-----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, RhbMr/SVdTtevPxexoA3QKi0mQ3sNIDYiM/8nNTOskoxM6t6vQlMPKKb9rw8Bege YNp1tlTvCFuRAXsbwNWmdQ== 0000313927-94-000012.txt : 19940518 0000313927-94-000012.hdr.sgml : 19940518 ACCESSION NUMBER: 0000313927-94-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940401 FILED AS OF DATE: 19940511 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: 94527158 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 FORM 10-Q FIRST QUARTER 1994 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 April 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 April 29, 1994, there were 19,733,927 shares of Common Stock outstanding. 1 of 13 PART I - FINANCIAL INFORMATION CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited)
Three Months Ended April 1, April 2, (In thousands, except per share data) 1994 1993* Net Sales $111,511 $123,897 Cost of sales 64,191 64,752 Gross profit 47,320 59,145 Selling, general and administrative expenses 45,542 51,559 Income from Operations 1,778 7,586 Investment income 189 349 Gain on disposal of product lines 103 102 Other income 164 116 Interest expense 24 109 Equity in joint venture income 1,621 1,800 Income before taxes and cumulative effect of accounting changes 3,831 9,844 Income taxes 1,412 3,718 Income before cumulative effect of accounting changes 2,419 6,126 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 2,419 2,926 Retained earnings at beginning of period 170,434 152,640 172,853 155,566 Dividends paid 2,210 2,032 Retained earnings at end of period $170,643 $153,534 Weighted average shares outstanding 20,071 20,315 Earnings Per Share: Income before cumulative effect of accounting changes $.12 $.30 Cumulative effect of accounting changes: Accrual of postretirement benefits - (.28) Accrual of postemployment benefits - (.03) Accounting for income taxes - .15 Net income per share $.12 $.14 * Restated as discussed in Notes 4 and 5.
2 of 13 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
April 1, December 31, 1994 1993 (Dollars in thousands) (Unaudited) Assets Current Assets Cash and cash equivalents $6,068 $5,581 Short-term investments 2,000 4,000 Accounts receivable 45,374 42,340 Inventories (Note 2) 54,853 52,739 Income taxes receivable - 3,010 Deferred income taxes 11,834 11,149 Prepaid expenses 5,782 4,634 Total Current Assets 125,911 123,453 Property, Plant and Equipment (Note 3) 124,899 122,195 Note Receivable from Joint Venture 11,000 11,000 Equity Investment in Joint Venture 16,662 16,557 Long-Term Supply Contracts 4,795 4,929 Intangibles, principally Goodwill 3,576 3,607 Total Assets $286,843 $281,741 Liabilities and Stockholders' Equity Current Liabilities Short-term borrowings $10,000 $2,000 Accounts payable and accrued expenses 64,993 66,812 Income taxes payable 2,607 - Total Current Liabilities 77,600 68,812 Long-Term Debt 7,650 7,644 Deferred Income Taxes 21,161 22,530 Deferred Income 646 749 Deferred Liabilities 1,315 1,282 Nonpension Postretirement and Postemployment Benefits 11,549 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 32,070 32,100 Retained earnings 170,643 170,434 Cumulative translation adjustments (868) (494) 225,175 225,370 Less common stock in treasury, at cost - 3,340,267 shares in 1994 and 3,251,280 shares in 1993 58,253 56,003 Total Stockholders' Equity 166,922 169,367 Total Liabilities and Stockholders' Equity $286,843 $281,741
3 of 13 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
Three Months Ended April 1, April 2, (Dollars in thousands) 1994 1993* Cash Flow From Operating Activities Net Income $2,419 $2,926 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 3,143 2,799 Provision for postretirement benefits 354 300 Deferred income taxes (2,054) 716 Equity in joint venture income (1,621) (1,800) Cumulative effect of accounting changes - 3,200 (Gain)/loss on asset disposals (103) (86) Other (53) 144 Change in assets and liabilities: (Increase) in accounts receivable (3,102) (1,529) (Increase) in inventories (2,280) (557) (Increase) in prepaid expenses (1,164) (1,019) (Decrease) in accounts payable (1,877) (495) Increase in income taxes payable 5,584 1,325 Net Cash Provided By (Used in) Operating Activities (754) 5,924 Cash Flow From Investing Activities (Increase) decrease in short-term investments 2,000 (993) Additions to property, plant and equipment (5,763) (7,846) Distributions from joint venture 1,517 1,952 Net Cash Used In Investing Activities (2,246) (6,887) Cash Flow From Financing Activities Proceeds from short-term borrowing 8,000 - Payment of cash dividends (2,210) (2,032) Proceeds from stock options exercised 124 253 Purchase of treasury stock (2,427) (2,088) Net Cash Provided by (Used In) Financing Activities 3,487 (3,867) Net Change In Cash and Cash Equivalents 487 (4,830) Cash And Cash Equivalents At Beginning Of Year 5,581 14,044 Cash And Cash Equivalents At End Of Period $6,068 $9,214 * Restated as discussed in Notes 4 and 5.
4 of 13 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The consolidated balance sheet as of April 1, 1994, the consolidated statements of income and retained earnings for the three months ended April 1, 1994 and April 2, 1993, and the consolidated statements of cash flow for the three 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 April 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 April 1, 1994 are not necessarily indicative of the operating results for the full year.
2. Inventories consist of the following: April 1, Dec. 31, (in thousands) 1994 1993 Raw materials and supplies $13,841 $12,690 Work in process 80 103 Finished goods 40,932 39,946 $54,853 $52,739
3. Property, Plant and Equipment consist of the following: April 1, Dec. 31, (in thousands) 1994 1993 Land $3,093 $3,103 Buildings and improvements 57,071 54,125 Machinery and equipment 117,601 108,665 Office equipment and leasehold improvements 12,035 11,974 Mineral rights 3,145 3,145 192,945 181,012 Less accumulated depreciation and amortization 77,166 74,248 115,779 106,764 Construction in progress 9,120 15,431 Net Property, Plant and Equipment $124,899 $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 13 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 April 1, April 2, (in thousands) 1994 1993 Net sales $10,803 $9,160 Gross profit 3,818 3,940 Net income 3,016 3,368 Company's share in net income 1,508 1,684 Elimination of Company's share of intercompany interest expense 113 116 Equity in joint venture income $1,621 $1,800
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. 6 of 13 MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations For the quarter ended April 1, 1994, net income was $2.4 million or $.12 per share. This compares with net income of $2.9 million or $.14 per share for the same period 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 for the quarter were $111.5 million, representing a decline of $12.4 million or 10% versus the first quarter of last year. The decrease was primarily a result of lower unit volume of ARM & HAMMER (registered trademark) DENTAL CARE (registered trademark) and ARM & HAMMER POWER FRESH (registered trademark) Powder Detergent. In addition, lower pricing on ARM & HAMMER POWER FRESH Powder Detergent instituted in December also contributed to the net sales decline. Specialty Products sales were essentially unchanged from the same period of a year ago. Gross margin was 42.4% in the first quarter, as compared with 47.7% in the first quarter of 1993. This was the result of the price reduction on the ARM & HAMMER POWER FRESH Powder Detergent and a weaker product mix associated with lower volume of both ARM & HAMMER DENTAL CARE and ARM & HAMMER POWER FRESH Powder Detergent. Selling, general and administrative expenses were $6.0 million lower in the current quarter versus the same period of a year ago. This decline is primarily the result of extraordinarily high promotional costs in connection with the introductory program behind ARM & HAMMER DENTAL CARE Tartar Control gel in 1993. Equity in joint venture income was slightly lower than a year ago as a result of higher manufacturing costs, partially offset by higher unit volume. Investment income decreased in the current quarter as compared to a year ago as a result of a reduction in the amount of funds available for investment. Interest payments were slightly higher in the first quarter as compared to the first quarter of last year due to short-term borrowing however, essentially the entire current year interest charge was capitalized in conjunction with investments in property, plant and equipment. The effective tax rate for the current quarter was 36.9%, down from 37.8% from the first quarter of 1993. This is a result of tax benefits on foreign operating results which were recognized at higher effective rates than the Company's domestic effective tax rate. Liquidity and Capital Resources The Company considers cash and short-term investments as the principal measurement of its liquidity. At April 1, 1994, cash including cash equivalents and short-term investments totaled $8.1 million as compared to $9.6 million at December 31, 1993. During the first quarter of 1994, operating activities required $.8 million of additional investment, primarily in working capital. The Company received $1.5 million in distributions from its Armand Products joint venture, and increased its short-term borrowing by $8.0 million. Significant expenditures included additions to property, plant and equipment of $5.8 million, the payment of cash dividends of $2.2 million and the purchase of treasury stock of $2.4 million. 7 of 13 PART II - Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits EXHIBIT (13) - Quarterly Report to Stockholders for the three months ended April 1, 1994. (b) No reports on Form 8-K were filed for the three months ended April 1, 1994. 8 of 13 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: May 10, 1994 /s/ Anthony P. Deasey ANTHONY P. DEASEY VICE PRESIDENT FINANCE DATE: May 10, 1994 /s/ Mark L. Stolp MARK L. STOLP CONTROLLER 9 of 13 EX-13 2 QUARTERLY REPORT TO STOCKHOLDERS 1st Quarter Report Dear Stockholder: January and February sales were weak, resulting in a first-quarter shortfall of 10 percent compared to last year. As anticipated, sales strengthened in March and we expect that this recovery will continue. Overall, sales declined to $111.5 million from $123.9 million in the previous year. Earnings per share were $0.12, down from $0.14 a year ago. However, last year's earnings were negatively impacted by the effects of several accounting changes, and comparable earnings per share were $0.30. Two products accounted for the sales shortfall. The price reduction for ARM & HAMMER (registered trademark) POWER FRESH (registered trademark) Heavy Duty Powder Laundry Detergent, implemented in late December, resulted in a significant decline in sales. Our powder detergent market share strengthened throughout the quarter, generating higher sales in March which were the catalyst for the Division's improvement. Lower sales of ARM & HAMMER DENTAL CARE (registered trademark) products generated most of the remaining shortfall compared to a strong, heavily promoted first quarter of 1993. There were several positive developments in our detergent business during the quarter. In addition to the continued roll-out of the powder detergent price reduction, we have also been testing a powder detergent with bleach in Florida. The results have been very good and we will introduce the product nationally in June. We also completed the roll-out of the quarter-cup concentrated ARM & HAMMER POWER FRESH Heavy Duty Liquid Laundry Detergent in the Northeast of the United States. Sales and share were strong throughout the first three months. ARM & HAMMER DENTAL CARE products are maintaining their premium pricing and a 9-percent market share in the face of major investments by competitive products. The national introduction of Mentadent (registered trademark), Unilever's baking soda and peroxide product, has further expanded the baking soda toothpaste category to almost one-third of the entire dentifrice market on a dollar basis. During the quarter, we continued the introduction of a new baking soda package. The new spill-proof FRIDGE-FREEZER PACK (trademark) with FRESHFLO VENTS (trademark) allows the product to deodorize without opening the box. Initial consumer reception has been excellent and should be strengthened by advertising support, consisting of 15-second television commercials in computer-animation style and full-page color print advertisements in major family service magazines, now appearing nationwide. In early January, ARM & HAMMER Deodorant Anti-Perspirant with Baking Soda was launched into the $1.4 billion deodorant/anti-perspirant category. The sell-in to the trade has gone extremely well. Consumer advertising will kick off in late June with a heavy schedule of 15- and 30-second television commercials. Cost-effective promotional support includes an extensive coupon campaign appearing on ARM & HAMMER product packages. This is one of many dimensions of our strategy which is targeted at users of ARM & HAMMER products who already appreciate the deodorizing benefits of baking soda. Other introductions include a new fragrance for the ARM & HAMMER Carpet Deodorizer potpourri line, VANILLA MEADOWS (trademark), a blend of vanilla and fresh meadow scents; and a redesigned box with improved graphics for ARM & HAMMER Cat Litter Deodorizer. Specialty Products Division sales, while off to a slow start in January and February, rebounded in March with ARMEX (registered trademark) Blast Media, potassium carbonate and performance sodium bicarbonate achieving record sales for the month, resulting in a satisfactory first quarter for the Division. Two new competitors have emerged in the potassium carbonate business, where our joint venture, the Armand Products Company, has enjoyed sole producer status in the United States for the past eight years. Vulcan Materials and Vicksburg Chemicals have both begun construction of 25,000-ton capacity facilities which will create an oversupply in the North American market. At the same time, the Armand Products Company has announced its intent to build a potassium carbonate facility in Southeast Asia, where the production of television glass is expected to more than double in the next two or three years. Because potassium carbonate is a major raw material in the manufacture of glass for television sets and computers, this new facility, anticipated to be on stream by late 1995, will give us a competitive advantage in supplying this growing market overseas. We are pleased to report that the 50,000-ton expansion at our sodium bicarbonate plant in Old Fort, Ohio, was completed in the first quarter ahead of schedule. The expansion project was designed to easily accommodate, with minimal capital investment, an additional production increase of 25,000 tons per year to meet future market growth. At its April 27 meeting, the Board of Directors declared a regular quarterly dividend of 11 cents per share, payable June 1, 1994 to stockholders of record at the close of business May 16, 1994. This is the Company's 373rd regular quarterly dividend. Sincerely, /s/ Dwight C. Minton Dwight C. Minton Chairman and Chief Executive Officer April 29, 1994 10 of 13 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended Apr. 1, Apr. 2, (In thousands, except per share data) 1994 1993* Net Sales $111,511 $123,897 Cost of sales 64,191 64,752 Gross profit 47,320 59,145 Selling, general and administrative expenses 45,542 51,559 Income from Operations 1,778 7,586 Other income (expense), net 432 458 Equity in joint venture income 1,621 1,800 Income before taxes and cumulative effect of accounting changes 3,831 9,844 Income taxes 1,412 3,718 Income before cumulative effect of accounting changes 2,419 6,126 Cumulative effect of accounting changes (net of tax effect) - (3,200) Net Income $2,419 $2,926 Earnings Per Share: Income before cumulative effect of accounting changes $.12 $.30 Cumulative effect of accounting changes - (.16) Net income per share $.12 $.14 Dividends per share $.11 $.10 Weighted average shares outstanding 20,071 20,315 * Quarterly financial information for 1993 has been restated to reflect the accounting for the Armand Products Company joint venture and the adoption of SFAS No. 112, "Employers' Accounting for Postemployment Benefits." These are discussed in Notes 5 and 10, respectively, to the Consolidated Financial Statements in the Company's 1993 Annual Report to Stockholders.
11 of 13 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands) Apr. 1, Apr. 2, 1994 1993* Assets Current Assets Cash, equivalents and securities $8,068 $18,266 Accounts receivable 45,374 44,630 Inventories 54,853 45,660 Deferred income taxes 11,834 11,818 Prepaid expenses and other current assets 5,782 6,682 Total Current Assets 125,911 127,056 Property, Plant and Equipment (Net) 124,899 111,739 Note Receivable from Joint Venture 11,000 11,000 Equity Investment in Joint Venture 16,662 17,830 Intangibles and Other Assets 8,371 9,388 Total Assets $286,843 $277,013 Liabilities and Stockholders' Equity Current Liabilities $77,600 $76,101 Long-Term Debt 7,650 7,759 Deferred Items 23,122 24,624 Nonpension Postretirement and Postemployment Benefits 11,549 10,381 Stockholders' Equity 166,922 158,148 Total Liabilities and Stockholders' Equity $286,843 $277,013
12 of 13 INVESTOR INFORMATION Church & Dwight Co., Inc. shares are traded on the New York Stock Exchange. The symbol is CHD. Stockholder Inquiries Communications concerning stockholder records, stock transfer, changes of ownership, account consolidations, dividends and change of address should be directed to: Church & Dwight Co., Inc. Chemical Bank J.A.F. Building P.O. Box 3068 New York, NY 10116-3068 1-800-851-9677 Dividend Reinvestment Plan Church & Dwight Co., Inc. offers an automatic Dividend Reinvestment Plan for our Common Stockholders. For details, contact: Church & Dwight Co., Inc. Dividend Reinvestment Plan Chemical Bank J.A.F. Building P.O. Box 3069 New York, NY 10116-3069 1-800-851-9677 13 0f 13 -----END PRIVACY-ENHANCED MESSAGE-----