SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
Form 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Three Months Ended Commission File number 0-6436
December 31, 1996
_________________________BLOCK DRUG COMPANY, INC._________________________
(Exact name of registrant as specified in its charter)
___New Jersey_________________________________________________22-1375645__
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
257 Cornelison Avenue, Jersey City, N.J._______________________07302______
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 434-3000
Indicate by check mark whether the registrant (1) has filed all Commission
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods that the
registrant is required to file such reports) and (2) has been subject to such
filing requirements for the past
90 days. YES_X__ NO_____
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the close of the period covered by this report.
_____Class______________ Outstanding_at_December 31,_1996
Common Stock - Class A 13,140,938
Common Stock - Class B 7,704,400
<PAGE> 1
BLOCK DRUG COMPANY, INC.
INDEX TO FORM 10-Q
DECEMBER 31, 1996
____________________________
Part I - Financial Information - Unaudited Page No.
Consolidated Balance Sheets - December 31, 1996
and March 31, 1996 2
Consolidated Statements of Income for the three
and nine months ended December 31, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows
for the nine months ended December 31, 1996 and 4
and 1995.
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of Operating
Results and Financial Condition 6 - 7
Part II - Other Information 8
<PAGE> 2
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Unaudited)
ASSETS __12/31/96__ __03/31/96__
<S> <C> <C>
Current Assets:
Cash $ 23,308,000 $ 16,388,000
Marketable securities,at market 35,054,000 13,433,000
Accounts receivable, less allowances
of $4,461,000 (12/31/96) and
$4,188,000 (3/31/96) 135,077,000 124,816,000
Inventories:
Raw & packaging materials 47,686,000 42,868,000
Finished goods 98,657,000 81,500,000
Other current assets ___67,367,000 __33,200,000
Total Current Assets 407,149,000 312,205,000
Property,plant and equipment, less
accumulated depreciation of $121,451,000
(12/31/96) and $114,724,000 (3/31/96) 253,251,000 242,552,000
Long term securities at market 208,476,000 222,667,000
Goodwill and other intangible assets-
net of amortization 150,980,000 127,047,000
Other assets ___ 4,170,000 __24,646,000
Total Assets $1,024,026,000 $929,117,000
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes and bonds payable $108,069,000 $75,559,000
Accounts payable & accrued expenses 141,785,000 118,273,000
Income taxes payable 14,549,000 7,751,000
Dividends payable ____4,901,000 __4,572,000
Total Current Liabilities 269,304,000 206,155,000
Notes and bonds payable 59,090,000 56,143,000
Deferred compensation and other payables 15,164,000 15,364,000
Deferred income taxes ___11,358,000 _10,413,000
Total Liabilities __354,916,000 288,075,000
Shareholders' Equity:
Class A common stock, non-voting, par
value $.10-15,000,000 shares authorized,
13,140,938 (12/31/96) and 13,111,962
(3/31/96) shares issued and outstanding 1,314,000 1,311,000
Class A common stock distributable 40,000
Class B common stock par value $.10-
30,000,000 shares authorized, 7,704,400
(1996 & 1995) shares issued and
outstanding 770,000 770,000
Class B common stock distributable 23,000
Capital in excess of par value 246,868,000 219,207,000
Retained earnings 420,528,000 416,200,000
Cumulative foreign currency translation
adjustment (3,313,000) (2,476,000)
Unrealized holding gain on marketable
securities ____2,880,000 _ 6,030,000
Total Shareholders' Equity __669,110,000 _641,042,000
Total Liabilities & Shareholders' Equity $1,024,026,000 $929,117,000
============= ============
</TABLE>
-2-
See notes to consolidated financial statements.
<PAGE> 3
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
THREE_MONTHS_ENDED NINE_MONTHS_ENDED
DECEMBER_31, DECEMBER_31,
_1996_____________1995____ _______1996________1995___
Revenues:
<S> <C> <C> <C> <C>
Net sales $216,409,000 $174,351,000 $625,439,000 $525,395,000
Interest, dividends
and other income ___9,431,000 ___6,557,000 __23,676,000 __23,171,000
_225,840,000 _180,908,000 _649,115,000 _548,566,000
Cost and Expenses:
Cost of goods sold 71,335,000 58,090,000 199,370,000 172,431,000
Selling, general and
administrative _135,353,000 _105,406,000 _387,202,000 _324,619,000
_ 206,688,000 _163,496,000 _586,572,000 _497,050,000
Income from continuing
operations before
income taxes 19,152,000 17,412,000 62,543,000 51,516,000
Income Taxes __2,922,000 ___4,325,000 15,636,000 11,282,000
Income from continuing
operations _16,230,000 __13,087,000 _46,907,000 __40,234,000
Discontinued operations(Note 2)
Income from disconti-
nued operations net
of taxes of $32,000(1995) 52,000
Gain(loss) on sale of
division,net of taxes of
$25,568,000(1995) (1,241,000) 41,716,000
----------- ----------- ---------- ----------
Income (loss)from
discontinued operations (1,241,000) 41,768,000
------------ ----------- ---------- ----------
Net income $16,230,000 $11,846,000 $46,907,000 $82,002,000
============= =========== =========== ==========
Average number of
shares outstanding 21,464,135 21,425,241 21,454,158 21,414,409
------------- ---------- ---------- ----------
Earnings per share:
From continuing
operations $ 0.76 $ 0.61 $ 2.19 $ 1.88
From discontinued
operations (0.06) 1.95
----------- ----------- ----------- ----------
Net earnings $ 0.76 $ 0.55 $ 2.19 $ 3.83
=========== ========== ============ ===========
Cash dividends per share
Class A $ 0.31 $ 0.29 $ 0.89 $ 0.83
Class B $ 0.1075 $ 0.10 $ 0.3075 $ 0.20
</TABLE>
-3-
See notes to consolidated financial statements
<PAGE> 4
<TABLE>
BLOCK DRUG COMPANY INC.AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31
_____1996_________1995____
<S> <C> <C>
CASH_FLOW_FROM_OPERATING_ACTIVITIES $ 46,463,000 $ 8,580,000
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of business segment 80,000,000
Additions to property, plant & equipment (30,544,000) (21,989,000)
Proceeds from the sale of property 5,200,000
Proceeds from sales of long-term securities 47,200,000 67,986,000
Purchases of long-term securities (31,981,000) (25,858,000)
(Increase) in marketable securities (23,326,000) (1,105,000)
Payment for products acquired (27,525,000) (16,682,000)
-------------- -----------
Net cash (used in) provided by investing
activities (60,976,000) 82,352,000
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt 2,947,000 3,154,000
Dividends paid to shareholders (14,052,000) (11,903,000)
Payments of notes payable (5,625,000) (935,000)
Increase (decrease) in short-term debt 38,135,000 (82,856,000)
------------ ------------
Net cash provided by (used in) financing
activities 21,405,000 (92,540,000)
Effect of exchange rates on cash ____ 28,000 ____548,000
Increase (decrease) in cash 6,920,000 (1,060,000)
Cash, Beginning of period __16,388,000 __13,706,000
Cash, end of period $ 23,308,000 $12,646,000
============ ===========
SUPPLEMENTAL CASH FLOW DATA
Cash paid during the year:
Interest $ 6,694,133 $ 8,555,337
Income taxes $ 14,791,092 $ 33,805,317
SUPPLEMENTAL SCHEDULE OF NON-CASH
FINANCING AND INVESTING ACTIVITIES
3% Stock Dividend $ 28,465,000 $ 23,330,000
</TABLE>
-4-
See notes to consolidated financial statements.
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying consolidated
financial statements include all adjustments (consisting of
only normal recurring adjustments) necessary for a fair
presentation of the data for the interim periods.
2. During the nine months ended December 31,1996, the Company
increased its net borrowings by $ 35,457,000 mainly from
lines of credit from various banks bearing interest at
variable rates.
3. During the quarter the Company purchased Atrisorb, a guided
tissue regeneration product for the treatment of periodontal
disease from Atrix Laboratories,Inc. The Company also signed
an agreement and exercised its option for the exclusive worldwide
license to Targon mouthwash from Jeffrey Mitchell Laboratories,Inc.
4. Subsequent event:
On February 5,1997 the Company announced it will consolidate its
manufacturing operations by closing six of its twelve production
facilities in various parts of the world. The cost of restructuring
and re-engineering will be approximately $70 million.
-5-
<PAGE> 6
BLOCK DRUG COMPANY, INC. & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATING RESULTS AND FINANCIAL CONDITION
OPERATING RESULTS
Consolidated world wide net sales of $216 million in the
third quarter and $625 million in the nine month ended
December 31, 1996 were 24% and 19% respectively above sales
for the comparable prior periods. Foreign sales increased
36% for the quarter and 30% for the nine month period due
mainly to new products and inclusion of Japanese operations
as a wholly-owned subsidiary. Stated in local currency
foreign sales for the quarter increased 42% and 36% for the
nine month period. Domestic sales were higher due to
selective price increases and unit gains in the consumer
products segment.
Interest, dividends and other income for the nine month
period was comparable with the year-ago period. Other income
increased in the quarter due to gain on sale of marketable
securities to help finance product line acquisitions.
The cost of goods sold percent to sales for the first
nine months of the current year was 31.9% compared with 32.8%
in the prior period. The decrease was due to improved
manufacturing operations and mix of products sold, in
addition to selective price increases.
Selling, general and administrative expenses, most of
which are related to advertising and promotional activities
were 61.9% and 61.8% respectively for the current and prior
nine month period. These expenses reflect a major spending
program to meet significant competition and build brand
equities.
Due to the above factors, income before taxes was 10.0%
in the first nine months of the current year compared to 9.8%
in the comparable prior year period.
The effective income tax rates of 25.0% and 21.9%
in the first nine months of the current and prior year,
respectively, reflect tax exempt interest from government
securities and income from the lower tax areas of Puerto Rico
and Ireland. The increase in the current nine month period
is due primarily to the effects of accounting for the
Company's Japanese operation as a wholly-owned subsidiary
following the termination of its joint venture in Japan.
- 6 -
<PAGE> 7
On February 5, 1997 the Company announced it will
consolidate its manufacturing operations by closing six of
its twelve production facilities in various parts of the
world. This action is expected to generate approximately
$25 million in additional annual cost savings which will be
reinvested to support the Company's brands, recent
acquisitions and new products as well as strengthen its
presence in major markets and enable the Company to penetrate
new geographic areas worldwide. The Company plans to take a
pre-tax charge of approximately $70 million in the fourth
fiscal quarter to cover the costs of restructuring and re-
engineering.
Financial Condition
Cash increased for the nine month period ended December
31, 1996 to $23.3 million from $16.4 million at year-end
March 31, 1996. The increase resulted primarily from an
increase in accounts payable and short-term debt partially
offset by payment for products acquired and increases in
capital expenditures.
In the prior year nine months cash decreased to $12.6
million from $13.7 million at year-end March 31, 1996. The
decrease resulted primarily from the reduction in debt,
payment for products acquired and increases in capital
expenditures, partially offset by the proceeds from the sale
of business segment and net sales of securities.
-7-
<PAGE> 8
PART II. OTHER INFORMATION
Item 6.__________Exhibits and Reports on Form 8K___________
(b) Reports on Form 8K - there were no reports on
Form 8K for the three months ended December 31,
1996.
_____SIGNATURES_______
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
__BLOCK_DRUG_COMPANY,_INC.__
(Registrant)
2-6-97 MELVIN KOPP
________________ ______________________________
DATE Melvin Kopp
Senior Vice President &
Chief Financial Officer
-8-
<PAGE> 9
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