<PAGE> 1
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 June 29, 1996
Commission file number 1-11793
THE DIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 51-0374887
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1850 NORTH CENTRAL AVENUE
PHOENIX, ARIZONA 85004-4525
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (602) 207-2800
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
----------- -----------
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE DIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(000 OMITTED)
<TABLE>
<CAPTION>
June 29, December 30,
1996 1995
-------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,441 $ 5,884
Receivables 55,106 39,647
Inventories 155,587 153,813
Deferred income taxes 24,322 32,301
Other current assets 11,545 3,418
--------- --------
Total current assets 251,001 235,063
Property and equipment 213,533 201,076
Deferred income taxes 27,291 26,881
Intangibles 330,611 334,708
Other assets 778 677
--------- --------
$823,214 $798,405
========= ========
LIABILITIES AND DIAL INVESTMENT AND
ADVANCES
Current Liabilities:
Short-term bank loans $ 91 $ 317
Trade accounts payable 66,066 79,502
Income taxes payable 9,025 2,765
Other current liabilities 86,257 106,266
Current portion of long-term debt 550
--------- --------
Total current liabilities 161,439 189,400
Long-term debt 2,453
Pension and other benefits 104,443 103,137
Other liabilities 7,324 7,185
Dial investment and advances 550,008 496,230
--------- --------
$823,214 $798,405
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 3
THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Quarter Ended
--------------------------
June 29,1996 July 1,1995
------------ ------------
(000 omitted)
<S> <C> <C>
Net sales $353,758 $ 363,893
------------ -----------
Costs and expenses:
Cost of products sold 185,472 185,672
Selling, general and administrative expenses 125,653 127,087
------------ -----------
311,125 312,759
------------ -----------
Operating income 42,633 51,134
------------ -----------
Interest expense 4,818 5,204
Spin-off transaction costs 4,000
------------ -----------
8,818 5,204
------------ -----------
Income before income taxes 33,815 45,930
Income taxes 14,526 18,062
------------ -----------
NET INCOME $ 19,289 $ 27,868
============ ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 4
THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------
June 29,1996 July 1,1995
-------------- -------------
(000 omitted)
<S> <C> <C>
Net sales $706,150 $701,755
------------ ---------
Costs and expenses:
Cost of products sold 358,823 358,555
Selling, general and administrative expenses 268,352 258,264
------------ ---------
627,175 616,819
------------ ---------
Operating income 78,975 84,936
------------ ---------
Interest expense 9,421 9,547
Spin-off transaction costs 4,000
------------ ---------
13,421 9,547
------------ ---------
Income before income taxes 65,554 75,389
Income taxes 26,657 29,274
------------ ---------
NET INCOME $ 38,897 $ 46,115
============ =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 5
THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------
June 29,1996 July 1,1995
-------------- -------------
(000 omitted)
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING
ACTIVITIES:
Net income $ 38,897 $ 46,115
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,722 15,220
Deferred income taxes 7,735 7,843
Change in operating assets and liabilities:
Receivables (10,462) 30,185
Inventories (1,774) 7,502
Trade accounts payable (13,436) (31,764)
Other assets and liabilities, net (21,969) (47,955)
--------- ---------
Net cash provided by operating activities 13,713 27,146
--------- ---------
CASH FLOWS PROVIDED (USED) BY INVESTING
ACTIVITIES:
Capital expenditures (22,950) (12,724)
Proceeds from sales of property and equipment 367 578
--------- ---------
Net cash used by investing activities (22,583) (12,146)
--------- ---------
CASH FLOWS PROVIDED (USED) BY FINANCING
ACTIVITIES:
Payments on long-term borrowings (3,003) (523)
Net change in short-term bank loans (226) 215
Net change in receivables sold (4,997) (14,244)
Cash transfers (to) from Dial, net 15,653 (1,972)
--------- ---------
Net cash provided (used) by financing activities 7,427 (16,524)
--------- ---------
Net decrease in cash and cash equivalents (1,443) (1,524)
Cash and cash equivalents, beginning of year 5,884 5,897
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,441 $ 4,373
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
THE DIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A. BASIS OF PREPARATION
On July 25, 1996, the Board of Directors of The Dial Corp ("Dial") declared a
dividend (the "Distribution") to effect the spin-off of its Consumer Products
Business. The dividend was paid on August 15, 1996 to stockholders of record as
of August 5, 1996. Each Dial stockholder received a dividend of one share of
common stock of The Dial Corporation, which after the Distribution owns and
operates the Consumer Products Business previously conducted by Dial.
Concurrently with the Distribution, the name of The Dial Corp was changed to
Viad Corp.
The Consolidated Financial Statements present the financial position, results of
operations and cash flows of the divisions and subsidiaries comprising the
Consumer Products Business (the "Company") of Dial as if the Company had been
formed as a separate entity for all periods presented. Dial's historical cost
basis of the assets and liabilities have been carried over to the Company. All
material intercompany balances and transactions among the entities comprising
the Company have been eliminated. Per share data for net income has not been
presented, as the Company was not a publicly held company during the periods
presented.
These financial statements should be read in conjunction with the financial
statements set forth in The Dial Corp Consumer Products Business Combined
Financial Statements and the notes thereto set forth in The Dial Corporation
Form 10/A (Amendment No. 2) declared effective by the Securities and Exchange
Commission on July 30, 1996.
Accounting policies utilized in the preparation of these financial statements
are the same as set forth in such Combined Financial Statements except as
modified for interim accounting policies which are within the guidelines set
forth in Accounting Principles Board Opinion No. 28, "Interim Financial
Reporting."
The interim combined financial statements are unaudited. In the opinion of
management, all adjustments, consisting only of normal recurring accruals,
necessary to present fairly the financial position as of June 29, 1996, the
results of operations for the quarters and six months ended June 29, 1996 and
July 1, 1995, and the cash flows for the six months ended June 29, 1996 and July
1, 1995 have been included. Interim results of operations are not necessarily
indicative of the results of operations for the full year.
<PAGE> 7
NOTE B. 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 six months ended June 29, 1996 and July 1, 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- ------------------
(000 omitted)
<S> <C> <C>
Computed income taxes at statutory federal
income tax rate of 35% $ 22,944 $ 26,386
Nondeductible goodwill amortization 497 700
State income taxes 2,605 2,185
Spin-off transaction costs 1,400
Other, net (789) 3
----------------- ------------------
Provison for income taxes $ 26,657 $ 29,274
================= ==================
</TABLE>
NOTE C. RESTRUCTURING CHARGES AND ASSET WRITEDOWNS
In the third quarter of 1995, the Company recorded restructuring charges and
asset writedowns totaling $135.6 million to provide for a business-based
reorganization through plant closings, workforce reductions and correction of
certain product lines.
Severance pay and benefits and exit costs, primarily facility closure costs,
have been recognized in accordance with Emerging Issues Task Force Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." Remaining severance and exit cost reserves of $17.1 million at
June 29, 1996 are believed to be adequate and are expected to be paid utilizing
cash flow from operating activities. Severance and exit costs paid and charged
against such reserves in the first six months of 1996 amounted to $7.7 million.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS:
There were no material changes in the nature of the Company's business, nor were
there any other changes in the general characteristics of its operations as
described and discussed in the Results of Operations section of Management's
Discussion and Analysis of Financial Condition and Results of Operations
presented in The Dial Corporation Form 10/A (Amendment No. 2) declared effective
by the Securities and Exchange Commission on July 30, 1996.
The results for the second quarter and first six months of 1996 include $4.0
million of estimated transaction costs associated with the spin-off of the
Company.
COMPARISON OF SECOND QUARTER OF 1996 WITH SECOND QUARTER OF 1995:
Revenues for the second quarter of 1996 were $353.8 million, a decrease of 2.8%
from revenues in the comparable period in 1995. On a comparative basis, revenues
for the second quarter of 1996 would have been higher than last year by
approximately 4.5% after adjusting for the effects of everyday low pricing for
detergents effective April 1, 1996, the discontinuation of certain product
lines, and the sale of a foreign business. Operating income for the second
quarter of 1996 was $42.6 million, a decrease of $8.5 million or 16.6% versus
the second quarter of 1995. Operating margins declined to 12.1% in the second
quarter of 1996 from 14.1% in the second quarter of 1995.
Second quarter 1996 revenues for personal care products increased $21.1 million
over the second quarter of 1995. The increase was due to new products, lower
second quarter 1995 revenue related to a customer inventory reduction program
and growth in established soap brands and commercial markets. Operating income
increased by $0.8 million with the small increase relative to revenue reflecting
increased marketing spending to support Dial brands.
The food category's revenues for the second quarter of 1996 were up $2.2 million
over the same period of 1995 driven largely by market share growth in Armour
Vienna Sausage and Armour Treet luncheon meat business. Operating income
declined $0.6 million from the second quarter of 1995 primarily due to marketing
spending supporting new products including Big Ones and Ultimate Chili.
Revenues for household products decreased by $15.6 million resulting from
weakness in fabric softener and other businesses, the discontinuation of liquid
bleach and private label products, and lower Dial Dish Detergent volume when
compared to the product's introductory period last year. Operating income
declined $11.1 million related to lower volume and higher promotional spending
in some certain intensely competitive categories.
During the second quarter of 1996 versus the same period of 1995, detergent
revenues decreased by $21.6 million as a result of a strategy to reduce pricing
as well as trade spending. Second quarter market share was essentially unchanged
from the same quarter last year. Operating income has increased $1.7 million
over the second quarter of 1995 as a result of lower trade spending along with
reductions in manufacturing, transportation and distribution costs.
<PAGE> 9
Revenues for the Company's international business in the second quarter of 1996
increased by $3.8 million and operating income increased by $0.7 million over
the comparable period of 1995. The increases in revenue and operating income
were due to increased exports to Canada and the results of a foreign soap
manufacturer which was acquired in the third quarter of 1995.
COMPARISON OF FIRST SIX MONTHS OF 1996 TO THE FIRST SIX MONTHS OF 1995:
Revenues for the first six months of 1996 were $706.2 million, an increase of
0.6% from revenues in the comparable period in 1995. Operating income for the
first six months of 1996 was $79 million, a decrease of $6 million, or 7% versus
the first six months of 1995. Operating margins declined to 11.2% in the first
half of 1996 from 12.1% in the first six months of 1995.
Revenues for personal care products increased $32.1 million over the first six
months of 1995. The increase was due to new products, lower revenue in the
second quarter of 1995 related to a customer inventory reduction program and
growth in established soap brands and commercial markets. Operating income
increased by $.5 million with the small increase relative to revenue reflecting
increased marketing spending to support Dial brands.
The food category's revenues for the first six months of 1996 were up $7.3
million over the same period of 1995. The increase was driven largely by market
share growth in Armour Vienna Sausage and Armour Treet luncheon meats and lower
revenues in the first six months of 1995 resulting from the customer inventory
reduction program. Operating income declined $1.3 million from the first six
months of 1995 primarily due to marketing spending for new products including
Big Ones and Ultimate Chili.
Revenues for household products decreased by $19.5 million in the first six
months of 1996 compared to the same period in 1995. This change resulted from
weakness in fabric softener and other businesses, the discontinuation of liquid
bleach and private label products and lower Dial Dish Detergent volume when
compared to the product's introductory period last year. Operating income
declined $11.5 million related to lower volume and higher promotional spending
in certain intensely competitive categories.
Detergent revenues decreased by $21 million in the first six months of 1996
compared to the same period of 1995 as a result of a strategy to reduce pricing
as well as trade spending. Market share was up by .7 points over the same period
last year. Operating income increased $4.7 million over the first six months of
1995 as a result of lower trade spending along with reductions in manufacturing,
transportation and distribution costs.
Revenues for the Company's international business during the first six months of
1996 increased $5.5 million and operating income increased by $1.4 million over
the comparable period of 1995. The increases in revenue and operating income are
due to increased exports to Canada and the results of a foreign soap
manufacturer which was acquired in the third quarter of 1995.
<PAGE> 10
INCOME TAXES:
The effective tax rate for the first six months of 1996 was 40.7 percent, up
from 38.8 percent in the comparable period of 1995. The increase in the
effective tax rate results primarily from the non-deductibility of the spin-off
transaction costs.
LIQUIDITY AND CAPITAL RESOURCES:
During the first six months of 1996, the Company generated cash from operating
activities totaling $13.7 million compared to $27.1 million for the first six
months of 1995. Capital expenditures for the first six months of 1996 (net of
asset dispositions) were $22.5 million versus $12.1 million for the same period
of 1995.
The Company has participated in Dial's financing plan of selling receivables to
accelerate cash flow. Receivables sold but not yet collected under this plan
amounted to $71.7 million at June 29, 1996 and $76.8 million on July 1, 1995.
The proceeds from the sale of such receivables have been remitted to Dial. The
Company expects to establish a comparable receivables financing plan subsequent
to the Distribution.
There were no other material changes in the Company'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 Financial Condition and Results of Operations as presented in The Dial
Corporation Form 10/A (amendment No. 2) declared effective by the Securities and
Exchange Commission on July 30, 1996.
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule.
(b) A report on Form 8-K dated August 16, 1996 was filed by the
registrant during the quarter for which this report is filed. The Form
8-K reported under Item 5 that the Company's shares were listed on the
New York Stock Exchange (ticker symbol:DL).
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 Corporation
(Registrant)
August 22, 1996 By /s/ Lowell L. Robertson
----------------------------
Lowell L. Robertson
Vice President and Controller
(Chief Accounting Officer and
Authorized Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Dial
Corporation's form 10-Q for the quarterly period ended June 29, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-28-1996 DEC-30-1995
<PERIOD-END> JUN-29-1996 JUL-01-1995
<CASH> 4,441 4,373
<SECURITIES> 0 0
<RECEIVABLES> 55,106 77,226
<ALLOWANCES> 3,633 3,837
<INVENTORY> 155,587 148,304
<CURRENT-ASSETS> 251,001 254,337
<PP&E> 213,533 259,597
<DEPRECIATION> 210,710 251,488
<TOTAL-ASSETS> 823,214 853,993
<CURRENT-LIABILITIES> 161,439 144,520
<BONDS> 0 2,421
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 550,008 599,944
<TOTAL-LIABILITY-AND-EQUITY> 823,214 853,993
<SALES> 706,150 701,755
<TOTAL-REVENUES> 706,150 701,755
<CGS> 358,823 358,555
<TOTAL-COSTS> 358,823 358,555
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,421 9,547
<INCOME-PRETAX> 65,554 75,389
<INCOME-TAX> 26,657 29,274
<INCOME-CONTINUING> 38,897 46,115
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 38,897 46,115
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
