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, 1995 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
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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 6, 1995, nonaffiliates held no voting shares of the Registrant;
therefore, the aggregate market value of voting shares held by nonaffiliates
is zero.
As of June 6, 1995, there were 12,473,151 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 55
<PAGE>
PART I
Item 1. Business
REVIEW OF OPERATIONS
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.
The POLIDENT and DENTU-CREME brand denture cleansers and their line
extensions continue to generate the largest dollar volume of Company sales.
An innovative new POLIDENT formula that cleans in only five minutes 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 television
advertising and promotion efforts as well as the introduction of the new
POLI-GRIP FREE Denture Adhesive brand, a natural product free of artificial
colors and flavors. A variety of other cream, powder and liquid adhesives
are marketed under the national brands names SUPER POLI-GRIP, WERNET'S and
SUPER WERNET'S.
The SENSODYNE brand is a specialty toothpaste for the treatment of
dentinal hypersensitivity. A recognized brand around the world, SENSODYNE is
marketed to the consumer and the dental professional. The SENSODYNE brand
with Baking Soda was marketed nationally during the fiscal year in the face of
competitive pressures from other leading brand name toothpastes. The
SENSODYNE brand accounts 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
The Company manufactures and markets professional dental supplies for
use in chairside patient treatment and dental office infection control.
Additionally, the Company markets prescription pharmaceutical products to
dentists to prescribe to patients to help alleviate pain or to improve their
oral health.
<PAGE>
A two-pronged approach helps the Company effectively market products
to the dental profession. Dental Consultants are employed to visit dentists
and hygienists to present our product lines. An extensive team of Tele-Sales
Consultants services thousands of dental offices by telephone from
headquarters.
During the fiscal year, the Company introduced the Lodine R (etodolac)*
brand to the dental professional under a co-promotion agreement with
Wyeth-Ayerst, its manufacturer. Lodine is a prescription non-steroidal
anti-inflammatory (NSAID) analgesic appropriate for the treatment of pain
associated with dental procedures. Dental Consultants market this product to
dentists throughout the United States.
The Company also markets Habitrol R**, a nicotine transdermal system,
to dental professionals in the continental United States and Hawaii. Habitrol
is a product of Ciba Self-Medication, Inc. Dentists know smoking is associated
with the development of periodontal disease and other oral health related
problems. Habitrol is indicated as an aid to smoking cessation, when used as
part of a comprehensive behavioral smoking cessation program.
The VITAL DEFENSE line of office infection control products is marketed
by the Company for sterilizing and disinfecting dental office surfaces and
equipment and providing protection for the patient and the dentist.
Other of the Company's professional dental products include: the MYNOL
line of endodontic products for use during root canal surgery; ADAMOUNT
Radiograph (X-Ray film) mounts; VISION prophylaxis paste; SENSODYNE Dentin
Desensitizer for chairside treatment of sensitive teeth; and the VITAL RESPONSE
Crisis Management System, an emergency kit for use by dentists to control
unexpected in-office medical emergencies.
CONSUMER PRODUCTS
Proprietary Over-the-Counter Brands
Included in the Company's personal care products line are four
well-known consumer brand names: NYTOL brand Sleep-Aid Tablets, TEGRIN brand
Medicated Shampoos, BC brand Headache Powder and the recently acquired GOODY's
Headache Powder line.
Television advertising for the NYTOL Sleep-Aid Tablets line continues
to generate awareness and trial for the brand. The NYTOL brand is sold in the
U.S., Canada, United Kingdom and in parts of Latin America.
TEGRIN brand Medicated Shampoo continues to compete and grow within
the specialty shampoo category.
<PAGE>
The BC brand Headache Powder maintained its leadership position in the
Southern region powdered analgesic market. Effective marketing and a
successful television/radio advertising campaign help the BC brand continue to
rank high in the regional over-the-counter analgesic marketplace.
* Lodine-R is a registered trademark of Wyeth-Ayerst.
** Habitrol-R is a registered trademark of Ciba Self-Medication, Inc.
The Company acquired the GOODY'S Headache Powder and Pain Relief
Tablets line in December 1994. The GOODY'S formula is different from BC,
and has the potential for expanded distribution and increased current user
usage. The Company also acquired the full line of GOODY'S over-the-counter
products including ISODETTES brand Sore Throat Spray, OJ's brand Astringent
Lotion, NUMZ-IT brand Baby Teething Lotion and Gel, and NUMZIDENT brand Oral
Pain Reliever Gel.
The BALMEX brand Diaper Rash Ointment, experienced expanded
distribution and increased sales during this fiscal year with targeted
consumer and professional support programs.
The PHAZYME line, over-the-counter products for gas relief, experienced
growth on the strength of continued enhanced distribution, the introduction of
a thirty dose size for the line, and use of television advertising, consumer
promotions and professional marketing programs to the physician.
Household Products
Household products marketed by the Company include the 2000 FLUSHES
line of toilet bowl cleaners and the X-14 line of household cleaners.
Despite the introduction of a number of competitive products, the 2000
FLUSHES line was again the leading brand name in the automatic toilet bowl
cleaning products category. The Company's marketing and advertising programs
and innovative research and development efforts help this line of products
stay in the forefront of this category's development.
The X-14 line of bathroom cleaning products includes X-14 Instant
Mildew Stain Remover, X-14 Soap Scum Remover, and X-14 Mineral & Rust Stain
Remover. The Company launched its first item in the all-purpose cleaner
category with the introduction of X-14 Kitchen Cleanser during fiscal 1995.
After the close of the fiscal year, the Company signed a contract to
acquire the U.S. Rug and Room Deodorizer businesses of Reckitt & Colman, Inc.
Pursuant to the agreement, the Company will purchase the CARPET FRESH-R and
RUG FRESH-R trademarks and be granted exclusive licenses for use of the
AIRWICK-R and NEUTRA AIR-R trademarks in the Rug and Room Deodorizer product
category in the U.S. This transaction is subject to receipt of regulatory
consents and is expected to close in the third calendar quarter of 1995.
<PAGE>
ETHICAL PHARMACEUTICAL PRODUCTS
Pharmaceutical products and ethical non-prescription products are
manufactured and marketed by the Reed & Carnrick Division. Reed & Carnrick
markets products concentrated in the fields of gastroenterology, dermatology
and cardiovascular disease.
After the close of the fiscal year, the Company entered into a contract
to sell selected assets of its U.S. Reed & Carnrick Pharmaceutical Division to
Schwarz Pharma Kremers-Urban, a wholly-owned subsidiary of Schwarz Pharma of
Monheim, Germany. The U.S. Reed & Carnrick Division's sales for the fiscal
year ended March 31, 1995 were approximately $50,000,000. International
pharmaceutical businesses were not included in the transaction. The sale is
subject to certain conditions and government approvals and is expected to close
by June 30, 1995. This divestiture renews the Company's focus on its key areas
of corporate strength to help achieve its long-term growth objectives.
Gastroenterology
In gastroenterology, the Division markets a variety of therapeutic
agents including COLYTE-flavored brand of bowel cleansing lavage, the first
flavored product of its type and the leading prescription product for
pre-colonoscopy preparation. The CORTIFOAM brand is the only 10%
hydrocortisone rectal foam available for the treatment of ulcerative proctitis.
The ETHAMOLIN brand, for the treatment of life-threatening bleeding esophageal
varicies, is also marketed to the gastroenterologist.
The PROCTOFOAM and PROCTOCREAM brands are the Division's widely
prescribed anti-hemorrhoidal preparations, which continue to show sales
increases at an impressive rate.
During the fiscal year, Reed & Carnrick executed a co-promotion
agreement with Eli Lilly & Company to market the Oral Vancocin-R HC Pulvules-R*
brand to gastroenterologists. This medication is indicated for the treatment
of pseudomembranous colitis, a serious bacterial infection of the colon often
induced by antibiotic treatment.
Dermatology
In dermatology, the Division markets the DURASCREEN brand, a long
lasting sunscreen in its second year on the market. The DURASCREEN brand is
now one of the top sunscreens recommended by dermatologists. The EPIFOAM
brand, a dual action topical treatment for corticosteroid responsive
dermatoses, has benefited from promotion to dermatologists. The ACTINEX
brand, is a treatment for actinic keratoses, or pre-cancerous lesions of the
skin.
Cardiology
The LEVATOL brand for the treatment of hypertension and the
DILATRATE-SR brand for the treatment of angina continue to post sales increases
despite participation in highly competitive markets.
*Vancocin-R HC Pulvules are registered trademarks of Eli Lilly & Company.
<PAGE>
Managed Care
A portion of the Reed & Carnrick staff consists of Managed Care
Directors whose efforts are focused on sales of our products to managed care
organizations, a growing segment of the healthcare marketplace.
Managed care organizations enroll 115 million Americans. The Company's
Managed Care Directors market products to the formularies of these
organizations so doctors in this healthcare setting can prescribe our brands
to their constituents.
International Operations
The Company's International Operations generated 49% of total corporate
sales in fiscal 1995 from its subsidiaries, branches and divisions on five
continents.
EUROPE
Europe is the Company's largest international market. Sales and
marketing organizations are well established in the United Kingdom, Germany,
France, Italy, Belgium, Holland, Spain, Portugal, Scandinavia, Eastern Europe,
Africa and the Middle East. A new office was established in Dubai during the
fiscal year to manage sales in the Persian Gulf Region.
The primary European businesses include denture cleansers, denture
adhesives and specialty toothpastes. SENSODYNE brand toothpaste is the
Company's leading product in Europe. Improved denture adhesive formulas,
new flavor denture adhesives, improved denture cleansing tablets, new gel
and baking soda formula toothpastes and children's toothpastes and
toothbrushes were recently introduced into the European market.
Our continued focus on over-the-counter medicines led to the successful
introduction of NYTOL brand sleep aid tablets in the United Kingdom. We plan
to build on this success, expanding to other European countries in the near
future.
LATIN AMERICA
Mexico, Colombia, Brazil and Argentina are the primary markets for the
Company's brands in Latin America. The Company has subsidiaries in each of
these countries, and in Chile, where a new subsidiary was recently established.
The Company continues to meet the challenges of doing business in Latin America
following the devaluation of the Mexican peso and its effect on our sales and
profits.
PACIFIC RIM AND CANADA
Japan, Australia, Thailand and the Philippines are the principal
markets for the Company's products in the Pacific Rim. Subsidiaries also
operate in Korea, New Zealand and, most recently China, where the SENSODYNE,
POLIDENT and SUPER POLI-GRIP brands are now marketed in Guang Dong Province.
<PAGE>
One of the Company's leading manufacturing, distribution and marketing
facilities is located at its Canadian subsidiary, which produces many products
for that country and other affiliates.
An International Quality Control and Regulatory Affairs group, located
at corporate headquarters, supports and assists subsidiaries to expand and
grow our business in the worldwide marketplace.
Research and Technology, Corporate Quality and Regulatory Affairs
The Company operates in competitive, highly regulated consumer and
professional product categories. Strong technical support is, therefore, an
essential part of its business. Research and Development, Corporate Quality
and Regulatory Affairs are integrated in one division staffed by scientists
from diverse academic and industrial backgrounds. This deepens the resources
which the Company can apply to a technical issue anywhere in the world.
Research and Development
The Company's Research and Development efforts focus on technical
leadership in each of the product categories in which we compete. While the
Company maintains modern, well-equipped research laboratories, it has a
significant investment in its technical staff. Great effort is made to
recruit and retain competent scientists, and continued training is offered
to them.
The Company's diverse product line of prescription and non-prescription
pharmaceuticals, dental products and household cleaners requires a broad mix
of dosage forms, packaging and delivery systems. The products are supported
by a diverse team of personnel including clinical, statistical, toxicological,
analytical, packaging, medical, dental and microbiological functions. The
Company also funds a new technology group which focuses on emerging
technologies with prospects for improving key brands. In an effort to speed
communications, manage the data generated, and maintain technical literature,
investments will continue in computerization, imaging and library sciences.
The Company continues to develop and refine products on a global basis.
To support this global effort, clinical studies are conducted in Europe, Latin
America, Asia and North America. With ongoing investments in technology, the
Company continues to seek technical leadership to improve its brands, launch
new products, and reduce costs.
Corporate Quality
The Company is proud that its Corporate Quality group is equal in
technical prowess to its Research & Development group. Working in
collaboration with colleagues in Operations to ensure the quality of its
products, the Corporate Quality group also ensures the Company's plants are
operated in compliance with all appropriate laws and regulations as well as
the Company's own high quality standards.
<PAGE>
Regulatory Affairs
The Company is subject to worldwide governmental regulations and
controls relating to product safety, efficacy, packaging, labelling 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
in most countries. Submission of a substantial amount of preclinical and
clinical information prior to market introduction significantly increases
the amount of time and related costs incurred for preparing such products
for market.
The Company submits data to the Food and Drug Administration as
necessary in response to the ongoing monograph review of the safety and
efficacy of all over-the-counter drug products marketed in the U.S. 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. Concern for maintaining compliance with federal, state,
local and foreign regulations on environmental protection, hazardous waste
management, occupational safety and industrial hygiene has 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.
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 Company's consolidated financial
position or results of operations.
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.
<PAGE>
A team of Dental Sales Consultants sells products directly to dentists
and a TeleSales group at headquarters services dental accounts by telephone.
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.
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 brand names are important
factors 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 brand names 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, 1995, there were
no substantial raw material shortages. The Company was able to obtain at
competitive prices all raw materials required for its normal operations.
<PAGE>
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 2,527,000
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; and Rio de Janeiro, Brazil.
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. Facilities in Zaragoza,
Spain serve as a distribution center.
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.
Item 4. Submission of Matters to a Vote of Security Holders
On June 6, 1995 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 Cash Dividends
of Class Declared Per
A Common Stock* Share
Fiscal Year Ended
March 31, 1995 High Low
First Quarter $32 3/4 $29 1/2 $0.26
Second Quarter 32 1/4 29 $0.26
Third Quarter 38 30 1/2 $0.27
Fourth Quarter 37 3/4 33 $0.27**
Fiscal Year Ended
March 31, 1994
First Quarter 53 45 $0.25
Second Quarter 46 1/2 32 $0.25
Third Quarter 37 3/4 29 3/4 $0.26
Fourth Quarter 37 1/2 31 3/4 $0.26***
* 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 3, 1995 to
Class A and B shareholders in Class A Common Stock.
*** In addition, a 3% stock dividend was paid on January 4, 1994 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 6, 1995:
Title of Class Number of Shareholders
Common Stock, Class A (non-voting) 554
Common Stock, Class B (voting) 5
<TABLE>
Item 6. Selected Financial Data
<CAPTION>
Fiscal Year Ended March 31
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Sales $669,854,000 $613,283,000 $624,826,000 $562,932,000 $512,884,000
Income, Dividends
& Other Income 23,026,000 23,383,000 26,490,000 22,328,000 17,970,000
Income Before
Income Taxes 63,649,000 57,114,000 77,713,000 68,454,000 69,062,000
Income Taxes 13,280,000 9,262,000 16,167,000 11,187,000 15,852,000
Net Income 50,369,000 47,852,000 61,546,000 57,267,000 53,210,000
Average Number of
Common Shares
Outstanding (1) 20,148,000 20,115,000 20,090,000 20,074,000 20,195,000
Net Income Per Share
of Common Stock (1) $2.50 $2.38 $3.06 $2.85 $2.63
Cash Dividends Declared
Per Share of
Class A Common $1.06 $1.02 $ .95 $ .85 $ .75
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 16,031,000 $ 13,580,000 $ 10,727,000 $ 9,059,000 $ 8,215,000
Working Capital 26,095,000 32,637,000 51,203,000 69,563,000 88,620,000
Current Ratio 1.1 1.2 1.3 1.4 1.8
Total Assets 871,320,000 $771,068,000 $726,497,000 $649,608,000 $550,735,000
Long-Term Debt and
Notes Payable 15,273,000 17,880,000 19,160,000 19,435,000 19,459,000
Shareholders' Equity 562,531,000 515,121,000 485,298,000 446,550,000 398,736,000
Number of Employees 3,521 3,491 3,505 3,301 3,105
</TABLE>
(1) Restated to reflect stock dividends declared on Class A and Class B
Common Stock by the Company in 1995 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, 1995 were $669.9 million, an increase of 9% from the prior fiscal
1994, which recorded a decrease of 2%. Domestic and international sales
increased in fiscal 1995. In fiscal 1994, both domestic and international
sales decreased from the prior fiscal year. Domestic sales in fiscal 1995
increased 6%, reflecting volume growth of 4% and price increases of 2%.
International sales in fiscal 1995 increased 12%. Excluding the impact of
foreign currency exchange rate fluctuations, fiscal year 1995 sales would
have risen 9%.
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 for
fiscal 1995 were $120.4 million, 30% higher than fiscal 1994, which had total
sales of $92.4 million, 30% higher than fiscal 1993.
The Company's largest business segment, dental products, increased 12%
to $441 million, following a 2% decrease in the prior year. Consumer product
sales increased to $149 million, a 1% increase compared to a 1% decrease in the
previous year. Ethical pharmaceutical products registered sales of $80 million
for an increase of 10%, compared to a decline of 4% in the prior fiscal year.
Interest, dividends and other income for the current year approximated
the prior year. In fiscal 1994, investment income decreased compared to fiscal
1993 principally due to lower interest rates.
The cost of goods sold percentage to sales was 32.9% in fiscal 1995
compared to 33.5% in fiscal 1994 and 33.0% in fiscal 1993. These percentages
were affected by improved manufacturing operations and mix of products sold,
in addition to selective price increases.
Selling, general and administrative expenses represented 61.0%, 61.0%
and 58.8% of sales in fiscal 1995, 1994 and 1993, 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. In fiscal 1995 and 1994, these expenses were substantially increased
and reflect a major program to increase advertising and promotion to meet
significant competition and build brand equities.
Due to the above factors, income before taxes was 9.5% of sales in
fiscal 1995 as compared to 9.3% and 12.4% in fiscal 1994 and 1993,
respectively.
The effective income tax rates of 20.9%, 16.2% and 20.8% in fiscal
1995, 1994 and 1993, respectively reflect tax-exempt interest from government
securities and income from the lower tax areas of Puerto Rico and Ireland.
For additional information, see "Income Taxes" in the Notes to Consolidated
Financial Statements.
<PAGE>
The Company's foreign operations measure profitability in terms of U.S.
Dollars and is subject to foreign exchange rate risk. If the U.S. Dollar
strengthens, the profitability of foreign operations can be affected adversely.
The profitability of foreign operations will benefit, however, if the U.S.
Dollar weakens. During fiscal 1995, the U.S. Dollar weakened as compared to
fiscal 1994. This had a favorable impact on profits for fiscal 1995.
Currently, the Company is not engaged in a hedging program for foreign currency.
Although inflation has been moderate throughout fiscal 1995 and 1994,
the Company has continued to utilize selective price increases and budgetary
monitoring of 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.
Liquidity and Capital Resources
Cash increased to $13.7 million at March 31, 1995 from $8.9 million
at March 31, 1994 and $6.6 million at March 31,1993.
Net cash flows from operating activities were $50 million in fiscal
1995, $26 million less than the prior year. Increases in accounts receivable
and inventories more than offset increases in accounts payable and other
current assets. In fiscal 1994, net cash flows from operating activities were
$76 million, $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. Accounts receivable at year-end 1995, 1994 and 1993
represented 2.1, 1.9 and 1.8 average month of sales, respectively. Inventory
levels comprised 6.2, 5.2, and 5.6 months supply at year-end 1995, 1994, and
1993 respectively.
Net cash used in investing activities for fiscal 1995 was $70 million,
compared to $58 million in fiscal 1994. Increases in goodwill and other
intangible assets, additions to property, plant and equipment, and purchases
of long-term securities more than offset proceeds from sales of securities.
In fiscal 1993, the net cash outflows for investing activity was $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.
In fiscal 1995, the Company acquired the product lines of Goody's
Pharmaceuticals Inc., a manufacturer and marketer of over-the-counter health
care products.
<PAGE>
After the close of the fiscal year, the Company entered into a
contract to sell selected assets of its U.S. Reed & Carnrick Pharmaceutical
Division to Schwarz Pharma Kremers-Urban, a wholly-owned subsidiary of Schwarz
Pharma of Monheim, Germany. The U.S. Reed & Carnrick Division's sales for the
fiscal year ended March 31, 1995 were approximately $50 million. International
pharmaceutical businesses were not included in the transaction. The sale is
subject to certain conditions and government approvals and is expected to close
by June 30, 1995. This divestiture renews the Company's focus on its key areas
of corporate strength to help achieve its long-term growth objectives.
After the close of the fiscal year, the Company signed a contract to
acquire the U.S. Rug and Room Deodorizer businesses of Reckitt & Colman, Inc.
Pursuant to the agreement, the Company will purchase the CARPET FRESH-R and
RUG FRESH-R trademarks and be granted exclusive licenses for use of the
AIRWICK-R and NEUTRA AIR-R trademarks in the Rug and Room Deodorizer product
category in the U.S. This transaction is subject to receipt of regulatory
consents and is expected to close in the third calendar quarter of 1995.
Net capital expenditures of $35 million in fiscal 1995 approximated
fiscal 1994, compared to $46 million in fiscal 1993.
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 1995.
Liquidity and Capital Resources (Continued)
Expenditures continued to be made for renovation and expansion of production
and warehousing facilities in Ireland, England, Belgium and Argentina.
Expansion, both domestic and foreign is expected to continue in fiscal 1996
but to a lesser extent than in fiscal 1995. 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 provided by financing activities was $25 million in fiscal
1995, compared to net cash used of $15 million in fiscal 1994. In fiscal
1993, there was a net cash inflow of $30 million. The financing inflows in
fiscal 1995 arose from the proceeds from debt issuance of $41 million to help
finanace the acquisition of Goody's Pharmaceuticals, Inc. which more than
offset dividends to shareholders and debt repayment. The financing outflows
in fiscal 1994 arose from the payment of dividends and payment of debt with no
new issuances of debt. In fiscal 1993, the proceeds from debt issuance of
$45 million more than offset dividends to shareholders and debt repayment.
<PAGE>
An overall weakening of the United States Dollar in relation to
foreign currencies resulted in net foreign currency translation gains of
$6.7 million in fiscal 1995. In fiscal 1994, a strong United States Dollar
relative to foreign currencies resulted in net foreign currency translation
losses of $7.5 million. Such amounts were charged directly to shareholders'
equity in the balance sheet.
In fiscal 1995, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115 "Accounting For Certain Investments in Debt and
Equity Securities" and has reclassified in the fourth quarter all long-term
securities as "available for sale". These long-term securities reported at
fair value resulted in unrealized holding gains of $1.8 million, which is net
of $0.6 million in taxes. This was charged directly to shareholders' equity
in the balance sheet.
In March, 1995, the Financial Accounting Standard Board ("FASB")
issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of." This pronouncement establishes
accounting standards for when impairment losses relating to long-lived assets,
identifiable intangibles, and goodwill related to those assets should be
recognized and how the losses should be measured. The Company must implement
SFAS No. 121 in fiscal 1996. Management anticipates that the adoption of
SFAS No. 121 will not have a significant impact on the Company's consolidated
financial position or results of operations.
The Company anticipates that sufficient finds will be provided from
operations and borrowing capabilities for capital expenditures, dividend
payments and other cash needs in fiscal 1996. The Company had uncommitted
lines of credit totaling $249 million and $201 million at March 31, 1995 and
1994, 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 48 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
10 percent and 26 percent, respectively, in the year ended March 31, 1995,
11 percent and 23 percent, respectively, in the year ended March 31, 1994 and
10 percent and 24 percent, respectively, in the year ended March 31, 1993 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, 1995 and 1994, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended
March 31, 1995 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.
As discussed in notes 1 and 4 to the consolidated financial statements
for the year ending March 31, 1995, the Company changed its method of
accounting for certain investments in debt and equity securities.
COOPERS & LYBRAND L.L.P.
New York, New York
June 6, 1995
<PAGE>
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31
ASSETS 1995 1994
<S> <C> <C>
Current Assets:
Cash $ 13,706,000 $ 8,896,000
Marketable securities, at market for 1995;
at cost which approximates market for
1994 (Note 4) 24,061,000 19,338,000
Accounts receivable, less allowances of
$3,222,000 (1995) and $2,709,000 (1994) 114,656,000 97,814,000
Inventories (Notes 1 and 2) 113,419,000 88,986,000
Other current assets 30,045,000 34,079,000
Total current assets 295,887,000 249,113,000
Property, plant and equipment, less
accumulated depreciation (Notes 1 and 3) 229,446,000 207,474,000
Long-term securities, at market for 1995;
at cost for 1994, market value $281,601,000
(1994) (Note 4). 260,076,000 275,574,000
Goodwill and other intangible assets,
less accumulated amortization of
$9,865,000 (1995) and $8,825,000 (1994)
(Note 1) 64,040,000 21,721,000
Other assets 21,871,000 17,186,000
Total assets $871,320,000 $771,068,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes and bonds payable (Note 5) $155,591,000 $114,983,000
Accounts payable and accrued expenses (Note 6) 101,952,000 88,359,000
Income taxes payable (Note 7) 8,884,000 10,056,000
Dividends payable 3,365,000 3,078,000
Total current liabilities 269,792,000 216,476,000
Long-Term notes and bonds payable (Note 5) 15,273,000 17,880,000
Deferred income taxes (Note 7) 13,086,000 11,424,000
Deferred compensation and other payables
(Notes 1 and 8) 10,638,000 10,167,000
Total liabilities 308,789,000 255,947,000
Shareholders' equity (Notes 1 and 9):
Class A common stock, non-voting par
value $.10-15,000,000 shares (1995 and 1994)
authorized, 12,466,172 (1995) and 11,839,501
(1994) shares issued and outstanding 1,247,000 1,184,000
Class B common stock, par value $.10-30,000,000
shares authorized, 7,704,400 shares issued and
outstanding 770,000 770,000
Capital in excess of par value 194,426,000 173,372,000
Retained earnings 367,325,000 349,500,000
Cumulative foreign currency translation
adjustment (Note 1) (3,054,000) (9,705,000)
Unrealized holding gain on marketable
securities (Note 4) 1,817,000 -
Total shareholders' equity 562,531,000 515,121,000
Total liabilities and shareholders' equity $871,320,000 $771,068,000
</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, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
Revenues:
<S> <C> <C> <C>
Net sales (Note 11) $669,854,000 $613,283,000 $624,826,000
Interest, dividends and
other income 23,026,000 23,383,000 26,490,000
692,880,000 636,666,000 651,316,000
Cost and Expenses:
Cost of goods sold 220,522,000 205,595,000 206,453,000
Selling, general and
administrative 408,709,000 373,957,000 367,150,000
629,231,000 579,552,000 573,603,000
Income before income taxes
(Note 11) 63,649,000 57,114,000 77,713,000
Income Taxes (Note 7):
Current 12,561,000 8,809,000 16,296,000
Deferred 719,000 453,000 (129,000)
13,280,000 9,262,000 16,167,000
Net Income 50,369,000 47,852,000 61,546,000
Retained earnings at beginning
of year 349,500,000 331,633,000 306,024,000
Less: Cash dividends declared-$1.06
(1995) and $1.02 (1994) and $.95
(1993) per share of Class A
common stock (12,731,000) (11,632,000) (10,286,000)
Stock dividend 3% (1995, 1994 and
1993) to Class A and Class B
shareholders payable in Class A
common stock (Note 9) (19,813,000) (18,353,000) (25,651,000)
Retained earnings at end of year $367,325,000 $349,500,000 $331,633,000
Earnings per share of common stock
(Notes 1 and 9) $ 2.50 $ 2.38 $ 3.06
</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, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net Income $ 50,369,000 $ 47,852,000 $ 61,546,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 17,071,000 14,539,000 11,659,000
Deferred income tax provision 719,000 453,000 (129,000)
Deferred compensation provision 2,700,000 1,773,000 2,492,000
Equity in net income of joint venture (2,836,000) (1,780,000) (958,000)
Gain on sales of long-term securities 10,000 (42,000) (4,747,000)
Other, net 1,947,000 1,283,000 915,000
Changes in assets and liabilities that
provided (used) cash, net of effects
from purchase of products acquired:
Accounts receivable 11,311,000 (5,286,000) (13,432,000)
Inventories (20,108,000) 5,224,000 (12,113,000)
Accounts payable and
accrued expenses 11,122,000 19,558,000 (4,000)
Other current assets 5,873,000 (2,482,000) (136,000)
Other assets (1,656,000) (2,523,000) (140,000)
Income taxes and dividends payable (1,738,000) (1,180,000) 3,287,000
Payments of deferred compensation (2,453,000) (1,351,000) (2,366,000)
Other noncurrent liabilities (100,000) (200,000)
Net cash flows from operating
activities 49,709,000 75,938,000 45,674,000
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and
equipment (34,542,000) (35,215,000) (46,268,000)
Decrease (increase) in marketable
securities 3,951,000 6,945,000 (3,271,000)
Proceeds from sales of long-term
securities 37,807,000 23,910,000 67,227,000
Purchase of Long-Term Securities (28,686,000) (52,992,000) (86,855,000)
Payment for products acquired (48,957,000) (250,000) (6,145,000)
Net cash used in investing
activities (70,427,000) (57,602,000) (75,312,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to shareholders (12,731,000) (11,631,000) (10,396,000)
Proceeds from issuance of debt 40,570,000 45,286,000
Payment of debt (2,612,000) (3,643,000) (5,172,000)
Net cash provided by (used in)
financing activities 25,227,000 (15,274,000) 29,718,000
Effect of exchange rates on cash 301,000 (793,000) (717,000)
Increase (decrease) in cash 4,810,000 2,269,000 (637,000)
Cash, beginning of year 8,896,000 6,627,000 7,264,000
Cash, end of year $13,706,000 $ 8,896,000 $ 6,627,000
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
For the Years Ended March 31, 1995, 1994 and 1993
SUPPLEMENTAL CASH FLOW DATA 1995 1994 1993
<CAPTION>
Cash Paid During the Year:
<S> <C> <C> <C>
Interest $ 7,676,000 $ 6,979,000 $ 6,927,000
Income taxes $13,646,000 $13,627,000 $14,396,000
</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 $2,951,000, $1,789,000 and $4,913,000,
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 1995, 1994 and 1993, respectively.
1995 1994 1993
Transactions $ 649,000 $ 383,000 $2,788,000
Translation 2,302,000 1,406,000 2,125,000
Total $2,951,000 $1,789,000 $4,913,000
CUMULATIVE TRANSLATION
ADJUSTMENT RECONCILIATION 1995 1994 1993
Balance-Beginning (9,705,000) (2,225,000) 11,093,000
Translation Adjustment 6,651,000 (7,480,000) (13,318,000)
Balance Ending (3,054,000) (9,705,000) (2,225,000)
<PAGE>
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. Average useful
lives are 50 years for buildings and building additions, and 12 years for
equipment. The cost of maintenance, repairs and minor renewals of property,
plant and equipment are charged to operations; major renewal and betterments
are capitalized.
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. Other
intangible assets are recorded at cost and amortized over their estimated
useful lives on the straight line method. Intangible assets are periodically
reviewed to determine the recoverability of unamortized balances using
undiscounted cash flows.
In March, 1995, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets for
Long-Lived Assets to be Disposed Of." This pronouncement establishes
accounting standards for when impairment losses relating to long-lived assets,
identifiable intangibles, and goodwill related to those assets should be
recognized and how the losses should be measured. The Company must implement
SFAS No. 121 in fiscal 1996. Management anticipates that the adoption of
SFAS No. 121 will not have a significant impact on the Company's consolidated
financial position or results of operations.
Amortization of goodwill and other intangible assets was $1,040,000,
$959,000 and $931,000 in the years ended March 31, 1995, 1994 and 1993,
respectively.
Marketable securities and fair value of financial instruments:
Marketable securities classified as current assets include cash
equivalents (i.e. interest-bearing securities with maturities of 90 days or
less at time of purchase) that are recorded at cost (which approximates
market) and other debt instruments with less than one year remaining until
maturity that are treated as available for sale and recorded at market value.
<PAGE>
On April 1, 1994, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Current and non-current
marketable securities were reclassified from held-to-maturity to available-
for-sale under SFAS No. 115 as of the beginning of the fourth fiscal quarter
of fiscal 1995. The fair values of such securities are determined by
independent pricing services and/or securities dealers.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
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.
Research and development expenditures:
Research and development expenditures are charged to operations as
incurred. The charges for years ended March 31, 1995, 1994 and 1993 were
$23,465,000, $21,568,000 and $20,428,000, 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 20,148,000, 20,115,000 and 20,090,000 in fiscal
1995, 1994 and 1993, respectively.
Note 2. Inventories:
March 31
Major classes of inventories comprise: 1995 1994
Raw and packaging materials $ 41,033,000 $32,398,000
Finished goods 72,386,000 56,588,000
Total $113,419,000 $88,986,000
<PAGE>
Note 3. Property, Plant and Equipment:
March 31
Major classes of property, plant and
equipment are summarized as follows: 1995 1994
Land $20,585,000 $18,925,000
Building and related improvements 147,138,000 132,460,000
Machinery and equipment 119,224,000 100,517,000
Furniture and fixtures 36,223,000 30,452,000
Construction in progress 4,825,000 7,060,000
327,995,000 289,414,000
Less: Accumulated depreciation
98,549,000 81,940,000
Total $229,446,000 $207,474,000
Depreciation expense for the years ended March 31, 1995, 1994 and 1993
was $16,031,000, $13,580,000 and $10,727,000 respectively. Certain of the
above properties are pledged as collateral for the bonds (Note 5).
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Note 4. Marketable Securities:
On April 1, 1994, the Company adapted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." It classified its
marketable securities as hold-to-maturity and reported at amortized cost.
On January 1, 1995, the Company reclassified all of its marketable securities
as available-for-sale. This reclassification is primarily a result of
changing economic circumstances. As a result of this change in
classification, on January 1, 1995, the Company recorded an unrealized holding
loss of $4,020,000, net of a tax effect of $127,000, in a separate component
of shareholders' equity. There was no effect on net income as a result of this
adoption or change in portfolio classification.
<PAGE>
The marketable securities, both current and noncurrent, as of
March 31, 1995 consisted of the following:
Unrealized Holding
Fair Value Gains Losses
U.S. government and its agencies $ 73,178,000 $1,781,000 $ 922,000
Municipal and state 195,530,000 3,906,000 2,371,000
Other, principally money market 15,429,000
$284,137,000 $5,687,000 $3,293,000
The above unrealized holding gains and losses, net of income taxes of
$577,000, are reflected as "unrealized holding gain on marketable securities"
in shareholders' equity.
The maturities of the Company's investment in debt securities, at
fair value, as of March 31, 1995 were as follows:
Within 1 year $ 24,061,000
After 1 year through 5 years 19,539,000
After 5 years through 10 years 154,437,000
After 10 years 86,100,000
$284,137,000
For the year ended March 31, 1995, the proceeds from the sales of
available-for-sale securities were $10,161,000. Gross realized gains and
gross realized losses from these transactions were $270,000 and $258,000,
respectively. The cost of marketable securities sold was determined by
specific identification.
As of January 1, 1995, the amortized cost of securities transferred
from held-to-maturity to available-for-sale was $288,214,000.
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Note 5. Notes and Bonds Payable:
Short-term notes payable consist of borrowings from various banks at
interest rates ranging from 6.3% to 9.8%. At March 31, 1995, the Company
maintained short term uncommitted bank lines of credit aggregating
$248,810,000 and $200,668,000. Of these amounts, $93,513,000 and $86,736,000
was unused at March 31, 1995 and 1994, respectively.
March 31
Long-term notes and bonds payable are
comprised of the following: 1995 1994
9.1% notes due in fiscal 1995 $ - $ 1,698,000
11.75% bonds due fiscal 1995 through
fiscal 2001 5,625,000 6,560,000
5.0% to 7.8% notes due in fiscal 1995 - 2,392,000
7.3% to 7.5% notes due in fiscal 1997 3,380,000 2,780,000
7% notes due fiscal 2000 1,818,000 -
Variable rate bonds (currently 4.2%),
due in fiscal 2010 4,450,000 4,450,000
$15,273,000 $17,880,000
Certain properties of the Company (approximate book value $10,817,000)
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 including long-term
marketable securities of $250,000,000 and $50,000,000, respectively.
Interest expense on all borrowing aggregated $8,292,000 in fiscal
1995, $7,029,000 in fiscal 1994 and $6,926,000 in fiscal 1993.
<PAGE>
Long-term debt at March 31, 1995 is payable as
follows:
Year ended March 31
1997 $ 4,320,000
1998 935,000
1999 940,000
2000 2,753,000
2001 and later 6,325,000
$ 15,273,000
The Company has entered into interest rate cap agreements to reduce
the impact of increases in interest rates on its short-term floating rate
debt. They cover a $100 million notional value for the period 6/1/93 to
6/1/02 and an additional $50 million for the period of 6/1/95 to 6/1/02. The
agreements, which are spread equally among six counterparties, entitle the
Company to receive quarterly amounts, if any, by which interest on the
notional value at the 90 day LIBOR rate exceeds 4% at quarterly reset dates
during the year beginning 6/1/93, 5% during the year beginning 6/1/94, 7%
during the two years beginning 6/1/95 and 9% during the five years beginning
6/1/97. The premium is paid for the term of the agreements in quarterly
installments of $127,236 on the $100 million beginning 6/1/93 and $116,013
on the $50 million beginning 6/1/95. The Company received payment totaling
$265,000 during the year pursuant to these agreements and recorded the
payment as a reduction of interest expense. As of March 31, 1995, the fair
market value of the $100 million notional amount of these agreements, net of
the present value of premium installment payments due, was $585,000.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Note 6. Accounts Payable and Accrued Expenses:
March 31
Accounts payable and accrued expenses are
comprised of the following: 1995 1994
Accounts payable - trade $ 31,568,000 $ 23,928,000
Accrued salaries, wages, vacation pay
and bonuses 28,114,000 23,488,000
Accrued advertising and selling expenses 26,505,000 26,868,000
Other current liabilities 15,765,000 14,075,000
$101,952,000 $ 88,359,000
<PAGE>
Note 7. Income Taxes:
The Company adopted SFAS No. 109, "Accounting for Income Taxes," in
the first fiscal quarter of 1994. SFAS No. 109 requires an asset and
liability approach for income tax accounting. 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, 1995:
Federal $3,326,000 $1,123,000 $4,449,000
Foreign 7,836,000 (500,000) 7,336,000
State 1,399,000 96,000 1,495,000
$12,561,000 $ 719,000 $13,280,000
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
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:
1995 1994 1993
For the year ended March 31:
Depreciation $2,140,000 $1,786,000 1,664,000
Expenses (not) currently
deductible for tax purposes (669,000) (1,437,000) (1,424,000)
Other (722,000) 104,000 (369,000)
$ 719,000 $ 453,000 $(129,000)
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Total income tax expense for the fiscal years ended March 31, 1995,
1994 and 1993 was 20.9%, 16.2% and 20.8%, respectively, of income before income
taxes as compared to the U.S. statutory income tax rate of 35.0%, 35.0% 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: 1995 1994 1993
U.S. statutory income tax rate 35.0% 35.0% 34.0%
Tax exempt state and municipal
bond income (5.5) (5.8) (3.4)
Irish operating income taxed at
lower rate (4.4) (8.9) (6.0)
Reduction in taxes resulting from
Puerto Rico source income subject
to lower tax rate (3.6) (3.1) (4.4)
Other, net (0.6) (1.0) .6
20.9% 16.2% 20.8%
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 has
a 10% tax rate on export sales. The Company has not accrued U.S. federal
income taxes on cumulative undistributed earnings of foreign subsidiaries of
$175,184,900 as of March 31, 1995, 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
1995 1994
Deferred tax assets:
Coupon accrual, sales discounts, and
workers compensation $3,331,000 $3,826,000
Employee benefits 4,708,000 3,945,000
Accrual on vacation 1,055,000 1,062,000
Deferred compensation 2,770,000 3,237,000
Other 2,047,000 1,580,000
$13,911,000 $13,650,000
<PAGE>
Deferred tax liabilities:
Property, plant and equipment $16,361,000 $14,516,000
Other 1,254,000 2,173,000
$17,615,000 $16,689,000
* As of March 31, 1995 and 1994, recoverable income taxes reflected in the
balance sheet in "Other current assets" included current deferred tax
assets of $9,382,000 and $9,065,000, respectively. In 1994, this amount
was 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".
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Note 8. 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.
1995 1994 1993
Service cost $4,822,000 $4,151,000 $4,492,000
Interest cost on projected
benefit obligation 4,404,000 3,776,000 3,662,000
Actual return on plan assets (1,216,000) (5,106,000) (5,935,000)
Net amortization and deferral (4,928,000) (616,000) 698,000
Net periodic pension cost $3,082,000 $2,205,000 $2,917,000
<PAGE>
The following table sets forth the present value of benefit
obligations and funded status for the Company's foreign and domestic plans:
1995 1994
Actuarial present value of benefit
obligations, including vested
benefits of $42,403,000 in 1995
and $33,941,000 in 1994 $41,664,000 $34,945,000
Projected benefit obligations 62,824,000 $47,733,000
Plan assets at fair value
(primarily invested in stocks, $67,763,000 $67,754,000
bonds and government obligations) 2,988,000 1,686,000
Add: Unrecognized prior service cost
Less: Unrecognized, net gain on
assets 13,432,000 21,136,000
Unamortized transition asset
established as of February 28,
1985 3,653,000 4,462,000 43,842,000
Adjustment for minimum
liability 634,000
One time purchase price
liability 315,000 52,717,000
Net pension liability $10,107,000 $3,891,000
The expected long-term rate of return on plan assets was 8% for 1995
and 1994. The weighted average discount rate was 8% for 1995 and 1994. The
rate of increase in future compensation levels used in determining the
actuarial present value of projected benefit obligations was 6.0% for 1995
and 1994.
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, 1995,
1994 and 1993 were $559,000, $718,000 and $2,478,000, 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 $2,801,000 at March 31, 1995 and $2,508,000 at
March 31, 1994, 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 Blue Cross Blue Shield of New Jersey and
selected Health Maintenance Organizations. 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, 1995 is as follows:
1995
Retirees
$3,080,000
Fully eligible active plan participants 858,000
Other active plan participants 3,263,000
Total accumulated postretirement benefit
obligation 7,201,000
Less: Plan assets at fair value and accruals -
Unrecognized net loss from past experience
different from that assumed and from changes
in assumptions 168,000
Unrecognized transition obligation 5,052,000
Accrued postretirement benefit cost
recognized in the Balance Sheet $1,981,000
<PAGE>
The costs of providing postretirement benefits for the period April 1, 1994
to March 31, 1995 includes the following:
1995
Service cost benefits attributed to service
during the period $ 273,000
Interest cost on the accumulated
postretirement benefit obligation 508,000
Estimated return on plan assets -
Amortization of transition obligation 281,000
Net periodic postretirement benefit cost $1,062,000
The accumulated postretirement benefit obligation was determined by
application of the terms of the medical plan together with relevant actuarial
assumptions and a health-care cost trend rate of 9% in 1995 decreasing
gradually to 6.0% in 2001 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 $704,000 and the aggregate of the service and interest cost
components of net postretirement health care cost for 1995 would be
approximately $68,000.
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
implemented SFAS No. 112 in fiscal 1995. The adoption of SFAS 112 did not
have a significant effect on the results of operations and financial position.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Note 9. Shareholders' Equity:
The two classes of the 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 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.
<PAGE>
On October 25, 1994, the Company declared an increased cash dividend
of $.27 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, 1995 to
shareholders of record as of December 1, 1994.
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 4, 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.
Net income per share of common stock has been restated to reflect the
current and prior year's stock dividends.
Changes in Class A Common Stock, Class B Common Stock and capital in
excess of par value during fiscal 1995, 1994 and 1993 were as follows:
CLASS A CLASS B
COMMON STOCK COMMON STOCK
Capital in
ISSUED ISSUED Excess of Par
Value
Shares Amount Shares Amount
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
3% Stock Dividend 587,066 $ 59,000 $ 19,755,000
Savings Incentive Plan (1) 39,605 4,000 1,299,000
Balance, March 31, 1995 12,466,172 $1,247,000 7,704,400 $770,000 $194,426,000
(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 10. 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 or results
of operations.
Note 11. 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.
Note 12. Subsequent Events:
The Company has signed an agreement to sell selected assets of its U.S.
Reed & Carnrick Pharmaceutical Division with annual sales of approximately
$50,000.000. The Company's international pharmaceutical businesses are not
included in the sale and will operate as they did prior to the sale. The
transaction is expected to close by the end of June, 1995, and is not expected
to have an unfavorable impact on the Company operating results.
After the close of the fiscal year, the Company signed a contract to
acquire the U.S. Rug and Room Deodorizer businesses of Reckitt & Colman, Inc.
Pursuant to the agreement, the Company will purchase the Carpet Fresh-R and
Rug Fresh-R trademarks and be granted exclusive licenses for use of the
Airwick-R and Neutra Air-R trademarks in the Rug and Room Deodorizer product
category in the U.S. This transaction is subject to receipt of regulatory
consents and is expected to close in the third calendar quarter of 1995.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table presents information concerning the Company's
operations by product segment and geographic area for the years ended
March 31, 1995, 1994 and 1993.
1995 1994 1993
(in thousands)
PRODUCT SEGMENTS
Net Sales:
Dental $ 440,531 $393,613 $401,161
Consumer Products 149,208 147,012 148,012
Ethical Pharmaceutical 80,115 72,658 75,653
Consolidated net sales $ 669,854 $613,283 $624,826
Operating Income:
Dental $ 58,742 $ 46,177 $ 54,554
Consumer Products 15,530 21,853 26,759
Ethical Products 10,178 10,156 12,464
Total operating income 84,450 78,186 93,777
General corporate expenses (20,801) (21,072) (16,064)
Consolidated income before
income taxes $ 63,649 $ 57,114 $ 77,713
Assets:
Dental $ 333,188 $325,325 $271,819
Consumer Products 174,890 115,496 101,045
Ethical Pharmaceutical 53,145 57,166 60,200
Total identifiable assets 561,223 497,987 433,064
General corporate assets 310,097 273,081 293,433
Consolidated assets $ 871,320 $771,068 $726,497
<PAGE>
Depreciation and Amortization:
Dental $ 9,950 $ 8,554 $ 7,204
Consumer Products 4,856 3,756 2,707
Ethical Pharmaceutical 2,264 2,229 1,748
Consolidated depreciation
and amortization $ 17,070 $ 14,539 $ 11,659
Capital Expenditures, Net:
Dental $ 22,234 $ 18,836 $ 26,586
Consumer Products 9,899 13,251 13,754
Ethical Pharmaceutical 2,409 3,128 5,928
Consolidated capital expenditures $ 35,542 $ 35,215 $ 46,268
GEOGRAPHIC AREA
Net Sales:
United States $ 340,028 $318,665 $326,431
Europe 242,424 211,539 223,665
Other 87,402 83,079 74,730
Consolidated net sales $ 669,854 $613,283 $624,826
Operating Income:
United States $ 41,801 $ 29,963 $ 49,830
Europe 29,932 31,068 30,555
Other 12,717 17,155 13,392
Total operating income 84,450 78,186 93,777
General corporate expenses (20,801) (21,072) (16,064)
Consolidated income before
income taxes $ 63,649 $ 57,114 $ 77,713
Assets:
United States $ 314,149 $243,437 $232,999
Europe 212,830 203,767 164,626
Other 34,244 50,783 35,439
Total identifiable assets 561,223 497,987 433,064
General corporate assets 310,097 273,081 293,433
Consolidated assets $871,320 $771,068 $726,497
<PAGE>
General corporate expenses consist of administrative expenses,
translation losses relating to highly inflationary countries and interest less
investment income. General corporate assets consist principally of marketable
and long-term securities. 1994 and 1993 amounts are reclassified to conform to
1995 presentation.
QUARTERLY FINANCIAL INFORMATION
(Unaudited)
The following is a tabulation of quarterly results of operations for
the years ended March 31, 1995 and 1994 (in thousands, except per share
amounts):
Fiscal 1995 Quarters
First Second Third Fourth
Net sales $159,994 $165,894 $163,644 $180,322
Gross profit 109,140 112,216 112,664 115,312
Income before income taxes 15,565 16,290 15,213 16,581
Net income 11,923 12,382 12,220 13,844
Earnings per share of
common stock (1) $ .59 $ .61 $ .61 $ .69
Fiscal 1994 Quarters
First Second Third Fourth
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) $ .78 $ .53 $ .54 $ .53
(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.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
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 83 6/96 Senior Chairman of the Board*
James A. Block 58 6/96 Chairman of the Board*
Thomas R. Block 50 6/96 President and Treasurer* **
Donald H. LeSieur 59 6/96 Executive Vice President and
President, International
Division
Michael C. Alfano,
D.M.D., Ph.D. 47 6/96 Senior Vice President, Research
and Technology
Alfred E. Brown,
Ph.D. 78 6/96 Director of Scientific Affairs**
Celanese Corporation (Retired)
Peggy Danziger 55 6/96 Private Investor
William T. Golden 85 6/96 Corporate Director and Trustee**
Melvin Kopp 65 6/96 Senior Vice President and Chief
Financial Officer
John E. Peters 53 6/96 Senior Vice President, General
Counsel and Secretary
Peter J. Repetti 77 6/96 Member, Fulbright &
Jaworski L.L.P. (Retired)
Susan B. Stearns 50 6/96 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 Boards of Directors of any other
public corporation, except for (1) William T. Golden who serves on the Boards
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.
(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:
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant: (Continued)
Date of Date Term
Name Age Appointment Expires Positions
Leonard Block 83 10/88 6/96 Senior Chairman of the Board*
James A. Block 58 10/88 6/96 Chairman of the Board*
Thomas R. Block 50 10/88 6/96 President and Treasurer*
Donald H. LeSieur 59 10/88 6/96 Executive Vice President and
President, International
Division*R
Michael C. Alfano,
D.M.D., Ph.D. 47 5/87 6/96 Senior Vice President,
Research and Technology+R
Melvin Kopp 65 10/72 6/96 Senior Vice President and
Chief Financial Officer+R
Peter C. Mann 53 11/79 6/96 President, U.S. Division+R
John E. Peters 53 12/78 6/96 Senior Vice President,
General Counsel and
Secretary+R
Gilbert Seymann 56 5/84 6/96 Senior Vice President,
Operations+R
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
U.S. marketing, sales, corporate development, research and 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, and is directly
responsible for all operations, including manufacturing, engineering and
corporate, financial and administrative functions.
Donald H. LeSieur is Executive Vice President and President,
International Division, a Member of the Office of the Chief Executive, and has
direct responsibility for all international operations.
* Member - Office of the Chief Executive
+ Consultant - Office of the Chief Executive
R 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, President, U.S. Division, is responsible for all
domestic marketing, sales 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
Long Term Compensation
Annual Compensation Awards Payouts
All
Other Restricted Other
Name and Annual Stock Options LTIP Compen-
Principal Fiscal Salary Bonus Compen- Award(s) /SARs Payouts sation
Position Year $ $ sation($) ($) ($) ($) ($)
Leonard Block(1) 1995 357,469 89,500 * * * * 34,537
Senior Chairman 1994 340,832 79,000 34,504
of the Board 1993 338,127 83,900 33,589
James A. Block(2) 1995 327,948 88,900 * * * * 9,099
Chairman of the 1994 316,219 90,600 9,011
Board 1993 303,059 78,500 8,056
Thomas R. Block(3)1995 327,948 92,000 * * * * 6,641
President and 1994 316,219 93,500 5,832
Treasurer 1993 303,059 85,100 4,690
Donald H.
LeSieur(4) 1995 342,288 148,100 * * * 122,031 9,981
Executive Vice 1994 329,148 110,100 151,289 9,011
President, Pres. 1993 313,339 102,300 157,825 8,056
International
Division
Peter C. Mann 1995 258,638 94,500 * * * 78,941 6,269
President, U.S. 1994 248,625 65,600 - 6,164
Division 1993 235,917 60,600 338,395 5,313
* 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 1994, the director's annual fee was $8,500 and
remains unchanged for calendar year 1995. Executive officers who are
directors receive no director's, audit committee or attendance fees.
During calendar year 1994, four directors each received attendance fees
of $750 per meeting. The fee of $750 per meeting was increased to $850
for calendar year 1995. The total includes payments of $8,500 made to
each of five directors, including three payments to each of such directors
of $2,125 in calendar year 1994 and one payment of $2,125 during the first
quarter of calendar year 1995. This total further includes an aggregate
of 9,950 paid to four directors as director's attendance fees and an
aggregate of $6,500 paid to two directors as audit committee member fees.
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>
1995 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 $ 5,370.60 $10,741.20 $16,111.80 $ 21,482.40
100,000 12,840.00 25,680.00 38,520.00 51,360.00
150,000 20,340.00 40,680.00 61,020.00 81,360.00
200,000 27,840.00 55,680.00 83,520.00 111,360.00
250,000 35,340.00 70,680.00 106,020.00 120,000.00*
300,000 42,840.00 85,680.00 120,000.00* 120,000.00*
350,000 50,340.00 100,680.00 120,000.00* 120,000.00*
* Maximum permissible benefit under IRC Sec. 415, effective January 1, 1995.
The Company's domestic pension expense for the fiscal years ended
March 31, 1995 and 1994 was $1,475,938 and $926,559, 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, 1995.
The remuneration covered by these plans is the total regular salary
excluding any bonuses, overtime or other special compensation.
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.
With respect to the figures of the table on page 37, 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 ($324,675.99); Thomas R. Block
($324,675.99); Donald H. LeSieur ($337,324.40); and Peter C. Mann ($258,374.94).
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.
As of March 31, 1995, the above five (5) employees had the following
credited years of service in these plans: Leonard Block, 46 years;
James A. Block, 33 years; Thomas R. Block, 25 years; Donald H. LeSieur,
21 years; and Peter C. Mann, 22 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, 1995, the units
were valued at $92.20.
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, 1995, a total of 276,089 units had been awarded having
an average value of $84.72 per unit. Of those 276,089 units, 57,551 units at
an average value of $91.76 per unit were awarded during the past fiscal year.
During fiscal year 1995, the following units were awarded to executives:
2,242 units at $91.90 per unit and 2,745 units at $91.10 per
unit to Donald H. LeSieur and 1,613 units at $93.00 per unit and 2,745 units
at $91.10 per unit to Peter C. Mann.
During the year ended March 31, 1995, $2,453,431 was paid in lump
sum payments to the participants in the Special Stock Unit plan.
Long-Term Incentive Plans - Awards In Last Fiscal Year
Estimated Future Payouts Under
Non-Stock Price-Based Plans
Performance or
No. of Shares, Other Period * **
Units or Other Until Maturity Threshold Target Maximum
Name Rights or Payout ($) ($) ($)
Donald H. LeSieur 2,309 5 Years 1,028 126,000 -
2,745 0 153,000
Peter C. Mann 1,661 5 Years 157 92,000 -
2,745 0 153,000
* Minimum value as of March 31, 1995
** 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 6, 1995, 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.
Amount
and Nature
Name and Address of Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
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
(1) Pursuant to a shareholders' agreement, dated April 18, 1991, Leonard
Block has sole voting power with respect to these shares. The following
shares are all subject to the shareholders' agreement beneficially
owned by the Leonard Block Trust, the Thomas Block Trust and the Peggy
Danziger Trust, respectively, 385,424; 1,733,388; and 1,733,388.
(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.
(b) Securities ownership of management:
The following table sets forth, as of June 6, 1995, the securities
ownership of all directors, naming them, and all Directors and Officers of the
Company, as a group, without naming them:
<PAGE>
Item 12. Securities Ownership of Certain Beneficial Owners and Management
(Cont'd)
BLOCK DRUG COMPANY, INC.
SECURITIES BENEFICIALLY OWNED
Class A Common Stock Beneficially Owned Class B
No Shared Shared 401-K Common Stock
Name of Beneficial Investment Investment Plan Percentage Beneficially
Owner Power Power Holdings Owned Owned
Leonard Block
(1) (4) (5) 1,068,137 96,803 831 10% 3,852,200 - 50%
James A. Block
(2) (3) 2,249,622 - 1,470 18% 3,852,200 - 50%
Thomas Block
(1) (4) (5) 163,433 1,977,878 904 17% -
Donald H. LeSieur - - 1,495 - -
Michael C. Alfano - - 1,147 - -
Alfred E. Brown
(6) 1,261 - - - -
Peggy Danziger
(1) (4) (5) (8) 81,341 1,289,642 - 11% -
William T. Golden 5,864 13,184 - - -
Melvin Kopp 52 - - - -
Peter C. Mann 6 - 1,283 - -
John E. Peters - - 1,058 - -
Peter J. Repetti
(7) 250 - - - -
Gilbert M. Seymann 100 - 966 - -
Susan B. Stearns
(2) (3) - - - - -
As of June 6, 1995, 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 554.
<PAGE>
Item 12. Securities Ownership of Certain Beneficial Owners and Management
(Cont'd)
(1) Leonard Block owns 345,346 shares (not including 401-K Plan
Holdings); is deemed to be the beneficial owner of but disclaims
ownership of: 718,901 shares owned by Adlen Corporation, of
which Leonard Block is the sole shareholder; 96,803 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; 3,890 shares owned by Adele
Block, his wife.
(2) James A. Block owns 110 shares (not including 401-K Plan
Holdings); is deemed to be the beneficial owner of: 163,298
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; 947,249 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; 1,138,965 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 1,138,965
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.
<PAGE>
(4) Thomas Block owns 106,377 shares (not including 401-K Plan
Holdings); is deemed to be the beneficial owner but disclaims
ownership of: 21,544 shares owned by Marilyn Friedman, his wife;
35,512 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; 117,414 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
respect to the shares held by such trust; 158,460 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 41, all 158,460 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, 79,230 shares
(representing one-half of the total shares owned by the three
trusts) were allocated to Thomas Block and 79,230 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.
<PAGE>
Item 12. Securities Ownership of Certain Beneficial Owners and Management
(Cont'd)
In computing the aggregate number of shares owned by directors
and officers as a group, the 158,460 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 81,341 shares; 1,091,999 shares owned by a
trust for the benefit of Peggy Danziger of which she is a co-
trustee (with Michael Danziger, her son, and Katherine Danziger-
Horowitz, her daughter) and of which she shares investment
powers with respect to the shares held by such trusts; 35,238
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; 158,460 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 41, all 158,460 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 3,945 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, 79,230 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 79,230 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 158,460 shares owned by these three trusts were counted
only once.
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 1,261
shares owned by his wife.
(7) Peter J. Repetti disclaims beneficial ownership to 250 shares
owned by his wife.
(8) Peggy Danziger disclaims beneficial ownership to all 3,945
shares of which Richard M. Danziger, her husband is co-trustee
with a third party.
<PAGE>
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 commenced 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.
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, President,U.S. Division, 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.
<PAGE>
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 1995, 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, 1995 and 1994,
Consolidated Statements of Income and Retained Earnings for
the Years ended March 3l, 1995, 1994 and 1993,
Consolidated Statements of Cash Flows for the Years ended
March 3l, 1995, 1994 and 1993,
Notes to Consolidated Financial Statements
Supplementary Data:
Selected quarterly data for the two years ended
March 3l, 1995.
2. Additional Financial Statement Data:
Supplemental Auditors' Reports
3. Financial Statement Schedule: II
Schedules other than those listed above are omitted because they are
not required or not applicable.
4. Exhibits: The Exhibits Index is on page 55.
(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 92260 OEVEL-WESTERLO
Dear Sirs,
We have audited the accompanying balance sheets of Stafford-Miller Continental
N.V. as of December 31, 1994 and 1993, and the related statements of income,
retained earnings and cash flows for each of the three years in the period
ended December 31, 1994. 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 Continental
N.V. at December 31, 1994 and 1993 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1994
in conformity with accounting principles generally accepted in the United
States of America.
Our audits were made 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 the audits of the basic financial
statements and, in our opinion is fairly stated in all material respect in
relation to the basic financial statements taken as a whole.
Ernst & Young
J. Englishstraat 54
21 Borgerhout (Antwerpen)
March 28, 1995
<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, 1994 and 1993, and the statements of income and retained
earnings and cash flows for the years 1994, 1993 and 1992. 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 a 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, 1994 and 1993, and the results of its operations and its cash
flow for the years 1994, 1993 and 1992 in conformity with accounting
principles generally accepted in the United States of America.
Our audits have been made primarily for the purpose of expressing 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 the audits of the
basic financial statements and, and in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
Moret Ernst & Young Accountants
Drentestraat 20
1083 HK Amsterdam
PO Box 7883
1008 AB Amsterdam
February 10, 1995
<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, 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 December 31, 1994. 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, 1994 and 1993 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994 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 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
Via Torino 68
20123 Milano
February 9, 1995
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Block Drug Co. (Philippines) Inc.
We have audited the accompanying balance sheets of Block Drug Co. (Philippines)
Inc. (a wholly owned subsidiary of Block Drug Company, Inc.) as at
December 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
December 31, 1994. 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 United States 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 Co.
(Philippines) Inc. (a wholly owned subsidiary of Block Drug Company, Inc.)
as at December 31, 1994 and 1993, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1994,
in conformity with United States generally accepted accounting principles.
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, 1995 and 1994 and the related statements of
income and retained earnings and cash flows for each of the three years in the
period ended March 31, 1995. 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, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1995, in conformity with accounting principles generally accepted
in the United States of America.
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
Am Wehrhahn 50
40211 Dusseldorf
April 18, 1995
<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, 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 December 31, 1994. 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 materials respects, the financial position of Laboratoires Stafford-Miller,
S.A.R.L. at December 31, 1994 and 1993 and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1994, 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
Paris
Henry Seydoux
February 7, 1995
<PAGE>
Schedule II
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended March 31, 1995, 1994 and 1993
Additions
Balance at Charge to
Beginning Costs and Balance at
Description of Period Expenses Deductions End of Period
1995
Allowances for discounts,
doubtful accounts and
returns $2,709,000 $38,826,000 $38,313,000 $3,222,000
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
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
22 Subsidiaries of Registrant.
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
The Guangzhou Representative Office of Block Drug China
Company, Inc. (China)
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, Virgin Islands
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
Stafford-Miller Limited-Dubai Branch (United Arab Dubai
Emirates)
(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 6th day of
June, 1995.
BLOCK DRUG COMPANY, INC.
(Registrant)
BY MELVIN KOPP
Melvin Kopp
Senior Vice President & 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 6th day of June, 1995.
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, PH.D. JOHN E. PETERS
Alfred E. Brown, Ph.D. John E. Peters
MICHAEL C. ALFANO, D.M.D., PH.D. WILLIAM T. GOLDEN
Michael C. Alfano, D.M.D., Ph.D. William T. Golden
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