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, 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) |
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 30, 2004 |
16,161,880 |
INDEX
| Page Number | ||||||
| Part I. |
Financial Information | |||||
| Item 1. | Financial Statements | |||||
| Condensed Consolidated Balance Sheets | 3 | |||||
| Condensed Consolidated Statements of Operations and Comprehensive Income | 4-5 | |||||
| Condensed Consolidated Statements of Cash Flows | 6 | |||||
| Notes to Condensed Consolidated Financial Statements | 7-10 | |||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11-15 | ||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 15 | ||||
| Item 4. | Controls and Procedures | 16 | ||||
| Part II. |
Other Information | |||||
| Item 1. | Legal Proceedings | 17 | ||||
| Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 17 | ||||
| Item 5. | Other Information | 17 | ||||
| Item 6. | Exhibits and Reports on Form 8-K | 18 | ||||
| 19 | ||||||
| 20 | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
| June 30, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 3,066 | $ | 3,008 | ||||
| Restricted cash |
— | 2,516 | ||||||
| Accounts receivable, net |
51,875 | 40,804 | ||||||
| Income taxes receivable |
1,150 | 1,157 | ||||||
| Inventories: |
||||||||
| Raw materials |
10,996 | 10,212 | ||||||
| Work in process |
16,317 | 16,237 | ||||||
| Finished goods |
11,898 | 11,278 | ||||||
| Total inventories |
39,211 | 37,727 | ||||||
| Prepaid expenses and other current assets |
5,431 | 4,669 | ||||||
| Deferred tax assets |
3,665 | 3,188 | ||||||
| Total current assets |
104,398 | 93,069 | ||||||
| Property, plant and equipment, at cost |
193,945 | 175,270 | ||||||
| Accumulated depreciation |
(89,425 | ) | (84,242 | ) | ||||
| 104,520 | 91,028 | |||||||
| Other assets, net |
38,489 | 42,135 | ||||||
| Total assets |
$ | 247,407 | $ | 226,232 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Current portion of long-term debt |
$ | 3,826 | $ | 4,951 | ||||
| Accounts payable |
25,942 | 20,692 | ||||||
| Accrued taxes |
1,433 | 364 | ||||||
| Accrued payroll and other compensation |
4,891 | 3,326 | ||||||
| Deferred revenue |
5,245 | 3,715 | ||||||
| Other accrued liabilities |
7,363 | 4,905 | ||||||
| Total current liabilities |
48,700 | 37,953 | ||||||
| Long-term debt |
23,531 | 21,026 | ||||||
| Deferred tax liabilities |
13,633 | 12,658 | ||||||
| Pension and other long-term liabilities |
18,695 | 10,999 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock |
— | — | ||||||
| Common stock |
2,246 | 2,237 | ||||||
| Capital in excess of par value |
45,439 | 44,687 | ||||||
| Unearned compensation |
(650 | ) | (912 | ) | ||||
| Retained earnings |
165,526 | 163,944 | ||||||
| Accumulated other comprehensive loss |
(6,159 | ) | (4,718 | ) | ||||
| 206,402 | 205,238 | |||||||
| Treasury stock, at cost |
(63,554 | ) | (61,642 | ) | ||||
| Total stockholders’ equity |
142,848 | 143,596 | ||||||
| Total liabilities and stockholders’ equity |
$ | 247,407 | $ | 226,232 | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(In Thousands Except Per Share Data)
| Quarter Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| (Unaudited) | ||||||||
| Net sales |
$ | 74,349 | $ | 74,082 | ||||
| Cost of sales |
58,765 | 54,755 | ||||||
| Gross margin |
15,584 | 19,327 | ||||||
| Selling, product development and administrative expenses |
14,200 | 12,630 | ||||||
| Operating income |
1,384 | 6,697 | ||||||
| Interest expense |
371 | 284 | ||||||
| Other expense (income), net |
23 | (36 | ) | |||||
| Income before income taxes |
990 | 6,449 | ||||||
| Income tax expense |
346 | 2,319 | ||||||
| Net income |
$ | 644 | $ | 4,130 | ||||
| Basic earnings per common share |
$ | .04 | $ | .26 | ||||
| Diluted earnings per common share |
$ | .04 | $ | .26 | ||||
| Weighted average common shares outstanding |
16,097 | 16,079 | ||||||
| Weighted average common shares and equivalents outstanding |
16,173 | 16,115 | ||||||
| Net income |
$ | 644 | $ | 4,130 | ||||
| Other comprehensive (loss) income, before tax: |
||||||||
| Foreign currency translation adjustments |
(615 | ) | 1,782 | |||||
| Unrealized gain (loss) on derivative instruments |
66 | (8 | ) | |||||
| Other comprehensive (loss) income, before tax |
(549 | ) | 1,774 | |||||
| Income tax benefit (expense) related to other comprehensive income |
192 | (621 | ) | |||||
| Other comprehensive (loss) income, net of tax |
(357 | ) | 1,153 | |||||
| Comprehensive income |
$ | 287 | $ | 5,283 | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
4
LYDALL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(In Thousands Except Per Share Data)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| (Unaudited) | ||||||||
| Net sales |
$ | 146,470 | $ | 144,449 | ||||
| Cost of sales |
115,665 | 107,935 | ||||||
| Gross margin |
30,805 | 36,514 | ||||||
| Selling, product development and administrative expenses |
27,671 | 26,273 | ||||||
| Operating income |
3,134 | 10,241 | ||||||
| Interest expense |
676 | 539 | ||||||
| Other expense (income), net |
25 | (24 | ) | |||||
| Income before income taxes |
2,433 | 9,726 | ||||||
| Income tax expense |
851 | 3,482 | ||||||
| Net income |
$ | 1,582 | $ | 6,244 | ||||
| Basic earnings per common share |
$ | .10 | $ | .39 | ||||
| Diluted earnings per common share |
$ | .10 | $ | .39 | ||||
| Weighted average common shares outstanding |
16,124 | 16,079 | ||||||
| Weighted average common shares and equivalents outstanding |
16,207 | 16,124 | ||||||
| Net income |
$ | 1,582 | $ | 6,244 | ||||
| Other comprehensive (loss) income, before tax: |
||||||||
| Foreign currency translation adjustments |
(2,282 | ) | 2,920 | |||||
| Unrealized gain (loss) on derivative instruments |
65 | (97 | ) | |||||
| Other comprehensive (loss) income, before tax |
(2,217 | ) | 2,823 | |||||
| Income tax benefit (expense) related to other comprehensive income |
776 | (988 | ) | |||||
| Other comprehensive (loss) income, net of tax |
(1,441 | ) | 1,835 | |||||
| Comprehensive income |
$ | 141 | $ | 8,079 | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| (Unaudited) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 1,582 | $ | 6,244 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
8,305 | 6,495 | ||||||
| Loss on disposal of fixed assets |
147 | — | ||||||
| Amortization of unearned compensation |
262 | — | ||||||
| Deferred income taxes |
173 | 2,154 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(11,440 | ) | (7,047 | ) | ||||
| Income taxes receivable |
(104 | ) | 1,375 | |||||
| Inventories |
(2,226 | ) | (3,664 | ) | ||||
| Prepaid expenses and other assets |
2,911 | 507 | ||||||
| Accounts payable |
5,472 | 2,134 | ||||||
| Accrued taxes |
822 | 2 | ||||||
| Accrued payroll and other compensation |
1,624 | (1,232 | ) | |||||
| Other |
5,023 | 1,172 | ||||||
| Contributions to pension plans |
— | (434 | ) | |||||