<PAGE>
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
(MARK ONE)
 
/X/ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [FEE REQUIRED]
 
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
 
                                       OR
 
/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _______________________ TO ______________________
 
COMMISSION FILE NUMBER 1-7558
 
                           LAWTER INTERNATIONAL, INC.
 
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                         <C>
                 DELAWARE                                   36-1370818
     (STATE OR OTHER JURISDICTION OF                     (I.R.S. EMPLOYER
      INCORPORATION OR ORGANIZATION)                   IDENTIFICATION NO.)
 
     ONE TERRA WAY, 8601 95TH STREET,
            KENOSHA, WISCONSIN                                53142
 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                   (ZIP CODE)
</TABLE>
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (414) 947-7300
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
<TABLE>
<CAPTION>
                                 NAME OF EACH EXCHANGE ON
     TITLE OF EACH CLASS             WHICH REGISTERED
-----------------------------  -----------------------------
 
<S>                            <C>
   COMMON STOCK, $1.00 PAR        NEW YORK STOCK EXCHANGE
       VALUE PER SHARE
</TABLE>
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
 
                                      None
                                (TITLE OF CLASS)
 
    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 IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. / /
 
    AS OF FEBRUARY 13, 1998, 45,533,335 COMMON SHARES WERE OUTSTANDING. THE
AGGREGATE MARKET VALUE OF THE COMMON SHARES (BASED UPON THE FEBRUARY 13, 1998
CLOSING PRICE OF THESE SHARES ON THE NEW YORK STOCK EXCHANGE) OF LAWTER
INTERNATIONAL, INC. HELD BY NON-AFFILIATES WAS APPROXIMATELY $326 MILLION.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1997--PARTS I AND
II.
 
PROXY STATEMENT TO STOCKHOLDERS FOR THE 1998 ANNUAL MEETING--PART III.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
FORM 10-K
 ITEM NO.                                           NAME OF ITEM                                             PAGE
----------  --------------------------------------------------------------------------------------------     -----
 
<S>         <C>                                                                                           <C>
Part I
 
Item 1.     Business....................................................................................           2
 
Item 2.     Properties..................................................................................           4
 
Item 3.     Legal Proceedings...........................................................................           5
 
Item 4.     Submission of Matters to a Vote of Security Holders.........................................           5
 
Item 4A.    Executive Officers of the Registrant........................................................           5
 
Part II
 
Item 5.     Market for the Registrant's Common Equity and Related Stockholder Matters...................           5
 
Item 6.     Selected Financial Data.....................................................................           5
 
Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations.......           8
 
Item 8.     Financial Statements and Supplementary Data.................................................          11
 
Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........          11
 
Part III
 
Item 10.    Directors and Executive Officers of the Registrant..........................................          11
 
Item 11.    Executive Compensation......................................................................          12
 
Item 12.    Security Ownership of Certain Beneficial Owners and Management..............................          12
 
Item 13.    Certain Relationships and Related Transactions..............................................          12
 
Part IV
 
Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................          12
 
Report of Independent Public Accountants on Schedule and Consent of
  Independent Public Accountants........................................................................          26
 
Signatures..............................................................................................          28
</TABLE>
<PAGE>
                                     PART I
 
ITEM 1. BUSINESS.
 
    FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS--
 
  INDUSTRY SEGMENTS.
 
    The Company is engaged predominantly in a single industry, specialty
polymers.
 
    NARRATIVE DESCRIPTION OF BUSINESS--
 
  PRINCIPAL PRODUCTS.
 
    Reference is made to the information set forth under the caption "About
Lawter International, Inc." on the inside front cover of the Company's 1997
Annual Report to Stockholders (hereby incorporated by reference) for this
information.
 
    Information with respect to sales by product group is as follows:
 
<TABLE>
<CAPTION>
(PERCENT OF NET SALES)                                                      1997       1996       1995
                                                                          ---------  ---------  ---------
<S>                                                                       <C>        <C>        <C>
Printing Ink Vehicles and Slip Additives................................       44.2       43.3       44.7
Synthetic and Hydrocarbon Resins........................................       53.0       52.2       50.2
Other...................................................................        2.8        4.5        5.1
</TABLE>
 
    No material part of the business of the Company is dependent upon a single
product for any customer or a small group of customers.
 
    The Company manufactures its products in four plants in the United States
and in six plants in foreign countries (Belgium, China, England, Germany,
Ireland and Singapore). Products are sold primarily by Company employed
salesmen.
 
  RAW MATERIALS.
 
    The basic ingredients of the Company's products are purchased from others,
including larger chemical firms. Such ingredients are normally in adequate
supply. A portion of the Company's resin production is used by it in the
manufacture of printing ink vehicles.
 
  PATENTS.
 
    The Company owns certain patents on its products, but no single patent is
considered to be materially important to its business.
 
  SEASONAL INFLUENCES.
 
    The business of the Company is not in any material respect subject to
seasonal influences.
 
  BACKLOG.
 
    Since the Company generally fills orders for its products out of current
inventories, there is no significant backlog of orders at any time.
 
  CUSTOMERS.
 
    The Company sells the majority of its products to both large and small ink
companies. Lawter is a major supplier of printing ink vehicles and resins for
printing inks and, therefore, sells substantial quantities to the larger ink
companies around the world. The Company believes the five largest ink companies
are, in alphabetical order, Coates/Lorilleux, Dianippon Ink and Chemicals, Flint
Ink, Sakata and Toyo. Lawter sells a variety of specialized products to each of
their numerous companies, subsidiaries or branches in various countries, where
the purchasing decisions normally are made. Dianippon Ink and
 
                                       2
<PAGE>
Chemicals is Lawter's largest multilocation customer with twenty-two percent of
consolidated net sales for the most recently completed fiscal year.
 
  COMPETITION.
 
    The Company encounters keen competition in the conduct of its business.
Industry data indicating the relative ranking of competitive companies is not
available. The Company competes with several other independent producers of
printing ink vehicles and slip additives. The larger printing ink manufacturers
produce some of the vehicles required in their own operations, although
generally they do not sell vehicles in competition with the Company. The Company
is considered to be one of the medium sized to smaller producers of synthetic
and hydrocarbon resins. Several other producers of synthetic and hydrocarbon
resins are large chemical companies with much greater total sales and resources
than those of the Company.
 
    In the sale of its principal products, printing ink vehicles, slip
additives, and synthetic and hydrocarbon resins, the Company's principal methods
of meeting competition are in the areas of product performance and service. The
Company specializes in products prepared primarily for specific end uses such as
vehicles used in printing inks having particular characteristics, including fast
setting and mar resistant inks, ink systems designed to produce less waste and
resins used in the production of specialty inks, plastics and protective
coatings. The Company is capable of fulfilling the requirements of customers
either from inventories or from production runs on relatively short notice.
 
    The Company has approximately 25 competitors in the sale of its line of
printing ink vehicles and slip additives, and approximately 50 competitors in
the sale of its synthetic and hydrocarbon resins.
 
  RESEARCH.
 
    During the fiscal years ended December 31, 1997, 1996 and 1995, the Company
spent approximately $5,342,000, $5,049,000 and $5,320,000, respectively, on
research activities relating to the development of new products and the
improvement of existing products.
 
  ENVIRONMENTAL MATTERS.
 
    Environmental laws regulate the discharge of materials into the environment
and may require the Company to remove or minimize the environmental effects of
the disposal of waste. Environmental expenditures are expensed or capitalized
depending upon their future economic benefit. Expenditures that relate to an
existing condition caused by past operations and that have no future economic
benefits are expensed. Liabilities are recorded when environmental assessment
and/or remediation is probable and the costs can be reasonably estimated.
Expenditures for environmental matters during the fiscal years ended December
31, 1997, 1996 and 1995 were not material to the consolidated financial
statements of the Company.
 
    It has been and is the Company's policy to voluntarily install equipment
deemed necessary to control the discharge of pollutants into the environment.
The Company has voluntarily installed numerous in-line
incinerators/after-burners at its major manufacturing facilities in order to
minimize the generation of vapor, liquid or solid waste. The Company believes
that its facilities and products comply in all material respects with applicable
environmental regulations and standards.
 
    The Company believes that compliance with the Federal, state and local
environmental laws has had no material effect upon the capital expenditures or
competitive position of the Company. Environmental capital expenditures in 1998
are not anticipated to be material. The Company does not believe, based on
information available at this time, that the level of future expenditures for
environmental matters will have a material effect on its consolidated financial
position.
 
  EMPLOYEES.
 
    At December 31, 1997, the Company had 549 employees.
 
                                       3
<PAGE>
    FOREIGN SALES--
 
    Reference is made to Note 9 in the Consolidated Financial Statements which
are included in this Form 10-K Annual Report as indicated in Item 14.
 
ITEM 2. PROPERTIES.
 
    Information with respect to the principal properties, all of which are of
masonry and metal clad construction, in which the Company's operations are
conducted is as follows:
 
<TABLE>
<CAPTION>
                                         APPROXIMATE
                                          FLOOR AREA
                                           (SQUARE                   PRINCIPAL PRODUCTS                 OWNED OR
               LOCATION                     FEET)                       OR ACTIVITIES                    LEASED
---------------------------------------  ------------  -----------------------------------------------  ---------
<S>                                      <C>           <C>                                              <C>
Pleasant Prairie, Wisconsin                  250,000   Corporate headquarters                             Owned
                                                       Printing ink vehicles and slip additives
                                                       Synthetic and hydrocarbon resins
                                                       Research facilities
                                                       Warehouse
Moundville, Alabama                          250,000   Synthetic and hydrocarbon resins                    (1)
                                                       Warehouse
La Vergne, Tennessee                          27,000   Printing ink vehicles                              Owned
                                                       Warehouse
Newark, New Jersey                            50,000   Slip additives                                    Leased
                                                       Warehouse
Bell, California                              15,000   Warehouse                                         Leased
Kallo, Belgium                               230,000   Printing ink vehicles and slip additives           Owned
                                                       Synthetic and hydrocarbon resins
                                                       Research facilities
                                                       Warehouse
Rexdale, Ontario, Canada                      66,000   Warehouse                                          Owned
Tanggu, Peoples Republic of China             40,000   Printing ink vehicles                              Owned
                                                       Synthetic resins
                                                       Warehouse
Koge, Denmark                                 14,000   Warehouse                                          Owned
Bicester, Oxon, England                       38,000   Printing ink vehicles                              Owned
                                                       Warehouse
Frechen, Germany                              17,000   Printing ink vehicles                             Leased
                                                       Warehouse
Waterford, Ireland                            97,000   Synthetic resins                                   Owned
Jurong Town, Singapore                        10,000   Printing ink vehicles                              Owned
                                                       Warehouse
</TABLE>
 
------------
 
(1) The Moundville, Alabama plant is leased as described in Note 7 in the
    Consolidated Financial Statements which are included in this Form 10-K
    Annual Report as indicated in Item 14.
 
                                       4
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
 
    On September 25, 1995, the U.S. EPA filed an administrative complaint
alleging record keeping violations under the Toxic Substance Control Act (TSCA).
Simultaneously, Lawter and the U.S. EPA entered into a consent order fully
settling the complaint. Pursuant to the consent order, and without admitting any
liability, the Company has paid $280,000 to the U.S. EPA and is conducting a
TSCA compliance audit. The Company decided to settle this matter in order to
avoid protracted litigation and related costs. The outcome of this compliance
audit has not been determined, however, any potential liability related to this
matter has been fully accrued.
 
    The Company believes that it is the subject of a federal grand jury
investigation in Mobile, Alabama into the classification for tariff purposes of
certain products imported by the Company. The grand jury has subpoenaed Company
records. One current Company employee and one former Company employee have
appeared before the grand jury. The Company is cooperating with the
investigation. The Company believes that its classification of such products was
proper, and has presented its position to the U.S. Attorney's office in Mobile,
Alabama.
 
    Reference is made to Note 8 in the Consolidated Financial Statements which
are included in this Form 10-K Annual Report as indicated in Item 14 for
additional information.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
    There were no matters submitted to a vote of security holders in the fourth
quarter of the year ended December 31, 1997.
 
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
 
    Information with respect to the executive officers of the Company, all of
whose terms will expire at the annual meeting of the Board of Directors in April
1998, is as follows:
 
<TABLE>
<CAPTION>
                                                                                                          YEAR
NAME                                                    POSITION                                AGE      ELECTED
---------------------------  --------------------------------------------------------------     ---     ---------
<S>                          <C>                                                             <C>        <C>
John P. O'Mahoney..........  Chairman of the Board and Chief Executive Officer                      41       1996
John P. Jilek..............  President and Chief Operating Officer                                  46       1996
Mark W. Joslin.............  Chief Financial Officer, Treasurer and Secretary                       38       1996
Ludwig P. Horn.............  Vice President                                                         68       1980
</TABLE>
 
    Mr. O'Mahoney served as Vice President, 1993-1995 and as European General
Manager, 1990-1993 of the Company. Mr. Jilek served as Vice President of the
Company, 1989-1995. Mr. Joslin served as the Corporate Controller for ANGUS
Chemical Company, 1991-1996.
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
  MATTERS.
 
    Reference is made to the information listed under "Common Stock Prices" and
"Dividends Per Common Share" on the inside back cover of the Company's 1997
Annual Report to Stockholders (hereby incorporated by reference) for this
information.
 
ITEM 6. SELECTED FINANCIAL DATA.
 
    Information with respect to selected financial data is as follows. This
information should be read in conjunction with the Consolidated Financial
Statements which are included in this Form 10-K Annual Report as indicated in
Item 14.
 
                                       5
<PAGE>
TEN YEAR FINANCIAL SUMMARY
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
<TABLE>
<CAPTION>
                                                                      YEARS ENDED DECEMBER 31
                                                     ----------------------------------------------------------
                                                      1997(1)     1996(1)     1995(1)       1994        1993
                                                     ----------  ----------  ----------  ----------  ----------
<S>                                                  <C>         <C>         <C>         <C>         <C>
Net Sales..........................................  $  206,539  $  193,814  $  204,835  $  191,056  $  172,249
                                                     ----------  ----------  ----------  ----------  ----------
Gross Profit.......................................      63,100      60,433      45,801(7)     59,294     46,628
Selling, Administrative, Research and Distribution
  Expenses.........................................      27,283      24,793      28,762(7)     24,102     21,495
Subsidiary Closure Costs...........................       9,535(5)         --         --         --          --
                                                     ----------  ----------  ----------  ----------  ----------
Operating Income...................................      26,282      35,640      17,039      35,192      25,133
Net Investment Income..............................       2,333       4,914       6,170       4,470       4,318
Sale of Affiliate..................................      32,030(6)         --         --         --          --
                                                     ----------  ----------  ----------  ----------  ----------
Earnings Before Income Taxes and Cumulative Effect
  of Accounting Change.............................      60,645      40,554      23,209      39,662      29,451
Provision for Income Taxes.........................      23,319      11,779       6,931      10,257      28,449(4)
                                                     ----------  ----------  ----------  ----------  ----------
Earnings Before Cumulative Effect of Accounting
  Change...........................................      37,326      28,775      16,278      29,405       1,002
Cumulative Effect of Change in Accounting for
  Income Taxes.....................................          --          --          --          --       4,025(3)
                                                     ----------  ----------  ----------  ----------  ----------
Net Earnings.......................................  $   37,326  $   28,775  $   16,278  $   29,405  $    5,027
                                                     ----------  ----------  ----------  ----------  ----------
                                                     ----------  ----------  ----------  ----------  ----------
Depreciation and Amortization......................  $    5,832  $    5,499  $    5,447  $    4,344  $    4,291
Cash Provided by Operating Activities..............      10,792      25,253      13,766      23,047      23,811
Cash Dividends.....................................      18,173      18,077      17,989      17,951      17,909
Capital Expenditures, net..........................      10,485      25,925      21,928      10,613      12,940
Gross Property, Plant and Equipment................     127,451     141,346     126,406     102,788      87,856
Net Working Capital................................     117,961      74,410      71,722      88,993      87,523
Total Assets.......................................     276,184     293,123     261,474     231,827     209,477
Long-term Obligations..............................      29,050      29,050       4,100       4,152       4,206
Stockholders' Equity...............................     161,357     145,615     133,189     131,185     114,025
Average Shares Outstanding(2)......................      45,431      45,175      45,018      44,874      44,772
Earnings per Share(2):
Earnings Before Cumulative Effect of Accounting
  Change...........................................  $      .82  $      .64  $      .36  $      .66  $      .02
Cumulative Effect of Change in Accounting for
  Income Taxes.....................................          --          --          --          --         .09(3)
                                                     ----------  ----------  ----------  ----------  ----------
Net Earnings.......................................  $      .82  $      .64  $      .36  $      .66  $      .11
                                                     ----------  ----------  ----------  ----------  ----------
                                                     ----------  ----------  ----------  ----------  ----------
Cash Dividends per Share(2)........................         .40         .40         .40         .40         .40
Stockholders' Equity per Share(2)..................        3.55        3.22        2.96        2.92        2.55
Cash Dividends to Net Earnings.....................        48.7%       62.8%      110.5%       61.0%      356.3%
Net Earnings to Average Equity.....................        24.3%       20.6%       12.3%       24.0%        4.1%
</TABLE>
 
------------
 
(1) See Management's Discussion and Analysis for analysis of changes between
    years.
 
(2) Average shares outstanding and per share amounts are adjusted to reflect the
    four-for-three stock splits in 1991 and 1990.
 
(3) Represents cumulative effect on prior years' earnings of adopting SFAS No.
    109 which was adopted January 1, 1993.
 
(4) Includes additional tax provision of $21.6 million for future repatriation
    of foreign earnings.
 
(5) Represents costs associated with the closure of several subsidiaries. The
    after tax effect of these costs was $.20 per share.
 
(6) Represents the gain on the sale of the Company's 28% share of Hach Company
    common stock. This resulted in an after tax gain of $.43 per share.
 
(7) The 1995 Gross Margin was reduced by $10,562,000 for restructuring and other
    charges. The 1995 Selling, Administrative, Research and Distribution
    Expenses includes $2,791,000 in restructuring charges. The after tax effect
    of these charges was $.24 per share.
 
                                       6
<PAGE>
TEN YEAR FINANCIAL SUMMARY
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
<TABLE>
<CAPTION>
                                                                      YEARS ENDED DECEMBER 31
                                                     ----------------------------------------------------------
                                                        1992        1991        1990        1989        1988
                                                     ----------  ----------  ----------  ----------  ----------
<S>                                                  <C>         <C>         <C>         <C>         <C>
Net Sales..........................................  $  167,568  $  152,893  $  150,005  $  136,006  $  125,818
                                                     ----------  ----------  ----------  ----------  ----------
Gross Profit.......................................      53,933      50,543      48,397      40,576      40,633
Selling, Administrative, Research and Distribution
  Expenses.........................................      22,641      20,401      20,717      18,074      16,435
Subsidiary Closure Costs...........................          --          --          --          --          --
                                                     ----------  ----------  ----------  ----------  ----------
Operating Income...................................      31,292      30,142      27,680      22,502      24,198
Investment Income..................................       5,271       6,221       4,963       3,929       3,173
Sale of Affiliate..................................          --          --          --          --          --
                                                     ----------  ----------  ----------  ----------  ----------
Earnings Before Income Taxes and Cumulative Effect
  of Accounting Change.............................      36,563      36,363      32,643      26,431      27,371
Provision for Income Taxes.........................       9,548       9,893       9,223       6,963       6,520
                                                     ----------  ----------  ----------  ----------  ----------
Earnings Before Cumulative Effect of Accounting
  Change...........................................      27,015      26,470      23,420      19,468      20,851
Cumulative Effect of Change in Accounting for
  Income Taxes.....................................          --          --          --          --          --
                                                     ----------  ----------  ----------  ----------  ----------
Net Earnings.......................................  $   27,015  $   26,470  $   23,420  $   19,468  $   20,851
                                                     ----------  ----------  ----------  ----------  ----------
                                                     ----------  ----------  ----------  ----------  ----------
Depreciation and Amortization......................  $    4,179  $    3,900  $    3,521  $    3,550  $    3,410
Cash Provided by Operating Activities..............      34,440      23,192      34,240      20,388      15,796
Cash Dividends.....................................      17,556      14,947      12,582      12,561      12,403
Capital Expenditures, net..........................       7,548       8,902       6,198       3,073       4,524
Gross Property, Plant and Equipment................      78,491      74,022      66,271      57,421      54,282
Net Working Capital................................      96,082      87,075      82,560      70,200      62,807
Total Assets.......................................     187,334     178,218     153,500     133,988     125,210
Long-term Obligations..............................       4,858       5,238       5,137       5,083       4,810
Stockholders' Equity...............................     129,659     117,315     105,090      87,752      79,521
Average Shares Outstanding(2)......................      43,913      43,318      43,011      42,940      42,267
Earnings per Share(2):
Earnings Before Cumulative Effect of Accounting
  Change...........................................  $      .62  $      .61  $      .54  $      .45  $      .49
Cumulative Effect of Change in Accounting for
  Income Taxes.....................................          --          --          --          --          --
                                                     ----------  ----------  ----------  ----------  ----------
Net Earnings.......................................  $      .62  $      .61  $      .54  $      .45  $      .49
                                                     ----------  ----------  ----------  ----------  ----------
                                                     ----------  ----------  ----------  ----------  ----------
Cash Dividends per Share(2)........................         .40         .35         .29         .29         .29
Stockholders' Equity per Share(2)..................        2.95        2.71        2.44        2.04        1.88
Cash Dividends to Net Earnings.....................        65.0%       56.5%       53.7%       64.5%       59.5%
Net Earnings to Average Equity.....................        21.9%       23.8%       24.3%       23.3%       28.0%
</TABLE>
 
                                       7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
 
    Lawter's cash and equivalents, net of short-term borrowings, increased
$43,900,000 from $16,000,000 at December 31, 1996 to $59,900,000 at December 31,
1997. This is primarily the result of the sale, on July 8, 1997, of the
Company's investment in Hach Company for $60,000,000. The after tax cash
proceeds were approximately $42,100,000 which will be used to further the
Company's long term plans. In the short term, a portion of the funds was used to
pay off short term debt while the remainder was invested in short term time
deposits. The Company generally relies upon internally generated funds from
operations to satisfy working capital requirements and to fund capital
expenditures. However, in certain circumstances, the Company finds it is more
advantageous to borrow funds to satisfy these requirements. On March 19, 1998,
the Company entered into an agreement to repurchase 11,503,130 shares of Lawter
International, Inc.'s common stock held by the estate of Daniel J. Terra, at a
price of $11.375 per share. The agreement calls for the closing of this
transaction April 17, 1998. The repurchase will be financed by a combination of
debt and cash on hand.
 
    In 1997, the majority of Lawter's capital expansion program was financed
with internally generated funds. In 1996 and 1995, the Company used external
financing in connection with the new manufacturing facility in Belgium. The
revised capital expenditures budget for 1997 was $9,400,000. Actual expenditures
were 11% higher than budgeted due primarily to equipment additions and
improvements which were not included in the budget. Lawter's capital
expenditures for 1998 are estimated at $9,000,000. These expenditures include
funds for the startup of a joint venture in China as well as additions to and
maintenance of existing facilities elsewhere. The Company currently anticipates
using internally generated funds for the majority of these capital expenditures.
 
RESULTS OF OPERATIONS
 
    1997 VERSUS 1996
 
    NET SALES.  The Company's consolidated net sales increased 7% when compared
to 1996. Included in 1997 are $20,900,000 in sales of products, mostly in
Europe, relating to the Wolstenholme and Hercules acquisitions, which were
acquired in the fourth quarter of 1996. Excluding the Wolstenholme and Hercules
products from both years, consolidated net sales decreased 3% as a result of the
impact of a stronger U.S. dollar versus most European currencies and lower
average selling prices caused by a change in product mix, partially offset by
increased volume in all geographic areas.
 
    By region, net sales increased 12% in Europe, 24% in the Pacific Rim and
less than 1% in North America when compared to 1996. In addition to the impact
of Wolstenholme and Hercules sales, higher sales volumes in Europe were
partially offset by the stronger U.S dollar versus European currencies. The
increase in the Pacific Rim was the result of increased customer and product
base.
 
    GROSS PROFIT.  Gross profit as a percent of sales was 30.6% and 31.2% for
1997 and 1996, respectively. The gross profit in 1997 and 1996 included the
impact of the accounting for business interruption insurance claims (see
"Insurance" below). Excluding the effect of the business interruption insurance
claims, the gross margin increased from 28.2% in 1996 to 29.3% in 1997 as the
result of lower raw material costs in North America, decreased operating costs
as a result of the restructuring plan described in "Restructuring Charges" below
and the startup costs of the new polymer facility in Belgium included in 1996.
 
    SELLING, ADMINISTRATIVE, RESEARCH AND DISTRIBUTION EXPENSES.  Selling,
administrative, research and distribution expenses increased from $24,793,000 in
1996 to $27,283,000 in 1997. The higher expenses in 1997 were due principally to
increased sales volume, higher distribution costs caused by the shutdown of
various manufacturing facilities and increased commission and royalty payments
as the result of acquisitions.
 
    SUBSIDIARY CLOSURE COSTS.  The subsidiary closure costs represent $4,236,000
for the write off of goodwill related to the Company's Italian subsidiary along
with $3,299,000 for the write off of accumulated
 
                                       8
<PAGE>
foreign currency translation losses and $2,000,000 for other costs related to
other subsidiaries that have been or are in the process of being closed. The
after tax effect of these costs was $.20 per share.
 
    INVESTMENT INCOME.  Investment income decreased in 1997 when compared to
1996 as a result of the Company's July 1997 sale of its equity investment in
Hach Company and the liquidation of its stock portfolio in 1996 which had
resulted in appreciation gains in 1996.
 
    SALE OF AFFILIATE.  During the third quarter of 1997, the Company sold its
28% share of Hach Company common stock for $59,987,000. This resulted in an
after tax gain of $19,570,000 or $.43 per share.
 
    INCOME TAXES.  The effective tax rates for 1997 and 1996 were 38.5% and
29.0%, respectively. The higher effective tax rate in 1997 was the result of a
38.9% effective tax rate on the sale of the Hach Company stock along with a
minimal tax benefit from the subsidiary closure costs. Excluding these items,
the effective tax rate in 1997 would have been 29.1%.
 
  1996 VERSUS 1995
 
    NET SALES.  The Company experienced softness in the major markets for its
products in 1996. Consolidated net sales decreased by 5% when compared to 1995.
Record high paper prices in the second half of 1995 brought about a tightening
in certain markets for printed material. These markets are the principal outlets
for the Company's products. Paper prices have since subsided.
 
    By region, net sales decreased 3% in North America, 10% in Europe and
increased 5% in the Pacific Rim when compared to 1995. In addition to paper
prices, European sales were also impacted by a downturn in major European
economies; a stronger U.S. dollar versus most European currencies; more
intensive competition; a disruption in supply caused by an extended shutdown of
the Company's production facility in Ireland during the year; and by the
Company's decision not to renew participation in certain low margin business.
 
    GROSS PROFIT.  Gross profit as a percent of sales was 31.2% and 22.4% for
1996 and 1995, respectively. Excluding the charges listed below, the gross
profit for 1995 would have been 27.5%. The higher gross profit in 1996 when
compared to 1995 excluding the charges listed below was the result of the
accounting for business interruption insurance claims (see "Insurance" below), a
favorable LIFO inventory adjustment, decreased operating costs as a result of
the restructuring plan described in "Restructuring Charges" below and lower raw
material costs in North America, partially offset by the startup costs of the
new polymer facility in Belgium. The 1995 gross margin was decreased by
$5,658,000 for restructuring charges (see "Restructuring Charges" below) and
$4,904,000 for other charges. Other charges include: 1) Write down of inventory
to net realizable value - $1,215,000. This charge was the result of a review
made during the fourth quarter of 1995 which disclosed that certain inventory
would have to be reprocessed or sold at a price below the recorded book value;
2) Write off of the book value of a previously decommissioned manufacturing
facility - $1,235,000. During the fourth quarter of 1995, the Company determined
it may not be able to sell this property and therefore its book value was
written off; 3) Disputed charges on a raw material - $1,100,000. This represents
disputed charges on a specific raw material which the Company determined, in the
fourth quarter of 1995, it may be responsible for; 4) Disputed utility charges -
$900,000. This was due to a dispute of utility charges at one location; 5) Other
smaller items - $454,000.
 
    SELLING, ADMINISTRATIVE, RESEARCH AND DISTRIBUTION EXPENSES.  Selling,
administrative, research and distribution expenses decreased from $28,556,000 in
1995 to $24,793,000 in 1996. The 1995 selling, administrative, research and
distribution expenses included restructuring costs (see "Restructuring Charges"
below) of $2,791,000. Excluding these charges, selling, administrative, research
and distribution expenses decreased by $972,000 as a result of the
implementation of the restructuring plan in 1996, lower 1996 sales and a
favorable foreign exchange impact.
 
    INVESTMENT INCOME.  Investment income decreased in 1996 when compared to
1995 as cash and marketable securities were used to finance capital expenditures
and acquisitions and interest expense was incurred on borrowings to finance the
new plant in Belgium. Also included in 1995, was the benefit of favorable market
value adjustments on securities held. These favorable impacts were partially
offset by increased equity earnings in the Hach Company investment.
 
                                       9
<PAGE>
    INCOME TAXES.  The effective tax rates for 1996 and 1995 were 29.0% and
29.9%, respectively. The 1995 tax rate included the effect of the restructuring
charges discussed below. Without this charge, the 1995 effective tax rate would
have been 26.1%. The higher 1996 rate compared to the 1995 rate, excluding these
charges, was due to a shift in earnings from lower to higher taxed entities.
 
OTHER MATTERS
 
    RESTRUCTURING CHARGES.  In the fourth quarter of 1995, a new management team
was formed. The new management, taking into account a change in market
conditions, developed a new corporate strategy. Part of the decision making
process included an evaluation of the feasibility of continuing to utilize older
manufacturing facilities. With the anticipated completion of construction of the
new ink vehicle and resin facility in Belgium combined with the new ink vehicle
and resin facility in the U. S., the Company decided to implement a
restructuring plan. This plan included the decommissioning of older ink vehicle
and resin plants. This resulted in a pretax charge in the fourth quarter of 1995
of $8,449,000, of which $2,791,000 was charged to selling, administrative,
research and distribution expenses for personnel redundancy and $5,658,000 was
charged to Cost of Products Sold for site decommissioning. These restructuring
activities commenced in the fourth quarter of 1995 and have been substantially
completed as of the end of 1997.
 
    The personnel redundancy costs relate to cash outlays for benefits to be
paid to the manufacturing and office employees at the older plants in Europe and
North America. Approximately 100 positions were eliminated as a result of the
restructuring plan. As of December 31, 1997, employee headcount was down to 549
employees from a high of 604 employees in 1995. Redundancy payments charged
against the reserve through December 31, 1997 were $2,699,000 including $421,000
utilized in 1997. The balance of the reserve will be utilized for several
remaining employees at one of the European locations.
 
    The site decommissioning costs represent demolition, cleanup, relocation and
asset write down costs along with costs incurred during the wind down period for
older facilities, mainly in Europe and North America. Included in the
$5,658,000, is $4,461,000 for non-cash items which relate to the write down of
the net book value of the assets at these locations. As of December 31, 1997,
five manufacturing facilities in North America and six manufacturing facilities
in Europe were shut down and/or sold. The costs charged against the reserve
related to these facilities were $5,194,000 comprised of $3,880,000 for the
write down of net book value of the assets, $563,000 for cleanup costs, $880,000
for costs incurred during the wind down period of the European facilities,
$110,000 for plant and equipment dismantling and $191,000 for relocation costs,
partially offset by the proceeds of $430,000 from the sale of the assets of one
of the North American facilities. The balance of the site decommissioning
reserve will be used for the final dismantling and cleanup costs of one of the
European facilities.
 
    INSURANCE.  In April 1996, there was an explosion and fire at the Company's
resin facility in Ireland. The facility was shut down for several months. The
Company was adequately insured and, therefore, recorded business interruption
insurance proceeds of $4,000,000 in 1996 and $2,622,000 in 1997 for lost sales
and additional expenses incurred. This was recorded as a reduction to Cost of
Products Sold. This facility is now fully operational.
 
    The Company also received proceeds of $1,864,000 in 1996 for the final
settlement of claims arising from an explosion and fire at its U.S. resin
facility in 1994. This was in addition to the $1,675,000 recorded in 1995 for
these claims. These amounts were also recorded as a reduction to Cost of
Products Sold.
 
    YEAR 2000.  Modifications to significant portions of the Company's computer
software will be required in order for it to function properly in the year 2000
and beyond. An initial assessment of the situation has been completed. Systems
affected have been identified and alternatives have been considered. Conversion
and testing of system applications is expected to be substantially completed by
the end of 1998. The costs associated with the year 2000 compliance are expected
to be approximately $200,000 and will be expensed as incurred. The Company is
continuing to address the year 2000 impact with customers, suppliers and other
constituents.
 
    EFFECTS OF INFLATION.  The Company attempts to minimize the effects of
inflation on sales and earnings by appropriately increasing selling prices and
pursuing ongoing cost control programs and productivity improvements. The
effects of inflation were minimized through increased manufacturing efficiencies
and cost controls in 1997 and 1996. During 1995, there was a tightening of
supply of some important raw
 
                                       10
<PAGE>
materials and their prices increased. These increases had been difficult to
fully pass on, in a timely fashion, to Lawter customers.
 
    LOOKING FORWARD.  Lawter management believes that the Company's prospects
for growth of future sales and earnings are promising. While our markets
continue to be highly competitive, development of new markets, selective
acquisitions, continued emphasis on research and development, improved raw
material sourcing and cost effective utilization of our new production
facilities, combined with the present program of streamlining operations, will
position the Company for both medium and long-term gains in our strategic
markets.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
    Financial statements and supplementary data are included in this Form 10-K
Annual Report as indicated in Item 14.
 
                   OPERATING RESULTS BY QUARTERS (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
<TABLE>
<CAPTION>
                                                                          NET EARNINGS/(LOSS)
                                                              GROSS     ------------------------
1996                                           NET SALES     PROFIT      AMOUNT      PER SHARE
---------------------------------------------  ----------  -----------  ---------  -------------
<S>                                            <C>         <C>          <C>        <C>
March 31.....................................  $   49,366   $  13,556   $   6,165    $     .14
June 30......................................      46,247      14,193       7,360          .16
September 30.................................      47,157      15,797       7,644          .17
December 31..................................      51,044      16,887       7,606          .17
                                               ----------  -----------  ---------          ---
                                               $  193,814   $  60,433   $  28,775    $     .64
                                               ----------  -----------  ---------          ---
                                               ----------  -----------  ---------          ---
 
<CAPTION>
 
1997
---------------------------------------------
<S>                                            <C>         <C>          <C>        <C>
March 31.....................................  $   50,140   $  15,616   $   5,938    $     .13
June 30......................................      50,657      16,034       7,566          .17
September 30.................................      50,411      16,014      17,099(1)         .37
December 31..................................      55,331      15,436       6,723          .15
                                               ----------  -----------  ---------          ---
                                               $  206,539   $  63,100   $  37,326    $     .82
                                               ----------  -----------  ---------          ---
                                               ----------  -----------  ---------          ---
</TABLE>
 
------------
 
(1) Includes a one-time gain from the sale of the Hach Company stock net of a
    one-time charge for subsidiary closure charges. Excluding these items, the
    net income in the third quarter would have been $6,815,000 or $.15 per
    share.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
 
    There have been no changes in or disagreements with independent auditors on
accounting and financial disclosure.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
    Reference is made to the Company's 1998 Proxy Statement under the heading
"Election Of Directors" (hereby incorporated by reference) and Item 4A
"Executive Officers of the Registrant" in Part I of this Form 10-K for this
information.
 
ITEM 11. EXECUTIVE COMPENSATION.
 
    Reference is made to the Company's 1998 Proxy Statement under the heading
"Executive Compensation" (hereby incorporated by reference) for this
information.
 
                                       11
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
    Reference is made to the Company's 1998 Proxy Statement under the headings
"Security Ownership of Certain Beneficial Owners" and "Security Ownership of
Management" (hereby incorporated by reference) for this information.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
    Reference is made to the Company's 1998 Proxy Statement under the headings
"Indebtedness of Management" and "Certain Relationships and Related
Transactions" (hereby incorporated by reference) for this information.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
(a)1. Consolidated Financial Statements--
 
<TABLE>
<CAPTION>
                                                                                                     PAGE
                                                                                                    NUMBER
                                                                                                   ---------
<S>                                                                                                <C>
Balance Sheets as of December 31, 1997 and 1996..................................................     14
Statements of Earnings for the years ended December 31, 1997, 1996 and 1995......................     15
Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995....................     16
Statements of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995..........     17
Notes to the Consolidated Financial Statements for the years ended December 31, 1997, 1996 and
  1995...........................................................................................     18
Report of Independent Public Accountants.........................................................     26
</TABLE>
 
(a)2. Financial Statement Schedules--
 
<TABLE>
<CAPTION>
                                                                                                       PAGE NUMBER
                                                                                                      -------------
<C>        <S>                                                                                        <C>
Report of Independent Public Accountants on Schedule................................................           26
      II.  Valuation and Qualifying Accounts........................................................           27
</TABLE>
 
    All other schedules are not submitted because they are not applicable, not
required or the required information is included in the consolidated financial
statements or notes thereto.
 
(a)3. Exhibits--
 
<TABLE>
<S>           <C>
       (3)(a) Certificate of Incorporation, as amended through April 27, 1993 (incorporated by
              reference to Exhibit I of the Company's Quarterly Report on Form 10-Q for the
              quarter ended March 31, 1993) (File No. 1-7558).
          (b) Bylaws of the Company, as amended through November 9, 1995 (incorporated by
              reference to Exhibit (3)(b) of the Company's Annual Report on Form 10-K for the
              year ended December 31, 1995) (File No. 1-7558).
       (4)    Private Shelf Agreement between Lawter International, Inc. and The Prudential
              Insurance Company of America (incorporated by reference to Exhibit 99.2 of the
              Company's Form 8-K dated January 9, 1996) (File No. 1-7558).
      (10)(a) Lawter International, Inc. Growth Sharing Plan for Salaried and Office Clerical
              Hourly Employees, as amended through January 1, 1989 (incorporated by reference
              to Exhibit (10)(a) of the Company's Annual Report on Form 10-K for the year
              ended December 31, 1989) (File No. 1-7558).*
          (b) 1983 Incentive Stock Option Plan (incorporated by reference to Exhibit 2 of
              Registration Statement No. 2-84421).*
          (c) 1992 Non-Qualified Stock Option Plan (incorporated by reference to Exhibit
              (10)(d) of the Company's Annual Report on Form 10-K for the year ended December
              31, 1992) (File No. 1-7558).*
          (d) The 1994 Amendment to the 1992 Non-Qualified Stock Option Plan (incorporated by
              reference to Appendix A of the Company's Definitive Proxy Statement dated April
              28, 1994) (File No. 1-7558).*
          (e) The 1995 Amendment to the 1992 Non-Qualified Stock Option Plan.*
</TABLE>
 
                                       12
<PAGE>
<TABLE>
<S>           <C>
          (f) The 1997 Amendment to the 1992 Non-Qualified Stock Option Plan.*
          (g) 1995 Non-Qualified Stock Option Plan for Non-Employee Directors (incorporated by
              reference to Appendix A of the Company's Definitive Proxy Statement dated April
              24, 1995) (File No. 1-7558).*
          (h) The 1997 Amendment to the 1995 Non-Qualified Stock Option Plan for Non-Employee
              Directors.*
          (i) Employment Agreement, dated January 1, 1997, between the Company and Ludwig P.
              Horn.*
          (j) Employment Agreement, dated July 24, 1997, between the Company and John P.
              Jilek.*
          (k) Employment Agreement, dated October 24, 1996, between the Company and John P.
              O'Mahoney (incorporated by reference to Exhibit (10)(i) of the Company's Annual
              Report on Form 10-K for the year ended December 31, 1996) (File No. 1-7558).*
          (l) Employment Agreement, dated October 24, 1996, between the Company and Mark W.
              Joslin (incorporated by reference to Exhibit (10)(j) of the Company's Annual
              Report on Form 10-K for the year ended December 31, 1996) (File No. 1-7558).*
          (m) Consulting Agreement, effective January 1, 1996, between the Company and Richard
              D. Nordman (incorporated by reference to Exhibit (10)(j) of the Company's Annual
              Report on Form 10-K for the year ended December 31, 1995) (File No. 1-7558).*
      (13)    Those portions of the Lawter International, Inc. and Subsidiaries' 1997 Annual
              Report to Stockholders which are incorporated by reference in this Form 10-K
              Annual Report.
      (21)    Principal Subsidiaries of the Company.
      (23)    Consent of Independent Public Accountants (included in this Form 10-K on page
              26).
      (27)    Financial Data Schedule for the year ended December 31, 1997.
</TABLE>
 
*   These documents constitute all of the management contracts, compensatory
    plans or arrangements in which any director or executive officer
    participates.
 
(b) There were no reports on Form 8-K filed during the fourth quarter of 1997.
 
    Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
 
    The foregoing undertaking is made in compliance with Form S-8, as amended as
of July 13, 1990, and shall be incorporated by this reference into each Form S-8
of the registrant, including Registration Statements Nos. 33-24859, 33-61506 and
2-84421.
 
                                       13
<PAGE>
                           LAWTER INTERNATIONAL, INC.
                          CONSOLIDATED BALANCE SHEETS
               (in thousands, except share and per share figures)
 
<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31
                                                                                            ----------------------
                                                                                               1997        1996
                                                                                            ----------  ----------
<S>                                                                                         <C>         <C>
ASSETS
Current Assets:
Cash (Note 1).............................................................................  $    8,052  $    8,221
Time Deposits, Interest Bearing (Note 1)..................................................      74,819      46,710
Marketable Securities (Note 1)............................................................          --       2,400
Accounts Receivable--less allowance for doubtful accounts of $490 in 1997 and $743 in
  1996....................................................................................      44,170      47,671
Inventories (Note 1)......................................................................      43,090      49,611
Prepaid Expenses..........................................................................       1,051       1,974
                                                                                            ----------  ----------
Total Current Assets......................................................................  $  171,182  $  156,587
                                                                                            ----------  ----------
Property, Plant and Equipment (Notes 1 and 7):
Land......................................................................................  $    6,982  $    7,670
Buildings.................................................................................      34,476      40,022
Machinery and Equipment...................................................................      83,681      92,810
Construction in Progress..................................................................       2,312         844
                                                                                            ----------  ----------
                                                                                            $  127,451  $  141,346
Less Accumulated Depreciation.............................................................      38,803      49,229
                                                                                            ----------  ----------
Net Property, Plant and Equipment.........................................................  $   88,648  $   92,117
Equity Investment (Note 6)................................................................          --      24,833
Other Assets (Note 1).....................................................................      16,354      19,586
                                                                                            ----------  ----------
Total.....................................................................................  $  276,184  $  293,123
                                                                                            ----------  ----------
                                                                                            ----------  ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable..........................................................................  $   12,324  $   20,162
Accrued Expenses..........................................................................      13,805      21,682
Short-term Borrowings (Note 8)............................................................      22,993      38,962
Income Taxes Payable......................................................................       4,099       1,371
                                                                                            ----------  ----------
Total Current Liabilities.................................................................  $   53,221  $   82,177
                                                                                            ----------  ----------
Long-term Obligations (Note 7)............................................................      29,050      29,050
Deferred Income Taxes (Note 4)............................................................      32,556      36,281
                                                                                            ----------  ----------
Total Liabilities.........................................................................  $  114,827  $  147,508
                                                                                            ----------  ----------
Stockholders' Equity (Note 3):
Preferred Stock--no par value, authorized 500,000 shares; none issued.....................  $       --  $       --
Common Stock--$1.00 par value, authorized 120,000,000 shares; issued 45,533,335 shares....      45,533      45,349
Additional Paid-in Capital................................................................      16,747      14,711
Retained Earnings (Note 1)................................................................     109,070      89,917
Cumulative Translation Adjustments (Note 1)...............................................      (9,535)     (3,826)
Other.....................................................................................        (458)       (536)
                                                                                            ----------  ----------
Total Stockholders' Equity................................................................  $  161,357  $  145,615
                                                                                            ----------  ----------
Total.....................................................................................  $  276,184  $  293,123
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>
 
The accompanying notes to the consolidated financial statements are an integral
part of these balance sheets.
 
                                       14
<PAGE>
                           LAWTER INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF EARNINGS
                    (in thousands, except per share figures)
 
<TABLE>
<CAPTION>
                                                                                    YEARS ENDED DECEMBER 31
                                                                               ----------------------------------
                                                                                  1997        1996        1995
                                                                               ----------  ----------  ----------
<S>                                                                            <C>         <C>         <C>
Net Sales....................................................................  $  206,539  $  193,814  $  204,835
Cost of Products Sold........................................................     143,439     133,381     159,034
                                                                               ----------  ----------  ----------
Gross Profit.................................................................  $   63,100  $   60,433  $   45,801
Selling, Administrative, Research & Distribution Expenses....................      27,283      24,793      28,762
Subsidiary Closure Costs.....................................................       9,535          --          --
                                                                               ----------  ----------  ----------
Operating Income.............................................................  $   26,282  $   35,640  $   17,039
Investment Income............................................................       2,333       4,914       6,170
Sale of Affiliate............................................................      32,030          --          --
                                                                               ----------  ----------  ----------
Earnings Before Income Taxes.................................................  $   60,645  $   40,554  $   23,209
Provision for Income Taxes (Notes 1 and 4)...................................      23,319      11,779       6,931
                                                                               ----------  ----------  ----------
Net Earnings.................................................................  $   37,326  $   28,775  $   16,278
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
Net Earnings per Share (Note 1):.............................................  $      .82  $      .64  $      .36
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
</TABLE>
 
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
 
                                       15
<PAGE>
                           LAWTER INTERNATIONAL, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
 
<TABLE>
<CAPTION>
                                                                                    YEARS ENDED DECEMBER 31
                                                                               ----------------------------------
                                                                                  1997        1996        1995
                                                                               ----------  ----------  ----------
<S>                                                                            <C>         <C>         <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Earnings.................................................................  $   37,326  $   28,775  $   16,278
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating
  Activities--
  Depreciation and Amortization..............................................       5,832       5,499       5,447
  Deferred Income Taxes......................................................      (3,474)        433         425
  Undistributed Equity Income................................................      (1,456)     (2,583)     (2,236)
  Deferred Exchange Gain (Loss)..............................................       2,984      (1,327)       (575)
  Purchase of Marketable Securities..........................................          --     (23,202)     (3,179)
  Proceeds from Sales of Marketable Securities...............................       2,502      27,828       3,173
  Net (Gain) Loss from Marketable Securities.................................          (2)       (605)     (2,002)
  Gain on Sale of Business...................................................        (738)         --          --
  Gain on Sale of Hach Company Common Stock..................................     (33,730)         --          --
  Write-off of Goodwill......................................................       4,236          --          --
(Increase) Decrease in Current Assets--
  Accounts Receivable........................................................         858      (4,983)      1,733
  Inventories................................................................       3,149          43     (11,484)
  Prepaid Expenses...........................................................         787         220         585
Increase (Decrease) in Current Liabilities--
  Accounts Payable...........................................................      (6,541)     (1,663)      3,266
  Accrued Expenses...........................................................      (3,651)       (367)      6,914
  Income Taxes Payable.......................................................       2,710      (2,815)     (4,579)
                                                                               ----------  ----------  ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES....................................  $   10,792  $   25,253  $   13,766
                                                                               ----------  ----------  ----------
CASH FLOW FROM INVESTING ACTIVITIES:
  Expenditures for Property, Plant and Equipment, net........................  $  (10,485) $  (25,925) $  (21,928)
  Purchase of Business, net of cash..........................................      (9,219)    (17,161)         --
  Proceeds from the Sale of Business.........................................       4,856          --          --
  Proceeds from Sale of Hach Company Common Stock............................      59,987          --          --
  Loans to Officers..........................................................         (24)       (478)       (200)
  Repayment of Officers' Loans...............................................          43          47         155
                                                                               ----------  ----------  ----------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES.........................  $   45,158  $  (43,517) $  (21,973)
                                                                               ----------  ----------  ----------
CASH FLOW FROM FINANCING ACTIVITIES:
  Exercise of Stock Options..................................................  $    2,220  $    2,929  $    1,223
  Principal Payments on Long-term Obligations................................         (50)        (50)        (52)
  Proceeds from Long-term Borrowings.........................................          --      25,000          --
  Payment of Short-term Borrowings...........................................     (11,182)    (26,177)     (1,055)
  Proceeds from Short-term Borrowings........................................          --      26,013      22,468
  Cash Dividends Paid........................................................     (18,173)    (18,077)    (17,989)
                                                                               ----------  ----------  ----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES.........................  $  (27,185) $    9,638  $    4,595
  Effect of Exchange Rate Changes on Cash....................................        (825)       (123)        505
                                                                               ----------  ----------  ----------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS..................................  $   27,940  $   (8,749) $   (3,107)
  Cash and Equivalents, Beginning of Year....................................      54,931      63,680      66,787
                                                                               ----------  ----------  ----------
  Cash and Equivalents, End of Year..........................................  $   82,871  $   54,931  $   63,680
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
</TABLE>
 
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
 
                                       16
<PAGE>
                           LAWTER INTERNATIONAL, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    (in thousands, except per share figures)
 
<TABLE>
<CAPTION>
                                                            COMMON     ADDITIONAL               CUMULATIVE
                                                           STOCK $1      PAID-IN     RETAINED   TRANSLATION
                                                           PAR VALUE     CAPITAL     EARNINGS   ADJUSTMENTS    OTHER
                                                          -----------  -----------  ----------  -----------  ---------
<S>                                                       <C>          <C>          <C>         <C>          <C>
Years Ended December 31, 1995, 1996 and 1997
Balance, January 1, 1995................................   $  44,924    $  10,347   $   80,929   $  (5,015)  $      --
Add (deduct):
  Net Earnings..........................................          --           --       16,278          --          --
  Cash Dividends Declared--$.40 per share...............          --           --      (17,989)         --          --
  Exercise of Stock Options.............................         142        1,517           --          --          --
  Loans to Officers (Note 3)............................          --           --           --          --         (45)
  Foreign Currency Translation Adjustments..............          --           --           --       2,101          --
                                                          -----------  -----------  ----------  -----------  ---------
Balance, December 31, 1995..............................   $  45,066    $  11,864   $   79,218   $  (2,914)  $     (45)
Add (deduct):
  Net Earnings..........................................          --           --       28,775          --          --
  Cash Dividends Declared--$.40 per share...............          --           --      (18,076)         --          --
  Exercise of Stock Options.............................         283        2,847           --          --          --
  Loans to Officers (Note 3)............................          --           --           --          --        (431)
  Unrealized Loss on Investments........................          --           --           --          --         (60)
  Foreign Currency Translation Adjustments..............          --           --           --        (912)         --
                                                          -----------  -----------  ----------  -----------  ---------
Balance, December 31, 1996..............................   $  45,349    $  14,711   $   89,917   $  (3,826)  $    (536)
Add (deduct):
  Net Earnings..........................................          --           --       37,326          --          --
  Cash Dividends Declared--$0.40 per share..............          --           --      (18,173)         --          --
  Exercise of Stock Options.............................         184        2,036           --          --          --
  Loans to Officers (Note 3)............................          --           --           --          --          18
  Unrealized Gain on Investments........................          --           --           --          --          60
  Foreign Currency Translation Adjustments..............          --           --           --      (5,709)         --
                                                          -----------  -----------  ----------  -----------  ---------
Balance, December 31, 1997..............................   $  45,533    $  16,747   $  109,070   $  (9,535)  $    (458)
                                                          -----------  -----------  ----------  -----------  ---------
                                                          -----------  -----------  ----------  -----------  ---------
</TABLE>
 
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
 
                                       17
<PAGE>
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1--STATEMENT OF ACCOUNTING POLICIES
 
  PRINCIPLES OF CONSOLIDATION
 
    The consolidated financial statements of the Company include all of its
wholly owned subsidiaries. All material intercompany balances and transactions
have been eliminated in consolidation. The equity method is used for any
investment where ownership is from 20% to 50%.
 
  FOREIGN CURRENCY TRANSLATION
 
    All assets and liabilities of operations denominated in foreign currencies
are translated at the rates of exchange in effect at the close of the year.
Revenue and expense accounts are translated at the average exchange rates which
were in effect during the year. Translation gains and losses are reported as a
separate component of stockholders' equity and are not included in net earnings.
Foreign currency transaction gains and losses continue to be an element in
determining net earnings for the period. Foreign currency transaction gains
(losses), included in selling, administrative, research and distribution
expenses, were $(321,000) in 1997, $93,000 in 1996 and $169,000 in 1995.
Revenues and expenses are also affected by fluctuations of currency rates from
year to year. The effect of these rate fluctuations in 1997 when compared to
1996 and 1996 when compared to 1995 resulted in an unfavorable impact on
operating results in addition to the transaction gains or losses reflected in
net earnings.
 
  CONSOLIDATED STATEMENT OF CASH FLOWS
 
    The Company considers time deposits, which are highly liquid with an
original maturity of three months or less, to be cash equivalents for purposes
of the consolidated statements of cash flows. The carrying amount of cash and
time deposits approximates fair market value. The Company paid interest of
$4,462,000 in 1997, $3,778,000 in 1996 and $2,154,000 in 1995.
 
  EARNINGS PER SHARE
 
    In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share," which
requires companies to present basic earnings per share and diluted earnings per
share, instead of primary earnings per share and fully diluted earnings per
share that were previously required. The new standard is effective for all
periods ending after December 15, 1997. The new standard has no impact on the
Company's earnings per share.
 
    Earnings per share of common stock are computed on the weighted average
shares outstanding during the respective years (45,431,000 in 1997, 45,175,000
shares in 1996 and 45,018,000 shares in 1995). Net earnings per share would not
be materially different from reported earnings per share if all outstanding
stock options were exercised.
 
  INTANGIBLE ASSETS
 
    The excess of cost over equity in net assets of acquisitions is being
amortized on a straight line basis over periods not exceeding 40 years. The
Company continually evaluates whether later events and circumstances have
occurred that indicate the remaining estimated useful life of goodwill may
warrant revision or that the remaining balance of goodwill may not be
recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, the Company uses an estimate of the related business
segment's undiscounted net income over the remaining life of the goodwill in
measuring whether the goodwill is recoverable.
 
                                       18
<PAGE>
NOTE 1--STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
  RESEARCH AND DEVELOPMENT
 
    Research and development costs ($5,342,000 in 1997, $5,049,000 in 1996 and
$5,320,000 in 1995) are charged to expense as incurred.
 
  INCOME TAXES
 
    The Company provides U.S. income taxes on earnings of those foreign
subsidiaries which are intended to be remitted to the parent company.
Undistributed earnings reinvested indefinitely in foreign subsidiaries totaled
$26,653,000 at December 31, 1997. Income taxes paid during 1997, 1996 and 1995
amounted to $23,295,000, $13,595,000 and $9,419,000, respectively.
 
  INVESTMENTS
 
    During 1997 and 1996, all of Lawter's marketable securities were classified
as available-for-sale securities, which were reported at fair value. Unrealized
gains and losses were charged or credited to Stockholders' Equity. In 1997 and
1996, proceeds from the sales of these securities were $2,502,000 and
$7,333,000, respectively, the realized gain (loss) included in income was $2,000
and $(183,000), respectively and the unrealized gain (loss) charged to
Stockholders' Equity (net of the tax effect) was $60,000 and $(60,000),
respectively.
 
    At December 31, 1995, all of Lawter's marketable securities were classified
as trading securities. Trading securities were reported at fair value, with
changes in fair value included in earnings. The net unrealized holding gain
(loss) included in income was $(1,699,000) and $2,206,000 in 1996 and 1995,
respectively.
 
    For the purpose of determining realized gains and losses, the cost of
securities sold was based upon specific identification.
 
  INVENTORIES
 
    The majority of the Company's domestic inventories are valued at last-in,
first-out (LIFO) cost which is not in excess of net realizable value. The
Company's other inventories aggregating $28,375,000 and $30,608,000 at December
31, 1997 and 1996, respectively, are valued at the lower of first-in, first-out
(FIFO) cost or market. The finished goods inventories include the cost of raw
materials and manufacturing labor and overhead. Inventories are summarized as
follows:
 
<TABLE>
<CAPTION>
(IN THOUSANDS)                                                              1997       1996
                                                                          ---------  ---------
<S>                                                                       <C>        <C>
Raw Materials...........................................................  $  21,132  $  24,094
Finished Goods..........................................................     21,958     25,517
                                                                          ---------  ---------
                                                                          $  43,090  $  49,611
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
    If the FIFO inventory valuation method had been used for all inventories,
they would have been $4,259,000 and $4,839,000 higher than reported at December
31, 1997 and 1996, respectively.
 
  PROPERTY
 
    Property, plant and equipment is stated at cost. Depreciation, computed
using the straight-line method for financial statement purposes, is provided
over the useful lives of the various classes of property, plant and equipment.
 
  USE OF ESTIMATES
 
    The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions. The reported amounts of assets and liabilities
 
                                       19
<PAGE>
NOTE 1--STATEMENT OF ACCOUNTING POLICIES (CONTINUED)
and disclosure of contingent assets and liabilities at the date of the financial
statements and the amount of revenues and expenses reported during the period
are affected by these assumptions and estimates. Actual results could differ
from these estimates.
 
  STATEMENT OF EARNINGS PRESENTATION
 
    Certain prior year amounts have been reclassified to conform with current
year presentation.
 
NOTE 2--RETIREMENT PLANS
 
    The Company had in 1997, 1996 and 1995 contributory profit sharing plans and
a non-contributory money purchase pension plan. The majority of domestic and
Canadian employees are covered by one of these plans.
 
    Company contributions to these plans charged to operations were $478,000 in
1997, $494,000 in 1996 and $530,000 in 1995 and are funded on a current basis.
There is no past service liability under these plans. The Company has no
material postretirement or postemployment benefit obligations.
 
NOTE 3--COMMON STOCK
 
    In 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which permits either recording the
estimated value of stock-based compensation over the applicable vesting period
or continued application of APB Opinion No. 25 with disclosure on a pro forma
basis of information for the unrecorded cost and related effect on earnings per
share in the Notes to the Financial Statements. The Company applies the standard
on a pro forma basis. Had compensation costs for the Company's stock option
plans been determined based on the fair value at the grant dates for awards
consistent with the provisions of SFAS No. 123, the Company's net earnings and
earnings per share would have been adjusted to the pro forma amounts indicated
below.
 
<TABLE>
<CAPTION>
(IN THOUSANDS)                                                   1997       1996       1995
                                                               ---------  ---------  ---------
<S>                                                            <C>        <C>        <C>
Net earnings--as reported....................................  $  37,326  $  28,775  $  16,278
Net earnings--pro forma......................................     37,054     28,292     16,042
Earnings per share--as reported..............................  $     .82  $     .64  $     .36
Earnings per share--pro forma................................        .82        .63        .36
</TABLE>
 
    The Company has two fixed stock option plans for officers, directors and
other key employees. Options may be granted at prices not less than the fair
market value at the date of grant. Options expire ten years from the date of
grant and are exercisable one year after the date of grant.
 
    The fair value of each option granted is estimated on the grant date using
the Black-Scholes option-pricing model. The following weighted average
assumptions were made in estimating the fair value: dividend yield of 3.3%, 3.6%
and 3.5% in 1997, 1996 and 1995, respectively; expected volatility of 22.0% in
1997 and 18.1% in both 1996 and 1995; risk-free interest rate of 5.8% in 1997
and 1996 and 6.4% in 1995; and expected lives of 5 years.
 
    The Company issues common stock when stock options are exercised. At the
time of exercise, officers may borrow funds from the Company in order to
exercise their stock options. These loans bear interest at the Company's
effective rate to borrow and are repayable within eighteen months. The unpaid
portion of the options exercised, evidenced by a note, has been deducted from
Stockholders' Equity in the accompanying Consolidated Balance Sheets. The par
value of the shares issued is credited to the common stock account and the
excess of the purchase price over the par value is credited to additional
paid-in capital.
 
                                       20
<PAGE>
NOTE 3--COMMON STOCK (CONTINUED)
    A summary of the status and activity in the stock option plans is shown in
the tables below.
 
<TABLE>
<CAPTION>
                                                                           NUMBER     WEIGHTED
                                                                             OF        AVERAGE
                                                                           SHARES       PRICE
                                                                         ----------  -----------
<S>                                                                      <C>         <C>
Outstanding January 1, 1995............................................   1,870,331   $   11.71
Granted................................................................     388,500       11.38
Exercised..............................................................    (142,657)       8.58
Forfeited or Expired...................................................     (95,861)      12.20
                                                                         ----------
Outstanding December 31, 1995..........................................   2,020,313       11.85
Granted................................................................     233,250       11.29
Exercised..............................................................    (282,149)      10.38
Forfeited or Expired...................................................    (160,864)      11.91
                                                                         ----------
Outstanding December 31, 1996..........................................   1,810,550       12.00
Granted................................................................     205,000       11.86
Exercised..............................................................    (184,800)      12.01
Forfeited or Expired...................................................     (63,375)      12.10
                                                                         ----------
Outstanding December 31, 1997..........................................   1,767,375       11.97
                                                                         ----------
                                                                         ----------
Exercisable December 31, 1995..........................................   1,631,813       11.96
Exercisable December 31, 1996..........................................   1,608,550       12.08
Exercisable December 31, 1997..........................................   1,568,500       11.71
</TABLE>
 
<TABLE>
<CAPTION>
                                            1997               1996               1995
                                      -----------------  -----------------  -----------------
<S>                                   <C>                <C>                <C>
Price range at end of year..........  $  10.75 to 14.38  $  11.00 to 14.38  $   9.29 to 14.38
Price range for exercised shares....  $  11.25 to 13.25  $   9.29 to 10.41  $   6.62 to 12.25
Options available for grant at end
  of year...........................            843,825            992,950          1,075,700
Weighted average remaining
  contractual life at the end of the
  year..............................            7 Years            8 Years            7 Years
</TABLE>
 
NOTE 4--PROVISION FOR INCOME TAXES
 
    The Company uses the asset and liability method to account for income taxes.
 
    Pre-tax earnings were as follows:
 
<TABLE>
<CAPTION>
(IN THOUSANDS)                                                   1997       1996       1995
                                                               ---------  ---------  ---------
<S>                                                            <C>        <C>        <C>
United States................................................  $  56,758  $  25,483  $  13,393
Foreign......................................................      3,887     15,071      9,816
                                                               ---------  ---------  ---------
                                                               $  60,645  $  40,554  $  23,209
                                                               ---------  ---------  ---------
                                                               ---------  ---------  ---------
</TABLE>
 
                                       21
<PAGE>
NOTE 4--PROVISION FOR INCOME TAXES (CONTINUED)
    The provisions (benefits) for income taxes were as follows:
 
<TABLE>
<CAPTION>
(IN THOUSANDS)                                                   1997       1996       1995
                                                               ---------  ---------  ---------
<S>                                                            <C>        <C>        <C>
Currently payable:
United States:
  Federal....................................................  $  19,871  $   8,667  $   4,082
  State......................................................      4,009      1,180      1,060
Foreign......................................................      1,650      1,481      1,353
                                                               ---------  ---------  ---------
Total Current................................................     25,530     11,328      6,495
                                                               ---------  ---------  ---------
Deferred (principally U.S.):
Excess of tax over book depreciation.........................      3,952      1,556        442
Undistributed earnings of the equity investment..............     (6,148)       904        782
Undistributed earnings of foreign subsidiaries...............         --     (2,560)    (1,485)
Other........................................................        (15)       551        697
                                                               ---------  ---------  ---------
Total Deferred...............................................     (2,211)       451        436
                                                               ---------  ---------  ---------
                                                               $  23,319  $  11,779  $   6,931
                                                               ---------  ---------  ---------
                                                               ---------  ---------  ---------
</TABLE>
 
    Temporary differences that gave rise to the deferred tax liability at
December 31, 1997 were as follows:
 
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S>                                                                                  <C>
Undistributed earnings of foreign subsidiaries.....................................  $  25,971
Excess of tax over book depreciation...............................................      7,856
Other..............................................................................     (1,271)
                                                                                     ---------
                                                                                     $  32,556
                                                                                     ---------
                                                                                     ---------
</TABLE>
 
    The Company's earnings from manufacturing operations in Waterford, Ireland
were tax exempt until 1990 and will have a 10% tax rate through 2010.
 
    The total "Provision for Income Taxes" represents an effective tax rate of
38.5% for 1997, 29.0% for 1996 and 29.9% for 1995. The differences from the U.S.
statutory rate for 1997, 1996 and 1995 were as follows:
 
<TABLE>
<CAPTION>
(IN THOUSANDS)                                                   1997       1996       1995
                                                               ---------  ---------  ---------
<S>                                                            <C>        <C>        <C>
Computed tax provision at 35%................................  $  21,226  $  14,194  $   8,123
Increase (decrease) in tax provision resulting from:
Waterford, Ireland operation.................................     (1,144)    (1,884)    (1,947)
Inclusion of state & local income taxes (net of Federal
  income taxes)..............................................      2,606        787        689
Goodwill write off...........................................      1,483         --         --
Foreign currency translation adjustment write off............      1,606         --         --
Other foreign operations.....................................     (1,033)      (710)     1,009
Other........................................................     (1,425)      (608)      (943)
                                                               ---------  ---------  ---------
Provision for Income Taxes...................................  $  23,319  $  11,779  $   6,931
                                                               ---------  ---------  ---------
                                                               ---------  ---------  ---------
</TABLE>
 
NOTE 5--RESTRUCTURING CHARGES
 
    In the fourth quarter of 1995, a new management team was formed. The new
management, taking into account a change in market conditions, developed a new
corporate strategy. Part of the decision making process included an evaluation
of the feasibility of continuing to utilize older manufacturing facilities. With
 
                                       22
<PAGE>
NOTE 5--RESTRUCTURING CHARGES (CONTINUED)
the anticipated completion of construction of the new ink vehicle and resin
facility in Belgium combined with the new ink vehicle and resin facility in the
U. S., the Company decided to implement a restructuring plan. This plan included
the decommissioning of older ink vehicle and resin plants. This resulted in a
pretax charge in the fourth quarter of 1995 of $8,449,000, of which $2,791,000
was charged to selling, administrative, research and distribution expenses for
personnel redundancy and $5,658,000 was charged to Cost of Products Sold for
site decommissioning. These restructuring activities commenced in the fourth
quarter of 1995 and have been substantially completed as of the end of 1997.
 
    The personnel redundancy costs relate to cash outlays for benefits to be
paid to the manufacturing and office employees at the older plants in Europe and
North America. Approximately 100 positions were eliminated as a result of the
restructuring plan. As of December 31, 1997, employee headcount was down to 549
employees from a high of 604 employees in 1995. Redundancy payments charged
against the reserve through December 31, 1997 were $2,699,000 including $421,000
utilized in 1997. The balance of the reserve will be utilized for several
remaining employees at one of the European locations.
 
    The site decommissioning costs represent demolition, cleanup, relocation and
asset write down costs along with costs incurred during the wind down period for
older facilities, mainly in Europe and North America. Included in the
$5,658,000, is $4,461,000 for non-cash items which relate to the write down of
the net book value of the assets at these locations. As of December 31, 1997,
five manufacturing facilities in North America and six manufacturing facilities
in Europe were shut down and/or sold. The costs charged against the reserve
related to these facilities were $5,194,000 comprised of $3,880,000 for the
write down of net book value of the assets, $563,000 for cleanup costs, $880,000
for costs incurred during the wind down period of the European facilities,
$110,000 for plant and equipment dismantling and $191,000 for relocation costs,
partially offset by the proceeds of $430,000 from the sale of the assets of one
of the North American facilities. The balance of the site decommissioning
reserve will be used for the final dismantling and cleanup costs of one of the
European facilities.
 
NOTE 6--EQUITY INVESTMENTS
 
    At December 31, 1996, the Company owned 3,157,223 shares, representing
approximately 28% of the outstanding shares, of the Common Stock of Hach Company
(Hach). During the third quarter of 1997, the Company sold its 28% share of Hach
for $59,987,000. This resulted in an after tax gain of $19,570,000 or $.43 per
share. The investment in Hach was accounted for under the equity method.
 
    Hach is a leading international manufacturer of instruments and test kits
that analyze the chemical content and other properties of water and other
aqueous solutions. In addition, Hach sells analytical reagents which are used in
connection with the instruments and test kits.
 
NOTE 7--LONG-TERM OBLIGATIONS
 
    Long-term obligations were as follows:
 
<TABLE>
<CAPTION>
(IN THOUSANDS)                                                              1997       1996
                                                                          ---------  ---------
<S>                                                                       <C>        <C>
Series 1993-LI IDB Bond.................................................  $   4,000  $   4,000
Series 1978-A IDB Bond..................................................         50         50
                                                                          ---------  ---------
Net long-term bonds payable.............................................      4,050      4,050
Prudential Shelf Agreement..............................................     25,000     25,000
                                                                          ---------  ---------
Total long-term obligations.............................................  $  29,050  $  29,050
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
    In December of 1995, the Company entered into a private shelf agreement with
Prudential Capital Group under which it may borrow up to $125,000,000. The shelf
agreement provides for promissory notes to mature no more than 15 years after
the original date of issuance, which was December 6, 1995. The
 
                                       23
<PAGE>
NOTE 7--LONG-TERM OBLIGATIONS (CONTINUED)
 
interest is payable semi-annually at 6.33%. There are various covenants related
to this agreement. At December 31, 1997, the Company was in compliance with
these covenants.
 
    Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 107, "Disclosures about the Fair Value of
Financial Instruments." SFAS No. 107 requires disclosure of the fair value of
significant financial instruments, including long-term obligations. At December
31, 1997 and 1996, the fair value of Lawter's long-term obligations was not
materially different than cost.
 
    During 1993, the Industrial Development Board of the Town of Moundville
(IDB) issued a $4,000,000, 6.75% Industrial Revenue Bond, Series 1993-LI to the
Company. Interest is payable semi-annually. Principal is due in six annual
installments of various amounts beginning December 1, 2006 with the final
payment due December 1, 2011. The Series 1978-A Industrial Revenue Bond was
originally issued in 1978 by the IDB for $1,000,000. Interest is payable
semi-annually at 7.25%. Remaining principal of $50,000 is payable on September
1, 2003.
 
    In connection with the issuance of these Industrial Revenue Bonds by the
IDB, the Company entered into capital lease agreements with the IDB with future
minimum lease payments sufficient to amortize the principal and interest on each
series of the Industrial Revenue Bonds.
 
    Costs capitalized under these leases were $8,500,000 as of December 31, 1997
and 1996. The capitalized costs are being depreciated over the estimated useful
lives of the individual assets.
 
    At December 31, 1997, the future lease payments under the capitalized leases
relating to the Industrial Revenue Bonds were as follows:
 
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S>                                                                              <C>
1998...........................................................................    $     270
1999...........................................................................          270
2000...........................................................................          270
2001...........................................................................          270
2002...........................................................................          270
Later years....................................................................        5,859
                                                                                 -------------
Total minimum lease payments...................................................        7,209
Less interest..................................................................       (3,159)
                                                                                 -------------
Present value of minimum lease payments........................................    $   4,050
                                                                                 -------------
                                                                                 -------------
</TABLE>
 
    Operating leases are not significant.
 
NOTE 8--COMMITMENTS AND CONTINGENCIES
 
    The Company has unsecured lines of credit for borrowings of $255,000,000 at
December 31, 1997. During 1997, average borrowings were $32,318,000 against
these lines of credit and the weighted average interest rate was 4.08%. In 1996,
average borrowings were $36,370,000 and the weighted average interest rate was
4.48%. In 1995, average borrowings were $30,765,000 and the weighted average
interest rate was 6.23%. There are no commitment fees or compensating balance
requirements relating to these lines of credit.
 
    The Company from time to time is subject to claims brought on behalf of both
private persons and governmental agencies. Management and the Company's general
counsel are not aware of any claim where the disposition of such claim is
expected to have a material adverse effect upon the Company's consolidated
financial position.
 
                                       24
<PAGE>
NOTE 9--SEGMENT INFORMATION
 
    A dominant portion of Lawter's operations is in a single industry-specialty
polymers. Within this industry, Lawter is principally engaged in the production
and marketing of printing ink vehicles, synthetic and hydrocarbon resins, and
slip additives.
 
    Lawter's total business is broken down into three geographical areas: North
America, Europe and Pac Rim. Pac Rim includes the Company's operations in China,
Japan, Singapore and Taiwan which, individually, are not considered to be
significant as defined by SFAS No. 14. The Company sells the majority of its
products to both large and small ink companies. Lawter is a major supplier of
printing ink vehicles and resins for printing inks and, therefore, sells
substantial quantities to larger ink companies around the world. One customer
whose purchases are made for a wide variety of specialized products at multiple
locations through numerous companies in various countries approximated
twenty-two percent of sales in 1997, nineteen percent of sales in 1996, and
eighteen percent of sales in 1995.
 
    Transfers between geographic areas are not material. Corporate earnings
before tax is the net of the gain on the sale of the Hach Company common stock,
investment income and corporate expenses. Identifiable assets are those assets
used exclusively in the operations of each geographic area. Corporate assets are
principally comprised of time deposits, marketable securities, the equity
investment and other assets. The contribution of European operations to net
earnings is greater than their contribution to earnings before tax principally
due to the Waterford, Ireland operation discussed in Note 4.
 
    Information about the Company's operations for the years ended December 31,
1997, 1996 and 1995 is shown in the table below.
 
<TABLE>
<CAPTION>
(IN THOUSANDS)                                                                    1997        1996        1995
                                                                               ----------  ----------  ----------
<S>                                                                            <C>         <C>         <C>
Net Sales:
North America................................................................  $  101,154  $  100,871  $  103,018
Europe.......................................................................      95,379      84,841      94,071
Pac Rim......................................................................      10,006       8,102       7,746
                                                                               ----------  ----------  ----------
Total........................................................................  $  206,539  $  193,814  $  204,835
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
Earnings Before Tax:
North America................................................................  $   25,754  $   24,947  $   12,820
Europe.......................................................................       5,912      11,113       4,687
Pac Rim......................................................................       1,340       1,368       1,345
Corporate....................................................................      27,639       3,126       4,357
                                                                               ----------  ----------  ----------
Total........................................................................  $   60,645  $   40,554  $   23,209
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
Identifiable Assets:
North America................................................................  $   69,339  $   72,418  $   77,548
Europe.......................................................................      98,842     116,320      83,812
Pac Rim......................................................................      10,915      10,062       8,719
Corporate....................................................................      97,088      94,323      91,395
                                                                               ----------  ----------  ----------
Total........................................................................  $  276,184  $  293,123  $  261,474
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
</TABLE>
 
NOTE 10--SUBSEQUENT EVENT
 
    On March 19, 1998, the Company entered into an agreement to repurchase
11,503,130 shares of Lawter International, Inc.'s common stock held by the
estate of Daniel J. Terra, at a price of $11.375 per share. The agreement calls
for the closing of this transaction April 17, 1998. The repurchase will be
financed by a combination of debt and cash on hand.
 
                                       25
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To the Board of Directors and Stockholders of Lawter International, Inc.:
 
    We have audited the accompanying consolidated balance sheets of Lawter
International, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
 
    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Lawter
International, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
 
    The schedule listed in the index on page 12 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audit of the basic consolidated financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic consolidated financial statements taken
as a whole.
 
                                          /s/ Arthur Andersen LLP
                                          ARTHUR ANDERSEN LLP
 
Chicago, Illinois,
February 9, 1998
(Except with respect to the matter discussed in Note 10, as to which the date is
March 19, 1998.)
 
                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
    As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 9, 1998 (except with respect to the
matter discussed in Note 10, as to which the date is March 19, 1998), included
(or incorporated by reference) in this Annual Report of Lawter International,
Inc. and Subsidiaries on Form 10-K for the year ended December 31, 1997, into
the Company's previously filed Registration Statements on Forms S-3 (File No.
33-24165), S-8 (File No. 33-24859), S-8 (File No. 33-61506) and S-8 (File No.
2-84421).
 
                                          /s/ Arthur Andersen LLP
                                          ARTHUR ANDERSEN LLP
 
Chicago, Illinois,
March 24, 1998
 
                                       26
<PAGE>
                  LAWTER INTERNATIONAL, INC. AND SUBSIDIARIES
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                 (in thousands)
 
<TABLE>
<CAPTION>
ALLOWANCES FOR DOUBTFUL ACCOUNTS                                                             1997       1996       1995
-----------------------------------------------------------------------------------------  ---------  ---------  ---------
<S>                                                                                        <C>        <C>        <C>
Balance at beginning of year.............................................................  $     743  $     636  $     415
  Additions (credited)/charged to earnings...............................................       (102)       166        327
  Additions/(deductions) for accounts written off, net of recoveries.....................       (151)       (59)      (106)
                                                                                           ---------  ---------  ---------
Balance at end of year...................................................................  $     490  $     743  $     636
                                                                                           ---------  ---------  ---------
                                                                                           ---------  ---------  ---------
</TABLE>
 
                                       27
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) 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.
 
                                          ______LAWTER INTERNATIONAL, INC.______
                                                       (Registrant)
 
                                          /s/ JOHN P. O'MAHONEY
                                          --------------------------------------
                                          John P. O'Mahoney
                                          Chairman of the Board and
                                          Chief Executive Officer
                                          (Principal Executive Officer)
 
                                          /s/ MARK W. JOSLIN
                                          --------------------------------------
                                          Mark W. Joslin
                                          Chief Financial Officer and Treasurer
                                          (Principal Financial and
                                          Accounting Officer)
 
Date: March 24, 1998
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
 
<TABLE>
<S>                                            <C>
/s/ WILLIAM P. CLARK                           /s/ RICHARD D. NORDMAN
--------------------------------------------   --------------------------------------------
William P. Clark, March 24, 1998               Richard D. Nordman, March 24, 1998
Director                                       Director
 
/s/ ARTHUR A. HARTMAN                          /s/ JOHN P. O'MAHONEY
--------------------------------------------   --------------------------------------------
Arthur A. Hartman, March 24, 1998              John P. O'Mahoney, March 24, 1998
Director                                       Director
 
/s/ JOHN P. JILEK                              /s/ FRED G. STEINGRABER
--------------------------------------------   --------------------------------------------
John P. Jilek, March 24, 1998                  Fred G. Steingraber, March 24, 1998
Director                                       Director
 
/s/ LEONARD P. JUDY
--------------------------------------------
Leonard P. Judy, March 24, 1998
Director
</TABLE>
 
                                                 Registrant's 1997 Annual Report
                                                 to Stockholders, some portions
                                                 of which have been incorporated
                                                 by reference in this Form 10-K,
                                                 has been sent to each
                                                 stockholder and was included
                                                 with this report to the
                                                 Securities and Exchange
                                                 Commission.
 
                                       28