10-Q 1 0001.txt QUARTERLY REPORT 1 of 13 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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 quarterly period ended September 29, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file Number 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 September 29, 2000, there were 38,139,819 shares of Common Stock outstanding. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Three Months Ended Nine Months Ended ------------------------------ ---------------------------- Sept. 29, Oct. 1, Sept. 29, Oct. 1, (In thousands, except per share data) 2000 1999 2000 1999 ------------------------------------------------------------------------------------------------------------------------- Net Sales $199,847 $185,949 $591,342 $547,022 Cost of sales 109,703 100,975 326,879 301,018 ----------------------------- ------------------------------ Gross profit 90,144 84,974 264,463 246,004 Advertising, consumer and trade promotion expenses 47,857 44,459 139,143 136,327 Selling, general and administrative expenses 22,070 22,517 67,098 64,746 Gain on sale of mineral rights - - - (11,772) Restructuring, impairment and other items 21,911 435 21,911 6,190 ----------------------------- ------------------------------ Income/(Loss) from Operations (1,694) 17,563 36,311 50,513 Equity in earnings of affiliates 855 1,372 2,033 5,321 Investment income 399 364 1,584 1,079 Other income/(expense) (274) 47 (161) 214 Interest expense (1,229) (886) (4,083) (2,180) ----------------------------- ------------------------------ Income/(Loss) before taxes (1,943) 18,460 35,684 54,947 Income tax(benefit) expense (869) 6,873 12,489 20,330 Minority Interest; net of taxes 162 208 324 417 ----------------------------- ------------------------------ Net Income/(Loss) (1,236) 11,379 22,871 34,200 Retained earnings at beginning of period 272,600 236,790 253,885 218,618 ----------------------------- ------------------------------ 271,364 248,169 276,756 252,818 Dividends paid 2,679 2,722 8,071 7,371 ----------------------------- ------------------------------ Retained earnings at end of period $268,685 $245,447 $268,685 $245,447 ------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------- Weighted average shares outstanding - Basic 38,235 38,837 38,355 38,780 Weighted average shares outstanding - Diluted 39,636 41,097 39,931 40,887 ------------------------------------------------------------------------------------------------------------------------- Earnings Per Share: Net income per share - Basic ($0.03) $0.29 $0.60 $0.88 Net income per share - Diluted ($0.03) $0.28 $0.57 $0.84 ------------------------------------------------------------------------------------------------------------------------- Dividends Per Share: $0.07 $0.07 $0.21 $0.19 -------------------------------------------------------------------------------------------------------------------------
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) Sept. 29, 2000 Dec. 31, 1999 --------------------------------------------------------------------------------- ---------------- --------------- Assets --------------------------------------------------------------------------------- ---------------- --------------- Current Assets Cash and cash equivalents $18,403 $19,765 Short-term investments 3,986 4,000 Accounts receivable, less allowances of $1,571 and $1,552 66,413 64,505 Inventories (Note 2) 62,801 72,670 Deferred income taxes 10,709 8,221 Prepaid expenses 6,358 6,622 ---------------- --------------- Total Current Assets 168,670 175,783 --------------------------------------------------------------------------------- ---------------- --------------- Property, Plant and Equipment (Note 3) 169,115 182,219 Note Receivable - 3,000 Equity Investment in Affiliates 22,198 20,177 Long-Term Supply Contracts 3,794 4,105 Goodwill and Other Intangibles 84,940 83,744 Other Assets 14,449 7,278 --------------------------------------------------------------------------------- ---------------- --------------- Total Assets $463,166 $476,306 --------------------------------------------------------------------------------- ---------------- --------------- Liabilities and Stockholders' Equity --------------------------------------------------------------------------------- ---------------- --------------- Current Liabilities Short-term borrowings $ 33,109 $ 25,574 Accounts payable and accrued expenses 131,355 106,109 Current portion of long-term debt 685 685 Income taxes payable 3,761 8,240 ---------------- --------------- Total Current Liabilities 168,910 140,608 --------------------------------------------------------------------------------- ---------------- --------------- Long-Term Debt 23,200 58,107 Deferred Income Taxes 16,225 20,416 Deferred Liabilities 11,721 11,860 Nonpension Postretirement and Postemployment Benefits 15,772 15,145 Minority Interest 3,680 3,437 Commitments and Contingencies (Note 10) Stockholders' Equity Preferred Stock - $1.00 par value Authorized 2,500,000 shares, none issued - - Common Stock - $1.00 par value Authorized 100,000,000 shares, issued 46,660,988 shares 46,661 46,661 Additional paid-in capital 20,236 18,356 Retained earnings 268,685 253,885 Accumulated other comprehensive income (loss) (7,843) (4,599) ---------------- --------------- 327,739 314,303 Less common stock in treasury, at cost - 8,521,169 shares in 2000 and 7,805,152 shares in 1999 (103,532) (87,021) Due from shareholder (549) (549) --------------------------------------------------------------------------------- ---------------- --------------- Total Stockholders' Equity 223,658 226,733 --------------------------------------------------------------------------------- ---------------- --------------- Total Liabilities and Stockholders' Equity $463,166 $476,306 --------------------------------------------------------------------------------- ---------------- ---------------
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW Nine Months Ended -------------------------------------- (Dollars in thousands) Sept. 29, 2000 Oct. 1, 1999 ----------------------------------------------------------------------------- ------------------- ------------------ Cash Flow From Operating Activities ----------------------------------------------------------------------------- ------------------- ------------------ Net Income $22,871 $34,200 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 16,464 14,321 Equity in income from affiliates (2,033) (5,321) Deferred income taxes (5,398) (1,094) Gain on sale of mineral rights - (11,772) Disposal of fixed assets 14,324 4,683 Other (241) 191 Change in assets and liabilities: (Increase) in accounts receivable (2,245) (2,499) Decrease/(increase) in inventories 9,622 (5,157) (Increase) in prepaid expenses (788) (1,579) Increase in accounts payable 22,896 5,061 (Decrease)/increase in income taxes payable (3,328) 4,614 Increase in other liabilities 810 5,073 ----------------------------------------------------------------------------- ------------------- ------------------ Net Cash Provided By Operating Activities 72,954 40,721 Cash Flow From Investing Activities ----------------------------------------------------------------------------- ------------------- ------------------ (Increase)/decrease in short-term investments 14 (2,958) Additions to property, plant and equipment (14,931) (24,120) Purchase of USA Detergent common stock (10,360) - Proceeds from sale of mineral rights - 16,762 Investment in affiliates (2,860) (9,364) Distributions from unconsolidated affiliates 2,788 2,861 Proceeds from repayment of notes receivable 3,000 3,329 Purchase of other assets (2,590) (3,341) Goodwill and other intangibles adjustment 1,507 - Proceeds from sale of fixed assets 863 - Purchase of intangibles (861) - ----------------------------------------------------------------------------- ------------------- ------------------ Net Cash (Used In) Investing Activities (23,430) (16,831) Cash Flow From Financing Activities ----------------------------------------------------------------------------- ------------------- ------------------ Long-term debt (repayments) (34,874) (3,817) Short-term debt borrowing (repayments) 7,602 (7,353) Payment of cash dividends (8,071) (7,371) Proceeds from stock options exercised 4,551 5,470 Purchase of treasury stock (20,094) (7,900) ----------------------------------------------------------------------------- ------------------- ------------------ Net Cash (Used In) Financing Activities (50,886) (20,971) Net Change In Cash and Cash Equivalents (1,362) 2,919 Cash And Cash Equivalents At Beginning Of Year 19,765 16,189 ----------------------------------------------------------------------------- ------------------- ------------------ Cash And Cash Equivalents At End Of Period $18,403 $19,108 ----------------------------------------------------------------------------- ------------------- ------------------
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet as of September 29, 2000, the consolidated statements of income and retained earnings for the three and nine months ended September 29, 2000 and October 1, 1999, and the consolidated statements of cash flow for the nine months ended September 29, 2000 and October 1, 1999 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments, except for the item in Note 6) necessary to present fairly the financial position, results of operations and cash flow at September 29, 2000 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, 1999 annual report to shareholders. The results of operations for the period ended September 29, 2000 are not necessarily indicative of the operating results for the full year. 2. Inventories consist of the following: Sept. 29, Dec. 31, (in thousands) 2000 1999 ------------------------------------------------------------------------------------------------------------------------------- Raw materials and supplies $21,922 $25,698 Work in process 23 22 Finished goods 40,856 46,950 ------------------------------ $62,801 $72,670 -------------------------------------------------------------------------------------------------------------------------------
3. Property, Plant and Equipment consist of the following: Sept. 29, Dec. 31, (in thousands) 2000 1999 ------------------------------------------------------------------------------------------------------------------------------- Land $ 5,589 $ 5,741 Buildings and improvements 77,278 85,411 Machinery and equipment 201,507 221,783 Office equipment and other assets 14,819 15,434 Software 5,857 5,857 Mineral rights 322 328 Construction in progress 18,772 4,960 ------------------------------ 324,144 339,514 Less accumulated depreciation and amortization 155,029 157,295 ----------------------------- Net Property, Plant and Equipment $169,115 $182,219 -------------------------------------------------------------------------------------------------------------------------------
4. Earnings Per Share Basic EPS is calculated based on income available to common shareholders and the weighted-average number of shares outstanding during the reported period. Diluted EPS includes additional dilution from potential common stock issuable pursuant to the exercise of stock options outstanding. 5. Recent Accounting Developments The Company recognizes revenue when product is shipped to trade customers. The Company has reviewed SEC Staff Accounting Bulletin No.101, Revenue Recognition in Financial Statements, issued in December 1999, and has determined it will not have a material effect on the Company's consolidated financial statements. During the third quarter, the Emerging Issues Task Force issued EITF 00-10, "Accounting for Shipping and Handling Fees and Costs". This EITF issue addresses income statement classification of amounts charged to customers for shipping and handling, as well as for costs incurred related to shipping and handling. The issue requires amounts invoiced to customers that relate to this be included as part of revenue and suggests the expense classified in cost of sales. The Company's Specialty Products Division currently offsets amounts charged to customers in cost of sales. This reclassification is approximately $10 million annually. The EITF also issued EITF 00-14, "Accounting for Certain Sales Incentives". This issue addresses the income statement classification for offers by a vendor directly to end consumers that are exercisable after a single exchange transaction in the form of coupons, rebate offers, or free products or services disbursed on the same date as the underlying exchange transaction. The issue requires the cost of these items to be accounted for as a reduction of revenues, not included as a marketing expense as the Company does today. This reclassification is approximately $20 million annually. Both EITF issues are effective for the fourth quarter 2000 and there is no net income impact. In June 1998, The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative Instruments and Hedging Activities." This Statement requires that all derivatives be recorded in the balance sheet as either an asset or liability measured at fair value. The Statement requires that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. In June 1999, the FASB issued SFAS No. 137, which deferred the effective date of adoption of SFAS No. 133 for one year. The Company will adopt SFAS No. 133 in the 2001 financial statements. The Company continues to evaluate this Statement and, based on available information, there does not appear to be a material impact on the Company's consolidated financial statements. 6. Restructuring, Impairment and Other Items During the quarter, the Company recorded a pre-tax charge of $21.9 million relating to three major elements: a $14.3 million book write-down of the Company's Syracuse N.Y. manufacturing facility, a $2.1 million charge for potential carrying and site clearance costs, and a $5.5 million severance charge related to both the Syracuse shutdown and the sales force reorganization. The Company expects to incur a further $1.9 million in accelerated depreciation from the plant shutdown and an estimated $3 million in integration costs over the next 9 to 12 months. These additional charges, most of which will flow through cost of sales, will bring the total one-time cost to approximately $27 million. The cash portion of this one-time cost, however, will be less that $5 million after tax. During 1999, the Company recorded a pre-tax charge of $6.6 million for impairment and certain other items relating to a planned plant shutdown which included the rationalization of both toothpaste and powder laundry detergent production. Components of the outstanding reserve balance included in accounts payable accrued expenses consist of the following: Disposals/ Reserves at Restructuring Adjustments Reserves at (In thousands) Dec. 31, 1999 Charge Payments Sept. 29, 2000 -------------------------------------------------------------------------------------------------------------------------------- Severance and other charges $268 $ 5,458 $ 17 $5,743 Fixed asset write-down and Demolition - 16,453 (14,324) 2,129 --------------------------------------------------------------------------------------------------------------------------------- $268 $21,911 ($14,307) $7,872
7. Segment Information Segment sales and operating profit/(loss) for the third quarter and year to date 2000 and 1999 are as follows: Unconsolidated (In thousands) Consumer Specialty Affiliates Corporate Total ----------------------------------------------------------------------------------------------------------------------------------- Net Sales Third quarter 2000 $161,021 $44,842 $(6,016) - $199,847 Third quarter 1999 149,683 42,964 (6,698) - 185,949 Year to date 2000 477,763 131,901 (18,322) - 591,342 Year to date 1999 441,546 124,731 (19,255) - 547,022 Operating Profit/(Loss) Third quarter 2000 14,004 7,056 (843) (21,911) (1,694) Third quarter 1999 13,035 6,318 (1,355) (435) 17,563 Year to date 2000 40,135 20,059 (1,972) (21,911) 36,311 Year to date 1999 29,897 20,306 (5,272) 5,582 50,513 -----------------------------------------------------------------------------------------------------------------------------------
Product line net sales data for the third quarter and year to date periods are as follows: Laundry and Oral and Uncon- Household Personal Deodor- Specialty Animal Specialty solidated Cleaners Care izing Chemicals Nutrition Cleaners Affiliates Total ----------------------------------------------------------------------------------------------------------------------------------- 3rd Qtr 2000 $75,756 $38,534 $46,731 $25,995 $16,974 $1,873 $(6,016) $199,847 3rd Qtr 1999 66,393 40,958 42,332 24,918 15,301 2,745 (6,698) 185,949 YTD 2000 232,757 119,639 125,367 77,777 48,087 6,037 (18,322) 591,342 YTD 1999 204,011 122,759 114,776 72,046 45,470 7,215 (19,255) 547,022 -----------------------------------------------------------------------------------------------------------------------------------
8. Comprehensive Income The following table presents the Company's Comprehensive Income for the three and nine months ending September 29, 2000 and October 1, 1999.
Three Months Ended Nine Months Ended ------------------------- ---------------------- Sept. 29 Oct. 1, Sept. 29 Oct. 1, (in thousands) 2000 1999 2000 1999 --------------------------------------------------------------------------------------------------------------------------------- Net Income $(1,236) $11,379 $22,871 $34,200 Other Comprehensive Income, net of tax: Foreign exchange translation adjustments (534) (535) (1,145) (4,331) Available for Sale securities 252 - (2,099) - ------------------------- ---------------------- Comprehensive Income/(Loss) $(1,518) $10,844 $19,627 $29,869 ---------------------------------------------------------------------------------------------------------------------------------
9. ARMUS LLC Joint Venture On June 14, 2000, the Company announced it was forming a joint venture with USA Detergents which will combine both Companies laundry detergent businesses. The new venture, named Armus LLC, encompasses Church & Dwight's ARM & HAMMER Powder and Liquid Laundry Detergents and USA Detergent's XTRA(R) Powder and Liquid Detergents and Nice'n FLUFFY(R) Liquid Fabric Softener brands. Under the terms of the agreement: a) Church & Dwight purchased 1.4 million shares of USA Detergents common stock for $10.1 million or $7 per share and agreed to acquire a further 5% interest for $5 million on or around January 1, 2001. b) The two partners will combine the marketing, sales and distribution of their laundry detergents. Both companies will continue to operate their own plants and the employees of each company will remain with their current employer. c) Church & Dwight will have a majority on the venture's Board and the General Manager will be a Church & Dwight employee. d) Church & Dwight's share of the profits will range from 55% to 65% depending on the venture's profit level. e) Church & Dwight has an option to purchase USA Detergent's partnership interest after 5 years and USA Detergents has an option to sell its interest to C&D after 10 years. In each case, the purchase price will be computed using a formula based on the venture's earnings for the two previous years of operations. The value of USA Detergent's stock on the date of closing was $6.8 million or $4.75 per share. The stock has been classified as Available for Sale and is marked to market on each reporting date through other comprehensive income, net of applicable deferred income taxes. The Company agreed to purchase additional shares on or about January 1, 2001, i.e. a forward contract, which is marked to market through other comprehensive income. As a result of the above joint venture agreement, goodwill of $4.8 million has been recorded and will be amortized over a period of 10 years. 10. Contingencies The Company, in the ordinary course of its business, is the subject of, or a party to, various pending or threatened legal actions. The Company believes that any ultimate liability arising from these actions will not have a material adverse effect on its consolidated financial statements. 11. Reclassification Certain prior year amounts have been reclassified in order to conform with the current year presentation. MANAGEMENT'S DISCUSSION AND ANALYSIS ------------------------------------ Results of Operations --------------------- For the quarter ended September 29, 2000, the Company recorded a net loss of $(1.2) million, equivalent to basic earnings/(loss) of $(.03) per share, from $11.4 million or $.29 per share, in last year's third quarter. Diluted earnings/(loss) were $(.03) per share compared to $.28 per share last year. The Company recorded a pre-tax charge of $21.9 million or $.35 per share relating to the planned shutdown of the Syracuse N.Y. manufacturing facility as a result of the formation of the ARMUS joint venture. Excluding this charge, net income would have been $12.7 million or $.32 per share. For the first nine months of 2000, net income was $22.9 million or basic earnings of $.60 per share compared to $34.2 million or $.88 per share last year. Diluted earnings were $.57 per share compared to $.84 per share last year. The prior year results include a net pre-tax gain of $5.6 million or $.08 per share from the sale of mineral reserves partially offset by plant impairment charges relating to a plant closing. Excluding the one-time items in both years, net income rose 19% to $36.8 million this year from $30.8 million last year and diluted earnings per share rose 21% to $.92 per share this year from $.76 per share last year. Net sales for the quarter increased by 7.5% to $199.8 million from $185.9 million in the same period last year. Consumer product sales increased 7.6%, led by strong growth in toothpaste, laundry detergent, cat litter and the recently acquired bathroom cleaner brands. This was partially offset by lower deodorant and gum sales. Specialty products sales increased 7.2% led by growth in animal nutrition. Net sales for the first nine months of 2000 increased 8.1% to $591.3 million, with consumer products up 8.2% and specialty products up 7.7%. This year's number includes two acquisitions completed in 1999: the Brazilian specialty chemical company QGN, in which the Company acquired a controlling interest in May and the two bathroom cleaners, SCRUB FREE(R) and CLEAN SHOWER(R) acquired in December. Excluding the product lines acquired last year, sales of established consumer products increased 1.8% and specialty products .6%. Deodorizing products increased primarily due to strong Cat Litter sales, while Laundry & Household Cleaning (exclusive of the bathroom cleaning products) was virtually unchanged and Oral & Personal Care products were slightly lower. The Company's gross margin of 45.1% and 44.7% for the quarter and nine-month period, respectively, was slightly lower versus the same periods of 1999. The current year's periods benefited from the elimination of co-packers to meet higher than expected order requirements in 1999 and manufacturing and distribution efficiencies in 2000, stemming partially from the Greenville plant shutdown in 1999. These favorable margin improvements were offset by higher raw and packaging materials for consumer products. Advertising, consumer and trade promotion expenses were higher for the quarter and nine month periods. Increased advertising on Deodorizing products, and expenses associated with the bathroom cleaning products acquired late in 1999 were partially offset by lower expenses for ARM & HAMMER DENTAL CARE GUM and Deodorant. Selling, general and administrative expenses decreased $.4 million in the current quarter and increased $2.4 million for the nine month period. The decrease in the quarter is largely due to lower selling expenses as the Company has combined its sales force with USA Detergent as a first step in making ARMUS operational, supported by a single national broker organization. This decrease is partially offset by personnel-related costs, and amortization of intangibles relating to the bathroom cleaners acquisition. The increase for the nine month period was also due to higher personnel related costs, and amortization of intangibles, partially offset by lower deferred compensation liability. During the quarter, the Company recorded a pre-tax charge of $21.9 million relating to three major elements: a $14.3 million book write-down of the Company's Syracuse N.Y. manufacturing facility, a $2.1 million charge for potential carrying and site clearance costs, and a $5.5 million severance charge related to both the Syracuse shutdown and the sales force reorganization. The Company expects to incur a further $1.9 million in accelerated depreciation from the plant shutdown and an estimated $3 million in integration costs over the next 9 to 12 months. These additional charges, most of which will flow through cost of sales, will bring the total one-time cost to approximately $27 million. The cash portion of this one-time cost, however, will be less that $5 million after tax, and the Company expects to recover this amount from synergies and other sources by year-end 2001. During the second quarter the ArmaKleen Company, a 50/50 joint venture between Church & Dwight and the Safety- Kleen Company recorded a bad debt provision relating to Safety-Kleen filing chapter 11. This caused the ArmaKleen Company to record a $1.4 million charge in the quarter, resulting in a $.7 million charge to Church & Dwight. The Company believes that the debtor in possession financing in place for Safety-Kleen, along with the relief of its pre-petition debt load, will enable it to emerge from chapter 11 as a going concern, thereby enabling the viability of the ArmaKleen Company. Should the Company be wrong in its base assumption about the viability of the ArmaKleen Company because the business with Safety-Kleen no longer exists, the results of operations and balance position of the Company would be adversely affected. ArmaKleen's results and lower earnings from Armand Products caused earnings from affiliates to be lower from last year for both the quarter and nine month periods. Investment income increased the nine month period due to the receipt of interest from the Fluid Packaging note. Interest Expense was higher in both the three and nine month periods due to an increased amount of debt. The effective tax rate for the nine months was 35.0%, down from 37.0% from last year. The decrease in the rate is a result of a lower effective state tax rate and lower taxes related to foreign activity. Minority interest represents 25% of the net income associated with the Company's Brazilian subsidiary. Liquidity and Capital Resources ------------------------------- The Company considers cash and short-term investments as the principal measurement of its liquidity. At September 29, 2000, cash, including cash equivalents and short-term investments totaled $22.4 million as compared to $23.8 million at December 31,1999. During the first nine months of 2000, the Company generated $73.0 million of cash flow from operating activities, received $3.0 million from Fluid Packaging, and $4.6 million from stock options exercised. Significant expenditures include the net repayment of debt of $27.3 million, the purchase of treasury stock of $20.1 million, additions to property, plant and equipment of $14.9 million, the purchase of 1.4 million shares of USA Detergent for $10.4 million and cash dividends of $8.1 million. ARMUS LLC Joint Venture ----------------------- On June 14, 2000, the Company announced it was forming a joint venture with USA Detergents which will combine both Companies laundry detergent businesses. The new venture, named Armus LLC, encompasses Church & Dwight's ARM & HAMMER Powder and Liquid Laundry Detergents and USA Detergents' XTRA Powder and Liquid Detergents and NICE `N FLUFFY Liquid Fabric Softener brands. Under the terms of the agreement: 1) Church & Dwight purchased 1.4 million shares of USA Detergents common stock for $10.1 million or $7 per share and agreed to acquire a further 5% interest for $5 million on or around January 1, 2001. 2) The two partners will combine the marketing, sales and distribution of their laundry detergents. Both companies will continue to operate their own plants and the employees of each company will remain with their current employer. 3) Church & Dwight will have a majority on the venture's Board and the General Manager will be a Church & Dwight employee. 4) Church & Dwight's share of the profits will range from 55% to 65% depending on the venture's profit level. 5) Church & Dwight has an option to purchase USA Detergent's partnership interest after 5 years and USA Detergents has an option to sell its interest to C&D after 10 years. In each case, the purchase price will be computed using a formula based on the venture's earnings for the two previous years of operations. The value of USA Detergent's stock on the date of closing was $6.8 million or $4.75 per share. The stock has been classified as Available for Sale and is marked to market on each reporting date through other comprehensive income, net of applicable deferred income taxes. The Company agreed to purchase additional shares on or about January 1, 2001, i.e. a forward contract, which is marked to market through other comprehensive income. As a result of the above joint venture agreement, goodwill of $4.8 million has been recorded and will be amortized over a period of 10 years. Fluid Note Receivable --------------------- In conjunction with the July 1998 purchase of the Lakewood, New Jersey, manufacturing facility, the Company loaned Fluid Packaging Co., Inc. $3.0 million at an interest rate of 8% per annum. The note was payable no later than July 15, 1999 and was secured by a pledge of and security interest in 65% of the capital stock of Allied Mexico, S.A. de C.V., a wholly-owned subsidiary of Fluid Packaging. During the second quarter of 2000, the Company received, full payment for the note, all interest due and partial out of pocket expenses incurred to collect the note. Cautionary Note on Forward-Looking Statements --------------------------------------------- This report contains forward-looking statements relating, among others, to financial objectives, sales growth and cost reduction programs. Many of these statements depend on factors outside the Company's control, such as economic conditions, market growth and consumer demand, competitive products and pricing, raw material costs and other matters. With regard to new product introductions, there is particular uncertainty related to trade, competitive and consumer reactions. If the Company's assumptions are incorrect, or there is a significant change in some of these key factors, the Company's performance could vary materially from the forward-looking statements in this report. PART II - Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (11) Computation of earnings per share (27) Financial Data Schedule (b) No reports on Form 8-K were filed for the three months ended September 29, 2000. CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES EXHIBIT 11 - Computation of Earnings Per Share (In thousands except per share amounts)
Three Months Ended Nine Months Ended ------------ ------------ ------------ ------------ Sept. 29, Oct. 1, Sept. 29, Oct. 1, 2000 1999 2000 1999 ------------ ------------ ------------ ------------ BASIC: Net Income/(Loss) $(1,236) $11,379 $22,871 $34,200 Weighted average shares outstanding 38,235 38,837 38,355 38,780 Basic earnings/(loss) per share $(0.03) $0.29 $0.60 $0.88 DILUTED: Net Income/(Loss) $(1,236) $11,379 $22,871 $34,200 Weighted average shares outstanding 38,235 38,837 38,355 38,780 Incremental shares under stock option plans 1,401 2,260 1,576 2,107 ------------ ------------ ------------ ------------ Adjusted weighted average shares outstanding 39,636 41,097 39,931 40,887 ------------ ------------ ------------ ------------ Diluted earnings/(loss) per share $(0.03) $0.28 $0.57 $0.84
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: November 9, 2000 Zvi Eiref ------------------------------------ --------- ZVI EIREF VICE PRESIDENT FINANCE AND CHIEF FINANCIAL OFFICER DATE: November 9, 2000 Gary P. Halker ------------------------------------- -------------- GARY P. HALKER VICE PRESIDENT, CONTROLLER AND CHIEF INFORMATION OFFICER