-----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, cXPqSw2ZMeafk4ng0OLcZcFgtu8vYaclXbov4uwg4leKFD0KADb4Rmik9KvGzYt2 h9tGDW5186UYRCGrG0XA8Q== 0000884219-94-000058.txt : 19941117 0000884219-94-000058.hdr.sgml : 19941117 ACCESSION NUMBER: 0000884219-94-000058 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941110 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIAL CORP /DE/ CENTRAL INDEX KEY: 0000884219 STANDARD INDUSTRIAL CLASSIFICATION: 2840 IRS NUMBER: 361169950 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11015 FILM NUMBER: 94558753 BUSINESS ADDRESS: STREET 1: DIAL TOWER STREET 2: DIAL CORPORATE CNTR CITY: PHOENIX STATE: AZ ZIP: 85077 BUSINESS PHONE: 6022074000 10-Q 1 THE DIAL CORP 3RD QTR 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1994 Commission file number 001-11015 THE DIAL CORP (Exact Name of Registrant as Specified in its Charter) DELAWARE 36-1169950 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) DIAL TOWER, PHOENIX, ARIZONA 85077 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (602)207-4000 Indicate by check mark whether the registrant (1) has filed all Exchange Act reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No --------- --------- As of September 30, 1994, 92,552,218 shares of Common Stock ($1.50 par value) were outstanding. PART I. FINANCIAL INFORMATION Item 1. Financial Statements THE DIAL CORP CONSOLIDATED BALANCE SHEET
September 30, December 31, (000 omitted, except number of shares) 1994 1993 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 16,059 $ 10,659 Receivables, less allowance of $21,668 and $22,597 197,726 199,996 Inventories 217,989 216,837 Deferred income taxes 49,076 46,373 Other current assets 42,927 43,082 ---------- ---------- 523,777 516,947 Funds and agents' receivables restricted for payment service obligations, after eliminating $75,000 and $65,000 invested in Dial commercial paper 468,523 535,657 ---------- ---------- Total current assets 992,300 1,052,604 Investments restricted for payment service obligations: Securities available for sale 400,282 574,094 Securities held to maturity 319,416 Property and equipment 804,123 740,724 Other investments and assets 71,809 59,757 Deferred income taxes 129,673 124,096 Intangibles 810,838 729,813 ---------- ---------- $ 3,528,441 $ 3,281,088 ========== ==========
September 30, December 31, (000 omitted, except number of shares) 1994 1993 ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term bank loans $ 467 $ 8,935 Accounts payable 218,497 248,975 Accrued compensation 78,341 69,060 Other current liabilities 249,788 272,430 Current portion of long-term debt 2,264 2,295 ---------- ---------- 549,357 601,695 Payment service obligations 1,259,462 1,147,063 ---------- ---------- Total current liabilities 1,808,819 1,748,758 Long-term debt 732,027 624,662 Pension and other benefits 316,789 295,656 Other deferred items and insurance reserves 94,316 99,834 Minority interests 26,103 35,866 $4.75 Redeemable preferred stock 6,589 6,624 Common stock and other equity: Common stock, $1.50 par value, 200,000,000 shares authorized, 97,108,724 and 48,554,362 (pre-split) shares issued 145,663 72,832 Additional capital 304,799 378,814 Retained income 372,688 304,481 Cumulative translation adjustments (10,071) (9,889) Unearned employee benefits related to: Employee Equity Trust (144,003) (158,429) Guarantee of ESOP debt (30,236) (31,511) Unrealized loss on securities available for sale (17,334) Common stock in treasury, at cost, 4,556,506 and 2,536,354 (pre-split) shares (77,708) (86,610) ---------- ---------- Total common stock and other equity 543,798 469,688 ---------- ---------- $ 3,528,441 $ 3,281,088 ========== ========== See Notes to Consolidated Financial Statements.
THE DIAL CORP STATEMENT OF CONSOLIDATED INCOME
Quarter ended September 30, 1994 1993 (000 omitted, except per share data) ---------- ---------- Revenues $ 912,523 $ 770,401 ---------- ---------- Costs and expenses: Costs of sales and services 811,037 687,028 Unallocated corporate expense and other items, net 12,841 12,401 Interest expense 14,271 12,729 Minority interests 2,638 2,692 ---------- ---------- 840,787 714,850 ---------- ---------- Income before income taxes 71,736 55,551 Income taxes 26,308 18,367 ---------- ---------- Income from Continuing Operations 45,428 37,184 Income from discontinued operations 22,354 ---------- ---------- Income before extraordinary charge 45,428 59,538 Extraordinary charge for early retirement of debt, net of tax benefit of $11,833 (21,908) ---------- ---------- Net Income $ 45,428 $ 37,630 ========== ========== Income Per Common Share: Continuing operations $ 0.52 $ 0.44 Discontinued operations 0.26 Extraordinary charge (0.26) ---------- ---------- Net Income Per Common Share $ 0.52 $ 0.44 ========== ========== Dividends declared per common share $ 0.15 $ 0.14 ========== ========== Average outstanding common and equivalent shares 86,888 85,140 ========== ========== See Notes to Consolidated Financial Statements.
THE DIAL CORP STATEMENT OF CONSOLIDATED INCOME
Nine months ended September 30, 1994 1993 (000 omitted, except per share data) ---------- ---------- Revenues $ 2,629,373 $ 2,182,452 ---------- ---------- Costs and expenses: Costs of sales and services 2,379,669 1,976,652 Unallocated corporate expense and other items, net 37,690 37,863 Interest expense 39,713 39,708 Minority interests 3,041 3,226 ---------- ---------- 2,460,113 2,057,449 ---------- ---------- Income before income taxes 169,260 125,003 Income taxes 63,229 43,281 ---------- ---------- Income from Continuing Operations 106,031 81,722 Income from discontinued operations 32,120 ---------- ---------- Income before extraordinary charge 106,031 113,842 Extraordinary charge for early retirement of debt, net of tax benefit of $11,833 (21,908) ---------- ---------- Net Income $ 106,031 $ 91,934 ========== ========== Income Per Common Share: Continuing operations $ 1.22 $ 0.95 Discontinued operations 0.38 Extraordinary charge (0.26) ---------- ---------- Net Income Per Common Share $ 1.22 $ 1.07 ========== ========== Dividends declared per common share $ 0.44 $ 0.42 ========== ========== Average outstanding common and equivalent shares 86,488 85,616 ========== ========== See Notes to Consolidated Financial Statements.
THE DIAL CORP STATEMENT OF RETAINED INCOME
Nine months ended September 30, 1994 1993 (000 omitted) ---------- ---------- Balance, beginning of year $ 304,481 $ 234,655 Net income 106,031 91,934 Dividends on common and preferred shares (38,246) (36,215) Other 422 332 ---------- ---------- Balance, end of period $ 372,688 $ 290,706 ========== ========== See Notes to Consolidated Financial Statements.
THE DIAL CORP STATEMENT OF CONSOLIDATED CASH FLOWS
Nine months ended September 30, 1994 1993 (000 omitted) ---------- ---------- CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES: Net income $ 106,031 $ 91,934 Adjustments to reconcile net income to net cash provided (used) by operations: Depreciation and amortization 83,841 75,511 Deferred income taxes 7,128 19,916 Income from discontinued operations (32,120) Extraordinary charge for early retirement of debt 21,908 Gain on sale of property (2,368) (768) Other noncash items, net 7,672 29,361 Change in operating assets and liabilities: Receivables (258) (50,553) Inventories 2,624 (11,978) Funds and agents' receivables and payment service obligations, net 185,371 78,387 Accounts payable and accrued compensation (24,640) 35,969 Other assets and liabilities, net (51,670) (38,910) ---------- ---------- Net cash provided by operating activities 313,731 218,657 ---------- ---------- CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES: Capital expenditures (64,806) (57,869) Acquisitions of businesses and other assets, net of cash acquired (146,678) (100,891) Proceeds from sales and maturities of investments restricted for payment service obligations 241,195 450,546 Purchases of investments restricted for payment service obligations (410,983) (578,962) Proceeds from sale of shares of the Transportation Manufacturing and Service Parts Group 245,700 Proceeds from sale of property 6,770 16,737 Investment in and advances from discontinued operations, net 35,084 Other, net (89) (55) ---------- ---------- Net cash provided (used) by investing activities (374,591) 10,290 ---------- ---------- CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES: Proceeds from long-term borrowings 70,000 99,963 Payments on long-term borrowings (2,163) (182,725) Extraordinary charge for early retirement of debt (21,908) Net change in short-term borrowings 31,456 (66,066) Dividends on common and preferred stock (38,246) (36,215) Minority portion of subsidiary's special dividend (9,761) Proceeds from sale of treasury stock 24,291 23,933 Common stock purchased for treasury (38,642) Net change in receivables sold (18,800) Cash payments on interest rate swaps (9,317) (23,232) ---------- ---------- Net cash provided (used) by financing activities 66,260 (263,692) ---------- ---------- Net increase (decrease) in cash and cash equivalents 5,400 (34,745) Cash and cash equivalents, beginning of year 10,659 43,917 ---------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 16,059 $ 9,172 ========== ========== See Notes to Consolidated Financial Statements.
THE DIAL CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A--Basis of Preparation This information should be read in conjunction with the financial statements set forth in The Dial Corp Annual Report to Stockholders for the year ended December 31, 1993. Accounting policies utilized in the preparation of the financial information herein presented are the same as set forth in The Dial Corp's annual financial statements except as discussed in Note D below and as modified for interim accounting policies which are within the guidelines set forth in Accounting Principles Board Opinion No. 28. The interim consolidated financial information is unaudited. In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary to present fairly Dial's financial position as of September 30, 1994, and the results of operations for the quarters and nine months ended September 30, 1994 and 1993, and the cash flows for the nine months ended September 30, 1994 and 1993 have been included. Interim results of operations are not necessarily indicative of the results of operations for the full year. NOTE B--Stock Split On May 10, 1994, Dial's Board of Directors declared a two-for-one stock split which was paid on July 1, 1994, to shareholders of record as of June 1, 1994. Unless otherwise noted, all references in the financial statements with regard to number of shares of common stock and related dividends declared and income per share amounts have been restated to reflect the stock split. NOTE C--Acquisitions of Businesses and Other Assets During the first nine months of 1994, Dial completed its acquisition of fifteen flight catering kitchens from United Airlines ("UAL") and also acquired several small companies. All acquisitions were accounted for as purchases. The purchase prices, including acquisition costs, were allocated to the net tangible and intangible assets acquired based on estimated fair values at the dates of the respective acquisitions. The difference between the purchase prices and the related fair values of net assets acquired represents goodwill which is being amortized on a straight-line basis over 40 years. The fair value of patents and other intangible assets purchased in the acquisitions is amortized over their estimated useful lives. The results of the acquired operations have been included in the Statement of Consolidated Income from the dates of acquisition. The net cash paid, assets acquired and debt and other liabilities assumed in all acquisitions made during the first nine months of 1994 were as follows:
UAL Flight Kitchens Other Total (000 omitted) ----------- ----------- ----------- (000 omitted) Assets acquired: Property and equipment $ 62,553 $ 10,997 $ 73,550 Intangibles, primarily goodwill 61,940 11,919 73,859 Other assets 2,689 2,448 5,137 Debt and other liabilities assumed (5,868) (5,868) ----------- ----------- ----------- Net cash paid $ 127,182 $ 19,496 $ 146,678 =========== =========== ===========
NOTE D--Investments Restricted for Payment Service Obligations On January 1, 1994, The Dial Corp adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115 requires the classification of securities at acquisition into one of three categories: available for sale, held to maturity or trading. Dial has no securities classified in the trading category. Securities Available for Sale--Securities that are being held for indefinite periods of time, including those securities which may be sold in response to needs for liquidity or changes in interest rates are classified as securities available for sale and are carried at fair value, with the net, after-tax, unrealized holding gain or loss reported as a separate component of common stock and other equity, with no effect on current results of operations. The change in the unrealized loss on securities available for sale for the nine months ended September 30, 1994 is as follows:
(000 omitted) Unrealized loss on securities available for sale at January 1, 1994, the date of adoption of SFAS No. 115 $ (1,369) Net increase in unrealized loss, due principally to increases in interest rates (15,965) ----------- Unrealized loss on securities available for sale, September 30, 1994 $ (17,334) ===========
A summary of securities available for sale at September 30, 1994 is as follows:
Gross Gross Amortized Unrealized Unrealized (000 omitted) Cost Gains Losses Fair Value ----------- ----------- ----------- ----------- U. S Government Agencies $ 5,197 $ $ 28 $ 5,169 Obligations of states and political subdivisions 247,157 14,438 232,719 Corporate debt securities 63,383 5,190 58,193 Mortgage-backed and other asset-backed securities 96,415 45 7,802 88,658 Other securities 16,191 648 15,543 ----------- ----------- ----------- ----------- $ 428,343 $ 45 $ 28,106 $ 400,282 =========== =========== =========== ===========
Maturities of securities available for sale at September 30, 1994 are as follows:
Amortized (000 omitted) Cost Fair Value ----------- ----------- Due in 1995-1998 $ 123,523 $ 113,700 1999-2003 139,783 130,372 2004 and later 165,037 156,210
Actual maturities may differ from contractual maturities because the borrowers have the right to call or prepay certain obligations, sometimes without penalties. Mortgage-backed and other asset-backed securities not due at a single maturity date are included in the table above based on their expected maturity. Proceeds from the sale of securities during the nine months ended September 30, 1994 were approximately $231.8 million. Gross realized gains and losses on those sales were $1.6 million and $500,000, respectively, based on the specific identification method of determining cost. Securities Held to Maturity--Securities classified as held to maturity consist of securities that management has the ability and intent to hold to maturity, are carried at amortized cost, and are summarized as follows at September 30, 1994:
Gross Gross Amortized Unrealized Unrealized (000 omitted) Cost Gains Losses Fair Value ----------- ----------- ----------- ----------- U. S Government Agencies $ 59,587 $ $ 2,826 $ 56,761 Obligations of states and political subdivisions 54,590 3,320 51,270 Corporate debt securities 128,369 10,125 118,244 Other securities 76,870 971 75,899 ----------- ----------- ----------- ----------- $ 319,416 $ $ 17,242 $ 302,174 =========== =========== =========== ===========
Maturities of securities held to maturity at September 30, 1994 are as follows:
Amortized (000 omitted) Cost Fair Value ----------- ----------- Due in 1995-1998 $ 180,794 $ 174,700 1999-2003 87,277 79,210 2004 and later 51,345 48,264
Actual maturities may differ from contractual maturities because the borrowers have the right to call or prepay certain obligations, sometimes without penalties. There were no sales or transfers of securities held to maturity to another category of securities during the nine months ended September 30, 1994. NOTE E--Other Matters At September 30, 1994 and December 31, 1993, Dial classified as long-term debt $265 million and $225 million, respectively, of short-term borrowings supported by unused commitments under long- term revolving credit agreements. NOTE F--Income Taxes A reconciliation of the provision for income taxes and the amount that would be computed using statutory federal income tax rates on income before income taxes for the nine months ended September 30, is as follows:
1994 1993 (000 omitted) ------------ ------------ Computed income taxes at statutory federal income tax rate of 35% $ 59,241 $ 43,751 Nondeductible goodwill amortization 3,189 2,433 Minority interests 1,064 1,129 State income taxes 5,227 5,110 Foreign tax differences (538) 1,229 Tax-exempt income (3,453) (1,627) Adjustment of deferred tax assets at January 1, 1993 for enacted change in tax rate (4,386) Adjustment to estimated annual effective rate (1,000) (3,000) Other, net (501) (1,358) ----------- ----------- Provision for income taxes $ 63,229 $ 43,281 =========== ===========
NOTE G--Discontinued Operations The caption "Income from discontinued operations" in the Statement of Consolidated Income includes the following:
Periods ended September 30, 1993 -------------------------- Quarter Nine months (000 omitted) ------------ ------------ Transportation Manufacturing and Service Parts Group, income from operations (sold August 12, 1993) $ 427 $ 10,193 Gain on sale of segment, net of taxes of $47,393 40,151 40,151 Additional provisions for previously discontinued operations, net of tax benefit of $7,776 (18,224) (18,224) ------------ ------------ $ 22,354 $ 32,120 ============ ============
NOTE H--Supplementary Information--Revenues and Operating Income
Quarter ended Nine months ended September 30, September 30, ------------------------- -------------------------- 1994 1993 1994 1993 (000 omitted) ----------- ----------- ----------- ----------- Revenues: Consumer Products $ 363,399 $ 345,260 $ 1,101,854 $ 1,023,583 Services: Airline Catering and Other Food Services 235,570 152,522 633,188 441,526 Convention Services 124,097 89,944 387,504 239,639 Travel and Leisure and Payment Services (1) 189,457 182,675 506,827 477,704 ----------- ----------- ----------- ----------- Total Services (1) 549,124 425,141 1,527,519 1,158,869 ----------- ----------- ----------- ----------- $ 912,523 $ 770,401 $ 2,629,373 $ 2,182,452 =========== =========== =========== =========== Operating Income: Consumer Products $ 40,427 $ 35,442 $ 120,557 $ 104,544 Services: Airline Catering and Other Food Services 20,359 13,584 43,442 30,669 Convention Services 11,539 4,972 38,888 18,379 Travel and Leisure and Payment Services (1) 29,161 29,375 46,817 52,208 ----------- ----------- ----------- ----------- Total Services (1) 61,059 47,931 129,147 101,256 ----------- ----------- ----------- ----------- Total principal business segments 101,486 83,373 249,704 205,800 Unallocated corporate expense and other items, net (12,841) (12,401) (37,690) (37,863) ----------- ----------- ----------- ----------- $ 88,645 $ 70,972 $ 212,014 $ 167,937 =========== =========== =========== =========== (1) Dial's payment services subsidiary is investing increasing amounts in tax exempt securities. On a fully taxable equivalent basis, revenues and operating income are higher by $2,376,000 for the 1994 quarter and $985,000 for the 1993 quarter and by $5,312,000 and $2,503,000, respectively, for the 1994 and 1993 nine month periods.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results: There were no material changes in the nature of Dial's business, nor were there any other changes in the general characteristics of its operations as described and discussed in the first paragraph of the results section of Management's Discussion and Analysis of Results of Operations and Financial Condition presented in The Dial Corp Annual Report to Stockholders for the year ended December 31, 1993. Comparison of Third Quarter of 1994 with Third Quarter of 1993: In the third quarter of 1994, revenues increased 18 percent to $912.5 million, up from $770.4 million in the 1993 quarter. Third quarter income from continuing operations and net income was $45.4 million or $0.52 per share, up 18 percent on a per share basis from both 1993's income from continuing operations of $37.2 million or $0.44 per share, and net income of $37.6 million, also $0.44 per share. Excluding the $3.8 million or $0.04 per share one-time net benefit in the 1993 quarter from the 1 percent increase in the U.S. corporate income tax rate (signed into law during the 1993 third quarter but effective as of January 1, 1993), income from continuing operations and net income were up 30 percent on a per share basis in the quarter. Consumer Products The Consumer Products Group's revenues were up $18.1 million or 5 percent from those of the 1993 quarter. Operating income increased $5 million or 14 percent from that of the 1993 quarter. Operating margins improved to 11.1 percent from 10.3 percent in the 1993 quarter. Skin Care division's revenues and operating income declined $4.5 million and $2.6 million, respectively, from those of 1993's quarter. While soap market share was up from that of last year, reflecting consumer takeaway, actual sales volumes to distributors were down, causing the revenue and operating declines. Lower marketing expenses and lower raw material and process costs partially offset the decline in revenue. The Food division's revenues and operating income increased $3.7 million and $932,000 respectively, from those of the 1993 quarter. Sales of most food products except microwaveables were up from last year's quarter, while lower meat costs also contributed to increased operating income. The Household division's third quarter revenues were up slightly while operating income increased $2 million, due mostly to lower marketing expenses and manufacturing costs. Laundry division revenues for the quarter were up $16.4 million while operating income was up $2.9 million, led by sales volume increases in Purex liquid detergents. Lower raw material costs also helped increase operating income. International division's revenues increased $2.2 million for the quarter, driven by substantially higher sales in Mexico, Canada, and Germany. Operating income was up $1.7 million due to these sales increases and to lower costs. Services Combined Services revenues were $549.1 million, $124 million (29 percent) greater than the 1993 quarter's amounts, while operating income of $61.1 million was up $13.1 million (27 percent). Both continue to be aided by the 1993 acquisitions of convention services businesses and the 1994 addition of the United Airlines flight kitchens. Airline Catering and Other Food Services. These companies' revenues and operating income of $235.6 million and $20.4 million, respectively, were up $83 million (54 percent) and $6.8 million (50 percent) from those of 1993's quarter, as this year's quarter benefited from having all recently acquired flight kitchens operational. Operating margins for the segment were 8.6 percent in the quarter, down slightly from 8.9 percent in last year's third quarter, as several of the new flight kitchens were still in their start-up phase and had not reached full efficiency. Convention Services. The Convention Services companies' revenues and operating income of $124.1 million and $11.5 million, respectively, were $34.2 million (38 percent) and $6.6 million (132 percent) greater than the 1993 quarter's levels. Operating margins were 9.3 percent, up from 5.5 percent in 1993's third quarter. This year's quarter benefited from the 1993 (United Exposition Service Co., Inc. and Andrews, Bartlett and Associates, Incorporated) and other recent smaller acquisitions. In addition, the achievement of planned operating efficiencies for the merged operations contributed to 1994's operating income, while last year's quarter included only the United Exposition acquisition. The 1994 quarter also benefited from World Cup business. Travel and Leisure and Payment Services. Revenues of these companies were up $8.2 million (4 percent) to $191.8 million, while operating income was up $1.2 million (4 percent), both on a fully taxable equivalent basis. Operating margins declined very slightly to 16.4 percent from 16.5 percent in 1993, also on a fully taxable equivalent basis. Most of Dial's travel and leisure companies experience their highest level of activity in the third quarter. Canadian transportation companies' revenue and earnings increased about 6 percent during the third quarter, but that translated into flat results in U.S. dollars, as the Canadian dollar's exchange rate fell 5 percent from that of the 1993 quarter. U.S. dollar revenue increased $916,000 while operating income was unchanged. Revenue from newly purchased routes and higher Courier Express and sightseeing, charter, and snowfield revenues were partially offset by lower passenger ridership. Passenger traffic continues to be affected by general economic uncertainties and by low airfares on medium and long haul destinations. Duty Free and shipboard concession revenues were up $3.9 million due to substantially more passenger days than last year, offset partially by lower concession revenues due to the loss of a major airport contract at Dulles International Airport this spring. Operating income was up only slightly due to an increase in the sales of lower margin items. Cruise revenues were down $4.4 million from 1993's quarter due to fewer passenger days and lower passenger yields. Operating results were down $3.9 million due primarily to the lower revenues and increased marketing expenses. Aircraft services revenues were up $4 million from last year's quarter, with operating income up $709,000. Both increases were due to revenues generated by four new airport contracts. On a fully taxable equivalent basis, payment services revenue decreased $1.6 million for the quarter due principally to cancellation of certain money order agents who presented undue credit risk. In spite of lower revenue, operating income increased $2.1 million due to lower operating costs. Interest Expense Interest expense increased $1.5 million from 1993's quarter, as short-term rates and average outstanding debt were higher in 1994's quarter. In last year's third quarter, proceeds from the sale of Dial's transportation manufacturing and service parts group were used initially to reduce short-term debt, but since that time, Dial has borrowed to make acquisitions to replace the manufacturing business. Income Taxes The provision for income taxes for the 1993 third quarter includes a net benefit of approximately $3.8 million, or $0.04 per share, from accounting for the effects of a 1 percent increase in the U.S. corporate income tax rate effective as of January 1, 1993, which was signed into law on August 10, 1993 (Omnibus Budget Reconciliation Act of 1993). The net benefit represents the favorable impact of the increase on deferred tax assets at January 1, 1993 ($4.4 million), less the increased tax expense on 1993 income through June 30, 1993 ($600,000). Comparison of First Nine Months of 1994 to the First Nine Months of 1993: Revenues for the first nine months of 1994 increased 20 percent to $2.6 billion from $2.2 billion in the same period of 1993. For the first nine months of 1994, income from continuing operations and net income was $106 million, up from 1993's income from continuing operations of $81.7 million. On a per share basis, the 1994 period's income from continuing operations of $1.22 per share was 28 percent higher than 1993's $0.95. Excluding the $4.4 million, or $0.05 per share, one-time benefit in the 1993 period from the effects of the 1 percent increase in the U.S. corporate income tax rate on January 1, 1993 deferred tax assets, income per share from continuing operations for the nine months was up 36 percent. Consumer Products For the first nine months of 1994, the Consumer Products Group's revenues of $1.1 billion were up $78.3 million or 8 percent from those of the 1993 period. Operating income of $120.6 million was $16 million or 15 percent higher than that of the 1993 period. Operating margins improved to 10.9 percent from 10.2 percent in the 1993 period. Skin Care division's revenues and operating income declined $24.9 million and $6.8 million, respectively, from those of 1993's first nine months. In spite of lower soap sales to distributors, causing the revenue and operating income declines, market share of Dial soap was up from period to period, reflecting continuing healthy consumer acceptance. Lower marketing expenses partially offset the decline in operating income. The Food division revenues and operating income increased $4 million and $2.2 million, respectively, from those of the 1993 nine months. Sales of most food products except microwaveables were up from last year's period, while lower meat costs also contributed to increased operating income. The Household division's first nine months' revenues were up $46 million while operating income increased $10.4 million. The 1994 period includes $44 million more revenue and $9 million more operating income from the Renuzit product line acquired in May of 1993, accounting for most of the improvement. Laundry division revenues for the nine months of 1994 were up $48 million while operating income was up $5.9 million, led by sales volume increases in Purex liquid detergents. Lower raw material costs also helped increase operating income. International division's revenues increased $5 million for the nine months, driven by substantially higher sales in Mexico, Canada, and Germany. Operating income was up $4.2 million due to these sales increases and to lower costs. Services Combined Services revenues for the first nine months of 1994 were $1.5 billion, $369 million (32 percent) greater that of the 1993 period. Operating income of $129.1 million was $27.9 million (28 percent) higher. Both continue to be aided by 1993 acquisitions of convention services businesses and the 1994 addition of the United Airlines flight kitchens. Airline Catering and Other Food Services. These companies' revenues and operating income of $633.2 million and $43.4 million, respectively, were up $191.7 million (30 percent) and $12.8 million (29 percent) from those of 1993's first nine months. Operating margins for both periods were 6.9 percent. As discussed previously, several recently acquired kitchens were still in their start-up phase and had not reached full efficiency. Convention Services. The Convention Services companies' revenues and operating income of $387.5 million and $38.9 million, respectively, were $147.9 million (62 percent) and $20.5 million (112 percent) greater than those of the 1993 period. Operating margins were 10.0 percent, up from 7.7 percent in the 1993 period. This year benefited from the 1993 (United Exposition Service Co., Inc. and Andrews, Bartlett and Associates, Incorporated) and other recent smaller acquisitions as well as the achievement of planned operating efficiencies for the merged operations. Last year's period included only the United Exposition acquisition from May of 1993. The 1994 period also benefited from World Cup business. Travel and Leisure and Payment Services. For the first nine months of 1994, revenues of these companies were $512.1 million, up $31.9 million (7 percent) while operating income of $52.1 million was down 5 percent, compared with the same period of 1993, all on a fully taxable equivalent basis. Operating margins were 10.2 percent (on a fully taxable equivalent basis), down from the 1993 period's 11.4 percent. Canadian transportation companies' revenue decreased $5.9 million while operating income was down $660,000 in U. S. dollars. In Canadian dollars, revenue increased about $2.6 million as revenue from newly purchased routes and higher Courier Express and sightseeing, charter, and snowfield revenues more than offset decreases in passenger ridership. Passenger traffic continues to be affected by general economic uncertainties and low airfares on medium and long haul destinations. Operating income in Canadian dollars was up slightly due mostly to the revenue increases. As discussed previously, the Canadian-to-U.S. exchange rate worsened this year almost 7 percent compared to 1993's first nine months. Duty Free and shipboard concession revenues were up $19 million due to a 30 percent increase in passenger days, offset partially by lower concession revenues due to the loss of a major airport contract at Dulles International Airport this spring and reduction of international flights at two other airports. Operating income was up $1.8 million due primarily to higher sales. Cruise revenues were down $4.9 million from 1993's first nine months due to fewer passenger days and lower passenger yields. Operating results were down $9.7 million due primarily to the revenue decrease and increased marketing expenses. Aircraft services revenues were up $5.6 million from that of last year's nine months, with operating income up $1.1 million. Both increases were due to revenue generated by six new airport contracts. On a fully taxable equivalent basis, payment services revenue increased $5.4 million due to higher dispenser fee and service charge revenue, offset somewhat by cancellation of certain money order agents who presented undue credit risks. Operating income increased $3.5 million due to revenue increases and lower operating costs including lower provisions for credit losses. Interest Expense Interest expense for the first nine months of 1994 was about even with that of 1993's period. The reduction in interest expense this year resulting from the prepayment of certain high-coupon, fixed-rate debt at the end of 1993's third quarter was offset by the combination of higher debt levels related to expenditures for acquisitions in the consumer products, airline catering and convention services businesses (starting in May of 1993 and continuing throughout the last quarter of 1993 and the first nine months of 1994) and higher short-term interest rates during 1994. Income Taxes Income taxes for the 1993 nine months includes the $4.4 million, or $0.05 per share, favorable impact of the increase on the deferred tax assets at January 1, 1993 from accounting for the effects of a 1 percent increase in the U.S. corporate income tax rate discussed previously. Liquidity and Capital Resources: The Dial Corp's total debt at September 30, 1994 was $734.8 million compared with $635.9 million at December 31, 1993. The debt-to-capital ratios at September 30, 1994 and December 31, 1993 were 0.56 to 1 and 0.55 to 1, respectively. The increase in debt was attributable primarily to expenditures for acquisitions made during the first nine months of 1994 and to an increase in working capital requirements. In July, 1994 a Shelf Registration filed with the Securities and Exchange Commission became effective. Under the Shelf Registration, Dial can issue up to an aggregate $500 million of debt and/or equity securities. No debt has been issued and there is no intention to issue any equity securities at the present time. The filing increases Dial's financing flexibility in the future. As discussed further in Note C of Notes to Consolidated Financial Statements, during the first nine months of 1994 Dial completed the acquisition of the United Airlines flight catering kitchens and acquired several small companies. The combined purchase price for all 1994 acquisitions was $147 million. Property and equipment and intangibles increased as a result of these acquisitions which were financed through cash flow from operations and additional long-term debt. Dial's payment service operations generate funds from the sale of money orders and other payment instruments. The proceeds of such sales are invested, in accordance with applicable state laws, in highly liquid debt instruments (classified, along with cash in transit from agents, as "Funds and agents' receivables restricted for payment service obligations") and in a portfolio of high- quality investments (more than 97 percent have ratings of A- or above or are collateralized by federal agency securities), including federal, state and municipal obligations, asset-backed securities and corporate debt securities (classified as "Investments restricted for payment service obligations"). These funds are ultimately used to satisfy the liability to pay, upon presentment, the face amount of such money orders and other payment instruments. Fluctuations in the balances of payment service assets and obligations result from varying levels of sales of money orders and other payment instruments, the timing of the collections of agents' receivables and the timing of the presentment of such instruments. There were no other material changes in The Dial Corp's financial condition nor were there any substantive changes relative to matters discussed in the Liquidity and Capital Resources section of Management's Discussion and Analysis of Results of Operations and Financial Condition as presented in The Dial Corp Annual Report to Stockholders for the year ended December 31, 1993. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit No. 11 - Statement Re Computation of Per Share Earnings. Exhibit No. 27 - Financial Data Schedule (b) No Reports on Form 8-K have been filed by the registrant during the quarter for which this report is filed. 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. THE DIAL CORP (Registrant) November 10, 1994 By /s/Richard C. Stephan ------------------------ Richard C. Stephan Vice President-Controller (Chief Accounting Officer and Authorized Officer) EX-11 2 EXHIBIT 11 FOR THE DIAL CORP 3RD QTR 10-Q Exhibit 11 Page 1 of 2 THE DIAL CORP STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (000 omitted)
Quarter ended September 30, ---------------------------- Primary: 1994 1993 ------------ ------------ Net income $ 45,428 $ 37,630 Less: Preferred stock dividends (281) (280) Subsidiary dilutive securities (17) ------------ ------------ $ 45,130 $ 37,350 ============ ============ Average common shares outstanding (1) before common equivalents 85,275 84,012 Common equivalent stock options 1,613 1,128 ------------ ------------ 86,888 85,140 ============ ============ Net income per share (dollars) $ 0.52 $ 0.44 ============ ============ (1) The average outstanding common and equivalent shares does not include 6,898 shares held by the Employee Equity Trust (the "Trust") at September 30, 1994. Shares held by the Trust are not considered outstanding for net income per share calculations until the shares are released from the Trust.
Quarter ended September 30, ------------------------------------------------------- 1994 1993 -------------------------- ---------------------------- Common Common Fully Diluted: Shares Income Shares Income ------------ ------------ ------------ ------------ Average common and equivalent shares and net income per above 86,888 $ 45,130 85,140 $ 37,350 Common equivalent stock options ------------ ------------ ------------ ------------ 86,888 $ 45,130 85,140 $ 37,350 ============ ============ ============ ============ Net income per share (dollars) $ 0.52 $ 0.44 ============ ============
Exhibit 11 Page 2 of 2 THE DIAL CORP STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (000 omitted)
Nine months ended September 30, ---------------------------- Primary: 1994 1993 ------------ ------------ Net income $ 106,031 $ 91,934 Less: Preferred stock dividends (842) (841) Subsidiary dilutive securities (17) ------------ ------------ $ 105,172 $ 91,093 ============ ============ Average common shares outstanding (1) before common equivalents 84,833 84,144 Common equivalent stock options 1,655 1,472 ------------ ------------ 86,488 85,616 ============ ============ Net income per share (dollars) $ 1.22 $ 1.07 ============ ============ (1) The average outstanding common and equivalent shares does not include 6,898 shares held by the Employee Equity Trust (the "Trust") at September 30, 1994. Shares held by the Trust are not considered outstanding for net income per share calculations until the shares are released from the Trust.
Nine months ended September 30, ------------------------------------------------------- 1994 1993 -------------------------- ---------------------------- Common Common Fully Diluted: Shares Income Shares Income ------------ ------------ ------------ ------------ Average common and equivalent shares and net income per above 86,488 $ 105,172 85,616 $ 91,093 Common equivalent stock options ------------ ------------ ------------ ------------ 86,488 $ 105,172 85,616 $ 91,093 ============ ============ ============ ============ Net income per share (dollars) $ 1.22 $ 1.07 ============ ============
EX-27 3 EXHIBIT 27 FOR THE DIAL CORP 3RD QTR 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DIAL CORP'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994 AND FROM THE DIAL CORP'S FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000
Exhibit 27 Page 1 of 2 THE DIAL CORP FINANCIAL DATA SCHEDULE DEC-31-1994 DEC-31-1993 SEP-30-1994 DEC-31-1993 9-MOS YEAR 16,059 10,659 0 0 197,726 199,996 21,668 22,597 217,989 216,837 992,300 1,052,604 1,420,718 1,307,729 616,595 567,005 3,528,441 3,281,088 Exhibit 27 Page 2 of 2 1,808,819 1,748,758 732,027 624,662 145,663 72,832 6,589 6,624 0 0 398,135 396,856 3,528,441 3,281,088 1,101,854 1,420,173 2,629,373 3,000,342 981,297 1,280,960 2,379,669 2,725,049 37,690 50,061 0 0 39,713 49,965 169,260 171,649 63,229 61,376 106,031 110,273 0 32,120 0 (21,908) 0 0 106,031 120,485 1.22 1.40 1.22 1.40
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