-----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, Hh89rmIxFfopCRZOd9/QnboMRxK8JStLwroJcy1gBPhNLq8D8Gnw3Og78iKwJ73X gjvQ+FLxcsN0vaiTuzyKnw== 0000018000-96-000003.txt : 19960726 0000018000-96-000003.hdr.sgml : 19960726 ACCESSION NUMBER: 0000018000-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960725 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: 1934 Act SEC FILE NUMBER: 001-05910 FILM NUMBER: 96598751 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. 20541 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, 1996 ( ) 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 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, 1996 were 33,960,500 and 12,430,900, respectively. CARTER-WALLACE, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q JUNE 30, 1996 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Consolidated Statements of Earnings for the three months ended June 30, 1996 and 1995 1 Condensed Consolidated Balance Sheets at June 30, 1996 and March 31, 1996 2 Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 1996 and 1995 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 10 Item 6 - Exhibits and Reports on Form 8-K 10 Signatures 11 PART I - FINANCIAL INFORMATION CARTER-WALLACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
Three Months Ended June 30, 1996 1995 Revenues: Net sales $169,889,000 $177,037,000 Other revenues 1,912,000 2,342,000 171,801,000 179,379,000 Cost and expenses: Cost of goods sold 62,463,000 62,392,000 Advertising, marketing & other selling expenses 63,728,000 64,617,000 Research & development expenses 6,648,000 6,821,000 General, administrative & other expenses 22,181,000 23,180,000 Provision for condom plant closing - 20,100,000 Interest expense 1,086,000 809,000 156,106,000 177,919,000 Earnings before taxes on income 15,695,000 1,460,000 Provision for taxes on income 6,435,000 599,000 Net earnings $ 9,260,000 $ 861,000 Net earnings per average share of common stock outstanding $.20 $.02 Cash dividends per share $.04 $.04 Average shares of common stock outstanding 46,387,000 46,146,000
CARTER-WALLACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, March 31, 1996 1996 Assets (Unaudited) Current Assets: Cash and cash equivalents $ 48,808,000 $ 51,185,000 Short-term investments 12,269,000 20,034,000 Accounts and other receivables less allowances of $6,654,000 at June 30, 1996 and $6,716,000 at March 31, 1996 130,078,000 131,931,000 Inventories: Finished goods 55,558,000 55,427,000 Work in process 13,683,000 13,327,000 Raw materials and supplies 24,996,000 23,450,000 94,237,000 92,204,000 Deferred taxes, prepaid expenses and other current assets 43,474,000 41,419,000 Total Current Assets 328,866,000 336,773,000 Property, plant and equipment, at cost 270,236,000 261,255,000 Less: accumulated depreciation and amortization 124,953,000 121,982,000 145,283,000 139,273,000 Intangible assets 129,348,000 131,422,000 Deferred taxes and other assets 110,179,000 111,457,000 Total Assets $713,676,000 $718,925,000 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 39,924,000 $ 38,941,000 Accrued expenses 144,145,000 154,695,000 Notes payable 7,024,000 6,054,000 Total Current Liabilities 191,093,000 199,690,000 Long-Term Liabilities: Long-term debt 55,433,000 55,928,000 Deferred compensation 13,253,000 13,503,000 Accrued postretirement benefit obligation 69,081,000 68,588,000 Other long-term liabilities 43,953,000 48,320,000 Total Long-Term Liabilities 181,720,000 186,339,000 Stockholders' Equity: Common stock 34,620,000 34,613,000 Class B common stock 12,585,000 12,592,000 Capital in excess of par value 3,602,000 3,268,000 Retained earnings 317,978,000 310,573,000 Less: Foreign currency translation adj. and other 18,043,000 18,059,000 Treasury stock, at cost 9,879,000 10,091,000 Total Stockholders' Equity 340,863,000 332,896,000 Total Liabilities and Stockholders' Equity $713,676,000 $718,925,000
CARTER-WALLACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED JUNE 30, 1996 AND 1995 (Unaudited)
1996 1995 Cash flows from operations: Net earnings $ 9,260,000 $ 861,000 One-time charge for condom plant closing - 20,100,000 Cash payments for prior years one-time charges (8,081,000) (7,483,000) Changes in assets and liabilities (5,681,000) (17,069,000) Depreciation and amortization 5,724,000 6,354,000 1,222,000 2,763,000 Cash flows used in investing activities: Additions to property, plant and equipment (9,754,000) (10,661,000) Decrease in short-term investments 7,700,000 3,285,000 Other investing activities 187,000 183,000 (1,867,000) (7,193,000) Cash flows used in financing activities: Dividends paid (1,855,000) (1,847,000) Increase in borrowings 1,629,000 8,253,000 Payments of debt (1,254,000) (27,000) Purchase of treasury stock (134,000) (2,815,000) (1,614,000) 3,564,000 Effect of exchange rate changes on cash and cash equivalents (118,000) 81,000 Decrease in cash and cash equivalents $ (2,377,000) $ (785,000)
CARTER-WALLACE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 AND 1995 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, except as separately disclosed herein, are of a normal recurring nature. Note 2: Review of Independent Auditors The financial information included in this report 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: Restructuring of Operations and Facilities In connection with its restructuring program, the Company incurred one-time pre-tax charges of $16,500,000 in the year ended March 31, 1996 and $74,060,000 in the year ended March 31, 1995. The restructuring charges of $90,560,000 recorded over the two years consist primarily of estimated employee termination costs ($30,800,000), estimated plant closing costs including equipment write-offs ($26,000,000) and costs associated with the planned subleasing of office space on which the Company holds a long-term lease ($27,800,000). The total anticipated reduction in the number of worldwide employees will be approximately 990 including 120 vacancies that will not be filled. Through June 30, 1996, 750 employees have been terminated with employee termination costs of $26,100,000 applied against the restructuring liability. In addition, approximately 110 positions have been eliminated as a result of voluntary resignations. Net plant closing costs of $25,600,000, as well as $5,800,000 in costs associated with the subleasing of office space on which the Company holds a long-term lease have been applied against the restructuring liability. Approximately $27,900,000 of the $90,560,000 provision for restructuring charges remains to be utilized in future periods. Substantially all of the $27,900,000 represents expected future cash outlays for subleasing costs and employee severance. (Continued) CARTER-WALLACE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 AND 1995 (Continued) Note 4: Closure of the Trenton Condom Manufacturing Facility In the quarter ended June 30, 1995, the Company incurred a one-time pre-tax charge of $20,100,000 ($11,860,000 after taxes or $.26 per share) related to the planned closure of the Company's condom manufacturing plant in Trenton, New Jersey. Condom production currently performed at Trenton is in the process of being transferred to the Company's facility in Colonial Heights, VA. This pre-tax charge was subsequently adjusted by $3,000,000 to $23,100,000 in the quarter ended March 31, 1996. Note 5: Felbatol As previously reported, in the year ended March 31, 1995 the Company incurred a one-time charge to pre-tax earnings of $37,780,000 related to use restrictions for Felbatol. This charge was adjusted by $8,200,000 to $45,980,000 in the quarter ended March 31, 1996. 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 that would have a material adverse effect on the Company's results of operations and possibly on its financial condition. Should the product no longer be available, the Company currently estimates that the additional one-time charge, consisting primarily of inventory write-offs and anticipated returns of product currently in the market, will be in the range of $25,000,000 to $30,000,000 on a pre-tax basis. Note 6: Litigation Information regarding Legal Proceedings involving the Company is presented in Note 20 "Litigation Including Environmental Matters" of the Notes to the Consolidated Financial Statements on pages 31 to 33 of the Company's 1996 Annual Report to Stockholders incorporated by reference in the Company's Form 10-K for the year ended March 31, 1996 and is herein expressly incorporated by reference. In addition to the legal proceedings outlined in the Company's 1996 Annual Report to Stockholders, five additional individual product liability actions have been filed against the Company. In one of these actions the complaint seeks compensatory damages of $50,000 and punitive damages of $50,000. In the other actions, the damages sought are unspecified. The Company continues to believe, based upon opinion of counsel, it has good defenses to all of the above actions and should prevail. 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, 1996, and the related condensed consolidated statements of earnings and cash flows for the three-month periods ended June 30, 1996 and 1995. 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, 1996, 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 6, 1996, 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, 1996 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 25, 1996 CARTER-WALLACE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Three months ended June 30, 1996 compared to three months ended June 30, 1995 Consolidated earnings after taxes in the three months ended June 30, 1996 were $9,260,000 or $.20 per share compared with net earnings of $861,000 or $.02 per share in the three months ended June 30, 1995. Excluding the one-time charge for the condom plant closing, net earnings for the three months ended June 30, 1995 were $12,720,000 or $.28 per share. Net sales decreased $7,148,000 (4.0%) in the current year period as compared to net sales in the prior year period. The lower sales level resulted primarily from reduced unit volume in the Health Care segment. Sales of pharmaceutical products in the Health Care segment continue to be adversely impacted by generic competition. Sales of Organidin NR may be particularly affected by generic competition. Unit sales were lower overall in the Consumer Products segment; however, unit volume for consumer products in international operations exceeded the prior year level. Selling price increases, primarily in the Health Care segment, had a postive effect on sales in comparison with the prior year period. Lower foreign exchange rates had the effect of decreasing sales in the current year period by approximately $300,000 versus the prior year period. Other revenues decreased $430,000 from $2,342,000 in the prior year period to $1,912,000 in the current year period. Cost of goods sold as a percentage of net sales increased from 35.2% in the prior year period to 36.8% in the current year period primarily due to changes in product mix. Advertising, marketing and other selling expenses decreased by $889,000 or 1.4% versus the prior year period due to reduced expenses in the Consumer Products segment. Spending in the Health Care segment increased versus the prior year period. Research and development expenses decreased by $173,000 or 2.5% versus the prior year period, primarily in the Health Care segment. General, administrative and other expenses decreased $999,000 or 4.3% versus the prior year period, primarily due to lower rent expense and reduced compensation including fringe benefits. Interest expense increased by $277,000 (34.2%) over the prior year period as a result of increased borrowings related largely to the expansion of the Colonial Heights, VA condom facility. The estimated annual effective tax rate applied in the current year period was 41%, the same rate as in the prior year period. (Continued) CARTER-WALLACE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Restructuring of Operations and Facilities In connection with its restructuring program, the Company incurred one-time pre-tax charges of $16,500,000 in the year ended March 31, 1996 and $74,060,000 in the year ended March 31, 1995. The restructuring charges of $90,560,000 recorded over the two years consist primarily of estimated employee termination costs ($30,800,000), estimated plant closing costs including equipment write-offs ($26,000,000) and costs associated with the planned subleasing of off ice space on which the Company holds a long-term lease ($27,800,000). The total anticipated reduction in the number of worldwide employees will be approximately 990 including 120 vacancies that will not be filled. Through June 30, 1996, 750 employees have been terminated with employee termination costs of $26,100,000 applied against the restructuring liability. In addition, approximately 110 positions have been eliminated as a result of voluntary resignations. Net plant closing costs of $25,600,000, as well as $5,800,000 in costs associated with the subleasing of office space on which the Company holds a long-term lease have been applied against the restructuring liability. Approximately $27,900,000 of the $90,560,000 provision for restructuring charges remains to be utilized in future periods. Substantially all of the $27,900,000 represents expected future cash outlays for subleasing costs and employee severance. Closure of the Trenton Condom Manufacturing Facility In the quarter ended June 30, 1995, the Company incurred a one-time pre-tax charge of $20,100,000 ($11,860,000 after taxes or $.26 per share) related to the planned closure of the Company's condom manufacturing plant in Trenton, New Jersey. Condom production currently performed at Trenton is in the process of being transferred to the Company's facility in Colonial Heights, VA. This pre-tax charge was subsequently adjusted by $3,000,000 to $23,100,000 in the quarter ended March 31, 1996. (Continued) CARTER-WALLACE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Felbatol As previously reported, in the year ended March 31, 1995 the Company incurred a one-time charge to pre-tax earnings of $37,780,000 related to use restrictions for Felbatol. This charge was adjusted by $8,200,000 to $45,980,000 in the quarter ended March 31, 1996. 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 that would have a material adverse effect on the Company's results of operations and possibly on its financial condition. Should the product no longer be available, the Company currently estimates that the additional one-time charge, consisting primarily of inventory write-offs and anticipated returns of product currently in the market, will be in the range of $25,000,000 to $30,000,000 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. In the Statements of Cash Flows the change in assets and liabilities in the current year period is lower than that in the prior year period due primarily to a smaller increase in deferred taxes. Cash outlays in the three months ended June 30, 1996 relating to prior years one-time charges amount to approximately $8,100,000. PART II - OTHER INFORMATION Item 1 - Legal Proceedings Please refer to Note 6 "Litigation" of Notes to Condensed Consolidated Financial Statements for information regarding legal proceedings. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K - No reports on Form 8-K have been filed during the quarter ended June 30, 1996 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 25, 1996 s/Daniel J. Black Daniel J. Black President & Chief Operating Officer Date: July 25, 1996 S/Paul A. Veteri Paul A. Veteri Vice President, Finance & Chief Financial Officer EX-27 2
5 3-MOS MAR-31-1996 JUN-30-1996 48,808,000 12,269,000 136,732,000 6,654,000 94,237,000 713,676,000 270,236,000 124,953,000 713,676,000 191,093,000 62,457,000 0 0 47,205,000 293,658,000 713,676,000 169,889,000 171,801,000 62,463,000 156,106,000 0 0 1,086,000 15,695,000 6,435,000 9,260,000 0 0 0 9,260,000 .20 0
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