SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1994 Commission File No. 0-6436
BLOCK DRUG COMPANY, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1375645
(State or other jurisdiction of incorporation (I.R.S. Employer I.D. No.)
or organization)
257 Cornelison Avenue, Jersey City, New Jersey 07302-9988
(Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (201) 434-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock - $.10 par value
(Title of Class)
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 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 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. Yes x No
As of June 7, 1994, nonaffiliates held no voting shares of the Registrant;
therefore, the aggregate market value of voting shares held by nonaffiliates
is zero.
As of June 7, 1994, there were 11,844,451 shares of Class A Common Stock
and 7,704,400 shares of Class B Common Stock of Registrant outstanding.
Documents Incorporated by Reference: None
Exhibit Index: Page 58
<PAGE>
PART I
Item 1. Business
Block Drug Company, Inc. develops, manufactures and markets three
categories of products: dental products, including consumer oral hygiene
and professional dental products; consumer products, including proprietary
over-the-counter products and household products; and ethical
pharmaceuticals.
DENTAL PRODUCTS
Consumer Oral Hygiene Products
Denture cleansers and adhesives, specialty toothpastes and toothbrushes
are the products that comprise the consumer oral hygiene product segment of
our business. These over the counter products are marketed to the consumer
through advertising and promotion programs in the United States and in many
parts of the world.
POLIDENT and DENTU-CREME denture cleanser brands and their line
extensions continue to generate the largest dollar volume. These brands
are sold in more than forty countries around the world. DOUBLE-ACTION
POLIDENT Tablets and new POLIDENT WIPES Denture Cleanser Towelettes
contributed to brand sales during the fiscal year.
POLI-GRIP is the Company's leading brand name in the denture adhesive
category. Brand growth during the year is traced to effective advertising,
introduction of the new "Easy to Squeeze" tube and successful promotion
efforts.
A variety of other cream, powder and liquid adhesives are marketed under
the national brand names SUPER POLI-GRIP, WERNET'S and SUPER WERNET'S.
SENSODYNE and PROMISE are specialty toothpastes for the treatment of
dentinal hypersensitivity. SENSODYNE, a recognized brand around the world,
is marketed to the consumer and the dental professional.
SENSODYNE with Baking Soda was introduced nationally during the fiscal
year in the face of competitive pressures from leading brand name
toothpastes. The SENSODYNE and PROMISE brands account for a substantial
share of the United States market for products that treat this common
dental problem affecting one in four adults.
Professional Dental Products
We are a leading manufacturer and marketer of professional dental
products for use in chairside patient treatment and dental office infection
control. In addition, the Company markets pharmaceutical products which
dentists may recommend to patients to help improve their oral health.
The Company employs Dental Consultants who personally visit the dental
professional and Tele-Sales Consultants who service thousands of dental
offices by telephone.
<PAGE>
HABITROLr, the nicotine transdermal system, is marketed by the Company
to dental professionals in the continental United States and Hawaii.
HABITROL is a product of the Pharmaceutical Division of Ciba-Geigy
Corporation. It is indicated as an aid to smoking cessation for the relief
of nicotine withdrawal symptoms and is used as part of a comprehensive
behavioral smoking cessation program.
The Company markets the VITAL DEFENSE line of office infection control
products. This line includes continuing education program materials on
office infection control requirements and applicable regulations
established by government agencies.
SensoGARD Canker Sore Relief Gel is a new over the counter medication
introduced during the fiscal year to treat the pain of aphthous ulcers of
the mouth.
The MYNOL line of endodontic products includes endodontic instruments
for use during root canal surgery. ADAMOUNT X-Ray film mounts and VISION
prophylaxis paste are among the Company's professional dental products.
SENSODYNE Sealant Dentin Desensitizing Kit is a chairside treatment for
sensitive teeth. The kit combines professional in-office treatment and on-
going home care therapy, including a sample of SENSODYNE toothpaste and a
special toothbrush.
The Company also markets the VITAL RESPONSE Crisis Management System, an
emergency kit for use by dentists to control unexpected in-office
emergencies.
CONSUMER PRODUCTS
Proprietary Over-the-Counter Products
Included in the Company's personal care products line are three well-
known consumer brand names: NYTOL Sleep-Aid Tablets, TEGRIN Medicated
Shampoos and BC Headache Powder.
NYTOL Sleep-Aid Tablets television advertising continues to generate
awareness of the brand and growth for its line extension, NYTOL Maximum
Strength. NYTOL is sold in the U.S., Canada, United Kingdom and in parts
of Latin America.
Tegrin Medicated Shampoo continues to compete and grow within the
specialty shampoo category.
The BC Headache Powder brand maintained its leadership position in the
Southern region powdered analgesic market. Effective marketing and a
successful television/radio advertising campaign help BC brand continue to
rank high in the regional over the counter analgesic marketplace. BC KEEP
GOING Stimulant Caplets were added to the BC line during the fiscal year.
<PAGE>
The Company acquired rights to BALMEX Diaper Rash Ointment in November
1993. BALMEX Ointment has a unique formula with potential for expanded
distribution and consumer and professional support programs.
PHAZYME, an over-the-counter product for gas relief, experienced growth
on the strength of broader distribution for the PHAZYME line, the
introduction of a chewable tablet form and use of television advertising.
The Company continues to market this brand to the physician as well.
Household Products
Household products sold by the Company include the 2000 FLUSHES, X-14
and EARTHWISE brand names.
The 2000 FLUSHES line of toilet bowl cleaners was again the market
leader in the automatic toilet bowl cleaning category. 2000 FLUSHES
Chlorine Clear Tablet continues to grow in the U.S. market.
Under the X-14 brand name, a chlorine and a blue automatic toilet bowl
cleaning product were introduced during the fiscal year to compete in the
short duration category of toilet bowl cleaners.
Our X-14 line of hard surface cleaners now includes X-14 Instant Mildew
Stain Remover, X-14 Soap Scum Remover and X-14 Mineral and Rust Stain
Remover. The X-14 line was stable in a year of unusually strong
competitive pressures.
In July 1993, the Company acquired the EARTHWISE line of environmentally
responsible household cleaners and plastic bags sold primarily in health
food stores. The Company believes this line offers opportunity for
future growth.
ETHICAL PHARMACEUTICAL PRODUCTS
Pharmaceutical products and ethical non-prescription products are
manufactured and marketed by Reed & Carnrick. This Division markets
products in several medical categories including gastroenterology,
dermatology, cardiovascular disease and proctology.
In gastroenterology, the Company's product COLYTE-FLAVORED bowel
cleansing lavage, remains the leading prescription product for
precolonoscopy exams.
The Division's PROCTOFOAM-HC and PROCTOCREAM-HC line of
antihemorrhoidals continued to show sales growth, bolstered by the
introduction of a higher strength cream line extension. CORTIFOAM, a high
potency anti-inflammatory foam was the fastest growing product for the
Division during the year.
During the fiscal year, the Company began selling the DURASCREEN long-
lasting sunscreen product and marketing PENECARE products for dry skin
treatment following an acquisition, co-promotional sales and distribution
agreement with Penederm Inc.
<PAGE>
INTERNATIONAL OPERATIONS
With thirty-two subsidiaries, branches and divisions, the Company's
International Operations manufacture and distribute products to consumers
and professional markets spanning five continents.
Well known brand name products marketed by the Company in the United
States are marketed internationally as well. International product sales
accounted for 48% of corporate sales in fiscal 1994.
The Company's denture cleansers, denture adhesives, specialty
toothpastes and household products continue to penetrate the existing
international marketplace and reach out to emerging new countries.
Three divisions comprise the Company's International Operations:
Europe, Latin America and Pacific Rim/Canada. Operations in each of these
areas employ the marketing techniques similar to those used in the United
States, adapted to accommodate individual market characteristics.
The Company's largest foreign market is in Europe, where there are sales
and marketing organizations in Germany, United Kingdom, France, Italy,
Spain, Sweden, Belgium, the Netherlands and Portugal. Factories in the
United Kingdom, Wales, Ireland and Belgium supply these markets.
In Latin America, our principal markets include Mexico, Colombia, Brazil
and Argentina. Manufacturing plants are located in each of these
countries. During the year, the Company established a new subsidiary
in Chile and will launch several brands there.
The Company's base for the Pacific Rim is Australia in which our
subsidiary has its own manufacturing facility and marketing operation.
Principal markets include Japan, Australia, Thailand and the Philippines.
In Canada, a state of the art manufacturing, distribution and marketing
facility provides product for the country as well as other of the Company's
affiliates in certain parts of the world.
Plans are well underway for the establishment of other subsidiaries in
Asia and the Middle East.
RESEARCH & DEVELOPMENT
The Company maintains an active Research and Development program in
modern laboratories designed to support each of its worldwide marketing
areas: consumer products; oral health care; prescription pharmaceuticals
and household products. This diverse mix requires the department maintain
expertise in a variety of different dosage forms and delivery systems, as
well as full clinical, regulatory, toxicological, analytical, packaging and
statistical support services. In addition, the department supports a New
Technology group which focuses on technologies to improve the Company's key
brands.
<PAGE>
During the fiscal year, the department significantly enhanced its
computer support system with consequent improvements in productivity. This
effort is expected to continue as the department implements new imaging
systems and electronic document and project management. The Company
continues to expand its worldwide clinical research program with studies
throughout Europe, United States, Canada and Japan. This global effort is
complemented by R&D project priorities assigned on a worldwide basis to
reduce the number of formulas which must be developed and maintained.
The Company continues its commitment to the maintenance and expansion of
its technology infrastructure with special focus on the quality of its
personnel, facilities and equipment. The Company will continue to use and
build this technology base to develop new and improved products.
REGULATORY AFFAIRS
As a major manufacturer of consumer and ethical pharmaceutical products,
the Company is subject to worldwide governmental regulations and controls
relating to product safety, efficacy, packaging, labeling and distribution.
While not all of the products which the Company plans to introduce into the
market are "new drugs" or "new devices", those fitting the regulatory
definitions are subject to a stringent premarket approval process. Under
the current requirements of the U.S. Food and Drug Administration (FDA),
the compilations and submission of a substantial amount of preclinical and
clinical information prior to market introduction has significantly
increased the amount of time and related costs incurred for new drug and/or
device product development.
The Company continues to submit data to the FDA in response to the
ongoing review of the safety and efficacy of all over the counter drug
products marketed in the U.S., as is the case with all manufacturers of
over the counter products. The reports issued by the Scientific Advisory
Panels for this Over-the-Counter Drug Review program have prompted a
continuing, comprehensive reexamination and documentation of the safety and
efficacy of the Company's currently marketed non-prescription drug
products. As a responsible manufacturer, the Company is alert to the
possibility that the final monographs to be issued in the foreseeable
future may require formula modifications of certain of its products to
maintain compliance with these regulations, a possibility facing
competitive products as well.
Manufacturing companies, especially those engaged in health care related
fields, are subject to a wide range of federal, state and local laws and
regulations. The Company is no exception. Concern for maintaining
compliance with federal, state, local and foreign regulations on
environmental protection, hazardous waste management, occupational safety
and industrial hygiene have also increased substantially. The Company's
policies and practices in the areas of environmental quality, product
safety, loss prevention, occupational health and safety are tempered by the
many laws and regulations affecting these areas.
<PAGE>
Our required compliance programs have had no significant effect on the
capital expenditures, earnings or the competitive position of the Company
or its subsidiaries.
The Company cannot predict what additional legislation or governmental
action, if any, will be enacted or taken with respect to the above matters
and what its effect, if any, will be on the operations of the Company.
MARKETING
The Company commits a substantial portion of its gross income to
advertising, promotion, market research and test marketing. Its consumer,
dental, personal care and household products are advertised directly to
consumers on network, cable and spot television, network and spot radio,
and in magazines and newspapers. The largest
expenditures by the Company are for the purchase of television time.
Oral hygiene, professional dental and ethical pharmaceutical products
are promoted by the Company through medical and dental journals. Exhibits
are presented at dental and medical conventions. Ethical pharmaceutical
products are promoted to the medical profession through professional
channels. A separate staff of professional sales representatives calls on
physicians, pharmacies, hospitals and governmental installations to
describe these products and their uses. Sales of these products are made
through sales representatives, principally to wholesalers and drug chain
headquarters, hospitals and governmental agencies.
A team of Dental Sales Consultants sells products directly to dentists.
The Company sells its consumer denture, dental care, oral hygiene and
personal care products through its national sales force. In-store
merchandising is provided by a national food broker merchandising force.
Sales are made directly to food and drug chains, wholesalers, mass
merchandisers and independent food and drug stores. Food brokers are
retained for sales of household products. In addition, the Company employs
marketing and sales representative in foreign countries.
PATENTS AND TRADEMARKS
Certain of the Company's products are covered by patents owned by the
Company or manufactured under license from others. While the Company
believes its patents, licenses and formulae to be of material value, it
does not consider its business as a whole to be dependent upon patent
protection.
The Company's principal trademarks are of material importance to its
business. Many of the Company's principal trademarks appear in this report
in capital letters. These trademarks are owned by the Company or its
wholly-owned subsidiaries.
<PAGE>
COMPETITION
The Company markets products in highly competitive fields. For many of
its products, its competitors include significantly larger corporations
with substantially greater resources. The high degree of trademark
recognition and goodwill associated with many of the Company's brands is an
important factor in its ability to compete effectively. While larger
competitors are able to commit significantly greater revenues to national
advertising, the Company believes its advertising and marketing expertise
enable it to compete effectively.
The primary competitive factors affecting proprietary over-the-counter
brands are product formulation, reputation and advertising. In the ethical
pharmaceutical market, the Company competes against significantly larger
companies in selected therapeutic areas. It relies upon clinical evidence,
the reputation of its brands and its marketing force concentrating its
efforts to promote to medical specialists, internists and family
practitioners. In the household products segment of its business, the
Company relies heavily on advertising and consumer promotion to compete.
MANUFACTURING
Most of the principal raw materials used by the Company in its domestic
manufacturing operation are purchased domestically and are generally
obtainable from a number of sources at competitive prices. Certain raw
materials are available only from single sources of supply and in these
cases the Company sees no likelihood of the termination of such sources of
supply. The Company maintains adequate inventories of raw materials.
During the course of the fiscal year ended March 31, 1994, there were no
substantial raw material shortages. The Company was able to obtain at
competitive prices all raw materials required for its normal operations.
The Company manufactures the majority of its products. Some products
are manufactured by independent third parties.
In its manufacturing operations, the Company emphasizes control of the
quality of its products. Procedures to assure quality and stability
include rigid specifications, continuously reviewed and upgraded for
ingredients and packaging materials. A staff of professional and technical
employees is maintained at each manufacturing facility to assure the
Company's standards are met in all phases of production.
<PAGE>
Item 2. Properties
The worldwide executive and administrative offices, manufacturing,
research and development, warehousing and distribution facilities of the
Company and its subsidiaries use an aggregate of approximately 2,488,000
square feet. This figure does not include undeveloped land on which its
facilities are located or land adjacent to certain properties. The Company
or its subsidiaries own substantially all the properties.
Among these properties are the following: (1) corporate headquarters,
Jersey City, New Jersey; (2) Reed & Carnrick ethical pharmaceuticals,
manufacturing and administrative facilities, Piscataway, New Jersey; (3)
dental product manufacturing: Humacao, Puerto Rico (Dentco, Inc.);
Glendale, Wisconsin (leased); Dungarvan, Ireland; and Cwmbran, Wales; (4)
manufacturing plants for more than one product group: Memphis, Tennessee;
Dayton (South Brunswick), New Jersey: Humacao, Puerto Rico (Reedco, Inc.);
Mississauga, Canada; Plymouth, Great Britain; Oevel, Belgium; Sydney
Australia; Mexico City, Mexico; Buenos Aires, Argentina; Rio de Janeiro,
Brazil; and Zaragoza, Spain.
The Company owns land contiguous to the Memphis, South Brunswick,
Toronto, Plymouth, Oevel and Dungarvan facilities. Additional warehouse
facilities are in Memphis and in South Brunswick.
The Company also has offices in buildings which it owns in Welwyn Garden
City, Great Britain and Ratingen, Germany.
In Puerto Rico, the Company owns land, building and equipment which it
leases to an independent supplier of metal tubes for some of its products.
The Company's plants and facilities, in the opinion of management, are
in good condition and, together with expansions and alterations recently
completed, or in the process of being completed, are regarded by management
as adequate for current requirements and for those of the next several
years.
Item 3. Legal Proceedings
The Company is involved in various routine litigation incidental to its
business. While the significance of these matters cannot be fully assessed
at this time, management, on advice of counsel, does not believe that any
liability that may arise from these proceedings will have a material
adverse impact on the Company's consolidated financial position and results
of operations.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
On June 2, 1994 by waiver and unanimous consent of the Class B
shareholders of the Company, the Board of Directors, consisting of the
persons named in Item 10, was elected in its entirety.
Leonard N. Block, James A. Block and Thomas R. Block were reappointed
Members of the Executive Committee of the Board of Directors which, upon
unanimous consent of all its Members, may exercise all the authority of the
Board of Directors.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
STOCK PRICE AND DIVIDEND INFORMATION
Market Price Range of Cash Dividends
Class A Common Stock* Declared Per
Share
Fiscal Year Ended March 31, 1994 High Low
First Quarter 53 45 $0.250
Second Quarter 46 1/2 32 $0.250
Third Quarter 37 3/4 29 3/4 $0.260
Fourth Quarter 37 1/2 31 3/4 $0.260**
Fiscal Year Ended March 31, 1993 High Low
First Quarter 57 45 $0.225
Second Quarter 48 42 1/2 $0.225
Third Quarter 56 1/2 46 1/2 $0.250
Fourth Quarter 58 1/4 46 $0.250***
* These are high and low bid quotes and reflect inter-dealer prices
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
** In addition, a 3% stock dividend was paid on January 4, 1994 to
Class A and B shareholders in Class A Common Stock.
*** In addition, a 3% stock dividend was paid on January 2, 1993 to
Class A and B shareholders in Class A Common Stock.
The following table indicates the approximate number of shareholders of
each class of the Company's equity securities as of June 7, 1994:
Title of Class Number of Shareholders
Common Stock, Class A (non-voting) 564
Common Stock, Class B (voting) 5
<PAGE>
<TABLE>
Item 6. Selected Financial Data
<CAPTION>
Fiscal Year Ended March 31
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net Sales $613,283,000 $624,826,000 $562,932,000 $512,884,000 $433,605,000
Income, Dividends
& Other Income 23,383,000 26,490,000 22,328,000 17,970,000 19,409,000
Income Before
Income Taxes 57,114,000 77,713,000 68,454,000 69,062,000 57,026,000
Income Taxes 9,262,000 16,167,000 11,187,000 15,852,000 10,886,000
Net Income 47,852,000 61,546,000 57,267,000 53,210,000 46,140,000
Average Number of
Common Shares
Outstanding (1) 19,529,000 19,504,000 19,490,000 19,606,000 19,795,000
Net Income Per Share
of Common Stock (1) $2.45 $3.16 $2.94 $2.71 $2.33
Cash Dividends Declared
Per Share of Class A
Common $1.02 $ .95 $ .85 $ .75 $ .67
Stock Dividends Declared
Per Share of Class A
Common 3% 3% 3% 3% 3%
Stock Dividends Declared
Per Share of Class B
Common (2) 3% 3% 3% 3% 3%
Depreciation $13,580,000 $10,727,000 $ 9,059,000 $ 8,215,000 $ 6,187,000
Working Capital 32,637,000 51,203,000 69,563,000 88,620,000 103,315,000
Current Ratio 1.2 1.3 1.4 1.8 2.4
Total Assets $771,068,000 $726,497,000 $649,608,000 $550,735,000 $460,268,000
Long-Term Debt and
Notes Payable 17,880,000 19,160,000 19,435,000 19,459,000 19,660,000
Shareholders' Equity 515,121,000 485,298,000 446,550,000 398,736,000 352,013,000
Number of Employees 3,491 3,505 3,301 3,105 3,050
</TABLE>
(1) Restated to reflect stock dividends declared on Class A and Class B
Common Stock by the Company in 1994 and previously.
(2) Payable in Class A Common Stock.
<PAGE>
Item 7. Management's Discussion and Analysis of Operating Results and
Financial Condition
Operating Results
Consolidated worldwide net sales for the fiscal year ended March 31,
1994 were $613.3 million, a decrease of 2% from the prior fiscal year 1993,
which recorded an increase of 11%. Both domestic and international sales
decreased in fiscal 1994. In fiscal 1993, both domestic and international
sales were higher than those of the prior fiscal year. Foreign currency
translation had a considerable impact on the current year's sales decrease
and consolidated sales would have shown an increase of approximately 3% in
absence of such impact. The 2% decrease in domestic sales was attributable
to volume decreases, offset in part by selective price increases.
Although international sales declined 1% in fiscal 1994, unit sales were
generally higher and sales in local currency were ahead
of year-ago levels.
Not included in the Company's sales is its 50% interest in a Japanese
joint-venture company, Kobayashi-Block Company Limited, which is accounted
for under the equity method. Total sales of the joint-venture Company
for fiscal 1994 were $92.4 million, 30% higher than fiscal year 1993 which
had total sales of $70.9 million, 43% higher than fiscal 1992.
The largest business segment, dental products, decreased 2% to $394
million, following a 9% advance in the prior year. Consumer product sales
decreased to $134 million, a 2% decrease compared to a 17% increase in the
previous year. Ethical pharmaceutical products registered sales of $86
million for a decline of 1%, compared to a 12% gain in the prior fiscal
year.
Interest, Dividends and Other Income decreased $3.1 million in fiscal
1994. The decrease occurred principally from lower interest rates. In
fiscal 1993, investment income increased compared to fiscal 1992,
principally because of increased security holdings.
The cost of goods sold percentage to sales was 33.5% in fiscal 1994,
compared to 33.0% in fiscal 1993 and 32.2% in fiscal 1992. Favorable
purchase prices and operating efficiencies served to maintain gross
margins. However, higher costs associated with modernization and expansion
of the Company's facilities in recent years, coupled with changes in
product mix and strong competitive pricing pressure, has resulted in
moderately higher cost, relative to selling price.
Selling, general and administrative expenses represented 61.0%, 58.8%
and 59.6% of sales in fiscal 1994, 1993 and 1992, respectively. The major
portion of such expenses are advertising and promotional expenditures
essential to do business in the highly competitive environment in which the
Company operates. Such expenses were increased substantially in fiscal
1994 and reflect a major spending program to increase advertising and
promotion behind core businesses to build brand equities and meet
significant competition.
<PAGE>
Due to the above factors, income before taxes was 9.3%, of sales as
compared to 12.4% and 12.2% in fiscal 1993 and 1992, respectively.
The effective income tax rates of 16.2%, 20.8% and 16.3% in
fiscal 1994, 1993 and 1992, respectively, reflect tax-exempt
interest from governmentsecurities and income from the
lower tax areas of Puerto Rico and Ireland. The decrease in the
effective income tax rate for fiscal 1994 results from
a combination of factors including relatively higher profits in
subsidiaries located in lower-tax jurisdictions.
Net foreign exchange losses of $1,789,000, $4,913,000 and $685,000,
consisting of transaction gains and losses and translation losses relating
to highly inflationary countries, were included in the determination of
net income for fiscal years 1994, 1993 and 1992, respectively.
Although inflation has been moderate throughout fiscal 1994 and 1993,
the Company has continued to utilize such measures as selective price
increases and budgetary monitoring over advertising, personnel and other
operating expenses to control its operating margins. Research and
development outlays have been increased in the continuing effort to develop
new and improved products and line extensions.
In November, 1992, the FASB issued SFAS No. 112, "Employers' Accounting
for Postemployment Benefits," which requires accrual accounting for
benefits provided to former or inactive employees after employment but
before retirement. These benefits include salary continuation, disability
benefits, severance pay and continuation of health care benefits. The
Company must implement SFAS 112 in fiscal 1995. Management anticipates
that the adoption of SFAS 112 will not have a significant effect on net
income.
In fiscal 1995, the Company will also adopt SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Consistent with
current practice, investments in debt securities are expected to be
classified as hold-to-maturity and reported at amortized cost. All other
securities are expected to be classified as available-for-sale and reported
at fair value, with unrealized gains and losses reported in a separate
component of shareholders equity. The adoption of this standard is not
expected to have a significant impact on financial position or results of
operations.
Liquidity and Capital Resources
Cash increased to $8.9 million at March 31, 1994 from $6.6 million at
March 31, 1993 and $7.3 million at March 31, 1992.
Net cash flows from operating activities were $76 million in fiscal
1994, $30 million more than the prior year. Decreases in inventories,
together with increases in accounts payable, more than offset decreases in
operating results and increases in accounts receivable and other current
and non-current assets. In fiscal 1993, net cash flows from operating
activities were $46 million, $1 million less than the prior year.
<PAGE>
Increases in inventories and accounts receivable, together with decreases
in accounts payable, more than offset increases in operating results and
other current and non-current assets. Accounts receivable at year-end
1994, 1993 and 1992 represented 1.9, 1.8 and 1.9 average months of sales,
respectively. Inventory levels comprised 5.2, 5.6 and 5.9 months supply at
year-end 1994, 1993 and 1992, respectively.
Net cash used in investing activities for fiscal 1994 was $58 million,
compared to $75 million in fiscal 1993. Additions to net property, plant
and equipment, and purchases of long-term securities more than offset
proceeds from sales of securities. In fiscal 1992, the net cash out flows
for investing activities was also $75 million. Throughout the three-year
period, the Company, consistent with its plans for growth and expansion,
continued the modernization and expansion of its manufacturing,
distribution and office facilities, domestically and internationally.
Net capital expenditures decreased to $35 million in fiscal 1994 from
$46 million in fiscal 1993 and $36 million in fiscal 1992. Domestically,
major projects over this three-year period have been the modernization and
expansion of laboratories and office facilities at the Jersey City, New
Jersey corporate headquarters, the purchase of a new distribution and
manufacturing facility near the South Brunswick, New Jersey plant and the
renovation and expansion of production and warehouse facilities at the
Memphis, Tennessee and South Brunswick, New Jersey plants. The Company's
foreign facilities were also expanded in fiscal 1994. Expenditures
continued to be made for renovation and expansion of production and
warehousing facilities in Ireland, England and Belgium. Expansion, both
domestic and foreign is expected to continue in fiscal 1995 but to a lesser
extent than in fiscal 1994. The Company anticipates future capital
spending to approximate 5% of net sales, and expects to fund modernization
and expansion programs through funds generated from operations and through
short-term borrowings, as appropriate.
Net cash used in financing activities was $15 million in fiscal 1994,
compared to net cash inflows of $30 million in both fiscal 1993 and fiscal
1992. The financing outflows in fiscal 1994 arose from the payment of
dividends and payment of debt with no new issuances of debt. In both
fiscal 1993 and 1992, proceeds from debts issuance of $45 million and $39
million, respectively, more than offset dividends to shareholders and debt
repayments.
An overall strengthening of the United States dollar in relation to
foreign currencies resulted in net foreign currency translation losses of
$7.5 million and $13.3 million in fiscal 1994 and fiscal 1993,
respectively. Such amounts were charged directly to shareholders' equity
in the balance sheet.
The Company anticipates that sufficient funds will be provided from
operations and borrowing capabilities for capital expenditures, dividend
payments and other cash needs in fiscal 1995. The Company had uncommitted
lines of credit totaling $180 million and $145 million at March 31, 1994
and 1993, respectively.
<PAGE>
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
We have audited the consolidated financial statements and the financial
statement schedules of Block Drug Company, Inc. and Subsidiaries listed in
the index on page 44 of this Form 10-K. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We did
not audit the financial statements of certain foreign subsidiaries and
branches, which statements reflect total assets and total revenues
constituting approximately 11 percent and 23 percent, respectively, in the
year ended March 31, 1994, 10 percent and 24 percent, respectively, in the
year ended March 31, 1993 and 9 percent and 22 percent, respectively, in
the year ended March 31, 1992 of the corresponding consolidated totals.
These statements were audited by other auditors whose reports thereon were
furnished to us. Our opinion expressed herein, insofar as it relates to
the amounts for such subsidiaries and branches, is based solely upon such
reports.
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, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Block Drug Company, Inc.
and Subsidiaries as of March 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three
years in the period ended March 31, 1994 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the
basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND
New York, New York
June 7, 1994
<PAGE>
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31
ASSETS 1994 1993
<S> <C> <C>
Current Assets:
Cash $ 8,896,000 $ 6,627,000
Marketable securities, at cost, which approximates
market value 19,338,000 26,283,000
Accounts receivable, less allowances of
$2,709,000 (1994) and $2,815,000 (1993) 97,814,000 95,743,000
Inventories (Notes 1 and 2) 88,986,000 96,458,000
Other current assets 34,079,000 29,728,000
Total current assets 249,113,000 254,839,000
Property, plant and equipment, less
accumulated depreciation (Notes 1 and 3) 207,474,000 189,251,000
Long-term securities, at cost; market
value $ 281,601,000 (1994) and $257,861,000 (1993) 275,574,000 246,984,000
Goodwill and other intangible assets, less
accumulated amortization of $8,825,000 (1994) and
$7,866,000 (1993) (Note 1) 21,721,000 22,430,000
Other assets 17,186,000 12,993,000
Total assets $771,068,000 $726,497,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes and bonds payable (Note 4) $114,983,000 $117,908,000
Accounts payable and accrued expenses (Note 5) 88,359,000 70,700,000
Income taxes payable (Note 6) 10,056,000 12,218,000
Dividends payable 3,078,000 2,810,000
Total current liabilities 216,476,000 203,636,000
Long-Term notes and bonds payable (Note 4) 17,880,000 19,160,000
Deferred income taxes (Note 6) 11,424,000 8,433,000
Deferred compensation and other
payables (Notes 1 and 7) 10,167,000 9,970,000
Total liabilities 255,947,000 241,199,000
Shareholders' equity (Notes 1 and 8):
Class A common stock, non-voting par value
$.10-15,000,000 shares (1994 and 1993) authorized,
11,839,501 (1994) and 11,241,377 (1993) shares
issued and outstanding 1,184,000 1,124,000
Class B common stock, par value $.10-30,000,000
shares (1994 and 1993) authorized, 7,704,400
1994 and 1993) shares issued and outstanding 770,000 770,000
Capital in excess of par value 173,372,000 153,996,000
Retained earnings 349,500,000 331,633,000
Cumulative foreign currency translation
adjustment (Note 1) (9,705,000) (2,225,000)
Total shareholders' equity 515,121,000 485,298,000
Total liabilities and shareholders' equity $771,068,000 $726,497,000
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Years Ended March 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
Revenues:
<S> <C> <C> <C>
Net sales (Note 10) $613,283,000 $624,826,000 $562,932,000
Interest, dividends and other income 23,383,000 26,490,000 22,328,000
636,666,000 651,316,000 585,260,000
Cost and Expenses:
Cost of goods sold 205,595,000 206,453,000 181,514,000
Selling, general and administrative 373,957,000 367,150,000 335,292,000
579,552,000 573,603,000 516,806,000
Income before income taxes (Note 10) 57,114,000 77,713,000 68,454,000
Income Taxes (Note 6):
Current 8,809,000 16,296,000 10,756,000
Deferred 453,000 (129,000) 431,000
9,262,000 16,167,000 11,187,000
Net Income 47,852,000 61,546,000 57,267,000
Retained earnings at beginning of year 331,633,000 306,024,000 287,726,000
Less: Cash dividends declared $1.02
(1994) and $.95 (1993) per share of
Class A common stock (11,632,000) (10,286,000) (8,733,000)
Stock dividend 3% (1994, 1993 and 1992)
to Class A and Class B shareholders
payable in Class A common stock (Note 8) (18,353,000) (25,651,000) (30,236,000)
Retained earnings at end of year $349,500,000 $331,633,000 $306,024,000
Earnings per share of common stock
(Notes 1 and 8) $ 2.45 $ 3.16 $ 2.94
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended March 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net Income $47,852,000 $61,546,000 $57,267,000
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 14,539,000 11,659,000 10,554,000
Deferred income tax provision 453,000 (129,000) 431,000
Deferred compensation provision 1,773,000 2,492,000 3,300,000
Equity in net income of joint venture 1,780,000 958,000 705,000
Gain on sales of long-term securities (42,000) (4,747,000) (3,674,000)
Purchase of forward exchange contracts,
net of proceeds on sales - - (215,000)
Other, net 1,283,000 915,000 702,000
Changes in Assets and Liabilities that
Provided (Used) Cash:
Accounts receivable (5,286,000) (13,432,000) (11,956,000)
Inventories 5,224,000 (12,113,000) (8,639,000)
Accounts payable and accrued expenses 19,558,000 (4,000) 12,004,000
Other current assets (2,482,000) (136,000) (8,274,000)
Other assets (6,083,000) (2,056,000) (3,137,000)
Income taxes and dividends payable (1,180,000) 3,287,000 97,000
Payments of deferred compensation (1,351,000) (2,366,000) (2,472,000)
Other noncurrent liabilities (100,000) (200,000) (13,000)
Net Cash Flow from Operating Activities 75,938,000 45,674,000 46,680,000
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant and Equipment (35,215,000) (46,268,000) (36,202,000)
Increase in Marketable Securities 6,945,000 (3,271,000) (463,000)
Proceeds from Sales of Long-Term Securities 23,910,000 67,227,000 72,402,000
Purchase of Long-Term Securities (52,992,000) (86,855,000) (109,241,000)
(Increase) Decrease in Goodwill and
Other Intangible Assets (250,000) (6,145,000) (1,431,000)
Net Cash Used in Investing Activities (57,602,000) (75,312,000) (74,935,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends Paid to Shareholders (11,631,000) (10,396,000) (8,733,000)
Proceeds from Issuance of Debt - 45,286,000 38,577,000
Payment of Debt (3,643,000) (5,172,000) (121,000)
Net Cash Provided by (Used in)
Financing Activities (15,274,000) 29,718,000 29,723,000
Effect of Exchange Rates on Cash (793,000) (717,000) (183,000)
Increase (Decrease) in Cash 2,269,000 (637,000) 1,285,000
Cash, Beginning of Year 6,627,000 7,264,000 5,979,000
Cash, End of Year $ 8,896,000 $ 6,627,000 $ 7,264,000
Cash Paid During the Year:
Interest $ 6,979,000 $ 6,927,000 $ 5,999,000
Income Taxes $13,627,000 $14,396,000 $11,482,000
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BLOCK DRUG COMPANY, INC. AND
SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies:
Basis of consolidation:
The accompanying consolidated financial statements include the accounts
of the Company and its domestic and foreign subsidiaries, all of which are
wholly-owned. The Company's investment in a 50% owned Joint Venture
(Kobayashi-Block Company Limited) is accounted for under the equity method.
With the exception of the March 31 year-end accounts of Germany, Japan and
Colombia, all other accounts of foreign subsidiaries have been included on
the basis of fiscal years ended December 31 in order to be available for
inclusion in the consolidation. All material intercompany transactions and
balances have been eliminated in consolidation.
Foreign currency translation:
All assets and liabilities, other than those of highly inflationary
countries, are translated at year-end exchange rates. In such cases,
translation gains and losses are recorded as a separate component of
shareholders' equity and are not included in the determination of net
income. For subsidiaries that are considered to be operating in highly
inflationary countries (Brazil and Argentina), certain assets and
liabilities are translated at historical exchange rates and resulting
translation gains and losses are included in the determination of net
income. In all cases, foreign currency transaction gains and losses are
included in the determination of net income.
Net foreign exchange losses of $1,789,000, $4,913,000 and $685,000
consisting of transaction gains and losses and translation losses relating
to highly inflationary countries, were included in the determination of net
income for fiscal years 1994, 1993 and 1992, respectively.
Inventories:
Inventories are stated at the lower of cost or market. Cost is
determined principally by the average cost and first-in, first-out methods.
Property, plant and equipment and depreciation:
Property, plant and equipment is recorded at cost. Depreciation is
provided over estimated lives using the straight-line method. The cost of
maintenance, repairs and minor renewals of property, plant and equipment
are charged to operations; major renewal and betterments are capitalized.
Long-term securities:
Long-term securities with a fixed maturity are stated at cost to reflect
management's intention to retain the securities until maturity. Other long-
term securities are carried at the lower of cost or market.
<PAGE>
In fiscal 1995, the Company will adopt SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Consistent with
current practice, investments in debt securities are expected to be
classified as hold-to-maturity and reported at amortized cost. All other
securities are expected to be classified as available-for-sale and reported
at fair value, with unrealized gains and losses reported in a separate
component of shareholders equity. The adoption of this standard is not
expected to have significant impact on financial position or results of
operations.
Goodwill and other intangible assets:
Goodwill and other intangible assets represent the excess of cost over
the fair value of net tangible assets of companies or products purchased.
Goodwill acquired prior to October 31, 1970 is not being amortized since,
in management's opinion, its value has not diminished. Goodwill acquired
subsequent to that date is being amortized using the straight-line method
over the years estimated to be benefited, but not to exceed 40 years.
Amortization of goodwill and other intangible assets was $959,000,
$931,000 and $1,495,000 in the years ended March 31, 1994, 1993 and 1992,
respectively.
Fair value of financial instruments:
The Company estimates that the aggregate fair value of all financial
instruments at March 31, 1994 does not differ materially from the aggregate
carrying values of its financial instruments recorded in the Consolidated
Balance Sheet. The estimated fair value amounts have been determined by
the Company using available market information and appropriate valuation
methodologies.
Retirement plans and deferred compensation agreements:
Pension costs recorded as charges to operations include actuarial
determined current service costs and an amount equivalent to amortization
of prior service costs in accordance with the provisions set forth in
Statement of Financial Accounting Standards (SFAS) No. 87, "Employer's
Accounting for Pensions." It is the Company's policy to fund pension costs
in accordance with the Internal Revenue Service full funding limitation.
The Company has agreements with certain key executives which provide
deferred compensation depending on length of service and average salary
level. Benefits payable in the future to these executives under these
agreements are charged to operations on an actuarial determined basis over
the attribution period which equals the estimated period of active
employment of such executives.
<PAGE>
Research and development expenditures:
Research and development expenditures are charged to operations as
incurred. The charges for years ended
March 31, 1994, 1993 and 1992 were $21,568,000, $20,428,000 and
$20,281,000, respectively.
Net income per share of common stock:
Net income per share of common stock is based on the combined
weighted average number of shares of Class A and Class B Common Stock
outstanding during each period, which was 19,529,000, 19,504,000
and 19,490,000 in fiscal 1994, 1993 and 1992, respectively.
Cash and Cash Equivalents:
All highly liquid investments purchased with a maturity of three months
or less are considered to be cash equivalents. These investments are
stated at cost which approximates market value.
Note 2. Inventories:
March 31
Major classes of inventories comprise: 1994 1993
Raw and packaging materials $32,398,000 $34,982,000
Finished Goods 56,588,000 61,476,000
Total $88,986,000 $96,458,000
Note 3. Property, Plant and Equipment:
March 31
Major classes of property, plant and
equipment are summarized as follows: 1994 1993
Land $ 18,925,000 $ 16,863,000
Building and related improvements 132,460,000 122,312,000
Machinery and equipment 100,517,000 83,829,000
Furniture and fixtures 30,452,000 28,354,000
Construction in progress 7,060,000 8,443,000
289,414,000 259,801,000
Less: Accumulated depreciation 81,940,000 70,550,000
Total $207,474,000 $189,251,000
Depreciation expense for the years ended March 31, 1994, 1993 and 1992 was
$13,580,000, $10,727,000 and $9,059,000 respectively. Certain of the
above properties are pledged as collateral for the bonds (Note 4).
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Note 4. Notes and Bonds Payable:
Short-term notes payable consists of borrowing from various banks at
interest rates ranging from 3.12% to 14.4%. At March 31, 1994 and 1993,
the Company had uncommitted lines of credit totalling $180,000,000 and
$145,000,000, respectively. Of those amounts, $77,400,000 and $41,500,000
was unused at March 31, 1994 and 1993, respectively.
March 31
Long-term notes and bonds payable are
comprised of the following: 1994 1993
9.1% Notes due in fiscal 1995 $ 1,698,000 $ 1,720,000
18.9% Notes due fiscal 1995 - 34,000
10.0% Notes due fiscal 1995 - 76,000
11.75% Bonds due fiscal 1995 through fiscal 2001 6,560,000 7,500,000
5.0% to 7.8% Notes due in fiscal 1995 2,392,000 2,488,000
7.3% to 7.5% Notes due in fiscal 1997 2,780,000 2,892,000
Variable rate bonds (currently 2.55%),
due in fiscal 2010 4,450,000 4,450,000
$17,880,000 $19,160,000
Certain properties of the Company (approximate book value $11,330,000) are
pledged as collateral for the bonds (Note 3). The requirements of the bond
indentures include the maintenance by the Company of minimum consolidation net
worth and net working capital (as defined) of $59,000,000 and $24,000,000,
respectively.
Interest expense on all borrowing aggregated $7,029,000 in fiscal 1994,
$6,926,000 in fiscal 1993 and $5,989,000 in fiscal 1992.
Long-term debt at March 31, 1994
was payable as follows:
Year ended March 31
1995 $ 5,025,000
1996 940,000
1997 3,715,000
1998 940,000
1999 935,000
2000 and later 6,325,000
$17,880,000
The Company entered into interest rate cap agreements, effective June 1,
1993, to reduce the impact of changes in interest rates on its floating-
rate short-term debt. At March 31, 1994, the Company had 4 nine-year
contracts expiring May 31, 2002 that entitled it to receive quarterly
amounts, if any, by which interest on a total of $100 million of short-term
debt at the 90 day Libor rate exceeds 4% in 1994, 5% in 1995, 7% in years
1996 and 1997, and 9% in years 1998 through 2002. The $4,580,000 premium
is being paid in quarterly installments over the life of the contracts.
For fiscal 1994, the Company received no payments under these contracts.
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Note 5. Accounts Payable and Accrued Expenses:
March 31
Accounts payable and accrued expenses
are comprised of the following: 1994 1993
Accounts payable - trade $23,928,000 $22,149,000
Accrued salaries, wages, vacation pay and bonuses 23,488,000 19,341,000
Accrued advertising and selling expenses 26,868,000 16,709,000
Other current liabilities 14,075,000 12,501,000
$88,359,000 $70,700,000
Note 6. Income Taxes:
In February 1992, the Financial Accounting Standards Board issued SFAS
No. 109, "Accounting for Income Taxes," which requires an asset and
liability approach for income tax accounting, as compared to the deferred
method under Accounting Principles Board Opinion No. 11. The Company
adopted SFAS No. 109 in the first fiscal quarter of 1994. The net impact
of adoption did not have a significant effect on net income.
The provision for income tax expense comprised the following:
Current Deferred Total
For the year ended March 31:
1994 Federal $(1,096,000) $(270,000) $(1,366,000)
Foreign 9,107,000 746,000 9,853,000
State 798,000 (23,000) 775,000
$ 8,809,000 $ 453,000 $ 9,262,000
For the year ended March 31:
1993 Federal $ 7,443,000 77,000 $ 7,520,000
Foreign 7,699,000 (213,000) 7,486,000
State 1,154,000 7,000 1,161,000
$16,296,000 $(129,000) $16,167,000
For the year ended March 31:
1992 Federal $ 4,934,000 $(365,000) $ 4,569,000
Foreign 5,168,000 828,000 5,996,000
State 654,000 (32,000) 622,000
$10,756,000 $ 431,000 $11,187,000
Deferred income tax expenses result from temporary differences in the
recognition of revenue and expense for tax and financial statement
purposes. The source and the tax effect of these differences were as
follows:
1994 1993 1992
For the year ended March 31:
Depreciation $1,786,000 $1,664,000 $1,450,000
Expenses (not) currently deductible for
tax purposes (1,437,000) (1,424,000) (724,000)
Other 104,000 (369,000) (295,000)
$ 453,000 $ (129,000) $ 431,000
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Total income tax expense for the fiscal years ended March 31, 1994, 1993
and 1992 was 16.2%, 20.8% and 16.3%, respectively, of income before income
taxes as compared to the U.S. statutory income tax rate of 35.0%, 34.0% and
34.0% respectively. The principal differences between the U.S. statutory
and effective income tax rates were as follows:
Percent of Income Before Income Taxes
For the year ended March 31: 1994 1993 1992
U.S. statutory income tax rate 35.0% 34.0% 34.0%
Tax exempt state and municipal
bond income (5.8) (3.4) (4.3)
Irish operating income taxed at
lower rate (8.9) (6.0) (5.6)
Reduction in taxes resulting from
Puerto Rico source income subject
to lower tax rate (3.1) (4.4) (6.0)
Other, net (1.0) .6 (1.8)
16.2% 20.8% 16.3%
The Company's subsidiaries in Puerto Rico have agreements which commenced
in fiscal 1988 and expire in 2002, which provide for a 90% exemption from
income taxes on operating income. The Company's subsidiary in Ireland had
a 10% tax rate on export sales. The Company had not accrued U.S. federal
income taxes on cumulative undistributed earnings of foreign subsidiaries
of $161,031,000 as of March 31, 1994, since the majority of such earnings
are expected to be permanently reinvested abroad. Where it is the
intention to remit earnings, the related U.S. income taxes on these
earnings, after giving effect to available tax credits, would not be
material.
Deferred tax assets and liabilities consisted of the following*:
March 31, 1994
Deferred tax assets:
Coupon accrual, sales discounts,
and workers compensation $ 3,826,000
Employee benefits 3,945,000
Accrual on vacation 1,062,000
Deferred compensation 3,237,000
Other 1,580,000
13,650,000
Deferred tax liabilities:
Property, plant and equipment 14,516,000
Other 2,173,000
16,689,000
* Recoverable income taxes, reflected in the balance sheet in Other
Current Assets, include current deferred tax assets of $9,065,000,
reduced by current deferred tax liabilities of $680,000. The
remaining deferred tax liabilities, net of deferred tax assets, were
reflected in the balance sheet as deferred income taxes.
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Note 7. Retirement and Deferred Compensation Plans:
The Company and its subsidiaries have several pension plans covering
substantially all domestic employees and certain employees in foreign
countries. The Company makes annual contributions to the plan equal to the
amounts allowable under the Internal Revenue Service maximum full funding
limitation. The domestic plan benefits are primarily based upon the
employee's compensation during the sixty highest consecutive months of the
last 120 months of employment and the number of years of service. Net
pension expense includes the following components.
1994 1993 1992
Service cost $4,151,000 $4,492,000 $4,000,000
Interest cost on projected benefit
obligation 3,776,000 3,662,000 3,246,000
Actual return on plan assets (5,106,000) (5,935,000) (8,277,000)
Net amortization and deferral (616,000) 698,000 3,668,000
Net periodic pension cost $2,205,000 $2,917,000 $2,637,000
<PAGE>
The following table sets forth the present value of benefit obligations
and funded status for the Company's foreign and domestic plans:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations,
including vested benefits of $33,941,000 in 1994
and $28,962,000 in 1993 $34,945,000 $29,793,000
Projected benefit obligations 47,733,000 45,238,000
Plan assets at fair value (primarily invested in
stocks, bonds and government obligations) $67,754,000 $64,239,000
Add: Unrecognized prior service cost 1,686,000 1,905,000
Less: Unrecognized, net gain on asset 21,136,000 22,324,000
Unamortized transition asset established as of
February 28,1985 4,462,000 43,842,000 5,161,000 38,659,000
Net pension liability (1) $ 3,891,000 $ 6,579,000
</TABLE>
(1) The Company's Consolidated Balance Sheets at March 31, 1994 and 1993
include a pension liability which approximates the above net pension
liability.
The expected long-term rate of return on plan assets was 8% for 1994 and
1993. The weighted average discount rate was 8% for 1994 and 1993. The
rate of increase in future compensation levels used in determining the
actuarial present value of projected benefit obligations was 6.0% for 1994
and 1993.
The domestic plans are fully funded. Plan assets consist primarily of
government bonds, corporate bonds and common stocks. The Company's foreign
subsidiaries have plans under which funds are deposited with trustees or
annuities are purchased.
The Company has a Special Stock Unit Plan (the "Plan") whereby selected
participants receive the right to deferred compensation based on the growth
in the Company's average earnings per share, as defined in the Plan, and
the value of the awards is adjusted to reflect the dilutive effect of stock
dividends. Charges under the Plan for the years ended March 31, 1994, 1993
and 1992 were $718,000, $2,478,000 and $2,342,000, respectively.
The Company has employment contracts with four executives of the Company.
These contracts specify the payment of benefits to the individual or
beneficiary upon the termination of their employment or death. Deferred
compensation payable included $2,508,000 at March 31, 1994 and $2,079,000
at March 31, 1993, respectively. Such amounts represent the actuarially
determined present value of the vested benefits.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In addition to providing pension benefits, the Company provides certain
retiree health care benefits for substantially all non-union employees
(excluding Puerto Rico) who reach retirement age while working for the
Company. Health care benefits are provided by Travelers Insurance Company.
The Company reserves the right to change or discontinue these benefits, in
whole or in part at any time.
Effective April 1, 1993 the Company adopted Statement of Financial
Accounting Standards No. 106 (SFAS No. 106), "Employers Accounting for
Postretirement Benefits Other Than Pensions." This standard requires that
the estimated cost of these benefits, which are for health care, be accrued
during the employee's active working career. Prior to the adoption of
SFAS 106, these costs were recognized when benefits were paid. The Company
has elected to amortize the unfunded obligation existing at April 1, 1993
(transition obligation) over a period of 20 years.
The postretirement benefit liability as of March 31, 1994 is as follows:
1994
Retirees $3,661,000
Fully eligible active plan participants 808,000
Other active plan participants 3,289,000
Total accumulated postretirement
benefit obligation $7,758,000
Less: Plan asset at fair value and accruals -
Unrecognized net loss from past experience
different from that assumed and from
changes in assumptions 1,240,000
Unrecognized transition obligation 5,542,000
Accrued postretirement benefit cost
recognized in the Balance Sheet $ 976,000
The costs of providing postretirement benefits for the period April 1, 1993
to March 31, 1994 includes the following:
1994
Service cost benefits attributed to
service during the period $ 226,000
Interest cost on the accumulated
postretirement benefit obligation 494,000
Estimated return on plan assets -
Amortization of transition obligation 292,000
Net periodic postretirement benefit cost $1,012,000
<PAGE>
The accumulated postretirement benefit obligation was determined by
application of terms of the medical plan together with relevant actuarial
assumptions and a health-care cost trend rate of 11% in 1994 decreasing
gradually to 7.7% in 2005 and eventually to 6.1% in 2050 and thereafter.
These costs also reflect the implementation of a $2,000 per year cost cap
and contribution schedule of 0% to 75% of cost based on years of service at
retirement for new retirements after October 1, 1993. The effect of a 1%
annual increase in the assumed cost trend rates would have a minimal effect
due to the cost cap. The increase in the accumulated postretirement
benefit obligation would be approximately $655,000 and the aggregate of the
service and interest cost components of net postretirement health care cost
for 1994 would be approximately $55,000.
Measurement of the accumulated postretirement benefit obligation was
based on an 8.0% assumed discount rate.
In November, 1992, the FASB issued SFAS No. 112, "Employers' Accounting
for Postemployment Benefits," which requires accrual accounting for
benefits provided to former or inactive employees after employment but
before retirement. These benefits include salary continuation, disability
benefits severance pay and continuation of health care benefits. The
Company must implement SFAS No. 112 in fiscal 1995. Management anticipates
that the adoption of SFAS 112 will not have a significant effect on net
income.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Note 8. Shareholders' Equity:
The two classes of Company's Common Stock are identical in all respects
except that (a) all voting rights are held by the owners of Class B Common
Stock and (b) holders of Class A Common Stock are entitled to receive
dividends, when, as and if declared by the Board of Directors whether or
not dividends are declared in respect of the Class B Common Stock, but in
the event of the declaration of a dividend in respect of the Class B Common
Stock, a dividend of at least the same amount must be declared in respect
of the Class A Common Stock. The Company's Certificate of Incorporation
provides that upon an affirmative vote of the holders of two-thirds of the
outstanding Class B Common Stock, all shares of Class A Common Stock will
be converted into Class B Common Stock. The conversion terms are one share
of Class A Common Stock for one share of Class B Common Stock subject to
certain antidilutive or other capital reorganization provisions.
On October 26, 1993, the Company declared an increased cash dividend of
$.26 on the Class A Common Stock and a Class A Common Stock dividend of 3%
on both the Class A and Class B Common Stock payable on
January 3, 1994 to shareholders of record as of December 1, 1993.
On October 27, 1992, the Company declared an increased cash dividend of
$.25 on the Class A Common Stock and a Class A Common Stock dividend of 3%
on both the Class A and Class B Common Stock payable on
January 4, 1993 to shareholders of record as of December 1, 1992.
On October 29, 1991, the Company declared an increased cash dividend of
$.225 on the Class A Common Stock and a Class A Common Stock dividend of 3%
on both the Class A and Class B Common Stock payable on January 2, 1992 to
shareholders of record as of December 2, 1991.
Net income per share of common stock has been restated to reflect the
current and prior year's stock dividend.
<PAGE>
<TABLE>
Changes in Class A Common Stock, Class B Common Stock and capital in
excess of par value during fiscal 1994, 1993 and 1992 were as follows:
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK Capital in Excess
Issued Issued of Par Value
Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1991 10,125,551 $1,013,000 7,704,400 $770,000 $ 96,712,000
3% Stock Dividend 535,209 $ 53,000 $ 30,182,000
Savings Incentive Plan (1) 12,495 1,000 702,000
Balance, March 31, 1992 10,673,255 $1,067,000 7,704,400 $770,000 $127,596,000
3% Stock Dividend 551,632 $ 55,000 $ 25,596,000
Savings Incentive Plan (1) 16,490 2,000 804,000
Balance, March 31, 1993 11,241,377 $1,124,000 7,704,400 $770,000 $153,996,000
3% Stock Dividend 569,080 $ 57,000 $ 18,296,000
Savings Incentive Plan (1) 36,844 4,000 1,344,000
Repurchase of Shares (7,800) (1,000) (264,000)
Balance, March 31, 1994 11,839,501 $1,184,000 7,704,400 $770,000 $173,372,000
</TABLE>
(1) The Company has a voluntary savings incentive plan for eligible
domestic employees. Company contributions to this 401(K) plan are made
in the form of the Company's Class A Common Stock.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Note 9. Legal Matters:
The Company is involved in various routine litigation incidental to its
business. While the significance of these matters cannot be fully assessed
at this time, management, on advice of counsel, does not believe that any
liability that may arise from these proceedings will have a material
adverse impact on the Company's consolidated financial position.
Note 10. Product Segments:
The Company develops, manufactures and sells products classified into
three segments. The dental segment includes products used for cleansing
and retention of dentures, toothpastes, toothbrushes and other products for
general dental care. The consumer product segment consists of a variety of
over-the-counter products including medicated shampoos, headache powders,
sleep-aid tablets and household cleaning products. The ethical
pharmaceutical segment includes items promoted to the medical profession;
gastroenterological products, digestant tablets, dermatologicals, as well
as medications for the treatment of high blood pressure and angina.
<PAGE>
The following table presents information concerning the Company's
operations by product segment and geographic area for the years ended March
31, 1994, 1993 and 1992.
1994 1993 1992
(in thousands)
PRODUCT SEGMENTS
Net Sales:
Dental $393,613 $401,161 $367,655
Consumer Products 133,833 136,844 117,456
Ethical Pharmaceutical 85,837 86,821 77,821
Consolidated net sales $613,283 $624,826 $562,932
Operating Income:
Dental $ 46,177 $ 54,554 $ 48,605
Consumer Products 18,624 24,401 16,688
Ethical Products 13,385 14,822 14,589
Total operating income 78,186 93,777 79,882
General corporate expenses (21,072) (16,064) (11,428)
Consolidated income before income taxes $ 57,114 $ 77,713 $ 68,454
Assets:
Dental $325,325 $271,819 $252,717
Consumer Products 115,496 101,045 86,262
Ethical Pharmaceutical 57,166 60,200 48,348
Total identifiable assets 497,987 433,064 387,327
General corporate assets 273,081 293,433 262,281
Consolidated assets $771,068 $726,497 $649,608
Depreciation and Amortization:
Dental $ 8,554 $ 7,204 $ 6,899
Consumer Products 3,756 2,707 2,236
Ethical Pharmaceutical 2,229 1,748 1,419
Consolidated depreciation and amortization $ 14,539 $ 11,659 $ 10,554
Capital Expenditures, Net:
Dental $ 18,836 $ 26,586 $ 21,717
Consumer Products 13,251 13,754 11,742
Ethical Pharmaceutical 3,128 5,928 2,743
Consolidated capital expenditures $ 35,215 $ 46,268 $ 36,202
GEOGRAPHIC AREA
Net Sales:
United States $318,665 $326,431 $303,107
Europe 211,539 223,665 194,763
Other 83,079 74,730 65,062
Consolidated net sales $613,283 $624,826 $562,932
Operating Income:
United States $ 29,963 $ 49,830 $ 45,281
Europe 31,068 30,555 23,756
Other 17,155 13,392 10,845
Total operating income 78,186 93,777 79,882
General corporate expenses (21,072) (16,064) (11,428)
Consolidated income before income taxes $ 57,114 $ 77,713 $ 68,454
Assets:
United States $243,437 $232,999 $192,012
Europe 203,767 164,626 146,493
Other 50,783 35,439 48,822
Total identifiable assets 497,987 433,064 387,327
General corporate assets 273,081 293,433 262,281
Consolidated assets $771,068 $726,497 $649,608
<PAGE>
General corporate expenses consist of administrative expenses,
devaluation losses relating to highly inflationary countries and interest
less investment income. General corporate assets consist principally of
marketable and long-term securities.
<TABLE>
QUARTERLY FINANCIAL INFORMATION
(Unaudited)
The following is a tabulation of quarterly results of operations for the
years ended March 31, 1994 and 1993 (in thousands, except per share
amounts):
<CAPTION>
Fiscal 1994 Quarters
First Second Third Fourth
<S> <C> <C> <C> <C>
Net sales $150,480 $153,535 $155,644 $153,624
Gross profit 100,569 101,224 103,183 102,712
Income before income taxes 20,325 13,417 (2) 14,405 8,967 (2)
Net income 15,650 10,804 10,860 10,538 (3)
Earnings per share of common stock (1) $ .80 $ .55 $ .54 $ .54
Fiscal 1993 Quarters
First Second Third Fourth
Net sales $153,352 $159,342 $157,311 $154,821
Gross profit 103,259 105,655 109,082 100,377
Income before income taxes 19,969 19,761 18,613 19,370
Net income 15,975 15,809 14,890 14,872
Earnings per share of common stock (1) $ .82 $ .81 $ .76 $ .77
</TABLE>
(1) Restated to reflect the three percent stock dividends (see Note 8).
(2) Income before income tax reflects increased second and fourth quarter
advertising and promotional expenses.
(3) Net income reflects the effect of a reduction in the effective income tax
rate from 22.5% through the third quarter to 16.2% for the year.
The reduction occurred from a combination of factors including lower
than expected foreign exchange losses and higher research and
development tax credits.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant:
(a) Directors of the Registrant
The following is a list of each director of the Company, the date
their present terms of office will expire and all other positions presently
held with the Company:
Date Term Other Positions Held
Name Age Expires (or principal occupation)
Leonard Block 82 6/95 Senior Chairman of the Board*
James A. Block 57 6/95 Chairman of the Board*
Thomas R. Block 49 6/95 President and Treasurer* **
Donald H. LeSieur 58 6/95 Executive Vice President, U.S.
Michael C. Alfano, 46 6/95 Senior Vice President, Director of
D.M.D., Ph.D. Research and Technology
Alfred E. Brown, Ph.D. 77 6/95 Director of Scientific Affairs**
Celanese Corporation (Retired)
Peggy Danziger 54 6/95 Private Investor
William T. Golden 84 6/95 Corporate Director and Trustee**
Melvin Kopp 64 6/95 Senior Vice President and Chief
Financial Officer
John E. Peters 52 6/95 Senior Vice President, General
Counsel and Secretary
Peter J. Repetti 76 6/95 Member, Fulbright & Jaworski
L.L.P. (Retired)
Susan B. Stearns 49 6/95 Private Investor
* Member of the Executive Committee
** Member of the Audit Committee
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant: (Continued)
(a) Directors of the Registrant (Continued)
The following family relationships exist among the Directors of the
Company: Leonard Block is the father of Thomas R. Block and Peggy
Danziger, and is the uncle of James A. Block and Susan B. Stearns, who are
brother and sister. Thomas R. Block and Peggy Danziger are brother and
sister and are first cousins of James A. Block and Susan B. Stearns.
Each director of the Company has been employed by the Company for the
past five years except for (i) Susan B. Stearns who is a private investor,
(ii) William T. Golden who is a director and trustee of various
organizations, (iii) Alfred E. Brown, Ph.D., formerly Director, Scientific
Affairs, Celanese Corporation, now retired, (iv) Peter J. Repetti who is an
attorney and a retired member of the New York law firm of Fulbright &
Jaworski L.L.P., and (v) Peggy Danziger who is a private investor.
All Directors have served as Directors for a period in excess of five
(5) years.
None of the Directors serve on the Board of Directors of any other
public corporation, except for (1) William T. Golden who serves on the
Board of Directors of the following corporations: General American
Investors Company, Inc. and Verde Exploration Ltd.; and (2) Peter J.
Repetti who serves on the Board of Directors of Pulitzer Publishing
Company.
On October 31, 1977, Leonard Block and James A. Block executed a
document setting forth their mutual intent concerning the representation of
the Melvin Block family group and the Leonard Block family group on the
Board of Directors of the Company. Melvin Block (deceased) is the father
of James A. Block and brother of Leonard Block. They stated their
intention as shareholders and not as directors to maintain equal
representation of the Melvin Block family group and the Leonard Block
family group on the Board of Directors. They further stated their
awareness that the sentiments expressed in the letter did not constitute a
binding agreement between them and that all actions taken in the future by
them in whatever capacity to elect directors must and would be those which,
in their judgment, would be in the best interest of the Company. At
present, the Melvin Block family group has three (3) representatives on the
Board of Directors: James A. Block, Susan B. Stearns, and Peter J. Repetti
(attorney); and the Leonard Block family group has three (3)
representatives on the Board of Directors: Leonard Block, Thomas Block,
and Peggy Danziger.
<PAGE>
(b) Executive Officers of the Registrant
The following is a list of each executive officer of the Company, the
date his present term of office will expire, and all other positions
presently held with the Company:
PART III
Item 10. Directors and Executive Officers of the Registrant: (Continued)
Date
Date of Term
Name Age Appointment Expires Positions
Leonard Block 82 10/88 6/95 Senior Chairman of the Board*
James A. Block 57 10/88 6/95 Chairman of the Board*
Thomas R. Block 49 10/88 6/95 President and Treasurer*
Donald H. LeSieur 58 10/88 6/95 Executive Vice President, U.S.* ***
Michael C. Alfano 46 5/87 6/95 Senior Vice President, Director of
D.M.D., Ph.D. Research and Technology ** ***
Melvin Kopp 64 10/72 6/95 Senior Vice President and Chief
Financial Officer ** ***
Peter C. Mann 52 11/79 6/95 Senior Vice President, Group Vice
Pres., U.S. Consumer Mktg ** ***
John E. Peters 52 12/78 6/95 Senior Vice Pres., General Counsel
and Secretary ** ***
Gilbert Seymann 55 5/84 6/95 Sr.Vice Pres., Operations ** ***
Leonard Block is Senior Chairman of the Board of Directors, a Member of
the Executive Committee and the Office of the Chief Executive.
James A. Block is Chairman of the Board, a Member of the Executive
Committee, the Office of the Chief Executive, and is directly responsible
for all research, development and corporate quality.
Thomas R. Block is President and Treasurer of the Company, a Member of
the Executive Committee, the Office of the Chief Executive, is President of
the International Division, and directly responsible for all operations,
including manufacturing and engineering.
Donald H. LeSieur is Executive Vice President, U.S., a Member of the
Office of the Chief Executive, and has responsibility for all U.S. sales,
marketing and corporate development.
* Member - Office of the Chief Executive
** Consultant - Office of the Chief Executive
*** Covered under the Change in Control Agreement described in Item 13.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant: (Continued)
Michael C. Alfano, D.M.D., Ph.D., Senior Vice President - Director
Research and Technology, is responsible for all research, development and
quality assurance activities of the Company.
Melvin Kopp, Senior Vice President, is the Chief Financial Officer of
the Company.
Peter C. Mann, Senior Vice President, Group Vice President, U.S.
Consumer Marketing, is responsible for all domestic marketing and sales
(except Reed & Carnrick) and corporate development.
John E. Peters, Senior Vice President, General Counsel and Secretary, is
the Chief Legal Officer of the Company.
Gilbert Seymann, Senior Vice President - Operations, is responsible for
domestic manufacturing and corporate engineering.
All executive officers of the Company have been employed by the Company
in the same capacities for at least the last five years.
No family relationships exist between the executive officers of the
Company, except as noted above between the Directors who are also executive
officers.
<PAGE>
Item 11. Executive Compensation
<TABLE>
<CAPTION>
----------Long Term Compensation---------
----Annual Compensation--- ------Awards------ Payouts
Other Restricted
Annual Stock Options LTIP All Other
Name and Principal Fiscal Salary Bonus Compen- Award(s) /SARs Payouts Compensation
Position Year $ $ sation ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leonard Block (1) 1994 340,832 79,000 * * * * 34,504
Senior Chairman of the 1993 338,127 83,900 33,589
Board 1992 324,602 86,727 32,328
James A. Block (2) 1994 316,219 90,600 * * * * 9,011
Chairman of the Board 1993 303,059 78,500 8,056
1992 289,455 86,927 5,716
Thomas R. Block (3) 1994 316,219 93,500 * * * * 5,832
President and Treasurer 1993 303,059 85,100 4,690
1992 289,455 87,227 4,251
Donald H. LeSieur (4) 1994 329,148 110,100 * * * 151,289 9,011
Executive Vice President, 1993 313,339 102,300 157,825 8,056
US 1992 296,771 102,927 221,724 7,312
Peter C. Mann 1994 248,625 65,600 * * * - 6,164
Senior VP, Group Vice 1993 235,917 60,600 338,395 5,313
Pres., US Cons. Mktg. 1992 223,826 61,500 33,496 3,861
</TABLE>
* None to be reported
(1) On January 1, 1981, the Company entered into an Employment Agreement
with Leonard Block, which runs through April 30, 1997. The agreement
provides for a minimum annual base salary of $209,242.00, which will be
adjusted in accordance with certain economic factors. Mr. Block may, for a
period not to exceed twenty years, elect to perform his services on a
reduced basis at a reduced level of compensation. The agreement provides
for payment of an amount (based upon an average of Mr. Block's salary for
the three years in which the highest salary was paid) to certain designated
beneficiaries for a period not to exceed twenty years. Leonard Block has
been employed by the Company since 1933.
(2) On September 1, 1984, the Company entered into an Employment Agreement
with James A. Block, which runs through April 30, 1997. The agreement
provides for a minimum annual base salary of $164,792.00, which will be
adjusted in accordance with certain economic factors. The terms of this
employment agreement are substantially identical to the above described
employment agreement with Leonard Block. James A. Block has been employed
by the Company since 1959.
<PAGE>
(3) On May 1, 1987, the Company entered into an Employment Agreement with
Thomas R. Block, which runs through April 30, 1997. Pursuant to the
agreement, Thomas R. Block's annual base salary is to be no less than
$234,451.00, which will be adjusted in accordance with certain economic
factors. The terms of this employment agreement are substantially
identical to the above described employment agreement with Leonard Block.
Thomas R. Block has been employed by the Company since 1968.
(4) On September 1, 1984, the Company entered into an Employment Agreement
with Donald H. LeSieur for a one (1) year period renewable for three (3)
consecutive five (5) year terms. Mr. LeSieur's annual base salary is to be
no less than $164,600.00, which will be adjusted in accordance with certain
economic factors. Mr. LeSieur will receive deferred compensation equal to
one-third of his average annual salary for three (3) years prior to his
termination, which compensation vests at the rate of one and one-quarter
percent per quarter, except that such compensation will become one-hundred
percent vested if termination occurs due to death or disability. Such
payments shall continue for a period of 13 1/2 years. Should termination
occur by Company action other than for cause, a further payment equal to
one-half his annual salary as of the date of termination for a maximum of
five (5) years or until his 65th birthday, whichever first occurs. Donald
H. LeSieur has been employed by the Company since 1973.
During calendar year 1993, the director's annual fee was $8,000 and was
increased to $8,500 for calendar year 1994. Executive officers who are
directors receive no director's, audit committee or attendance fees.
During calendar year 1993, four directors each received attendance fees of
$750 per meeting. The fee of $750 per meeting remains unchanged for
calendar year 1994. The total includes payments of $8,125 made to each of
five directors, including three payments to each of such directors of
$2,000 in calendar year 1993 and one payment of $2,125 during the first
quarter of calendar year 1994. This total further includes an aggregate of
$11,250 paid to four directors as director's attendance fees and an
aggregate of $6,100 paid to two directors as audit committee member fees.
A. The Company maintains defined benefit pension plans under which
annual costs are actuarially computed based on the overall assets in these
plans and the actuary's estimates of the present value of overall benefits.
The following table sets forth benefits that will be received under these
plans based on the participants' final average compensation and years of
service:
<PAGE>
1994 Table of
Annual Pension Benefits by Final
Average Compensation and Service Classifications
Final Average Years of Service at Age 65
Compensation 10 20 30 40
$ 50,000 $ 5,473.20 $10,946.40 $16,419.60 $23,244.00
100,000 12,935.40 25,870.80 38,806.20 53,118.00
150,000 20,435.40 40,870.80 61,306.20 83,118.00
200,000 27,935.40 55,870.80 83,806.20 113,118.00*
250,000 35,435.40 70,870.80 106,306.20 118,800.00*
300,000 42,935.40 85,870.80 118,800.00* 118,800.00*
350,000 50,435.40 100,870.80 118,800.00* 118,800.00*
* Maximum permissible benefit under IRC Sec. 415, effective January 1, 1994.
B. The Company's domestic pension expense for the fiscal years ended
March 31, 1994 and 1993 was $926,559 and $1,809,693, respectively. The
plans are in a fully funded status, and accordingly, the Company's
financial statements reflect no domestic pension funding contribution for
the fiscal year ended March 31, 1994.
C. The remuneration covered by these plans is the total regular salary
excluding any bonuses, overtime or other special compensation.
D. Benefits payable from these plans are based on the Final Average
Compensation for the 60 highest consecutive months of the last 120 months
of employment, the years of service as a member of these plans and the
primary Federal Social Security Benefit.
E. With respect to the figures of the table on page 33, the accrual of
pension benefits is estimated using only the individual's base salary. The
base salaries used for the estimation of pension benefits for the
individuals listed in the table are: James A. Block ($313,118.31); Thomas
R. Block ($313,118.31); Donald H. LeSieur ($313,968.42); and Peter C. Mann
($246,416.74).
F. Leonard Block reached age 65 in December, 1976. In accordance with
the terms of this plan he elected to receive a lump sum benefit. The
actuarial equivalent of his pension at that time as adjusted through
December 31, 1980 was segregated into a separate account. No additional
benefits have accrued for Leonard Block since December 31, 1980. Upon
retirement or death the balance in the segregated account will be
distributed to him or his designated beneficiaries subject to limitations
set forth in the provisions of Section 415 of the Internal Revenue Code.
G. As of March 31, 1994, the above five (5) employees had the following
credited years of service in these plans: Leonard Block, 45 years; James
A. Block, 32 years; Thomas R. Block, 24 years; Donald H. LeSieur, 20 years;
and Peter C. Mann, 21 years.
<PAGE>
Special Stock Unit Plan
This plan is intended to provide greater motivation and incentive for
those eligible employees of the Company and its Subsidiaries who are making
and can continue to make significant contributions to the success of the
business, to attract and to retain employees of outstanding caliber and
competence and to enhance the identity of interests between the
shareholders of the Company and the employees who are participants in this
plan.
The purpose of the plan is to provide supplemental income, at intervals
specified in the plan, to participants during their employment and to
provide deferred compensation, which is considered as qualified retirement
benefits, to participants upon their retirement.
Under this plan, units (the value of which is based on a formula, the key
component of which is a multiple of earnings per share of Class A Common
Stock) may be awarded from time to time to employees by the Committee
administering this plan. The participant (or beneficiary in the case of
death) will be entitled to receive, subject to certain conditions, an
amount reflecting the maximum appreciation in value of such units (as
determined under this plan) between the date of the award and the dates
provided in this plan for valuing units. As of March 31, 1994, the units
were valued at $91.90.
The total number of units which may be credited to all participants in
this plan at any one time, exclusive of units awarded to former employees,
cannot exceed five percent of the total number of the then outstanding
shares of all classes of Common Stock.
As of March 31, 1994, a total of 280,616 units had been awarded having an
average value of $79.94 per unit. Of those 280,616 units, 55,972 units at
an average value of $92.04 per unit were awarded during the past fiscal
year. During fiscal year 1994, the following units were awarded to
executives: 2,267 units at $90.90 per unit to Donald H. LeSieur and 2,271
units at $93.00 per unit to Peter C. Mann.
During the year ended March 31, 1994, $1,352,030 was paid in lump sum
payments to the participants in the Special Stock Unit plan.
<PAGE>
<TABLE>
Long-Term Incentive Plans - Awards In Last Fiscal Year
<CAPTION>
Estimated Future Payouts Under Non-
Stock Price-Based Plans
Performance or
No. of Shares Other Period * **
Units or Other Until Maturity Threshold Target Maximum
Name Rights or Payout ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Donald H. LeSieur 2,267 5 Years 1,240 122,000 -
Peter C. Mann 2,271 5 Years 182 125,000 -
</TABLE>
* Minimum value as of March 31, 1994
** Projected value at maturity, based on assumed 10% annual compounded
Earnings Per Share increase over the five-year period from inception
of the award to maturity.
Note: See accompanying description of Plan above.
<PAGE>
Item 12. Securities Ownership of Certain Beneficial Owners and Management
(a) Securities ownership of certain beneficial owners:
The following table sets forth, as of June 7, 1994, each person who
owns of record, or is known by the Company to beneficially own more than
5% of the outstanding Class B Common Stock of the Company, which stock
is the only class of voting securities of the Company.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
Title of Class of Beneficial Owner of Beneficial Ownership of Class
<S> <C> <C> <C>
Class B Common Leonard Block, Representative 3,852,200 (1) 50%
Leonard Block Family Shareholders'
Agreement dated April 18, 1991
257 Cornelison Avenue
Jersey City, N.J. 07302-9988
Class B Common James A. Block, Trustee 3,852,200 (2) 50%
Voting Trust Agreement
dated January 11, 1990
257 Cornelison Avenue
Jersey City, N.J. 07302-9988
</TABLE>
(1) Pursuant to a shareholders' agreement, dated April 18, 1991,
Leonard Block has sole voting power with respect to these shares.
385,424, 1,733,388 and 1,733,388 shares, all subject to the
shareholders' agreement, are beneficially owned by the Leonard Block
Trust, the Thomas Block Trust and the Peggy Danziger Trust,
respectively.
(2) James A. Block has sole voting power with respect to these
shares as a result of a voting trust agreement entered into as of
January 11, 1990. The voting trust agreement grants the trustee the
power to vote the shares which are subject to the agreement. The voting
trust agreement is for a 21 year term. James A. Block is a co-trustee
of the trusts which are parties to the voting trust agreement and
pursuant to these trusts, James A. Block has sole investment power with
respect to these shares. James A. Block disclaims beneficial ownership
to all 1,926,100 shares held in trust for the benefit of Susan B.
Stearns.
<PAGE>
(b) Securities ownership of management:
The following table sets forth, as of June 7, 1994, the
securities ownership of all directors, naming them, and all Directors and
Officers of the Company, as a group, without naming them:
Item 12. Securities Ownership of Certain Beneficial Owners and Mgmt. (Cont'd)
<TABLE>
BLOCK DRUG COMPANY, INC.
SECURITIES BENEFICIALLY OWNED
<CAPTION>
----Class A Common Stock Beneficially Owned-----
No. Shared Shared 401-K Class B Common
Name of Beneficial Investment Investment Plan Percentage Stock Beneficially
Owner Power Power Holdings Owned Owned
<S> <C> <C> <C> <C> <C>
Leonard Block 1,031,985 93,984 757 10% 3,852,200 - 50%
(1) (4) (5)
James A. Block 2,071,901 - 1,251 18% 3,852,200 - 50%
(2) (3)
Thomas Block 63,544 1,969,885 719 17% -
(1) (4) (5)
Donald H. LeSieur - - 1,276 - -
Michael C. Alfano - - 949 - -
Alfred E. Brown 1,225 - - - -
(6)
Peggy Danziger 38,330 1,283,928 - 11% -
(1) (4) (5) (8)
William T. Golden 5,694 - - - -
Melvin Kopp 51 - 954 - -
Peter C. Mann 6 - 1,077 - -
John E. Peters - - 865 - -
Peter J. Repetti 243 - - - -
(7)
Susan B. Stearns - - - - -
(2) (3)
</TABLE>
<PAGE>
As of June 7, 1994, all directors and officers as a group owned 56% of
the Company's Class A Common Stock. The number of shareholders of Class A
Common Stock is 564.
Item 12. Securities Ownership of Certain Beneficial Owners and Mgmt. (Cont'd)
(1) Leonard Block owns 330,245 shares (not including 401-K Plan Holdings);
is deemed to be the beneficial owner of but disclaims ownership of:
697,963 shares owned by Adlen Corporation, of which Leonard Block is the
sole shareholder; 93,984 shares owned by a trust for the benefit of Adele
Block, his wife, of which Leonard Block is a co-trustee (with Thomas Block
and Peggy Danziger, his children) and shares investment powers with respect
to the shares held by such trusts; 3,777 shares owned by Adele Block, his
wife.
(2) James A. Block owns 107 shares (not including 401-K Plan Holdings); is
deemed to be the beneficial owner of: 158,542 shares owned by a trust for
the benefit of James A. Block of which he is a co-trustee (with Peter and
Valerie Block, his children) and has sole investment powers with respect to
the shares held by such trust; 863,560 shares owned by a trust for the
benefit of James A. Block of which he is a co-trustee (with Susan B.
Stearns, his sister, and Peter and Valerie Block, his children) and has
sole investment powers with respect to the shares held by such trust;
1,049,692 shares owned by two trusts for the benefit of Susan B. Stearns of
which James A. Block is the co-trustee (with Susan B. Stearns) and has sole
investment powers with respect to the shares held by such trusts. James A.
Block disclaims ownership to all 1,049,692 Class A shares and 1,926,100
Class B shares owned by the trusts for the benefit of Susan B. Stearns of
which he is a trustee or co-trustee.
(3) James A. Block has sole voting power with respect to the Class B shares
as a result of voting trust agreement entered into as of January 11, 1990.
The voting trust agreement grants the trustee the power to vote the shares
which are subject to the agreement. The voting trust agreement is for a 21
year term. James A. Block is a co-trustee of the trusts which are parties
to the voting trust agreement and pursuant to these trusts, James A. Block
has sole investment power with respect to the Class B shares. James A.
Block disclaims beneficial ownership to all 1,926,100 shares held in trust
for the benefit of Susan B. Stearns.
(4) Thomas Block owns 9,336 shares (not including 401-K Plan Holdings); is
deemed to be the beneficial owner but disclaims ownership of: 20,376
shares owned by Marilyn Friedman, his wife; 33,832 shares held by Marilyn
Friedman, as Custodian under the New York State Uniform Gifts to Minors Act
for Jonathan Block and Alison Block, the children of Thomas Block; 113,995
shares owned by two trusts for the benefit of Jonathan Block and Alison
Block, his children, of which Thomas Block is a co-trustee (with Marilyn
Friedman, his wife) and shares investment powers with respect to the shares
held by such trusts; 1,702,004 shares owned by a trust for the benefit of
Thomas Block of which Thomas Block is a co-trustee (with Adele Block, his
mother, and Peggy Danziger, his sister) and shares investment powers with
<PAGE>
respect to the shares held by such trust; 153,886 shares owned by three
trusts of which Thomas Block is a co-trustee (with Peggy Danziger, his
sister) and shares investment powers with respect to the shares held by
such trusts; for the purposes of reporting shares for which a beneficial
owner shares investment power in the tabular presentation on page 39, all
153,886 shares of these three trusts have been included in the total number
of shares reported for Thomas Block and Peggy Danziger, and as a result
have been reported twice. In computing the percentage of Class A shares
owned by a beneficial owner, 76,943 shares (representing one-half of the
total shares owned by the three trusts) were allocated to Thomas Block and
76,943 shares were allocated to Peggy Danziger. The impact of this
treatment of these shares on the percentages reported for Thomas Block and
Peggy Danziger is negligible.
Item 12. Securities Ownership of Certain Beneficial Owners and Mgmt. (Cont'd)
In computing the aggregate number of shares owned by directors and
officers as a group, the 153,886 shares owned by these three trusts
were counted only once. Thomas Block disclaims ownership of those
shares in which he shares investment powers with Peggy Danziger.
(5) Peggy Danziger owns 38,330 shares; 1,091,999 shares owned by a trust
for the benefit of Peggy Danziger of which she is a co-trustee (with
Thomas Block, her brother, and Adele Block, her mother) and of which
she shares investment powers with respect to the shares held by such
trusts; 34,212 shares owned by a trust for the benefit of another
with a right of reversion to Peggy Danziger, of which she is a
co-trustee and of which she shares investment powers with respect to
the shares held by such trust; 153,886 shares owned by three trusts
of which Peggy Danziger is a co-trustee (with Thomas Block, her
brother) and shares investment powers with respect to the shares
held by such trusts; for the purposes of reporting shares for which
a beneficial owner shares investment power in the tabular
presentation on page 39, all 153,886 shares of these three trusts
have been included in the total number of shares reported for Thomas
Block and Peggy Danziger, and as a result have been reported twice;
and all 3,831 shares owned by two testamentary trusts of which
Richard Danziger, her husband, is a co-trustee with another party
having shared investment powers with respect to the shares held by
such trusts. In computing the percentage of Class A shares owned by
a beneficial owner, 76,943 shares (representing one-half of the
total shares owned by the three trusts in which Peggy Danziger is a
co-trustee with Thomas Block) were allocated to Thomas Block and
76,943 shares were allocated to Peggy Danziger. The impact of this
treatment of these shares on the percentages reported for Thomas
Block and Peggy Danziger is negligible. In computing the aggregate
number of shares owned by directors and officers as a group, the
153,886 shares owned by these three trusts were counted only once.
<PAGE>
Peggy Danziger disclaims beneficial ownership of one-half of the
shares for which she is co-trustee.
(6) Alfred E. Brown disclaims beneficial ownership to all 1,225 shares
owned by his wife.
(7) Peter J. Repetti disclaims beneficial ownership to 243 shares owned
by his wife.
(8) Peggy Danziger disclaims beneficial ownership to all 3,831 shares of
which Richard M. Danziger, her husband is co-trustee with a third
party.
Item 13. Certain Relationships and Related Transactions
On March 1, 1989, Donald H. LeSieur, Executive Vice President, United
States, gave a promissory note to the Company in the amount of $200,000
pursuant to an agreement under which two previous loans were consolidated
into a single loan evidenced by a single promissory note. Under the terms
of the consolidated loan agreement the previous loans were cancelled. On
May 26, 1989, Mr. LeSieur received an additional loan in the amount of
$20,000 also secured by a promissory note. These loans are collateralized
by sums to which Mr. LeSieur is entitled as deferred compensation under the
Company's Special Stock Unit Plan or under any other deferred compensation
program in which Mr. LeSieur participates and a mortgage on certain real
estate owned by Mr. LeSieur and his wife. The principal of each loan is
payable on or before June 30, 2007. Interest on the unpaid principal
balance accrues at the seven year Treasury Bill rate as published by The
New York Times, said interest to be adjusted semi-annually on July 1 and
January 1 of each year. Interest only on the unpaid principal balance is
due and payable monthly. Principal of the consolidated loan is to be
repaid at the rate of $12,000 per annum. Principal of the May 26, 1989
loan is to be repaid at the rate of $1,200 per annum, commencing June 1,
1991. The loan agreement provides for immediate repayment of the unpaid
principal balance upon the occurrence of any one of a number of specified
events.
On October 27, 1992, the Company entered into a Consulting Agreement with
Melvin Kopp. The term of this agreement commences March 1, 1995 and
expires on February 28, 2005. Under this agreement, after his retirement
and on a part time basis, Mr. Kopp will continue to provide the Company
with his services for a minimum of sixty days annually. Mr. Kopp's
compensation for each day of service as a Consultant, will be equivalent to
the daily cost to the Company for Mr. Kopp's service as an employee at the
time of his retirement. His compensation will be adjusted annually in
accordance with the Company's salary administration policy.
<PAGE>
On June 1, 1993, John E. Peters, Senior Vice President, General Counsel
and Secretary, gave a Promissory Note to the Company in the amount of
$100,000.00 pursuant to an agreement under which the Company loaned
$100,000.00 to Mr. Peters. This loan is collateralized by sums to which
Mr. Peters is entitled as deferred compensation under the Company's Special
Stock Unit Plan and by a mortgage on certain real estate owned by Mr.
Peters and his wife. The principal of the loan is payable on or before May
31, 1998. Interest on the unpaid principal balance accrues at the seven
year Treasury Bill rate as published in The New York Times, said interest
to be adjusted semi-annually on July 1 and January 1 of each year.
Interest only on the unpaid principal balance is due and payable semi-
monthly. Principal is to be repaid at the rate of $5,000.00 per annum,
which is to be deducted from sums to which Mr. Peters is entitled under the
Company's Executive Incentive Plan. The loan agreement provides for
immediate repayment of the unpaid principal balance upon the occurrence of
any one of a number of specified events.
On January 26, 1994, the Company entered into an agreement with Peter
Mann, Senior Vice President and Group Vice President, U.S. Consumer
Marketing, under which the minimum value of the 1991 special stock unit
award to Mr. Mann, and only the 1991 special stock unit award, under the
Company's Special Stock Unit Plan would, subject to the vesting rules under
the Plan, be guaranteed to be no less than $83.30 per special stock unit.
Change in Control Agreement
Certain key executives have entered into a Change-In-Control Agreement
(CIC) with the Company to assure continuity in management in the event the
Block family divests itself of more than fifty percent (50%) of the
Company's voting stock.
The Agreement expires December 31, 1995, or upon the covered Executive's
sixty-fifth (65) birthday, but provides for automatic extensions which
effectively create a continuing rolling five year term. The Agreement also
provides for an automatic three (3) year extension. The Agreement defines
the formula by which a covered Executive's severance, compensation and
benefits will be calculated and paid in the event Executive's employment is
either: terminated within one year of the change in control; if
circumstances of Executive's employment are changed within three (3) years
of the change in control; or if the Executive's employment is terminated
180 days prior to the execution of an agreement which, if concluded, will
activate the CIC.
Compensation Committee Interlocks and Insider Participation
The Company does not have a Compensation and Benefits Committee which
determines the compensation of its Executive Officers. The Company
utilizes the services of independent expert compensation consultants to
evaluate the total compensation of the Company's Executive Officers. The
consultants' recommendations are submitted to the members of Office of the
Chief Executive for consideration. During fiscal year 1994, Leonard Block,
James A. Block, Thomas R. Block and Donald H. LeSieur were members of the
Office of the Chief Executive.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
1. Financial Statements and Supplementary Data:
Report of Independent Accountants
Consolidated Balance Sheets - March 3l, 1994 and 1993,
Consolidated Statements of Income and Retained Earnings for the
Years ended March 3l, 1994, 1993 and 1992,
Consolidated Statements of Cash Flows for the Years ended March 3l,
1994, 1993 and 1992,
Notes to Consolidated Financial Statements
Supplementary Data:
Selected quarterly data for the two years ended March 3l, 1994.
2. Additional Financial Statement Data:
Supplemental Auditors' Reports
3. Financial Statement Schedules: I, II, V, VI, VIII, IX, X
Schedules other than those listed above are omitted because they are not
required or not applicable.
4. Exhibits: The Exhibits Index is on page 58.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
<PAGE>
To the Board of Directors of
STAFFORD-MILLER CONTINENTAL N.V.
Nijverheidsstraat 9
2260 OEVEL-WESTERLO
Dear Sirs,
We have audited the accompanying balance sheets of Stafford-Miller
Continental N.V. as of December 31, 1993 and 1992, and the related
statements of income, retained earnings and cash flows for each of the
three years in the period ended December 31, 1993. 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, the financial statements referred to above present fairly
in all material respects the financial position of Stafford-Miller
Continental N.V. at December 31, 1993 and 1992 and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1993 in conformity with accounting principles generally
accepted in the United States of America.
As discussed in note 12 to the financial statements, the Company changed
its method for accounting for inventories of samples in 1991.
Ernst & Young
March 16, 1994
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Stafford-Miller Nederland B.V.
We have audited the accompanying balance sheets of Stafford-Miller
Nederland B.V. at December 31, 1993 and 1992, and the statements of income
and retained earnings and cash flows for the years 1993, 1992 and 1991.
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.
The Company is a wholly-owned subsidiary of Block Drug Company, Inc. and
has material transactions with affiliated companies. The terms and
conditions of these transactions are reflected in the accompanying
financial statements on a basis determined by the affiliated group.
In our opinion the financial statements referred to above present fairly,
in all material respects, the financial position of Stafford-Miller
Nederland B.V. at December 31, 1993 and 1992, and the results of its
operations and its cash flows for the years 1993, 1992 and 1991 in
conformity with accounting principles generally accepted in the United
States of America.
Moret Ernst & Young Accountants
February 8, 1994
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Stafford-Miller S.r.l.
We have audited the accompanying balance sheets of Stafford Miller S.r.l.
as of December 31, 1993 and 1992 and the related statements of income and
retained earnings, and cash flows for each of the three years in the period
ended December 31, 1993. 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 auditing standards generally
accepted in the United States. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Stafford Miller S.r.l.
at December 31, 1993 and 1992 and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1993 in conformity with accounting principles generally accepted in the
United States.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The accompanying
supplementary information is presented for purposes of additional analysis
and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, is fairly stated in
all material respects in relation to the basic financial statements taken
as a whole.
Reconta Ernst & Young
February 21, 1994
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Block Drug Co. (Philippines) Inc.
We have examined the balance sheets of Block Drug Co. (Philippines) Inc. (a
wholly owned subsidiary of Block Drug Company, Inc. a U.S. company) as at
December 31, 1993 and 1992, and the related statements of income and
retained earnings and cash flows for the years then ended. Our
examinations were made in accordance with generally accepted auditing
standards and, accordingly, included such tests of the accounting records
and such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the financial statements referred to above present fairly
the financial position of Block Drug Co. (Philippines) Inc. as at December
31, 1993 and 1992, and the results of its operations and its cash flows for
the years then ended, in conformity with generally accepted accounting
principles applied on a consistent basis.
Sycip, Gorres,Velayo & Co.
PTR No. 5148781
January 19, 1994
Makati, Metro Manila
January 25, 1994
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Management
Block Drug Company, Inc.
Ratingen Branch
We have audited the accompanying balance sheets of Block Drug Company,
Inc., Ratingen Branch, as of March 31, 1994 and 1993 and the related
statements of income and retained earnings and cash flows for each of the
three years in the period ended March 31, 1994. These financial statements
are the responsibility of the Branch'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, the financial statements referred to above present fairly,
in all material respects, the financial position of Block Drug Company,
Inc., Ratingen Branch, as of March 31, 1994 and 1993, and the results of
its operations and its cash flows for each of the three years in the period
ended March 31, 1994, in conformity with accounting principles generally
accepted in the United States of America and those in the Federal Republic
of Germany.
Our audits have been made primarily for the purpose of expressing an
opinion on the basic financial statements taken as a whole. The
accompanying supplementary information (pages 1 to 16) is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. The supplementary information has been subjected to
the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, is fairly stated in all material respects
in relation to the basic financial statements taken as a whole.
Ernst & Young GmbH
Wirtschaftsprufungsgesellschaft
Karl G. Reifert Reinhard Beyer
CPA Wirtschaftsprufer
Dusseldorf
April 18, 1994
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of
Laboratoires Stafford-Miller, S.A.R.L.
We have audited the accompanying balance sheets of Laboratoires Stafford-
Miller, S.A.R.L. (the Company) at December 31, 1993 and 1992 and the
related statements of income and retained earnings and cash flows for each
of the three years in the period ended December 31, 1993. 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 auditing standards generally
accepted in the United States of America. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Laboratoires Stafford-
Miller, S.A.R.L. at December 31, 1993 and 1992 and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1993, in conformity with accounting principles generally
accepted in the United States of America.
Our audits have been made primarily for the purpose of forming an opinion
on the basic financial statements taken as a whole. The accompanying
additional information is presented for purposes of additional analysis and
is not a required part of the basic financial statements. Such additional
information has been subjected to the auditing procedures applied in our
audits of the basic financial statements mentioned above and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ERNST & YOUNG Entrepreneurs
Departement d'HSP - CJ
Henry Seydoux
February 7, 1994
<PAGE>
Schedule I
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
Marketable Securities - Other Security Investments
at March 31, 1994
Number of Amount at Value based on
shares or which carried current market
Name of Issuer and units - in balance quotations at
Title of Issue principal sheet (at balance sheet
amount of amortized date
bonds and cost) (in (in thousands)
notes (in thousands)
thousands)
MARKETABLE SECURITIES:
Bank Time Deposits $1,830 $1,830
Govt. of Canada 1,613 1,613
Treasury Bills
15,895 15,895
Money Market Accounts
Total Marketable Securities $19,338 $19,338
Securities
LONG-TERM SECURITIES:
U.S. Gov't. and Agency
Obligations 50,950 $49,580 $51,471
Corporate Obligations 10,000 7,716 8,128
State and Agency
Obligations 97,120 99,330 100,653
Municipal Obligations 118,215 118,948 121,349
Total Long-Term
Securities $275,574 $281,601
Total Long-Term and
Marketable Securities $294,912 $300,939
<PAGE>
<TABLE>
Schedule II
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
Amounts Receivable From Related Parties and Underwriters,
Promoters, and Employees Other Than Related Parties
<CAPTION>
Balance at
Beginning of --Balance at End of Period--
Name of Debtor Year Period Additions Deductions Current Non-Current
<S> <C> <C> <C> <C> <C> <C>
D. LeSieur 1992 $220,000 - $13,200 $13,200 $193,600
D. LeSieur 1993 $206,800 - $13,200 $13,200 $180,400
D. LeSieur 1994 $193,600 $13,200 $13,200 $167,200
J. Peters 1994 $100,000 - $5,000 $95,000
</TABLE>
The principal of Mr. LeSieur's loans is due on or before June 30, 2007 and
is to be repaid at the aggregate rate of $13,200 per annum. Interest on
the unpaid principal is payable monthly and is adjusted semi-annually to
reflect the seven year Treasury Bill rate as published by The New York
Times.
The principal of Mr. Peters' loan is payable on or before May 31, 1998 at
the rate of $5,000 per annum. Interest on the unpaid principal balance is
payable semi-monthly and is adjusted semi-annually to reflect the seven
year Treasury Bill rate as published by The New York Times.
These loans are collateralized by sums to which Mr. LeSieur and Mr. Peters
are entitled as deferred compensation under the Company's Special Stock
Unit Plan or under any other deferred compensation program in which they
participate and mortgages on certain real estate owned by Mr. LeSieur and
his wife and real estate owned by Mr. Peters and his wife.
<PAGE>
<TABLE>
Schedule V
Block Drug Company, Inc. and Subsidiaries
Property, Plant and Equipment
(in thousands)
<CAPTION>
Opening Other Closing
Classification Balance Additions Retirements Changes (A) Balance
- - ---------------------------------------1994-------------------------------------------
<S> <C> <C> <C> <C> <C>
Land and Improvements $ 16,863 $ 2,450 $ (388) $18,925
Buildings and Improvements 122,312 6,141 4,007 132,460
Machinery and Equipment 83,829 17,433 (F) (1,154) 409 100,517
Furniture and Fixtures 28,354 2,310 (100) (112) 30,452
Construction in Progress 8,443 12,722 (14,105) 7,060
Total $259,801 $41,056 ($1,254) $(10,189) $289,414
<CAPTION>
- - ---------------------------------------1993------------------------------------------
<S> <C> <C> <C> <C> <C>
Land and Improvements $ 16,270 $ 1,578 $ (71) $ (914) $ 16,863
Buildings and Improvements 108,924 20,522 (C) (446) (6,688) 122,312
Machinery and Equipment 70,852 19,570 (D) (2,433) (4,150) 83,829
Furniture and Fixtures 22,789 6,309 (1,488) 744 28,354
Construction in Progress 9,172 18,192 (E) (1) (18,920) 8,443
Total $228,007 $66,171 $(4,449) $(29,928) $259,801
<CAPTION>
- - ---------------------------------------1992------------------------------------------
<S> <C> <C> <C> <C> <C>
Land and Improvements $ 14,008 $ 2,515 $ - $ (253) $ 16,270
Buildings and Improvements 95,239 14,322 (B) - (637) 108,924
Machinery and Equipment 60,437 11,443 (656) (372) 70,852
Furniture and Fixtures 17,975 5,130 (270) (46) 22,789
Construction in Progress 5,277 12,257 (986) (7,376) 9,172
Total $192,936 $45,667 $(1,912) $(8,684) $228,007
</TABLE>
<PAGE>
NOTES
Depreciation is provided over estimated lives using the straight-line
method. The usual lives are 40 years for real property and 12 years for
personal property.
(A) Other Changes represents currency translation gains (losses) and
transfers from construction in progress.
(B) Purchase of property at Dayton, N.J. for use as a distribution
facility, $5,106,000.
(C) Buildings and Improvements include $7,316,000 relating to improvements
at the Company's Corporate Headquarters in Jersey City, N.J.
(D) Machinery and Equipment includes $4,908,000 relating to expansion of a
product line at the Company's Memphis, Tennessee facility. Also
included is $4,706,000 relating to improvements at the Company's
distribution facility in Dayton, N.J.
(E) Construction in Progress includes $7,624,000 related to ongoing
renovation of the Company's Headquarters facility in Jersey City,
N.J. In addition, $4,965,000 relates to renovation of the Company's
Dayton, N.J. facility.
(F) Machinery and Equipment includes $5,600,000 and $4,086,000 relating
to expansion of product lines and upgrades at the Company's Memphis,
Tennessee and Ireland facilities, respectively.
<PAGE>
<TABLE>
Schedule VI
Block Drug Company, Inc. and Subsidiaries
Accumulated Depreciation
(In thousands)
<CAPTION>
Opening Other Closing
Classification Balance Additions Retirements Changes Balance
(A)
- - --------------------------------------1994------------------------------------------
<S> <C> <C> <C> <C> <C>
Land Improvements $ 171 $ 48 - $ 219
Buildings and Improvements 24,904 3,814 - (492) 28,226
Machinery and Equipment 34,397 7,769 (779) (1,129) 40,258
Furniture and Fixtures 11,078 2,417 (90) (168) 13,237
Total $ 70,550 $ 14,048 $ (869) $(1,789) $81,940
<CAPTION>
- - --------------------------------------1993------------------------------------------
<S> <C> <C> <C> <C> <C>
Land Improvements $ 144 $ 48 $ - $ (21) $ 171
Buildings and Improvements 22,867 3,539 (177) (1,325) 24,904
Machinery and Equipment 32,401 6,346 (2,170) (2,180) 34,397
Furniture and Fixtures 10,155 2,181 (926) (332) 11,078
Total $65,567 $12,114 $(3,273) $(3,858) $70,550
<CAPTION>
- - --------------------------------------1992-----------------------------------------
<S> <C> <C> <C> <C> <C>
Land Improvements $ 94 $ 50 $ - $ - $ 144
Buildings and Improvements 19,693 2,961 - 213 22,867
Machinery and Equipment 28,302 4,307 (492) 284 32,401
Furniture and Fixtures 8,566 1,741 (175) 23 10,155
Total $56,655 $9,059 $ (667) $ 520 $65,567
</TABLE>
(A) Other changes represents currency translation gains and (losses).
<PAGE>
<TABLE>
Schedule VIII
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended March 31, 1994, 1993 and 1992
<CAPTION>
Additions
Balance at Charged to
Description Beginning Costs and Balance at
of Period Expenses Deductions End of Period
<S> <C> <C> <C> <C>
1994
Allowances for discounts,
doubtful accounts and returns $2,815,000 $31,622,000 $31,728,000 $2,709,000
1993
Allowances for discounts,
doubtful accounts and returns $2,439,000 $28,158,000 $27,782,000 $2,815,000
1992
Allowances for discounts,
doubtful accounts and returns $2,314,000 $18,816,000 $18,691,000 $2,439,000
</TABLE>
<PAGE>
Schedule IX
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
Short-Term Borrowings
Short-term notes and bonds payable included in the consolidated
balance sheets at March 31, 1994, 1993, and 1992 and the related weighted
average interest rates at the end of each fiscal year were as follows:
<TABLE>
<CAPTION>
--------1994--------- --------1993--------- ---------1992------
Avg. Avg. Avg.
Interest Interest Interest
Amount Rate Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C>
Notes payable to banks* $114,983,000 4.4% $117,908,000 5.4% $79,983,000 6.8%
$114,983,000 4.4% $117,908,00 5.4% $79,983,000 6.8%
</TABLE>
The following information relates to aggregate short-term borrowings:
[CAPTION]
----1994---- ----1993---- ---1992----
1. Maximum amount outstanding at
any month's end $130,544,000 $117,908,000 $79,983,000
2. Average amount outstanding (total
of month's end outstanding
divided by 12) $120,904,000 $ 93,976,000 $58,406,000
3. Weighted average interest rate
(actual interest expense on short-
term debt divided by average short-
term debt outstanding) 4.4% 5.4% 6.8%
* Principally comprised of demand notes with various maturities pursuant
to uncommitted lines of credit, at the discretion of the lending
institutions.
<PAGE>
<TABLE>
Schedule X
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
Supplementary Income Statement Information
<CAPTION>
Charges to Costs and Expenses for the
Years Ended March 31,
1994 1993 1992
<S> <C> <C> <C>
Advertising costs, including
cost of product samples $181,340,000 $177,667,000 $167,592,000
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
22 Subsidiaries of Registrant.
<PAGE>
EXHIBIT 22
Subsidiaries of Registrant
The following list shows the Company and its subsidiaries, all of which
(except as indicated) are wholly owned and included in the Consolidated
Financial Statements in this report.
Jurisdiction
Identification of Incorporation
Block Drug Company, Inc. New Jersey
Stafford-Miller International, Inc. New Jersey
Reedco, Inc. Delaware
Dentco, Inc. Delaware
Block Drug Corporation New Jersey
Block Drug Company (Canada) Limited Ontario, Canada
Block Drug Company (Philippines), Inc. Manila, Philippines
Block Drug Company (Thailand) Limited Thailand
Block Drug Company (Korea) Limited Korea
Kobayashi-Block Company, Ltd. (a) Japan
Laboratoires Stafford-Miller S.A.R.L. (b) France
Stafford Miller Argentina S.A. Argentina
Stafford-Miller (Canada) Inc. (c) Ontario, Canada
Stafford-Miller Chile Limitada Santiago, Chile
Stafford-Miller Continental, NV-SA Belgium
Stafford-Miller de Espana, S.A. Spain
Stafford-Miller de Mexico, S.A. de C.V. Mexico
Stafford-Miller Industria Ltda. Brazil
Stafford-Miller Foreign Sales Corporation St. Thomas, VI
Stafford-Miller (Ireland) Limited Ireland
Stafford-Miller Limited Great Britain
Stafford-Miller Nederland B.V. Netherlands
Stafford-Miller (N.Z.) Limited New Zealand
Stafford-Miller (Portugal) Quimico-Farmaceutica, Lda. Portugal
Stafford-Miller RE Limited (d) Great Britain
Stafford-Miller S.r.l. Italy
Stafford-Miller Sweden Aktiebolag Sweden
(a) 50% owned joint venture with Kobayashi Pharmaceutical Company, Ltd.,
organized under the laws of Japan, has been accounted for by the
equity method.
(b) Wholly-owned subsidiary of Stafford-Miller Continental, NV-SA.
(c) Wholly-owned subsidiary of Stafford-Miller (Ireland) Limited.
(d) Wholly-owned subsidiary of Stafford-Miller (Ireland) Limited.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the
7th day of June, 1994.
BLOCK DRUG COMPANY, INC.
(Registrant)
BY MELVIN KOPP
Melvin Kopp
Senior Vice Pres. & Chief Financial Officer
Pursuant to the requirements of Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 7th day of June, 1994.
Principal Executive Officer:
LEONARD BLOCK
Leonard Block
Senior Chairman
Principal Financial and Accounting Officer:
MELVIN KOPP
Melvin Kopp
Senior Vice President & Chief Financial Officer
Directors:
LEONARD N. BLOCK JAMES A. BLOCK
Leonard N. Block James A. Block
THOMAS R. BLOCK SUSAN B. STEARNS
Thomas R. Block Susan B. Stearns
PEGGY DANZIGER MELVIN KOPP
Peggy Danziger Melvin Kopp
DONALD H. LESIEUR PETER J. REPETTI
Donald H. LeSieur Peter J. Repetti
ALFRED E. BROWN JOHN E. PETERS
Alfred E. Brown, Ph.D. John E. Peters
MICHAEL C. ALFANO WILLIAM T. GOLDEN
Michael C. Alfano, D.M.D., Ph.D. William T. Golden
<PAGE>
