-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PIf+kXGAtJi44VqQReraoSnno9LJsFrJHZIwwKNsMvKhrhllI2G+s0ftZnKPVHrv NSlIEF1WDRKvlFLWFsHjYg== 0000012654-98-000010.txt : 19981113 0000012654-98-000010.hdr.sgml : 19981113 ACCESSION NUMBER: 0000012654-98-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLOCK DRUG CO INC CENTRAL INDEX KEY: 0000012654 STANDARD INDUSTRIAL CLASSIFICATION: PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS [2844] IRS NUMBER: 221375645 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-06436 FILM NUMBER: 98745399 BUSINESS ADDRESS: STREET 1: 257 CORNELISON AVE CITY: JERSEY CITY STATE: NJ ZIP: 07302 BUSINESS PHONE: 2014343000 MAIL ADDRESS: STREET 1: 257 CORNELISON AVENUE CITY: JERSEY CITY STATE: NJ ZIP: 07302 10-Q 1 BLOCK DRUG CO,INC.FORM 10-Q,3MONTHS ENDED 09/30/98 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________________ Form 10-Q Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Three Months Ended Commission File number 0-6436 September 30, 1998 _________________________BLOCK DRUG COMPANY, INC._________________________ (Exact name of registrant as specified in its charter) ___New Jersey_________________________________________________22-1375645__ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 257 Cornelison Avenue, Jersey City, N.J._______________________07302______ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (201) 434-3000 Indicate by check mark whether the registrant (1) has filed all Commission 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 periods that the registrant is required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES_X__ NO_____ Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the close of the period covered by this report. _____Class______________ Outstanding_at_September 30,_1998 Common Stock - Class A 14,011,333 Common Stock - Class B 8,173,600 1 BLOCK DRUG COMPANY, INC. INDEX TO FORM 10-Q SEPTEMBER 30, 1998 ____________________________ Part I - Financial Information - Unaudited Page No. Consolidated Balance Sheets - September 30, 1998 and March 31, 1998 3 Consolidated Statements of Income for the three and six months ended September 30, 1998 and 1997 4 Condensed Consolidated Statements of Comprehensive Income for the three and six months ended September 30, 1998 and 1997 5 Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 1998 and 6 and 1997. Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Operating Results and Financial Condition 8-10 Part II - Other Information 11 2 BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Unaudited) ASSETS __09/30/98__ __03/31/98__ Current Assets: Cash $ 28,117,000 $ 37,320,000 Marketable securities,at market 42,778,000 24,081,000 Accounts receivable, less allowances of $4,371,000 (9/30/98) and $4,446,000 (3/31/98) 138,717,000 143,114,000 Inventories: Raw & packaging materials 41,811,000 42,661,000 Finished goods 92,798,000 96,478,000 Other current assets 40,059,000 37,056,000 ----------- ----------- Total current assets 384,280,000 380,710,000 ----------- ----------- Property,plant and equipment, less accumulated depreciation of $125,354,000 (9/30/98) and $132,292,000 (3/31/98) 240,504,000 251,737,000 Long term securities at market 243,575,000 263,518,000 Goodwill and other intangible assets- net of amortization 194,273,000 183,654,000 Other assets 7,863,000 7,453,000 -------------- ------------- Total assets $1,070,495,000 $1,087,072,000 ============= ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes and bonds payable $104,503,000 $171,210,000 Accounts payable & accrued expenses 158,540,000 173,226,000 Income taxes payable 12,758,000 11,128,000 Dividends payable 5,313,000 5,306,000 ----------- ----------- Total current liabilities 281,114,000 360,870,000 ----------- ----------- Notes and bonds payable 107,235,000 58,318,000 Deferred compensation and other payables 18,925,000 17,606,000 Deferred income taxes 3,112,000 3,023,000 ----------- ----------- Total liabilities 410,386,000 439,817,000 ----------- ----------- Shareholders' Equity: Class A common stock, non-voting, par value $.10-15,000,000 shares authorized, 14,011,000 (9/30/98) and 13,991,000 (3/31/98) shares issued and outstanding 1,401,000 1,399,000 Class B common stock par value $.10- 30,000,000 shares authorized, 8,174,000 (1998 & 1997) shares issued and outstanding 817,000 817,000 Capital in excess of par value 282,868,000 281,993,000 Retained earnings 391,704,000 377,595,000 Cumulative other comprehensive income(loss) (16,681,000) (14,549,000) -------------- ----------- Total shareholders' equity 660,109,000 647,255,000 -------------- ------------- Total liabilities & shareholders' equity $1,070,495,000 $1,087,072,000 ============== ==============
-3- See notes to consolidated financial statements. 3 BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE_MONTHS_ENDED SIX_MONTHS_ENDED SEPTEMBER_30, SEPTEMBER_30, _1998_____________1997____ _______1998________1997___
Revenues: Net sales $204,063,000 $221,878,000 $393,510,000 $422,084,000 Interest, dividends and other income 5,165,000 6,790,000 18,384,000 13,117,000 ----------- ----------- ----------- ----------- 209,228,000 228,668,000 411,894,000 435,201,000 Cost and expenses: ----------- ----------- ----------- ----------- Cost of goods sold 63,098,000 77,628,000 119,488,000 137,077,000 Selling, general and administrative 125,924,000 126,785,000 252,478,000 249,776,000 Interest expense 3,296,000 3,044,000 6,824,000 6,351,000 ----------- ----------- ----------- ----------- 192,318,000 207,457,000 378,790,000 393,204,000 ----------- ----------- ----------- ----------- Income before taxes 16,910,000 21,211,000 33,104,000 41,997,000 Income taxes 4,116,000 5,934,000 8,375,000 11,339,000 ----------- ----------- ----------- ---------- Net income $12,794,000 $15,277,000 $24,729,000 $30,658,000 ============ =========== ========== =========== Average number of shares outstanding 22,180,977 22,137,845(1) 22,175,325 22,133,087(1) =========== =========== ========== =========== Net earnings per share $ 0.58 $ 0.69(1) $ 1.12 $ 1.39 (1) (basic) =========== =========== ========== =========== Cash dividends per share Class A common stock $ .315 $ .31 $ 0.63 $ 0.62 Class B common stock $ .11 $ .1075 $ 0.22 $ 0.215
(1) Restated to reflect 3% stock dividend declared November 1997. -4- See notes to consolidated financial statements 4 BLOCK DRUG COMPANY INC. & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
THREE_MONTHS_ENDED SIX_MONTHS_ENDED SEPTEMBER_30, SEPTEMBER_30, _1998_____________1997____ _______1998________1997___ Net income $12,794,000 $15,277,000 $24,729,000 $30,658,000 Other comprehensive income/(loss) Foreign currency translation adjust- -ment * 1,229,000 2,387,000 (4,450,000) (11,825,000) Unrealized holding gain on marketable securities 2,162,000 1,131,000 2,318,000 1,879,000 ------------ ---------- ----------- ----------- Other comprehensive income/(loss) 3,391,000 3,518,000 (2,132,000) (9,946,000) ------------ ---------- ----------- ----------- Comprehensive income /(loss) $16,185,000 $18,795,000 $22,597,000 $20,712,000 ============ =========== =========== ============
* The Company does not provide for U.S. income taxes on foreign currency translation adjustments because it does not provide for such taxes on undistributed earnings of foreign subsidiaries. See notes to consolidated financial statements - 5 - 5 BLOCK DRUG COMPANY INC.AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30 _____1998_________1997____ CASH_FLOW_FROM_OPERATING_ACTIVITIES $ 25,425,000 $ 30,869,000 ------------ ------------ CASH FLOW FROM INVESTING ACTIVITIES Additions to property, plant & equipment (18,543,000) (16,351,000) Proceeds from sale of assets 31,790,000 Proceeds from sales of long-term securities 94,940,000 39,062,000 Purchases of long-term securities (95,805,000) (49,637,000) Decrease(increase)in marketable securities 5,148,000 (7,312,000) Payment for products acquired (24,915,000) (39,008,000) ------------- ------------ Net cash used in investing activities (7,385,000) (73,246,000) ------------- ------------ CASH FLOW FROM FINANCING ACTIVITIES Dividends paid to shareholders (10,620,000) (10,136,000) Proceeds from issuance of notes payable 50,000,000 Decrease in long-term debt (73,000) (Decrease)increase in short-term debt (67,790,000) 67,946,000 ----------- ------------ Net cash (used in)provided by financing activities (28,410,000) 57,737,000 ------------ ----------- Effect of exchange rates on cash 1,167,000 1,403,000 ------------ ----------- (Decrease)increase in Cash (9,203,000) 16,763,000 Cash, beginning of period 37,320,000 13,862,000 ------------ ------------ Cash, end of period $ 28,117,000 $ 30,625,000 ============ ============ SUPPLEMENTAL CASH FLOW DATA Cash paid during the year: Interest $ 7,119,300 $ 6,369,200 Income taxes $ 2,882,355 $ 8,325,300
-6- See notes to consolidated financial statements. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of management, the accompanying consolidated financial statements include all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the data for the interim periods. 2. During the quarter ended September 30,1998,the Company converted short-term variable bank debt to fixed rate by issuing $50,000,000 of 10 year notes maturing July 1,2008 at 6.46%. During the six months ended September 30,1998, the Company reduced its net borrowings by $ 17,790,000 mainly from lines of credit from various banks bearing interest at variable rates. 3. At June 30,1998,the Company adopted Statement of Financial Accounting Standards No.130 "Reporting Comprehensive Income"("SFAS 130"). SFAS 130 establishes standards for reporting and display of an alternative income measurement and its components (revenue,expenses,gains and losses) in a full set of general purpose financial statements. Total comprehensive income includes net earnings,net unrealized currency gains and losses on translation and net unrealized gains and losses on securities. Adoption of this Statement had no effect on the Company's financial position or operating results. 4. During the second quarter of 1998, the Financial Accounting Standards Board issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" which must be adopted by the Company by April 1, 2000, with early adoption permitted. SFAS No. 133 requires that all derivative instruments be recorded on the consolidated balance sheet at their fair value. Changes in the fair value of derivatives will be recorded each period in earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are affected by the hedged item. The Company has not yet determined the timing of adoption or the impact that adoption or subsequent application of SFAS No. 133 will have on its earnings or financial position. -7- 7 BLOCK DRUG COMPANY, INC. & SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATING RESULTS AND FINANCIAL CONDITION Operating Results: - ------------------ Consolidated worldwide net sales of $ 204.1 million in the second quarter and $393.5 million in the first half year ended September 30,1998 were lower by 8.0% and 6.8%,respectively,compared to prior year periods.Domestic sales for the first half of the year were lower by 10.2% due to the divestiture of three household product lines. Foreign sales for the first half of the year were lower by 4.3%. Excluding the effects of a stronger U.S. Dollar related to foreign currencies, world wide net sales from ongoing operations increased 2.6% over the prior year. Interest, dividends and other income increased during the first half of the year compared to the prior year comparable period due primarily to a gain on sale of the household product lines. The cost of goods sold percent to sales was 30.4% and 32.5% for the first six months of the current and prior year,respectively. The cost of goods represents continued improvements in our manufacturing operations and mix of products sold. Selling, general and administrative expenses, most of which are related to advertising and promotional activities, were 64.2% and 59.2% for the first six months of the current and prior year periods,respectively. These expenses reflect major spending programs to meet significant competition and build brand equities. Interest expense percent to sales was 1.7% and 1.5% for the first six months of the current and the prior year,respectively. The increasing trend represents the additional borrowings by foreign subsidiaries to finance product acquisitions and conversion of short-term debt to long-term debt at a slightly higher interest rate. Due to the above factors, income before taxes was 8.4% and 9.9% of sales for the first half of the current and prior year, respectively. The effective income tax rates of 25.3% and 27.0% for the first half of the current and prior year,respectively, reflect tax exempt interest from government securities and income from the lower tax areas of Puerto Rico and Ireland. The Company's International operations represent approximately 60% of the Company's business. During the current quarter, the performance was impacted by currency issues, the instability and recession in Asian and certain European markets key to our business, as well as competitive pressures in many of its markets around the world. Although inflation has been moderate, the Company continues to utilize selective price increases and budgetary monitoring of advertising, personnel and other expenses to control its operating margins. Year 2000: - ---------- As many computer systems and other equipment or processors with embedded chips (collectively, "Business Systems") use only two digits to represent the year, they may be unable to process accurately certain data before during or after the year 2000. As a result, business and government entities are at risk for possible miscalculations or systems failures causing disruption in their business operations. - 8 - 8 This is commonly known as the year 2000 (Y2K Millennium Bug or Y2K) problem. The Y2K problem can arise at any point in the Company's supply, manufacturing, processing, distribution and financial chains. The Block Drug Company and each of its operating subsidiaries are in the process of implementing a Y2K compliance readiness program with the objective of having all of their significant Business Systems, including those that affect facilities and manufacturing activities, functioning properly with respect to the Y2K problem before January 1, 2000. All operating subsidiaries are in the remediation stage of Y2K readiness. The first component of the Y2K compliance program is to identify the internal Business Systems of the Company and its operating subsidiaries that are susceptible to system failures or processing errors as a result of the Y2K problem. This effort is substantially complete with all operating subsidiaries having identified the Business Systems that may require remediation or replacement and established priorities for repair or replacement. Those Business Systems considered most critical to continuing operations are being given the highest priority. The second component of the Y2K compliance program involves the actual remediation and replacement of Business Systems. The Company and its operating subsidiaries are using both internal and external resources to complete this process. Business Systems ranked highest in priority have either been remediated or replaced or scheduled for remediation or replacement. Business Systems previously earmarked for retirement and replacement without regard to the Y2K problem have been evaluated for early replacement with Y2K compliant systems or programs or, in the alternative, remediation. The Company is in the process of implementing Y2K compliant software/hardware whereever needed in the US as well as fixing or replacing hardware and software where warranted,with Y2K compliant solutions in our affiliates.The Company's objective is to complete substantially all remediation and replacement of internal Business Systems by March, 1999 to complete final testing and certification for Y2K readiness by July, 1999 and all contingency plans prepared by September, 1999. As part of the Y2K compliance program, significant service providers, vendors, suppliers, customers and government entities ("Key Business Partners") that are believed to be critical to business operations after January 1, 2000 have been identified and steps are being undertaken in an attempt to reasonably ascertain their stage of Y2K readiness through questionnaires, interviews, on-site visits and other available means. Wherever we have electronic or computer to computer communications with Key Partners, we plan to jointly test these interfaces. In conjunction with this effort, key government agencies and utilities upon which the Company and its subsidiaries rely are being approached on a worldwide basis to identify their level of Y2K preparedness. In many cases these entities, particularly outside North America, have a lower level of Y2K awareness and are less willing to provide information concerning their state of Y2K readiness. - 9 - 9 Because of the vast number of Business Systems used by the Company and its operating subsidiaries, the significant number of Key Business Partners and the extent of the Company's international operations, the Company presently believes that it may experience some disruption in its business due to the Y2K problem. More specifically, because of the interdependent nature of Business Systems, the Company and its operating subsidiaries could be materially adversely affected if utilities and government entities with which they do business or that provide essential services are not Y2K ready. The Company currently believes that the greatest risk of disruption in its businesses exists in certain international markets. The possible consequences of the Company of Key Business Partners not being fully Y2K compliant by January 1, 2000 include among other things, temporary plant closings, delays in the delivery products, delay in receipt of supplies, invoice and collection errors, and inventory and supply obsolescence. Concurrently, the business and results of operations of the Company could be materially adversely affected by a temporary inability of the Company and its operating subsidiaries to conduct their businesses in the ordinary course for a period of time after January 1, 2000. However, the Company believes that its Y2K readiness program, including the contingency plannning discussed below, should significantly reduce the adverse effect any such disruptions may have. Concurrently, with Y2K readiness measures described above, The Company and its operating subsidiaries are developing contingency plans intended to mitigate the disruption in business operations that may result from Y2K problems, and are developing cost estimates for such plans. Contingency plans may include stockpiling raw and packaging materials, increasing inventory levels, securing alternate sources of supply, adjusting facility shut-down and start-up schedules and other appropriate measure. Once developed, contingency plans and related cost estimates will be continually refined as additional information becomes available. The Company is investing an estimated $14 million to address it's Y2K effort as well as other business information requirements.To date approximately $9 million has been spent.These amounts do not include any cost associated with the implementation of contingency plans, which are in the process of being developed. The Company's Y2K compliance program is an ongoing process and the estimates of costs and completion dates for various components of the Y2K compliance program described above are subject to change, but the Company is making every effort to ensure scheduled completion dates are not missed. Financial Condition: Cash decreased for the six month period ended September 30,1998 to $28.1 million from $37.3 million at year-end March 31,1998. The decrease resulted primarily from decreases in accounts payable and short-term debt partially offset by the issuance of long-term debt and proceeds from sale of assets. In the prior year six months cash increased to $30.6 million from $13.9 million at year-end March 31,1997. The increase resulted primarily from a decrease in accounts receivable and an increase in short-term debt partially offset by an increase in other current assets and payments for products acquired. - 10 - 10 PART II. OTHER INFORMATION Item 6.__________Exhibits and Reports on Form 8K___________ (b) Reports on Form 8K - there were no reports on Form 8K for the three months ended September 30, 1998. _____SIGNATURES_______ Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. __BLOCK_DRUG_COMPANY,_INC.__ (Registrant) 11-12-98 MELVIN KOPP ________________ ______________________________ DATE Melvin Kopp Senior Vice President & Chief Financial Officer -11- 11 EX-27 2
5 1000 6-MOS MAR-31-1999 SEP-30-1998 28117 42778 143088 4371 134609 384280 365858 125354 1070495 281114 0 0 0 2218 657891 1070495 393510 411894 119488 119488 252478 0 6824 33104 8375 24729 0 0 0 24729 1.12 1.12
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