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, 1998 Commission File No. 0-6436
BLOCK DRUG COMPANY, INC.
(Exact name of registrant as specified in its charter)
New Jersey
(State or other jurisdiction of incorporation or organization)
22-1375645
(I.R.S. Employer Identification No.)
257 Cornelison Avenue, Jersey City, New Jersey
(Address of principal executive offices)
07302-9988
(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
None
Name of each exchange on which registered
None
<PAGE>1
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 2, 1998, nonaffiliates held no voting shares of the Registrant;
therefore, the aggregate market value of voting shares held by nonaffiliates
is zero. As of June 2, 1998, the aggregate market value on non-voting shares
held by nonaffiliate s was $263,946,961. For purposes of this Form 10-K,
nonaffiliates are all holders of non-voting stock other than directors,
officers and members of the Block family.
As of June 2, 1998 there were 13,996,379 shares of Class A Common Stock and
8,173,600 shares of Class B Common Stock of Registrant outstanding.
Documents Incorporated by Reference: None
PART I
Item 1. Business
REVIEW OF OPERATIONS
Block Drug Company, Inc. is a worldwide manufacturer and marketer of
denture care products, oral health care products, consumer over-the-counter
medicines and professional dental products.
DENTURE CARE AND ORAL HEALTH CARE
The Company's denture care and oral health care product lines are the
foundation of the Company's worldwide business. Our denture care products
continue to be category leaders and recognized names throughout the world.
Our oral health care products include leading specialty dentifrices in
addition to mouthwashes and professional dental products.
In fiscal 1998, the Polident line of denture cleanser tablets strengthened
its position in the United States. Polident now has five varieties for
denture wearers. In other parts of the world, Polident, Corega and
Dentu-Creme are denture cleanser leaders in many markets and are key
products for each of the Company's international subsidiaries.
Poli-Grip brand denture adhesive continued its strong performance in fiscal
1998. In the United States, a line of five different formulas helps
Poli-Grip remain competitive in the marketplace. Poli-Grip Ultra Fresh
and Poli-Grip Superior Hold w ere introduced during fiscal 1998.
Poli-Grip and Corega denture adhesive brands are leaders in several
international markets including Japan, the U.K. and France.
<PAGE>2
Sensodyne brand desensitizing toothpaste continues as the leading brand in
its category in the United States and much of the world. Sensodyne Extra
Whitening was introduced in fiscal 1998 to appeal to the market for whitening
toothpastes. Sensodyne continues to benefit from being the most recommended
brand by dental professionals for hypersensitivity around the world.
Formulated from natural ingredients, Parodontax brand toothpaste is the
Company's specialty dentifrice for gum care. It is sold in thirty countries
outside of the United States.
Targon Smoker's Mouthwash, the only mouthwash targeted to smokers, was
successfully introduced in the United States, adding a new dimension to
our line of consumer oral health care products. The brand's new line
extension, Targon Clean Taste, was launched during the fiscal year
following the significant growth of the original Targon formula.
PROFESSIONAL DENTAL PRODUCTS
The Company markets serious dental medicines to the dental professional.
These include PerioGlas brand, a bioactive glass used in the treatment
of periodontal disease, for which the Company holds an exclusive license.
New, advanced dental products marketed through the Company's Professional
Dental Sales Force include Atrisorb , a barrier for guided tissue
regeneration, and Atridox , a subgingival anti-infective treatment used in
the treatment of chronic adult peri odontitis. The Company has an exclusive
agreement with Atrix Laboratories, Inc. for the marketing of these innovative
dental treatments. Atridox was the subject of an approvable letter from the
Food & Drug Administration (FDA) received in April, 19 98. Atrix is working
with FDA toward final approval of this medication. These products are
based on Atrix's proprietary Atrigel biodegradable polymeric drug delivery
system. While this technology is new to the market, initial reaction among
dental professionals has been favorable.
Aphthasol (amlexanox oral paste 5%), a new chemical entity for the treatment
of aphthous ulcers, commonly known as canker sores, became available by
prescription in fiscal 1998. Developed with the Company's Research and
Technology team, this new ch emical compound treats a common condition for
which no other prescription medication exists. Initial acceptance by dental
professionals has been enthusiastic and we are now marketing to the wider
medical community as well.
Marketing oral health care products to the profession is accomplished by the
Company's trained force of consultants who call on dentists, oral surgeons
and periodontists throughout U.S. and in many major markets around the world.
Trained telephone sales representatives supplement this effort.
CONSUMER OVER-THE-COUNTER PRODUCTS
The Company's line of distinctive niche brands meets specific consumer needs
in our over-the-counter medicines businesses.
With this year's acquisition of Beano brand food enzyme dietary supplement,
the Company is now the leader in gas treatment products in the United States.
The Phayzme gas relief products line strengthened its position this year with
the introduction of a maximum strength formula.
Balmex brand diaper rash ointment is a leading brand in the category.
<PAGE>3
The Company's analgesic powder brands include Goody's and BC, which lead the
regional powdered analgesic market and enjoy enduring customer loyalty.
Recent line extensions Goody's PM and BC Allergy Sinus are helping to
expand the market for these brands.
Nytol brand sleep-aid and Nature's Remedy natural laxative round out the
Company's consumer over-the-counter products line. Nytol Natural, the only
homeopathic sleep-aid with an established brand name, taps into the market
for natural ingredient products.
Lava hand soap, a 100 year old brand, achieved its distribution goals during
the fiscal year. The brand's highlight was the introduction of Lava Liquid,
a new line extension in a pump dispenser.
CONSUMER OVER-THE-COUNTER PRODUCTS
INTERNATIONAL MARKETS
Approximately 60% of our business is derived from non-U.S. markets including
the Pacific Rim, Europe, Canada and Latin America. The Company's
international business was challenged in fiscal year 1998 by the strength
of the U.S. dollar and downturns in certain key markets around the world.
The Company's presence in the Pacific Rim includes Australia, South Korea,
Thailand, Indonesia, the Philippines and Japan, countries that were affected
by well-publicized economic uncertainties. This had a significant dampening
effect on sales growth.
In Japan, a principal market for the Company, our brands Polident, Poli-Grip
and Sensodyne remained leaders in the denture cleanser, denture adhesive
and desensitizing toothpaste categories respectively, despite challenging
market conditions.
In the U.K., Setler's Wind-Eze gas treatment, Setler Antacid, and Piriton
allergy relief brands all enjoyed growth. In Continental Europe, Parodontax
specialty gum care toothpaste posted gains, while the strong Sensodyne brand
led its category.
In Latin America, the Company operates in Argentina, Brazil, Colombia and
Mexico. Our business in Brazil was strong this year, led by the Sensodyne
brand.
Our businesses in Canada remain strong with Sensodyne toothpaste and Nytol
sleep aid brands contributing to this growth.
ACQUISITIONS AND DIVESTITURES
In fiscal year 1998, we acquired Beano brand food enzyme dietary supplement,
a product which helps stop gas before it starts. The Beano brand has been
well received in the six months since acquisition.
Subsequent to the close of the fiscal year, the Company's Italian subsidiary
acquired VAJ S.p.A. of Piacenza, Italy, a manufacturer and marketer of
grooming products. The flagship STREP brand is a leading wax depilatory
in Italy. The Company expects this multi-use product to be an important
addition to our product portfolio in Italy and other parts of Europe.
<PAGE>4
Also subsequent to the close of the fiscal year, the Company sold the
worldwide rights to three household products brands: 2000 Flushes automatic
toilet bowl cleaners, the X-14 line of toilet bowl and hard surface cleaners
and Carpet Fresh rug and room deodorizes. The sale of these businesses,
which no longer fit with our long-term strategic direction, will help us
build our key areas of strength: denture care, oral healthcare, serious
dental medicines and over-the-counter consumer products.
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,
results of operat ions or cash flows.
MARKETING
The Company commits a substantial portion of its gross income to advertising,
promotion, market research and test marketing. Its denture care, oral
healthcare, and over-the-counter consumer 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 and professional dental products are promoted by the Company
through dental journals. A team of Dental Sales Consultants sells products
directly to dentists and a TeleSales group at headquarters services dental
accounts by telephone.
<PAGE>5
The Company sells its consumer denture, dental care, oral hygiene and personal
care products through its national sales 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 representatives in
international markets.
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 wh ole to be dependent upon patent protection.
The Company's principal trademarks are of material importance to its business.
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 wit h 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 revenue to national advertising, the
Company believes its advertising and marketing ex pertise enable it to
compete effectively.
The primary competitive factors affecting proprietary over-the-counter
medicines, denture care, and consumer oral care products are product
formulation, reputation, advertising and consumer promotion.
MANUFACTURING
Most of the principal raw materials used by the Company in its domestic
manufacturing operations 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 does not anticipate 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, 1998, there were no
substantial raw material shortages. The Company was able to obtain all raw
materials required for its normal operations at competitive prices.
The Company manufactures the majority of its products. Some products are
manufactured by independent third parties.
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 2,565,289 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 of the properties.
<PAGE>6
Among these properties are the following: (1) corporate headquarters,
Jersey City, New Jersey; (2) professional dental product manufacturing:
Humacao, Puerto Rico (Reedco I); Glendale, Wisconsin (leased);
(3) manufacturing plants for the Company's denture care, oral health care
and over-the-counter products; Memphis, Tennessee; South Brunswick,
New Jersey: Dungarvan, Ireland; Humacao, Puerto Rico (Dentco and Reedco II);
Plymouth, UK; Buenos Aires, Argentina; and Rio de Janeiro, Brazil.
Subsequent to the end of the fiscal year, the Company entered into
negotiations to sell its factories in South Brunswick, New Jersey, and in
Buenos Aires, Argentina.
The Company owns land contiguous to the Memphis, South Brunswick, Toronto,
Plymouth and Dungarvan facilities which would allow for the future expansion
of such facilities. Additional warehouse and distribution facilities are in
Mississauga, Canada; Memphis, Tennessee; Dayton, New Jersey; Plymouth, UK
and Zaragoza, Spain.
The Company also has offices in buildings which it owns in Welwyn Garden City,
UK, Mississauga, Canada and Ratingen, Germany where business involving each
product group is conducted.
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 as part of the manufacturing
restructuring and reengineering program, are regarded by management as
adequate for current requirements and for those of the next several years.
Management's Discussion and Analysis of Operating Results and Financial
Condition further describes the Company's restructuring program.
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 a rise from these proceedings will have a material adverse
impact on the Company's consolidated financial position, results of
operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the holders of Class B Common Stock
during the quarter ended March 31, 1998.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
<PAGE>7
STOCK PRICE AND DIVIDEND INFORMATION
Market Price Cash Dividends Declared
Range of Class A Per Share
Common Stock*
Fiscal Year Ended
March 31, 1998 High** Low**
First Quarter $47 1/2 $40 3/4 $0.31 Class A Shares
$0.1075 Class B Shares
Second Quarter 51 1/2 43 5/8 $0.31 Class A Shares
$0.1075 Class B Shares
Third Quarter 50 7/8 41 1/2 $0.315 Class A Shares
$0.11 Class B Shares
Fourth Quarter 44 3/4 39 1/4 $0.315 Class A Shares***
$0.11 Class B Shares***
Fiscal Year Ended
March 31, 1997
High Low
First Quarter $45 3/4 $36 1/2 $0.29 Class A Shares
$0.10 Class B Shares
Second Quarter 46 3/4 40 1/2 $0.29 Class A Shares
$0.10 Class B Shares
Third Quarter 48 44 1/8 $0.31 Class A Shares
$0.1075 Class B Shares
Fourth Quarter 48 1/4 42 $0.31 Class A Shares****
$0.1075 Class B Shares****
*The Company's Class A (non-voting) Common Stock is traded on the Nasdaq
National Market System. There is no established trading market for the
Company's Class B (voting) Common Stock.
**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 2, 1998 to Class A
and B shareholders in Class A and B Common Stock, respectively.
****In addition, a 3% stock dividend was paid on January 2, 1997 to Class A
and B shareholders in Class A and B Common Stock, respectively.
The following table indicates the approximate number of shareholders of each
class of the Company's equity securities based upon the number of record
holders as of June 2, 1998:
<PAGE>8
Title of Class Number of Shareholders
Common Stock, Class A (non-voting) 467
Common Stock, Class B (voting) 5
Item 6. Selected Financial Data
<TABLE>
Fiscal Year Ended March 31
<CAPTION>
1998 1997(2) 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Sales
from
Continuing
Operations $863,057,000 $862,471,000 $715,242,000 $621,139,000 $566,772,000
Interest,
Dividends
& Other
Income 25,882,000 28,335,000 30,157,000 23,026,000 23,383,000
Income from
Continuing
Operations
before
Income Taxes 69,611,000 10,817,000 65,501,000 57,870,000 54,147,000
Income Taxes 17,819,000 2,210,000 11,798,000 11,944,000 8,135,000
Income from
Continuing
Operations 51,792,000 8,607,000 53,703,000 45,926,000 46,012,000
Average Number
of Common
Shares
Outstanding(1) 22,143,000 22,103,000 22,062,000 22,017,000 21,980,000
Income from
Continuing
Operations,
Per Share
of Common
Stock(1) $2.34 $0.39 $2.43 $2.09 $2.09
Net Income
Per Share
of Common
Stock(1) $2.34 $0.39 $4.02 $2.29 $2.17
Cash Dividends
Declared Per
Share of
Class A
Common $1.25 $1.20 $1.12 $1.06 $1.02
Cash Dividends
Declared Per
Share of
Class B
Common $0.435 $0.415 $0.30 - -
Stock Dividends
Declared Per
Share of
Class A
Common 3% 3% 3% 3% 3%
Stock Dividends
Declared Per
Share of
Class B
Common 3% 3% 3% 3% 3%
Depreciation $19,651,000 $20,210,000 $19,012,000 $16,031,000 $13,580,000
Working
Capital $19,840,000 $90,172,000 $106,050,000 $26,095,000 $32,637,000
Current
Ratio 1.1 1.3 1.5 1.1 1.2
Total
Assets $1,087,072,000 $1,014,923,000 $929,117,000 $871,320,000 $771,068,000
Long-Term
Debt and
Notes
Payable $ 58,318,000 $55,943,000 $56,143,000 $15,273,000 $17,880,000
Shareholders'
Equity $647,255,000 $631,320,000 $641,042,000 $562,531,000 $515,121,000
Number of
Employees 3,380 3,703 3,600 3,521 3,491
</TABLE>
<PAGE>9
Management's Discussion and Analysis of Operating Results and Financial
Condition is presented on pages 9 to 12 of this report.
(1) Restated to reflect stock dividends declared on Class A and Class B
Common Stock by the Company in 1998 and previously.
(2) Fiscal 1997 income statement numbers reflect a pre-tax provision of
$72,450,000 for manufacturing restructuring and re-engineering.
Additionally, these amounts reflect the consolidation of the Block Drug
Company (Japan) Inc. subsidiary, whi ch had been previously accounted for
as a 50%-owned equity joint venture. The Company acquired the remaining
50% share in fiscal year 1997.
Item 7. Management's Discussion and Analysis of Operating Results and Financial
Condition
Operating Results:
Consolidated worldwide sales for the fiscal year ended March 31, 1998 were
$863.1 million, up slightly over the prior fiscal year 1997 which recorded
an increase of 21%. Sales would have grown 4%, excluding the negative
effect of foreign exchange. Domestic sales were up by 4.6% reflecting
price increases of 2.2% and volume growth of 2.4%. The International sales
were lower by 3.0% compared to the prior fiscal year 1997. Excluding the
effects of currency, International sales would have increased 3.7%.
Sales for the Company's largest business segment, dental products, decreased
by 2.3% to $606.8 million, following a 25% increase in the prior year. At
comparable rates of exchange, the sales would have increased by 2.4% to
$635.8 million. C onsumer products sales increased to $256.3 million, a
6.2% increase, compared to a 10% increase in the previous year. At
comparable rates of exchange, sales would have increased by 8.4% to
$261.7 million.
Interest, dividends and other income decreased in the current year due
primarily to reduction in co-promotion income.
The cost of goods sold percentage to sales was 32.6% in fiscal 1998 compared
to 32.4% in fiscal 1997 and 32.8% in fiscal 1996. These percentages reflect
the mix of products sold, in addition to selective price increases.
Selling, general and administrative expenses represented 60.7%, 60.1%
and 61.1% of sales in fiscal 1998, 1997 and 1996, respectively. The major
portion is related to advertising and promotional activities. These expenses
reflect major spend ing programs to meet significant competition and build
brand equities.
Interest expense represents 1.6% of sales in fiscal 1998 and 1.2% in both
fiscal 1997 and 1996. The increasing trend represents the additional
borrowings to finance product acquisitions and capital additions.
Due to the strengthening of the U.S. Dollar, the unfavorable impact on net
income was $7,599,000 or $0.34 per share for the fiscal year 1998.
Due to the above factors, income before taxes was 8.1% of sales in fiscal
1998 as compared to 9.7% (excluding restructuring charges) and 9.2% in fiscal
1997 and 1996 respectively.
<PAGE>10
The effective income tax rates of 25.6% 20.4% and 18% in fiscal 1998, 1997
and 1996, respectively, reflect tax exempt interest from government securities
and income from the lower tax areas of Puerto Rico and Ireland. For
additional informat ion see "Income Taxes" in Notes to Consolidated Financial
Statements.
The Company's International operations represent approximately 60% of the
Company's business. During fiscal 1998, the performance was impacted by
currency issues, the instability and recession in Asian and certain European
markets key to our business, as well as competitive pressures in many of its
markets around the world.
Although inflation has been moderate throughout fiscal 1998, 1997 and 1996,
the Company continues to utilize selective price increases and budgetary
monitoring of advertising, personnel and other expenses to control its
operating margins.
In February 1997, the Company announced the consolidation of its manufacturing
operations by planning to close six of its twelve production facilities in
various parts of the world over the next two years. This action is expected
to generate approximately $25 million in additional annual cost savings
beginning in fiscal 2000 which will be reinvested to support the Company's
brands, acquisitions and new products, strengthen the Company's presence
in major markets and to enable the Company to penetrate new geographic areas
worldwide. The worldwide manufacturing restructuring and re-engineering
program resulted in a pre-tax charge of $72.5 million ($55.7 million net of
tax), or $2.60 per share after taxes in fiscal 1997, of which $20 million
remains as a liability as of March 31, 1998. The restructuring program is
expected to be substantially completed by the end of fiscal 1999. As of
March 31, 1998 the Company has sold its factories in Wales, Belgium and
Australia. In addition, the Company has discontinued manufacturing
activities in Canada and leased out that portion of the facility to a
third party.
During fiscal 1998, the Company acquired the Beano brand food enzyme dietary
supplement for U.S. and Canada. The Company also introduced Aphthasol, a
prescription medicine for the treatment of canker sores.
The Company has conducted a review of the potential impact of the year 2000
on its information systems as well as the potential impact on key
relationships with third parties, including suppliers and customers. The
Company is expanding its u se of the SAP computer system, which is year 2000
compliant. Non-SAP systems will be upgraded either through modification or
replacement. The Company currently anticipates this upgrading will be
completed during calendar year 1998 so that testing may take place in 1999.
Expenses incurred in connection with year 2000 compliance will be expensed as
incurred, other than the acquisition of new software or hardware, which will
be capitalized. The Company currently believes that the cost of fixing the
year 2000 problem will not have a material effect on the Company. While the
Company has initiated communications with its key suppliers and customers
regarding their year 2000 remediation efforts, there can be no guarantee that
the systems of these companies will be converted on a timely basis which
could have an adverse effect on the Company.
<PAGE>11
Subsequent to the close of the fiscal year, the Company announced:
A. The divestiture of the rights to three of its household products brands,
2000 Flushes , X-14 , and Carpet Fresh . Divestiture activity prior to
the close of this sale had an adverse impact on fourth quarter sales and
earnings.
B. The receipt of an approvable letter by Atrix Laboratories, Inc. from the
Food & Drug Administration for Atridox , a site-specific anti-microbial
delivery system for use in the treatment of chronic adult periodontitis
for which the Com pany has acquired exclusive U.S. and Canadian marketing
rights from Atrix.
Liquidity and Capital Resources:
Cash increased to $37.3 million at March 31, 1998 from $13.9 million at
March 31, 1997 and $16.4 million at March 31, 1996.
<PAGE>12
Net cash flow from operating activities was $97 million in fiscal 1998,
$39 million more than the prior year. The increase in operating cash flows
was due to an increase in accounts payable and a decrease in accounts
receivable. In fiscal 1997, net cash flows from operating activities were
$58 million, $16 million more than the prior year. Earnings net of non-cash
expenses more than offset increases in accounts receivable and inventories.
Accounts receivable at year-end 1998, 1997 and 1996 represent 2.0, 2.3 and
2.1 average months of sales, respectively. Inventory levels comprised 5.9,
6.0 and 6.4 months supply at year-end 1998, 1997 and 1996, respectively.
Net cash used in investing activities in fiscal 1998 was $108 million,
compared to net cash used of $84 million in fiscal 1997. In fiscal 1998,
additions to property, plant and equipment, payments for products acquired
and purchases of marke table securities more than offset the proceeds from
the sale of securities and property, plant and equipment. In fiscal 1997,
cash was invested primarily in property, plant and equipment and for payments
for products acquired. In fiscal 1996, the net cash inflow for investing
activity was $16 million.
Net capital expenditures of $38 million for fiscal 1998 and 1997 are
approximately $5 million higher than in fiscal 1996.
Domestically, major projects over the three-year period include a substantial
investment in computer modernization and business process reengineering. The
production and warehouse facilities in Memphis, Tennessee and in Puerto Rico
have undergone expansion and modernization projects that will continue as a
result of the Company's Production Optimization Program.
The Company's foreign facility in Dungarvan, Ireland was expanded in fiscal
1998. The Dungarvan facility will continue to undergo expansion as a result
of the Company's Production Optimization Program. The Company anticipates
future aggregate capital spending to approximate 5% of net sales, and expects
to fund moderization and expansion through internally generated funds and
through short-term borrowings as appropriate.
<PAGE>12
Net cash provided by financing activities was $38 million in fiscal 1998
compared to net cash provided of $23 million in fiscal 1997. In fiscal 1996,
there was a net cash outflow of $56 million. The financial inflows in fiscal
1998 arose from the proceeds from debt issuance of $59 million, which more
than offset dividends paid to shareholders. The financial inflows in fiscal
1997 were the result of the issuance of debt. The financial outflows in
fiscal 1996 were the result of debt repayment funded mostly with the proceeds
from the sale of the Reed & Carnrick Division.
An overall strengthening of the U.S. dollar in relation to foreign currencies
resulted in net foreign currency translation losses of $20 million in fiscal
1998. In fiscal 1997, net foreign currency translation gains were $4.5
million. These amounts were included directly to Shareholder's Equity in the
balance sheet.
The Company uses financial instruments to manage interest rate and foreign
exchange exposures. It does not take speculative positions. The cost of
these transactions is amortized over the respective periods covered and is
limited to fixed a mounts determined at the dates of execution. See Note 5
for additional information.
<PAGE>13
The Company has classified all long-term securities as "available for sale".
These long-term securities are reported at fair market value resulting in
unrealized holdings gains of $3,692,000 net of taxes of $941,000 as of
March 31, 1998. Holding gains were $551,000 net of taxes of $254,000 as of
March 31, 1997, and $6 million, net of taxes of $1.3 million as of
March 31, 1996.
The Company anticipates that sufficient funds will be provided from
operations and borrowing capabilities for capital expenditures, dividend
payments and other cash needs in fiscal 1998. The Company has uncommitted
lines of credit totaling $ 313 million and $240 million at March 31, 1998 and
1997, respectively.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS No. 128"), which simplifies existing computational guidelines, revises
disclosure requirements and increases the comparability of earnings-per-share
data on an international basis. SFAS No. 128 is effective for financial
statements for periods ending after December 15, 1997 and requires restatement
of all prior-period earnings-per-share data presented. During the year ended
March 31, 1998, the Company adopted SFAS No. 128 which had no material impact
on the earnings per share reported.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information", which establishes standards for reporting
information about operating segments in annual financial statements. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997. In February 1998, the FASB issued
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits", which revises employers' disclosures about pension and other
postretirement benefit plans. SFAS No. 132 does not change the measurement
or recognition of those plans. SFAS No. 132 is effective for fiscal years
beginning after December 15, 1997. In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15,
1999. The Company is currently ev aluating the impact of the new statements
on its fiscal 1999 disclosures.
<PAGE>13
Information Concerning Forward-Looking Statements:
The Company has made, and may continue to make, various forward-looking
statements with respect to its financial position, business strategy, projected
costs, projected savings, and plans and objectives of mangement. Such forward-
looking sta tements are identified by the use of forward-looking words or
phrases such as "anticipates," "intends," "expects," "plans," "believes,"
"estimates," or words or phrases of similar import. These forward-looking
statements are subject to numerous assumptions, risks, and uncertainties,
and the statements looking forward beyond fiscal year 1998 are subject to
greater uncertainty because of the increased likelihood of changes in
underlying factors and assumptions. Actual results could differ materially
from those anticipated by the forward-looking statements.
The Company's forward-looking statements represent its judgement only on
the dates such statements are made. By making any forward-looking statements,
the Company assumes no duty to update them to reflect new, changed, or
unanticipated events or circumstances.
Item 8. Financial Statements and Supplementary Data
<PAGE>14
REPORT OF INDEPENDENT ACCOUNTANTS
We have audited the accompanying consolidated financial statements and the
financial statement schedules of Block Drug Company, Inc. and subsidiaries
listed in the index of page 46 of this Form 10-K. 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 did
not audit the financial stat ements of certain foreign subsidiaries and
branches, which statements reflect total assets and total revenues constituting
approximately 13 percent and 32 percent, respectively, as of and for the year
ended March 31, 1998, 15 percent and 37 percent, respectively, as of and for
the year ended March 31, 1997 and 11 percent and 28 percent, respectively, in
the year ended March 31, 1996 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, 1998 and 1997, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended March 31, 1998, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedules
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND L.L.P.
New York, New York
June 2, 1998.
<PAGE>14
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31
1998 1997
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 37,320,000 $ 13,862,000
Marketable securities, at market (Note 4) 24,081,000 24,923,000
Accounts receivable, less allowances of
$4,446,000 (1998) and $4,504,000 (1997) 143,114,000 164,104,000
Inventories (Note 1 and 2) 139,139,000 138,679,000
Other current assets 37,056,000 51,508,000
----------- -----------
Total current assets 380,710,000 393,076,000
Property, plant and equipment, less
accumulated depreciation (Notes 1 and 3) 251,737,000 235,486,000
Long-term securities, at market (Note 4) 263,518,000 225,999,000
Goodwill and other intangible assets,
less accumulated amortization of
$19,065,000 (1998) and $14,046,000
(1997) (Note 1) 183,654,000 153,425,000
Other assets 7,453,000 6,937,000
-------------- --------------
Total assets $1,087,072,000 $1,014,923,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes and bonds payable (Note 6) $ 171,210,000 $ 118,522,000
Accounts payable and accrued expenses
(Note 7) 173,226,000 167,744,000
Income taxes payable (Note 8) 11,128,000 11,612,000
Dividend payable 5,306,000 5,026,000
------------ ------------
Total current liabilities 360,870,000 302,904,000
Notes and bonds payable (Note 6) 58,318,000 55,943,000
Deferred income taxes (Note 8) 3,023,000 8,744,000
Deferred compensation and other
liabilities (Notes 1 and 9) 17,606,000 16,012,000
----------- ------------
Total liabilities 439,817,000 383,603,000
Shareholders' equity (Notes 1 and 10):
Class A common stock non-voting par value
$.10-15,000,000 shares authorized,
13,991,000 (1998) and 13,544,000 (1997)
shares issued and outstanding 1,399,000 1,354,000
Class B common stock, par value
$.10-30,000,000 shares authorized,
8,174,000 (1998) and 7,936,000 (1997)
shares issued and outstanding 817,000 794,000
Capital in excess of par value 281,993,000 249,375,000
Retained earnings 377,595,000 377,202,000
Cumulative foreign currency translation
adjustment (Note 1) (18,241,000) 2,044,000
Unrealized holding gain on marketable
securities (Note 4) 3,692,000 551,000
------------- ------------
Total shareholders' equity 647,255,000 631,320,000
------------- ------------
Total liabilities and shareholders' equity $1,087,072,000 $1,014,923,000
</TABLE> ============== ==============
See notes to consolidated financial statements.
<PAGE>15
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
INCOME AND RETAINED EARNINGS
For the Years Ended March 31, 1998, 1997 and 1996
<CAPTION>
1998 1997 1996
Revenues:
<S> <C> <C> <C>
Net sales $863,057,000 $862,471,000 $715,242,000
Interest, dividends and
other income 25,882,000 28,335,000 30,157,000
------------ ------------ ------------
888,939,000 890,806,000 745,399,000
------------ ------------ ------------
Cost and Expenses:
Cost of goods sold 281,475,000 279,334,000 234,782,000
Selling, general and
administrative 523,959,000 518,059,000 436,742,000
Interest expense 13,894,000 10,146,000 8,374,000
Manufacturing restructuring
and re-engineering costs
(Note 13). - 72,450,000 -
----------- ----------- -----------
819,328,000 879,989,000 679,898,000
----------- ----------- -----------
Income from Continuing Operations
before income taxes 69,611,000 10,817,000 65,501,000
------------- ----------- -----------
Income Taxes (Note 8):
Current 14,868,000 14,112,000 17,602,000
Deferred 2,951,000 (11,902,000) (5,804,000)
---------- ----------- ----------
17,819,000 2,210,000 11,798,000
---------- ----------- ----------
Income from Continuing
Operations 51,792,000 8,607,000 53,703,000
Discontinued Operations
(Note 12): Income from
discontinued operations, net
of taxes of $32,000 - - 52,000
Gain on sale of division, net of taxes
of $21,406,000 - - 34,925,000
----------- ----------- -----------
Income from discontinued
operations - - 34,977,000
------------ ----------- -----------
Net Income 51,792,000 8,607,000 88,680,000
Retained earnings at
beginning of year. 377,202,000 416,200,000 367,325,000
Less: Cash dividends - $1.25
(1998), $1.20 (1997) and
$1.12 (1996) per share of
Class A common stock (17,087,000) (15,881,000) (14,164,000)
Cash dividends $0.435 (1998)
$.415 (1997) and $.30 (1996)
per share of Class B common
stock (3,503,000) (3,197,000) (2,311,000)
Stock dividends 3% (1998, 1997
and 1996) to Class A
shareholders payable in
Class A common stock (19,441,000) (17,982,000) (14,431,000)
Stock dividends 3% to Class B
shareholders payable in
Class B common stock (1998)
and (1997), and in Class
A common stock (1996) (11,368,000) (10,545,000) (8,899,000)
Retained earnings at -------------- ------------- -------------
end of year $ 377,595,000 $377,202,000 $416,200,000
============= ============= =============
Earnings per share of common stock
(Notes 1 and 10):
From Continuing Operations $2.34 $ 0.39 $ 2.43
From Discontinued Operations 1.59
Net Earnings Per Share $2.34 $ 0.39 $ 4.02
</TABLE>
See notes to consolidated financial statements.
<PAGE>16
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Years Ended March 31, 1998, 1997 and 1996
<CAPTION>
1998 1997 1996
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 51,792,000 $ 8,607,000 $88,680,000
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Gain on sale of
discontinued operation - - (34,925,000)
Depreciation and
amortization 24,670,000 24,629,000 21,470,000
Deferred income tax
provision 2,951,000 (11,902,000) (5,804,000)
Deferred compensation
provision 4,310,000 2,110,000 1,979,000
Equity in net income of
joint venture (4,111,000)
(Gain) loss on sales of
long-term securities (987,000) (3,136,000) (919,000)
Restructuring and
re-engineering
(payments) charges (15,016,000) 67,415,000 -
Employee savings plan
provision 1,879,000 1,707,000 1,515,000
Other, net 80,000 963,000 986,000
Gain) loss on sale of
property, plant and
equipment (3,557,000) - -
Changes in assets and
liabilities that provided
(used) cash, net of effects
from purchase of products
acquired
Accounts receivable 12,161,000 (38,291,000) (10,817,000)
Inventories (7,169,000) (17,705,000) (10,725,000)
Accounts payable and
accrued expenses 25,716,000 12,682,000 16,173,000
Other current assets 4,751,000 (8,441,000) (923,000)
Other assets (1,230,000) 15,950,000 275,000
Income taxes and
dividends payable (1,113,000) 4,946,000 249,000
Payments of deferred
compensation and
other noncurrent
liabilities (2,292,000) (1,210,000) (1,381,000)
Changes from sale of
division, net - - (19,063,000)
------------ ---------- ------------
Net cash flow from
operating activities 96,946,000 58,324,000 42,659,000
------------ ----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sales of
U.S. Pharmaceutical
Division, net of cash
expenses - - 64,431,000
Additions to property,
plant and equipment (45,822,000) (45,418,000) (32,693,000)
Proceeds from sale of
property, plant
and equipment 7,970,000 7,555,000
(Increase) decrease in
marketable securities,
net 5,912,000 (11,537,000) 4,924,000
Dispositions of
long-term securities 46,457,000 49,039,000 74,808,000
Purchase of long-term
securities (84,234,000) (55,771,000) (25,858,000)
Payment for products
acquired (38,173,000) (28,171,000) (69,870,000)
Net cash (used in) provided -------------- ------------ -----------
by investing activities (107,890,000) (84,303,000) 15,742,000
-------------- ------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid to
shareholders (20,590,000) (19,078,000) (16,475,000)
Proceeds from issuance
of debt 58,890,000 51,190,000 50,000,000
Payment of debt - (9,005,000) (89,288,000)
Net cash provided by (used in) ------------ ------------ --------------
financing activities 38,300,000 23,107,000 (55,763,000)
------------ ------------ --------------
Effects of exchange rates
on cash (3,898,000) 346,000 44,000
------------ ------------ -------------
(Decrease) increase in cash 23,458,000 (2,526,000) 2,682,000
Cash, beginning of year 13,862,000 16,388,000 13,706,000
------------ ------------ ------------
Cash, end of year $ 37,320,000 $13,862,000 $16,388,000
============ ============= ============
SUPPLEMENTAL CASH FLOW DATA
Cash Paid During the Year:
Interest $14,076,000 $10,381,000 $ 8,850,000
Income Taxes $12,350,000 $ 9,560,000 $39,812,000
</TABLE>
See notes to consolidated financial statements.
<PAGE>17
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. With the exception of the March 31 year-end accounts of
Germany and Colombia branches, 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.
Revenue Recognition
The Company recognizes revenue from product sales when the goods are shipped
to the customer.
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 in cluded in the determination of net
income. For subsidiaries that are considered to be operating in highly
inflationary countries (Brazil for fiscal years 1998, 1997 and 1996 and
Mexico for 1998), 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 gains and (losses) of $(2,523,000), ($3,940,000) and
$379,000, were included in selling, general and administrative expenses in
the determination of net income for fiscal years 1998, 1997 and 1996,
respectively.
1998 1997 1996
Transaction gains (losses) $(2,339,000) $(3,805,000) $ 826,000
Translation relating to
highly inflationary
countries (184,000) (135,000) (447,000)
------------ ------------ ----------
Total $(2,523,000) $(3,940,000) $ 379,000
============ ============ ==========
CUMULATIVE TRANSLATION
ADJUSTMENT RECONCILIATION 1998 1997 1996
Balance -Beginning $ 2,044,000 $(2,476,000) $(3,054,000)
Translation Adjustment (20,285,000) 4,520,000 578,000
------------- ------------ -------------
Balance-Ending $(18,241,000) $2,044,000 $(2,476,000)
============= ============ ============
<PAGE>18
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, 12 years for equipment
and 5 years for computers. 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 amor tized 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.
Amortization of goodwill and other intangible assets was $5,019,000,
$4,419,000 and $2,458,000 in the years ended March 31, 1998, 1997 and 1996
respectively.
Marketable securities, financial instruments 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. Long-term
securities are also treated as available for sale and are recorded at market
value. Unrealized holding gains and lo sses on securities classified as
available for sale are recorded in a separate component of shareholders
equity. The fair values of such securities are determined by independent
pricing services and/or securities dealers.
The Company uses financial instruments for purposes other than trading and
does so to reduce its exposure to fluctuations in interest rates and foreign
currency exchange rates. Gains and losses related to qualifying hedges of
anticipated transactions are deferred and are recognized in income or as
adjustments of carrying amounts when the hedged transaction occurs.
Retirement plans and deferred compensation agreements:
Pension costs recorded as charges to operations include actuarially
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 Account ing 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.
<PAGE>19
The Company accounts for postretirement benefits other than pensions in
accordance with SFAS No. 106, "Employers Accounting for Postretirement
Benefits Other Than Pensions." The Company accounts for the cost of these
benefits, which are for health care, by accruing them during the employee's
active working career. The Company has elected to amortize the unfunded
obligation existing at April 1, 1993 (transition obligation) over a period of
20 years.
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 actuarially determined basis
over the attribution period which equals the estimated period of active
employment of such executives.
Concentration of Credit Risk
The Company sells a broad range of products in many countries of the world.
Concentrations of credit risk with respect to trade receivables are limited
due to the large number of customers comprising the Company's customer base.
Ongoing credit evaluations of customer's financial condition are performed
and, generally, no collateral is required. The Company maintains reserves
for potential credit losses.
Research and development expenditures:
Research and development expenditures are charged to operations as incurred.
The charges for the years ended March 31, 1998, 1997 and 1996 were $25,849,000,
$28,180,000 and $23,959,000, 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 22,143,000, 22,103,000 and 22,062,000 in fiscal
year 1998, 1997 and 1996, respectively.
New Accounting Standards:
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share", which simplifies existing computational
guidelines, revises disclosure requirements and increases the comparability of
earnings-per -share-data on an international basis. SFAS No. 128 is effective
for financial statements for periods ending after December 15, 1997 and
requires restatement of all prior-period earnings-per-share data presented.
During the year ended March 31, 199 8 the Company adopted SFAS No.128 which
had no material impact on the earnings per share reported.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which establishes standards for
reporting information about operating segments in annual financial statements.
It also establishes standards for related disclosures about products and
services, geographic areas and major customers. SFAS No. 131 is effective
for fiscal years beginning after December 15, 1997. In February 1998, the
FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits", which revises employers' disclosures about pension
and other postretirement benefit plans. SFAS No. 132 does not change the
measurement or recognition of those plans. SFAS No. 132 is effective for
fiscal years beginning after December 15, 1997. In June 1998, the FASB
issued SFAS No. 133, "Accounting for Derivatives and Hedging Activities",
which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. The Company is currently evaluating
the impact of the new statements on its fiscal 1999 disclosures.
<PAGE>20
Risk and Uncertainties:
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 is an
important factor in its ability to compete effectively. While larger
competitors are able to commit significantly greater revenues to national
advertising, the Company believes its advertising and marketing expertise
enable it to compete effectively.
The primary competitive factors affecting proprietary over-the-counter
brands are product formulation, reputation and advertising and consumer
promotions.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported. Actual amounts
are not expected to diffe r materially from those estimates.
Reclassification:
Certain prior year amounts have been reclassified to conform with current
year presentation.
Note 2. Inventories:
Major classes of inventories comprise: March 31
1998 1997
Raw and packaging materials $ 42,661,000 $ 44,334,000
Finished goods 96,478,000 94,345,000
------------ -------------
Total $139,139,000 $138,679,000
============ =============
Note 3. Property, Plant and Equipment:
Major classes of property, plant
and equipment are summarized
as follows: March 31
1998 1997
Land $ 16,745,000 $ 22,182,000
Building and related improvements 143,854,000 138,546,000
Machinery and equipment 162,440,000 141,442,000
Furniture and fixtures 45,512,000 45,550,000
Construction in progress 15,478,000 9,861,000
----------- -----------
384,029,000 357,581,000
Less: Accumulated depreciation 132,292,000 122,095,000
------------ ------------
Total $251,737,000 $235,486,000
============ ============
Depreciation expense for the years ended March 31, 1998, 1997 and 1996 was
$19,651,000, $20,210,000 and $19,012,000, respectively. Certain of the above
properties are pledged as collateral for long term debt (Note 6).
<PAGE>21
Note 4. Marketable and Long-Term Securities:
The Company accounts for securities in accordance with SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities".
Currently, the Company classifies its marketable securities as
available-for-sale.
The Company's marketable and long-term securities, both current and
noncurrent, as of March 31, 1998 consisted of the following:
Unrealized Holding
Fair Value Gains Losses
U.S government and its
agencies $148,977,000 $1,850,000 $570,000
Municipal and state 115,543,000 3,340,000 55,000
Hedge funds 4,068,000 68,000 -
Other, principally
money market 19,011,000 - -
------------ ---------- ----------
$287,599,000 $5,258,000 $625,000
============ ========== ==========
The above unrealized holding gains and losses, net of income taxes of
$941,000, are reflected as "unrealized holding gain on marketable securities"
in shareholders' equity.
The Company's marketable and long-term securities, both current and
noncurrent, as of March 31, 1997 consisted of the following:
Unrealized Holding
Fair Value Gains Losses
U.S government and
its agencies $127,606,000 $1,275,000 $ 3,048,000
Municipal and state 98,393,000 2,581,000 3,000
Other, principally
money market 24,923,000 - -
------------ ---------- -----------
$250,922,000 $3,856,000 $3,051,000
============ ========== ==========
The above unrealized holding gains and losses, net of income taxes of
$254,000, are reflected as "unrealized holding gain on marketable securities"
in shareholders' equity.
<PAGE>22
The maturities of the Company's investment in debt securities, at fair value,
as of March 31, 1998 and 1997 were as follows:
1998 1997
Within 1 year $ 24,081,000 $ 24,923,000
After 1 year through 5 years 48,854,000 57,063,000
After 5 years through 10 years 75,350,000 38,258,000
After 10 years 139,314,000 130,678,000
------------ ------------
$287,599,000 $250,922,000
============ ============
The proceeds from the sales of available-for-sale securities (excluding
normal principal payments on government agency obligations, bond redemptions
and maturities) were $23,062,000 and $41,028,000 for the years ended
March 31, 1998 and 1997, respectively. Gross realized gains and gross
realized losses from these transactions were $994,000 and $0 for the year
ended March 31, 1998 and $3,110,000 and $0 for the year ended March 31, 1997,
respectively. The cost of marketable securities so ld was determined by
specific identification.
Note 5. Financial Instruments
The Company uses financial instruments to reduce exposures to market risks
resulting from fluctuations in interest and foreign exchange rates. The
Company does not use such financial instruments for trading or speculative
purposes.
During 1998, the Company entered into two monthly series of Japanese yen put
options to establish a minimum exchange rate of the Japanese yen versus the
U.S. dollar and yen versus Irish punt on anticipated inventory purchases
during calendar year 1997. Net gains on these contracts totaling $860,000
were recognized in the months of settlement during 1998.
In connection with the anticipated inventory purchases, additional contracts
were purchased protecting the Company against the average of the monthly
exchange rates of German marks versus U.S. dollars, marks versus punt, yen
versus dollars and yen versus punt exceeding certain levels. The cost of
these contracts exceeded benefits received by $95,622.
The Company again purchased average rate foreign exchange rate options to
protect against adverse movements of the German mark vs. the Irish punt and
U.S. dollar and the Japanese yen vs. the punt and dollar during calendar 1998.
These contracts, which cost $778,273 had a market value of $941,810 at year end.
The Company has interest rate cap agreements that protect against the 90 day
LIBOR rate exceeding 7% for the period from 6/1/95 to 6/1/97 and 9% from 6/1/97
through 3/1/02 on a notional amount of $100 million. The premium is paid for
the term of the agreements in quarterly installments of $127,236. At year end
the market value of the cap agreements, net of the present value of the
remaining premium payment obligations, was a liability of $1,731,817.
<PAGE>23
Note 6. Notes and Bonds Payable:
Short-term notes payable consist primarily of borrowings from various banks
at interest rates ranging from 3.7% to 33.8%. At March 31, 1998 and 1997,
the Company maintained short term uncommitted bank lines of credit aggregating
$313,000,000 and $240,000,000, respectively. Of these amounts, $151,200,000
and $166,825,000 was unused at March 31, 1998 and 1997, respectively. The
fair value of the short-term notes payable approximates book value.
Long-term notes and bonds payable are comprised of the following:
March 31
1998 1997
7.0% Notes due fiscal 2000 $ 1,353,000 $ 1,493,000
Variable rate mortgage notes
(currently 4.05%) due
fiscal 2001 2,515,000 -
6.47% Senior note due fiscal 2006 50,000,000 50,000,000
Variable rate bonds (currently 3.7%),
due fiscal 2010 4,450,000 4,450,000
----------- -----------
$58,318,000 $55,943,000
=========== ===========
Certain properties of the Company (approximate book value $4,801,000) are
pledged as collateral for the bonds. The requirements of the bond indentures
include the maintenance by the Company of specified financial ratios and
tests including a maximum ratio of indebtedness to total capitalization and
a minimum interest coverage ratio.
Interest expense on all borrowings aggregated $13,894,000 in fiscal 1998,
$10,146,000 in fiscal 1997 and $8,374,000 in fiscal 1996.
Long-term debt at March 31, 1998 is payable as follows:
Year ended March 31
2000 $ 1,353,000
2001 and later 56,965,000
-----------
$58,318,000
===========
The fair value of the long-term debt was approximately equal to the book
value as of March 31, 1998.
<PAGE>24
Note 7. Accounts Payable and Accrued Expenses:
Accounts payable and accrued expenses are comprised of the following:
March 31
1998 1997
Accounts payable - trade $ 34,300,000 $ 38,013,000
Accrued salaries, wages,
vacation pay and bonuses 38,696,000 35,483,000
Accrued advertising and selling expenses 28,197,000 23,656,000
Restructuring and re-engineering 20,040,000 35,756,000
Other current liabilities 51,993,000 34,836,000
------------ ------------
$173,226,000 $167,744,000
============ ============
Note 8. Income Taxes:
Income taxes on continuing operations consisted of:
Current Deferred Total
For the year ended March 31, 1998
Federal $ 3,741,000 $ 752,000 $ 4,493,000
Foreign 11,353,000 2,135,000 13,488,000
State (226,000) 64,000 (162,000)
------------ ----------- ------------
$14,868,000 $2,951,000 $17,819,000
============ =========== ============
For the year ended March 31, 1997
Federal $ 2,762,000 $ (3,995,000) $(1,233,000)
Foreign 11,155,000 (7,564,000) 3,591,000
State 195,000 (343,000) (148,000)
----------- ------------- ------------
$14,112,000 $(11,902,000) $ 2,210,000
For the year ended March 31, 1996
Federal $ 7,361,000 $ (6,115,000) $ 1,246,000
Foreign 9,466,000 835,000 10,301,000
State 775,000 (524,000) 251,000
----------- ------------ -----------
$17,602,000 $ (5,804,000) $11,798,000
=========== ============= ============
<PAGE>25
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:
1998 1997 1996
For the year ended March 31:
Depreciation ($1,996,000) $ 651,000 $2,025,000
Expenses (not) currently
deductible for
tax purposes 6,376,000 (14,111,000) (7,999,000)
Other (1,429,000) 1,558,000 170,000
------------ ------------- ------------
$2,951,000 ($11,902,000) ($5,804,000)
=========== ============== ============
A reconciliation of the provision for income taxes on income from continuing
operations and the amount that would be computed using statutory federal
income tax rates on income before income taxes for the years ended March 31
is as follows:
(In millions)
1998 1997 1996
For the year ended March 31:
Tax at U.S. Federal statutory rate of 35% $24.4 $ 3.8 $ 22.9
Tax exempt state and municipal bond income (2.7) (3.2) (3.9)
Irish operating income taxed at lower rate (5.7) (4.8) (3.5)
Reduction in taxes resulting from Puerto Rico
source income subject to lower tax rate (2.8) (2.9) (4.5)
Foreign Tax Rate Differential 3.7 3.4 2.0
Foreign Tax Credit (1.1) (2.9) -
Non-Deductible Restructuring Charges - 9.2 -
Other,net 2.0 (.4) (1.2)
------ ------ -----
Total $17.8 $ 2.2 $11.8
====== ======= ======
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 $205,687,000
as of March 31, 1998, 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:*
Deferred tax assets: March 31,
1998 1997
Coupon accrual, sales discounts, and
workers compensation $ 3,053,000 $ 2,763,000
Employee benefits 7,784,000 7,284,000
Accrual on vacation 1,226,000 1,531,000
Deferred compensation 4,968,000 3,993,000
Capital gain 7,807,000 4,660,000
Accrued restructuring 7,642,000 16,763,000
Other 1,497,000 1,633,000
----------- -----------
$33,977,000 $38,627,000
=========== ===========
Deferred tax liabilities:
Property, plant and equipment 15,990,000 $17,986,000
SFAS No. 115 adjustment 942,000 231,000
Other 7,621,000 7,324,000
----------- -----------
$24,553,000 $25,541,000
=========== ===========
*As of March 31, 1998 and 1997, recoverable income taxes reflected in the
balance sheet in "Other current assets" included current deferred tax assets
of $12,447,000 and $21,830,000, respectively. The remaining deferred tax
liabilities, net of deferred tax assets, were reflected in the balance sheet
as "Deferred income taxes".
<PAGE>26
Note 9. 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:
1998 1997 1996
Service cost $ 5,649,000 $ 5,473,000 $ 5,196,000
Interest cost on projected
benefit obligation 6,085,000 5,618,000 5,339,000
Actual return on plan assets (14,076,000) (9,297,000) (12,860,000)
Net amortization and deferral 1,857,000 2,717,000 6,697,000
Special charges, net 2,592,000 - -
----------- ----------- ------------
Net periodic pension cost $ 2,107,000 $ 4,511,000 $ 4,432,000
=========== =========== ============
The following table sets forth the present value of benefit obligations and
funded status for the Company's foreign and domestic plans:
1998 1997
Actuarial present value
of benefit obligations,
including vested
benefits of
$71,162,000 in 1998
and $56,065,000 in 1997 $76,783,000 $57,215,000
=========== ===========
Projected benefit obligations $96,172,000 $77,229,000
Plan assets at fair value
(primarily invested in
stocks, bonds and
government obligations) $100,918,000 $89,416,000
Add: Unrecognized prior
service cost 5,042,000 5,526,000
Less: Unrecognized net gain
on assets 21,544,000 29,037,000
Unamortized transition
asset established
as of February 28, 1985 1,543,000 2,295,000
Adjustment for minimum
liability 1,608,000 581,000
81,265,000 63,029,000
---------- ----------
Net pension liability $14,907,000 $14,200,000
=========== ===========
The expected long-term rate of return on plan assets was 9% for 1998 and 8%
for 1997. The weighted average discount rate was 7.25% for 1998 and 8% in
1997. The rate of increase in future compensation levels used in determining
the actuarial present value of projected benefit obligations was 5.0% for 1998
and 1997.
<PAGE>27
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, 1998, 1997
and 1996 were $2,894,000, $3,289,000 and $923,000, respectively. Deferred
compensation payable included $3,877,000 at March 31, 1998 and $3,482,000 at
March 31, 1997, respectively. Such amounts represent the actuarially
determined present value of the vested benefits.
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 employment or death.
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 benefit s 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.
The postretirement benefit liability as of March 31, 1998 and 1997 is as
follows:
1998 1997
Retirees $3,774,000 $4,080,000
Fully eligible active plan participants 926,000 819,000
Other active plan participants 3,855,000 3,394,000
Total accumulated postretirement --------- ---------
benefit obligation 8,555,000 8,293,000
Less: Plan assets at fair value
and accruals - -
Unrecognized net gain from
past experience
different from
that assumed and from
changes in assumptions (775,000) (278,000)
Unrecognized transition obligation 4,210,000 4,491,000
----------- ----------
Accrued postretirement benefit
cost recognized in
accounts payable and
accrued expenses $5,120,000 $4,080,000
========== ============
<PAGE>28
The cost of providing postretirement benefits for the period ending
March 31, 1998 and March 31, 1997 includes the following:
1998 1997
Service cost benefits attributed to
service during the period $ 287,000 $ 296,000
Interest cost on the accumulated
postretirement benefit obligation 622,000 587,000
Estimated return on plan assets - -
Amortization of transition obligation 281,000 281,000
Net periodic postretirement ---------- ----------
benefit cost $1,190,000 $1,164,000
========== ==========
The accumulated postretirement benefits 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 7.5% in 1997 decreasing
gradually to 5.5% 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 these 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 $325,000 and the aggregate of the service and interest cost
components of net postretirement health care cost for 1998 would be
approximately $29,000.
Measurement of the accumulated postretirement benefit obligation was based
on an assumed discount rate of 7.25% for 1998 and 8% for 1997.
Note 10. 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.
On November 4, 1997, the Company declared an increased cash dividend of
$.315 on the Class A Common Stock and an extra Common Stock dividend of 3%
on both the Class A and Class B Common Stock, and an increased cash dividend
of $.11 per share on the Class B Common Stock, payable on January 2, 1998
to shareholders of record as of December 1, 1997.
On November 5, 1996, the Company declared an increased cash dividend of
$.31 on the Class A Common Stock and an extra Common Stock dividend of 3%
on both the Class A and Class B Common Stock, and an increased cash dividend
of $.1075 per share on the Class B Common Stock, payable on January 2, 1997
to shareholders of record as of December 2, 1996.
On October 31, 1995, the Company declared an increased cash dividend of $.29
on the Class A Common Stock and a Class A Common Stock dividend of 3% on both
the Class A and Class B Common Stock, payable on January 2, 1996 to
shareholders of rec ord as of December 1, 1995. On August 8, 1995 the
Company declared an increased cash dividend of $.10 on the Class B Common Stock.
<PAGE>29
Net income per share of common stock has been restated to reflect the
current and prior years' stock dividends.
Changes in Class A Common Stock, Class B Common Stock and capital in excess
of par value during fiscal 1998, 1997 and 1996 were as follows:
<TABLE>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
<CAPTION> Capital in
Issued Issued Excess of
Shares Amount Shares Amount Par Value
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1995 12,466,000 $1,247,000 7,704,000 $770,000 $194,426,000
3% Stock Dividend 606,000 $ 60,000 $ 23,269,000
Savings Incentive Plan(1) 40,000 4,000 1,512,000
---------- ---------- --------- -------- ------------
Balance, March 31, 1996 13,112,000 $1,311,000 7,704,000 $770,000 $219,207,000
========== ========== ========== ========= ============
3% Stock Dividend 394,000 $ 39,000 232,000 $ 24,000 $ 28,465,000
Savings Incentive Plan(1) 38,000 4,000 1,703,000
---------- ---------- --------- -------- ------------
Balance, March 31, 1997 13,544,000 $1,354,000 7,936,000 794,000 $249,375,000
========== ========== ========= ========= ==============
3% Stock Dividend 407,000 $ 41,000 238,000 $ 23,000 $ 30,744,000
Savings Incentive Plan(1) 40,000 4,000 1,874,000
---------- ---------- ---------- -------- ------------
Balance, March 31, 1998 13,991,000 $1,399,000 8,174,000 $817,000 $281,993,000
========== ========== ========== ========= ============
</TABLE>
(1) The Company has a voluntary savings incentive plan for eligible domestic
employees. Company contributions to this 401(K) plan are made in the
form of the Company's Class A Common Stock.
Note 11. Legal Proceedings:
The Company is involved in various routine litigation incidental to its
continuing and discontinued operations. 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 12. Discontinued Operations:
On June 30, 1995, the Company sold its U.S. Reed & Carnrick Pharmaceutical
Division. In connection therewith, the Company recorded a gain on disposal
of $34,925,000, net of taxes of $21,406,000 ($1.63 per share). The U.S.
Reed & Carnrick Ph armaceutical business is reported as a discontinued
operation for all periods presented. The statements of consolidated income
and related notes to consolidated financial statements have been restated to
conform to the discontinued operations presentation.
The sales for the U.S. Reed & Carnrick Pharmaceutical business for the
quarter ended June 30, 1995 (through the date of disposition) were
$10,039,000. Income from discontinued operations for the fiscal years ended
March 31, 1998, 1997 and 19 96 net of taxes, was $0, $0 and $52,000
respectively.
<PAGE>30
Note 13. Restructured Operations:
In February 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 manufacturing restructuring and
re-engineering is designed to further enhance profitable growth over several
years by generating significant efficiencies and improving competitiveness.
This will result in a reduction of over 400 employees at the Company's
manufacturing facilities, representing approximately 12% of its worldwide
work force.
The manufacturing restructuring and re-engineering program resulted in a
pre-tax charge of $72,450,000 ($55,687,000 net of tax) or $2.60 per share
after taxes in fiscal 1997.
Below is a summary of the manufacturing restructuring and
re-engineering reserve:
<TABLE>
Original Amounts Remaining Amount Remaining
<CAPTION> Provision Utilized In Balance In Utilized In Balance at
Fiscal 1997 Fiscal 1997 March 31, 1997 Fiscal 1998 Other March 31, 1998
<S> <C> <C> <C> <C> <C> <C>
Employee serverance
& related costs $15,454,000 - $15,454,000 ($ 7,516,000) ($3,300,000) $ 4,638,000
Plant Closings &
related asset
write-offs 32,978,000 (24,468,000) 8,510,000 - (8,510,000) -
Re-engineering 7,184,000 (7,184,000) - - - -
Contractual
Obligations
and other 16,834,000 (5,042,000) 11,792,000 (7,500,000) 11,110,000 15,402,000
----------- ------------- ----------- ------------- ----------- -------------
$72,450,000 ($36,694,000) $35,756,000 ($15,016,000) $ (700,000) $20,040,000
=========== ============== ============ ============= ============= =============
</TABLE>
The Other column represents reclassifications and adjustments of amounts to
reflect latest estimates.
The balance at the end of the year is classified as a current liability.
<PAGE>32
Note 14. Acquisition of Joint Venture:
In fiscal year 1997, the Company acquired the remaining 50% share of the
Kobayashi-Block Company Ltd. joint venture. Previously, the Company's
investment in the joint venture was accounted for under the equity method,
with the investment cla ssified as an other asset in the balance sheet.
Sales for the wholly-owned subsidiary were $78,103,000 and $99,277,000 for
the fiscal years ended March 31, 1998 and March 31, 1997, respectively.
In fiscal year 1996, the equity in the net income of the joint venture, which
was recorded in interest, dividends and other income, was $4,111,000.
Note 15. Product Segments:
The Company develops, manufactures and sells products classified into two
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
household cleaning products, over-the-counter products including anti-gas
preparations, headache powders, sleep-aid tablets, digestive aids, diaper
rash ointments and medicated shampoos.
The following table presents information concerning the Company's continuing
operations by product segment and geographic area for the years ended
March 31, 1998, 1997 and 1996.
<TABLE>
PRODUCT SEGMENTS 1998 1997 1996
<CAPTION> (in thousands)
<S> <C> <C> <C>
Net Sales:
Dental $ 606,812 $621,103 $495,798
Consumer Products and other 256,245 241,368 219,444
---------- --------- --------
Consolidated net sales $ 863,057 $862,471 $715,242
========== ========= ========
Operating Income:
Dental $ 73,279 $ 28,987 $ 60,170
Consumer Products and other 46,279 18,286 31,623
------- --------- --------
Total operating income 119,558 47,273 91,793
General corporate expenses (49,947) (36,456) (26,292)
Consolidated income before --------- --------- ---------
income taxes $ 69,611 $ 10,817 $ 65,501
========= ======== =========
Assets:
Dental $ 485,040 $475,176 $376,988
Consumer Products and other 328,482 286,252 302,466
-------- ------- -------
Total identifiable assets 813,522 761,428 679,454
General corporate assets 273,550 253,495 249,663
--------- ---------- --------
Consolidated assets $1,087,072 $1,014,923 $929,117
========= ========= ========
Depreciation and Amortization:
Dental $ 14,134 $ 13,647 $ 13,389
Consumer Products and other 10,536 10,982 8,081
Consolidated depreciation ------- -------- ---------
and amortization $ 24,670 $ 24,629 $ 21,470
======= ======== ========
Capital Expenditures:
Dental $ 29,605 $ 33,565 $ 23,406
Consumer Products and other 16,217 11,853 9,287
------- -------- ----------
Consolidated capital expenditures $ 45,822 $ 45,418 $ 32,693
======= ======== ========
GEOGRAPHIC AREA
Net Sales:
United States $ 363,507 $347,523 $334,614
Europe, Africa, Middle East 296,765 295,774 285,245
Asia/Pacific 104,061 121,931 19,784
Other 98,724 97,243 75,599
-------- -------- --------
Consolidated net sales $ 863,057 $862,471 $715,242
======== ======= ========
Operating Income:
United States $ 52,186 $ 31,317 $ 45,564
Europe, Africa, Middle East 45,353 24,173 32,834
Asia/Pacific 2,622 7,235 (1,044)
Other 19,397 (15,452) 14,439
-------- --------- ---------
Total operating income 119,558 47,273 91,793
General corporate expenses (49,947) (36,456) (26,292)
Consolidated income before --------- ---------- --------
income taxes $ 69,611 $ 10,817 $ 65,501
========= ======== =========
Assets:
United States $ 428,078 $377,667 $361,543
Europe, Africa, Middle East 287,205 307,113 270,641
Asia/Pacific 42,164 43,231 9,191
Other 56,075 33,417 38,079
-------- -------- ---------
Total identifiable assets 813,522 761,428 679,454
General corporate assets 273,550 253,495 249,663
---------- ---------- ----------
Consolidated assets $1,087,072 $1,014,923 $929,117
========== ========== ==========
</TABLE>
<PAGE>33
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.
Note 16. Subsequent Events:
Subsequent to the close of the fiscal year, the Company sold three of its
household products brands, 2000 Flushes toilet bowl cleaners, X-14 toilet
bowl and hard surface cleaners and Carpet Fresh rug and room deodorizers.
An approvable letter from the Food and Drug Administration was received by
Atrix Laboratories, Inc. for Atridox , a site-specific anti-microbial
delivery system for use in the treatment of chronic adult periodontitis for
which the Company has acquired exclusive U.S. and Canadian marketing rights
from Atrix.
<TABLE>
QUARTERLY FINANCIAL INFORMATION
(Unaudited)
The following is a tabulation of quarterly results of operations for the
years ended March 31, 1998 and 1997:
Fiscal 1998 Quarters
<CAPTION>
First Second Third Fourth
<S> <C> <C> <C> <C>
Net sales $200,206,000 $221,878,000 $208,284,000 $232,689,000
Gross profit 140,757,000 144,250,000 140,327,000 156,248,000
Income from Continuing
Operations Before
Income Taxes 20,786,000 21,211,000 13,095,000 14,519,000
Net Income 15,381,000 15,277,000 11,432,000 9,702,000
Earnings per share of
Common Stock
From Continuing
Operations(1) $.70 $.69 $.51 $.44
Fiscal 1997 Quarters
First Second Third Fourth
Net sales $205,507,000 $203,523,000 $216,409,000 $237,032,000
Gross profit 140,999,000 139,996,000 145,074,000 157,068,000
Income (Loss) from
Continuing Operations
Before Income Taxes 21,990,000 21,401,000 19,152,000 (51,726,000)(2)
Net Income (Loss) 15,415,000 15,262,000 16,230,000 (38,300,000)(2)
Earnings per share
of Common Stock
From Continuing
Operations(1) $.70 $.69 $.73 ($1.73)(2)
</TABLE>
(1) Restated to reflect the three percent stock dividends (see Note 10).
(2) The fourth quarter of fiscal 1997 includes a provision for manufacturing
restructuring and re-engineering costs of $72,450,000 ($55,687,000 or $2.60
per share, after tax).
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
<PAGE>34
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 unless otherwise noted:
Name Age Date of Date Term Other Positions Held
Appointment Expires (or principal occupation)
Leonard Block 86 9/48 6/99 Senior Chairman of the Board
James A. Block 61 4/63 6/99 Chairman of the Board
Thomas R. Block 53 7/70 6/99 President
Donald H. LeSieur 62 5/74 6/99 Executive Vice President
and President, International
Division
Michael C. Alfano, 50 10/88 6/99 Senior Vice President,
D.M.E., Ph.d. Research and Technology
Peter M. Block 31 5/97 6/99 President, European Division
Michael P. Danziger 34 1/98 6/99 President, The Steppingstone
Foundation
Peggy Danziger 58 5/89 6/99 Private Investor
Dominick P. DePaola, 55 10/97 6/99 President & Director,
Forsyth Dental Center,
Boston, MA
William T. Golden 88 7/70 6/99 Corporate Director and
Trustee
Melvin Kopp 68 12/78 6/99 Senior Vice President
and Chief Financial Officer
Peter C. Mann 56 3/96 6/99 President, U.S. Division
John E. Peters 56 10/88 6/99 Senior Vice President,
General Counsel and
Secretary
Peter J. Repetti 80 3/76 6/99 Member, Fulbright &
Jaworski L.L.P. (Retired)
Mary C. Tanner 48 9/95 6/99 Managing Director,
Lehman Brothers
<PAGE>35
The following family relationships exist among the Directors of the Company:
Leonard Block is the father of Thomas R. Block and Peggy Danziger, the uncle
of James A. Block, great uncle of Peter M. Block and the grandfather of
Michael Danziger. James A. Block is the father of Peter M. Block. Thomas
R. Block and Peggy Danziger are brother and sister and are first cousins of
James A. Block. Michael Danziger is the son of Peggy Danziger, grandson
of Leonard Block, and nephew of Thomas R. Block.
Each Director of the Company has been employed by the Company for the past
five years except for (i) William T. Golden who is a director and trustee of
Verde Exploration Ltd, (ii) Peter J. Repetti, an attorney and a retired member
of the New York law firm of Fulbright & Jaworski L.L.P., (iii) Peggy Danziger,
who is a private investor, (iv) Michael Danziger, President, The Steppingstone
Foundation, (v) Mary C. Tanner, a Managing Director of Lehman Brothers, and
(vi) Dominick P. DePaola, D DS, Ph.D, President & Director, Forsyth Dental
Center.
Subsequent to Michael C. Alfano's reelection to the Board of Directors,
Dr. Alfano tendered his resignation effective July 3, 1998.
The Executive Committee consists of Leonard N. Block, James A. Block and
Thomas R. Block. Subsequent to the fiscal year end, Peter M. Block was added
as a member of this committee.
The Audit Committee consists of Thomas R. Block, William T. Golden and
Mary Tanner.
The Compensation Committee consists of William T. Golden and Peter J.Repetti.
None of the Directors serve on the Boards of Directors of any other public
corporation, except for William T. Golden who serves on the Board of Directors
of Verde Exploration Ltd.
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. On January 8, 1998, Leonard Block and James A. Block executed a
letter expressing their mutual intent to add another Leonard Block family
group member to the Board of Directors of the Company. The letter authorizes
the Melvin Block family group to add a fourth representative to the Board of
Directors. They further stated their awareness that the sentiments expressed
in such letters 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,
Peter M. Block, and Peter J. Repetti (attorney); and the Leonard Block
family group has four (4) representatives on the Board of Directors:
Leonard Block, Thomas Block, Peggy Danziger and Michael Danziger.
<PAGE>36
(b) Executive Officers of the Registrant
The following is a list of each executive officer of the Company, the date
his present term of office will expire, and all other positions presently held
with the Company: PART III
Name Age Date of Date Term
Appointment Expires Positions
Leonard N. Block 86 10/88 6/99 Senior Chairman of the Board*
James A. Block 61 10/88 6/99 Chairman of the Board*
Thomas R. Block 53 10/88 6/99 President*
Donald H. LeSieur 62 10/88 6/99 Executive Vice President
and President, International
Division*(1)
Michael C. Alfano 50 5/87 6/99 Senior Vice President,
D.M.D., Ph.D. Research and Technology(1)(2)
Peter M. Block 31 5/97 6/99 President, European Division
Melvin Kopp 68 10/72 6/99 Senior Vice President and
Chief Financial Officer(1)(2)
Peter C. Mann 56 11/79 6/99 President, U.S. Division(1)(2)
John E. Peters 56 12/78 6/99 Senior Vice President,General
Counsel and Secretary(1)(2)
Gilbert Seymann 59 5/84 6/99 Senior Vice President,
Worldwide Operations(1)(2)
Leonard N. 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 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 administrat ive 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 businesses in Japan, North Asia, Latin America and Canada.
* Member - Office of the Chief Executive
(1) Covered under the Change in Control Agreement described in Item 13.
(2) Consultant - Office of the Chief Executive
<PAGE>37
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.
Peter M. Block is President, European Division, a Consultant to the
Office of the Chief Executive, and is responsible for the Company's businesses
in Europe, Africa, the Middle East and South Asia.
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 - Worldwide Operations, is
responsible for manufacturing and corporate engineering activities worldwide.
All executive officers of the Company have been employed by the Company
in the same or similar capacities for at least the last five years.
The following table sets forth information in respect of compensation
for the fiscal years ended March 31, 1998, 1997 and 1996, for the five most
highly compensated executive officers of the Company based upon total annual
salary and bonus for the fiscal year ended March 31, 1998 (the "Named
Executives").
<PAGE>38
<TABLE>
Item 11. Executive Compensation
<CAPTION> Long Term Compensation
Annual Compensation Awards Payouts
Other Restricted
Annual Stock Options LTIP All Other**
Name and Principal Fiscal Salary Bonus Compen- Award(s) /SARs Payouts Compensation
Position Year $ $ sation($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leonard Block 1998 382,031 153,700 * * * * 35,480
Senior Chairman of the 1997 375,768 165,000 35,144
Board 1996 362,347 136,500 34,950
James A. Block 1998 357,083 148,900 * * * * 13,527
Chairman of the Board 1997 346,345 167,500 10,500
1996 336,252 119,600 9,449
Thomas R. Block 1998 357,083 151,400 * * * * 7,574
President 1997 346,345 168,400 7,181
1996 336,252 125,400 6,702
Donald H. Lesieur 1998 492,006 232,000 * * * 13,925
Executive Vice President 1997 402,369 405,400 - 13,560
Pres. International Division 1996 393,248 243,800 - 13,074
Peter C. Mann 1998 332,146 153,900 * * * 144,220*** 9,709
President, U.S. Division 1997 309,992 175,700 14,905*** 7,549
1996 297,300 184,600 92,986*** 6,687
</TABLE>
* None to be reported.
** Other compensation includes the value of the Company's matching
contribution for the 401-K and group life insurance imputed income.
*** Payments made pursuant to awards under the Special Stock Unit Plan as
follows:
The 1998 payout is based upon two awards granted in January 1993; the 1997
payout is based upon one award granted in February, 1992; and the 1996
payout is based upon two awards granted in January 1991.
Employee Agreements
On January 1, 1981, the Company entered into an Employment Agreement with
Leonard N. Block, which was amended on April 29, 1997 to run through April 30,
2007. 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.
On September 1, 1984, the Company entered into an Employment Agreement with
James A. Block, which was amended on April 29, 1997 to run through April 30,
2007. 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>39
On May 1, 1987, the Company entered into an Employment Agreement with
Thomas R. Block, which was amended to run through April 30, 2007. 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.
For the period of April 1, 1997 through June 30, 1997, Donald H. LeSieur
was covered by an Employment Agreement dated September 1, 1984, which provided
for an annual base salary of not less than $164,600.00, to be adjusted in
accordance with certain economic factors. The Company entered into an
Employment Agreement, effective July 1, 1997, with Mr. LeSieur for a minimum
of one and a maximum of three and one-half years whereby Mr. LeSieur will
reduce his time commitment to the Company but will work for the Company for
a minimum of 125 days in each calendar year. Mr. LeSieur's compensation
for each day of service will be equivalent to the daily cost to the Company
if he continued as a full-time employee. His compensation will
be adjusted annually in accordance with the Company's salary administration
policy. Mr. LeSieur's deferred compensation, pension, and other benefits
will be calculated as though he was a full-time employee earning his gross
salary ($403,484) as of June 30, 1998, as adjusted ("Adjusted Salary").
Upon termination, Mr. LeSieur will receive deferred compensation equal to
one-third of his average annual Adjusted Salary for three years prior to
his termination, which compensation vests at the rate of 1 1/4% per
quarter, except that such compensation will become 100% vested if
termination, occurs due to death or disability. Such payment shall
continue for a maximum term equal to one-half of the number of full years of
service with the Company, which term shall not exceed 13 1/2 years.
Should termination occur by Company action other than for cause, a
further payment equal to one-half his annual Adjusted Salary, as of the
date of termination, shall be paid for five years or until his 65th
birthday, whichever first occurs. Donald H. LeSieur has been employed
by the Company since 1973.
For the period of April 1, 1997 through June 30, 1997, Melvin Kopp was
covered by a Consulting Agreement dated October 22, 1992, which became
effective on March 1, 1995 and required Mr. Kopp to work a minimum of
sixty (60) days annually for which he would be compensated at a rate
equal to his daily cost to the Company while he served as an employee.
Effective May 1, 1997, the Company entered into the following
agreements with Melvin Kopp, Senior Vice President and Chief
Financial Officer (i) a revised Consulting Agreement which expires
on February 28, 2005. Under the Consulting Agreement, Mr. Kopp, now
retired, will continue to provide the Company with his services for
a minimum of one hundred days annually. Mr. Kopp's compensation for
each day of service as a Consultant will be equivalent to the daily
cost to the Company if he continued as an employee after his retirement
in 1995. His compensation will be adjusted annually in accordance with
the Company's salary administration policy, (ii) a Change in Control
Agreement (CIC) which mirrors the provisions of the CICs entered into
with key executives of the Company, and (iii) a Deferred Compensation
Agreement, the provisions of which mirror the terms of the Company's
Special Stock Unit Plan.
<PAGE>40
Effective November 1, 1997, the Company entered into an Employment
Agreement with Peter M. Block to run through April 30, 2007. Pursuant
to the agreement, Peter M. Block's annual base salary is to be no less
$225,000, which shall be adjusted annually by the same factor used by
the Company to increase the salaries of Company executives who are not
in salary ranges and additionally as deemed appropriate by the
Company's Office of the Chief Executive to reflect additional assignments
and enhanced responsibilities. Peter M. Block has been employed by the
Company since 1991.
The Company's compensation program for nonemployee directors
provides that each nonemployee director receive an annual fee of
$8,500, payable in quarterly installments. During the 1997 calendar
year, nonemployee directors also received $1,050 for each board of
directors meeting attended. This attendance fee was increased to
$1,150 for the 1998 calendar year. In addition, members of the audit
committee and compensation committee receive fees of $900 and $450,
respectively, for each committee meeting attended. With the exception
of Melvin Kopp, employees of the Company receive no additional
compensation for acting as a director or member of a committee of the
board of directors. The Company also reimburses directors for expenses
incurred in connection with meetings of the board of committees.
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 payable on retirement years of service:
1998 Table of
Annual Pension Benefits by Final
Average Compensation and Service Classifications
Years of Service at Age 65
Final Average
Compensation 10 20 30 40
$ 50,000 $5,260.80 $10,521.60 $15,782.40 $22,536.00
100,000 12,584.40 25,168.80 37,753.20 51,948.00
150,000 20,084.40 40,168.80 60,253.20 81,948.00
200,000 27,584.40 55,168.80 82,753.20 111,948.00
250,000 35,084.40 70,168.80 105,253.20 130,000.00*
300,000 42,584.40 85,168.80 127,753.20* 130,000.00*
350,000 50,084.40 100,168.80 130,000.00* 130,000.00*
* Maximum permissible benefit under IRC Sec. 415, effective January 1, 1998.
The Company's domestic pension expense for the fiscal years ended
March 31, 1998 and 1997 was $99,751 and $2,565,431, respectively. The
plans are in a fully funded status, and accordingly, the Company's
financial statements do not reflect a domestic pension funding
contribution for the fiscal year ended March 31, 1998.
The compensation covered by these plans is the total regular salary
excluding any bonuses, overtime or other special compensation. (The
"Final Average Compensation")
<PAGE>41
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 33, the accrual
of pension benefits is estimated using only the individual's base
salary calculated on a calendar rather than a fiscal year basis. The
base salaries used for the estimation of pension benefits for the
individuals listed in the table are: James A. Block ($354,357.27);
Thomas R. Block ($354,357.24); Donald H. LeSieur ($403,483.95); and
Peter C. Mann ($318,453.84).
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 in to 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, 1998, the four (4) employees described in Item 10
had the following credited years of service in these plans: James A.
Block, 36 years; Thomas R. Block, 28 years; Donald H. LeSieur, 24
years; and Peter C. Mann, 25 years.
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, Leonard Block, James Block and
Thomas Block. 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 (not subject to reduction)
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, 1998, the units were valued at $105.12.
Subject to certain conditions participants are required to make an
irrevocable decision whether to receive payment of the compensation
amount when the special stock units become fully vested or to defer payment to a
subsequent date.
<PAGE>42
Awards become fully vested on the fifth anniversary of the award provided
the participant is still employed with the Company. When there is termination
of employment of a participant due to death, disability, or retirement, all
special stock units become fully vested, irrespective of the length of the
period between the award date and the date of termination of employment.
When a compensation payment is made, a replacement award equal to the
original dollar value of the award for which payment is made is issued. That
replacement award becomes fully vested in five years and does not take the
place of additional awards which can be made at the discretion of the Committee.
The issuance of replacement awards is contingent upon participant's employment
with the Company. The Company has not established, nor is it required to
establish a special or separate fund or has it segregated assets to assure or
secure nor does the Company guaranty payment of the compensation amount.
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, 1998, a total of 348,902 units had been awarded having an
average value of $92.81 per unit. Of those 348,902 units, 73,907 units at an
average value of $102.26 per unit were awarded during the past fiscal year.
During the year ended March 31, 1998, an aggregate amount of $874,057 was
paid in lump sum payments to the participants in the Special Stock Unit plan.
<TABLE>
Long-Term Incentive Plans - Awards In Last Fiscal Year
Estimated Future Payouts Under Non-Stock
<CAPTION> Price-Based Plans
Performance or
No. of Shares, Other Period ** ** No
Units or Other Until Maturity Threshold Target Maximum
Name Rights or Payout ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Peter C. Mann 1,442* 5 Years 294 92,000 -
2,681* 284 168,000
</TABLE>
* During fiscal year 1998, the following units were awarded to executives:
1,442 units at $104.07 per unit and 2,681 units at $102.90 per unit to
Peter C. Mann.
** Minimum vested value as of March 31, 1998
*** 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.
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 2, 1998, 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.
<PAGE>43
Name and Address Amount and Nature Percent
Title of Class of Beneficial Owner of Beneficial Ownership of Class
Class B Common Leonard Block, Representative 4,086,800(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 4,086,800(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 beneficially owned by the Leonard Block Trust, 408,896; the Thomas
Block Trust, 1,838,952 and the Peggy Danziger Trust, 1,838,952.
(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 2,043,400 shares held in trust for the benefit of
Susan B. Stearns.
(b) Securities ownership of management:
<PAGE>44
The following table sets forth, as of June 2, 1998, the securities
ownership of all directors and Named Executives, individually, and all Directors
and Officers of the Company, as a group
<TABLE>
BLOCK DRUG COMPANY, INC.
SECURITIES BENEFICIALLY OWNED
<CAPTION> Class B Common
Class B Common Stock Beneficially Owned Stock Beneficially
Name of Beneficial No Shared Shared 401-K Plan Owned
Owner Investment Investment Holdings Percentage
Power Power Owned
<S> <C> <C> <C> <C> <C>
Leonard Block 1,131,411 - 950 8% 4,086,800-50%
(1)(4)(7)
James A. Block 2,580,815 - 2,092 18% 4,086,800-50%
(2)(3)(5)
Thomas Block 129,204 2,305,663 1,419 17% -
(4)(7)
Donald H. Lesieur - - 2,128 * -
Michael C. Alfano - - 1,713 * -
Peter M. Block 1,274,893 - 391 9% -
(2)(5)
Michael P. Danziger 95,721 1,067,782 - 8% -
(6)(7)
Peggy Danziger 127,201 1,306,680 - 10% -
(4)(6)(7)(9)
Dominick P. DePaola - - - - -
William T. Golden 6,406 14,405 - * -
Melvin Kopp 2,209 - - * -
Peter C. Mann 867 109 1,875 * -
John E. Peters - 2,152 1,607 * -
Peter J. Repetti (8) 271 - - * -
Gilbert M. Seymann 155 - 1,498 * -
Susan B. Stearns - - - - -
(2)(3)
Mary C. Tanner - - - - -
All Directors and - - - 53% -
Officers as a Group
(17 persons)
*Represents less than one percent (1%) of Class A Common Stock of the Company.
</TABLE>
<PAGE>45
(1) Leonard Block owns 341,600 shares (not including 401-K Plan Holdings); is
deemed to be the beneficial owner of but disclaims ownership of: 785,562
shares owned by Adlen Corporation, of which Leonard Block is the sole
shareholder; 4,249 shares owned by Adele Block, his wife.
(2) James A. Block owns 119 shares (not including 401-K Plan Holdings); is
deemed to be the beneficial owner of: 178,438 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; 1,096,381 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).
James A. Block has sole investment powers with respect to the shares held
by such trust. For the purpose of reporting shares for which a
beneficial owner has sole investment power in the tabular presentation on
page 40, all 1,274,819 shares of these two trust have been included in
the total number of shares reported for both James A. Block and Peter
Block, and as a result such shares have been reported twice; and
1,305,877 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 1,305,877 Class A shares and
2,043,400 Class B shares owned by the trusts for the benefit of Susan B.
Stearns of which he is a trustee or co-trustee. In computing the
percentage of Class A shares owned by a beneficial owner, 1,274,819
shares (representing the total number of shares owned by the two trusts
in which Peter Block is a co-trustee with James A. Block) were allocated
to James A. Block and 1,274,819 shares were allocated to Peter Block,
and as a result, the percentage of Class A shares owned has been
attributed to both parties. In computing the aggregate number of shares
owned by directors and officers as a group, the 1,274,819 shares owned by
these two trusts were counted only once.
(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 2,043,400 shares held in trust for the benefit of Susan B. Stearns.
(4) Thomas Block owns 63,533 shares (not including 401-K Plan Holdings); is
deemed to be the beneficial owner but disclaims ownership of: 25,053
shares owned by Marilyn Friedman, his wife; 40,618 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; 128,298 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; 1,914,992 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; 262,373 shares owned by four 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 40, all 262,373 shares of these four
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, 262,373 shares (representing of the total number of
shares owned by the four trusts) were allocated to Thomas Block and
262,373 shares were allocated to Peggy Danziger and as a result the
percentage of Class A shares owned has been attributed to both parties.
<PAGE>46
In computing the aggregate number of shares owned by directors and
officers as a group, the 262,373 shares owned by these four trusts were
counted only once. Thomas Block disclaims ownership of those shares in
which he shares investment powers with Peggy Danziger.
(5) Peter Block owns 74 shares (not including 401-K Plan Holdings); 1,274,819
shares owned by two trusts for the benefit of James A. Block of which
Peter Block is co-trustee. James A. Block has sole investment powers
with respect to the shares held by such trusts. For the purpose of
reporting shares for which a beneficial owner has no shared investment
power in the tabular presentation on page 40, all 1,274,819 shares of
these two trusts have been included in the total number of shares
reported for James A. Block and Peter Block, and as a result such share
have been reported twice. In computing the percentage of Class A shares
owned by a beneficial owner, 1,274,819 shares (representing the total
number of shares owned by the two trusts in which Peter Block is a
co-trustee with James A Block) were allocated to James A. Block and
1,274,819 shares were allocated to Peter Block. In computing the
aggregate number of shares owned by directors and officers as a group,
the 1,274,819 shares owned by these two trusts were counted only once.
(6) Michael Danziger owns 14,687 shares, is deemed to be the beneficial
owner but disclaims ownership of 5,811 shares owned by Elizabeth
Danziger, his wife, 14,086 shares held by Michael Danziger as Custodian
under the Massachusetts Uniform Gifts to Minors Act for James, Robert
and Charles Danziger, his children; 61,137 shares held in trust for
Michael Danziger, beneficiary of such trust; 27,784 shares owned by a
trust for the benefit of Michael Danziger of which Michael Danziger is
a co-trustee (with Richard Danziger, his father, and Katherine Danziger
Horowitz, his sister) and shares investment powers with respect to the
shares held by such trust; 1,039,998 shares owned by a trust for the
benefit of Peggy Danziger of which Mic hael Danziger is a co-trustee
(with Peggy Danziger, his mother, and Katherine Danziger Horowitz,
his sister) and shares investment power with respect to the shares
held by such trust; for the purpose of reporting shares for which a
beneficial owner shares investment power in the tabular presentation
on page 40, all 1,039,998 shares of such trust have been included in
the total number of shares reported for Michael Danziger and Peggy
Danziger, and as a result have been reported twice. In computing the
percentage of Class A shares owned by a beneficial owner, 1,039,998
shares (representing the total number of shares owned by said trust)
were allocated to Michael Danziger and 1,039,998 shares were allocated
to Peggy Danziger. In computing the aggregate number of shares owned
by directors and officers as a group, the 1,039,998 shares owned by
such trust were counted only once.
Michael Danziger disclaims ownership to those shares in which he shares
investment powers with Peggy Danziger.
<PAGE>47
(7) Peggy Danziger owns 127,201 shares; 1,039,998 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; for the purpose of reporting shares for which a beneficial
owner shares investment power in the tabular presentation on page 40,
all 1,039,998 shares of such trust have been included in the total number
of shares reported for Peggy Danziger and Michael Danziger, and as a
result have been reported twice. In computing the percentage of Class A
shares owned by a beneficial owner, 1,039,998 (representing the total
number of shares owned by said trust) were allocated to Peggy Danziger
and 1,039,998 shares were allocated to Michael Danziger and as a result,
the percentage of Class A shares owned has been attributed to both
parties. In computing the aggregate number of shares o wned by
directors and officers as a group, the 1,039,998 shares owned by said
trust were counted only once; 262,373 shares owned by four 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 purpose of reporting shares for which a beneficial owner shares
investment power in the tabular presentation on page 40, all 262,373
shares of these four trusts have been included in the total number of
shares reported for both such shares Thomas Block and Peggy Danziger, and
as a result such shares have been reported twice; and all 4,309 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, 262,373 shares
(representing the total number of shares owned by the four trusts in
which Peggy Danziger is a co-trustee with Thomas Block) were allocated
to Thomas Block and 262,373 shares were allocated to Peggy Danziger and
as a result, the percentage of Class A shares owned has been attributed
to both parties. In computing the aggregate number of shares owned by
directors and officers as a group, the 262,373 shares owned by these
four trusts were counted only once.
Peggy Danziger disclaims beneficial ownership of one-half of the shares
for which she is co-trustee.
(8) Peter J. Repetti disclaims beneficial ownership of 271 shares owned by
his wife.
(9) Peggy Danziger disclaims beneficial ownership to all 4,309 shares of
which Richard M. Danziger, her husband is co-trustee with a third party.
Item 13. Certain Relationships and Related Transactions
On March 1, 1989, Donald H. LeSieur, Executive Vice President, United States
gave a promissory note to the Company in the amount of $200,000 pursuant to an
agreement under which two previous loans were consolidated into a single loan
evidenced by a single promissory note. Under the terms of the consolidated loan
agreement the previous loans were cancelled. On May 26, 1989, Mr. LeSieur
received an additional loan in the amount of $20,000 also secured by a
promissory note. These loans are collateralized by sums to which Mr. LeSieur
is entitled as deferred compensation under the Company's Special Stock Unit
Plan or under any other deferred compensation program in which Mr. LeSieur
participates and a mortgage on certain real estate owned by Mr. LeSieur and his
wife equal to the amount of the loan. 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.
<PAGE>48
On May 31, 1998, John E. Peters, Senior Vice President, General Counsel and
Secretary, repaid in full the remaining principal balance of $80,000 on a
Promissory Note to the Company in the original principal amount of $100,000
made pursuant to an agreement, dated June 1, 1993, under which the Company
loaned $100,000 to Mr. Peters. The loan to Mr. Peters was collateralized by
sums to which Mr. Peters was 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 equal to the amount of loan. Mr. Peters paid
interest on the unpaid balance over the term of the loan at a rate equal to the
seven year Treasury Bill rate as published in the New York Times, as adjusted
semi-annually on July 1 and January 1 of each year.
Change in Control Agreement
Donald H. LeSieur, Melvin Kopp, Peter C. Mann, John E. Peters and Michael C.
Alfano 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 expired on 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 1998, Leonard Block, James A. Block,
Thomas R. Block and Donald H. LeSieur were members of the Office of the Chief
Executive.
<PAGE>49
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 Coopers & Lybrand L.L.P., dated June 2, 1998.
Consolidated Balance Sheets - March 3l, 1998 and 1997,
Consolidated Statements of Income and Retained Earnings for the
Years ended March 3l, 1998, 1997 and 1996,
Consolidated Statements of Cash Flows for the Years ended March 3l,
1998, 1997 and 1996,
Notes to Consolidated Financial Statements
Supplementary Data:
Selected quarterly data for the two years ended March 3l, 1998.
2. Additional Financial Statement Data:
Supplemental Auditors' Reports
3. Financial Statement Schedule: II - List names of auditors and date of
reports
Schedules other than those listed above are omitted because they are not
required or not applicable.
4. Index to Exhibits:
Exhibit 3(a) Restated Certificate of Incorporation, as amended June
14, 1971, December 10, 1985, October 9, 1987 and October
31, 1990, incorporated by reference from Exhibit 4.1 in
the Company's Form S-8 filed with the Securities and
Exchange Commission on June 3, 1998.
Exhibit 3(b) Amended and Restated By-Laws, as amended through January
8, 1998, incorporated by reference from Exhibit 4.2 in
the Company's Form S-8 filed with the Securities and
Exchange Commission on June 3, 1998.
Exhibit 3(c) Certified Resolution dated June 19, 1998 of the Board of
Directors Resolution dated June 2, 1998 amending the
Company By-Laws.
Exhibit 10(a) Block Drug Company, Inc. Stock Option Plan, dated May
27, 1998, incorporated by reference to Exhibit 99.1 to
the Company's Form S-8 filed with the Securities and
Exchange Commission on June 3, 1998.
Exhibit 10(b) Block Drug Company, Inc.'s Special Stock Unit Plan,
amended and restated as of January 31, 1997.
Exhibit 10(c) Block Drug Company, Inc.'s Restated Excess Benefit
Pension Plan, effective May 31, 1983.
<PAGE>50
Exhibit 10(d) Employment Agreement effective July 1, 1997, between
Block Drug Company, Inc. and Donald H. LeSieur,
Executive Vice President, President International
Division.
Exhibit 10(e) Employment Agreement effective November 1, 1997,
between Block Drug Company, Inc. and Peter M. Block,
President European Division.
Exhibit 10(f) Consulting Agreement effective May 1, 1997, between
Block Drug Company, Inc. and Melvin Kopp, Senior Vice
President and Chief Financial Officer.
Exhibit 10(g) Form of Award Letter under the Stock Option Plan, with
changes required by laws of foreign jurisdiction
relating to local labor law considerations and tax
matters.
Exhibit 21 Subsidiaries of the Company.
Exhibit 27 The Financial Data Schedule.
(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.
Block Austria Gesellschaft m.b.H.
ResselstraBe 18
A-6020 Innsbruck
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying balance sheets of Block Austria Gesellschaft
m.b.H.
We took as basis for our audit the Austrian Commercial Code and the rules of
your Audit Procedures for foreign Subsidiaries and Branches for the 1997
business year. The financial statements and all other documents used in the
audit are the responsibility of the management of Block Austria Gesellschaft
m.b.H..
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.
<PAGE>51
Audit Opinion
There are no objections against the enclosed financial statements as of
December 31, 1997 concerning the accounting, which was the basis for the
financial statements. Therefore, we can issue the following.
unqualified auditor's opinion
to the financial statements as of December 31, 1997
according to 274 (1) Austrian Commercial Code
"Based on an audit performed in accordance with our professional duties, the
accounting records and the financial statements comply with the legal
regulations. The financial statements present, in compliance with required
accounting principles, a true and fair view of the net worth, financial position
and results of the company."
Innsbruck, February 9, 1998
Europa Treuhand Ernst & Young Tirol
Wirtschaftspr fungs-und Steuerberatungs
Gesellschaft m.b.H.
(Dkfm. Dr. Rolf Kapferer) (Mag. Angelika Hellweger)
To the Board of Directors of
STAFFORD-MILLER CONTINENTAL N.V.
Nijverheidsstraat 9
2260 OEVEL-WESTERLO
Dear Sirs,
We have audited the accompanying balance sheets of Stafford-Miller Continental
N.V. as of December 31, 1997 and 1996, and the related statements of income,
retained earnings and cash flows for each of the three years in the period
ended December 31, 1997. 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, 1997 and 1996 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 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 materials respect in
relation to the basic financial statemen ts taken as a whole.
<PAGE>52
Ernst & Young
J. Englishstraat 54
2140 Borgerhout (Antwerpen)
April 8,1998
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Block Drug Company (Japan), Inc.:
We have audited the accompanying balance sheets of Block Drug Company (Japan),
Inc.(a Japanese corporation) as of December 31, 1997 and 1996, and the related
statements of income, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Block Drug Company (Japan),
Inc. as of December 31, 1997 and 1996, and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for depreciation in 1997.
Arthur Andersen
Osaka, Japan
March 5, 1998
<PAGE>54
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, 1997 and 1996, and the statements of income and retained
earnings and cash flows for the years 1997, 1996 and 1995. 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 statements 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 Nederland B.V.
at December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years 1997, 1996 and 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 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 ba sic financial statements taken as a whole.
Moret Ernst & Young Accountants
Drentestraat 20
1083 HK Amsterdam
PO Box 7883
1008 AB Amsterdam
The Netherlands
February 11, 1998
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Stafford-Miller S.r.l.
We have audited the accompanying balance sheets of Stafford Miller S.r.l. as of
December 31, 1997 and 1996 and the related statements of income and retained
earnings and cash flows for each of the three years in the period ended December
31, 1997. 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, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 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 as of and for the year ending December 31, 1997, is presented for
the purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Reconta Ernst & Young SpA
Via Torino 68
20123 Milano
February 11, 1998
<PAGE>55
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Stockholders and the Board of Directors
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 of
December 31, 1997 and 1996, and the related statements of income and retained
earnings and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Block Drug Co. (Philippines),
Inc. as of December 31, 1996 and 1996, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
As explained in Note 9 to the financial statements, the Company changed its
method of accounting for income tax effective 1997.
Our audits have been made primarily for the purpose of expressing an opinion on
the basic financial statements taken as a whole. The supplementary information
accompanying the financial statements is not necessary for the fair presentation
of the financial position, results of operations, and cash flows of Block Drug
Co. (Philippines), Inc. in conformity with generally accepted accounting
principles. The supplementary information is presented only for purposes of
additional analysis. The supplementary information has been subjected to the
auditing procedures applied in the audit 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.
Sycip, Gorres,Velayo & Co.
PTR No. 1263144
January 15, 1998
Makati City
February 16, 1998
<PAGE>55
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, 1998 and 1997 and the related statements of
income and retained earnings and cash flows for each of the three years in the
period ended Marc h 31, 1998. 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 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 Block Drug Company, Inc.,
Ratingen Branch, as of March 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1998, 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 r elation to the basic financial statements taken as a
whole.
Schitag Ernst & Young
Deutsche Allgemeine Treuhand AG
Wirtschaftsprufungsgesellschaft
Dingler Beyer
Wirtschaftsprufer Wirtschaftsprufer
(Independent Public (Independent Public
Accountant) Accountant)
Dusseldorf,
April 23, 1998
<PAGE>56
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, 1997 and 1996, and the related statements
of income and retained earnings and cash flows for the three years in the period
ended December 31, 1997. 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, 1997 and 1996 and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1997, 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'E&Y Audit
Christian Colineau
February 10, 1998
<PAGE>57
REPORT OF INDEPENDENT ACCOUNTANTS
Buenos Aires, February 18, 1998
To The Board of Directors of
Stafford Miller Argentina S.A.
In our opinion, the accompanying balance sheets of Stafford Miller Argentina
S.A. at December 31, 1997 and 1996 and the related statements of income and
retained earnings and of cash flows for each of the three years ended
December 31, 1997, expressed in historical pesos, are presented fairly, in all
material respects, for purposes of consolidation on the bases described in
Note 1. Our audits of the financial statements expressed in historical pesos
were made in conjunction with our audits of the restated local currency
statutory financial statements.
These financial statements are the responsibility of Stafford Miller
Argentina S.A. management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance wi th auditing standards generally accepted in the
United States of America which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
We have also audited the restated local currency financial statements of
Stafford Miller Argentina S.A. for the years ended December 31, 1997 and 1996,
not submitted herewith, prepared on the basis of accounting principles
generally accepted in Argentina. An unqualified report will be issued once
the financial statements at December 31, 1997 are approved by the Company's
Board of Directors. On April 30, 1997 we issued our unqualified report on the
financial statements at December 31, 1996.
Because of the limited purpose of the financial statements expressed in
historical pesos, this report is intended solely for the use of management
of Stafford Miller Argentina S.A. and Block Drug Company, Inc.
PRICE WATERHOUSE & CO.
by (Partner)
Juan P. Jackson Schedule II
<PAGE>58
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
<CAPTION>
Valuation and Qualifying Accounts
Years Ended March 31, 1998, 1997 and 1996
Additions
Balance at Charge to
Beginning Costs and Balance at
Description of Period Expenses Deduction End of Period
1998
<S> <C> <C> <C> <C>
Allowances for
discounts,
doubtful accounts
and returns $4,504,000 $27,095,000 $27,153,000 $4,446,000
1997
Allowances for
discounts,
doubtful accounts
and returns $4,188,000 $27,867,000 $27,551,000 $4,504,000
1996
Allowances for
discounts,
doubtful accounts
and returns $3,222,000 $23,645,000 $22,679,000 $4,188,000
</TABLE>
<PAGE>59
EXHIBIT 21
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 Austria Gmbh Austria
Block Uruguay, S.A. Uruguay
Block Drug Company (Canada) Limited Ontario, Canada
Block Drug Company (Japan), Inc. Japan
Block Drug Company (Philippines), Inc. Manila, Philippines
Block Drug Company (Thailand) Limited Thailand
Block Drug Company (Korea) Limited Korea
Laboratoires Stafford-Miller S.A.R.L. (a) France
Stafford Miller Argentina S.A. Argentina
Stafford-Miller (Canada) Inc. (b) Ontario, Canada
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 (b) Great Britain
Stafford-Miller S.r.l. Italy
Stafford-Miller Scandinavia Aktiebolag Sweden
(a) Wholly-owned subsidiary of Stafford-Miller Continental, NV-SA.
(b) Wholly-owned subsidiary of Stafford-Miller (Ireland) Limited.
<PAGE>60
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 2nd day of
June, 1998.
BLOCK DRUG COMPANY, INC.
(Registrant)
MELVIN KOPP
BY 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 2nd day of June, 1998.
Principal Executive Officer:
LEONARD N. BLOCK
Leonard N. Block
Senior Chairman
Principal Financial and Accounting Officer:
MELVIN KOPP
Melvin Kopp
Senior Vice President & Chief Financial Officer
Directors:
LEONARD BLOCK JAMES A. BLOCK
Leonard Block James A. Block
THOMAS R. BLOCK PETER M. BLOCK
Thomas R. Block Peter M. Block
DONALD H. LESIEUR MICHAEL C. ALFANO
Donald H. LeSieur Michael C. Alfano, D.M.D., Ph.D.
MICHAEL P. DANZIGER PEGGY DANZIGER
Michael P. Danziger Peggy Danziger
DOMINICK P. DEPAOLA WILLIAM T. GOLDEN
Dominick P. DePaola, D.D.S., Ph.D. William T. Golden
MELVIN KOPP PETER C. MANN
Melvin Kopp Peter C. Mann
JOHN E. PETERS PETER J. REPETTI
John E. Peters Peter J. Repetti
MARY C. TANNER
Mary C. Tanner
<PAGE>61
Exhibit 3(c)
Certified Resolution
I, John E. Peters, Hereby Certify that I am the duly elected and acting
Secretary of Block Drug Company, Inc., a New Jersey corporation, and that the
following is a true and correct copy of a Resolution adopted by the Board of
Directors of sa id corporation on June 2, 1998.
RESOLVED, that the following four (4) Officers, the Senior Chairman of
the Board, the Chairman of the Board, the President, and the President Europe of
the Corporation, are hereby appointed members of the Executive Committee of the
Board of D irectors, to act during the intervals between meetings of the Board
of Directors with the right, except as limited by statute or the Bylaws, to
exercise all the powers of the Directors in the management of the business and
affairs of the Corporation. Said Executive Committee shall act only upon the
consent of a majority of such members.
RESOLVED, that Leonard Block, James Block, Thomas Block, and Peter Block
are hereby appointed members of the Special Stock Unit Plan and Stock Option
Plan Committee of the Board of Directors. Said Special Stock Unit Plan and
Stock Option Plan Committee shall act only upon the consent of a majority of
such members.
In Witness Whereof, I have hereunto set my hand and the seal of the
corporation this 19th day of June, 1998.
JOHN E. PETERS
<PAGE>62 John E. Peters, Secretary
EXHIBIT 10(b)
SPECIAL STOCK UNIT PLAN
AS AMENDED, JANUARY 31, 1997
BLOCK DRUG COMPANY, INC.
(U.S. and International Employees)
A. PURPOSES:
The 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 stockholders of the Company and
the employees who are Participants in the Plan.
In furtherance of the foregoing it is the express purpose of the Plan
to provide Participants with:
1. Retirement income;
2. Deferred compensation;
3. Supplemental income; and
4. To have all payments from the Plan considered qualified
retirement benefits as set forth in paragraph 5 of Section L of
this Plan.
B. DEFINITIONS:
1. As used in this Plan, the following terms shall have the
meanings set forth below:
(a) Award Date" shall mean the date on which an award, or
replacement award, of one or more Special Stock Units is made
to a Participant.
(b) "Base Period Earnings Per Share" shall mean four (4) times the
average of the Quarterly Earnings Per Share of the twelve (12)
consecutive completed Calendar Quarters next preceding the
Award Date: PROVIDED, HOWEVER, that if the sum of the Quarterly
Earnings Per Share of any four (4) consecutive Calendar Quarters
[within such period of three (3) years] is less than the sum of
the Quarterly Earnings Per Share of the immediately preceding
four (4) consecutive Calendar Quarters, there shall be
substituted, for each of such succeeding four (4) Calendar
Quarters, the net earnings per share fixed by the Committee.
(c) "Base Period Value Per Unit" shall mean an amount equal to
fifteen (15) times the Base Period Earnings Per Share multiplied
by two (2).
(d) "Calendar Quarter" shall mean the quarter-annual periods ending
on June 30, September 30, December 31 and March 31.
(e) "Committee" shall mean the committee having control of the
administration of the Plan as provided for in Section C of
this Plan.
(f) "Common Stock" shall mean the Class A Common Stock of the
Company, or any class of common stock of the Company issued in
exchange or substitution therefor.
(g) "Company" shall mean Block Drug Company, Inc., or any successor
thereto.
(h) "Disability" and "Disabled" shall have the meaning given those
terms in the Block Drug Retirement Plan, as amended from time
to time.
(i) "Deferred Compensation Amount" shall mean the amount payable
to a Participant, Participant's designated beneficiaries or
Participant's estate which shall be determined in the manner
provided for in Section G of this Plan.
(j) "Election" shall mean Participant's required irrevocable
decision, within sixty (60) days after an Award Date, as
evidenced by a form provided by the Company and signed by
Participant, to receive payment of the Deferred Compensation A
mount when the Special Stock Units become fully vested, or to
defer payment to any subsequent year after the Special Stock
Units become fully vested, but subject to the provisions of
Section H paragraph 1 and the restrictions in Section H
paragraph 2. If Participant decides to defer payment,
Participant shall have the choice of designating whether
payment of the Deferred Compensation Amount shall be made on
February 15, or August 15, in the year in which Participant
elects to receive payment ("the Elected Payment Day"). Thus,
the Termination Earnings Per Share Date will be either the
31st of December or the 30th of June of that year whichever
immediately precedes the date Participant elected to receive
payment.
(k) "Hardship" shall mean an extreme financial emergency or need
for which funds are not reasonably available from other sources.
These needs include extraordinary medical expenses not covered
by insurance, purchase of a primary residence, burdensome family
educational expenses or any other extraordinary financial need.
(l) "Interest" shall mean the annual rate of interest equal to the
prime rate of interest as published in the Wall Street Journal
on the day which necessitates payment is to be made, minus the
percentage obtained by multiplying said prime rate by the
percentage amount of the maximum Federal and the effective New
Jersey corporate income tax rates applicable to the Company.
In its sole and nonreviewable discretion, the Committee shall
determine whether and to what extent, if any, adjustments should
be made to the rate of interest to be paid, if there are
fluctuations in the tax rates applicable to the Company.
(m) "Normal Retirement Date" shall mean the first day of the month
coincident with or next following a Participant's sixty-fifth
(65th) birthday; PROVIDED, HOWEVER, that the Committee, in its
sole and nonreviewable discretion, and upon such criteria as
the Committee may consider appropriate, may treat the date of
the Termination of Employment of any living, nondisabled
Participant over the age of sixty-two (62) years as his Normal
Retirement Date, in which event such Participant's Termination
of Employment shall be deemed to have occurred by reason of
Participant's retirement on Participant's Normal Retirement
Date for all purposes hereunder.
(n) "Participant" shall mean an employee of the Company or a
Subsidiary to whom one or more Special Stock Units are awarded
under this Plan.
(o) "Participant's Account" shall mean the record established by
the Company for each Participant showing the number of Special
Stock Units awarded to Participant by the Committee from time
to time, and the Base Period Value Per Unit and Award Date of
each such Special Stock Unit.
(p) "Plan" shall mean the Special Stock Unit Plan of the Company,
as described herein, or as amended from time to time.
(q) "Quarterly Earnings Per Share" shall mean the Calendar Quarter
net earnings per share of Common Stock reported by the Company
to the Securities and Exchange Commission, as adjusted, by the
Committee, or as restated by the Company, if the Committee, in
its sole and nonreviewable discretion, shall deem it
appropriate, by, but not limited to:
(I) Eliminating or restating any one or more items of income,
expense, gain or loss, of whatever nature, and/or:
(II) Restating net earnings per share to reflect a material reduction
or increase in the number of outstanding shares of the common
stock of the Company, of whatever class, and/or:
(III) Limiting the Quarterly Earnings Per Share for any Calendar
Quarter to an amount equal to one hundred and fifteen percent
(115%) of the Quarterly Earnings Per Share of the comparable
Calendar Quarter in the immediately preceding Calend ar Year,
after adjusting the earnings of each such prior year's quarter
by the increase in the cost-of-living for the twelve (12) month
period succeeding such prior year's quarter. Such
cost-of-living adjustment shall be based upon the Consumer
Price Index for All Urban Consumers published by the U.S.
Department of Labor, Bureau of Labor Statistics or its
equivalent.
In the event that the net earnings per share of any one or more
prior Calendar Quarters shall be adjusted, as provided for
herein, the Committee, in its sole and nonreviewable discretion,
shall determine whether and to what extent, if any, such prior
period adjustments should be reflected in the computation of
Base Period Earnings Per Share and/or Termination Earnings Per
Share and whether the number of Special Stock Units credited
to each Participant's Account should be adjusted .
(r) "Special Stock Unit" shall mean the equivalent of two (2)
shares of the Common Stock having a value equal to its Base
Period Value Per Unit.
(s) "Special Stock Units Awarded" shall mean the number of Special
Stock Units originally awarded and adjusted to reflect stock
dividends paid on the Common Stock or as otherwise adjusted by
the Committee.
(t) "Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the total combined voting stock, of all
classes, is owned by the Company and/or another corporation or
entity which directly or indirectly controls, is controlled by,
or is under control of the Company.
(u) "Termination of Employment" shall mean the cessation of any
Participant's employment with the Company and any and all
Subsidiaries for any reason, including death or disability.
(v) "Termination Date" shall mean the first to occur of (a) the
Participant's Normal Retirement Date, or (b) the effective date
of the Termination of Employment of a Participant from the
Company and any and all Subsidiaries, irrespective of the cause
or reason for such termination.
(w) "Termination Earnings Per Share" shall mean four (4) times the
average of the highest Quarterly Earnings Per Share of any
twelve (12) consecutive Calendar Quarters starting with the
first Calendar Quarter used to compute the Participant's Base
Period Earnings Per Share and ending with the last completed
Calendar Quarter on or before the date Participant is entitled
to receive payment.
(x) "Termination Value Per Unit" shall mean an amount equal to
fifteen (15) times the Termination Earnings Per Share
multiplied by two (2).
C. ADMINISTRATION:
1. The Board of Directors of the Company shall appoint a Committee
of two (2) or more individuals, who shall serve at the pleasure
of the Board of Directors, to administer the Plan. The
Committee shall elect one of the members thereof to serve as
Chairman at the pleasure of the Committee. No award of Special
Stock Units shall be made to an employee of the Company or any
Subsidiary while and so long as that employee shall be a member
of the Committee.
2. The Committee, among other things, shall determine, in its sole
discretion, subject to the provisions of this Plan:
(a) The employees of the Company and/or its Subsidiaries who
shall participate in this Plan from time to time;
(b) The time or times when Special Stock Units shall be
awarded to any and all Participants; and
(c) The number of Special Stock Units which shall be awarded
to each and every Participant.
3. The Committee shall construe and interpret the meaning and
application of all provisions of this Plan, and all such
constrictions and interpretations shall be binding and
conclusive on all persons having any interest therein.
4. The Committee shall hold meetings upon such notice, at such
place or places, and at such time or times as the members
shall determine from time to time. The Committee may delegate
ministerial duties to one or more employees of the Company or
its Subsidiaries, and may authorize one or more of their number
as an agent to execute or deliver any instrument or make any
payment on behalf of the Committee, and may employ or engage
such persons as may be reasonably required or desirable in
carrying out the provisions of this Plan.
5. A majority of the members of the Committee at the time in office
shall constitute a quorum for the transaction of business. All
resolutions or other actions taken by the Committee shall be by
the vote of a majority of the Committee, but resolutions may be
adopted or other actions taken by the Committee without a
meeting upon the written consent signed by a majority of the
members of the Committee.
6. No member of the Committee shall receive any compensation for
services rendered as such, nor shall such member be liable for
any act done or omitted or determination made in good faith.
7. The Company shall bear all costs and expenses incident to the
administration of the Plan.
D. ELIGIBILITY:
1. Any employee of the Company or its Subsidiaries, including an
employee who also may be an officer or director of the Company
or any Subsidiary (excepting only any employee who is a member
of the Committee while and so long as such emp loyee is a
member) shall be eligible to receive an award of one or more
Special Stock Units.
E. AWARD OF SPECIAL STOCK UNITS:
1. The Committee, from time to time, may award one or more Special
Stock Units to a Participant. Each such award shall be made as
of a month and day designated by the Committee.
2. All Special Stock Units awarded to a Participant shall be
credited to Participant's Account as of the Award Date.
Within sixty (60) days following such credit, the Committee
shall issue a non-negotiable certificate to the Participant
setting forth the number of Special Stock Units awarded to
Participant, the Base Period Value Per Unit and the Award Date
of each of such Special Stock Units.
3. The aggregate number of Special Stock Units credited to all
Participants at any one time shall not exceed two and one-half
percent (2.5%) of the total number of the then outstanding
shares of all classes of common stock of the Company . In
computing such aggregate number of Special Stock Units, there
shall not be included Special Stock Units awarded to any and
all Participants whose Termination of Employment has occurred
but, pursuant to paragraph 5 of Section H of this Plan, the
Deferred Compensation Amount has not yet been paid.
4. The Committee at any time and from time to time, with the
consent of a Participant, may cancel all or any number of
Special Stock Units theretofore awarded to Participant and
make an award of one or more Special Stock Units in lieu
thereof.
F. VESTING:
1. Except as otherwise provided in paragraphs 2 of this Section,
one-twentieth (1/20) of the Special Stock Units Awarded to a
Participant and credited to Participant's Account, as of a
particular Award Date, shall become vested at the end of such
successive period of three (3) full months following such Award
Date, provided that during such period, the Participant shall
be employed by the Company or a Subsidiary: thus, all Special
Stock Units Awarded to a Participant on any one Award Date
shall become fully vested on the fifth (5th) anniversary of
such Award Date, provided that on such fifth (5th) anniversary
Participant is employed by the Company or a Subsidiary and had
been so employed continuously during the period between the said
Award Date and the fifth (5th) anniversary thereof.
2. In any case when there is termination of employment of a
Participant due to death or disability, or if the Participant's
Normal Retirement Date is reached, (i) all Special Stock Units
in Participant's Account shall be fully vested on the date of
the occurrence of such event, irrespective of the length of the
period between the Award Date of any or all Special Stock Units
and the date of such termination of employment, or Normal
Retirement Date (ii) no additional Special Stock Units shall
be awarded to Participant, (iii) the value of said Special Stock
Units in Participant's Account will no longer appreciate and
(iv) the Deferred Compensation Amount will be paid in accordance
with the provisions of paragraph 5 of Section H of the Plan.
G. DETERMINATION OF DEFERRED COMPENSATION AMOUNT:
1. When Participant's Termination Date is reached, then, solely
with respect to that number of Special Stock Units Awarded and
credited to Participant's Account which are vested on the
Termination Date (in accordance with the provisions of
Section F of this Plan) or when payments are to be made in
accordance with Section H of this plan, Participant shall be
entitled to receive as the Deferred Compensation Amount the
excess, if any, of:
(a) The Termination Value Per Unit of the aggregate number
of Special Stock Units Awarded which are vested:
(b) The aggregate Base Period Value Per Unit of such vested
Special Stock Units awarded: PROVIDED, HOWEVER, in
computing the Deferred Compensation Amount, there shall
not be taken into account any one Award where the
aggregate Bas e Period Value Per Unit exceeds the
Termination Value Per Unit of the aggregate number of
Special Stock Units Awarded.
H. PAYMENT OF DEFERRED COMPENSATION AMOUNT:
1. Subject to the provisions of paragraph 2 of this Section,
Participants who have not made an Election to defer payment
of their Deferred Compensation Amount shall be paid the
Deferred Compensation Amount on the thirtieth (30th) day
following the date on which Participant's Special Stock Units
become fully vested in accordance with the provisions of this
Plan. Participants who have made an Election to defer payment
shall be paid their Deferred Compensation Amount on the Elected
Payment Day. Participants receiving payment under the
provisions of this paragraph, shall receive replacement Special
Stock Units as provided in paragraph 4 of this Section.
2. Regardless of when vesting occurs, payments will not be made
during the period commencing with Participant's 60th birthday
and ending with Participant's Normal Retirement Date, except
when there is Termination of Employment.
3. In the case of Hardship, any Participant may request the
Committee for payment of Participant's Deferred Compensation
Amount with respect to any or all of those Special Stock Units
credited to Participant's Account which are fully vested as of
the date of such request. Such request must be made in writing
at least thirty (30) days prior to the proposed date of payment.
If the Committee, in the exercise of its sole and nonreviewable
discretion, shall consent to the request for such payment,
then the Deferred Compensation Amount to which the Participant
is entitled with respect to such fully vested Special Stock
Units shall be determined and then paid on the thirtieth (30th)
day following the date of the request, with a replacement award
to be issued in the manner provided in paragraph 4 of this
Section.
4. Except in situations where Participant is paid a Deferred
Compensation Amount (i) due to Participant's Normal Retirement
Date having been reached, or (ii) due to Participant's
Termination of Employment, upon Participant's tender of the
certificate(s) covering those Special Stock Units for which
payment is made the Special Stock Units will be cancelled and
a new award, equal to the original dollar value of the award(s)
being cancelled, will be issued. The Award Date of the
replacement Special Stock Units will be that date which is
thirty (30) days prior to the date payment is due. The
replacement Special Stock Units will fully vest in five (5)
years and will not take the place of normally scheduled awards.
The issuance of r eplacement Special Stock Units shall be
contingent upon Participant's employment by the Company or any
Subsidiary on the date payment is made.
5. When there is Termination of Employment of a Participant, or
if the Participant's Normal Retirement Date is reached, the
Deferred Compensation Amount shall be paid within one (1) year
from the date the event occurs. In the event the termination
of employment of a Participant shall be occasioned by
Participant's death or disability, the Deferred Compensation
Amount shall be paid, in the case of a disabled Participant,
to the Participant, or otherwise as Participant may in writing
direct, or else to a duly appointed committee, guardian or
conservator, if any, or in the case of a deceased Participant,
to the beneficiary or beneficiaries most recently designated by
the Participant in a writing filed with the Committee, or if no
such designation shall have been made, or if all designated
beneficiaries shall die before all payments have been made,
then any remaining payments shall be made to the Participant's
estate.
6. In all instances when the Deferred Compensation Amount is not
paid on the thirtieth (30th) day succeeding the event which
necessitates payments being made, Interest on the unpaid amount
shall accrue as of the thirty-first (31) day after the event
until the Deferred Compensation Amount is paid.
I. ADJUSTMENT OF SPECIAL STOCK UNITS:
1. If there shall be a material change in the character or number
of the outstanding shares of the Common Stock by reason of any
split-up, stock dividend, combination, recapitalization, merger,
consolidation or any redemption or exchange of shares, or
otherwise, the Committee shall make adjustments to (a) the
Base Period Value Per Unit of each of the Special Stock Units
previously awarded, or (b) the number of Special Stock Units
credited to each Participant Account, or both, as is necessary
to assure that they will reflect the same proportionate value
to the Participant after any such corporate action as before.
J. NON-ALIENATION OF BENEFITS:
1. A Participant's rights, interests and benefits under this Plan
shall not be subject to assignment, transfer, pledge,
encumbrance or charge, excepting only that in the case of a
Participant's death, Participant's rights, interests and
benefits may pass to Participant's beneficiaries or
Participant's estate as provided for in paragraph 5 of Section H
of this Plan.
K. AMENDMENT AND TERMINATION:
1. The Board of Directors of the Company shall have the right to
amend this Plan in any respect from time to time, or to
terminate it at any time.
2. Neither any amendment nor the termination of the Plan shall
affect the right of a Participant solely to receive the net
increment with respect to those Special Stock Units credited
to Participant's Account which are vested on the date of such
amendment or termination.
L. ADDITIONAL PROVISIONS:
1. Participant's decision to defer, or not to defer, payment of
the Deferred Compensation Amount may result in important tax
consequences to Participant. Participant should consult with
an attorney or financial advisor before making thi s decision.
2. The Company and its Subsidiaries shall have the right to deduct
from Participant's wages and from payments of Deferred
Compensation Amounts any taxes or other amounts required by
law to be withheld due to increases in the vested amounts or
due to the payment of the Deferred Compensation Amount.
3. Neither the Company or its Subsidiaries has established, nor
shall it be required to establish, any special or separate
fund nor has the Company or its Subsidiaries made any other
segregation of assets to assure, or secure, nor does the
Company or its Subsidiaries in any way guarantee the payment
of any Deferred Compensation Amount.
4. No employee of the Company or its Subsidiaries or any other
person shall have the right to become a Participant or have
any claim or right to receive an award of Special Stock Units
under this Plan.
5. Neither the existence nor provisions of this Plan nor any
action taken hereunder shall be deemed to give any employee
the right to be retained in the employ or service of the
Company or any Subsidiary or to interfere with the rights of
the Company or any Subsidiary to discharge any employee at any
time. It is the Company's intent to provide retirement income
to Participant and to have all payments under the Plan be
considered qualified retirement benefits under the law. By
paying Participant's Deferred Compensation Amounts prior to
Participant's Termination of Employment, the Company may lose
certain rights. Therefore, the Company may request the
Participant sign a waiver acknowledging the intent of the
Company and Participant to consider any such payment(s) to be
part of Participant's qualified retirement benefit and the lack
of such right by the Participant to be retained by the Company.
6. By action of their respective Boards of Directors, Subsidiaries
may adopt this Plan for Participants who are employees of such
Subsidiaries. In such event, such Subsidiaries shall assume the
payment liability of the Deferred Compensat ion Amount for
their Participant employees.
7. This Plan and all requirements thereunder shall be construed in
accordance with and governed by the laws of the State of New
Jersey, United States of America.
M. EFFECTIVE DATE:
1. The effective date of this Plan is May 25, 1976, as amended
February 14, 1989, April 1, 1991, and as further amended
January 31, 1997.
<PAGE>63
Exhibit 10(c)
BLOCK DRUG COMPANY, INC.
RESTATED EXCESS BENEFIT PLAN
WHEREAS, BLOCK DRUG COMPANY, INC. (the "Company") adopted an Excess
Benefit Plan effective May 31, 1983; and
WHEREAS, as a result of changes in the law regarding benefit
limitations, the Company amended the Plan by restating it in its
entirety on December 11, 1987 and January 25, 1989; and
WHEREAS, as a result of further changes in the law regarding benefit
limitations, the Company desires to restate the Plan; and
WHEREAS, the Company desires to provide additional benefits to its
corporate officers at the level of Vice-President and above who are
participants in the Block Drug Restated Retirement Plan (1984) and
whose benefits are limited by the provisions of Sections 401(a)(17)
and 415 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, the Company hereby adopts the following Excess Benefit
Plan:
1. DEFINITIONS. Unless the context requires otherwise, all terms
used herein (other than "Plan") shall have the meanings ascribed
to them in the Block Drug Restated Retirement Plan (1984). In
addition:
(a) "COVERED EMPLOYEE" means the corporate officers of the
Company at the level of Vice-President and above who are
Members of the Block Drug Restated Retirement Plan
(1984) and are entitled to benefits under this plan;
(b) "PLAN" means the Block Drug Company, Inc. Restated
Excess Benefit Plan, as set forth herein and as from
time to time amended; and
(c) "UNREDUCED BENEFIT@ means the benefit to which a
Covered Employee or his designated beneficiary would
be entitled under the Block Drug Restated Retirement
Plan (1984) in the absence of the limitations set forth
in Section 5.6 (or other limitations imposed by Sections
401(a)(17) and 415 of the Internal Revenue Code of 1986,
as amended) thereof. Where the Covered Employee's
pension benefits are segregated pursuant to any of the
provisions of the Block Drug Restated Retirement Plan
(1984), then the Unreduced Benefit shall be (a) the
value of the Covered Employee's segregated account
determined as of the date of payment plus (b) the value
(determined as of the date of withdrawal) of any assets
previously withdrawn from the segregated account for the
purpose of complying with the limitations set forth in
Section 5.6 (or other limitations imposed by
Sections 401(a)(17) and 415 of the Internal Revenue
Code of 1986, as amended) of the Block Drug Restated
Retirement Plan (1984) increased or decreased by the
rate of return compounded annually realized by the
segregated account between the date of withdrawal and
the date of payment. For example:
"A" has his retirement plan benefits held in a
segregated account. On January 1, 1983, the account
had a value of $1,000,000. On December 31, 1983, that
account had a value of $1,400,000, which is $400,000 in
excess of the maximum amount permitted under I.R.C.
Section 415. The $400,000 is withdrawn from the
segregated account. On December 31, 1984, the
segregated account has a value of $ 1,200,000, which
is $200,000 in excess of the maximum amount permitted
under I.R.C. Section 415. The $200,000 is withdrawn
from the segregated account. On December 31, 1985, the
segregated account has a value of $1,300,000, which is
$300,000 in exc ess of the maximum amount permitted
under I.R.C. Section 415. The $300,000 is withdrawn
from the segregated account. Employee A dies on
January 2, 1986. Employee A's unreduced benefit
is $2,184,000, computed as follows:
Original Value in account $1,000,000
Plus 40% earnings for 1983 on $1,000,000 400,000
Plus 20% earnings for 1984 on $1,400,000 280,000
Plus 30% earnings for 1985 on $1,680,000 504,000
$2,184,000
2. Participation in the Plan. Benefits under this Plan shall be
payable to each Covered Employee in the Block Drug Restated
Retirement Plan (1984) whose Unreduced Benefit exceeds the
maximum retirement benefits payable under the Block Drug
Restated Retirement Plan (1984). Benefits shall also be
payable to the beneficiary of a Covered Employee if such
beneficiary's Unreduced Benefit exceeds the maximum benefit
payable to him under the Block Drug Restated Retirement Plan
(1984).
3. Amount of Benefit. Each Covered Employee or beneficiary shall
be entitled to a benefit equal to the difference between his
Unreduced Benefit and the maximum benefit which may be paid to
him under the provisions of Section 5.6 (or other limitations
imposed by Sections 401(a)(17) and 415 of the Internal Revenue
Code of 1986, as amended) of the Block Drug Restated Retirement
Plan (1984).
However, except for corporate officers who are beneficial
shareholders of more than one percent (1%) of the Company's
stock, Executive Incentive Plan Payments ("EIP Payments")
will be added to wages and included as compensation for the
purposes of calculating the pension benefit of executives at
the level of Senior Vice President and above (the "Executive")
provided:
(a) For Senior Vice Presidents appointed after
December 1, 1994, only those EIP Payments paid to the
Executive during the time the Executive was a Senior
Vice President or above will apply;
(b) The Executive remains employed with the Company until
age sixty two (62) or the Executive's employment
terminates prior to that date due to the Executive's
death or disability;
(c) The increase in the Executive's pension benefit does
not exceed fifty percent (50%) of the amount the
Executive would have been entitled to if EIP Payments
were not included in calculating the benefit under the
Plan and the Company's Restated Retirement Plan, as
amended, and
(d) The Company's net worth or working capital has not
declined by more than fifty percent (50%) from the
amounts recorded on the Company's consolidated balance
sheet from the Company's March 31, 1994 certified
financial statement.
4. Distribution of Benefits.
(a) Benefits under this Plan shall be paid to the Covered
Employee or his designated beneficiary named under the
Block Drug Restated Retirement Plan (1984). If a
designated beneficiary has not been named, then benefits
under this Plan shall be payable to the legal
representative of the Covered Employee's estate.
(b) Benefits under this Plan shall be paid in the same form
and at the same time as the benefits payable under the
Block Drug Restated Retirement Plan (1984). Where the
Covered Employee's pension benefits are segregated
pursuant to the provisions of the Block Drug Restated
Retirement Plan (1984), the benefits under this Plan
shall be paid using assets identical to the assets which
are paid to the Covered Employee or his designated
beneficiary under the Block Drug Restated Retirement
Plan (1984).
5. Obligation of the Company. All benefits payable under
this Plan shall be unsecured and unfunded contractual
obligations of the Company.
6. Amendment or Termination. The Company may amend or
terminate this Plan without the consent of any Covered
Employee or beneficiary. If the Block Drug Restated
Retirement Plan (1984) shall be terminated, this Plan
shall be ter minated effective no earlier than the date
of the Board of Directors' resolution terminating the
Block Drug Restated Retirement Plan (1984).
Notwithstanding anything set forth above, any amendment
or termination of the Plan shall have prospective
application only and shall not reduce the benefit to
which a Covered Employee or beneficiary shall be
entitled pursuant to paragraph 3, hereof, determined as
of the date of any such amendment or termination.
IN WITNESS WHEREOF, BLOCK DRUG COMPANY, INC. has caused this Restated
Excess Benefit Plan to be executed by its duly authorized officer and its
corporate seal to be affixed hereto by authority of its Board of Directors
this 1st day of December, 1994.
BLOCK DRUG COMPANY, INC.
By: JAMES A. BLOCK
James A. Block
Chairman of the Board
ATTEST:
JOHN E. PETERS
John E. Peters
Secretary
<PAGE>64
EXHIBIT 10(d) BLOCK DRUG COMPANY, INC.
Manufacturers and Distributors of Drug and Toiletry Preparations
257 CORNELISON AVE., JERSEY CITY, N.J. 07302-9988
AREA CODE 201 434-3000
James A. Block
CHAIRMAN OF THE BOARD
July 1, 1997
Mr. Donald H. LeSieur
1365 Valley Road
New Canaan, CT 06840
Re: 1997 Employment Agreement ("Agreement")
Dear Don:
Notwithstanding the provisions of Paragraph 8 of the subject Agreement, the
Company hereby extends to you the option to receive a lump sum payment of the
deferred compensation payments which would be made to you over a course of
years, provided you give the Company written notice of your election to take
a lump sum at least sixty (60) days prior to the date your employment with the
Company terminates ("Termination Date") and provided the termination is in
accord with the terms and conditions of the Agreement. If you notify us in
writing, upon your termination of employment, that this sixty (60) days
notice requirement places a severe financial hardship upon you, the Company
will use its good faith efforts to provide such lump sum within fifteen (15)
business days from the Termination Date.
If the Termination of your employment is caused by your death or Permanent
Disability, as that term is defined in the Agreement, regardless of your age,
you or your guardian, in case of your Permanent Disability, or your executor
or administrator, in case of your death, may also elect to receive a lump sum.
The lump sum shall be paid in the case of your Permanent Disability to you or
your guardian, or in the case of your death, to the beneficiary indicated in
Paragraph 8b of the subject Agreement.
If you choose to take a lump sum, the calculation of the amount of the lump
sum will be determined in accordance with Paragraph 8e of the Agreement.
Sincerely,
JAMES A. BLOCK
James A. Block
EMPLOYMENT AGREEMENT
This Employment Agreement ("the 1997 Employment Agreement") is made and
entered into this lst day of July, 1997 ("the Effective Date") by and between
BLOCK DRUG COMPANY, INC., a corporation of the State of New Jersey ("the
Company"), having its principal office at 257 Cornelison Avenue, Jersey City,
New Jersey 07302, and Donald H. LeSieur ("the Executive") residing at 1365
Valley Road, New Canaan, CT 06840.
W I T N E S S E T H:
WHEREAS, Executive has served as a major Executive of the Company since
June 18, 1973 and is presently serving as the Company's Executive Vice President
and President, International Division under an Employment Agreement dated
September 1, 1984, as amended April 12, 1991; ("the 1984 Employment Agreement");
and
WHEREAS, Executive and Company are desirous of entering into the 1997
Employment Agreement which will terminate and supersede the 1984 Employment
Agreement in order to secure Executive's continued exclusive services as a
senior executive empl oyee on revised terms and conditions of employment; and
WHEREAS, the Company's Office of the Chief Executive has approved the
revised terms and conditions respecting the employment of Executive as set
forth herein and has authorized the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the premises the mutual covenants
hereinafter contained and other good and valuable consideration, the Company
and Executive hereby agree as follows:
1. Subject to the provisions of Paragraph 10, the term of this
Agreement will commence on the Effective Date and expire on
December 31, 2000, or on such earlier date, as this Agreement
may be terminated by reason of the following: (a) by Company or
the Executive having given four (4) months' written notice to
the Company's Chairman of the Board, but in no event shall such
notice be given earlier than March 1, 1998; or (b) Executive 's
death or permanent disability ("the Term"). For purposes of
this Agreement, Permanent Disability shall mean the total and
permanent incapacity of the Executive during the Term that
would qualify Executive to receive disability benefits under
the Federal Social Security Act.
2. During the Term, Executive shall serve the Company as Executive
Vice President and President, International Division rendering
advice and counsel to the company's senior officers and the
Office of the Chief Executive, handling special assignments and
duties similar in type and character to those previously and now
being performed by the Executive, and such other duties
appropriate to his position as a senior management employee as
shall be designated by the Executive Committee of the Board of
Directors of the Company; provided, however, that Executive
shall not be assigned duties that would require his presence
on a regular and continuing basis at any office of the Company
which is more than 100 miles from New Canaan, Connecticut.
3. Executive hereby accepts the assignments contemplated in this
Agreement and agrees to perform the duties required of him
hereunder. Executive will continue to serve as a Director on
the Company's Board of Directors if elected, a member of the
Company's Office of the Chief Executive, and the G7 management
group without additional compensation except in the event that
the Company shall pay fees to management employee members of
its Board of Directors.
4. Executive agrees to work a minimum of one thousand hours (1000)
or the equivalent of one hundred twenty-five (125) working days
in each calendar year and will be compensated as follows: for
each day employed, Executive will be paid at the daily rate of
two thousand eight hundred thirty-one dollars ($2,831). The
Daily Rate is to be increased at the beginning of each calendar
year by the factor used by the Company to grant executive
increases to those executives not in salary ranges.
a. The term "working days" as referred to in this Agreement shall
mean a nominal eight (8) hour day. The time required by
Executive to assemble reports and other data for the Company
while away from the Company premises shall be conside red part
of a working day. Working days shall not include commutation
or business travel time. Part days can be consolidated into
an eight (8) hour working day for purposes of calculating the
one thousand hour requirement in Paragraph 4 above.
b. Payments are to be made bi-weekly unless Executive defers such
compensation payments. If compensation payments are deferred,
the amounts deferred will earn interest at the annual rate of
interest equal to the prime rate of interest, as published in
the Wall Street Journal on the day interest is to begin to
accrue, minus the percentage obtained by multiplying said prime
rate by the percentage amount of the maximum Federal and the
effective New Jersey corporate income tax rates ap plicable to
the Company.
c. Executive will continue to participate in the Company's Pension,
401(k), Special Stock Unit Plan, and other Company benefit plans
which are, or may become, available to full-time employees of
the Company. This Agreement will in no way affect or change the
post retirement benefits to which Executive is entitled as a
result of Executive's working less than full-time.
d. Executive is entitled to an Executive Incentive Plan ("EIP")
bonus for the first fiscal quarter (April 1, 1997 -
June 30, 1997) of the Company's 1998 fiscal year. The EIP
bonus will be paid to Executive in late May 1998 and represent
25% of the amount to which Executive would be entitled if he
were a full-time employee earning the Adjusted Salary.
e. Executive shall be paid on or before July 10, 1997 for the
accrued vacation days not taken by Executive on or before
June 30, 1997.
5. With respect to the Company's Pension Plan, Executive's benefits
under the Company's Pension Plan will be calculated as though
Executive had remained a full-time employee receiving his full
salary with the annual adjustments per Paragraph 4 above. In
determining Executive's benefits for Pension Plan purposes,
Executive's compensation, as that term is defined in the Plan,
will be based upon (a)
Executive's current annual gross salary which, as a full-time
employee is as of June 30, 1997 $430,718.00, will be adjusted
annually as set forth in Paragraph 4 above ("the Adjusted
Salary") , plus (b) forty-six and six tenths percent (46.6%) of
the Adjusted Salary as Executive's projected bonus for each
year, or part thereof, during the Term of this Agreement.
See Example #1 attached.
6. With respect to the Company's Special Stock Unit Plan, payments
to Executive will be made in accordance with the terms of the
Plan. Executive will receive a Special Stock Unit Award on
June 21, 1998 representing one hundred percent ( 100%) of his
Adjusted Salary as of June 21, 1998. Future Awards, if any,
will be likewise based upon Executive's Adjusted Salary.
See Example #2 attached.
7. The Company will reimburse Executive for all reasonable and
necessary expenses incurred by Executive in performance of
services rendered under this Agreement.
a. Reimbursement of such expenses and the payment of fees by
Company to Executive shall be made on a timely basis, provided
that prior to such payment Executive has transmitted to Company
a statement in detail of services provided and expenses incurred
under this Agreement for which payment is due.
b. For the purpose of providing services hereunder, the Company
shall provide Executive with his present office, present
secretary, if available, dictating, plain paper fax, computer
(including the cost of "on-line services"), and other equipment,
and duplicates if necessary, for both office and home use,
which equipment shall remain the property of the Company.
c. The Company shall also provide Executive with a car of the same
model, cost and quality of the car currently being utilized by
Executive, or other make and model of car of similar value, to
be replaced at the same frequency as has been past practice.
The costs of said car will be deducted annually from the
special bonus which will be paid to Executive at the end of
each fiscal year, the sum of which shall be equivalent to the
sum of the cost of said car, plus an amount equal to the
applicable taxes Executive would pay on that cost.
d. For travel which Executive will be required to undertake in
order to perform the services hereunder, the Company will
reimburse Executive for first-class round trip transportation,
when available, and appropriate living accommodations while
Executive is traveling on Company business. When the Company
requires Executive to render services at locations within or
outside the Continental United States, Company will reimburse
Executive for his costs plus the cost of travel for one (1)
additional person for first-class round trip travel and living
accommodations.
8. As additional consideration for Executive's service, in the
event Executive's employment with the Company shall terminate
for any reason other than Executive's discharge by the company
for Cause, as herein defined, Executive shall be paid deferred
compensation equal to one-third (1/3) of Executive's average
annual salary or Adjusted Salary, whichever is higher, for the
three full fiscal years immediately preceding the year in which
Executive's employment terminates. This Deferred Compensation
will vest at the rate of one and one-quarter percent (13%) per
quarter, commencing September 1, 1980 and become fully vested
on August 31, 2000. The amount of the Deferred Compensation
will be paid monthly for a term equal to one-half the full years
Executive was employed with the Company commencing June 18,1973,
but in no event shall such payments exceed thirteen and one-half
(132) years. If Executive's termination of employment occurs
due to death or Permanent Disability, the Deferred Compensation
will become 100% vested. See Example # 3 attached.
a. If termination occurs for reason other than Executive's death
or Permanent Disability prior to age sixty-five, payments to
Executive will commence at age sixty-five or upon Executive's
death or Permanent Disability, whichever first occurs.
b. In the event Executive's employment terminates as a result of
Executive's death, payment will be made to Executive's spouse,
Virginia K. LeSieur, and if she does not survive Executive,
then payment will be made to Executive's estate.
c. If Executive's termination occurs by Company action other that
for Cause, Executive or his estate will receive an additional
payment equal to one-half of Executive's annual salary or
Adjusted Salary, as the case may be, whichever is higher as of
the date of termination. Such payment will be made until
Executive reaches age sixty-five. The payment set forth in
this Paragraph 8c is based upon Executive's agreement not to
engage in competitive employment and that all payment received
under this provision are in lieu of any and all claims for
damages based upon termination of Executive's employment.
d. Executive, his executor or administrator may, as the case may
be, for the purpose of obtaining a lump sum payment of any or
all of the deferred compensation amounts, request the company,
in writing, which shall be at least sixty (60) days prior to
the requested payment date, to pay such deferred compensation
amounts in a lump sum. If such a request is made, and
notwithstanding the previous paragraphs, the Company, solely
at its option and in the exercise of its sole and nonreviewable
discretion, may cause these deferred compensation amounts to
which Executive is entitled to be paid to Executive in a lump
sum rather than in monthly installments.
e. If a lump sum payment is made, the amount will be determined by
calculating the present value of the installment payments due
to Executive as of Executive's Termination Date, using the prime
rate of interest as published in the Wall Street Journal, as of
the first business day of the month immediately preceding,
Executive's Termination Date. The lump sum will be paid to
Executive within twelve (12) months after Executive's
Termination Date. If payment of the lump sum is deferred,
the amount of the lump sum will earn interest ("Interest")
from Executive's Termination Date until the date it is paid.
"Interest" shall mean the annual rate of interest equal to the
prime rate of interest as published in the Wall Street Journal
on the day which necessitates payment is to be made, minus the
percentage obtained by multiplying said prime rate by the
percentage amount of the maximum Federal and the effective New
Jersey corporate income tax rates applicable to the Company.
9. Change in Control. If upon a Change in Control or a Subsequent
Change in Control (as those terms are defined in the Change in
Control Agreement entered into between Company and Executive
effective April 12, 1991) and termination of Executive occurs
(other than for Cause), Executive shall be entitled to receive
all benefits under the Change in Control Agreement plus those
benefits set forth in Paragraph 8 of this Agreement. In no
event shall Executive be entitled to receive severance payments
under Paragraph 8c of this Agreement and under
subsection 5.01 (c) of the Change in Control Agreement; payment
of severance under either agreement is in lieu of severance pay
under the other agreement. Notwithstanding the foregoing, to
the extent that the Executive's employment is terminated for
any reason (other than for Cause), Executive shall continue to
be entitled to exercise his other rights under this Agreement
and such other rights are not limited by the Change in Control
Agreement.
10. The Company can terminate this Agreement for cause. The term
"cause" shall mean: Executive having been found guilty of fraud,
embezzlement, dishonesty or defalcation during the Term hereof,
or as a result of any one or more assignments with, the Company
and/or one or more of its subsidiaries.
11. Executive agrees that, unless the Company shall consent in
writing thereto, Executive will not at any time during the Term
hereof engage in any activity which shall be substantially
competitive with any business then carried on by the Company.
Executive shall be free, however, without such written consent,
to purchase and deal in, as investments or otherwise, stocks or
other securities of any corporation, competitive or otherwise,
generally traded in by the public; provided that Executive's
ownership of shares of stock of any such competitive corporation
shall not exceed one percent (1%) of the outstanding shares of
capital stock.
12. Wherever referred to herein, "Company" shall include all
corporations or other business entities of which fifty per cent
(50%) or more of the control of outstanding common stock is
owned by the Company directly and/or through its affiliates or
subsidiaries.
13. This Agreement can be terminated by either party on ninety (90)
days written notice if a Change in Control or a Subsequent
Change in Control occurs (These terms are defined in the Change
in Control Agreement dated as of the Effective Date of this
Agreement, between Executive and Company ("the 1991 CIC
Agreement") .
14. This Agreement contains all of the covenants and agreements
between the parties, and all prior understandings and
agreements, relating to the subject matter herein are superseded
and cancelled by this Agreement. This Agreement shall not be
altered, modified, varied or amended except by an agreement in
writing of like dignity, executed by both Executive and Company.
15. Executive agrees all inventions (including new contributions,
improvements, ideas, or discoveries, whether patentable or not)
conceived or made by him during the Term of this Agreement
("Inventions"), provided such Inventions grow out of the
services rendered to the Company by Executive during the Term
hereof and are related in any manner to the business
(commercial or experimental) of the Company or of any of its
subsidiaries, shall become the property of the Company without
additional compensation having to be paid to Executive.
16. The Examples attached to this Agreement are meant to be just
that; examples based upon projections of Executive's Adjusted
Salary and the resulting impact on Executive's pension,
deferred compensation and Special Stock Unit Plan payments.
The figures in the Examples represent an approximation of the
amounts Executive should receive based upon the indicated
assumptions and projections and the company does not guarantee
these amounts.
17. This Agreement shall be interpreted and construed in accordance
with the laws of the State of New Jersey.
18. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which
together shall constitute but one and same document.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officers, and Executive has signed this Agreement, on the
date first above written.
WITNESS:
Donald H. LeSieur
ATTEST: BLOCK DRUG COMPANY, INC.
JOHN E. PETERS JAMES A. BLOCK
John E. Peters. James A. Block
Senior Vice President, Chairman of the Board
General Counsel & Secretary
<PAGE>65
Exhibit 10(e)
EMPLOYMENT AGREEMENT
November 1, 1997 is the effective date of this EMPLOYMENT AGREEMENT
between BLOCK DRUG COMPANY, INC., a corporation of the State of New Jersey
(hereinafter called "Company"), having its principal office at 257 Cornelison
Avenue, Jersey City, New Jersey 07302, and PETER M. BLOCK (hereinafter called
"Executive") residing in the City, County and State of New York.
W I T N E S S E T H:
WHEREAS, Executive has served as an executive of the Company and
presently is serving as the President-European Division of the Company; and
WHEREAS, the Company has determined it would be in the best interests
of the Company and its shareholders to assure itself of the continued exclusive
services of Executive and his specialized knowledge and unusual abilities with
respect to th e business and affairs of the Company; and
WHEREAS, Executive is willing to enter into this Agreement with the
Company for his exclusive services as a management executive on a full-time
basis or as an employee performing special management services with respect
to the business and af fairs of the Company; and
WHEREAS, the Executive Committee of the Board of Directors of the
Company has approved the terms and conditions respecting the Executive's
employment set forth herein and has authorized the execution and delivery of
this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter contained and other good and valuable consideration, the Company
and Executive hereby agree as follows:
1. (a) The Company hereby employs Executive until April 30, 2007, or
until such later date as Executive's employment may be
terminated in accordance with the provisions of subsection
(b) of this Section.
(b) Executive, at any time that he is serving the Company as a
management executive on a full time basis (i) may give the
Company written notice, effective as of the first date of the
month specified in such notice, that Executive shall thereafter
be employed as an executive of the Company rendering advice and
counsel to the senior officers and the Executive Committee of
the Company and handling special assignments (herein such role
is referred to as a special management executive"); or (ii) if
his physical or mental condition shall preclude his performing
the duties of a management executive on a full time basis,
Executive shall thereafter serve as a special management
executive. Executive shall be employed as such special
management executive for a period of years, not in excess
of twenty, equal to one-half of the number of full years that
Executive was employed by the Company (including any
predecessor) on a full time basis, or until the death of
Executive, if such death shall occur prior to the end of such
period of years.
2. When he is serving as a full time management executive:
(a) The duties required of Executive shall be of a management
executive nature similar in type and character to those duties
heretofore and now being performed by him and shall include
specifically domestic and international travel and the
maintenance of Company, employee, industry, trade and customer
relations, including such entertainment in accordance with
Executive's position and responsibilities as may be appurtenant
to the performance of such duties.
(b) Executive will be permitted vacation periods each year similar
to those taken in the past and as are customary for executives
holding a position of similar status and responsibility.
(c) Executive will devote his entire time and talents during regular
business hours to the interests of the Company, subject to the
following exceptions:
(i) During vacation periods and periods of illness other
incapacity.
(ii) Executive shall have the right to make and supervise his
and his family's personal investments or to serve as:
(A) an officer or director of any other company,
corporation or business organization, provided that the
same is non-competitive in any substantial respect with
the business engaged in by the company; (B) a fiduciary
of an estate or a trust for the benefit of a member of his
or his wife's family or a friend; or (C) an officer or
director of, and/or to ren der services to, any civic,
charitable, educational, eleemosynary or similar
organization or activity.
3. When he is serving as a special management executive, Executive
shall only be required to perform such duties as his health
permits. Among other things, Executive shall be available to
serve, if appointed, as a member of the Executive Committee of
the Company and any committees administering incentive and
retirement plans for employees of the Company, and to study,
evaluate and make recommendations with respect to the Company's
marketing plans, advertising campaigns, and proposed
acquisitions.
While Executive is employed as a special management executive
he shall not be required to be present at any office of the
Company on a regular basis, and he shall have the right to
vacation and to travel as he sees fit so long as when he is
absent from the Metropolitan New York, New Jersey area, he is
available for consultation by telephone, telefax, or computer
and materials and documents can be sent to him for his review
and consideration.
4. Executive will be provided at all times, whether he is
employed on a full time basis or as a special management
executive, with suitable executive office space and secretarial
services and staff assistance.
5. Executive hereby accepts the employment contemplated in this
Agreement and agrees to perform the duties required of him
hereunder. If elected thereto, Executive will serve as an
officer or director of the Company without additional
compensation, except if the Company pays fees to the management
members of its Board of Directors or fees to any members of any
committee of such directors of which Executive may be a member,
then Executive shall be entitled to retain the same.
6. (a) On January 25, 1997, the Executive's annual salary was set at
$225,000 (Two Hundred Twenty-Five Thousand Dollars) payable
biweekly in equal installments. It is understood that the
annual salary payable to Executive may be adjusted from time
to time, in the sole discretion of the Company; provided that
in no event will such annual salary be less than $225,000
(Two Hundred Twenty-Five Thousand Dollars).
(b) The annual salary payable to Executive for his services as a
special management executive shall be one-quarter of the rate
of annual salary payable to Executive for his services as a full
time management executive as of the date that the nature of
Executive's employment shall change from that of a full time
management executive to a special management executive.
(c) Executive's annual salary shall be increased, at a minimum,
(i) annually, by the same factor used by the Company to
increase the salaries of Company executives who are not in
salary ranges, and (ii) additionally as deemed appropriate by
the Company's Office of the Chief Executive, to reflect
additional assignments and enhanced responsibilities.
7. Anything to the contrary hereinbefore stated notwithstanding, if
the Company continues or adopts any plan or plans of any sort or
nature including but without limiting the generality of the
foregoing, pension plans, profit-sharing plans, bonus plans,
stock option plans or insurance plans by the terms of which
Executive would be eligible to participate therein, then
Executive, in whichever capacity he is employed by the Company,
shall have the right to participate therein and shall be
entitled to receive all em oluments or benefits as may be
provided thereunder, in addition to all of Executive's other
rights and benefits hereunder.
8. The Company recognizes that Executive has made and will make
out of his own personal funds certain minor expenditures for
entertainment and the like necessary in carrying out his duties
hereunder. Notwithstanding this recognition by the Company of
the necessity thereof, Executive agrees that the company will
not reimburse him for such expenditures made by him personally.
9. On April 30, 2007, if Executive is then living and is still
serving as a full time management executive, he will, in good
faith, first negotiate for the continuation of his employment
by the Company before accepting employment elsewhere.
10. (a) In the event of the death of Executive at any time after the
date of this Agreement, before, on or after April 2007, whether
or not Executive is employed by the company in any capacity at
the time of his death, the Company will pay th e annual amount
determined as provided in subsection (b) of this Section, in
equal monthly installments commencing with the month immediately
following that in which Executive's death shall have occurred,
for the period of years computed as provided in subsection
(c) of this Section, to Executive's wife, if any, if she shall
survive Executive, and upon her death thereafter prior to the
receipt of all payments, or in the event that Executive's wife,
if any, shall not survive Executive such remaining payments or
such payments, as the case may be, shall be made to Executive's
children.
(b) The annual amount shall be equal to one-half of the average
annual salary of Executive for those three years of his
employment by the Company in which Executive was paid the
highest amount of salary, not including, however, in the
computation of such annual amount any increase in Executive's
salary during those three highest salaried years other than
increases attributable to the salary adjustments provided in
subsection (c) (i) of Section 6.
(c) The payments provided for in subsection (a) of this Section
shall continue for a period of years, not in excess of twenty,
equal to one-half of the number of full years that Executive
shall have been employed as a full time executive by the Company
(including any predecessor). For the purposes of this
Agreement, it is acknowledged and agreed that Executive's
employment as a full time executive by the Company commenced
on September 16, 1991 and has continued uninterrupted to the
date hereof.
11. Executive agrees that, unless the Company shall consent thereto,
he will not at any time during his employment by the Company
engage in any activity which shall be substantially competitive
with any business then carried on by the Company. Executive
shall be free, however, without such consent, to purchase and
deal in, as investments or otherwise, stocks or other securities
of any corporation, competitive or otherwise, generally traded
in by the public,, provided that Executive's owners hip of
shares of stock of any such competitive corporation shall not
exceed one per cent of the outstanding shares of capital stock.
12. Wherever referred to herein, "Company" shall include all
corporations more than fifty percent of the outstanding common
stock of which is owned by the Company directly and/or through
its subsidiaries.
13. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Company upon any liquidation,
dissolution or winding-up of the Company, or upon any sale of
all or substantially all of the Company's assets, or upon any
merger or consolidation of the Company with or into any other
corporation, all as though such successors and assigns of the
Company and their respective successors and assigns were the
Company.
14. This Agreement contains all of the covenants and agreements
between the parties and all prior understandings and agreements
relating to the subject matter herein are superseded and
cancelled by this Agreement. This Agreement shall not be
altered, modified, varied or amended except by an agreement in
writing of like dignity, executed by both parties hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officers and its corporate seal to be affixed and Executive has
signed, sealed and delivered this Agreement as of the date first above written.
ATTEST: BLOCK DRUG COMPANY, INC.
By THOMAS R. BLOCK
Thomas R. Block, President
WITNESS:
By PETER M. BLOCK
Peter M. Block
<PAGE>66
Exhibit 10(f)
CONSULTING AGREEMENT
This Consulting Agreement (the 1997 Consulting Agreement) is made and
entered into this 1st day of May, 1997 (the Effective Date) by and between
BLOCK DRUG COMPANY, INC., a corporation of the State of New Jersey (hereinafter
called "Company") , having its principal office at 257 Cornelison Avenue,
Jersey City, New Jersey 07302, and Melvin Kopp (hereinafter called "Executive")
residing at 17 Weber Road, West Orange, New Jersey 07052.
W I T N E S S E T H:
WHEREAS, Executive has served as a major executive of the Company since
June 1, 1959 and is presently serving as the Company's Chief Financial Officer
and a consultant to the Company under a Consulting Agreement dated
October 22, 1992; (199 2 Consulting Agreement); and
WHEREAS, Executive is willing to enter into an amendment to the 1992
Consulting Agreement with the Company for his continued exclusive services as
a special management consultant on a part-time basis; and
WHEREAS, the Company=s Office of the Chief Executive has approved the
revised terms and conditions respecting the retention of Executive as set forth
herein and has authorized the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the premises" the mutual covenants
hereinafter contained and other good and valuable consideration, the Company and
Executive hereby agree as follows:
1. The term of this Agreement will commence on the Effective Date and
terminate on February 28, 2005, or on such earlier date as this Agreement may
be terminated by reason of Executive=s death or total disability as that term
is defined in the Company's Long Term Disability Income Plan ("Term").
2. During the Term, Executive shall serve the Company as a senior
management consultant rendering advice and counsel to the Company's senior
officers and the Office of the Chief Executive, handling special assignments
and duties similar in type and character to those previously and now being
performed by the Executive, and such other duties appropriate to his position
as a senior management consultant as shall be designated by the Executive
Committee of the Board of Directors of the Company; provided, however, that
Executive shall not be assigned duties that would require his presence on a
regular and continuing basis at any office of the Company which is more than
100 miles from Jersey City, New Jersey.
3. Executive hereby accepts the assignments contemplated in this
Agreement and agrees to perform the duties required of him hereunder. If
elected thereto, Executive will serve as a director on the Company's Board of
Directors and will be compensated at the same rate, and in the same manner as
all outside directors, including the payment of the annual retainer, meeting
and committee fees.
4. Exclusive of work required by the Company's Board of Directors for
which compensation will be paid by the Company as directed by the Board,
Executive agrees to work a minimum of one hundred (100)days in each calendar
year and will be com pensated as follows: for each day employed, Executive will
be paid at the daily rate of eighteen hundred dollars ($1,800). The Daily Rate
is to be increased at the beginning of each calendar year by the factor used by
the Company to grant executive increases to those executives not in salary
ranges. Payments are to be made bi-weekly unless Executive defers such
compensation payments. If compensation payments are deferred, the amounts
deferred will earn interest at the annual rate of interes t equal to the prime
rate of interest, as published in the Wall Street Journal on the day interest
is to begin to accrue, minus the percentage obtained by multiplying said prime
rate by the percentage amount of the maximum Federal and the effective New
Jersey corporate income tax rates applicable to the Company. Executive has
entered into a 1997 Extraordinary Deferred Compensation Agreement (the 1997
EDCA) which will provide Executive with deferred compensation in a manner which
mirrors the Company's Special Stock Unit Plan (SSUP), details of which are set
forth in the 1997 EDCA. However, as a consultant, Executive will not be
eligible to participate in the Company's Pension, 401(k), [Bonus] or other
Company benefit plans, except for th ose benefit plans regularly provided by
the Company for its retirees. This Agreement in no way affects or changes the
post retirement benefits to which Executive is entitled.
5. The Company will reimburse Executive for all reasonable and
necessary expenses incurred by Executive in performance of services rendered
under this Agreement.
a. Reimbursement of such expenses and the payment of fees by Company
to Executive shall be made on a timely basis , provided that prior to such
payment Executive has transmitted to Company a statement in detail of services
provided and expenses incurred under this Agreement for which payment is due.
b. For the purpose of providing services hereunder, the Company shall
provide Executive with an office, secretarial services, dictating and other
equipment, which equipment shall remain the property of Company.
c. The term "working days" as referred to in this Agreement shall
mean a nominal eight (a) hour day. The time required by Executive to assemble
reports and other data for the Company while away from the Company premises
shall be conside red part of a working day. These part days can be
consolidated into an eight (8) hour working day.
d. For travel which Executive may from time to time be required to
undertake in order to perform the services hereunder, the Company will reimburse
Executive for first-class round trip transportation, when available, and
appropriate living accommodations while Executive is traveling on Company
business. When the Company requires Executive to render services at locations
within or outside the Continental United States, Company will reimburse
Executive for his costs plus the cost of one (1) additional person for
first-class round trip travel and living accommodations.
6. The Company can terminate this Agreement for cause . The term
"cause" shall mean: Executive=s having been found guilty of fraud, embezzlement,
dishonesty or defalcation during the Term hereof, or as a result of any one or
more assignments with, the Company and/or one or more of its subsidiaries.
7. Executive agrees that, unless the Company shall consent in writing
thereto, Executive will not at any time during the Term hereof engage in any
activity which shall be substantially competitive with any business then
carried on by the Company. Executive shall be free, however, without such
written consent, to purchase and deal in, as investments or otherwise, stocks
or other securities of any corporation, competitive or otherwise, generally
traded in by the public; provided that Executive's ownership of shares of
stock of any such competitive corporation shall not exceed one percent (1%)
of the outstanding shares of capital stock.
8. Wherever referred to herein, "Company" shall include all
corporations or other business entities of which fifty per cent (50%) or more
of the control of outstanding common stock is owned by the Company directly
and/or through its affiliates or subsidiaries.
9. This Agreement can be terminated by either party on ninety (90)
days written notice if a Change in Control or a Subsequent Change in Control
occurs (These terms are defined in the Change in Control Agreement dated as of
the Effective Date of this Agreement, between Executive and Company (the 1997
CIC Agreement).
10. This Agreement contains all of the covenants and agreements between
the parties, and all prior understandings and agreements, relating to the
subject matter herein are superseded and cancelled by this Agreement. This
Agreement shall not be altered, modified, varied or amended except by an
agreement in writing of like dignity, executed by both Executive and Company.
11. Executive agrees all inventions (including new contributions,
improvements, ideas, or discoveries, whether patentable or not) conceived or
made by him during the Term of this Agreement ("Inventions"), provided such
Inventions grow out of the services rendered to the Company by Executive during
the Term hereof and are related in any manner to the business (commercial or
experimental) of the Company or of any of its subsidiaries, shall become the
property of the Company without additional compensation having to be paid to
Executive.
12. This Agreement shall be interpreted and construed in
accordance with the laws of the State of New Jersey.
13. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute but one and the same document.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officers, and Executive has signed this Agreement, on the
date first above written.
ATTEST: BLOCK DRUG COMPANY, INC.
JOHN E. PETERS By JAMES BLOCK
John E. Peters. James Block
Senior Vice President, Chairman of the Board
General Counsel & Secretary
WITNESS:
MELVIN KOPP
Melvin Kopp
<PAGE>67
EXHIBIT 10(g)
June , 1998
RE: Option Award Letter
Dear :
On May 27, 1998, the Executive Committee of the Board of Directors of
Block Drug Company, Inc. (the "Company") and the voting shareholders of the
Company authorized and approved the Stock Option Plan of the Company (the
"Plan"). The Plan provides for the grant of options to certain key employees
of the Company and its subsidiaries. A copy of the Plan was attached to the
Prospectus dated June 3, 1998 that was given to you and shall be deemed a part
of this agreement as if fully set fort h herein. Unless the context otherwise
requires, all terms defined in the Plan shall have the same meaning when used
herein.
The Company hereby grants to you, as a matter of separate inducement
and not in lieu of any salary or other compensation for your services, the
option (the "Option") to purchase, in accordance with the terms and conditions
set forth in the Plan, an aggregate of shares of Common Stock at a price
of $ per share, such option price being, in the judgment of the
Committee, not less than one hundred percent (100%) of the fair market value
of such share at the date hereof.
The Option is not intended to qualify as an "incentive stock option"
within the meaning of Section 422 of the United States Internal Revenue Code of
1986, as amended.
Subject to the modifications and limitations provided in the Plan, this
Option may be exercised by you during the period commencing on the third
anniversary of the date of grant of this Option and terminating at the close of
business on June , 2008, after which the unexercised portion of the Option
granted herein will automatically terminate and become null and void. In the
event your employment with the Company or any subsidiary is terminated prior to
the close of business on June , 2001, this Option shall only be exercisable
thereafter to the extent provided in the Plan, and shall otherwise terminate
and become null and void.
In no event shall you exercise this Option for a fraction of a share
or for less than five hundred (500) shares (unless the number purchased is the
total balance for which the Option is then exercisable).
This Option is not transferable by you otherwise than by will or the
laws of descent and distribution, and is exercisable, during your lifetime,
only by you (or by your legal representative appointed in the event of your
Disability). This Option may not be assigned, transferred (except by will or
the laws of descent and distribution), pledged or hypothecated in any way,
except to the extent necessary to comply with any cashless exercise procedure
coordinated by the Company with one or more brokerage firms. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of this
Option contrary to the provisions hereof, and the levy of any attachment or
similar proceeding upon the Option, shall be null and void and wi thout effect.
During your lifetime, you may not transfer your Option. In the event
you die holding an unexercised Option which has not expired, the Option may be
exercised by your legal representative on behalf of your estate upon
presentation of such rep resentative of letters testamentary or equivalent
proof (satisfactory to the Committee) of the right of such person to exercise
such Option. You should consult your tax and estate planning advisors as to how
the Option should be handled in your estate.
Any exercise of this Option shall be in writing addressed to the
Corporate Secretary of the Company at the principal place of business of the
Company, and shall be substantially in the form attached hereto. The purchase
price for any such exercise shall accompany such writing and shall be in the
form of a certified or bank cashier's check payable to the order of the Company,
for the full amount of the purchase price of the shares so purchased denominated
in U.S. dollars; provided, however, that the purchase price may also be paid on
your behalf pursuant to a "cashless exercise" arrangement that may be
established by the Company. The Company reserves the right to limit or modify
the methods of exercise to facilitate Plan administration [or to satisfy local
requirements].
As provided in the Plan, the Company may withhold from sums due or to
become due to you from the Company an amount necessary to satisfy its obligation
to withhold taxes incurred by reason of the issuance or disposition of shares
pursuant to t his Option, or may require you to reimburse the Company in such
amount. The Company may hold the stock certificate to which you are entitled
upon the exercise of this Option as security for the payment of withholding tax
liability, until cash suffic ient to pay such liability has been accumulated.
This agreement is subject to all terms, conditions, limitations and
restrictions contained in the Plan, which shall be controlling in the event of
any conflicting or inconsistent provisions.
You acknowledge that you are receiving the grant of a stock option under
the Company's Stock Option Plan and have received and understood a description
of this Plan. You further understand that the Company has reserved the right
to amend or terminate the Plan at any time and that the grant of an option in
one year or at one time does not in any way obligate the Company [or insert the
name of the local subsidiary] to make a grant in any future year or in any
given amount. You also ackno wledge and understand that the grant is wholly
discretionary in nature and is not to be considered part of your normal or
expected compensation subject to severance, resignation, redundancy or similar
pay.
Please indicate your acceptance of all the terms and conditions of this
Option and the Plan by signing and returning a copy of this letter within
30 days.
Very truly yours,
BLOCK DRUG COMPANY, INC.
By: THOMAS BLOCK
Thomas Block
President
By: JOHN E. PETERS
John E. Peters
Senior Vice President, General
Counsel & Secretary
ACCEPTED:
Signature of Employee
Name of Employee-Please Print
Date:
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