-----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, AmrA7m6z+1m8epTZ40HE6YLhs8Q05Cfv3oxyj9KhsjsVhNkP4h0776FBBQJ1xIW5 pM4VAQCdnmrjlH1KFvrCvQ== 0000018000-98-000005.txt : 19980803 0000018000-98-000005.hdr.sgml : 19980803 ACCESSION NUMBER: 0000018000-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980730 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARTER WALLACE INC /DE/ CENTRAL INDEX KEY: 0000018000 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 134986583 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05910 FILM NUMBER: 98674166 BUSINESS ADDRESS: STREET 1: 1345 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 2123395000 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended June 30, 1998 ( ) Transition Report Pursuant to Section 13 or 15 (d) of the Securities Act of 1934 For the transition period from to Commission File Number 1-5910 CARTER-WALLACE, INC. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (Exact name of registrant as specified in its charter) Delaware 13-4986583 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1345 Avenue of the Americas New York, New York 10105 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: 212-339-5000 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 The number of shares of the registrant's Common Stock and Class B Common Stock outstanding at June 30, 1998 were 32,982,800 and 12,345,900, respectively. CARTER-WALLACE, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q JUNE 30, 1998 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Consolidated Statements of Earnings for the three months ended June 30, 1998 and 1997 1 Condensed Consolidated Balance Sheets at June 30, 1998 and March 31, 1998 2 Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 1998 and 1997 3 Notes to Condensed Consolidated Financial Statements 4 Report by KPMG Peat Marwick LLP on their limited review 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION Item 1 - Legal Proceedings 9 Item 6 - Exhibits and Reports on Form 8-K 9 Signatures 10 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS CARTER-WALLACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
Three Months Ended June 30, 1998 1997 Revenues: Net sales $169,662,000 $170,115,000 Other revenues 3,084,000 1,423,000 172,746,000 171,538,000 Cost and expenses: Cost of goods sold 63,415,000 59,982,000 Advertising, marketing & other selling expenses 63,366,000 65,878,000 Research & development expenses 6,688,000 6,227,000 General, administrative & other expenses 22,449,000 22,854,000 Interest expense 1,266,000 1,080,000 157,184,000 156,021,000 Earnings before taxes on income 15,562,000 15,517,000 Provision for taxes on income 6,069,000 6,207,000 Net earnings $ 9,493,000 $ 9,310,000 Earnings per share - Basic and Diluted $ .21 $ .20 Cash dividends per share $ .04 $ .04 Average shares of common stock outstanding 45,343,000 46,338,000
CARTER-WALLACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, March 31, 1998 1998 Assets (Unaudited) Current Assets: Cash and cash equivalents $ 11,068,000 $ 51,661,000 Short-term investments 40,016,000 25,826,000 Accounts and other receivables less allowances of $7,727,000 at June 30, 1998 and $7,306,000 at March 31, 1998 154,168,000 133,011,000 Inventories: Finished goods 43,728,000 45,811,000 Work in process 10,632,000 9,751,000 Raw materials and supplies 26,870,000 25,408,000 81,230,000 80,970,000 Deferred taxes, prepaid expenses and other current assets 33,103,000 28,470,000 Total Current Assets 319,585,000 319,938,000 Property, plant and equipment, at cost 302,159,000 300,051,000 Less: accumulated depreciation and amortization 153,402,000 149,828,000 148,757,000 150,223,000 Intangible assets 126,284,000 124,542,000 Deferred taxes and other assets 100,919,000 98,910,000 Total Assets $695,545,000 $693,613,000 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 36,796,000 $ 32,506,000 Accrued expenses 114,522,000 123,863,000 Notes payable 17,792,000 17,854,000 Total Current Liabilities 169,110,000 174,223,000 Long-Term Liabilities: Long-term debt 48,728,000 48,887,000 Deferred compensation 19,089,000 17,553,000 Accrued postretirement benefit obligation 69,494,000 69,292,000 Other long-term liabilities 33,813,000 34,008,000 Total Long-Term Liabilities 171,124,000 169,740,000 Stockholders' Equity: Common stock 34,705,000 34,698,000 Class B common stock 12,500,000 12,507,000 Capital in excess of par value 4,399,000 4,204,000 Retained earnings 357,495,000 349,815,000 Less: Foreign currency translation adjustment 26,002,000 24,811,000 Treasury stock, at cost 27,786,000 26,763,000 Total Stockholders' Equity 355,311,000 349,650,000 Total Liabilities and Stockholders' Equity $695,545,000 $693,613,000
CARTER-WALLACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED JUNE 30, 1998 AND 1997 (Unaudited)
1998 1997 Cash flows from operations: Net earnings $ 9,493,000 $ 9,310,000 Cash payments for one-time charges (1,578,000) (7,637,000) Changes in assets and liabilities (29,046,000) (8,772,000) Depreciation and amortization 6,312,000 6,009,000 (14,819,000) (1,090,000) Cash flows used in investing activities: Additions to property, plant and equipment (2,648,000) (3,799,000) Cash paid for acquisitions (3,633,000) - (Increase) decrease in short-term investments (14,789,000) 5,984,000 Proceeds from sale of property, plant and equipment 136,000 5,940,000 (20,934,000) 8,125,000 Cash flows used in financing activities: Dividends paid (1,813,000) (1,854,000) Increase in borrowings 1,507,000 - Payments of debt (2,059,000) (515,000) Purchase of treasury stock (1,286,000) (796,000) (3,651,000) (3,165,000) Effect of exchange rate changes on cash and cash equivalents (1,189,000) (73,000) (Decrease) increase in cash and cash equivalents $(40,593,000) $ 3,797,000
CARTER-WALLACE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 AND 1997 Note 1: Interim Reports The results of the interim periods are not necessarily indicative of results expected for a full year's operations. In the opinion of management, all adjustments necessary for a fair statement of results of these interim periods have been reflected in these financial statements and are of a normal recurring nature. Note 2: Review of Independent Auditors The financial information included in this Form has been reviewed by KPMG Peat Marwick LLP, independent auditors. A copy of their report on this limited review is included in this Form. Note 3: Felbatol As previously reported, in the fiscal years ended March 31, 1995 and 1996 the Company incurred one-time charges to pre-tax earnings totaling $45,980,000 related to use restrictions for Felbatol. Depending on future sales levels, additional inventory write-offs may be required. If for any reason the product at some future date should no longer be available in the market, the Company will incur an additional one-time charge, consisting primarily of inventory write-offs and anticipated returns of product currently in the market, in the range of $20,000,000 on a pre-tax basis. Note 4: Litigation Information regarding Legal Proceedings involving the Company is presented in Note 19 "Litigation Including Environmental Matters" of the Notes to the Consolidated Financial Statements on pages 28 to 31 of the Company's 1998 Annual Report to Stockholders incorporated by reference in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998 and is herein expressly incorporated by reference. In July 1998, the United States Court of Appeals for the Second Circuit affirmed in part and reversed and remanded in part the decision of the United States District Court, Southern District of New York, which had dismissed with prejudice the Second Amended Class Action Complaint alleging that certain statements made by the Company with respect to the safety and anticipated future sales of its anti-epilepsy drug Felbatol were false and misleading. The Company continues to believe, based upon opinion of counsel, that it has good defenses to all of the above pending actions and should prevail. (Continued) CARTER-WALLACE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 AND 1997 (Continued) Note 5: Accounting Pronouncement The Company has adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income". This Statement establishes standards for reporting and displaying comprehensive income and its components. Comprehensive income for the three months ended June 30, 1998 and June 30, 1997 was $8,302,000 and $9,195,000, respectively. INDEPENDENT AUDITORS' REPORT The Board of Directors Carter-Wallace, Inc.: We have reviewed the condensed consolidated balance sheet of Carter-Wallace, Inc. and subsidiaries as of June 30, 1998, and the related condensed consolidated statements of earnings for the three month periods ended June 30, 1998 and 1997 and the condensed consolidated statements of cash flows for the three month periods ended June 30, 1998 and 1997. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Carter-Wallace, Inc. and subsidiaries as of March 31, 1998, and the related consolidated statements of earnings and retained earnings, and cash flows for the year then ended (not presented herein); and in our report dated May 7, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 1998 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. KPMG PEAT MARWICK LLP New York, New York July 29, 1998 CARTER-WALLACE, INC. ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - Three months ended June 30, 1998 compared to three months ended June 30, 1997 Consolidated earnings after taxes in the three months ended June 30, 1998 were $9,493,000 or $.21 per share compared with net earnings of $9,310,000 or $.20 per share in the three months ended June 30, 1997. Net sales decreased $453,000 (0.3%) in the current year period as compared to net sales in the prior year period. The decline was due primarily to lower unit volume in the Health Care segment and unfavorable foreign exchange rates in international operations. Sales of pharmaceutical products in the Health Care segment continue to be adversely impacted by generic competition. Selling price increases had a positive effect on sales in both the Health Care and Consumer Products segments. Unit volume in the Consumer Products segment was higher than in the prior year. Sales and earnings from foreign operations are subject to fluctuations in exchange rates. Lower foreign exchange rates had the effect of decreasing sales in the current year period by approximately $2,800,000. The effect of changes in foreign exchange on earnings was not material. Other revenues increased by $1,661,000 from $1,423,000 in the prior year period to $3,084,000 in the current year period. Included in the current year period is a credit related to joint venture operations. Cost of goods sold as a percentage of net sales increased from 35.3% in the prior year period to 37.4% in the current year period primarily due to changes in product mix. Advertising, marketing and other selling expenses decreased by $2,512,000 or 3.8% versus the prior year period due to reduced spending in both the Consumer Products and Health Care segments. Research and development expenses increased by $461,000 or 7.4% versus the prior year period due primarily to increased spending in the Health Care segment. General, administrative and other expenses decreased $405,000 or 1.8% versus the prior year period due primarily to reduced legal expenses. The estimated annual effective tax rate applied in the three months ended June 30, 1998 was 39%, the same as the fiscal 1998 annual tax rate. However, this rate is lower than the 40% rate applied in the three months ended June 30, 1997. (Continued) CARTER-WALLACE, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Astelin In July 1998, the Company entered into a joint venture agreement with ASTA Medica AG with an effective date of November, 1997. Under the terms of the agreement the Company is responsible for all manufacturing, selling, marketing and administrative activities for Astelin and Depen, another product licensed from ASTA Medica AG, and receives compensation for these activities from the joint venture. Felbatol As previously reported, in the fiscal years ended March 31, 1995 and 1996 the Company incurred one-time charges to pre-tax earnings totaling $45,980,000 related to use restrictions for Felbatol. Depending on future sales levels, additional inventory write-offs may be required. If for any reason the product at some future date should no longer be available in the market, the Company will incur an additional one-time charge, consisting primarily of inventory write-offs and anticipated returns of product currently in the market, in the range of $20,000,000 on a pre-tax basis. Liquidity and Capital Resources Funds provided from operations are used for capital expenditures, acquisitions, the purchase of treasury stock, the payment of dividends and working capital requirements. External borrowings are incurred as needed to satisfy cash requirements relating to seasonal business fluctuations, to finance major facility expansion programs and to finance major acquisitions. Approximately 15% of the Company's debt is financed at variable interest rates. Changes in interest rates could affect interest expense in future periods. In the Statement of Cash Flows, the cash outflow from the change in assets and liabilities in the current year period compared to that in the prior year period is due primarily to increased working capital requirements in the current year, primarily accounts receivable. In October 1997, the Company's Board of Directors approved repurchase by the Company of up to 1,000,000 shares of its outstanding common stock in the open market or in privately negotiated transactions. Under this program the Company repurchased 945,000 shares at a total cost of $15,890,000 through March 31, 1998 with the balance of the shares repurchased in April 1998 at a total cost of $985,000. PART II - OTHER INFORMATION Item 1 - Legal Proceedings Please refer to Note 4: "Litigation" of Notes to Condensed Consolidated Financial Statements for information regarding legal proceedings. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule (EDGAR filing only) (b) Reports on Form 8-K - On April 7, 1998, the Company filed a report on Form 8-K announcing that, because the clinical data to date does not support efficacy, it had terminated its clinical study of the intravenous use of Taurolin (taurolidine) for sepsis. 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. Carter-Wallace, Inc. (Registrant) Date: July 29, 1998 /s/Ralph Levine Ralph Levine President & Chief Operating Officer Date: July 29, 1998 /s/Paul A. Veteri Paul A. Veteri Executive Vice President & Chief Financial Officer EX-27 2
5 3-MOS MAR-31-1999 JUN-30-1998 11,068,000 40,016,000 161,895,000 7,727,000 81,230,000 319,585,000 302,159,000 153,402,000 695,545,000 169,110,000 66,520,000 0 0 47,205,000 308,106,000 695,545,000 169,662,000 172,746,000 63,415,000 157,184,000 0 0 1,266,000 15,562,000 6,069,000 9,493,000 0 0 0 9,493,000 .21 .21
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