share Amount | ||||||||||
| Basic earnings per share |
$ | 938 | 16,151 | $ | .06 | $ | 2,114 | 16,079 | $ | .13 | ||||||
| Effect of dilutive stock options |
— | 86 | ||||||||||||||