-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ZB5BEKFbUYKbBcHSXHnDqoFXPIH5x7ZJu9Zo4bsetK26XuX36Vy6OuOxy/zcUkQl E9DT+vpUekG1QLTMvI1C/Q== 0000313927-94-000021.txt : 19940817 0000313927-94-000021.hdr.sgml : 19940817 ACCESSION NUMBER: 0000313927-94-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940701 FILED AS OF DATE: 19940811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHURCH & DWIGHT CO INC /DE/ CENTRAL INDEX KEY: 0000313927 STANDARD INDUSTRIAL CLASSIFICATION: 2810 IRS NUMBER: 134996950 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10585 FILM NUMBER: 94543091 BUSINESS ADDRESS: STREET 1: 469 N HARRISON ST CITY: PRINCETON STATE: NJ ZIP: 08543-5297 BUSINESS PHONE: 6096835900 MAIL ADDRESS: STREET 1: 469 N HARRISON STREET CITY: PRINCETON STATE: NJ ZIP: 08543-5297 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarter ended July 1, 1994 Commission file No. 1-10585 CHURCH & DWIGHT CO., INC. (Exact name of registrant as specified in its charter) Delaware 13-4996950 (State of incorporation) (I.R.S. Employer Identification No.) 469 North Harrison Street, Princeton, N.J. 08543-5297 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (609) 683-5900 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 twelve 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 As of July 29, 1994, there were 19,534,169 shares of Common Stock outstanding. 1 of 10 PART I - FINANCIAL INFORMATION CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited)
Three Months Ended Six Months Ended July 1, July 2, July 1, July 2, (In thousands, except per share data) 1994 1993* 1994 1993* Net Sales $130,656 $130,308 $242,167 $254,205 Cost of sales 72,858 69,431 137,049 134,183 Gross profit 57,798 60,877 105,118 120,022 Selling, general and administrative expenses 49,393 53,264 94,935 104,823 Income from Operations 8,405 7,613 10,183 15,199 Investment income 175 205 364 554 Gain on disposal of product lines 102 106 205 208 Other income/(expense) (50) 158 114 274 Interest expense 244 20 268 129 Equity in joint venture income 2,194 2,143 3,815 3,943 Income before taxes and cumulative effect of accounting changes 10,582 10,205 14,413 20,049 Income taxes 4,194 3,762 5,606 7,480 Income before cumulative effect of accounting changes 6,388 6,443 8,807 12,569 Cumulative effect of accounting changes (Note 4) (net of income tax effect): Accrual of postretirement benefits - - - (5,647) Accrual of postemployment benefits - - - (533) Accounting for income taxes - - - 2,980 Net Income 6,388 6,443 8,807 9,369 Retained earnings at beginning of period 170,643 153,534 170,434 152,640 177,031 159,977 179,241 162,009 Dividends paid 2,141 2,029 4,351 4,061 Retained earnings at end of period $174,890 $157,948 $174,890 $157,948 Weighted average shares outstanding 19,673 20,289 19,872 20,302 Earnings Per Share: (Note 6) Income before cumulative effect of accounting changes $.32 $.32 $.44 $.62 Cumulative effect of accounting changes: Accrual of postretirement benefits - - - (.28) Accrual of postemployment benefits - - - (.03) Accounting for income taxes - - - .15 Net income per share $.32 $.32 $.44 $.46 * Restated as discussed in Notes 4 and 5.
2 of 10 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
July 1, December 31, 1994 1993 (Dollars in thousands) (Unaudited) Assets Current Assets Cash and cash equivalents $5,690 $5,581 Short-term investments 1,000 4,000 Accounts receivable 53,606 42,340 Inventories (Note 2) 58,197 52,739 Income taxes receivable - 3,010 Deferred income taxes 9,797 11,149 Prepaid expenses 5,265 4,634 Total Current Assets 133,555 123,453 Property, Plant and Equipment (Note 3) 129,864 122,195 Note Receivable from Joint Venture 11,000 11,000 Equity Investment in Joint Venture 15,150 16,557 Long-Term Supply Contracts 4,754 4,929 Intangibles, principally Goodwill 3,556 3,607 Total Assets $297,879 $281,741 Liabilities and Stockholders' Equity Current Liabilities Short-term borrowings $26,300 $2,000 Accounts payable and accrued expenses 67,455 66,812 Income taxes payable 2,370 - Total Current Liabilities 96,125 68,812 Long-Term Debt 7,500 7,644 Deferred Income Taxes 19,382 22,530 Deferred Income 544 749 Deferred Liabilities 1,244 1,282 Nonpension Postretirement and Postemployment Benefits 11,904 11,357 Stockholders' Equity Preferred Stock - $1 par value Authorized 2,500,000 shares, none issued - - Common Stock - $1 par value Authorized 100,000,000 shares, issued 23,330,494 shares 23,330 23,330 Additional paid-in capital 32,725 32,100 Retained earnings 174,890 170,434 Cumulative translation adjustments (741) (494) 230,204 225,370 Less common stock in treasury, at cost 3,796,625 shares in 1994 and 3,251,280 shares in 1993 69,024 56,003 Total Stockholders' Equity 161,180 169,367 Total Liabilities and Stockholders' Equity $297,879 $281,741
3 of 10 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
Six Months Ended (Dollars in thousands) July 1, July 2, 1994 1993* Cash Flow From Operating Activities Net Income $8,807 $9,369 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 6,256 5,602 Provision for postretirement benefits 709 483 Deferred income taxes (1,799) 750 Equity in joint venture income (3,815) (3,943) Cumulative effect of accounting changes - 3,200 (Gain) on asset disposals (205) (198) Other (256) 393 Change in assets and liabilities: (Increase) in accounts receivable (11,280) (10,443) (Increase) in inventories (5,570) (3,966) (Increase) in prepaid expenses (641) (172) Increase in accounts payable 541 2,409 Increase/(Decrease) in income taxes payable 5,348 (978) Net Cash Provided By (Used in) Operating Activities (1,905) 2,506 Cash Flow From Investing Activities Decrease in short-term investments 3,001 1,024 Additions to property, plant and equipment (13,117) (12,259) Investment in subsidiary (625) (325) Distributions from joint venture 5,222 3,977 Net Cash Used In Investing Activities (5,519) (7,583) Cash Flow From Financing Activities Proceeds from short-term borrowing 24,300 - Payment of cash dividends (4,351) (4,061) Proceeds from sale of common stock 1,595 1,935 Proceeds from stock options exercised 458 610 Purchase of treasury stock (14,469) (4,489) Net Cash Provided by (Used In) Financing Activities 7,533 (6,005) Net Change In Cash and Cash Equivalents 109 (11,082) Cash And Cash Equivalents At Beginning Of Year 5,581 14,044 Cash And Cash Equivalents At End Of Period $5,690 $2,962 * Restated as discussed in Notes 4 and 5.
4 of 10 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The consolidated balance sheet as of July 1, 1994, the consolidated statements of income and retained earnings for the six months ended July 1, 1994 and July 2, 1993, and the consolidated statements of cash flow for the six months then ended have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flow at July 1, 1994 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1993 annual report to shareholders. The results of operations for the period ended July 1, 1994 are not necessarily indicative of the operating results for the full year.
2. Inventories consist of the following: (in thousands) July 1, Dec. 31, 1994 1993 Raw materials and supplies $15,705 $12,690 Work in process 116 103 Finished goods 42,376 39,946 $58,197 $52,739
3. Property, Plant and Equipment consist of the following: (in thousands) July 1, Dec. 31, 1994 1993 Land $3,096 $3,103 Buildings and improvements 57,309 54,125 Machinery and equipment 118,090 108,665 Office equipment and leasehold improvements 12,052 11,974 Mineral rights 5,020 3,145 195,567 181,012 Less accumulated depreciation and amortization 80,163 74,248 115,404 106,764 Construction in progress 14,460 15,431 Net Property, Plant and Equipment $129,864 $122,195
4. Accounting Changes The Company adopted three new accounting standards as of January 1, 1993. Statement of Financial Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for Postretirement Benefits Other than Pensions" requires the accrual of the estimated cost of postretirement benefits. The cost of these benefits was previously expensed on a pay-as-you-go basis. Adoption of SFAS 106 resulted in an after-tax charge against earnings of $5.6 million or $.28 per share. Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," changed the method by which companies account for deferred income taxes, and its adoption resulted in an after-tax credit of $3.0 million or $.15 per share. 5 of 10 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) During the fourth quarter of 1993, the Company elected to adopt, effective as of January 1, 1993, the accounting provisions of Statement of Financial Accounting Standards No. 112 (SFAS 112), "Employers' Accounting for Postemployment Benefits". First quarter 1993 results have been restated to reflect such adoption. This standard requires that the cost of benefits provided to former or inactive employees be recognized on the accrual basis of accounting. Previously, the Company recognized postemployment benefit costs when paid. The cumulative effect of this change resulted in a charge against earnings of $.5 million or $.03 per share. The combined effect of adopting the three new accounting standards was a charge against earnings of $3.2 million, or $.16 per share. 5. Investment in Joint Venture In financial statements originally issued for periods prior to December 31, 1993, the Company had consolidated its proportionate share of each of the individual assets, liabilities, revenues and expenses of the Armand Products Company joint venture. In 1993, the Company restated its financial statements to reflect the 50 percent interest in the joint venture on the equity method of accounting for investments. This method reflects the Company's proportionate share of the joint venture net profit as a single-line item, "Equity in joint venture income," in the income statement. Similarly, the Company's investment and cumulative share of profits less distributions received from the joint venture is reflected as a single-line item, "Equity investment in joint venture," in the Company's balance sheet. This change had no effect upon stockholders' equity or the net income of the Company for any period.
Summarized income statement data for Armand Products Company is as follows: Three Months Ended Six Months Ended July 1, July 2, July 1, July 2, (in thousands) 1994 1993 1994 1993 Net sales $12,021 $10,853 $22,824 $20,013 Gross profit 4,973 4,854 8,791 8,794 Net income 4,160 4,062 7,176 7,430 Company's share in net income 2,080 2,031 3,588 3,715 Elimination of Company's share of intercompany interest expense 114 112 227 228 Equity in joint venture income $2,194 $2,143 $3,815 $3,943
The financial information presented above is based upon the results of operation of the Armand Products Company, a joint venture partnership. Product and services are provided to the Armand Products Company by the joint venture partners at cost. As a result, the above information would not be indicative of the results of operations had the joint venture operated on a stand-alone basis. 6. Net income per share is computed based upon the weighted average number of shares outstanding during the period. Common equivalent shares have not been included as their effect is not material. 7. Officer Loan Guarantees In accordance with a long-term compensation plan approved by the Board of Directors, 70,000 shares of Company common stock were sold to senior officers in the second quarter of 1994 at a price of $22.63 per share. In the second quarter of 1993, the Company sold 60,000 shares of common stock to senior officers at a price of $32.25 per share. The selling price in both cases was the market price on the date of sale. These transactions, amounting to $1.6 million and $1.9 million, respectively, were financed by loans to the individuals by financial institutions. These loans have been guaranteed by the Company. 6 of 10 MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations For the quarter ended July 1, 1994, net income was $6.4 million or $.32 per share. These results were essentially equal to same time period a year ago. For the first six months of 1994, net income was $8.8 million or $.44 per share. This compares with net income of $9.4 or $.46 per share for the first half of 1993. In the first quarter of 1993, the Company adopted three new accounting standards; Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions," Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" and Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits". The net effect of adopting the new accounting standards was a net charge against earnings of $3.2 million or $.16 per share. Net sales in the second quarter amounted to $130.7 million, which were slightly ahead of a year ago. Volume gains of ARM & HAMMER (registered trademark) Powder Laundry Detergent, the newly introduced ARM & HAMMER Deodorant Anti-Perspirant and international sales of ARM & HAMMER DENTAL CARE (registered trademark) were experienced during the quarter. These gains were partially offset by lower domestic unit volume of ARM & HAMMER DENTAL CARE, ARM & HAMMER Baking Soda, which experienced an exceptionally strong second quarter in 1993 and the reduced price strategy implemented in late 1993 on ARM & HAMMER Powder Laundry Detergent. Specialty Product sales were essentially unchanged from the same period of a year ago. Net sales for the first six months of 1994 were $242.2 million, representing a 4.7 percent decline from a year ago. This is primarily due to lower domestic unit volume of ARM & HAMMER DENTAL CARE, ARM & HAMMER Baking Soda, and the price reduction on ARM & HAMMER Powder Laundry Detergent, partially offset by volume associated with ARM & HAMMER Deodorant Anti-Perspirant and sales of ARM & HAMMER DENTAL CARE internationally. The Specialty Products Division net sales were slightly lower than in 1993, as a result of lower unit volume of MEGALAC (registered trademark) Rumen Bypass Fat, partially offset by gains of performance sodium bicarbonate. The Company's gross margin was 44.2 percent in the second quarter and 43.4 percent in the first half of 1994. This compares with 46.7 percent and 47.2 percent in the corresponding quarter and six months of last year. The decline can be attributed to the price reduction on ARM & HAMMER Powder Laundry Detergent and lower volume of high margin ARM & HAMMER DENTAL CARE. Selling, general and administrative costs decreased by $3.9 million and $9.9 million in the second quarter and first half of 1994, respectively as compared with the same periods a year ago. The reduction in costs was primarily the result of lower advertising and promotion for ARM & HAMMER DENTAL CARE and reduced spending in the area of systems development. These lower costs were partially offset by introductory marketing support for ARM & HAMMER Deodorant Anti-Perspirant. Other Income/Expense Investment income decreased in the current quarter and year-to-date as compared to the corresponding periods of last year as a result of a decrease in the amounts available for investment. Interest payments were higher in the current quarter and year-to-date as compared to the same periods of last year due to an increase in short-term borrowing. Income Taxes The effective tax rate for the first half of 1994 was 38.9 percent, up from 37.3 percent in the first half of 1993. This is primarily due to the 1993 increase of the U.S. corporate statutory tax rate which was enacted during the third quarter of 1993. 7 of 10 MANAGEMENT'S DISCUSSION AND ANALYSIS Liquidity and Capital Resources The Company considers cash and short-term investments as the principal measurement of its liquidity. At July 1, 1994, cash including cash equivalents and short-term investments totaled $6.7 million as compared to $9.6 million at December 31, 1993. During the first half of 1994, operating activities required $1.9 million of additional investment primarily in working capital. The Company received $5.2 million in distributions from its Armand Products joint venture, increased its short-term borrowings by $24.3 million and received $1.6 million in connection with the sale of Company stock to senior officers. Significant expenditures include additions to property, plant and equipment of $13.1 million, the purchase of 669,400 shares of Company common stock for the treasury totaling $14.5 million and the payment of cash dividends of $4.4 million. 8 of 10 PART II - Other Information Item 4. Results of Vote of Security Holders The Company's Annual Meeting of Stockholders was held on May 5, 1994. The following nominees were elected to the Company's Board of Directors for a term of three years. Nominee For Withhold John D. Leggett, III 41,829,372 290,682 Robert A. McCabe 41,387,649 732,405 Jarvis J. Slade 41,808,269 311,785 The results of voting on the following additional items were as follows: Approval of the appointment of Deloitte & Touche as independent auditors of the Company's 1994 financial statements. For Against Abstained Broker Non-Votes 41,859,032 127,710 133,312 0 To consider and act upon a stockholder proposal requesting that the Board of Directors take the steps necessary to provide for the election of Directors annually and not by class. For Against Abstained Broker Non-Votes 4,093,461 35,164,437 537,908 2,324,248 To consider and act upon a stockholder proposal requesting that the Board of Directors search for qualified minority candidates for nomination to the Board of Directors. For Against Abstained Broker Non-Votes 2,397,088 36,519,432 879,332 2,324,202 Item 6. Exhibits and Reports on Form 8-K (a) No reports on Form 8-K were filed for the three months ended July 1, 1994. 9 of 10 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. CHURCH & DWIGHT CO.,INC. (REGISTRANT) DATE: August 10, 1994 /s/ Anthony P. Deasey ANTHONY P. DEASEY VICE PRESIDENT FINANCE DATE: August 10, 1994 /s/ Mark L. Stolp MARK L. STOLP CONTROLLER 10 of 10 -----END PRIVACY-ENHANCED MESSAGE-----