UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 28, 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
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $.01 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all Exchange Act
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
----------- -----------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
As of March 14, 1997, 95,913,395 shares of Common Stock ($.01 par value) were
outstanding and the aggregate market value of the Common Stock (based on its
closing price per share on such date) held by non affiliates was approximately
$1.52 billion.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENTS WHERE INCORPORATED
A portion of Proxy Statement for Annual Meeting of
Shareholders to be held May 29, 1997. Part III
Portions of the 1997 Annual Report to Shareholders. Part I,II and IV
Part I.
ITEM 1. BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS.
On July 25, 1996, the Board of Directors of The Dial Corp ("the Former
Parent") declared a dividend (the "Distribution") to effect the spinoff of its
Consumer Products Business. The dividend was paid on August 15, 1996, to
shareholders of record as of August 5, 1996. Each Dial shareholder received a
dividend of one share of common stock of The Dial Corporation ("the Company"),
which, after the Distribution, owns and operates the Consumer Products
Business previously conducted by the Former Parent. Concurrently with the
Distribution, the name of the Former Parent was changed to Viad Corp.
In connection with the Distribution, the Company filed a registration
statement on Form 10/A (Am. No. 2) with the Securities and Exchange
Commission, which was declared effective on July 30, 1996 ( the "Form 10").
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The Company operates in one business segment, nondurable consumer products.
These operations include the manufacturing and marketing of nondurable
consumer products sold primarily through grocery and other retail outlets.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
The Company is a leading producer and marketer of personal care, detergent,
air freshener and shelf-stable food products, with such well-known household
brands as Dial and Liquid Dial soaps, Purex detergents, Renuzit air fresheners
and Armour Star canned meats. The Company produced annual revenue of
approximately $1.4 billion and operating income (exclusive of restructuring
charges, discontinued inventories and other asset write-downs) of
approximately $125 million in 1996. In 1996, the Company was the leading
seller of antibacterial bar soaps in the United States, the second largest
seller of antibacterial liquid soaps in the United States, and the third
largest seller of bar soaps in the United States, measured by unit sales
(where, in each case, unit sales of soap are measured by ounces sold). The
Company was the third largest seller of detergents and the leader in the
growing value segment of the detergent market in the United States, measured
by standard cases sold in 1996. In the domestic market for air freshener
products, the Company was the second largest seller measured by dollar retail
sales in 1996. In the domestic market, the Company was the second largest
seller of canned meats, measured by both dollar retail sales and unit sales.
Soaps, detergents, air fresheners and canned meats core products represented
approximately 90% of revenues in 1996.
The Company operates production facilities and maintains sales offices in the
United States, Canada, Mexico, Guatemala and England and also conducts
business in certain other foreign countries. The Company employs
approximately 2,800 people and has seven manufacturing plants in the United
States. Currently, the Company's corporate headquarters are in Phoenix,
Arizona. The Company will be moving its corporate headquarters to
Scottsdale, Arizona, in mid-year 1997 as part of an extensive cost-cutting
program that included eliminating 250 positions, largely in management and
administration, and plans to eliminate more than half of its product lines by
mid-year 1997.
The Company's business strategy is to emphasize its four core brands: Dial
soaps, Purex detergents, Renuzit air fresheners and Armour Star canned meats.
Increasing focus on core brands, while discontinuing underperforming brands
and continuing to reduce the Company's cost structure, are intended to
generate savings for reinvestment in the future. In addition, the Company
plans to increase its international revenues through acquisitions and
strategic alliances.
Raw Materials
- --------------------
The Company believes that ample sources of raw materials are generally
available with respect to all of its major products. Paper, fats and oils,
detergent chemicals and meat are the raw materials that generally have the
most significant impact on the Company's costs. Generally, the Company
purchases such raw materials from a variety of suppliers. While the Company
believes that it can generally respond to price increases by increasing
sales prices, rapid increases in the prices of such raw materials could have
a short-term, adverse impact on results. In addition, the antibacterial agent,
Triclosan, which is the active ingredient used in Liquid Dial products, is
sourced from a single supplier. Although the Company has an adequate supply
of this ingredient for its current and foreseeable needs, a disruption in
this supply could also have a short-term, adverse impact on results.
Production Capacity
- ----------------------------
In general, the Company's manufacturing facilities are operating between five
and six days a week, with two to three shifts per day. Should additional
productive capacity become necessary, additional days of production and/or
additional shifts can be added relatively quickly.
In addition, the Company utilizes contract manufacturers for the production
of certain products. Contract manufacturers are selected on the basis of
their ability to reliably produce high quality products at a competitive cost.
In addition, the Company maintains alternative manufacturing arrangements to
ensure a ready supply of producers. Most contract manufacturing arrangements
can be canceled without significant penalty with 90 days' notice.
Patents and Trademarks
- ----------------------------------
United States patents are currently granted for a term of 17 years from the
date a patent application is filed. The Company owns a number of patents that
give the Company competitive advantages in the marketplace for the duration of
the patents.
United States trademark registrations are for a term of 10 years, renewable
every 10 years so long as the trademarks are used in the regular course of
trade. The Company maintains a portfolio of trademarks, representing
substantial goodwill in the businesses using these marks. The Company
considers these trademarks to have substantial importance and value.
Seasonality
- ----------------
The Company's business is not impacted significantly by seasonality.
However, in the past, marketing practices have caused the Company's revenue
and operating income to be highest in the fourth quarter. In the future, the
Company intends to manage its business to avoid significant variations in any
single quarter's revenue as a result of marketing practices or seasonality.
Working Capital Practices
- ------------------------------------
For information about working capital practices, refer to the information set
forth in Part II, Item 7 of this report.
Customers and Backlog
- ---------------------------------
The Company sells to thousands of customers, primarily in the United States,
including supermarkets, drug stores, wholesalers, mass merchandisers,
membership club stores, distributors and other outlets. The largest customer
of the Company in fiscal year 1996, Wal*Mart Stores, Inc (and its affiliate
SAM'S Club), accounted for approximately 16% of net sales. The Company's
payment terms to customers range from 30 to 60 days. Order backlog is not a
significant factor in the Company's business.
Competition
- -----------------
The Company competes primarily on the basis of brand equity, brand
advertising, customer service, product performance and product quality at
competitive retail price points. The Company's operations must compete with
numerous, well-established local, regional, national and international
companies, some of which are very large and act aggressively in obtaining and
defending their products' market shares and brands. The principal
competitors of the Company are, in the soap category, The Procter & Gamble
Company ("P&G"), Colgate-Palmolive Company ("Colgate") and Lever Brothers Co.,
a division of Unilever United States Inc. ("Lever"); in the detergent
category, P&G, Lever, Colgate, Church & Dwight Co. Inc. and USA Detergents; in
the air freshener category, S.C. Johnson, Clorox, P&G, Colgate and Reckitt &
Colman Inc.; and in the canned meat category, Hormel Foods Corp., American
Home Food Products Inc. and the Libby's division of Nestle.
Research and Development
- ---------------------------------------
The Company conducts research and development at its facility in Scottsdale,
Arizona. The Company engages primarily in applied research and development,
relying on outside sources for general research and development activities.
Approximately 120 employees are engaged in this function. The Company's
research and development expenditures totaled approximately $15.2 million,
$14.9 million and $15.3 million for 1996, 1995 and 1994, respectively.
The Company relies on industry and other sources, various attitude and usage
studies prepared by independent marketing firms on behalf of the Company, and
direct sales information from its largest customers to identify consumer needs
and anticipate shifts in consumer preferences, allowing the Company to
develop line extensions and new products to meet changing demands. The
Company's marketing and product development groups and research and
development laboratories work together to redesign and reformulate existing
products and to develop new products.
Government Regulation
- --------------------------------
Substantially all of the operations of the Company are, or may become subject
to, various federal laws and agency regulations. These include the Federal
Food, Drug, and Cosmetic Act, which is administered by the Food and Drug
Administration (the"FDA") and regulates the manufacturing, labeling, and sale
of the Company's over-the-counter drug and cosmetic products; the Federal
Insecticide, Fungicide, and Rodenticide Act and the Toxic Substances Control
Act, which are administered by the Environmental Protection Agency (the "EPA")
and regulate the Company's disinfectant products and all the substances used
in the manufacturing of its products, respectively; the Federal Meat
Inspection Act, which is administered by the Department of Agriculture and
regulates the Company's meat products; the Federal Hazardous Substances Act,
which is administered by the Consumer Product Safety Commission, and regulates
the labeling of the Company's household products; and the Fair Packaging and
Labeling Act, which is administered by the Federal Trade Commission (FTC), and
regulates the packaging and labeling of all the Company's products. The
Company's products also are subject to regulation by various state laws and
various state regulatory agencies. In addition, the Company is subject to
similar laws and regulations imposed by foreign jurisdictions.
Federal, state, local and foreign environmental compliance may from time to
time require changes in product formulation or packaging. Such changes have
not had, and are not expected to have, a material effect on revenues, capital
expenditures or earnings of the Company.
The FDA's regulation of most of the over-the-counter drug products in the
United States (such as the Dial antibacterial products), has remained in a
state of flux since the mid- 1970s, and many final rules regarding such
products have not been issued, and may not be issued for many years. In
addition, the FTC continually monitors the advertising practices of consumer
products companies with respect to claims made relating to product
functionality and efficacy.
Environmental
- --------------------
The Company is subject to the following United States environmental laws:
Clean Air Act, Comprehensive Environmental Response, Compensation and
Liability Act, Emergency Planning and Community Right-to-Know Act, Federal
Water Pollution Control Act, Oil Pollution Act of 1990, Resource Conservation
and Recovery Act, Safe Drinking Water Act, and Toxic Substances Control Act,
all as amended. The Company is subject to the United States environmental
regulations promulgated under these acts, and also is subject to state and
local environmental regulations, which have their foundation in the foregoing
United States environmental laws. The Company is further subject to the
environmental laws of Canada, Mexico, Guatemala and Great Britain.
As is the case with many companies, the Company faces exposure to actual or
potential claims and lawsuits involving environmental matters. Although there
are a number of pending environmental disputes involving the Company, the
Company has not suffered, and does not anticipate that it will suffer, a
material adverse effect as a result of any past, current or pending action by
any governmental agency or other party, or as a result of compliance with such
environmental laws and regulations.
At December 28, 1996, the Company had accrued approximately $13 million in
expenses related to the general clean-up and site preparation of various
closed plant sites in anticipation of the eventual sale of these properties.
These accruals are believed to be adequate and will be paid utilizing cash
flow from the Company's operations.
Employees
- ---------------
As of December 28, 1996, The Company employed approximately 2,800 individuals,
of whom approximately 1,350 were covered by collective bargaining agreements.
The Company announced in the third quarter of 1995 that it intended to close
six plants, which would result in a work force reduction of approximately 700
employees. By September 28, 1996, all six plants had been closed and by
December 28, 1996, a total of 691 of such employees had been terminated.
Additionally, in the third quarter of 1996, the Company announced that it
would take a one-time restructuring charge to provide for a business-based
reorganization through work force reductions and rationalization of product
lines. The management and administrative organization was streamlined by
discontinuing a number of underperforming brands and related assets and by
eliminating approximately 250 positions.
The Company believes that relations with its employees are satisfactory. No
collective bargaining agreements expire in 1997.
Sales
- --------
The Company's customers are served by a national sales organization of
approximately 200 employees. The sales organization is divided into four,
grocery sales regions plus specialized sales operations that sell to large
mass merchandisers, membership club stores, chain drug stores, vending and
military customers. In addition, customers are served by a national broker
sales organization and regional retail merchandising organizations. The
Company's sales representatives focus their efforts both on sales of products
to the Company's trade customers, as well as on designing and executing
programs to ensure sales to ultimate consumers. Programs directed at
consumers offer combinations of in-store merchandising, price reductions and
discounts, and include cooperative advertising efforts.
Promotion and Advertising
- ------------------------------------
The Company expends a significant portion of its revenues for the promotion
and advertising of its products. In the past three years, more than $1
billion has been spent for promotion and advertising. The Company believes
that such expenditures are necessary to maintain and increase market share in
an industry highly dependent on product image and quality, trade support and
consumer trends. The Company spent $381 million in 1996, or 27% of 1996 net
sales, for these purposes.
Distribution
- ----------------
Products are shipped from seven warehouses located at domestic manufacturing
facilities and 10 regional warehouses. Regional warehouses are operated by
third parties except for one company-owned and operated warehouse. Total
distribution space at regional warehouses is approximately 2,000,000 square
feet, and at warehouses located at manufacturing facilities, space totals
approximately 530,000 square feet. Outside carriers are principally used to
transport products.
In addition, in April 1996, two large distribution centers of approximately
450,000 square feet were established in St. Louis, Missouri, and Allentown,
Pennsylvania, for the distribution of detergent products. Shipments from
these centers and, to some extent, from detergent manufacturing facilities are
in lots of 28 pallets and 44,000 pounds. Efficiencies and lower costs are
attained because full pallets are shipped without warehouse personnel picking
and assembling product for shipment. In addition, these large distribution
centers use the Chep Mark 55, a four-way pallet that can be turned in any
direction and packed in a more compact manner, saving space on the trailers
and reducing damage in shipment.
The Company began a program of continuous, automatic replenishment of certain
of its trade customers' inventories in 1990. The primary objective of the
Continuous Replenishment Program is to improve service to customers and reduce
costs by shortening the order-to-delivery pipeline; i.e., by anticipating
customer needs based on historical sales, by shipping the product just before
those needs arise and by elimination of redundancy, errors and interruption
throughout the replenishment process. This is accomplished by using
information systems to track customer inventory levels and the movement of
each product at the customers' distribution centers and by managing the
customers' warehouse inventories. Since its inception, the Continuous
Replenishment Program has expanded, and sales under the Program currently
account for approximately 15% of the Company's net sales.
Restructuring Charges and Asset Write-Downs
- ----------------------------------------------------------------
See Note D of Notes to Consolidated Financial Statements, for information
concerning Restructuring Charges and Asset Write Downs.
ITEM 2. PROPERTIES.
The Company's headquarters occupies approximately 119,000 square feet of a
building in Phoenix, Arizona, leased from Viad Corp. The Company announced
in the third quarter of 1996 that it plans to vacate this facility as part of
its business-based reorganization. The Company has committed to a ten year
lease to secure a 130,000-square-foot, single-tenant building in Scottsdale,
Arizona, that is adjacent to its currently owned technical and administrative
facility described below. The Company will occupy the new facility in
mid-year 1997. The Company owns a 200,000-square-foot facility in
Scottsdale, Arizona, where its research, technical and certain
administrative activities are conducted.
The Company owns and operates seven plants in the United States, one plant in
Guatemala, one plant in Mexico and one plant in England. Principal
manufacturing plants are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
LOCATION SQUARE FEET PRODUCTS MANUFACTURED
- ----------------- ----------- ---------------------------------------------------------------------------
Aurora, IL 451,000 Bar Soaps
- ----------------- ----------- ---------------------------------------------------------------------------
Fort Madison, IA 447,000 Canned Meats, Microwaveable Meals, Corn Starch
- ----------------- ----------- ---------------------------------------------------------------------------
St Louis, MO 272,400 Fabric Softener, Dry and Liquid Laundry Detergents
- ----------------- ----------- ---------------------------------------------------------------------------
Bristol, PA 261,800 Dry Detergents
- ----------------- ----------- ---------------------------------------------------------------------------
West Hazleton, PA 214,470 Liquid Detergents, Ammonia, Scouring Pads, Fabric Softener and Liquid Soaps
- ----------------- ----------- ---------------------------------------------------------------------------
London, OH 140,000 Scouring Pads and Fabric Softeners
- ---------------- ----------- ---------------------------------------------------------------------------
Guatemala 100,000 Translucent Bar Soaps
- ----------------- ----------- ---------------------------------------------------------------------------
</TABLE>
Management believes that the facilities of the Company, in the aggregate, are
adequate and suitable for their purposes and that capacity is sufficient for
current needs.
ITEM 3. LEGAL PROCEEDINGS.
For information regarding legal matters, see Note O of Notes to the
Consolidated Financial Statements included herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during 1996.
OPTIONAL ITEM. EXECUTIVE OFFICERS OF REGISTRANT.
The names, ages and positions of the executive officers of the Company as of
March 15, 1997, are listed below:
<TABLE>
<CAPTION>
<S> <C> <C>
Position with Company and
Name Age Principal Business Affiliations During Past Five Years
- ------------------- --- ------------------------------------------------------
Malcolm Jozoff 57 Chairman, President and Chief Executive Officer
Prior to the Distribution, Mr. Jozoff served as
President and Chief Executive Officer of the
Consumer Products Business of the Former Parent,
positions to which he was appointed in May of 1996. From
1993 to 1995, he was Chairman and Chief
Executive Officer of Lenox, Inc., a manufacturer of
consumer durables. From 1967 to 1992, he was
employed by The Procter & Gamble Company, a
manufacturer of consumer products where, in 1990,
he achieved the positions of President-Health Care
Sector, Corporate Group Vice President and a
Member of the Executive Committee. Mr. Jozoff
also is a director of the Columbia Gas System, Inc.
and ChemTrak Incorporated. In 1993, in
connection with a civil proceeding brought by the
Securities and Exchange Commission, Mr. Jozoff
consented, without admitting or denying the
allegations, to the entry of an order enjoining
him from violating Section 10(b) of the
Securities Exchange Act of 1934.
Daniel J. King 44 Senior Vice President-Product Supply
Mr. King has served as Senior Vice President-Product
Supply since September 1996. From 1991 to 1996,
Mr. King served as the Company's Senior Vice
President- Customer Service.
Scott McHenry 45 Senior Vice President-Marketing and Sales
Mr. McHenry has served as the Senior Vice President-
Marketing and Sales since joining the Company in
October 1996. From 1991 to 1996, Mr. McHenry
served as a Principal of McKinsey & Company, an
international management consulting firm, which he
joined in 1983. While at McKinsey & Company, Mr.
McHenry primarily served packaged goods clients
and, in 1992, became co-leader of the North
American packaged goods practice.
Lowell L. Robertson 65 Senior Vice President and Controller
Mr. Robertson has served as Senior Vice President
and Controller since March 1997. He joined the
Company in July 1996 as Vice President and
Controller. From February to October 1995, Mr.
Robertson served as the Chief Financial Officer of
Megafoods Stores, Inc. From 1966 to 1994, Mr.
Robertson was an Audit Partner with Deloitte &
Touche LLP, an international public accounting firm.
Mark R. Shook 41 Senior Vice President-International
Mr. Shook has served as the Senior Vice President-
International since September 1996. From September
1990 to September 1996, Mr. Shook was an
Executive Vice President of the Company, serving as
General Manager, Food from September 1990 to
September 1993; General Manager, Food and
International from September 1993 to April 1994;
General Manager, Laundry and International from
April to September 1994; General Manager, Soaps
and Detergents from September 1994 to July 1995;
and General Manager, Personal Care from July 1995
to September 1996.
Robert B. Stearns 44 Senior Vice President and Chief Financial Officer
Mr. Stearns has served as Senior Vice President and
Chief Financial Officer of the Company since July
1996. From May 1995 to July 1996, he was the Vice
President-Corporate Development for The Dial Corp.
From April 1992 to May 1995, he was president of
R.B. Stearns and Company, a New York based
merchant bank focused on emerging markets. From
January 1991 to April 1992, he was managing director
in charge of investment banking (North America) for
UBS Securities, Inc., a New York investment bank.
Bernhard J. Welle 48 Senior Vice President-Human Resources
Mr. Welle has served as the Senior Vice President-
Human Resources since August 1996. Prior to that,
Mr. Welle was Vice President-Human Resources for
the Company since 1987.
</TABLE>
The term of office of the executive officers is until the next annual
organization meeting of the Board, which follows the Annual Meeting of
Shareholders, or until their successors shall be chosen.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is traded on the New York Stock Exchange. The
following table summarizes the high and low market prices as reported on the
New York Stock Exchange Composite Tape and the cash dividends declared for the
year ended December 28, 1996:
<TABLE>
<CAPTION>
SALES PRICE RANGE OF COMMON STOCK
CALENDAR QUARTER 1996 HIGH LOW
<S> <C> <C>
First N/A* N/A*
------ ------- -------
Second N/A* N/A*
------ ------- -------
Third $14.875 $11.125
------ ------- -------
Fourth $15.000 $13.250
------ ------- -------
</TABLE>
<TABLE>
<CAPTION>
DIVIDENDS DECLARED ON COMMON STOCK
<S> <C>
Calendar Quarter 1996
---------------- -----
Third $0.08
---------------- -----
Fourth $0.08
---------------- -----
</TABLE>
*Stock began trading on August 15, 1996.
As of March 14, 1997, there were 95,913,395 holders of record of the
Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA.
Applicable information is included in Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Applicable information is included in Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
1. Financial Statements--See Item 14 hereof.
2. Supplementary Data--See Condensed Consolidated Quarterly Results in
Exhibit 13.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding Directors of the Company is included in the
Company's Proxy Statement to be filed for the Annual Meeting of Shareholders,
to be held on May 29, 1997, and is incorporated herein and made a part hereof.
The information regarding executive officers of the Company is found as
an Optional Item in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
The information is contained in the Proxy Statement and is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information is contained in the Proxy Statement and is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of the report:
FINANCIAL STATEMENTS.
The following are included in Exhibit 13: Independent Auditors' Report and
Consolidated Financial Statements (Balance Sheet, Statement of Operations,
Statement of Cash Flows, Statement of Shareholders' Equity and Notes to
Consolidated Financial Statements).
EXHIBITS.
3 (a) Restated Certificate of Incorporation of the Company filed as Exhibit 3
(a) to the Company's Form 10/A (Am. No. 2), dated July 26, 1996, (the "Form
10") and is hereby incorporated by reference.
3 (b) Bylaws of the Company filed as Exhibit 3 (b) to the Form 10 are hereby
incorporated by reference.
4. Form of Rights Agreement between the Company and the Rights Agent named
therein filed as Exhibit 4 to the Form 10 is hereby incorporated by reference.
10 (a) Directors Indemnification Agreement, filed as Exhibit 10 (a) to the
Company's Form 10-Q, dated November 11, 1996, is hereby incorporated by
reference.
10 (b) Officers Indemnification Agreement, filed as Exhibit 10 (b) to the
Company's Form 10-Q, dated November 11, 1996, is hereby incorporated by
reference.
10 (c) Supplemental Capital Accumulation Plan Agreement, filed as Exhibit 10
(c) to the Company's Form 10-Q, dated November 11, 1996, is hereby
incorporated by reference.
10 (d) Supplemental Pension Plan Agreement, filed as Exhibit 10 (d) to the
Company's Form 10-Q, dated November 11, 1996, is hereby incorporated by
reference.
10 (e) The Company's 1996 Stock Incentive Plan, filed as Exhibit 10 (d) to the
Form 10, is hereby incorporated by reference.
10 (f) Annual Incentive Plan.*
10 (g) Form of Deferred Compensation Plan for the Directors of the Company,
filed as Exhibit 10 (e) to the Form 10, is hereby incorporated by reference.
10 (h) Form of the Company's Director's Charitable Award Program, filed as
Exhibit 10 (f) to the Form 10, is hereby incorporated by reference.
10 (i) Form of the Company's Deferred Compensation Plan, filed as Exhibit 10
(g) to the Form 10, is hereby incorporated by reference.
10 (j) Form of Employment Agreements with certain executive officers of the
Company, filed as Exhibit 10 (h) to the Form 10, is hereby incorporated by
reference.
10 (k) Employment Agreement between the Company and Malcolm Jozoff, filed as
Exhibit (i) to the Form 10, is hereby incorporated by reference.
10 (l) Form of the Company Employee Equity Trust, filed as Exhibit 10 (k) to
the Form 10, is hereby incorporated by reference.
10 (m) Credit Agreement filed as Exhibit 10 (j) to the Form 10, is hereby
incorporated by reference.
11. Statement Re: Computation of Per Share Earnings.*
13. Financial Information Set Forth in Annual Report to Securityholders.*
21. List of Subsidiaries of the Company.*
23. Consent of Independent Auditors.*
24. Power of Attorney.*
27. Financial Data Schedule.*
* Filed herewith.
(b) The Company filed no reports on Form 8-K during the fourth quarter of
1996.
SIGNATURES
Pursuant to the requirements of Section 13 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, in Phoenix, Arizona, on the 14th
of March, 1997.
THE DIAL CORPORATION
/s/ Malcolm Jozoff
Malcolm Jozoff
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Principal Executive Officer
Date: March 14, 1997 /s/ Malcolm Jozoff
Malcolm Jozoff
Chairman, President and Chief
Executive Officer
Principal Financial Officer
Date: March 14, 1997 /s/ Robert B. Stearns
Robert B. Stearns
Senior Vice President and Chief
Financial Officer
Principal Accounting Officer
Date: March 14, 1997 /s/ Lowell L.Robertson
Lowell L.Robertson
Senior Vice President and
Controller
Directors
Joy A. Amundson
Herbert M. Baum
Joe T. Ford
Thomas L. Gossage
Donald E. Guinn
Malcolm Jozoff
Michael T. Riordan
Dennis C. Stanfill
Barbara S. Thomas
A. Thomas Young
Date: March 14, 1997 /s/ Lowell L. Robertson
Lowell L. Robertson
Attorney in Fact
Exhibit 10f
Annual Incentive Plan
The Dial Corporation
November 21, 1996
Approved Plan Document
Contents
Page
Article 1. Establishment and Purpose 1
Article 2. Definitions 1
Article 3. Administration 4
Article 4. Eligibility and Participation 5
Article 5. Award Determination 6
Article 6. Payment of Final Awards 7
Article 7. Termination of Employment 8
Article 8. Covered Employees 8
Article 9. Rights of Participants 10
Article 10. Beneficiary Designation 11
Article 11. Change in Control 11
Article 12. Amendments 11
Article 13. Miscellaneous 12
The Dial Corporation
Annual Incentive Plan
Article 1. Establishment and Purpose
1.1 ESTABLISHMENT OF THE PLAN. The Dial Corporation, a Delaware
corporation (the "Company"), hereby establishes an annual incentive
compensation plan to be known as "The Dial Corporation Annual Incentive Plan"
(the "Plan"), as set forth in this document. The Plan permits the awarding of
annual bonuses to Employees of the Company, based on the achievement of
preestablished performance goals.
Upon approval by the Board of Directors of the Company, the Plan shall
become effective as of January 1, 1997 (the "Effective Date") and shall remain
in effect until December 31, 2006, or until earlier terminated by the Board.
1.2 PURPOSE. The primary purposes of the Plan are to: (a) motivate
participants toward achieving annual goals that are within group and/or
individual control, and are considered key to the Company's success; (b)
encourage teamwork among Participants in various segments of the Company; and
(c) reward performance with pay that varies in relation to the extent to which
the preestablished goals are achieved.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings
set forth below and, when the defined meaning is intended, the term is
capitalized:
2.1 "TARGET AWARD" means the various levels of incentive award
payouts which a Participant may earn under the Plan, as established by the
Committee pursuant to Sections 5.1 and 5.2 herein.
2.2 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of
the Company.
2.3 "CAUSE" means: (a) willful misconduct on the part of a
Participant that is materially detrimental to the Company; or (b) the
conviction of a Participant for the commission of a felony or crime involving
moral turpitude; provided, however, that if the Participant has entered into
an employment agreement that is binding as of the date of employment
termination, and if such employment agreement defines "Cause," such definition
of "Cause" shall apply. "Cause" under either (a) or (b) shall be determined in
good faith by the Committee.
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2.4 "CHANGE IN CONTROL." For the purpose of this Plan, a Change in
Control" shall mean:
(a) The acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (hereinafter "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of twenty percent (20%) or more of either (i) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or
(ii) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following acquisitions shall not constitute a
Change in Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any corporation pursuant
to a transaction which complies with clauses (i), (ii), and (iii) of
subsection (c) of this Section 2.4; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the effective date of this Plan whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individuals whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation of a reorganization, merger, consolidation, sale, or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than fifty
percent (50%) of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be,
of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, twenty percent (20%)
or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination, and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination; or
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
2.5 "CODE" means the Internal Revenue Code of 1986, as amended.
2.6 "COMMITTEE" means a committee of two (2) or more individuals,
appointed by the Board to administer the Plan, pursuant to Article 3 herein.
2.7 "COMPANY" means The Dial Corporation, a Delaware corporation
(including any and all Subsidiaries), and any successor thereto.
2.8 "COVERED EMPLOYEE" means a Participant who, as of the date of
payout of a Final Award, is one of the group of "covered employees," as
defined in the Regulations promulgated under Code Section 162(m), or any
successor statute.
2.9 "DISABILITY" means a disability as determined under the
disability plan of the Company or Subsidiary applicable to the Participant.
2.10 "EFFECTIVE DATE" means the date the Plan becomes effective, as
set forth in Section 1.1 herein.
2.11 "EMPLOYEE" means a nonunion, full-time, salaried employee of the
Company. The plan excludes any employees on a sales incentivevs plan and
temporary employees.
2.12 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
2.13 "FINAL AWARD" means the actual award earned during a Plan Year
by a Participant, as determined by the Committee following the end of the Plan
Year.
2.14 "PARTICIPANT" means an Employee who is actively participating in
the Plan.
2.15 "PLAN" means The Dial Corporation Annual Incentive Plan, as set
forth herein.
2.16 "PLAN YEAR" means the Company's fiscal year.
2.17 "RETIREMENT" shall have the meaning ascribed to such term in the
Company's tax-qualified retirement pension plan.
2.18 "SUBSIDIARY" means any corporation (other than the Company) in
which the Company or a Subsidiary of the Company owns fifty percent (50%) or
more of the total combined voting power of all classes of stock.
2.19 "TARGET AWARD" means the award to be paid to Participants when
the Company meets "targeted" performance results, as established by the
Committee.
2.20 "ACTUAL ANNUAL EARNINGS" means the actual earnings that will be
used to calculate the final award.
Article 3. Administration
3.1 THE COMMITTEE. The Plan shall initially be administered by the
Executive Compensation Committee of the Board. Subject to the terms of this
Plan, the Board may appoint a successor Committee to administer the Plan. The
members of the Committee shall be appointed by, and shall serve at the
discretion of, the Board.
3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees who
shall participate in the Plan; determine the size and types of Target Awards
and Final Awards; determine the terms and conditions of Target Awards in a
manner consistent with the Plan; construe and interpret the Plan and any
agreement or instrument entered into under the Plan; establish, amend, or
waive rules and regulations for the Plan's administration; and (subject to the
provisions of Article 8 herein) amend the terms and conditions of any
outstanding Target Award to the extent such terms and conditions are within
the discretion of the Committee as provided in the Plan. Further, the
Committee shall make all other determinations which may be necessary or
advisable for the administration of the Plan. As permitted by law, the
Committee may delegate its authorities as identified hereunder.
3.3 DECISIONS BINDING. All determinations and decisions of the
Committee as to any disputed question arising under the Plan, including
questions of construction and interpretation, shall be final, binding, and
conclusive upon all parties.
<PAGE>
3.4 INDEMNIFICATION. Each person who is or shall have been a member
of the Committee, or of the Board, shall be indemnified and held harmless by
the Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may
be a party, or in which he or she may be involved by reason of any action
taken or failure to act under the Plan, and against and from any and all
amounts paid by him or her in settlement thereof, with the Company's approval,
or paid by him or her in satisfaction of any judgment in any such action,
suit, or proceeding against him or her, provided he or she shall give the
Company an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under
the Company's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
Article 4. Eligibility and Participation
4.1 ELIGIBILITY. Employees as defined in 2.11 shall be eligible to
participate in the Plan.
4.2 PARTICIPATION. Participation in the Plan shall be determined
annually by the Committee. Employees who are chosen to participate in the Plan
in any given Plan Year shall be so notified in writing, and shall be apprised
of the performance measure(s), performance goal(s), and related Award
Opportunities for the relevant Plan Year, as soon as is practicable.
4.3 PARTIAL PLAN YEAR PARTICIPATION. Except as provided in Article 8
herein, an Employee who becomes eligible after the beginning of a Plan Year
may participate in the Plan on a prorata basis for that Plan Year. The
Committee, in its sole discretion, retains the right to prohibit or allow
participation in the initial Plan Year of eligibility for any of the
aforementioned Employees.
4.4 NO RIGHT TO PARTICIPATE. No Participant or other Employee shall
at any time have a right to be selected for participation in the Plan for any
Plan Year, despite having previously participated in the Plan.
Article 5. Award Determination
5.1 PERFORMANCE MEASURES AND PERFORMANCE GOALS. Prior to the
beginning of each Plan Year, or as soon as practicable thereafter, the
Committee shall select performance measures and shall establish performance
goals for that Plan Year. Except as provided in Article 8 herein, the
performance measures may be based on any combination of corporate and/or
individual goals.
The Committee may establish one or more performance measures which must
be achieved for any Participant to receive any portion of his or her Final
Award payment for that Plan Year.
5.2 TARGET AWARD. Prior to the beginning of each Plan Year, or as
soon as practicable thereafter, the Committee shall establish, in writing,
Target Awards which correspond to various levels of achievement of the
preestablished performance goals. Except as provided in Article 8 herein, in
the event a Participant changes job levels during a Plan Year, the
Participant's Target Award may be adjusted to reflect the amount of time at
each job level during the Plan Year.
5.3 ADJUSTMENT OF PERFORMANCE GOALS AND TARGET AWARD. Once
established, performance goals normally shall not be changed during the Plan
Year. However, except as provided in Article 8 herein, if the Committee
determines that external changes or other unanticipated business conditions
have materially affected the fairness of the goals, then the Committee may
approve appropriate adjustments to the performance goals (either up or down)
during the Plan Year as such goals apply to the Target Award of specified
Participants. In addition, the Committee shall have the authority to reduce or
eliminate the Final Award determinations, based upon any objective or
subjective criteria it deems appropriate.
Notwithstanding any other provision of this Plan, in the event of any
change in corporate capitalization, such as a stock split, or a corporate
transaction, such as any merger, consolidation, separation, including a
spin-off, or other distribution of stock or property of the Company, any
reorganization (whether or not such reorganization comes within the definition
of such term in Code Section 368), or any partial or complete liquidation of
the Company, such adjustment shall be made in the Target Award and/or the
performance measures or performance goals related to then-current performance
periods, as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that subject to Article 8 herein, any such
adjustment shall not be made if it would eliminate the ability of the Target
Award held by Covered Employees to qualify for the "performance-based"
exception under Code Section 162(m).
5.4 FINAL AWARD DETERMINATIONS. At the end of each Plan Year, Final
Awards shall be computed for each Participant as determined by the Committee.
Subject to the terms of Article 8 herein, Final Award amounts may vary above
or below the Target Award, based on the level of achievement of the
pre-established corporate and/or divisional performance goals.
5.5 AWARD LIMIT. The Committee may establish guidelines governing the
maximum Final Awards that may be earned by Participants (either in the
aggregate, by Employee class, or among individual Participants) in each Plan
Year. The guidelines may be expressed as a percentage of Company-wide goals or
financial measures, or such other measures as the Committee shall from time to
time determine; provided, however, that the maximum payout with respect to a
Final Award payable to any one Participant in connection with performance in
any one Plan Year shall be two million dollars ($2,000,000).
5.6 THRESHOLD LEVELS OF PERFORMANCE. The Committee may establish
minimum levels of performance goal achievement, below which no payouts of
Final Awards shall be made to any Participant.
Article 6. Payment of Final Awards
6.1 FORM AND TIMING OF PAYMENT. Unless a deferral election is made by
a Participant pursuant to Section 6.2 herein, each Participant's Final Award
shall be paid in cash, in one lump sum, within forty-five (45) calendar days
after the end of each Plan Year.
6.2 DEFERRAL OF FINAL AWARD PAYOUTS. The Committee may permit (or
require, if necessary, to preserve full deductibility under Code Section
162(m)) a Participant to defer such Participant's receipt of the payment of
cash that would otherwise be due pursuant to his or her Final Award. If any
such deferral election is required or permitted, the Committee shall, in its
sole discretion, establish rules and procedures for such payment deferrals.
6.2 UNSECURED INTEREST. No participant or any other party claiming an
interest in amounts earned under the Plan shall have any interest whatsoever
in any specific asset of the Company. To the extent that any party acquires a
right to receive payments under the Plan, such right shall be equivalent to
that of an unsecured general creditor of the Company.
Article 7. Termination of Employment
7.1 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR
RETIREMENT. In the event a Participant's employment is terminated by reason of
death, Disability, or Retirement, the Final Award determined in accordance
with Section 5.4 herein shall be reduced to reflect participation prior to
termination only. The reduced award shall be determined by multiplying said
Final Award by a fraction; the numerator of which is the number of days of
employment in the Plan Year through the date of employment termination, and
the denominator of which is three hundred sixty-five (365). In the case of a
Participant's Disability, the employment termination shall be deemed to have
occurred on the date that the Committee determines the definition of
Disability to have been satisfied.
The Final Award thus determined shall be paid within seventy-five (75)
calendar days following the end of the Plan Year in which employment
termination occurs.
7.2 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event a
Participant's employment is terminated for any reason other than death,
Disability, or Retirement (of which the Committee shall be the sole judge),
all of the Participant's rights to a Final Award for the Plan Year then in
progress shall be forfeited. However, except in the event of an involuntary
employment termination for Cause, the Committee, in its sole discretion, may
pay a prorated award for the portion of the Plan Year that the Participant was
employed by the Company, computed as determined by the Committee.
Article 8. Covered Employees
8.1 APPLICABILITY OF ARTICLE 8. The provisions of this Article 8
shall apply only to Covered Employees. In the event of any inconsistencies
between this Article 8 and the other Plan provisions as they pertain to
Covered Employees, the provisions of this Article 8 shall control.
8.2 ESTABLISHMENT OF TARGET AWARDS. Except as provided in Section 8.8
herein, the Target Awards for Covered Employees shall be established as a
percentage of each Covered Employee's Base Salary (as defined below). Within
ninety (90) days after the beginning of each Plan Year, the Committee shall
establish, in writing, various levels of Final Awards which will be paid with
respect to specified levels of attainment of the preestablished performance
goals.
8.4 COMPONENTS OF TARGET AWARDS. Each Covered Employee's Target Award
shall be based on: (a) the potential Final Awards corresponding to various
levels of achievement of the pre-established performance goals, as established
by the Committee; and (b) Company and business unit performance in relation to
the pre-established performance goals.
Except as provided in Section 8.8 herein, performance measures which may
serve as determinants of Covered Employees' Award Opportunities shall be
limited to one or more of the following: operating margin (including a
definition such as earnings before interest and taxes divided by net
revenues), net revenue growth, asset turnover (including a definition such as
revenue divided by average total assets), cash flow, earnings per share,
economic value added, cash-flow return on investment, expenses, gross or net
margin, increase in stock price, inventory turnover, market share, net income
(before or after taxes), return on assets, return on equity, return on
investment, return on sales, revenue, and total shareholder return. These
performance measures may be applied singly or in tandem, and may be linked to
Companywide performance, business unit performance, or both.
8.5 NO MID-YEAR CHANGE IN AWARD OPPORTUNITIES. Except as provided in
Section 8.8 herein, each Covered Employee's Final Award shall be based
exclusively on the Target Award levels established by the Committee pursuant
to Section 8.2 herein.
8.6 NONADJUSTMENT OF PERFORMANCE GOALS. Except as provided in Section
8.8 herein, performance goals shall not be changed following their
establishment, and Covered Employees shall not receive any payout when the
minimum company/corporation performance goals are not met or exceeded.
8.7 INDIVIDUAL PERFORMANCE EVALUATION AND DISCRETIONARY ADJUSTMENTS.
Except as provided in Section 8.8 herein, subjective evaluations of
performance shall not be applied to increase Final Awards. However, the
Committee shall have the discretion to decrease or eliminate the amount of the
Final Award otherwise payable to a Covered Employee.
8.8 POSSIBLE MODIFICATIONS. If, on the advice of the Company's tax
counsel, the Committee determines that Code Section 162(m) and the Regulations
thereunder will not adversely affect the deductibility for federal income tax
purposes of any amount paid under the Plan by permitting greater discretion
and/or flexibility with respect to Target Awards granted to Covered Employees
pursuant to this Article 8, then the Committee may, in its sole discretion,
apply such greater discretion and/or flexibility to such Target Awards as is
consistent with the terms of this Plan, and without regard to the restrictive
provisions of this Article 8.
Without limiting the generality of the foregoing, in the event it is
determined that the Committee may make adjustments to performance goals to
reflect the impact of events that are extraordinary and/or nonrecurring
without precluding compliance with Code Section 162(m), such adjustments may
be made. Further, in determining the degree to which performance goals have
been satisfied in any year, the Committee shall disregard the impact of
accounting changes made by the Financial Accounting Standards Board which
become effective after the performance goals for such year have been
established.
In the event the Committee determines that compliance with Code Section
162(m) is not desired with respect to any Target Awards granted or to be
granted under the Plan, then compliance with Code Section 162(m) will not be
required (for example, if such a determination is made, the performance
measures specified in Section 8.4 herein need not be the only determinants of
Final Awards, and subjective discretion may be applied to increase the Final
Awards of Covered Employees). In addition, in the event that changes are made
to Code Section 162(m) to permit greater flexibility with respect to any Award
Opportunities under the Plan, the Committee may, subject to this Article 8,
make any adjustments it deems appropriate.
Article 9. Rights of Participants
9.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate any Participant's employment at
any time, nor confer upon any Participant any right to continue in the employ
of the Company.
9.2 NONTRANSFERABILITY. No right or interest of any Participant in
the Plan shall be assignable or transferable, or subject to any lien,
directly, by operation of law or otherwise, including, but not limited to,
execution, levy, garnishment, attachment, pledge, and bankruptcy.
Article 10. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively)
to whom any benefit under the Plan is to be paid in case of his or her death
before he or she receives any or all of such benefit. Each designation will
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Committee, and will be effective only when filed by the
Participant in writing with the Committee during his or her lifetime. In the
absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
<PAGE>
Article 11. Change in Control
In the event of a Change in Control, each Participant shall be entitled
to a pro rata payment of his or her Target Award for the Plan Year during
which such Change in Control occurs. The Final Award deemed earned by each
Participant in such year shall equal the greater of: (i) the Participant's
Target Award for such year; or (ii) the estimated actual performance as of the
date of the Change in Control, projected to the end of such year, as
determined by the Compensation Committee. The proration applicable to the
Target Awards in the year of a Change in Control shall be determined as a
function of the number of days within the Plan Year prior to the effective
date of the Change in Control, in relation to three hundred sixty-five (365).
Such amount shall be paid in cash to each Participant within thirty (30) days
after the effective date of the Change in Control.
Article 12. Amendments
The Committee, in its sole discretion, without notice, at any time and
from time to time, may modify or amend, in whole or in part, any or all of the
provisions of the Plan, or suspend or terminate it entirely; provided,
however, that no such modification, amendment, suspension, or termination may,
without the consent of a Participant (or his or her beneficiary in the case of
the death of the Participant), materially reduce the right of a Participant
(or his or her beneficiary as the case may be) to a payment or distribution
hereunder to which he or she is entitled.
Article 13. Miscellaneous
13.1 GOVERNING LAW. The Plan, and all agreements hereunder, shall be
governed by and construed in accordance with the laws of the state of
Delaware.
13.2 WITHHOLDING TAXES. The Company shall have the right to deduct
from all payments under the Plan any Federal, state, or local taxes required
by law to be withheld with respect to such payments.
13.3 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular, and the singular shall include the plural.
13.4 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
13.5 COSTS OF THE PLAN. All costs of implementing and administering
the Plan shall be borne by the Company.
13.6 SUCCESSORS. All obligations of the Company under the Plan shall
be binding upon and inure to the benefit of any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business and/or assets of the Company.
THE DIAL CORPORATION
EXHIBIT 11-COMPUTATION OF EARNINGS PER SHARE*
(000 omitted, except per share data)
<TABLE>
<CAPTION>
1996
-------
<S> <C>
PRIMARY:
Income before cumulative effect of accounting changes $29,912
Cumulative effect of accounting changes
Net Income $29,912
-------
Weighted average shares outstanding 90,974
Primary earnings per share:
Income before cumulative effect of accounting change $ 0.33
Cumulative effect of accounting changes
Net Income per share $ 0.33
-------
FULLY DILUTED:
Income before cumulative effect of accounting changes $29,912
Cumulative effect of accounting changes
Net Income $29,912
-------
Weighted average shares outstanding 90,974
Incremental shares under stock option plans 42
-------
Adjusted weighted average shares outstanding 91,016
-------
Fully diluted earnings per share:
Income before cumulative effect of accounting changes $ 0.33
Cumulative effect of accounting changes
Net Income per share $ 0.33
-------
</TABLE>
*Per share data is not presented on a historical basis because the Company was
not a publicly-held company during the periods presented. Income (loss) per
share is presented as pro forma information for 1996 as the Company's common
shares were not publicly-traded until August 15, 1996. Accordingly, the
calculation of income (loss) per share assumes that the common shares and
common share equivalents were outstanding for the entire period presented.
EXHIBIT 13.
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OTHER DATA
(000 OMITTED, EXCEPT PER SHARE DATA, NUMBER OF EMPLOYEES AND SHAREHOLDERS OF RECORD)
<S> <C> <C> <C> <C> <C>
YEAR ENDED Dec. 28 Dec. 30 Dec. 31 Dec. 25 Dec. 26
1996 1995 1994 1993 1992
OPERATIONS
Net sales $1,406,400 $1,365,290 $1,511,362 $1,420,173 $1,275,447
Operating income (loss) (1) 70,397 (23,656) 160,008 139,213 118,616
Net income (loss) (1) (2) 29,912 (27,489) 91,072 84,181 31,068
Net income (loss)
per share (3) $ 0.33
Average outstanding
common and equivalent
shares (3) 90,974
Dividends declared per common
share (3) $ 0.16
FINANCIAL POSITION AT YEAR END
Total assets $ 866,126 $ 798,405 $ 887,373 $ 857,516 $ 685,266
Total debt 269,515 3,320 3,510 6,063 31,502
Working capital 41,107 45,663 56,188 (10,177) (50,790)
Parent investment and
advances 496,230 555,703 502,199 350,799
Common stock and other equity 140,657
OTHER DATA
Depreciation and amortization 30,533 29,118 34,910 33,583 31,542
Capital expenditures 49,468 27,214 37,471 40,605 45,508
Number of employees (end of
year) 2,812 3,985 3,995 4,000 4,197
Number of employees (average) 3,125 3,992 3,983 4,121 4,186
Shareholders of record 64,867
</TABLE>
(1) After deducting restructuring charges and asset write-downs and spinoff
transaction costs of $60,000,000 ($36,435,000 after tax) or $0.40 per share
in 1996 and after deducting restructuring charges and asset write-downs of
$156,000,000 ($94,900,000 after tax) in 1995. Also, after deducting
$6,800,000 ($4,310,000 after tax) in 1992 for increased ongoing expenses
resulting from the adoption of Statement of Financial Accounting Standards
("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," effective as of January 1, 1992.
(2) Cumulative effect of change in accounting principle amounted to
$43,433,000 in 1992 from initial application of SFAS No. 106.
(3) Per share information is not presented for 1995 and prior years because
the Company was not a publicly held company during such years. Income (loss)
per share is presented for 1996, as the Company's common shares were issued on
August 15, 1996. The calculation of income (loss) per share assumes that the
common shares and common share equivalents were outstanding for the entire
year.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
BACKGROUND
The Dial Corporation (the "Company") is a leading producer and marketer of
personal care, detergent, air freshener and shelf-stable food products.
Prior to August 15, 1996, its consumer products business was conducted by The
Dial Corp ("the Former Parent") (now named Viad Corp) directly and through
certain of its subsidiaries. On that date, The Dial Corp contributed its
consumer products business to the Company and distributed ("the Distribution"
or "the spinoff") to the holders of its common stock all of the outstanding
common stock of the Company, creating a new, independent, publicly traded
company. A complete description of the Distribution is included in Form 10/A
(Amendment No. 2), declared effective by the Securities and Exchange
Commission on July 30, 1996. All references to the Company refer to
operations of the consumer products business conducted by The Dial Corp prior
to August 15, 1996, and by The Dial Corporation, the independent company
created by the Distribution, thereafter.
FINANCIAL CONDITION
In the third quarter of 1996, the Company announced an administrative and line
of business reorganization to streamline its management and administrative
organization, eliminate approximately 250 positions, sell or discontinue a
number of underperforming brands and exit the current corporate headquarters.
The Company recorded restructuring charges and asset write-downs of $55
million ($33.6 million after tax) in the third quarter of 1996 for severance
costs, discontinuance of product lines and building exit costs.
Approximately $27.9 million of the charge related to inventories and was
included in cost of products sold. Approximately $15 million in reserves for
such costs remained at December 28, 1996. These reserves are believed to be
adequate and will be paid utilizing cash flow from operations. The Company
estimates that the 1996 administrative reorganization will save the Company
approximately $40 million annually.
In the third quarter of 1995, the Company recorded restructuring charges and
asset write-downs totaling $156 million ($94.9 million after tax) to provide
for a business-based reorganization through plant closings, work force
reductions and elimination of certain products. The charges provided for the
closing of six plants (Clearing, Illinois; Burlington, Iowa; Auburndale,
Florida; Omaha, Nebraska; Memphis, Tennessee; and New Berlin, Wisconsin) and
the reduction of the work force by approximately 700 people, substantially all
of whom were based in the plants that were closed. All six plants were closed
by September 28, 1996. Approximately $20.4 million of the charge related to
inventories and was included in cost of products sold. Approximately $20
million in reserves for environmental costs and other plant post-closing
expenses remained at December 28, 1996. Such reserves are believed to be
adequate and are expected to be paid utilizing cash flow from operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were $99.5 million in 1996, $90.3 million
in 1995 and $85.2 million in 1994, while capital expenditures for those years
were $49.5 million, $27.2 million and $37.5 million, respectively. As of
December 28, 1996, there were no material contractual commitments for capital
expenditures.
The Company's capital expenditures generally have been for necessary
replacement of equipment and for the expansion of capacity in manufacturing
facilities. The Company intends to increase the amount of capital
expenditures in 1997 and future years. Capital spending is expected to shift
to equipment and information systems that provide opportunities to reduce
manufacturing, logistic and administrative costs. However, such plans are
dependent on the availability of funds, as well as the identification of
projects with sufficient returns. As a result, there can be no assurance as
to the quantity and the type of capital spending in the future.
The Company's financing plan includes the sale of receivables to accelerate
cash flow. Receivables sold but not yet collected under this plan at December
28, 1996, and December 30, 1995, were $74.9 million and $76.7 million,
respectively.
In conjunction with the strategy of the Company to expand its business through
internal growth or acquisitions, the Company is planning an equity offering
of at least $100 million during 1997. The Company anticipates the proceeds
will be used to pay down long-term debt, fund capital additions or fund an
acquisition of a business or businesses. However, such a transaction is
dependent upon stock market conditions, the economy, the Company's
performance, acquisition prospects and other factors. As a result, there can
be no assurance when or in what form such a transaction will occur.
For the foreseeable future, the Company believes that cash generated by
operating activities will be sufficient to finance its capital expenditures,
pay dividends on common stock and provide working capital for sales growth.
In addition, the Company has available as of December 28, 1996, approximately
$80.5 million under its long-term credit agreement for general corporate
purposes.
The Company intends to vacate its corporate headquarters in the Viad Tower and
move to more economical office space in Scottsdale, Arizona, during mid-year
1997. The Company has 10 years remaining on the lease for the Viad Tower
space, which commits the Company to payments of approximately $2,676,000
annually through 2006. The Company is actively marketing the space for
sublease. Estimated losses on this lease were provided for in the
restructuring charges and asset write-downs recorded in the third quarter of
1996.
As of December 28, 1996, the Company had approximately $125.3 million in net
deferred tax benefits, which the Company believes are fully realizable in
future years. The realization of such benefits will require average annual
taxable income of approximately $20.9 million over the next 15 years. The
Company's average income before income taxes over the last three years was
approximately $47.6 million.
RESULTS OF OPERATIONS
Basis of Management's Discussion and Analysis
In the line of business reorganization undertaken in the third quarter of
1996, the Company identified certain products and lines of business on which
it intends to focus the resources of the Company. These businesses are
retail branded products carrying the Dial, Purex, Renuzit and Armour names, as
well as the Company's international line of business. These products and
lines of business were identified on the basis of their profitability,
strength in the marketplace and potential for growth. The Company considers
these products and lines of business to be its "core" business. Accordingly,
the Company's plan is that all products and lines of business outside of this
identified core will be discontinued, sold or managed to maximize their
near-term cash flow.
COMPARISON OF 1996 WITH 1995
Revenues for 1996 were $1,406.4 million, an increase of $41.1 million (or 3%)
over 1995 revenues of $1,365.3 million. Operating income for 1996 was $70.4
million, an increase of approximately $94 million over the 1995 operating loss
of $23.7 million. Included in operating income for 1996 and 1995 are
restructuring charges, inventory and other asset write-downs of $55 million
and $156 million, respectively. Operating income before restructuring and
other charges for 1996 was $125.4 million, which was $6.9 million less than
1995 operating income before restructuring and other charges of $132.3
million. The following discussion of operating results excludes the effects
of the restructuring and other charges recorded in 1996 and 1995.
The Company's core business experienced revenue growth of 8.3%, driven by the
strong performance of Renuzit (up 47.9% over 1995), Dial (up 15% over 1995),
Armour (up 14.5% over 1995) and international (up 29.5% over 1995).
The increases in revenues on these businesses were driven by new product
introductions (primarily, Renuzit Candles and the Dial Ultra Skin Care line)
and overall increases in marketplace consumption. These increases were offset
by a decline in Purex revenues of 9.6% as a result of the 15% price reduction
on detergent products initiated in the first quarter of 1996. Consumers
responded favorably to the new lower prices, as Purex standard case shipments
for 1996 increased approximately 8%.
Revenue declines in the Company's noncore businesses offset much of the growth
in the core business. Noncore revenues in 1996 of approximately $152 million
declined approximately $46 million (or 23%) from 1995 levels. Approximately
$41 million of this decline was from products that are being discontinued.
The Company expects that revenues from noncore businesses will continue to
decline over the next 12 months. The operating loss from noncore businesses
in 1996 was $20.2 million, which was $8.4 million more than the operating loss
on noncore businesses in 1995.
Gross profits declined $2.3 million, from $656.1 million in 1995 to $653.8
million in 1996. Included in cost of products sold in 1996 and 1995 are
charges for the write-down of discontinued product inventories associated with
the product line and line of business reorganizations in those years of $27.9
million and $20.4 million, respectively. Excluding those charges, gross
profit margins declined from 49.6% in 1995 to 48.5% in 1996. The decline in
the gross profit percentage is comprised of a 2.6% decline as a result of the
Purex price reduction initiative, offset by a 1.5% improvement in cost of
products sold. The improvement in cost of products sold was driven by lower
costs resulting from the 1995 manufacturing restructuring and efficiencies
from greater production volumes resulting from increased sales.
Selling, general and administrative expenses were $556.3 million in 1996, an
increase of $12.1 million (or 2.2%) over 1995 levels. The increase was the
result of increases in marketing and selling expenses of $8.5 million and
administrative costs of $3.6 million.
The increase in marketing and selling expenses resulted from increased
marketing support of approximately $27 million for existing Dial and Renuzit
branded products and introductory marketing expenditures supporting Renuzit
Candles and the Dial Ultra Skin Care line. These increases were offset by
lower trade promotion expenditures of $24 million on Purex, which were no
longer necessary as a result of the price reduction taken in the first
quarter of 1996. The remainder of the increases in selling and marketing
expenses was caused by higher selling expenses as a result of the increase in
sales volume due to the new product introductions.
The majority of the increase in general and administrative expenses reflects
incremental costs associated with being a public company. These incremental
costs were incurred for only the portion of the year immediately preceding
and subsequent to the Distribution. Had such costs been incurred for a full
year, an additional $3.6 million in expense would have been recorded.
Interest expense decreased $5.4 million in 1996 compared to 1995, resulting
from lower interest-bearing advances to the Company from its Former Parent
company. This decrease was offset by a $2.9 million increase in accretion
costs related to Armour employee benefit liabilities assumed from the Former
Parent company.
The effective tax rate for 1996 was approximately 29.5%, down from 41.5% for
the comparable period in 1995. The decrease in the effective rate is the
result of a one-time tax benefit of $4 million (9.5%) recognized in 1996 from
the revaluation of the Company's deferred tax benefits for the higher state
tax rate that the Company will incur after the spinoff. In addition, in 1996
the Company had income from certain foreign operations, which is not subject
to taxation.
The sustainable combined federal and state effective income tax rate for 1997
is expected to approximate 39%.
COMPARISON OF 1995 WITH 1994
Revenues of $1.4 billion in 1995 were down $146.1 million or 10% from those of
1994. The revenue decrease was due to the completion of the 1995 program to
effect reductions of trade customers' inventories. This initiative, coupled
with more rapid replenishment as consumers purchase the products off the
shelf, addresses the retailers' increased emphasis on efficient consumer
response. In addition, a sales shortfall of $54.1 million in the fourth
quarter of 1995 resulted from a softness in orders due to the effects of
reduced promotional programs in connection with the 1995 trade inventory
reduction initiative, as well as certain orders received late in the fourth
quarter that were deferred and shipped in the first quarter of 1996 to achieve
efficiency in the distribution network. A planned reduction of microwaveable
meals volume and other discontinued low margin products also contributed to
the variance.
The Company reported an operating loss of $23.7 million for 1995, versus
operating income of $160 million for 1994. Included in the operating loss
for 1995 are restructuring, discontinued inventories and other asset
write-downs of $156 million. Operating income for 1995, excluding
restructuring, discontinued inventories and other asset write-downs, was
$132.3 million. On the same basis, operating margins declined to 9.7% in 1995
from 10.6% in 1994, as the effects of the volume shortfall more than offset
the initial cost savings from the inventory reduction program. The following
discussion of operating results excludes the effect of the restructuring
charges and asset write-downs recognized in 1995.
As noted above, revenues in 1995 declined approximately 10% from 1994 levels
as a result of the trade inventory reduction plan. This decline was evidenced
across all franchises. Dial franchise revenues declined $42.2 million, Purex
franchise revenues declined $53.7 million, Renuzit franchise revenues declined
$10.9 million, and Armour franchise revenues declined $43.1 million. These
shortfalls were only partially offset by growth in the Company's international
line of business. Gross profits for 1995 (before restructuring charges and
asset write-downs) were approximately $676.5 million (49.6% of revenues),
compared to 1994 gross profits of $765.4 million (50.6% of revenues). The
decline in gross profit percentage was the result of less efficient plant
utilization from lower production volumes.
Selling, general and administrative expenses were $544.2 million in 1995, a
reduction of $61.2 million from selling, general and administrative expenses
of $605.4 million in 1994. Trade promotion and selling expenses for 1995 were
$35 million lower than in 1994 as a result of the lower sales volumes and the
reduction in trade promotional spending as part of the trade inventory
reduction program. General and administrative expenses were $26 million
lower in 1995 than in 1994. The decrease resulted from aggressive reductions
in all administrative categories, such as headcount, consulting, travel,
incentive payments and other discretionary items, in light of the lower sales
volumes experienced during the year.
The increase in interest expense of $10.9 million in 1995 compared to 1994
resulted from higher interest-bearing advances to the Company from its Former
Parent company and increases in the prime lending rate.
Excluding the effects of the restructuring charges and asset write-downs, the
1995 effective income tax rate was 38.4% compared to 38.3% in 1994.
- ------------------------------------------------------------------------------
SAFE HARBOR ACT STATEMENT
The Company has made, and may continue to make, various forward-looking
statements with respect to its financial position, business strategy,
projected costs, projected savings, and plans and objectives of management.
Such forward-looking statements are identified by the use of forward-looking
words or phrases such as "anticipates," "intends," "expects," "plans,"
"believes," "estimates," or words or phrases of similar import. These
forward-looking statements are subject to numerous assumptions, risks, and
uncertainties, and the statements looking forward beyond 1997 are subject to
greater uncertainty because of the increased likelihood of changes in
underlying factors and assumptions. Actual results could differ materially
from those anticipated by the forward-looking statements.
In addition to factors previously disclosed by the Company and factors
identified elsewhere herein, the factors described in the Company's Form 10
(under the caption "Risk Factors") could cause actual results to differ
materially from such forward-looking statements. All subsequent written and
oral forward-looking statements attributable to the Company, or persons acting
on behalf of the Company, are expressly qualified in their entirety by
reference to such factors.
The Company's forward-looking statements represent its judgment only on the
dates such statements are made. By making any forward-looking statements, the
Company assumes no duty to update them to reflect new, changed, or
unanticipated events or circumstances.
- ------------------------------------------------------------------------------
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of The Dial Corporation has the responsibility for preparing
and assuring the integrity and objectivity of the accompanying financial
statements and other financial information in this report. The financial
statements were prepared using generally accepted accounting principles
consistently applied. The financial statements reflect, where applicable,
management's best estimates and judgments and include disclosures and
explanations that are relevant to an understanding of the financial affairs of
the Company.
The Company's financial statements have been audited by Deloitte & Touche LLP.
Management has made available to Deloitte & Touche LLP all of the Company's
financial records and other relevant data and has made appropriate and
complete written and oral representations and disclosures in connection with
the audit.
Management has established and maintains a system of internal control that is
designed to provide reasonable assurance that transactions are authorized and
properly recorded, that assets are protected and that materially inaccurate
financial reporting is prevented and detected. The appropriate segregation
of responsibilities and careful selection of employees are components of the
system of internal controls. The internal control system is independently
monitored and evaluated by an extensive and comprehensive internal auditing
program.
The Board of Directors, acting through its Audit Committee, oversees the
adequacy of the Company's internal control environment. The Audit Committee
meets regularly with management representatives and, jointly and separately,
with representatives of Deloitte & Touche LLP and internal auditing management
to review accounting, auditing and financial reporting matters.
\s\ Malcolm Jozoff \s\ Lowell Robertson
Malcolm Jozoff Lowell Robertson
Chairman, President and Senior Vice President and
Chief Executive Officer Controller
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of The Dial Corporation:
We have audited the accompanying consolidated balance sheets of The Dial
Corporation as of December 28, 1996 and December 30, 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three fiscal years in the period ended December 28, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of The Dial Corporation as of
December 28, 1996 and December 30, 1995, and the results of its operations and
its cash flows for each of the three fiscal years in the period ended December
28, 1996 in conformity with generally accepted accounting principles.
\s\ Deloitte & Touche LLP
Deloitte & Touche LLP
Phoenix, Arizona
February 14, 1997
<TABLE>
<CAPTION>
THE DIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(000 omitted)
<S> <C> <C>
December 28, December 30,
1996 1995
-------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 14,102 $ 5,884
Receivables, less allowance of $3,170 and $3,826 28,689 39,647
Inventories 139,492 153,813
Deferred income taxes 61,379 32,301
Other current assets 4,119 3,418
-------------- -------------
Total current assets 247,781 235,063
Property and equipment 226,551 201,076
Deferred income taxes 63,918 26,881
Intangibles 325,739 334,708
Other assets 2,137 677
-------------- -------------
$ 866,126 $ 798,405
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 91,341 $ 79,502
Income taxes payable 7,188 2,765
Other current liabilities 108,145 107,133
-------------- -------------
Total current liabilities 206,674 189,400
Long-term debt 269,515 2,453
Pension and other benefits 233,306 103,137
Other liabilities 15,974 7,185
-------------- -------------
Total liabilities 725,469 302,175
-------------- -------------
Commitments and contingencies (Notes L and O)
Shareholders' Equity:
Common stock, $.01 par value, 300,000,000 shares
authorized, 95,638,532 shares issued 956
Additional capital 247,209
Retained deficit (20,308)
Unearned employee benefits (87,129)
Cumulative translation adjustment 575
Treasury stock, 49,399 shares held (646)
Parent investment and advances 496,230
-------------- -------------
Total shareholders' equity 140,657 496,230
-------------- -------------
$ 866,126 $ 798,405
============== =============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(000 omitted, except per share data)
<CAPTION>
<S> <C> <C> <C>
Year Ended
--------------------------------------------
December 28, December 30, December 31,
1996 1995 1994
------------- -------------- -------------
Net sales $ 1,406,400 $ 1,365,290 $ 1,511,362
------------- -------------- -------------
Costs and expenses:
Cost of products sold 724,683 688,776 745,963
Write down of discontinued
product inventories 27,924 20,400
------------- -------------- -------------
752,607 709,176 745,963
Selling, general and
administrative expenses 556,320 544,170 605,391
Restructuring charges and
other asset write-downs 27,076 135,600
------------- -------------- -------------
1,336,003 1,388,946 1,351,354
------------- -------------- -------------
Operating income (loss) 70,397 (23,656) 160,008
------------- -------------- -------------
Spinoff transaction costs 5,000
Interest and other expenses 22,974 23,360 12,468
------------- -------------- -------------
27,974 23,360 12,468
------------- -------------- -------------
Income (loss) before income taxes 42,423 (47,016) 147,540
Income taxes (benefit) 12,511 (19,527) 56,468
------------- -------------- -------------
NET INCOME (LOSS) $ 29,912 $ (27,489) $ 91,072
============= ============== =============
NET INCOME PER SHARE $ 0.33
=============
Average outstanding common
and equivalent shares 90,974
=============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
(000 omitted )
<CAPTION>
<S> <C> <C> <C>
Year Ended
----------------------------------------------
December 28, December 30, December 31,
1996 1995 1994
-------------- -------------- --------------
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income (loss) $ 29,912 ($27,489) $ 91,072
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 30,533 29,118 34,910
Deferred income taxes (965) (34,733) 875
Restructuring charges and asset write-downs 55,000 156,000
Change in operating assets and liabilities:
Receivables 12,766 69,202 (23,453)
Inventories (7,763) (10,005) (542)
Trade accounts payable 11,839 (22,356) 3,182
Other assets and liabilities, net (31,870) (69,429) (20,801)
-------------- -------------- --------------
Net cash provided by operating activities 99,452 90,308 85,243
-------------- -------------- --------------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Capital expenditures (49,468) (27,214) (37,471)
Acquisition of business, net of cash acquired (23,558)
Proceeds from sales of property and equipment 128 7,099 1,313
-------------- -------------- --------------
Net cash used by investing activities (49,340) (43,673) (36,158)
-------------- -------------- --------------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Net payments on long-term borrowings (13,488) (491) (495)
Net change in short-term bank loans (317) 301 (2,058)
Net change in receivables sold (1,808) (14,290) (6,000)
Dividends paid on common stock (14,365)
Cash proceeds from stock options 2,779
Cash transfers to parent, net (14,695) (32,168) (35,829)
-------------- -------------- --------------
Net cash used by financing activities (41,894) (46,648) (44,382)
-------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents 8,218 (13) 4,703
Cash and cash equivalents, beginning of year 5,884 5,897 1,194
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 14,102 $ 5,884 $ 5,897
============== ============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
(000 omitted )
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stock
------------------------- Unearned Cumulative Parent
Additional Retained Employee Translation Investment
Shares Amount Capital Deficit Benefits Adjustment and Advances
------------ ----------- --------- ---------- ------------- ----------- --------------
BALANCE, JANUARY 1, 1994 $ 502,199
Net income 91,072
Payments to parent (37,568)
------------ ----------- --------- ---------- ------------- --------- --------------
BALANCE, DECEMBER 31, 1994 557,703
Net income (27,489)
Payments to parent (31,984)
------------ ----------- --------- ---------- ------------- ----------- --------------
BALANCE, DECEMBER 30, 1995 496,230
Net income 35,855
Payments to parent (14,695)
------------ ----------- --------- ---------- ------------- ---------- --------------
BALANCE PRIOR TO SPINOFF,
AUGUST 15, 1996 517,390
Spinoff capitalization 95,346 953 237,664 (81,379) (517,390)
------------ ----------- --------- ---------- ------------- ----------- --------------
BALANCE AFTER SPINOFF,
AUGUST 15, 1996 95,346 953 237,664 (81,379) $ -----
Exercise of stock options 293 3 3,165
Translation adjustment 575
Dividends on common stock (14,365)
Change in unearned
employee benefits 6,380 (5,750)
Net loss (5,943)
------------ ----------- --------- ---------- ------------- ----------- --------------
BALANCE, DECEMBER 28, 1996 95,639 $ 956 $ 247,209 $ (20,308) $ (87,129) $ 575 $ -----
============ =========== ========= ========== ============= =========== ==============
<S> <C> <C>
Common
Stock in
Treasury Total
---------- ----------
BALANCE, JANUARY 1, 1994 $ 502,199
Net income 91,072
Payments to parent (37,568)
--------- ----------
BALANCE, DECEMBER 31, 1994 555,703
Net income (27,489)
Payments to parent (31,984)
--------- ----------
BALANCE, DECEMBER 30, 1995 496,230
Net income 35,855
Payments to parent (14,695)
--------- ----------
BALANCE PRIOR TO SPINOFF,
AUGUST 15, 1996 517,390
Spinoff capitalization (360,152)
--------- ----------
BALANCE AFTER SPINOFF,
AUGUST 15, 1996 157,238
Exercise of stock options (389) 2,779
Translation adjustment 575
Dividends on common stock (14,365)
Change in unearned
employee benefits (257) 373
Net loss (5,943)
---------- ----------
BALANCE, DECEMBER 28, 1996 $ (646) $ 140,657
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED DECEMBER 28, 1996; DECEMBER 30, 1995;
AND DECEMBER 31, 1994
NOTE A. BASIS OF PREPARATION
On July 25, 1996, the Board of Directors of The Dial Corp ("the Former
Parent") declared a dividend (the "Distribution" or "the spinoff") to effect
the spinoff of its Consumer Products Business. The dividend was paid on
August 15, 1996, to shareholders of record as of August 5, 1996. Each Dial
shareholder received a dividend of one share of common stock of The Dial
Corporation ("the Company"), which, after the Distribution, owns and operates
the Consumer Products Business previously conducted by the Former Parent.
Concurrently with the Distribution, the name of the Former Parent 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
Dial Corporation, as if it 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 new company. Concurrent with the spinoff, the
Company was capitalized through settlement of The Dial Corp's investment and
advances account of $517.4 million by the assumption of $280 million of
long-term debt and $80.2 million (net of income taxes) in Armour employee
benefit liabilities, with the net amount remaining of $157.2 million
comprising the Company's shareholders' equity as of the spinoff date. All
material intercompany balances and transactions among the entities comprising
the Company have been eliminated.
NOTE B. SIGNIFICANT ACCOUNTING POLICIES
The Consolidated Financial Statements are prepared in accordance with
generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The Company's fiscal year ends on the last Saturday closest to the end of
December. Fiscal years 1996 and 1995 consisted of 52 weeks, and fiscal
year 1994 consisted of 53 weeks.
REVENUE RECOGNITION. Sales are recorded at the time products are shipped to
trade customers.
MAJOR CUSTOMERS. Major customers are defined as those that individually
accounted for more than 10% of the Company's sales. Sales to a major
customer accounted for 16%, 13% and 12% of the Company's net sales in 1996,
1995 and 1994, respectively.
MARKETING AND RESEARCH AND DEVELOPMENT COSTS. All expenditures for marketing
and research and development are charged against earnings in the year incurred
and are reported in the Statement of Consolidated Operations under the caption
"Selling, general and administrative expenses." Marketing costs include the
costs of advertising and various sales promotional programs.
CASH EQUIVALENTS. The Company considers all highly liquid investments with
original maturities of three months or less from the date of purchase to be
cash equivalents.
INVENTORIES. Generally, inventories are stated at the lower of cost (first
in, first out and average cost methods) or market.
IMPAIRMENT OF LONG-LIVED ASSETS. In the fourth quarter of 1995, the Company
elected the early adoption of Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." The adoption of SFAS No. 121 had no
material effect on the Consolidated Financial Statements. SFAS No. 121
establishes the accounting standards for the impairment of long-lived assets
that are to be held and used and for long-lived assets and certain
identifiable intangibles that are to be disposed of.
In accordance with the provisions of SFAS No. 121, the Company reviews the
carrying values of its long-lived assets and identifiable intangibles for
possible impairment whenever events or changes in circumstances indicate that
the carrying amount of assets to be held and used may not be recoverable. SFAS
No. 121 requires that for assets to be held and used, if the sum of the
expected future undiscounted cash flow is less than the carrying amount of the
asset, an impairment loss should be recognized, measured as the amount by
which the carrying amount exceeds the fair value of the asset. For assets to
be disposed of, the Company reports long-lived assets and certain identifiable
intangibles at the lower of carrying amount or fair value less cost to sell.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost, net of
impairment write-downs.
Depreciation is provided principally by use of the straight-line method at
annual rates as follows:
Buildings 2% to 5%
Machinery and other equipment 5% to 33%
Software 33%
Leasehold improvements Lesser of lease term or useful life
INTANGIBLES. Intangibles are carried at cost less accumulated amortization.
Intangibles that arose prior to November 1, 1970, as a result of the Former
Parent's initial investment in the Company are not being amortized. Goodwill
arising on or after November 1, 1970, is amortized on the straight-line method
over the periods of expected benefit but not in excess of 40 years.
Trademarks are amortized on the straight-line method over 40 years. The
customer list that arose from the acquisition of Purex is being amortized
over 30 years. The Company evaluates the carrying value of goodwill and
other intangible assets at each reporting period for possible impairment in
accordance with the provisions of SFAS No. 121 described above. Prior to the
adoption of SFAS No. 121, the Company evaluated the possible impairment of
goodwill and other intangible assets based on the undiscounted projected
operating income of the related business unit.
PENSION AND OTHER BENEFITS. Trusteed, noncontributory pension plans cover
substantially all employees, with benefit levels supplemented in most cases by
defined matching common stock contributions to employees' 401 (k) plans.
Defined benefits are based primarily on final average salary and years of
service. Funding policies provide that payments to defined benefit pension
trusts shall be at least equal to the minimum funding required by applicable
regulations.
The Company has defined benefit postretirement plans that provide medical and
life insurance for eligible retirees and dependents. The related
postretirement benefit liabilities are recognized over the period that
services are provided by employees.
FOREIGN CURRENCY TRANSLATION. In accordance with SFAS No. 52, "Foreign
Currency Translation," the assets and liabilities of the Company's foreign
subsidiaries are translated into U.S. dollars at exchange rates in effect at
the balance sheet date. Resulting unrealized translation gains and losses are
included in shareholders' equity. Income and expense items are converted
into U.S. dollars at average rates of exchange prevailing during the year.
STOCK-BASED COMPENSATION. In October 1995, the Financial Accounting Standards
Board issued SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS
No. 123 defines a fair-value based method of accounting for an employee stock
option or similar equity instrument. As permitted by SFAS No. 123, the
Company has elected to continue to measure cost for its stock-based
compensation plans using the intrinsic-value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." See Note N to the Consolidated Financial
Statements for additional information concerning stock-based compensation.
NET INCOME (LOSS) PER COMMON SHARE. Net income (loss) per common share is
computed by dividing net income (loss) by the weighted average number of
common shares outstanding during the year after giving effect to stock options
considered to be dilutive common stock equivalents. Fully diluted net income
(loss) per common share is not materially different from primary net income
(loss) per common share. The average outstanding and equivalent shares do
not include shares held by the Employee Equity Trust (the "Trust"). Shares
held by the Trust are not considered outstanding for net income (loss) per
share calculations until the shares are released from the Trust.
At December 28, 1996, there were 95,638,532 shares of common stock issued and
89,918,315 shares outstanding. At December 28, 1996, a total of 5,670,818 of
the outstanding shares were held by The Dial Corporation Employee Equity
Trust, and 49,399 shares were held in treasury by the Company.
In addition to common stock, the Company is authorized to issue 10,000,000
shares of preferred stock, par value of $.01 per share, none of which has
been issued.
Per share information is not presented for 1995 and 1994 because the Company
was not a publicly held company during such years. Income (loss) per share is
presented for 1996, as the Company's common shares were issued on August 15,
1996. The calculation of income (loss) per share assumes that the common
shares and common share equivalents were outstanding for the entire year.
NOTE C. ACQUISITION OF BUSINESS
The Company acquired a small foreign soap manufacturer in 1995. The
acquisition was accounted for as a purchase. The purchase price, including
acquisition costs, was allocated to the net tangible and intangible assets
acquired based on estimated fair values at the date of acquisition. The
difference between the purchase price and the related fair value of net assets
acquired represents goodwill, which is being amortized on a straight-line
basis over 25 years. The fair value of patents and other intangible assets
acquired is amortized over their estimated useful lives. The results of the
acquired company have been included in the Statement of Consolidated
Operations from the date of acquisition. The results of operations of the
acquired company from the beginning of 1995 to the date of acquisition are not
material.
Net cash paid, assets acquired and debt and other liabilities assumed are
shown in the table below. There were no acquisitions of businesses in 1994
or 1996.
<TABLE>
<CAPTION>
<S> <C>
1995
--------------
(000 omitted)
Assets acquired:
Property and equipment $ 4,766
Intangibles 10,515
Other assets 10,361
Debt and other liabilities assumed (2,084)
--------------
Net cash paid $ 23,558
==============
</TABLE>
NOTE D. RESTRUCTURING CHARGES AND INVENTORY AND ASSET WRITE-DOWNS
In the third quarter of 1996, the Company announced an administrative and line
of business reorganization to streamline its management and administrative
organization, eliminate approximately 250 positions, sell or discontinue a
number of underperforming brands and exit the current corporate headquarters.
The Company recorded restructuring charges and asset write-downs of $55
million ($33.6 million after tax) in the third quarter of 1996 for severance
costs, discontinuance of product lines and building exit costs.
Approximately $27.9 million of the charge related to inventories and was
included in cost of products sold. Approximately $15 million in reserves for
such costs remained at December 28, 1996. These reserves are believed to be
adequate and will be paid utilizing cash flow from operations.
<TABLE>
<CAPTION>
<S> <C>
(Millions)
-----------
Write-down of inventories $ 27.9
Other asset write-downs 12.3
Severance pay and benefits 6.2
Building exit costs 8.6
-----------
Total restructuring charges and inventory
and other asset write-downs $ 55.0
Tax benefit (21.4)
-----------
Net restructuring charges and inventory
and other asset write-downs $ 33.6
===========
</TABLE>
Based upon the discontinuation and product rationalization analysis completed,
the related assets and intangibles were determined to be impaired and were
written down to their net realizable value. Severance pay and benefits and
exit costs have been recognized in accordance with Emerging Issues Task Force
Issue No. 94-3 (EITF No. 94-3), "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." As of December 28, 1996, severance costs
totaling $3.6 million had been paid and charged against these reserves.
In the third quarter of 1995, the Company recorded restructuring charges and
asset write-downs totaling $156 million ($94.9 million after tax) to provide
for a business-based reorganization through plant closings, work force
reductions and elimination of certain products. The charges provided for the
closing of six plants (Clearing, Illinois; Burlington, Iowa; Auburndale,
Florida; Omaha, Nebraska; Memphis, Tennessee; and New Berlin, Wisconsin) and
the reduction of the work force by approximately 700 people, substantially all
of whom were based in the plants that were closed.
All six plants were closed by September 28, 1996. Approximately $20.4
million of the charge related to inventories and was included in cost of
products sold. Approximately $20 million in reserves for environmental costs
and other plant post-closing expenses remained at December 28, 1996. Such
reserves are believed to be adequate and are expected to be paid utilizing
cash flow from operations. Severance pay and benefits and exit costs,
primarily facility closure costs, were also recognized in accordance with EITF
No. 94-3 and are included in the restructuring reserve described above.
Severance and exit costs paid and charged against such reserves in 1996
amounted to $12.7 million.
NOTE E. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
------------- ------------
<S> <C> <C>
(000 omitted)
Raw materials and supplies $ 37,744 $ 42,659
Work in process 10,939 8,495
Finished goods 90,809 102,659
------------- -------------
$ 139,492 $ 153,813
============= =============
</TABLE>
NOTE F. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
------------------- --------------
<S> <C> <C>
(000 omitted)
Land $ 5,473 $ 5,475
Buildings and leasehold improvements 81,874 79,845
Machinery and other equipment 328,014 301,763
Construction in progress 33,054 16,517
------------------- --------------
448,415 403,600
Less accumulated depreciation (221,864) (202,524)
------------------- --------------
$ 226,551 $ 201,076
=================== ==============
</TABLE>
NOTE G. INTANGIBLES
Intangibles consisted of the following:
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
------------------- --------------
<S> <C> <C>
(000 omitted)
Goodwill (1) $ 238,623 $ 233,854
Trademarks 69,675 73,967
Customer list and other intangibles 98,689 99,939
------------------- --------------
406,987 407,760
Less accumulated amortization (81,248) (73,052)
------------------- --------------
$ 325,739 $ 334,708
=================== ==============
</TABLE>
(1) Includes $155,259,000 of goodwill arising prior to November 1, 1970, that
is not being amortized.
NOTE H. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
------------------- -------------
<S> <C> <C>
(000 omitted)
Accrued compensation $ 12,829 $ 14,046
Accrued trade promotions 22,835 22,378
Severance and exit cost reserves 34,875 24,800
Other 37,606 45,909
------------------- -------------
$ 108,145 $ 107,133
=================== =============
</TABLE>
NOTE I. DEBT
Long-term debt at December 28, 1996, amounted to $269,515,250 in the form of
bank borrowings supported by a $350,000,000 long-term, revolving credit
agreement. Borrowings under the agreement are on a revolving basis under
commitments available until August 15, 2001.
The interest-rate applicable to borrowings under the agreement is, at the
Company's option, indexed to the bank prime rate or the London Interbank
Offering Rate ("LIBOR"), plus appropriate spreads over such indices during the
period of the credit agreement. The agreement also provides for commitment
fees. Such spreads and fees will change moderately should the Company's debt
ratings change. Interest expense incurred on long-term debt in 1996, 1995
and 1994 was $6,500,000, $333,000 and $467,000, respectively.
The financial covenants of the revolving credit agreement require the Company
to maintain shareholders' equity equal to 80% of such equity as of the
Distribution Date plus 25% of net income subsequent thereto plus certain other
additions to shareholders' equity. The Company is also required to maintain
a three-to-one ratio of long-term debt to income before interest, taxes,
depreciation and amortization. Under the most restrictive of these
covenants, approximately $27,000,000 of shareholders' equity was available for
dividends as of December 28, 1996.
Long-term debt at December 30, 1995, consisted of $3,003,000 in Industrial
Revenue Bonds at 6.75% interest, payable to 2003. Such long-term debt was
prepaid in March 1996 to permit the sale of the related facility. In
addition, the Company had certain foreign revolving credit loans from banks
under agreements that provide for credit of $6,625,000 (stated in U.S. dollar
equivalent), of which $317,000 was outstanding at December 30, 1995.
Interest paid to lenders other than the Former Parent company in 1996, 1995
and 1994 was approximately $5,329,800, $133,300 and $285,200, respectively.
NOTE J. INCOME TAXES
The deferred income tax assets (liabilities) included in the Consolidated
Balance Sheet at December 28, 1996, and December 30, 1995, are related to the
following:
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
------------------- --------------
<S> <C> <C>
(000 omitted)
Property, plant and equipment $ (42,159) $ (21,938)
Pension and other employee benefits 89,098 39,433
1995 restructure costs 28,170 26,785
1996 restructure costs 12,299
Other 16,949 11,163
Deferred state income taxes 20,940 3,739
------------------- --------------
$ 125,297 $ 59,182
=================== ==============
</TABLE>
The combined provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
-------------- --------- -------
(000 omitted)
Current:
United States:
Federal $ 10,262 $ 14,576 $48,019
State 3,081 549 7,367
Foreign 133 81 207
-------------- --------- -------
13,476 15,206 55,593
-------------- --------- -------
Deferred:
United States:
Federal 5,977 (30,955) 683
State (6,942) (3,778) 192
-------------- --------- -------
(965) (34,733) 875
-------------- --------- -------
Provision (benefit) for
income taxes $ 12,511 $(19,527) $56,468
============== ========= =======
</TABLE>
Income taxes paid in 1996, 1995 and 1994 amounted to $3,789,000,
$32,237,000 and $67,550,000,respectively.
Reconciliations between the statutory federal income tax rate and the
Company's consolidated effective income tax rate for the years ended December
28, 1996; December 30, 1995; and December 31, 1994, are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
Nondeductible goodwill amortization 1.1 (2.1) .5
Nondeductible spinoff transaction
costs .5
FSC exclusion (benefit) (1.0) .8 (.5)
State income taxes 3.6 2.9 3.3
State deferred tax asset adjustment (9.5)
Impact of lower foreign tax rate (benefit)
(1.4)
Other, net 1.2 4.9
----- ----- -----
Effective income tax rate 29.5% 41.5% 38.3%
===== ===== =====
</TABLE>
NOTE K. PENSION AND OTHER BENEFITS
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
-------------- --------- --------
(000 omitted)
Service cost benefits earned during
the period $ 4,516 $ 4,483 $ 5,225
Interest cost on projected benefit
obligation 11,419 6,951 6,553
Actual return on plan assets (gain)
loss (13,767) (14,841) 174
Net amortization and deferral 3,573 8,973 (4,788)
Other items, primarily defined
contribution and multi-employer
plans 3,360 3,154 2,605
-------------- --------- --------
Net pension cost $ 9,101 $ 8,720 $ 9,769
============== ========= ========
</TABLE>
Weighted average assumptions used were:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
----- ----- -----
Discount rate for obligation 8.0% 8.0% 8.5%
Rate of increase in compensation
levels 5.0% 5.0% 5.0%
Long-term rate of return on assets 9.5% 9.5% 9.5%
</TABLE>
The following table indicates the plans' funded status and amounts recognized
in the Company's Consolidated Balance Sheet:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
-------------------------------- ------------------------------
December 28, December 30, December 28, December 30,
1996 1995 1996 1995
--------------- --------------- -------------- --------------
(000 omitted)
Actuarial present value of benefit obligations:
Vested benefit obligation $ 47,300 $ 40,179 $ 77,506 $ 24,661
=============== =============== ============== ==============
Accumulated benefit obligation $ 52,298 $ 45,550 $ 82,562 $ 28,585
=============== =============== ============== ==============
Projected benefit obligation $ 68,802 $ 65,392 $ 85,870 $ 35,663
Market value of plan assets, primarily
equity and fixed income securities (1) 64,496 58,546 72,829 24,515
--------------- --------------- -------------- --------------
Plan assets under projected benefit obligation
(4,306) (6,846) (13,041) (11,148)
Unrecognized transition (asset) obligation
(126) (145) 1,381 1,727
Unrecognized prior service cost (reduction)
(579) (748) 6,168 6,665
Unrecognized net (gain) loss (829) 2,047 (195) (4,286)
Additional minimum liability (2) (6,252) (143)
--------------- --------------- -------------- --------------
Accrued pension cost $ (5,840) $ (5,692) $ (11,939) $ (7,185)
=============== =============== ============== ==============
</TABLE>
(1) The assets reported represent primarily the portion of the trust assets
funding the Former Parent's joint benefit plan allocated to the Company under
separate SFAS No. 87 calculations. In conjunction with the Distribution,
assets are to be transferred from the trust funding the joint, defined benefit
plan based upon actuarial determinations made in conformity with regulatory
requirements. There is provision for payment by the Former Parent (from a
source other than the trust) to the Company of an amount in cash equal to the
excess of the amount allocated to the Company under separate SFAS No. 87
calculations over the amount allocated from the trust in accordance with
regulatory requirements. For all free-standing qualified plans
attributable directly to the Company, the related trust assets were
transferred based upon the amounts in the respective plans' trusts.
(2) The Company recorded an additional minimum liability for pensions of
$6,252,000, an intangible asset of $143,000, a deferred tax asset of
$2,397,000 and a reduction of equity of $3,712,000 at December 28, 1996, and
an additional minimum liability of $143,000 and an intangible asset of
$143,000 at December 30, 1995. There are restrictions on the use of certain
excess pension plan assets in the event of a defined change in control of the
Company.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. The Company and its subsidiaries
have defined benefit postretirement plans that provide medical and life
insurance for eligible employees, retirees and dependents. In addition, the
Company retained the obligations for such benefits for eligible retirees of
Armour and Company (sold in 1983).
Effective January 1, 1992, the Company adopted the provisions of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
("OPEB"), which requires that estimated OPEB benefits be accrued during the
years the employees provide services.
The status of the plans was as follows:
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
------------------- --------------
<S> <C> <C>
(000 omitted)
Accumulated postretirement benefit obligation:
Retirees $ 157,224 $ 28,887
Fully eligible active plan participants 13,264 19,512
Other active plan participants 25,748 38,089
Accumulated postretirement benefit obligation 196,236 86,488
Unrecognized prior service cost 14,045 2,410
Unrecognized net gain 21,080 7,272
Accrued postretirement benefit cost $ 231,361 $ 96,170
=================== ==============
Discount rate for obligation 8.0% 8.0%
</TABLE>
The assumed health-care rate cost trend used in measuring the 1996 accumulated
postretirement benefit obligation was 11% for retirees below age 65, gradually
declining to 5% by the year 2002 and remaining at that level thereafter, and
8.0% for retirees above age 65, gradually declining to 5.0% by the year 2002
and remaining at that level thereafter.
A 1.0% increase in the assumed health-care cost trend rate for each year would
increase the accumulated postretirement benefit obligation as of December 28,
1996, by approximately 9% and the ongoing expense by approximately 12%.
The net periodic postretirement benefit cost includes the following
components:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
-------------- ------- -------
(000 omitted)
Service cost-benefits attributed to
service during the period $ 2,589 $2,979 $ 3,623
Interest cost on the accumulated
postretirement benefit obligation 15,641 6,695 6,572
Net amortization and deferral (3,087) (233)
-------------- ------- -------
Net periodic postretirement benefit
cost $ 15,143 $9,441 $10,195
============== ======= =======
Curtailment gains due to termination
of certain benefits $ 4,611
==============
</TABLE>
The 1996 components of net periodic postretirement benefit cost reflect a full
year's expense of $6.9 million incurred on the Armour employee benefit
liabilities assumed in the Distribution. Expenses of $4.7 million incurred
prior to the Distribution were recorded in the financial statements of the
Former Parent company. Expenses of approximately $2.2 million incurred after
the Distribution are included in "Interest and other expenses" in the
Statement of Consolidated Operations for the year ended December 28, 1996.
NOTE L. LEASES
Certain sales and administration offices and equipment are leased. The
leases expire in periods ranging generally from one to five years, and some
provide for renewal options ranging from one to eight years. Leases that
expire are generally renewed or replaced by similar leases depending on
business needs at that time. Net rent expense paid in 1996, 1995 and 1994
totaled $3,797,000, $3,234,000 and $3,319,000, respectively.
At December 28, 1996, the Company's future minimum rental payments with
respect to noncancelable operating leases with terms in excess of one year
were as follows: $5,597,000 (1997), $5,226,000 (1998), $4,639,000 (1999),
$4,427,000 (2000) and $4,267,000 (2001).
Included in the above future minimum rental payments are payments of
$2,676,000 per year through 2006 for office space in the Viad Tower, which
the Company intends to vacate in mid-year 1997. The Company intends to
sublease this office space.
NOTE M. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND FAIR VALUE OF
FINANCIAL INSTRUMENTS
Financial Instruments with Off-Balance-Sheet Risk.
At December 28, 1996, the Company had an agreement to sell undivided
participating interests in a defined pool of trade accounts receivable in an
amount not to exceed $90,000,000 as a means of accelerating cash flow. From
time to time, as collections reduce accounts receivable in the pool, the
Company sells participating interests in new receivables. The Company's
expenses of selling receivables amounted to approximately $2,059,000,
$2,323,000 and $3,941,000 in 1996, 1995 and 1994, respectively, and are
included in the Statement of Consolidated Operations under the caption
"Interest and other expenses." Under the terms of the agreement, the
Company has retained substantially the same risk of credit loss as if the
receivables had not been sold, as the Company is obligated to replace
uncollectible receivables with new accounts receivable. The Company's
accounts receivable sold totaled $74,900,000 and $76,710,000 at December 28,
1996, and December 30, 1995, respectively. The Company's average accounts
receivable sold approximated $42,637,000, $33,500,000 and $79,700,000 during
1996, 1995 and 1994, respectively.
In connection with the Distribution, the Company assumed an interest rate
swap agreement in the notional amount of $65,000,000. The agreement, which
matures in December 1997, requires the Company to pay a fixed rate of 8.87%
and receive a six-month LIBOR rate (currently 5.63%).
Fair Value of Financial Instruments.
The carrying values of cash and cash equivalents, receivables, accounts
payable and bank borrowings approximate fair values due to the short-term
maturities of these instruments. The fair value of the above-described
interest rate swap agreement was $1,900,070 at December 28, 1996, representing
the estimated amount the Company would pay to the swap counter-party to
terminate the agreement.
NOTE N. STOCK OPTIONS
Certain officers and employees hold options to acquire the Company's common
stock, which were granted under the Former Parent company's stock option
plans. These options were granted over a period of nine years and have been
adjusted for stock splits and the spinoff of a major subsidiary occurring
during that period. Such options were transferred to the Company as part of
the spinoff, with the number of shares and option prices adjusted so as to
preserve the economic value of the options to the optionees. Such options were
granted at the market prices on the dates of grant, became exercisable 50%
after one year and 100% after two years and expire after 10 years. No
additional options are to be granted under these plans.
In connection with the spinoff, the Company adopted The Dial Corporation Stock
Incentive Plan ("1996 Plan") which is administered by the Executive
Compensation Committee of the Board of Directors. Under the 1996 Plan, the
aggregate number of shares of common and preferred stock covered by awards to
any one individual cannot exceed 1,000,000 shares for any three-year period
(plus shares necessary to replace options granted by the Former Parent company
and transferred to the Company in connection with the Distribution), and no
more than 9,600,000 shares are cumulatively available for options intended to
qualify as "incentive stock options" under the Internal Revenue Code. The
term of the options is 10 years. The Plan provides that options are generally
to be granted at the market price on the date of grant; however, the Executive
Compensation Committee may grant options at less than such market price. The
Plan also authorizes the issuance of stock appreciation rights and restricted
stock.
Under the 1996 Plan, incentive stock options to 5,104,264 shares and
nonqualified options to 792,410 shares were granted at the market price on
the dates of grant. After one year, one-third of the options become
exercisable when the average closing market price over 20 consecutive days
equals or exceeds 133% of the option price, two-thirds when such price equals
or exceeds 167% of the option price and 100% when such price equals or exceeds
200% of the option price. All such options become exercisable, in any event,
after five years from the date of grant. The options granted in 1996 were
intended to aggregate the grants that otherwise would have been made over a
period of three years. Accordingly, in the next two years, it is expected
that additional options granted will generally be limited to new employees.
Options to 67,000 shares were also granted to nonemployee members of the
Board of Directors and options to 262,650 shares were granted to certain
nonunion employees at the market prices on the dates of grant. Such options
are exercisable 50% after one year and 100% after two years. The options
expire after 10 years.
A summary of the status of the Company's stock option plans as of December 28,
1996, and changes during the year is presented below:
<TABLE>
<CAPTION>
<S> <C> <C>
Weighted
Average
Exercise
Shares Price
----------- ---------
Outstanding at spinoff 4,298,041 $ 9.63
Granted 6,226,324 $ 13.11
Exercised (293,015) $ 9.25
Canceled (61,776) $ 11.84
----------- ---------
Outstanding at end of year 10,169,574 $ 11.76
=========== =========
Options exercisable at end of year 3,497,707 $ 9.34
=========== =========
</TABLE>
The following table summarizes information about stock options outstanding and
exercisable at December 28, 1996:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Options Outstanding Options Exercisable
---------------------------------------- ----------------------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Range of Options Life Exercise Options Exercise
Exercise Prices Outstanding (in years) Price Exercisable Price
- ---------------- ------------------- -------------------- --------- ----------- ---------
5.62 $ 6.88 909,116 3.2 $ 6.48 909,116 $ 6.48
7.89 $ 9.23 780,164 4.2 $ 8.78 780,164 $ 8.78
9.64 $11.15 1,259,775 6.8 $ 10.45 1,259,775 $ 10.45
11.91-$12.88 6,127,359 9.3 $ 12.74 445,542 $ 11.92
13.38-$14.50 1,093,160 9.7 $ 14.30 103,110 $ 13.94
------------------- -------------------- --------- ----------- ---------
10,169,574 7.0 $ 11.76 3,497,707 $ 9.34
=================== ==================== ========= =========== =========
</TABLE>
The estimated fair value of options granted during 1996 was $2.27 per share,
as determined using the Black-Scholes valuation model assuming an expected
average risk-free interest rate of 6.32%, an expected life of 4.2 years, an
expected volatility of 20.4% and expected dividend rate of 2.4%. The Company
applies Accounting Principles Board Opinion No. 25 and related Interpretations
in accounting for its stock option plans. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation." Accordingly, no compensation
cost has been recognized for the stock option plans. Had compensation cost
for the Company's stock option plans been determined based on the fair value
at the grant date consistent with the provisions of SFAS No. 123, the
Company's net income and net income per share would have been reduced to the
pro forma amounts indicated below. Compensation cost computed under SFAS
No. 123 for 1995 is immaterial.
<TABLE>
<CAPTION>
<S> <C>
1996
--------------
(000 omitted)
Net income as reported $ 29,912
==============
Pro forma net income $ 27,298
==============
Net income per share as reported $ 0.33
==============
Pro forma net income per share $ 0.30
==============
</TABLE>
NOTE O. LITIGATION AND CLAIMS
The Company is party to various legal actions, proceedings and pending claims.
Some of the foregoing involve, or may involve, compensatory, punitive or other
damages in material amounts. Litigation is subject to many uncertainties, and
it is possible that some of the legal actions, proceedings and claims
referred to above could be decided against the Company. Although the amount
of liability at December 28, 1996, with respect to these matters is not
ascertainable, the Company believes that any resulting liability will not
materially affect the Company's financial position or results of operations.
The Company is subject to various environmental laws and regulations of the
United States, as well as of the states and other countries in whose
jurisdictions the Company has or had operations and is subject to certain
international agreements. As is the case with many companies, the Company
faces exposure to actual or potential claims and lawsuits involving
environmental matters. Although the Company is a party to certain
environmental disputes, the Company believes that any liabilities resulting
therefrom, after taking into consideration amounts already provided for, but
exclusive of any potential insurance recoveries, will not have a material
adverse effect on the Company's financial position or results of operations.
NOTE P. CONDENSED CONSOLIDATED QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------------ ------------------ --------------------- ------------------
(000 omitted) 1996 1995 1996 1995 1996 1995 1996 1995
- ----------------------------- -------- -------- -------- -------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $352,392 $337,862 $353,758 $363,893 $350,508 $ 308,110 $349,742 $355,425
- ----------------------------- -------- -------- -------- -------- --------- ---------- -------- --------
Gross profit $179,041 $164,979 $168,286 $178,221 $138,391 $ 139,671 $168,075 $173,243
-------- -------- -------- -------- --------- ---------- -------- --------
Operating income
(loss) (1) (2) $ 36,342 $ 33,802 $ 42,997 $ 51,134 $(31,393) $(124,444) $ 22,451 $ 15,852
-------- -------- -------- -------- --------- ---------- -------- --------
Net income (loss) (1) (2) $ 19,608 $ 18,247 $ 19,289 $ 27,868 $(25,486) $ (78,109) $ 16,501 $ 4,505
-------- -------- -------- -------- --------- ---------- -------- --------
</TABLE>
(1) After deducting spinoff transaction costs of $4,000,000 ($2,400,000
after tax) or $0.03 per share in the second quarter of 1996 and restructuring
charges and asset write-downs and spinoff transaction costs of $56,000,000
($32,900,000 after tax) or $0.36 per share and $156,000,000 ($94,900,000 after
tax) in the third quarter of 1996 and 1995, respectively.
(2) Included in the fourth quarter of 1996 were credits of approximately $4.6
million ($2.8 million after tax) for pension expense and other postretirement
benefits resulting from favorable variances between budgeted and actual
expense.
In addition, the Company recorded a $4 million increase in deferred state
income tax assets in the fourth quarter of 1996. The Company's future state
income tax rate is approximately 1% higher than that which the Company was
subject to as a subsidiary of the Former Parent.
Exhibit 21.
THE DIAL CORPORATION
(Delaware)
SUBSIDIARIES
Active and Inactive (I) Subsidiaries and Affiliates* as of December 28, 1996
Andora S.A. (Mexico)
Ardison Properties, Inc. (Delaware)
ARMOUR INTERNATIONAL COMPANY (Arizona)
AIC Foreign Sales Corporation (Virgin Islands)
The Dial Corporation (Panama), S.A. (Panama)
Dial Consumer Product (UK) Limited (United Kingdom)
Armour International Limited (United Kingdom)
The Dial Corporation Mexico, S.A. de C.V. (Mexico)
The Dial Corporation (Puerto Rico), Inc. (Arizona)
Ft. Madison Dial, Inc. (Iowa)
ISC Incodisa Soap & Cosmetics (U.K.) Limited (United Kingdom)
ISC International Ltd. (British Virgin Islands)
Industrias Corporativas Diversificadas, S.A. (Guatemala)
ISC Incodisa Soap & Cosmetics - Nyon (Switzerland)
I.S.C. Internacional S.A. (Guatemala)
ISC International (U.S.A.), Inc. (Florida)
Purex de Panama, S.A. (Panama)
Dial Receivables Corporation (Delaware)
*Parent-subsidiary or affiliate relationships are shown by marginal
indentation. State, province or country of incorporation and ownership
percentage are shown in parentheses following name, except that no ownership
percentage appears for subsidiaries owned 100% (in the aggregate) by The Dial
Corporation. List does not include companies in which the aggregate direct
and indirect interest of The Dial Corporation is less than 20%.
Exhibit 23.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-10149, 333-10153, 333-10157, 333-11037 and 333-13187 of The Dial
Corporation on forms S-8 of our report dated February 14, 1997 appearing in
this Annual Report on Form 10-K of The Dial Corporation for the year ended
December 28, 1996.
\s\ Deloitte & Touche LLP
Deloitte & Touche LLP
Phoenix, Arizona
February 14, 1997
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director whose signature
appears below constitutes and appoints Lowell L. Robertson and Malcolm Jozoff,
and each of them severally, his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign the
Form 10-K Annual Report of The Dial Corporation for the fiscal year ended
December 28, 1996, and any and all amendments thereto, and to file the same,
with all exhibits, thereto, and other documents in connection herewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agents or either of the, or their or his or her substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
\s\ Joy A. Amundson March 14, 1997
Joy A. Amundson
\s\ Herbert M. Baum March 14, 1997
Herbert M. Baum
\s\ Joe T. Ford March 14, 1997
Joe T. Ford
\s\ Thomas L. Gossage March 14, 1997
Thomas L. Gossage
\s\ Donald E. Guinn March 14, 1997
Donald E. Guinn
\s\ Michael T. Riordan March 14, 1997
Michael T. Riordan
\s\ Dennis C. Stanfill March 14, 1997
Dennis C. Stanfill
\s\ Barbara S. Thomas March 14, 1997
Barbara S. Thomas
March 14, 1997
A. Thomas Young
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DIAL
CORPORATION'S FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 14,102
<SECURITIES> 0
<RECEIVABLES> 28,689
<ALLOWANCES> 3,170
<INVENTORY> 139,492
<CURRENT-ASSETS> 247,781
<PP&E> 226,551
<DEPRECIATION> 22,406
<TOTAL-ASSETS> 866,126
<CURRENT-LIABILITIES> 206,674
<BONDS> 269,515
0
0
<COMMON> 956
<OTHER-SE> 139,701
<TOTAL-LIABILITY-AND-EQUITY> 866,126
<SALES> 1,406,400
<TOTAL-REVENUES> 1,406,400
<CGS> 724,683
<TOTAL-COSTS> 724,683
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,974
<INCOME-PRETAX> 42,423
<INCOME-TAX> 12,511
<INCOME-CONTINUING> 29,912
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,912
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
