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, 1999 Commission File No. 0-6436
BLOCK DRUG COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
New Jersey 22-1375645
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION) (Employer Identification No.)
257 Cornelison Avenue, Jersey City, New Jersey 07302-9988
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (201) 434-3000
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock - $.10 par value
(TITLE OF CLASS)
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes X No
As of June 8, 1999, nonaffiliates held no voting shares of the Registrant;
therefore, the aggregate market value of voting shares held by nonaffiliates is
zero. As of June 8, 1999, the aggregate market value on non-voting shares held
by nonaffiliates was $283,033,819. 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 8, 1999 there were 14,467,258 shares of Class A Common Stock and
8,418,808 shares of Class B Common Stock of Registrant outstanding.
Documents Incorporated by Reference: None
<PAGE>1
PART I
Item 1. Business
GENERAL
Block Drug Company, Inc. (the "Company") is a worldwide manufacturer and
marketer of denture care products, oral health care products, consumer over-the-
counter medicines and professional dental products.
Approximately 60% of the Company's business is derived from non-U.S. markets.
The Company's key international markets are the U.K., Germany and Continental
Europe; Asia/ Pacific, including Japan, Australia, South Korea, Thailand, New
Zealand and the Philippines; Latin America (including Argentina, Brazil,
Colombia and Mexico) and Canada.
With the exception of Atridox(R) (doxycycline hyclate) 10% and Atrisorb(R),
which are only sold in the U.S. and Canada, the Company markets virtually the
same categories of products in international markets as it does domestically.
International operations are subject to certain risks. These include possible
nationalization, expropriation, importation limitations and other restrictive
governmental actions. Fluctuations in foreign currency exchange rates can impact
consolidated financial results. For additional information on international
operations, refer to "Management's Discussion and Analysis of Operations and
Financial Condition" (Item 7), "Financial Instruments" (Note 5), and "Segments
of an Enterprise" (Note 17), all found in this Form 10-K.
PRODUCT SEGMENT AND OTHER FINANCIAL INFORMATION
The "Product Segment Data" for the fiscal years ending March 31, 1999, 1998 and
1997 are as follows:
(In Thousands)
--------------
1999 1998 1997
---- ---- ----
Denture Care and Oral Health Care Products* $595,116 $606,812 $621,103
Consumer Over The Counter Medicines 225,985 256,245 241,368
--------- --------- ---------
Consolidated Net Sales $821,101 $863,057 $862,471
======== ======== ========
*Includes professional dental products
DENTURE CARE AND ORAL HEALTH CARE PRODUCTS
In the U.S., the Company's denture care products include the Polident(R) line
denture cleansers; the Poli-Grip(R) line of denture adhesives; and Dentu-Creme
and Dentu-Gel denture cleansers. Polident(R) Whitening Mouthwash, a specialty
mouthwash for denture wearers, was added to the line in the fourth quarter.
Polident brand is available in five varieties: Polident(R) Five Minute;
Polident(R) Overnight; Smoker's Polident(R); Polident(R) for Partials; and
Polident(R) Powder. The Company introduced Polident(R) with PoliShield(TM)
during fiscal 1999, a new formula which provides dentures with a protective
shield against stains and odors.
<PAGE>2
The Poli-Grip(R) line of denture adhesives includes Poli-Grip(R) Original;
Poli-Grip(R) Ultra Fresh and Poli-Grip(R) Free, a formula free of artificial
ingredients.
Corega(R) brand denture cleansers and adhesives are marketed by the Company, its
subsidiaries and branches in many international markets around the world.
One of the Company's leading brands is Sensodyne(R) anti-cavity toothpaste for
sensitive teeth. Sensodyne is a worldwide brand name except in Japan where the
product is sold under the Shumitect(R) brand name. In most markets in which
it is sold, Sensodyne is the leading desensitizing toothpaste brand. In the
U.S., the Company markets Sensodyne(R) Extra Whitening; Sensodyne(R)
Tartar Control; Sensodyne(R) with Baking Soda; Sensodyne(R) Fresh Mint;
Sensodyne(R) Cool Gel; and Sensodyne(R) Original Flavor.
Parodontax(R) brand toothpaste for gum care is another specialty dentifrice
marketed by the Company. It is sold in approximately 30 countries outside of the
United States.
The Company markets two brands of mouthwash, Targon(R) Smokers' Mouthwash and
Polident(R) Whitening Mouthwash. Targon brand is marketed to smokers to remove
tobacco tar from teeth. Polident(R) Whitening Mouthwash is marketed to denture
wearers to whiten dentures and freshen breath.
Targon is sold in two varieties; Original and Clean Taste. Polident(R) Whitening
Mouthwash is sold in Peppermint and Bright Mint(TM) flavors.
Serious dental medicines are marketed by the Company to dental professionals in
the U.S. These include Atridox(R) (doxycycline hyclate) 10%, a treatment for
chronic adult periodontitis; PerioGlas(R) brand bioactive glass used in the
treatment of periodontal disease; Atrisorb(R), a barrier for guided tissue
regeneration in oral surgery; and Aphthasol(R) (amlexanox oral paste, 5%) the
first and only prescription treatment for aphthous ulcers, also known as canker
sores. The products are detailed to dental professionals through the Company's
force of Dental Consultants.
CONSUMER OVER-THE-COUNTER MEDICINES
The Company markets consumer over-the-counter medicines in a variety of
categories in the U.S. and in most international markets.
The Company markets a broad selection of gas treatment and digestive products in
the U.S. These include the (1) Phazyme(R) line of gas relief products, (2)
Beano(R) food enzyme dietary supplement, and (3) Nature's Remedy(R) brand
laxative.
In the baby care products market, the Company markets Balmex(R) brand diaper
rash ointments. Balmex(R) with Aloe and Vitamin E was added to the line during
the fourth quarter. Numz-It(R) Teething Gel is another of the Company's baby
care brands.
<PAGE>3
Three brands of powdered analgesics are marketed by the Company in the Southern
U.S. These include the BC(R), Goody's(R) and Stanback(R) lines. The Stanback
line was acquired during the fiscal year. Goody's(R) Body Pain Formula was
introduced in the fourth quarter as a line extension of the parent brand. Other
line extensions in this category include Goody's(R) PM and BC(R) Allergy/Sinus.
Sleep-aid products sold by the Company include Nytol(R) brand and Nytol(R)
Natural. The latter brand is a homeopathic sleep-aid with a well-established
brand name.
The Chap-et(R) line of lip care products was acquired this fiscal year. It
includes a dozen varieties of lip balm products.
Tegrin(R) Shampoo is a value priced brand the Company markets in the dandruff
shampoo category.
ACQUISITIONS AND DIVESTITURES
The Company made a significant number of acquisitions during and immediately
after the close of the current fiscal year.
During The Fiscal Year:
The Company divested three household product brands (2000 Flushes(R) toilet bowl
cleaners, X- 14(R) toilet bowl and hard surface cleaners and Carpet Fresh(R) rug
and room deodorizers) in fiscal 1999.
In the U.S., the Company acquired the Stanback(R) line of powdered analgesics
and the Chap-et line of lip care products.
In Europe, the Company purchased Strep(R) depilatory in Italy and Pilca(R)
depilatory in Germany. The Agevit(R) line of herbal nutritional supplements,
known as nutraceuticals, was acquired in France.
Subsequent To The Close Of The Fiscal Year:
The Company divested the Lava(R) brand hand soap in April, 1999.
In Germany, the Company acquired Chlorahexamed(R), a medicated mouthwash sold
over-the-counter in that country and in other European markets.
In the UK, the Company acquired the Louis Marcel(R) line of depilatories.
In Latin America, acquisitions occurred in Brazil and Argentina. The Silidron(R)
and Espasmo Silidron(R) lines of anti-gas products were added to our product
portfolio in Brazil. In Argentina, the Company acquired the Pelo Libre(R) line
of pediculicides.
In Korea, the Company acquired the balance of certain marketing rights to the
Parodontax(R) brand toothpaste, which it sells in various countries.
<PAGE>4
MATERIAL REGULATIONS
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 operations 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.
The Company sells its consumer denture, dental care, oral hygiene and
over-the-counter medicines through its national sales force. Sales are made
directly to food and drug chains, wholesalers, mass merchandisers and
independent food and drug stores. In addition, the Company employs marketing and
sales representatives in international markets.
<PAGE>5
TRADEMARKS AND PATENTS
The Company's principal trademarks are of material importance to its business.
These trademarks are owned by the Company or its wholly-owned subsidiaries.
Although the Company enjoys certain benefits under patents which it owns or
licenses, no one patent or license is material to our overall business or to an
individual business segment.
COMPETITION
The Company markets products in highly competitive fields. For many of its
products, its competitors include significantly larger corporations with
substantially greater resources. The high degree of trademark recognition and
goodwill associated with many of the Company's brand names are important factors
in its ability to compete effectively. While larger competitors are able to
commit significantly greater revenue 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
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. Although some of the
Company's raw materials are obtained from single source providers, most are
available from alternate suppliers as well. In cases where a raw material is
available only from one source (as opposed to being only purchased from a single
source) alternate raw materials can be used as a replacement. The Company
maintains inventories of raw materials to protect against a business
interruption caused by moving from one supplier to another. In addition, the
Company has qualified alternate formulae to assure continued product
availability in the unlikely event any one raw material becomes unavailable.
During the course of the fiscal year ended March 31, 1999, 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. There is not a single third party
that manufactures 10% or more, in the aggregate, of the Company's products.
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 2,000,000 square feet.
This figure does not include undeveloped land on which its facilities are
located or land adjacent to certain properties. The Company or its subsidiaries
own substantially all of the properties.
<PAGE>6
Among these properties are the following: (1) corporate headquarters;
Jersey City, New Jersey; (2) professional dental product manufacturing:
Glendale, Wisconsin (leased); (3) manufacturing plants for the Company's denture
care, oral health care and over-the-counter products; Memphis, Tennessee;
Dungarvan, Ireland; Humacao, Puerto Rico (Dentco and Reedco); Plymouth, UK; Rio
de Janeiro, Brazil; Buenos Aires, Argentina; and Salisbury, North Carolina
(leased).
Subsequent to the end of the fiscal year, the Company entered into
negotiations to sell its factory in South Brunswick, New Jersey, has entered
into a contract for the sale of its facilities in Buenos Aires, Argentina and
has closed on the sale of its plant and offices in Mississauga, Canada.
The Company owns land contiguous to the Memphis, Plymouth and Dungarvan
facilities which would allow for the future expansion of such facilities.
Additional warehouse and distribution facilities are in Mississauga, Canada
(leased); Memphis, Tennessee (leased); Dayton, New Jersey; Plymouth, UK and
Zaragoza, Spain.
The Company also has offices in Welwyn Garden City, UK, Mississauga,
Canada (leased) 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
plan, 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 plan.
Item 3. Legal Proceedings
The Company is involved in various routine litigation incidental to its
business. While the significance of these matters cannot be fully assessed at
this time, management, on advice of counsel, does not believe that any liability
that may arise from these proceedings will have a material adverse impact on the
Company's consolidated financial position, results of operations or liquidity.
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, 1999.
<PAGE>7
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
STOCK PRICE AND DIVIDEND INFORMATION
Market Price Cash Dividends Declared
Range of Class A Per Share
Common Stock*
============================== ============================================
Fiscal Year Ended March 31, High** Low**
1999
First Quarter $46 $36 1/4 $0.315 Class A Shares
$0.11 Class B Shares
Second Quarter 40 1/4 32 1/2 $0.315 Class A Shares
$0.11 Class B Shares
Third Quarter 43 5/8 33 1/4 $0.3175 Class A Shares
$0.110625 Class B Shares
Fourth Quarter 47 36 1/2 $0.3175 Class A Shares***
$0.110625 Class B Shares***
- -----------------------------------------------------------------------------
Fiscal Year Ended March 31, High Low
1998
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****
================================================= =============== ==============
* 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
4, 1999 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, 1998 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 8, 1999:
Title of Class Number of Shareholders
============================================ ==================================
Common Stock, Class A (non-voting) 433
Common Stock, Class B (voting) 5
============================================ ==================================
<PAGE>8
<TABLE>
<CAPTION>
Item 6. Selected Financial Data
Fiscal Year Ended March 31,
1999(3) 1998 1997(2) 1996 1995
==================================== ================== ================= ================= ================ ================
<S> <C> <C> <C> <C> <C>
Net Sales from Continuing Operations $ 821,101,000 $863,057,000 $ 862,471,000 $ 715,242,000 $ 621,139,000
Interest, Dividends & Other Income $ 27,984,000 $ 25,882,000 $ 28,335,000 $ 30,157,000 $ 23,026,000
Income from Continuing Operations $ 67,497,000 $ 69,611,000 $ 10,817,000 $ 65,501,000 $ 57,870,000
before Income Taxes
Income Taxes $ 15,875,000 $ 17,819,000 $ 2,210,000 $ 11,798,000 $ 11,944,000
Income from Continuing Operations $ 51,622,000 $ 51,792,000 $ 8,607,000 $ 53,703,000 $ 45,926,000
Average Number of Common Shares 22,853,000 22,808,000 22,766,000 22,724,000 22,677,000
Outstanding(1)
Income from Continuing Operations,
Per Share of Common Stock (Basic $2.26 $2.27 $0.38 $2.36 $2.03
and Diluted)(1)
Earnings Per Share of
Common Stock (Basic and Diluted)(1) $2.26 $2.27 $0.38 $3.90 $2.22
Cash Dividends Per Share of
Class A Common $1.27 $1.25 $1.20 $1.12 $1.06
Cash Dividends Per Share of
Class B Common $0.441 $0.435 $0.415 $0.30 -
Stock Dividends Per Share of
Class A Common 3% 3% 3% 3% 3%
Stock Dividends Per Share of
Class B Common 3% 3% 3% 3% 3%
Depreciation $ 20,852,000 $ 19,651,000 $ 20,210,000 $ 19,012,000 $ 16,031,000
Working Capital $ 61,578,000 $ 19,840,000 $ 90,172,000 $ 106,050,000 $ 26,095,000
Current Ratio 1.2 1.1 1.3 1.5 1.1
Total Assets $1,166,763,000 $1,087,072,000 $1,014,923,000 $929,117,000 $871,320,000
Long-Term Debt and Notes Payable $ 107,012,000 $ 58,318,000 $ 55,943,000 $ 56,143,000 $ 15,273,000
Shareholders' Equity $ 683,885,000 $ 647,255,000 $ 631,320,000 $641,042,000 $562,531,000
Number of Employees 3,251 3,380 3,703 3,600 3,521
==================================== ================== ================= ================= ================ ================
</TABLE>
Management's Discussion and Analysis of Operating Results and Financial
Condition is presented on pages 10 to 20 of this report.
(1) Restated to reflect stock dividends on Class A and Class B Common Stock
by the Company in 1999 and previously.
(2) Fiscal 1997 income statement numbers reflect a pre-tax charge of
$72,450,000 for manufacturing restructuring and re-engineering.
Additionally, these amounts reflect the consolidation of the Block Drug
Company (Japan) Inc. subsidiary, which had been previously accounted for
as a 50%-owned equity joint venture. The Company acquired the remaining
50% share in fiscal year 1997.
(3) Fiscal 1999 income statement numbers reflect a credit of $12,673,000 in
connection with the manufacturing restructuring and re-engineering. See
Note 13 to the Consolidated Financial Statements.
<PAGE>9
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, 1999
were $821.1 million compared to $863.1 million and $862.5 million in fiscal 1998
and 1997, respectively. During the year, the Company sold three of its household
product brands (2000 Flushes (R) toilet bowl cleaners, X-14 (R) toilet bowl and
hard surface cleaners and Carpet Fresh (R) rug and room deodorizers). Excluding
the effects of the divestitures, consolidated sales were $813.2 million,
$795.4 million, $785.2 million for the fiscal years ended March 31, 1999, 1998
and 1997, respectively. For fiscal 1999, excluding the divestitures and
negative foreign exchange rates, sales would have increased
2.2% and 1.1%, respectively. Domestic sales were down by 9.2 % and international
sales were down by 1.8 %. Excluding the effects of the divestiture, domestic
sales increased 6.4%, of which 2% was due to price increases and 4.4 % due to
volume increases. Excluding the effects of the divestitures, international sales
were slightly lower.
SALES BY GEOGRAPHIC AREA (Dollars in Thousands)
Percent Percent
FY 1999 Change FY 1998 Change FY 1997
------- ------ ------- ------ -------
Domestic $330,246 -9% $363,507 5% $347,523
Europe, Africa, Middle East 312,866 5% 296,765 - 295,774
Latin America, Canada,
Asia/Pacific 177,989 -12% 202,785 -7% 219,174
--------- --------- ---------
Total Net Sales $821,101 -5% $863,057 - $862,471
======== ======== ========
Domestic sales growth was driven by relatively strong sales from
Polident(R) and Poli-Grip(R) and BC(R) and Goody's(R) analgesic powder brands.
In addition, Stanback(R) brand analgesic headache powder and Chap-et(R) lip
conditioner, which were acquired in the fourth quarter, contributed to the sales
increase. Sensodyne(R) brand sales were up by 8%, mainly due to the growth of
Sensodyne(R) Extra Whitening. Atridox(R) (doxycycline hyclate) 10%, a newly
introduced product, met sales targets.
In international markets, the European Division had sales growth of 5%.
Medical products showed strong growth. Setlers(R), Otomize(R) and Piriton(R)
brand sales increased by 12 %, 16 % and 21 %, respectively. Sales of Sensodyne
increased 5 %. Italy's exceptional sales performance was primarily due to the
acquisition of the STREP(R) depilatory brand. In Holland, sales were up by 13 %
mainly due to the successful introduction of Parodontax(R) toothpaste Gel line
extension. In other international areas, sales were down due to economic
recession, weak currencies and the household products divestitures.
The Company's international operations represent approximately 60% of the
Company's business. During fiscal 1999, the performance was impacted by the
divestiture of a household product in Latin America. The European market showed
a strong improvement during the year. The performance in the Asian market was
impacted by weak currency conditions and economic crisis. The net foreign
exchange gains and losses are included within selling, general and
administrative expenses due to the fact that they were insignificant. For
additional information see Note 1 to consolidated financial statements. The
largest markets in Austral-Asia are Japan
<PAGE>10
and Australia. In fiscal 1998, Australia experienced a 15% increase in local
currency sales. However, Japan sales in local currency, decreased by 13%. After
translating into U.S. Dollars, sales in Japan were down by 21% and sales in
Austral-Asia were up by 8% respectively. In fiscal 1999, sales in Australia were
up by 4% in local currency and sales in Japan were down by 9% in local currency.
After translating into U.S. Dollars, sales in Australia were down 12% and sales
in Japan were down 14% respectively. In fiscal 1998, U.S. Dollar translated
sales in Europe, Africa and Middle East were flat compared to the prior year.
However, if exchange rates remained constant, sales would have increased by 4%.
In fiscal 1999, U.S. Dollars translated sales in Europe, Africa and Middle East
were up by 5%. The exchange rate impact on sales in fiscal 1999 was not
material.
Interest, dividends and other income of $27,984,000 increased by 8%
compared to prior year income of $25,882,000, primarily due to increased
interest income from marketable securities. The increase was slightly offset by
the reduction in co-promotion income due to expiration of the contracts of
Habitrol(R) and Lodine(R) brands and discontinuation of the brand Duract(R).
The cost of goods sold percentage to sales was 33.1% in fiscal 1999
compared to 32.6% in fiscal 1998 and 32.4% in fiscal 1997. The domestic cost of
sales was 33.3%, 34.3% and 32.8% for fiscal 1999, 1998 and 1997, respectively.
These percentages reflect the mix of products sold, in addition to selective
price increases and the effect of divestiture of three household products
brands. The international cost of sales was 33%, 31.4% and 32.1% for fiscal
1999, 1998 and 1997, respectively. The increase was primarily due to an increase
in the cost of sales, outpacing the increase in the selling price because of a
very competitive European market.
Selling, general and administrative expenses represented 61.9%, 60.7% and
60.1% of sales in fiscal 1999, 1998 and 1997, respectively. The major portion is
related to advertising and promotional activities. These expenses reflect major
spending programs to meet significant competition and to build brand equities.
Interest expense in fiscal 1999 experienced a favorable variance from
fiscal 1998, primarily due to lower average debt resulting from the divestiture
of three household brands as well as declining interest rates on Euro
denominated borrowing. This was partially offset by additional financing for
product acquisitions and increased interest cost on some US denominated
short-term bank debt that was refinanced for ten years through the issuance of
the Company's privately placed 6.46% Senior Notes due 7/1/08.
The Company's interest rate exposures result from financing activity in
the form of short and long-term variable rate debt and investments in long-term
fixed income securities. The Company uses interest rate cap agreements to manage
the exposure resulting from variable rate debt (See Note 5). The notional amount
of such agreements at March 31, 1999 was $100 million. Investments in long-term
fixed income securities are typically held to maturity and fluctuations in their
market value, which are included in Other Comprehensive Income, are not hedged.
<PAGE>11
The Company's foreign exchange exposures derive primarily from the
activities of its foreign subsidiaries and affiliates which sell products to
customers generating accounts receivable both in their own local currency and in
other currencies. Certain subsidiaries, principally manufacturing locations in
the United Kingdom, Ireland and Brazil, also incur significant costs denominated
in currencies other than their functional currency. Additionally, the Company is
exposed to the risk that the results of operations of its foreign affiliates may
translate to lower than expected net income for inclusion in the Company's
consolidated results.
Interest rate cap agreements and foreign currency options are the only
types of derivatives used by the Company for risk management. The costs and
benefits derived from the interest rate caps are taken into income over the term
of the agreements as an adjustment to interest expense. No benefits were derived
from these agreements during fiscal 1999 or 1998. (See Note 5).
The Company manages its most significant foreign currency exposures,
principally inventory purchases, by purchasing average rate currency options
that protect against the fiscal year average value of each currency declining
more than an acceptable amount from the average for the prior year. Currencies
that are highly correlated to the U.S. Dollar and those that are illiquid or
have high interest rates (and therefore hedging cost) are not hedged.
However, certain affiliates in high interest rate environments maintain cash
balances in U.S. Dollars. If the affiliate's functional currency
declines against the dollar, such balances would produce incremental income,
thereby offsetting the declining dollar value of the affiliate's results
included in the Company's net income.
The cost of foreign currency options are expensed over the period to
which they relate and any benefits, to the extent of options deemed effective
hedges, are treated as an adjustment to the related costs of inventory when
purchased. For additional information, see 'Financial Instruments' (Note 5) in
Notes to Consolidated Financial Statements.
Worldwide Earnings by Geographic Region (Dollars in Thousands)
1999 1998 1997
---- ---- ----
United States $ 59,200 $ 52,186 $ 56,331
Europe, Africa, Middle East 33,745 45,353 43,029
Latin America, Canada, Asia/Pacific 10,825 22,019 20,363
-------- -------- ----------
Total Operating Income 103,770 119,558 119,723
General Corporate expenses, net (36,273) (49,947) (108,906)
-------- --------- --------
Consolidated Income Before Income Taxes $ 67,497 $ 69,611 $ 10,817
======== ========= ========
Income before income tax for the United States increased 13%. Europe,
Africa, Middle East decreased 26%. Latin America, Canada, Asia/Pacific decreased
51%. The increase in the United States was primarily due to mix of products sold
and the effect of the divestiture of three household product brands. The
decrease in Europe, Africa, Middle East was due to a very competitive European
market. The Latin America, Canada, Asia/Pacific decline was due to economic
recession, weak currencies and the household product divestitures.
<PAGE>12
Due to the above factors, income before taxes was 6.7% of sales in fiscal
1999 (excluding restructuring and
re-engineering credit) as compared to 8.1% and 9.7 % in fiscal 1998 and 1997
(excluding restructuring and re-engineering charges), respectively.
The effective income tax rates of 23.5%, 25.6% and 20.4% in fiscal 1999,
1998 and 1997, respectively, reflect tax exempt interest from government
securities and income from the lower tax areas of Puerto Rico and Ireland. The
effective rate increase from 1997 to 1998 occurred primarily as a result of a
change in taxability of certain Puerto Rico securities. The rate decrease from
1998 to 1999 occurred mainly because operating profit in lower taxed countries
was proportionally higher than in 1998. For additional information see "Income
Taxes" Note 8 to the Consolidated Financial Statements.
The operations in other Asian markets (excluding Japan and Australia)
were relatively insignificant to the Company's consolidated results.
Accordingly, the recession in Asia did not have a significant impact on
profits.
It is difficult to predict future exchange movement. If exchange rates
would continue at fiscal 1999 levels, management does not anticipate any major
material effects on the Company's future financial condition or liquidity.
Although inflation has been moderate throughout fiscal 1999, 1998 and
1997, 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 a two year period. 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, new products and strengthen 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 tax), or $2.60 per share after taxes in fiscal 1997, of which $9.2
million remains as a current liability as of March 31, 1999. As of March 31,
1999, the Company sold its factories in Wales, Belgium and Australia. In
addition, the Company discontinued manufacturing activities in Canada and
leased that portion of the facility to a third party. Subsequent to the fiscal
year end, the Company sold its facilities in Canada.
<TABLE>
<CAPTION>
The following table displays a rollforward of the liabilities for the
manufacturing restructuring from inception to March 31, 1999:
Original Amounts Remaining Amount Remaining Amount Amount Ending
Provision Utilized in Balance Utilized in Balance Utilized in Reversed in Balance
Type of Cost Fiscal 1997 Fiscal 1997 3-31-97 Fiscal 1998 Other 3-31-98 Fiscal 1999 Fiscal 1999 3-31-99*
- ------------ ----------- ----------- --------- ----------- ----- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Employee severance and $15,454(a) - $15,454 ($7,516) ($3,300) $4,638 ($2,637) ($2,001) -
related costs
Plant closing and 32,978(b) $(24,468) 8,510 - (8,510) - - - -
related asset
write-offs
Re-engineering 7,184(c) (7,184) - - - - - - -
Contractual obligations 16,834(d) (5,042) 11,792 (7,500) 11,110 15,402 (562) (5,640) $9,200
and other ------- --------- -------- ---------- ------- -------- ---------- ---------- ------
$72,450 $(36,694) $35,756 ($15,016) ($700) $20,040 ($3,199) ($7,641) $9,200
======= ========= ======== ========== ======== ======== ========= ========== ======
</TABLE>
* The balance at the end of the year is classified as a current liability.
<PAGE>13
(a) Represents severance costs for approximately 450 production employees at
six facilities. Estimates were based on calculations derived by attorneys
who considered the local labor laws at each location.
(b) Represents estimated impairment losses on land and buildings to be sold
($15 million) and machinery and equipment to be disposed ($14 million).
Also included is the estimate of site cleanup costs ($4 million). Estimates
were based principally on appraisals from third-party appraisers.
(c) Principally represents consulting costs, as well as limited training and
maintenance costs, which were expensed during 1997.
(d) Represents consulting and legal fees and other costs.
In 1997, the Company re-engineered certain major systems and processes.
The non-recurring, incremental costs of the re-engineering aggregated to $7.1
million, and included primarily consulting costs and training costs. These
amounts have been classified and presented within the Manufacturing
restructuring and re-engineering provision caption on the fiscal 1997
income statement.
During fiscal 1998, the Company sold three facilities at aggregate sales
prices substantially in excess of its original estimates, and continued to
actively market the three remaining facilities located in Canada, Argentina and
the U.S. The Canadian facility was sold on June 15, 1999 and management expects
the Argentine facility to be sold by September 1999. In addition, during
fiscal 1998 and 1999, the Company transferred a substantial portion of
production in the sites being sold to other facilities. As a result of the
realization of sales prices for the facilities sold in excess of amounts
originally anticipated, in 1998 the Company reclassified approximately $8.5
million from its plant closing liability and related asset write-offs to its
contractual obligations and other liability (as discussed below). In addition,
with the exception of a limited group of employees (approximately 56) at the
Company's U.S. facility, all manufacturing employees included in the initial
restructuring plan have been severed (392 employees). As of March 31, 1998, the
aggregate cost of the Company's severance program was $3.3 million less than
initially anticipated, principally due to favorable labor negotiations.
Accordingly, during fiscal 1998, the Company reclassified $3.3 million from its
employee severance and related costs liability to its contractual obligations
and other liability (as discussed below).
As of March 31, 1998, the Company had discontinued substantially all
production at the U.S. location to be closed, with the exception of the
production under a contractual obligation to produce one product for the
purchaser of the Company's ethical pharmaceutical practice division,
which was sold in 1996. In connection with the original restructuring plan,
the Company anticipated completely exiting its U.S. facility. As of
March 31, 1997, management believed that the facility would either be sold to
the entity to which the Company was obligated for production or to another
entity, whom it expected would assume responsibility for the production.However,
during 1998, despite the Company's efforts to sell the facility, it was unable
to do so. As a result of the transfer of all other production from this
facility, remaining production under this contract and other costs will result
in a loss of approximately $10 million, which was not recognized under the
original restructuring provision, but was increased to $10 million during 1998.
<PAGE>14
As of March 31, 1999, the Company identified additional excess amounts of
$7.6 million due to additional favorable experiences in calculating final
severance payments and settlement of post-closing adjustments in connection with
the sale of one of its plants. In addition, as a result of favorable fixed
asset disposals, which are not presented in the above table, a gain of
$5.1 million was generated. Consequently, the Company recorded a restructuring
credit of $12.7 million in its income statement for the year ended
March 31, 1999.
As of March 31, 1999, the Company's remaining obligation of $9.2 million
consists of its contractual obligation to produce a product for another entity.
Management believes that the remaining manufacturing reserves are adequate to
complete its plan during fiscal 2000.
During fiscal 1999, the Company acquired exclusive U.S. and Canadian
marketing rights for Atridox(R) for use in the treatment of chronic adult
periodontitis. The Company paid $19.1 million for the milestones already met as
of March 31,1999. Additional liability of $34 million is contingent upon certain
additional milestone events. If such milestone events are attained, the Company
believes its financial condition, results of operations and liquidity will be
substantially enhanced. In the U.S., the Company acquired the Stanback(R) line
of powdered analgesics and the Chap-et(R) line of lip care products. In
international markets, the Company acquired Strep(R) depilatory line, the
Agevit(R) nutraceutical line, and the Pilca(R) depilatory line in Italy, France
and Germany, respectively. The aggregate amount spent for these acquisitions was
$69.0 million, mainly comprised of goodwill payments. The Company sold three of
its domestic household products in April, 1998 at a modest gain. These products
did not fit the Company's long term strategy, and accordingly, management
anticipates these divestitures to positively impact its financial position,
results of operations and liquidity.
Year 2000
As many computer systems and other equipment or processors with embedded
chips (collectively, "Business Systems") use only two digits to represent the
year, they may be unable to process accurately certain data, before during or
after the year 2000. As a result, business and government entities are at risk
for possible miscalculations or systems failures causing disruption in their
business operations. This is commonly know as the year 2000 (Y2K Millennium Bug
or Y2K problem). The Y2K problem can arise at any point in the Company's supply,
manufacturing, processing, distribution and financial chains.
Block Drug Company and each of its operating subsidiaries are in the
process of implementing a Y2K compliance readiness program with the objective of
having all of their significant Business Systems, including those that affect
facilities and manufacturing activities, functioning properly with respect to
the Y2K problem before January 1, 2000. All operating subsidiaries are in the
remediation stage of Y2K readiness.
The first component of the Y2K compliance program is to identify the
internal Business Systems of the Company and its operating subsidiaries that are
susceptible to system failures or processing errors as a result of the Y2K
problem. This effort is substantially complete with all operating subsidiaries
having identified the Business Systems that may require remediation or
replacement and established priorities for repair or replacement. Those Business
Systems considered most critical to continuing operations are being given the
highest priority.
<PAGE>15
The second component of the Y2K compliance program involves the actual
remediation and replacement of Business Systems. The Company and its operating
subsidiaries are using both internal and external resources to complete this
process. The Business Systems ranked highest in priority have either been
remediated, replaced or scheduled for remediation or replacement. Business
Systems previously earmarked for retirement and replacement without regard to
the Y2K problem have been evaluated for early replacement with Y2K compliant
systems or programs or, in the alternative, remediation. The Company is in the
process of implementing Y2K compliant software/hardware wherever needed in the
US as well as fixing or replacing hardware and software where warranted, with
Y2K compliant solutions in our Affiliates. The Company completed all remediation
and replacement of its U.S. based internal Business Systems in March 1999. The
final testing and certification for Y2K readiness will be completed by July
1999, and the contingency plans will be prepared by September 1999.
As part of the Y2K compliance program, significant service providers,
vendors, suppliers, customers and government entities that are believed to be
critical to business operations after January 1, 2000, ("Key Business Partners")
have been identified and contacted through questionnaires, interviews or on-site
visits to ascertain their stage of Y2K readiness. Where ever we have electronic
or computer to computer communications with Key Partners, we plan to jointly
test these interfaces. In conjunction with this effort, key government agencies
and utilities upon which the Company and its subsidiaries rely are being
approached on a worldwide basis to identify their level of Y2K preparedness. In
many cases these entities, particularly those outside North America, have a
lower level of Y2K awareness and are less willing to provide information
concerning their state of Y2K readiness.
Because of the vast number of Business Systems used by the Company and
its operating subsidiaries, the significant number of Key Business Partners and
extent of the Company's foreign operations, the Company presently believes that
it may experience some disruption in its business due to the Y2K problem.
More specifically, because of the interdependent nature of Business
Systems, the Company and its operating subsidiaries could be materially
adversely affected if utilities and government entities with which they do
business or that provide essential services are not Y2K ready. The Company
currently believes that the greatest risk of disruption in its businesses
exists in certain international markets. The possible consequences of the
Company or Key Business Partners not being fully Y2K compliant by
January 1, 2000 include, among other things, temporary plant closings,
delay in the delivery of products, delay in receipt of supplies,
invoice and collection errors, and inventory and supply obsolescence.
Concurrently, the business and results of operations of the Company could be
materially adversely affected by a temporary inability of the Company and its
operating subsidiaries to conduct their businesses in the ordinary course for a
period of time after January 1, 2000. However, the Company believes that its Y2K
readiness program, including the contingency planning discussed below, should
significantly reduce the adverse effect of such disruptions.
Concurrently, with the Y2K readiness measures described above, the
Company and its operating subsidiaries are developing contingency plans intended
to mitigate the disruption in business operations that may result from Y2K
problems, and are developing cost estimates for such plans. Contingency plans
may include stockpiling raw and packaging materials, increasing inventory
levels, securing alternate sources of supply, adjusting facility shut-down and
start-up schedules and other appropriate measures. Once developed, contingency
plans and related cost estimates will be continually refined as additional
information becomes available.
<PAGE>16
The Company's original investment was estimated at $14 million to address
its Y2K effort as well as other business information requirements. This has been
revised, and it is expected that Y2K related expenses will reach a total of
about $16.9 million. To date, the Company has spent approximately $15.4 million.
These amounts do not include any costs associated with the implementation of
contingency plans, which are in the process of being developed.
The Company's Y2K compliance program is an ongoing process. Therefore,
the estimates of costs and completion dates for various components of the Y2K
compliance program are subject to change. The Company is, however, making every
effort to ensure that costs are forecasted as accurately as possible and
scheduled completion dates are achieved.
The estimates and conclusions herein contain forward-looking statements
and are based on management's best estimates of future events. The risks to
completing the plan include the availability of resources at specific facilities
and the ability of suppliers to bring their systems into Year 2000 compliance.
Euro Currency Adoption
As result of the European Economic and Monetary Union, a single currency
(the "Euro") will replace the national currencies of many of the European
countries in which the Company conducts business. The conversion rates between
the Euro and the participating nations' currencies were fixed as of January 1,
1999, with the participating national currencies scheduled to be removed from
circulation between January 1, and June 30, 2002, and replaced by Euro notes and
coinage. During the transition period from January 1, 1999 through December 31,
2001, public and private entities as well as individuals may pay for goods and
services using either checks, drafts, or wire transfers denominated in Euros or
the participating country's national currency. We do not expect the Euro
conversion to have a material negative impact on operations in fiscal 2000. All
affiliates can operate within the Euro market.
We are currently upgrading our computer systems so that we can operate
more efficiently within the Euro market in fiscal 2000.
Liquidity and Capital Resources
Cash and cash equivalents decreased to $48.4 million at March 31, 1999
from $56.3 million at March 31, 1998 and $38.9 million at March 31, 1997.
Net cash flow from operating activities was $86 million in fiscal 1999,
$11 million less than the prior year. The decrease in operating cash flow was
due to an increase in accounts receivable and an increase in other current
assets, partially offset by a decrease in inventories, and an increase in
accounts payable. In fiscal 1998, net cash flow from operating activities was
$97 million, $39 million more than the prior year. Earnings net of non-cash
expenses, an increase in accounts payable and a decrease in accounts receivable
more than offset increases in inventories. Accounts receivable at fiscal year
end 1999, 1998, 1997, represent 2.2, 2.0, 2.3 average month sales, respectively.
Inventory levels comprised 6.0 months supply at year end 1999, 1998 and 1997.
Net cash used in investing activities in fiscal 1999 was $93 million,
compared to net cash used of $114 million in fiscal 1998. In fiscal 1999,
additions to property, plant and equipment, payments for products acquired, and
purchases of marketable securities more than offset the
<PAGE>17
proceeds from the sale of securities, property plant and equipment and sale of
three household products brands. In fiscal 1998, cash was invested primarily
in property, plant and equipment and as payments for products acquired. In
fiscal 1997, the net cash outflow for investing activity was $59 million. The
Company is finalizing its Production Optimization Program which will
consolidate manufacturing facilities.
Net capital expenditures were $35 million for fiscal 1999, a decrease of
$3 million from fiscal 1998 and 1997.
Domestically, major projects over the three year period include a
substantial investment in computer modernization and R & D laboratories. The
production and warehouse facilities in Memphis, Tennessee and in Puerto Rico
have undergone expansion and modernization that will continue as a result of the
Company's Production Optimization Program.
The Company's 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
capital spending to approximate 5% of net sales, and expects to fund
modernization and expansion through internally generated funds and short-term
borrowings as appropriate.
Net cash utilized by financing activities was $2 million in fiscal 1999,
compared to net cash provided of $38 million in fiscal 1998. In fiscal 1997,
there was a net cash inflow of $23 million. The financial outflows in fiscal
1999 arose from the payment of dividends paid to shareholders and the retirement
of short term debt which was funded by the proceeds of the sale of three
household products brands. This was mostly offset with the proceeds from the
issuance of a $50 million ten year note. Financial inflows in fiscal 1998 were
the result of the issuance of debt. Financial inflows in fiscal 1997 were the
result of debt issuance offset by dividends paid to shareholders.
An overall weakening of the U.S. Dollar in relation to foreign currencies
resulted in net foreign currency translation gains of $4 million in fiscal 1999.
In fiscal 1998, net foreign currency translation losses were $20 million. These
amounts were recorded in the Shareholders' Equity section in the balance sheet
as a component of Other Comprehensive Income.
The Company classified all long-term securities as "available for sale".
These long-term securities are reported at fair market value resulting in
cumulative unrealized holding gains of $4,222,000, net of taxes of $ 1,083,000
as of March 31,1999. Cumulative holding gains were $3,692,000, net of taxes of
$941,000 as of March 31, 1998 and $551,000, net of taxes of $254,000 as of
March 31,1997.
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 2000. The Company has uncommitted lines
of credit totaling $341 million and $314 million at March 31, 1999 and 1998,
respectively.
Market Risk
The Company's primary market risk exposures consist of interest rate risk and
foreign currency exchange risk. See Note 5 "Financial Instruments" to the
consolidated financial statement for the Company's objectives and strategies for
managing potential exposures related to these risks.
<PAGE>18
Management primarily uses two types of financial instruments, interest rate cap
agreements and foreign currency put options, to hedge exposures to certain
foreign currency fluctuations as described in Note 5. As hedges, gains and
losses on forward contracts are offset by the effects of currency movements on
respective underlying hedged transactions. Therefore, with respect to
financial instruments outstanding at March 31, 1999, a change of 10 percent in
currency rates, compared to fiscal 1999 rates, would not have a material effect
on the Company's consolidated financial position, liquidity, cash flows or
results of operations.
The Company holds certain instruments, primarily debt obligations, which are
sensitive to changes in market interest rates. At March 31, 1999, the majority
of the Company's variable rate debt consisted of bank borrowings which are
subject to changes in market interest rates. However, at March 31, 1999, a
change of 10 percent in interest rates, compared to fiscal 1999 rates, would
not have a material effect on the Company's consolidated financial position,
liquidity, cash flows, results of operations or the fair value of the Company's
debt.
Reporting on Comprehensive Income:
Effective April 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 (SFAS 130), Reporting Comprehensive Income. SFAS
130 establishes standards for the reporting of comprehensive income, and
requires that an enterprise classify items of other comprehensive income by
their nature in a financial statement, and display the accumulated balance of
other comprehensive income in the statement of financial position. Other
comprehensive income consists of movements in the Company's cumulative
translation adjustment and unrealized holding gains and losses on marketable
securities.
Segments of an Enterprise:
During fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS 131 establishes
standards for the way public business enterprises report information about
operating segments in reports to shareholders. The adoption of SFAS 131 did
not affect results of operations or financial position but did affect the
disclosure of segment information. Prior year data has been restated for
comparability purposes. More details on segment information are contained in
Note 17 of the Notes to the Consolidated Financial
Statements.
Employers' Disclosures about Pensions and Other Postretirement Benefits:
During fiscal 1999, the Company adopted 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 (See
Note 9).
New Accounting Standards:
In June 1998, the FASB issued SFAS No. 133, "Accounting and 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, 2000 . The Company is currently evaluating the impact
of the new statement on its fiscal 2002 disclosures.
<PAGE>19
Subsequent Events
Subsequent to the close of the year, the Company divested the Lava(R)
hand soap brand for $19 million which resulted in a modest gain. This divesture
was consistent with the Company's long term strategy and is expected to
positively affect the financial position, results of operations and liquidity.
In Latin America, the Company acquired Silidron(R) and Espasmo Silidron(R)
anti-gas medicines and in Argentina, the Company acquired the Pelo Libre(R) line
of pediculicides. Louis Marcel(R), a depilatory brand, was acquired for the U.K.
market. In Germany, the Company purchased Chlorhexamed(R) medicated mouthwash.
The Company acquired the balance of certain marketing rights to Parodontax(R)
brand toothpaste in Korea. The aggregate amount spent on these acquisitions was
$55.6 million, mainly comprised of goodwill payments.
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 management. Such
forward-looking statements are identified by the use of forward-looking words or
phrases such as "anticipates," "intends," "expects," "plans," "believes,"
"estimates," or words or phrases of similar import. These forward-looking
statements are subject to numerous assumptions, risks, and uncertainties, and
the statements looking forward beyond fiscal year 1999 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.
<PAGE>20
Item 8. Financial Statements and Supplementary Data
Report of Independent Accountants
To the Board of Directors and
Shareholders of Block Drug Company, Inc.
In our opinion, based upon our audits and the reports of other auditors, the
accompanying consolidated financial statements and the financial statements
schedules of Block Drug Company, Inc. and subsidiaries listed in the index on
page 59 of this Form 10-K, present fairly, in all material respects, the
consolidated financial position of Block Drug Company, Inc. and subsidiaries at
March 31, 1999 and 1998 and the consolidated results of their operations and
their cash flows for each of the three years in the period ended March 31,
1999, in conformity with generally accepted accounting principles. 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 statements of certain foreign
subsidiaries and branches, which statements reflect total assets and total
revenues constituting approximately 15 percent and 30 percent, respectively,
as of and for the year ended March 31, 1999, 13 percent and 32 percent,
respectively, as of and for the year ended March 31, 1998 and 15 percent and 37
percent, respectively, in the year ended March 31, 1997 of the corresponding
consolidated totals. Those statements were audited by other auditors whose
reports thereon have been furnished to us and our opinion expressed herein,
insofar as it relates to the amounts included for Block Drug Company, Inc. and
subsidiaries, is based solely on the reports of the other auditors. We conducted
our audits of the consolidated financial statements in accordance with generally
accepted auditing standards which require that we plan and perform our audit to
obtain reasonable assurance about whether these financial statements are free of
material misstatements. An audit includes examining on a test basis evidence
supporting the amounts and disclosures in the financial statement, 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 and the reports of other auditors provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
June 8, 1999
<PAGE>21
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31,
1999 1998
--------------- --------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................................ $ 48,363,000 $ 56,331,000
Marketable securities, at market..................................................... 29,994,000 5,070,000
Accounts receivable, less allowances of $4,750,000 (1999) and
$4,446,000 (1998)................................................................. 153,470,000 143,114,000
Inventories.......................................................................... 135,947,000 139,139,000
Other current assets................................................................. 41,867,000 37,056,000
--------------- -------------
Total current assets.............................................................. 409,641,000 380,710,000
Property, plant and equipment, less
accumulated depreciation.......................................................... 252,270,000 251,737,000
Long-term securities, at market...................................................... 257,082,000 263,518,000
Goodwill and other intangible assets, less
accumulated amortization of $21,217,000(1999)
and $19,065,000 (1998)............................................................ 239,818,000 183,654,000
Other assets......................................................................... 7,952,000 7,453,000
-------------- --------------
Total assets...................................................................... $1,166,763,000 $1,087,072,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes and bonds payable........................................................... $ 143,740,000 $ 171,210,000
Accounts payable and accrued expenses............................................. 185,270,000 173,226,000
Income taxes payable.............................................................. 13,532,000 11,128,000
Dividend payable.................................................................. 5,521,000 5,306,000
-------------- ------------
Total current liabilities...................................................... 348,063,000 360,870,000
Notes and bonds payable.............................................................. 107,012,000 58,318,000
Deferred income taxes................................................................ 8,155,000 3,023,000
Deferred compensation and other liabilities.......................................... 19,648,000 17,606,000
-------------- -------------
Total liabilities.............................................................. 482,878,000 439,817,000
-------------- -------------
Shareholders' equity:
Class A common stock non-voting par value $.10-15,000,000
shares authorized, 14,456,000 (1999) and
13,991,000 (1998) shares issued and outstanding................................... 1,445,000 1,399,000
Class B common stock, par value $.10-30,000,000 shares
authorized, 8,419,000 (1999) and 8,174,000 (1998) shares
issued and outstanding............................................................ 842,000 817,000
Capital in excess of par value....................................................... 306,433,000 281,993,000
Retained earnings.................................................................... 384,952,000 377,595,000
Cumulative other comprehensive income (loss)......................................... (9,787,000) (14,549,000)
--------------- ---------------
Total shareholders' equity........................................................... 683,885,000 647,255,000
--------------- --------------
Total liabilities and shareholders' equity........................................ $1,166,763,000 $1,087,072,000
============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>22
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
INCOME AND RETAINED EARNINGS
<CAPTION>
For the Years Ended March 31, 1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Net sales................................................... $ 821,101,000 $863,057,000 $862,471,000
Interest, dividends and other income........................ 27,984,000 25,882,000 28,335,000
------------- ------------ ------------
849,085,000 888,939,000 890,806,000
------------- ------------ ------------
Cost and Expenses:
Cost of goods sold.......................................... 272,065,000 281,475,000 279,334,000
Selling, general and administrative......................... 508,668,000 523,959,000 518,059,000
Interest expense............................................ 13,528,000 13,894,000 10,146,000
Manufacturing restructuring and
re-engineering (credit) provision.......................... (12,673,000) - 72,450,000
-------------- ------------ ------------
781,588,000 819,328,000 879,989,000
------------- ------------ ------------
Income before income taxes.................................... 67,497,000 69,611,000 10,817,000
------------- ------------ ------------
Income Taxes:
Current..................................................... 11,194,000 14,868,000 14,112,000
Deferred.................................................... 4,681,000 2,951,000 (11,902,000)
------------- ------------ -------------
15,875,000 17,819,000 2,210,000
------------- ------------ ------------
Net Income.................................................... 51,622,000 51,792,000 8,607,000
Retained earnings at beginning of year........................ 377,595,000 377,202,000 416,200,000
Less: Cash dividends - $1.27
(1999), $1.25 (1998) and $1.20 (1997)
per share of Class A common stock (17,864,000) (17,087,000) (15,881,000)
Cash dividends $0.441 (1999)
$.435 (1998) and $.415 (1997) per share
of Class B common stock...................................... (3,634,000) (3,503,000) (3,197,000)
Stock dividends 3% (1999, 1998 and 1997)
to Class A shareholders
payable in Class A common stock............................. (14,385,000) (19,441,000) (17,982,000)
Stock dividends 3% to Class B
shareholders payable in Class B
common stock (1999, 1998 and 1997).......................... (8,382,000) (11,368,000) (10,545,000)
-------------- ------------- -------------
Retained earnings at end of year.............................. $ 384,952,000 $377,595,000 $377,202,000
============== ============ ============
Earnings per share of common stock:
Earnings per share - Basic and Diluted........................ $2.26 $2.27 $0.38
===== ===== =====
</TABLE>
See notes to consolidated financial statements.
<PAGE>23
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<CAPTION>
For the Years Ended March 31, 1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net income.................................................... $51,622,000 $51,792,000 $8,607,000
----------- ----------- ----------
Other comprehensive income (loss):
Foreign currency translation adjustment*.. 4,232,000 (20,285,000) 4,520,000
Unrealized holding gain (loss) on marketable
securities, net of taxes................................. 530,000 3,141,000 (5,479,000)
----------- ----------- -----------
4,762,000 (17,144,000) (959,000)
----------- ------------ -----------
Comprehensive income.......................................... $56,384,000 $34,648,000 $7,648,000
=========== ============ ===========
</TABLE>
See Note 15 for Accumulated Other Comprenhensive Income.
*The Company does not provide for U.S. income taxes on foreign currency
translation adjustments because it does not provide for such taxes on
undistributed earnings of foreign subsidiaries.
See notes to consolidated financial statements.
<PAGE>24
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<CAPTION>
For the Years Ended March 31, 1999 1998 1997
-------------- -------------- --------------
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income............................................................. $ 51,622,000 $ 51,792,000 $ 8,607,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization..................................... 26,110,000 24,670,000 24,629,000
Deferred income tax provision..................................... 4,681,000 2,951,000 (11,902,000)
Deferred compensation provision................................... 1,338,000 4,310,000 2,110,000
(Gain)on sales of long-term securities (283,000) (987,000) (3,136,000)
Restructuring and re-engineering
(payments) provision............................................. (3,202,000) (15,016,000) 67,415,000
Manufacturing restructuring credits............................... (12,673,000) - -
Employee savings plan provision................................... 1,744,000 1,879,000 1,707,000
Other, net........................................................ 557,000 80,000 963,000
Loss (gain)on sale of property, plant
and equipment.................................................. 152,000 (3,557,000) -
Changes in assets and liabilities that
provided (used) cash, net of effects from
purchase of products acquired:
Accounts receivable............................................... (8,535,000) 12,161,000 (38,291,000)
Inventories....................................................... 6,559,000 (7,169,000) (17,705,000)
Accounts payable and accrued expenses............................. 20,904,000 25,716,000 12,682,000
Other current assets.............................................. (4,158,000) 4,751,000 (8,441,000)
Other assets...................................................... (395,000) (1,230,000) 15,950,000
Income taxes and dividends payable................................ 2,561,000 (1,113,000) 4,946,000
Payments of deferred compensation and
other noncurrent liabilities.................................... (822,000) (2,292,000) (1,210,000)
------------ ------------- ------------
Net cash flow from operating activities................................ 86,160,000 96,946,000 58,324,000
------------ ------------ -----------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sales of household products brands,
net of cash expenses................................................. 28,475,000 - -
Additions to property, plant and equipment............................. (39,754,000) (45,822,000) (45,418,000)
Proceeds from sale of property, plant
and equipment........................................................ 5,163,000 7,970,000 7,555,000
Decrease (increase) in marketable
securities, net...................................................... 3,030,000 (100,000) 13,486,000
Dispositions of long-term securities................................... 54,515,000 46,457,000 49,039,000
Purchase of long-term securities....................................... (75,390,000) (84,234,000) (55,771,000)
Payments for products acquired,
primarily intangibles................................................ (69,011,000) (38,173,000) (28,171,000)
------------- ------------- ------------
Net cash used in investing activities.................................. (92,972,000) (113,902,000) (59,280,000)
------------- ------------- ------------
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid to shareholders......................................... (21,498,000) (20,590,000) (19,078,000)
Proceeds from issuance of long-term debt............................... 50,000,000 58,890,000 51,190,000
Payment of short-term notes............................................ (30,802,000) - (9,005,000)
------------- ------------- ------------
Net cash (used in) provided by
financing activities................................................. (2,300,000) 38,300,000 23,107,000
------------- ------------ -----------
Effects of exchange rates on cash...................................... 1,144,000 (3,898,000) 346,000
------------ ------------- -----------
(Decrease) increase in cash and cash
equivalents.......................................................... (7,968,000) 17,446,000 22,497,000
Cash and cash equivalents, beginning of year........................... 56,331,000 38,885,000 16,388,000
------------ ------------ -----------
Cash and cash equivalents, end of year................................. $ 48,363,000 $ 56,331,000 $38,885,000
============ ============ ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>25
<TABLE>
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<CAPTION>
For the Years Ended March 31, 1999 1998 1997
------------ ------------ ------------
SUPPLEMENTAL CASH FLOW DATA
<S> <C> <C> <C>
Cash Paid During the Year:
Interest............................................................. $12,127,000 $14,076,000 $10,381,000
Income Taxes......................................................... $10,257,000 $12,350,000 $ 9,560,000
</TABLE>
See notes to consolidated financial statements.
<PAGE>26
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
included in the determination of net income. For subsidiaries that are
considered to be operating in highly inflationary countries (Brazil for fiscal
years 1998 and 1997 and Mexico for 1999 and 1998), the functional currency is
the US dollar. Certain assets and liabilities are translated at historical
exchange rates and resulting translation gains and losses are included in the
determination of net income. Income statements are translated each month into US
dollars at the weighted average exchange rates during the period. In all cases,
foreign currency transaction gains and losses are included in the determination
of net income.
Net foreign exchange losses of ($1,369,000), ($2,523,000) and ($3,940,000),
were included in selling, general and administrative expenses in the
determination of net income for fiscal years 1999, 1998 and 1997, respectively.
1999 1998 1997
==================================== =========== ============ ============
Transaction (losses) $ (737,000) $(2,339,000) $(3,805,000)
Translation (losses) relating
to highly inflationary countries (632,000) (184,000) (135,000)
------------ ------------- ------------
Total $(1,369,000) $(2,523,000) $(3,940,000)
============ ============ ============
CUMULATIVE TRANSLATION ADJUSTMENT
RECONCILIATION 1999 1998 1997
================================== =========== ============= ==============
Balance -Beginning $(18,241,000) $ 2,044,000 $(2,476,000)
Translation Adjustment 4,232,000 (20,285,000) 4,520,000
Balance-Ending $(14,009,000) $(18,241,000) $2,044,000
Advertising:
Cost associated with advertising are expensed in the year incurred.
Advertising expenses, which are comprised primarily of television and print
media, were $205,099,000, $201,653,000 and $234,974,000 in fiscal 1999, 1998 and
1997, respectively.
Cash and Cash Equivalents:
Cash equivalents include primarily demand deposits, certificates of deposit
and time deposits with maturity periods of three months or less when purchased.
<PAGE>27
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 40
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. Such
assets consist primarily of goodwill and trademarks. At March 31, 1999, the
carrying values of these assets were $187 million and $53 million, respectively.
At March 31, 1998, these respective carrying values were $132 million and $52
million. Goodwill acquired prior to October 31, 1970 is not being amortized
since, in management's opinion, its value has not diminished. Goodwill acquired
subsequent to that date is being amortized using the straight-line method over
the years estimated to be benefited, but not to exceed 40 years. Other
intangible assets are recorded at cost and amortized over their estimated useful
lives on the straight line method. The Company periodically evaluates whether
current events or circumstances warrant adjustments to the carrying value or
estimated useful lives of its intangible assets in accordance with SFAS 121;
"Accounting for the Impairment of Long-Lived Assets", and APB 17, "Intangible
Assets".
Amortization of goodwill and other intangible assets was $5,258,000,
$5,019,000 and $4,419,000 in the years ended March 31, 1999, 1998 and 1997,
respectively.
Marketable securities, financial instruments and fair value of financial
instruments:
Marketable securities classified as current assets include debt instruments
with less than one year remaining until maturity, are treated as available for
sale and are recorded at market value. Long-term securities are also treated as
available for sale and are recorded at market value. Unrealized holding gains
and losses 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 published market prices, independent pricing services and/or
securities dealers.
The Company utilizes certain financial instruments to manage its foreign
currency and interest rate exposures. The Company does not engage in trading or
other speculative use of these financial instruments. To qualify as a hedge,
the Company must be exposed to currency or interest rate risk and the financial
instrument must reduce the exposure and be designated as a hedge. Additionally,
for hedges of anticipated transactions, the significant characteristics and
expected terms of the anticipated transaction must be identified and it must be
probable that the anticipated transaction will occur. Financial instruments
qualifying for hedge accounting must maintain a high correlation between the
hedging instrument and the item being hedged, both at inception and throughout
the hedged period. If anticipated transactions were not to occur, any gains or
losses would be recognized in earnings currently.
The Company uses foreign currency options to mitigate its foreign currency
exposure. The corresponding gains and losses on those contracts are deferred
and included in the basis of the underlying hedged transactions when settled.
Option premiums on options used to hedge anticipated exposures, principally
inventory purchases, are recorded as other current assets on the consolidated
balance sheets and amortized to expense over the lives of the related options.
The values of options, excluding their time values, are recognized as
adjustments to the related hedged items when the related transaction occurs.
The Company uses interest rate cap agreements to mitigate its interest rate
exposure related to variable rate borrowings. These agreements cover periods
similar to the third party debt which they are intended to hedge. The premiums
are amortized to interest expense over the lives of the related interest rate
agreements, or immediately if the related debt does not remain outstanding.
<PAGE>28
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which must be adopted by the Company by
April 1, 2001. SFAS No. 133 requires that all derivative financial instruments
be recorded on the consolidated balance sheets at their fair value. Changes in
the fair value of derivatives will be recorded each period in earnings or other
comprehensive earnings, depending on whether a derivative is designated as part
of a hedge transaction and, if it is, the type of hedge transaction. Gains and
losses on derivative instruments reported in other comprehensive income will be
reclassifed as earnings in the periods in which earnings are affected by the
hedged item. The Company does not anticipate that adoption of SFAS No. 133 will
have a material effect on its financial position or results of operations.
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 SFAS No. 87, "Employer's
Accounting for Pensions." It is the Company's policy to fund pension costs in
accordance with the Internal Revenue Service full funding limitation.
The Company 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, 1999, 1998 and 1997 were $22,635,000,
$25,849,000 and $28,180,000, respectively.
Reporting on Comprehensive Income:
In fiscal 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." Under provisions of this statement, the Company has included a
financial statement presentation of comprehensive income to conform to these new
requirements. SFAS 130 requires unrealized gains or losses on the Company's
available-for-sale securities and foreign currency translation adjustments,
which, prior to adoption of the statement were reported separately in
shareholders' equity, to be included in other comprehensive income. As a
consequence of this change, certain balance sheet reclassifications were
necessary for previously reported amounts to achieve the required presentation
of comprehensive income. See Note 15.
Risks 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 enables it to compete
effectively.
The primary competitive factors affecting proprietary over-the-counter brands
are product formulation, reputation and advertising and consumer promotions.
<PAGE>29
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 differ materially from those estimates.
Reclassifications:
Certain prior year amounts have been reclassified to conform with current year
presentation.
Note 2. Inventories:
Major classes of inventories are summarized as follows:
March 31
1999 1998
Raw and packaging materials................... $ 30,997,000 $ 42,661,000
Finished goods................................ 104,950,000 96,478,000
------------ ------------
Total....................................... $135,947,000 $139,139,000
============ ============
Note 3. Property, Plant and Equipment:
Major classes of property, plant and equipment
are summarized as follows: March 31
1999 1998
Land .................................... $ 15,496,000 $ 16,745,000
Building and related improvements........... 146,392,000 143,854,000
Machinery and equipment..................... 151,921,000 162,440,000
Furniture and fixtures .................... 61,128,000 45,512,000
Construction in progress.................... 12,594,000 15,478,000
------------ ------------
387,531,000 384,029,000
Less: Accumulated depreciation 135,261,000 132,292,000
------------ ------------
Total $252,270,000 $251,737,000
============ ============
Depreciation expense for the years ended March 31, 1999, 1998 and 1997 was
$20,852,000, $19,651,000 and $20,210,000, respectively. Certain of the above
properties are pledged as collateral for long term debt (Note 6).
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 and long-term securities as
available-for-sale.
The Company's marketable and long-term securities, both current and
noncurrent, as of March 31, 1999 consisted of the following:
<TABLE>
<CAPTION>
Unrealized Holding
Security Type Amortized Cost Fair Value Gains Losses
<S> <C> <C> <C> <C>
U.S. government & its agencies $ 39,843,000 $ 39,958,000 $ 267,000 $152,000
Mortgage backed securities 86,770,000 88,455,000 1,835,000 150,000
State and municipal 151,158,000 154,561,000 3,417,000 14,000
Hedge funds 4,000,000 4,102,000 102,000 0
------------ ------------ ---------- --------
Total $281,771,000 $287,076,000 $5,621,000 $316,000
</TABLE>
The above unrealized holding gains and losses, net of income taxes of
$1,083,000, are reflected as a component of "other comprehensive income" in
shareholders' equity.
<PAGE>30
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The marketable securities, both current and non-current, as of March 31, 1998
consisted of the following:
<CAPTION>
Unrealized Holding
Security Type Amortized Cost Fair Value Gains Losses
<S> <C> <C> <C> <C>
U.S. government & its agencies $ 22,947,000 $ 22,907,000 $ 84,000 $124,000
Mortgage backed securities 124,750,000 126,070,000 1,766,000 446,000
State and municipal 112,258,000 115,543,000 3,340,000 55,000
Hedge funds 4,000,000 4,068,000 68,000 0
------------ ------------ ---------- ---------
Total $263,955,000 $268,588,000 $5,258,000 $625,000
</TABLE>
The above unrealized holding gains and losses, net of income taxes of
$941,000 are reflected as a component of "other comprehensive income" in
shareholders equity.
The maturities of the Company's investment in debt securities, at fair value,
as of March 31, 1999 and 1998 were as follows:
1999 1998
Within 1 year $ 29,994,000 $ 5,070,000
After 1 year through 5 years 59,290,000 48,854,000
After 5 years through 10 years 107,614,000 75,350,000
After 10 years 90,178,000 139,314,000
Total $287,076,000 $268,588,000
For the years ended March 31, 1999, 1998, and 1997 the proceeds from the sales
of securities including normal principal payments on government agency
obligations, bond redemptions, and maturities were $54,515,000, $46,457,000, and
$49,039,000, respectively. Gross realized gains and gross realized losses from
these transactions were $367,000 and $84,000 for 1999,$995,000 and $8,000 for
1998, and $3,154,000 and $18,000 for 1997, respectively. The costs of
marketable securities sold were determined by specific identification.
Note 5. Financial Instruments:
The Company uses two types of financial instruments, interest rate cap
agreements and foreign currency put options, to reduce exposures to market risks
from fluctuations in interest and foreign exchange rates. The Company does not
use financial instruments for trading or speculative purposes.
At March 31, 1999 and 1998, the Company has interest rate cap agreements with a
notional amount of $100 million. These agreements limit the Company's interest
costs on its short and long-term variable rate debt during the period from
June 1, 1997 through March 1, 2002 if the LIBOR rate exceeds 9%. Due to the
timing of payments, there were no amounts recorded in the balance sheets as of
March 31, 1999 and 1998.
<PAGE>31
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of the end of fiscal years 1999 and 1998, the Company held foreign currency
put options to reduce the impact of fluctuations in certain foreign currencies,
principally the yen, the Euro, the pound sterling, the Australian dollar, and
the Canadian dollar, on anticipated transactions, principally inventory
purchases. The aggregate notional amount of these options, which expire in
fiscal years 2000 and 2001, approximated $137,703,000 and $52,000,000,
respectively, as of the end of fiscal year 1999, with a weighted average
maturity of 465 days. At the end of fiscal year 1998, the aggregate notional
amount of outstanding options approximated $61,929,000, with a weighted average
maturity of 365 days.
During fiscal years 1999 and 1998, the Company received proceeds of $1,980,000
and $1,283,000, respectively, from the exercise of foreign currency put options.
Gains and losses from option activity were not significant for fiscal years
1999, 1998, and 1997. The remaining carrying value of put options recorded in
other current assets at March 31, 1999 is $3,700,000.
The fair value of the interest rate cap agreements represents the estimated
amount that the Company would receive or pay to terminate the agreements. As of
March 31, 1999 and 1998, the Company would have paid $1,367,000 and $1,732,000,
respectively, to terminate the interest rate cap agreements.
The estimated fair value of the foreign currency put options at the end of
fiscal years 1999 and 1998, which represents the estimated amount the Company
would receive if it terminated the agreements, was $1,415,000 and $942,000,
respectively.
The Company is exposed to loss in the event of nonperformance by the
counterparties to its financial instruments. However, the Company does not
anticipate nonperformance by the counterparties, which are major financial
institutions.
Note 6. Notes and Bonds Payable:
Short-term notes payable consist primarily of borrowings from various banks
at interest rates ranging from 3.5% to 11.3% with a weighted average of 5.47%
and 6.28% for the fiscal years ended March 31, 1999 and 1998, respectively. At
March 31, 1999 and 1998, the Company maintained short-term uncommitted bank
lines of credit aggregating $341,046,000 and $313,630,000, respectively. Of
these amounts, $211,620,000 and $151,198,000 was unused at March 31, 1999 and
1998, respectively. The fair value of the short-term notes payable approximates
book value due to the relatively short maturity of these loans.
Long-term notes and bonds payable are comprised of the following:
March 31
1999 1998
------------- -------------
7.0% Notes due fiscal 2000................... $ - $ 1,353,000
Variable rate mortgage notes
(currently 3.85%) due fiscal 2002........... 2,562,000 2,515,000
6.47% Senior notes due fiscal 2006........... 50,000,000 50,000,000
6.46% Senior notes due fiscal 2009........... 50,000,000 -
Variable rate bonds (currently 3.1%),
due fiscal 2010............................. 4,450,000 4,450,000
----------- -----------
107,012,000 $58,318,000
============ ===========
Long-term notes and bonds payable maturing in the next five fiscal years and
thereafter is as follows:
March 31
1999 1998
------------ -------------
F'2000 7.0% Notes........................... $ - $ 1,353,000
F'2001...................................... - -
F'2002 Variable rate notes (now 3.85%)...... 2,562,000 2,515,000
F'2003...................................... - -
F'2004...................................... - -
F'2005 and later............................ $104,450,000 $54,450,000
Certain properties of the Company (approximate book value $8,450,000) 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.
<PAGE>32
Interest expense on all borrowings was charged to expense and aggregated
$13,528,000 in fiscal 1999, $13,894,000 in fiscal 1998 and $10,146,000 in
fiscal 1997.
The fair value of the senior notes at March 31, 1999 was $98,625,000. The
fair value of the senior note at March 31, 1998 was $49,362,000. The fair value
of the remaining long term debt approximates book value.
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
<CAPTION>
Note 7. Accounts Payable and Accrued Expenses:
Accounts payable and accrued expenses are comprised of the following:
March 31
1999 1998
------------- -------------
<S> <C> <C>
Accounts payable - trade................................................................ $ 42,611,000 $ 34,300,000
Accrued salaries, wages, vacation pay and bonuses....................................... 44,389,000 38,696,000
Accrued advertising and selling expenses................................................ 50,264,000 43,224,000
Restructuring and re-engineering........................................................ 9,200,000 20,040,000
Accrued legal........................................................................... 20,066,000 11,951,000
Other current liabilities............................................................... 18,740,000 25,015,000
------------ ------------
$185,270,000 $173,226,000
</TABLE>
Note 8. Income Taxes:
<TABLE>
Income taxes consisted of:
<CAPTION>
Current Deferred Total
For the year ended March 31, 1999
<S> <C> <C> <C>
Federal.......................................................... $ 3,679,000 $(1,586,000) $ 2,093,000
Foreign.......................................................... 7,179,000 6,403,000 13,582,000
State............................................................ 336,000 (136,000) 200,000
----------- ------------ -----------
$11,194,000 $ 4,681,000 $15,875,000
=========== =========== ===========
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
============ ============= ============
</TABLE>
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:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ----------- ----------
For the year ended March 31:
<S> <C> <C> <C>
Depreciation.................................................................. $1,794,000 $(1,996,000) $ 651,000
Expenses (not) currently deductible for
tax purposes.................................................................. 2,702,000 6,376,000 (14,111,000)
Other ................................................................... 185,000 (1,429,000) 1,558,000
---------- ----------- ------------
$4,681,000 $2,951,000 ($11,902,000)
========== =========== =============
</TABLE>
A reconciliation of the provision for income taxes 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)
1999 1998 1997
-------- -------- -------
For the year ended March 31:
Tax at U.S. Federal statutory rate of 35%......$23.6 $24.4 $ 3.8
Tax benefit on Puerto Rico investment income
related primarily to tax-exempt bonds........ (2.6) (2.7) (3.2)
Irish operating income taxed at lower rate..... (0.3) (5.7) (4.8)
Reduction in taxes resulting from Puerto Rico
source income subject to lower tax rate...... (5.0) (2.8) (2.9)
Foreign tax rate differential.................. 0.9 3.7 3.4
Non-deductible restructuring charges........... 0.0 0.0 9.2
Other.......................................... (0.7) 0.9 (3.3)
----- ------ ------
Total..........................................$15.9 $17.8 $ 2.2
===== ====== ======
<PAGE>33
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 $225,276,000 as of
March 31, 1999, 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. The Company believes that the determination
of the liability for the amount of unrecognized deferred taxes for temporary
differences related to investments in foreign subsidiaries that are permanent in
duration is not practicable.
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
<CAPTION>
Deferred tax assets and liabilities consisted of the following:*
Deferred tax assets: March 31,
----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Coupon accrual, sales discounts, and workers compensation.......................... $ 3,386,000 $ 3,053,000
Employee benefits.................................................................. 6,754,000 7,784,000
Accrual on vacation................................................................ 1,329,000 1,226,000
Deferred compensation.............................................................. 3,968,000 4,968,000
Capital gain....................................................................... 10,471,000 7,807,000
Accrued restructuring.............................................................. 3,496,000 7,642,000
Other.............................................................................. 4,250,000 1,497,000
----------- -----------
$33,654,000 $33,977,000
=========== ===========
Deferred tax liabilities:
Property, plant and equipment...................................................... 17,784,000 $15,990,000
SFAS No. 115 adjustment............................................................ 1,083,000 942,000
Other.............................................................................. 10,233,000 7,621,000
------------ -----------
$29,100,000 $24,553,000
============ ===========
</TABLE>
* As of March 31, 1999 and 1998, recoverable income taxes reflected in
the balance sheet in "Other current assets" included current deferred
tax assets of $12,709,000 and $12,447,000, respectively. The remaining
deferred tax liabilities, net of deferred tax assets, were reflected in
the balance sheet as "Deferred income taxes".
Note 9. Retirement and Deferred Compensation Plans:
In fiscal 1999, the Company adopted SFAS No. 132, "Employers' Disclosures
about Pensions and Postretirement Benefits," which standardizes the disclosure
requirements for pensions and other postretirement benefits. The Statement
addresses disclosure only. It does not address liablity measurement or expense
recognition. There was no effect on financial position or net income as a result
of adopting SFAS No. 132.
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.
In addition to providing pension benefits the Company provides certain
retiree health care benefits, presented as "Other Benefits", for
substantially all non-union employees (excluding Puerto Rico) who reach
retirement age while working for the Company. Health care benefits are
provided by Blue Cross Blue Shield of New Jersey and selected Health Maintenance
Organizations. The Company reserves the right to change or discontinue these
benefits in whole or in part at any time.
The following tables provide a reconciliation of changes in plan obligations
and fair values of plan assets at March 31, 1999 and 1998, and a statement of
the funded status of the plans at March 31, 1999 and 1998, respectively:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
-------------------------- ------------------------
1999 1998 1999 1998
----------- ----------- ---------- ----------
Change in Benefit Obligation
<S> <C> <C> <C> <C>
Benefit Obligation at Beginning of Year........................ $74,756,000 $57,229,000 $8,554,000 $8,292,000
Service Cost................................................... 4,261,000 3,592,000 329,000 287,000
Interest Cost.................................................. 4,352,000 4,515,000 607,000 622,000
Settlement..................................................... (17,075,000) - - -
Special Termination Benefits................................... 931,000 3,924,000 - -
Amendments..................................................... 913,000 - - -
Curtailments................................................... (394,000) - - -
(Gain)/Loss.................................................... 2,761,000 7,839,000 (279,000) (498,000)
Benefit Payments............................................... (6,065,000) (2,343,000) (169,000) (149,000)
------------ ------------ ----------- -----------
Benefit Obligation at End of Year.............................. $64,440,000 $74,756,000 $9,042,000 $8,554,000
=========== =========== ========== ===========
Change in Plan Assets
Fair Value of Assets at Beginning of Year...................... $77,492,000 $67,522,000 - -
Settlement..................................................... (17,075,000) - - -
Actual Return on Assets........................................ 4,523,000 12,135,000 - -
Employer Contribution.......................................... 3,227,000 178,000 $ 169,000 $ 149,000
Employee Contribution.......................................... - - 15,000 9,000
Benefits Payments.............................................. (6,065,000) (2,343,000) (184,000) (158,000)
------------ ------------- ----------- -----------
Fair Value of Assets at End of Year............................ $62,102,000 $77,492,000 $ - $ -
=========== ============ =========== ===========
</TABLE>
<PAGE>34
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
<CAPTION>
Pension Benefits Other Benefits
-------------------------- ------------------------
1999 1998 1999 1998
----------- ----------- ---------- ----------
Change in Benefit Obligation
<S> <C> <C> <C> <C>
Funded Status.................................................. $ (2,338,000) $ 2,736,000 $(9,043,000) $(8,554,000)
Unrecognized (Gain)............................................ (15,690,000) (20,927,000) (1,054,000) (775,000)
Unrecognized Prior Service Cost................................ 4,304,000 3,795,000 - -
Unrecognized Transition Obligation............................. (564,000) (1,365,000) 3,930,000 4,210,000
------------- -------------- ----------- -----------
(Accrued)/Prepaid Benefit Cost................................. $(14,288,000) $(15,761,000) $(6,167,000) $(5,119,000)
============= ============== ============ ============
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $6,337,000, $4,288,000 and zero, respectively as
of March 31, 1999 and $11,422,000, $9,035,000 and $3,813,000, respectively as of
March 31, 1998.
The following table provides the amounts recognized in the balance sheet as
of March 31, 1999 and 1998:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Prepaid Benefit Costs.......................................... $ 4,615,000 $ 3,181,000 $ - $ -
Accrued Benefit Liability...................................... (20,122,000) (20,550,000) (6,167,000) (5,119,000)
Intangible Asset............................................... 1,219,000 1,148,000 - -
Accumulated Other Comprehensive Income......................... - 460,000 - -
------------ ------------ ------------ -----------
Net Amount Recognized.......................................... $(14,288,000) $(15,761,000) $(6,167,000) $(5,119,000)
============= ============= ============= ============
</TABLE>
The following table provides the components of net periodic benefit costs for
the plans at March 31, 1999, 1998, and 1997.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
---------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Service Cost....................... $4,261,000 $ 3,592,000 $3,575,000 $ 328,000 $ 286,000 $ 296,000
Interest Cost...................... 4,353,000 4,515,000 4,086,000 607,000 622,000 587,000
Expected Return on
Plan Assets...................... (4,402,000) (5,268,000) (4,218,000) - - -
Amortization of
(Gain) Loss...................... (52,000) (4,935,000) (421,000) - - -
Amortization of Prior
Service Cost..................... 403,000 403,000 227,000 - - -
Amortization of
Transition Obligation............ (567,000) (684,000) (684,000) 281,000 281,000 281,000
---------- ------------ ------------ ---------- ---------- ----------
Annual Net Periodic
Benefit Cost..................... 3,996,000 (2,377,000) 2,565,000 1,216,000 1,189,000 1,164,000
Change in (gain) loss
recognition ...................... - (1,447,000) - - - -
Voluntary Retirement
Incentive Program................ - - - - - -
Curtailment Gain................... (394,000) - - - - -
Settlement Gain.................... (2,807,000) - - - - -
Special Termination
Benefits......................... 931,000 3,924,000 - - - -
---------- ----------- ----------- ---------- ---------- ----------
Total Pension Cost................. $1,726,000 $ 100,000 $2,565,000 $1,216,000 $1,189,000 $1,164,000
========== =========== =========== ========== ========== ==========
</TABLE>
As a result of a workforce reduction program, the Company offered special
enhanced benefits to potential retirees in fiscal years 1999 and 1998. As
required under SFAS No. 88, charges of approximately $.9 million and $3.9
million in fiscal years 1999 and 1998, respectively, related to these enhanced
benefits, were recognized immediately. In addition, in fiscal year 1999, the
Company recognized a curtailment gain of $.4 million and a settlement gain of
$2.8 million related to these reductions.
During fiscal year 1998, the Company changed the methodology for recognizing
gains and losses. The recognition methodology went from the minimum amortization
approach stated under SFAS No. 87 to a methodology that accelerates the
recognition of gains. The impact of this change resulted in a gain of
approximately $1.4 million.
The assumptions used in measuring the Company's benefit plan obligations are
as follows:
Benefits Obligation at Beginning of Year
Pension Benefits Other Benefits
1999 1998 1999 1998
Discount Rate............. 7.25% 7.25% 7.25% 7.25%
Expected Return on
Plan Assets............. 9.00 9.00 - -
Salary Scale............. 5.00 5.00 - -
<PAGE>35
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Health Care Trend Rates
A 7.5% annual rate of increase in the per capita cost of covered health
care benefits was assumed for 1998. The rate was assumed to decrease gradually
to 5.5% for 2001 and remain at that level thereafter. Increasing the assumed
health care cost trend rates by one percentage point in each year would increase
the Accumulated Postretirement Benefit Obligation as of March 31, 1999 by
approximately $298,000 and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for the year then ended
by $23,000. Similarly, decreasing the assumed health care cost care trend rates
by one percentage point in each year would decrease the Accumulated
Postretirement Benefit Obligation as of March 31, 1999 by approximately $341,000
and the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $29,000.
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, 1999, 1998 and 1997 were
$495,000, $2,894,000 and $3,289,000, respectively. Deferred compensation payable
include $3,338,000 at March 31, 1999 and $3,877,000 at March 31, 1998,
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.
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 3, 1998, the Company declared an increased cash dividend of
$.3175 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
$0.11 5/8 per share on the Class B Common Stock, payable on January 4, 1999 to
shareholders of record as of December 1, 1998.
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 $.10 3/4 per
share on the Class B Common Stock, payable on January 2, 1997 to shareholders of
record as of December 2, 1996.
Earnings per share of common stock has been restated to reflect the current
and prior years' stock dividends.
<PAGE>36
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
<CAPTION>
Changes in Class A Common Stock, Class B Common Stock and capital in excess
of par value during fiscal 1999, 1998 and 1997 were as follows:
CLASS A CLASS B
COMMON STOCK COMMON STOCK
Capital in
Issued Issued Excess of
Shares Amount Shares Amount Par Value
<S> <C> <C> <C> <C> <C>
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
========== ========== ========= ======== ============
3% Stock Dividend.......................... 421,000 $ 42,000 245,000 $ 25,000 $ 22,700,000
Savings Incentive Plan(1).................. 44,000 4,000 1,740,000
---------- ---------- --------- -------- ------------
Balance, March 31, 1999.................... 14,456,000 $1,445,000 8,419,000 $842,000 $306,433,000
========== ========== ========= ======== ============
</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 which is valued at fair value at
the date of the contribution.
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,
results of operations or liquidity.
Note 12. Earnings Per Common Share:
Basic earnings per common share was calculated by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share was calculated by dividing net income by the sum of the
weighted average number of common shares outstanding plus all additional common
shares that would have been outstanding if potentially dilutive common shares
had been issued.
The following table reconciles the number of shares utilized in the earnings
per share calculations:
Year Ended March 31,
(In Thousands)
1999 1998 1997
------------------------------------
Net income............................. $51,622 $51,792 $8,607
Earnings per common share-basic....... $2.26 $2.27 $0.38
Earnings per common share-diluted...... $2.26 $2.27 $0.38
Number of shares (in thousands):
Common shares-basic....................22,853.0 22,808.0 22,766.0
Effect of dilutive securities:
Stock options......................... 12.0 - -
-------- -------- ---------
Common shares-diluted..................22,865.0 22,808.0 22,766.0
======== ======== ========
Note 13. Restructuring and Re-engineering Provision (Credit):
In the fourth quarter of fiscal 1997, the Company approved a program (the
"Program") to consolidate its manufacturing operations by closing six of its
twelve production facilities in various parts of the world. The facilities to be
exited were located in Belgium, the United Kingdom, Australia, Canada, U.S.
and Argentina. Significant components of the Program involved the
termination of approximately 450 manufacturing employees (23% of its
manufacturing workforce), the cleanup, closing and sale of plants, and the
physical disposition of inventory and equipment.
<PAGE>37
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
<CAPTION>
The following table displays a rollforward of the liabilities for the
manufacturing restructuring from inception to March 31, 1999:
Original Amounts Remaining Amount Remaining Amount Amount Ending
Provision Utilized in Balance Utilized in Balance Utilized in Reversed in Balance
Type of Cost Fiscal 1997 Fiscal 1997 3-31-97 Fiscal 1998 Other 3-31-98 Fiscal 1999 Fiscal 1999 3-31-99*
- ------------ ----------- ----------- --------- ----------- ----- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Employee severance and $15,454(a) - $15,454 ($7,516) ($3,300) $4,638 ($2,637) ($2,001) -
related costs
Plant closing and 32,978(b) $(24,468) 8,510 - (8,510) - - - -
related asset
write-offs
Re-engineering 7,184(c) (7,184) - - - - - - -
Contractual obligations 16,834(d) (5,042) 11,792 (7,500) 11,110 15,402 (562) (5,640) $9,200
and other ------- --------- -------- ---------- ------- -------- ---------- ---------- ------
$72,450 $(36,694) $35,756 ($15,016) ($700) $20,040 ($3,199) ($7,641) $9,200
======= ========= ======== ========== ======== ======== ========= ========== ======
</TABLE>
*The balance at the end of the year is classified as a current liability.
(a) Represents severance costs for approximately 450 production employees at six
facilities. Estimates were based on calculations derived by attorneys who
considered the local labor laws at each location.
(b) Represents estimated impairment losses on land and buildings to be sold
($15 million) and machinery and equipment to be disposed ($14 million).
Also included is the estimate of site cleanup costs ($4 million). Estimates
were based principally on appraisals from third-party appraisers.
(c) Principally represents consulting costs, as well as limited training and
maintenance costs, which were expensed during 1997.
(d) Represents consulting and legal fees and other costs.
In 1997, the Company re-engineered certain major systems and processes.
The non-recurring, incremental costs of the re-engineering aggregated to $7.1
million, and included primarily consulting costs and training costs. These
amounts have been classified and presented within the Manufacturing
restructuring and re-engineering provision caption on the fiscal 1997
income statement.
During fiscal 1998, the Company sold three facilities at aggregate sales prices
substantially in excess of its original estimates, and continued to actively
market the three remaining facilities located in Canada, Argentina and the U.S.
The Canadian facility was sold on June 15, 1999 and management expects the
Argentine facility to be sold by September 1999. In addition, during fiscal
1998 and 1999, the Company transferred a substantial portion of production in
the sites being sold to other facilities. As a result of the realization of
sales prices for the facilities sold in excess of amounts originally
anticipated, in 1998 the Company reclassified approximately $8.5 million from
its plant closing liability and related asset write-offs to its contractual
obligations and other liability (as discussed below). In addition, with the
exception of a limited group of employees (approximately 56) at the Company's
U.S. facility, all manufacturing employees included in the initial restructuring
plan have been severed (392 employees). As of March 31, 1998, the aggregate
cost of the Company's severance program was $3.3 million less than initially
anticipated, principally due to favorable labor negotiations. Accordingly,
during fiscal 1998, the Company reclassified $3.3 million from its employee
severance and related costs liability to its contractual obligations and other
liability (as discussed below).
As of March 31, 1998, the Company had discontinued substantially all production
at the U.S. location to be closed, with the exception of the production under a
contractual obligation to produce one product for the purchaser of the Company's
ethical pharmaceutical practice division, which was sold in 1996. In connection
with the original restructuring plan, the Company anticipated completely exiting
its U.S. facility. As of March 31, 1997, management believed that the facility
would either be sold to the entity to which the Company was obligated for
production or to another entity, whom it expected would assume responsibility
for the production. However, during 1998, despite the Company's efforts to sell
the facility, it was unable to do so. As a result of the transfer of all other
production from this facility, remaining production under this contract and
other costs will result in a loss of approximately $10 million, which was not
recognized under the original restructuring provision, but was increased to
$10 million during 1998.
As of March 31, 1999, the Company identified additional excess amounts of $7.6
million due to additional favorable experiences in calculating final severance
payments and settlement of post-closing adjustments in connection with the sale
of one of its plants. In addition, as a result of favorable fixed asset
disposals, which are not presented in the above table, a gain of $5.1 million
was generated. Consequently, the Company recorded a restructuring credit of
$12.7 million in its income statement for the year ended March 31, 1999.
<PAGE>38
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of March 31, 1999, the Company's remaining obligation of $9.2 million
consists of its contractual obligation to produce a product for another entity.
Management believes that the remaining manufacturing reserves are adequate to
complete its plan during fiscal 2000.
Note 14. Stock Option Plan
In June 1998, the Company implemented its Stock Option Plan (the "Plan")
whereby incentive and nonqualified options to purchase shares of the Company's
Class A Common Stock, par value $.10 per share, may be granted to employees of
the Company and its subsidiaries. The aggregate number of shares of common stock
for which options may be granted under the Plan is 1,000,000. The fair market
value of the Company's common stock is determined on the date of grant as quoted
on the NASDAQ National Market. Stock options expire ten years from the date they
are granted and vest over service periods of three years, although early vesting
may occur in cases of death, disability or normal retirement.
The following tables summarize activity regarding stock options for the year
ended March 31, 1999:
Options Weighted Average
Outstanding* Exercise Price*
(Shares in Thousands)
Balance at March 31, 1998 - -
Options granted 104,706 $36.72
Options exercised - -
Options cancelled/forfeited 2,920 37.06
-------
Balance at March 31, 1999 101,786 $36.74
* Adjusted to reflect the 1999 3% stock dividend.
There were 7,182 stock options exercisable at March 31, 1999.
Options
Outstanding at Remaining Contractual
Exercise Price* March 31, 1999* Life in Years
At $33.25 17,509 9.3
At $35.92 6,490 9.3
At $38.13 17,709 9.5
At $37.32 52,077 9.7
At $38.50 8,001 9.9
* Adjusted to reflect the 1999 3% stock dividend.
The Company applies Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees," ("APB 25") and related interpretations in
accounting for its Plan. During the year ended March 31, 1999, the Company did
not recognize compensation expense for options granted to employees as the
option exercise price per share of Class A Common Stock was equal to the closing
sale price of the stock on the date of grant as quoted on the NASDAQ National
Market. The Company estimates that it will recognize compensation expense in an
aggregate amount of $0 in future years as options vest for grants made during
fiscal 1999.
Had compensation expense for options granted to employees been determined
based upon the fair value at the date of grant for awards under the Plan
consistent with the methodology prescribed under SFAS No. 123, "Accounting for
Stock Based Compensation," ("SFAS 123"), the Company's net income and income per
share for the year ended March 31, 1999 would have decreased by approximately
$159,000 or $.01 per share.
<PAGE>39
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The fair values of options granted to employees during the year ended March
31, 1999 have been determined on the date of the respective grant using the
Black-Scholes option-pricing model based on the following weighted average
assumptions:
1999
Risk-free rate 5.19%
Volatility 25%
Expected life 5 years
Dividend yield 3.50%
Using the Black-Scholes model, the average fair value of options granted in
fiscal 1999 was $7.99.
Note 15. Accumulated Other Comprehensive Income:
Components of other comprehensive income/(loss) consists of the following:
Dollars in Thousands)
Accumulated
Foreign Unrealized Other
Currency Gain/(Losses) Comprehensive
Translation on Securites Income (Loss)
March 31, 1997 $ 2,044 $ 551 $ 2,595
Change in fiscal 1998 (20,285) 3,141 (17,144)
--------- ------ ---------
March 31, 1998 (18,241) 3,692 (14,549)
--------- ------ ---------
Change in fiscal 1999 4,232 530 4,762
--------- ------ ---------
March 31, 1999 $(14,009) $4,222 $ (9,787)
========= ====== =========
Note 16. Acquisition of Joint Venture:
In fiscal year 1997, the Company acquired the remaining 50% share of the
Kobayashi-Block Company Ltd. joint venture whereupon it became a wholly-owned
subsidiary. The purchase price was approximately $16,500,000. Sales for the
wholly-owned subsidiary were $67,243,000 and $78,103,000 and $99,277,000 for the
fiscal years ended March 31, 1999, March 31, 1998 and March 31, 1997,
respectively.
Note 17. Segments of an Enterprise:
The Company has adopted SFAS No. 131, "Disclosure about Segments of
a Business Enterprise and Related Information," which requires reporting certain
financial information according to the "management approach." This approach
requires reporting information regarding operating segments on the basis used
internally by management to evaluate segment performance.
The accounting policies of the segments are the same as those described in
Note 1, "Significant Accounting Policies".Transfers between geographic areas are
accounted for at prices which approximate arm's length market price. Segments
are determined based on geographic area. The Company evaluates the performance
of its segments based on operating profit, excluding interest expense, other
income and expense, certain unallocated expenses, the effects of nonrecurring
items, and income tax expense.
The Company is managed in three operating segments: United States; Europe,
Africa and the Middle East; and Latin America, Canada, and Asia/Pacific.
<PAGE>40
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
<CAPTION>
The following table presents information concerning the Company's continuing
operations by geographic area for the years ended March 31, 1999, 1998 and 1997.
1999 1998 1997
---------- ---------- -----------
(in thousands)
<S> <C> <C> <C>
GEOGRAPHIC AREA
Net Sales:
United States........................................................ $ 330,246 $ 363,507 $ 347,523
Europe, Africa, Middle East.......................................... 312,866 296,765 295,774
Latin America, Canada, Asia/Pacific.................................. 177,989 202,785 219,174
---------- ----------- ----------
Consolidated net sales............................................... $ 821,101 $ 863,057 $ 862,471
========== =========== ==========
Operating Income:
United States........................................................ $ 59,200 $ 52,186 $ 56,331
Europe, Africa, Middle East.......................................... 33,745 45,353 43,029
Latin America, Canada, Asia/Pacific.................................. 10,825 22,019 20,363
---------- ----------- -----------
Total operating income............................................... 103,770 119,558 119,723
General corporate expenses, net (1).................................. (36,273) (49,947) $ (108,906)
----------- ----------- -----------
Consolidated income before income taxes.............................. $ 67,497 $ 69,611 $ 10,817
=========== =========== ===========
Assets:
United States........................................................ $ 471,106 $ 446,198 $ 388,681
Europe, Africa, Middle East.......................................... 281,316 247,264 278,844
Latin America, Canada, Asia/Pacific.................................. 78,902 68,691 82,614
---------- ---------- ----------
Total identifiable assets............................................ 831,324 762,153 750,139
General corporate assets (2)......................................... 335,439 324,919 264,784
---------- ---------- ----------
Consolidated assets.................................................. $1,166,763 $1,087,072 $1,014,923
========== ========== ==========
Depreciation and Amortization:
United States........................................................ $ 16,761 $ 14,264 $ 15,298
Europe, Africa, Middle East.......................................... 7,408 7,812 6,852
Latin America, Canada, Asia/Pacific.................................. 1,941 2,594 2,479
---------- ---------- ----------
Consolidated depreciation and amortization........................... $ 26,110 $ 24,670 $ 24,629
========== ========== ==========
Capital Expenditures:
United States........................................................ $ 23,061 $ 26,709 $ 19,583
Europe, Africa, Middle East.......................................... 8,943 16,845 21,288
Latin America, Canada, Asia/Pacific.................................. 7,750 2,268 4,547
---------- ---------- ----------
Consolidated capital expenditures.................................... $ 39,754 $ 45,822 $ 45,418
========== ========== ==========
</TABLE>
(1) General corporate expenses include administrative expenses, translation
losses relating to highly inflationary countries, interest expense less
investment income and manufacturing restructuring provision and credits.
(2) General corporate assets include cash and cash equivalents, marketable
and long-term securities.
Note 18. Contingency Payments:
The Company is conditionally liable for additional milestone payments of $34
million related to the Atridox(R) acquisition if certain future events occur.
The timing of such future occurrences cannot currently be estimated.
Note 19. Subsequent Events:
Subsequent to the close of the fiscal year, the Company sold the Lava(R) hand
soap brand for approximately $19 million. In Germany, the Company acquired
Chlorhexamed(R), a medicated mouthwash. In U.K., the Company acquired the Louis
Marcel(R) line of depilatories. In Latin America, the Company acquired
Silidron(R) and Espasmo Silidron(R), two anti-gas medicines sold in Brazil. In
Argentina, the Pelo Libre(R) line of pediculicides was acquired. In Korea, the
Company acquired the balance of certain marketing rights to the Parodontax(R)
brand toothpaste. The aggregate amount spent on these acquisitions was $55.6
million, mainly comprised of goodwill payments.
<PAGE>41
<TABLE>
QUARTERLY FINANCIAL INFORMATION
(Unaudited)
<CAPTION>
The following is a tabulation of quarterly results of operations for the
years ended March 31, 1999 and 1998:
Fiscal 1999 Quarters
First Second Third Fourth(2)
<S> <C> <C> <C> <C>
Net sales............................................. $189,447,000 $204,063,000 $194,485,000 $233,106,000
Gross profit.......................................... 133,057,000 140,965,000 124,689,000 150,325,000
Income Before Income Taxes............................ 16,194,000 16,910,000 17,639,000 16,754,000
Net Income ........................................... 11,935,000 12,794,000 12,313,000 14,580,000
Earnings per share of Common Stock (Basic and Diluted)(1) $.52 $.56 $.54 $.64
Fiscal 1998 Quarters
First Second Third Fourth
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 (Loss)Before Income Taxes...................... 20,786,000 21,211,000 13,095,000 14,519,000
Net Income (Loss)..................................... 15,381,000 15,277,000 11,432,000 9,702,000
Earnings per share of Common Stock(1)................. $.67 $.67 $.51 $.42
</TABLE>
(1) Restated to reflect the three percent stock dividends (See Note 10).
(2) Reflects a credit of $12,673,000 in connection with the restructuring and
re-engineering. See Note 13 to the Consolidated Financial Statements.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
<PAGE>42
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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Date Term Other Positions Held
Name Age Appointment Expires (or principal occupation)
==================================== ============ ==================== ================= ==========================================
Leonard Block 87 9/48 6/00 Senior Chairman of the Board
James A. Block 62 4/63 6/00 Chairman of the Board
Thomas R. Block 54 7/70 6/00 President
Peter M. Block 32 5/97 6/00 President, International Division
Donald H. LeSieur 63 5/74 *12/98 Executive Vice President and President,
International Division
Michael C. Alfano, 51 10/88 **7/98 Senior Vice President, Research and
D.M.D., Ph.D. Technology
Michael P. Danziger 35 1/98 6/00 President, The Steppingstone
Foundation
Peggy Danziger 59 5/89 6/00 Private Investor
Dominick P. DePaola, 56 10/97 6/00 President & Director, Forsyth Institute
D.D.S., Ph.D. Boston, MA
William T. Golden 89 7/70 6/00 Corporate Director and Trustee
Melvin Kopp 69 12/78 6/00 Senior Vice President
Peter C. Mann 57 3/96 6/00 President, Americas Division
John E. Peters 57 10/88 6/00 Senior Vice President, General Counsel
and Secretary
Peter J. Repetti 81 3/76 6/00 Member, Fulbright & Jaworski L.L.P.
(Retired)
Mary C. Tanner 49 9/95 6/00 Financial Consultant
==================================== ============ ==================== ================= ==========================================
</TABLE>
* Mr. LeSieur served as a Director and Executive Officer until his retirement
on 12/31/98.
** Dr. Alfano tendered his resignation as an employee and Director on 7/3/98.
<PAGE>43
PART III
Item 10. Directors and Executive Officers of the Registrant: (Continued)
(a) Directors of the Registrant (Continued)
The following family relationships exist among the Directors of the
Company: Leonard Block is the father of Thomas R. Block and Peggy Danziger, 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 Financial Consultant, and (vi)
Dominick P. DePaola, DDS, Ph.D, President & Director, Forsyth Institute.
The Executive Committee consists of Leonard N. Block, James A. Block,
Thomas R. Block and Peter M. Block.
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. and General American Investors.
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.
(b) Executive Officers of the Registrant
The following is a list of each executive officer of the Company, the
date his/her present term of office will expire, and all other positions
presently held with the Company:
<PAGE>44
PART III
Item 10. Directors and Executive Officers of the Registrant: (Continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Date Term
Name Age Appointment Expires Positions
=============================== ========== ===================== ================= ============================================
Leonard N. Block 87 10/88 6/00 Senior Chairman of the Board(1)
James A. Block 62 10/88 6/00 Chairman of the Board(1)
Thomas R. Block 54 10/88 6/00 President(1)
Peter M. Block 32 5/97 6/00 President, International
Division(1)
Donald H. LeSieur 63 10/88 See below Executive Vice President and
President, International
Division(1)(3)
Michael C. Alfano, 51 5/87 See below Senior Vice President, Research
D.M.D., Ph.D. and Technology(2)(3)
Peter Anderson 44 5/99 6/00 Senior Vice President, Chief
Financial Officer(2)
Claus E. Blach 60 5/98 6/00 Senior Vice President,
Continental Group(2)(3)
Rodger Bogardus 58 1/99 6/00 Senior Vice President, Research
and Technology(2)
Melvin Kopp 69 10/72 6/00 Senior Vice President(2)(3)
Peter C. Mann 57 11/79 6/00 President, Americas Division(2)(3)
John E. Peters 57 12/78 6/00 Senior Vice President, General
Counsel and Secretary(2)(3)
James S. Rigby 48 5/98 6/00 Senior Vice President, UK
Group(2)(3)
Gilbert Seymann 60 5/84 6/00 Senior Vice President,
Worldwide Operations(2)(3)
William G. Whiteside 58 5/98 6/00 Senior Vice President, Canada,
Japan, N. Asia Group(2)(3)
=============================== ========== ===================== ================= ============================================
</TABLE>
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 administrative functions.
(1) Member - Office of the Chief Executive
(2) Consultant - Office of the Chief Executive
(3) Covered under the Change in Control Agreement described in Item 13.
<PAGE>45
PART III
Item 10. Directors and Executive Officers of the Registrant: (Continued)
Peter M. Block is President, International 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 Asia.
Donald H. LeSieur, who retired in December, 1998, was Executive Vice
President and President, International Division, a Member of the Office of the
Chief Executive, and had direct responsibility for businesses in Japan, North
Asia, Latin America and Canada.
Michael C. Alfano, D.M.D., Ph.D., Senior Vice President - Director
Research and Technology, who resigned on July 3, 1998, was responsible for all
research, development and quality assurance activities of the Company.
Peter Anderson is Senior Vice President and Chief Financial Officer.
Claus E. Blach, Senior Vice President, Continental Group is responsible
for the Company's businesses in Continental Europe.
Rodger Bogardus, Senior Vice President, Research & Technology is
responsible for all research, development and corporate quality activities.
Melvin Kopp is Senior Vice President of the Company.
Peter C. Mann, President, Americas Division, is responsible for all U.S.
marketing, sales and corporate development and is responsible for the Company's
businesses in Canada and Latin America.
John E. Peters, Senior Vice President, General Counsel and Secretary, is
the Chief Legal Officer of the Company.
James S. Rigby, Senior Vice President, UK Group, is responsible for the
Company businesses in the U.K., the Middle East, Africa and certain European
markets.
Gilbert Seymann, Senior Vice President - Worldwide Operations, is
responsible for manufacturing and corporate engineering activities worldwide.
William G. Whiteside, Senior Vice President, Canada/Japan/North Asia
Group is responsible for the Company's businesses in those areas.
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 except for
Mr. Bogardus and Mr. Anderson who joined the Company on 1/4/99 and 5/18/99
respectively.
<PAGE>46
PART III
Item 11. Executive Compensation
The following table sets forth information in respect of compensation for
the fiscal years ended March 31, 1999, 1998 and 1997, 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, 1999 (the "Named Executives").
<TABLE>
<CAPTION>
Long Term Compensation
===============================
Annual Compensation Awards Payouts
==================================== ====================== ======= ==============
Other Restricted
Annual Stock Options LTIP All Other**
Name and Principal Fiscal Salary Bonus Compen- Award(s) /SARs Payouts Compensation
Position Year $ $ sation ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leonard N. Block 1999 394.556 90,700 * * * * 35,588
Senior Chairman of the 1998 382,031 153,700 35,480
Board 1997 375,768 165,000 35,144
James A. Block 1999 367,064 86,300 * * * * 13,607
Chairman of the Board 1998 357,083 148,900 13,527
1997 346,345 167,500 10,500
Thomas R. Block 1999 367.064 92,800 * * * * 8,076
President 1998 357,083 151,400 7,574
1997 346,345 168,400 7,181
Donald H. LeSieur 1999 322.310 52,400 * * * $3,385,003 10,528
Executive Vice President, 1998 492,006 232,000 **** 13,925
Pres. International Division 1997 402,369 405,400 - 13,560
Peter C. Mann 1999 343.743 162,500 * * * 68,448*** 9,802
President, Americas Division 1998 322,146 153,900 144,220*** 9,709
1997 309,992 175,700 14,905*** 7,549
</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 1999 payout is based upon one award granted in December, 1993; The 1998
payout is based upon two awards granted in January 1993; the 1997 payout is
based upon one award granted in February, 1992;
**** Includes $820,350 in Special Stock Units; $1,564,653 in excess pension and
$1,000,000 in deferred compensation. Mr. LeSieur retired on 12/31/98.
<PAGE>47
Employment 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.
On May 1, 1987, the Company entered into an Employment Agreement with
Thomas R. Block, which was amended on April 29, 1997 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.
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 than $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.
Donald H. LeSieur was covered by an Employment Agreement dated July 1,
1997. He retired from the Company on December 31, 1998. Mr. LeSieur's deferred
compensation, pension and other benefits were calculated as though he was a
full-time employee earning his gross salary ($430,718) as of June 30, 1998, as
adjusted ("Adjusted Salary"). Upon retirement, he received deferred compensation
equal to one-third of his average annual Adjusted Salary for three years prior
to his retirement, which compensation vested at the rate of 1 1/4% per quarter.
Mr. LeSieur had been employed by the Company since 1973.
Effective May 1, 1997, the Company entered into the following agreements
with Melvin Kopp, Senior Vice President: (i) a 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>48
Employment Agreements (Cont'd)
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 1998 calendar year, nonemployee directors also received
$1,150 for each board of directors meeting attended. This attendance fee was
increased to $1,250 for the 1999 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:
1999 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 $ 5,248.20 $10,496.40 $15,744.60 $22,494.00
100,000 12,528.60 25,057.20 37,585.80 51,762.00
150,000 20,028.60 40,057.20 60,085.80 81,762.00
200,000 27,528.60 55,057.20 82,585.80 111,762.00
250,000 35,028.60 70,057.20 105,085.80 130,000.00*
300,000 42,528.60 85,057.20 127,585.80 130,000.00*
350,000 50,028.60 100,057.20 130,000.00* 130,000.00*
======== =============== ================ =============== ==================
* Maximum permissible benefit under IRC Sec. 415, effective January 1, 1999.
The Company's domestic pension expense for the fiscal years ended March
31, 1999 and 1998 was $1,726,000 and $100,000 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, 1999.
The compensation covered by these plans is the total regular salary
excluding any bonuses, overtime or other special compensation. (The "Final
Average Compensation")
Benefits payable from these plans are based on the Final Average
Compensation for the 60 highest consecutive months of the last 120 months of
employment, the years of service as a member of these plans and the primary
federal social security benefit.
<PAGE>49
Employment Agreements (Cont'd)
With respect to the figures of the table on page 45, 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 ($364,798.71); Thomas R. Block ($364,798.71); Donald H. LeSieur
($504,937.76); and Peter C. Mann ($328,299.92).
Leonard Block reached age 65 in December, 1976. In accordance with the
terms of this plan, he elected to receive a lump sum benefit. The actuarial
equivalent of his pension at that time as adjusted through December 31, 1980 was
segregated into a separate account. No additional benefits have accrued for
Leonard Block since December 31, 1980. Upon retirement or death, the balance in
the segregated account will be distributed to him or his designated
beneficiaries subject to limitations set forth in the provisions of Section 415
of the Internal Revenue Code.
As of March 31, 1999, the four (4) employees described in Item 11 had the
following credited years of service in these plans: James A. Block, 37 years;
Thomas R. Block, 29 years; Donald H. LeSieur, 25 years (retired 12/31/98); and
Peter C. Mann, 26 years.
<PAGE>50
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. With the May 27, 1998 adoption
of the Company's Stock Option Plan, all new eligible employees may become
participants in only the Stock Option Plan. Current Special Stock Unit
participants may irrevocably elect to receive any future awards in Stock Options
(new, not replacement awards) instead and, as of March 31, 1999, approximately
59% had so elected.
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, which consists of Leonard Block, James Block, Thomas Block and Peter
Block, who do not participate in the Plan. The participant (or beneficiary in
the case of death) will be entitled to receive, subject to certain conditions,
an amount reflecting the maximum appreciation in value (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,
1999, the units were valued at $107.23.
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.
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 normal 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, at the
election of the participant either in the form of special stock units or stock
options under the Company's Stock Option Plan. Once a stock option replacement
award is elected, any future replacement awards arising from that award will be
in the form of stock options. A replacement Special Stock Unit 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 payment
nor does the Company guarantee 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, 1999, a total of 286,761 units had been awarded having an
average value of $96.07 per unit. Of those 286,761 units, 41,045 units at an
average value of $105.54 per unit were awarded during the past fiscal year.
<PAGE>51
Special Stock Unit Plan (Cont'd)
During the year ended March 31, 1999, an aggregate amount of $3,637,632.18
was paid in lump sum payments to the participants in the Special Stock Unit
plan.
Long-Term Incentive Plans - Awards In Last Fiscal Year
Estimated Future Payouts Under
Non-Stock
Price-Based Plans
Performance or
No. of Shares, Other Period ** *** No
Units or Other Until Maturity Threshold Target Maximum
Name Rights or Payout ($) ($) ($)
================= ============== ============== ========= ========= ==========
Peter C. Mann 1,915* 5 Years 323 125,000 -
================= ============== ============== ========= ========= ==========
3,737* 634 244,000
================= ============== ============== ========= ========= ==========
* During fiscal year 1999, the following units were awarded to executives:
1,915 units at $107.05 per unit and 3,737 units at $107.05 per unit to
Peter C. Mann.
** Minimum vested value as of March 31, 1999 ***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.
Stock Option Plan
On May 27, 1998, the Company's Stock Option Plan was adopted by the
Company. This Plan affords to its Participants the right to purchase, from time
to time, pursuant to the terms and conditions of the Plan and options granted
thereunder, Class A Common Stock, $.10 par value per share, of the Company. The
purpose of this Plan is 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 Company's success, and to
attract and retain employees of outstanding caliber and competence and enhance
the common interests of stockholders and employees. The aggregate number of
shares available for issuance pursuant to options is equal to ten percent of the
total number of outstanding shares of all classes of common stock of the
Company. Currently 1,000,000 shares have been registered for issuance under the
Plan. The Committee administering this Plan is comprised of Leonard Block, James
Block, Thomas Block and Peter Block, who do not participate in the Plan. Options
vest in three years, although early vesting may occur in cases of death,
disability or normal retirement and later vesting may be required in certain
foreign countries and generally expire ten years after grant. The first options
were issued in June, 1998, and as of March 31, 1999, Options have been granted
for 101,786 shares at an average price of approximately $36.74 per share of
which only 7,182 were vested.
<PAGE>52
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 8, 1999, each person who
owns of record, or is known by the Company to beneficially own more than 5%
of the outstanding Class B Common Stock of the Company, which stock is the
only class of voting securities of the Company.
Amount and Nature
Name and Address of Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
============== ================================== ============= ==========
Class B Common Leonard Block, Representative 4,209,404 (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 4,209,404 (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,
421,162; the Thomas Block Trust, 1,894,121 and the Peggy Danziger Trust,
1,894,121.
(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 2,104,702 shares held
in trust for the benefit of Susan B. Stearns.
(b) Securities ownership of management:
The following table sets forth, as of June 8, 1999, the securities
ownership of all directors and Named Executives, individually, and all Directors
and Officers of the Company, as a group.
<PAGE>53
Item 12. Securities Ownership of Certain Beneficial Owners and Management
(Cont'd)
BLOCK DRUG COMPANY, INC.
SECURITIES BENEFICIALLY OWNED
Class A Common Stock Beneficially Owned
--------------------------------------------
Class B Common
Name of Beneficial No Shared Shared 401-K Plan Stock
Owner Investment Investment 401-K Plan Percentage Beneficially
Power Power Holdings Owned Owned
----------- ---------- ---------- ---------- --------------
Leonard Block 1,155,697 - 1,149 8% 4,209,404-50%
(1) (4) (7)
James A. Block 2,658,236 - 2,366 18% 4,209,404-50%
(2) (3) (5)
Thomas Block 111,437 2,374,788 1,649 17% -
(4) (7)
Peter M. Block 1,313,138 - 559 9% -
(2) (5)
Peter Anderson - - - - -
Claus Blach 340 - - * -
Rodger Bogardus - - - - -
Michael P. Danziger 98,368 1,066,891 - 8% -
(6) (7)
Peggy Danziger 115,076 1,314,637 - 10% -
(4) (6) (7) (9)
Dominick P. DePaola - - - - -
Gordon J. Girvin - - 1,260 * -
William T. Golden 6,598 14,837 - * -
Donald H. LeSieur 7,182** - - * -
Melvin Kopp 2,275 - - * -
Peter C. Mann 893 112 2,140 * -
John E. Peters - 2,216 1,855 * -
Peter J. Repetti (8) 279 - - * -
James S. Rigby - - - - -
Gilbert M. Seymann 159 - 1,738 - -
Susan B. Stearns - - - - -
(2) (3)
Mary C. Tanner - - - - -
William G. Whiteside 295 - - * -
All Directors and - - - 53% -
Officers as a Group
(22 persons)
* Represents less than one percent (1%) of Class A Common Stock of the Company.
** Represents shares under options exercisable within sixty (60) days.
<PAGE>54
Item 12. Securities Ownership of Certain Beneficial Owners and Management
(Cont'd)
(1) Leonard Block owns 342,193 shares (not including 401-K Plan
Holdings); is deemed to be the beneficial owner of but disclaims
ownership of: 809,128 shares owned by Adlen Corporation, of which
Leonard Block is the sole shareholder; 4,376 shares owned by Adele
Block, his wife.
(2) James A. Block owns 122 shares (not including 401-K Plan Holdings);
is deemed to be the beneficial owner of: 183,791 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; 1,129,271
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 54, all
1,313,062 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 1,345,052
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, his
sister) and has sole investment powers with respect to the shares
held by such trusts. James A. Block disclaims ownership to all
1,345,052 Class A shares and 2,104,702 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, 1,313,062 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
1,313,062 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 1,313,062 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 2,104,702 shares held in
trust for the benefit of Susan B. Stearns, his sister who is not
active in the business.
(4) Thomas Block owns 42,822 shares (not including 401-K Plan Holdings);
is deemed to be the beneficial owner but disclaims ownership of:
26,248 shares owned by Marilyn Friedman, his wife; 42,367 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; 132,146 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; 1,972,441 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;
270,201 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 54, all
270,201 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, 270,201 shares
(representing of the total number of shares
<PAGE>55
Item 12. Securities Ownership of Certain Beneficial Owners and Management
(Cont'd)
owned by the four trusts) were allocated to Thomas Block and 270,201
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 270,201 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 76 shares (not including 401-K Plan Holdings);
1,313,062 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 54, all 1,313,062 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, 1,313,062 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 1,313,062
shares were allocated to Peter Block. In computing the aggregate
number of shares owned by directors and officers as a group, the
1,313,062 shares owned by these two trusts were counted only once.
(6) Michael Danziger owns 10,895 shares, is deemed to be the beneficial
owner but disclaims ownership of 6,989 shares owned by Elizabeth
Danziger, his wife, 17,513 shares held by Michael Danziger as
Custodian under the Massachusetts Uniform Gifts to Minors Act for
James, Robert and Charles Danziger, his children; 62,971 shares held
in trust for Michael Danziger, beneficiary of such trust; 26,893
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
Michael 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 54, 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>56
Item 12. Securities Ownership of Certain Beneficial Owners and Management
(Cont'd)
(7) Peggy Danziger owns 115,076 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 owned by
directors and officers as a group, the 1,039,998 shares owned by
said trust were counted only once; 270,201 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 52, all 270,201 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 such shares have been reported
twice; and all 4,438 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, 270,201 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
270,201 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 270,201 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 279 shares owned
by his wife.
(9) Peggy Danziger disclaims beneficial ownership to all 4,438 shares of
which Richard M. Danziger, her husband is co-trustee with a third
party.
<PAGE>57
Item 13. Certain Relationships and Related Transactions
On April 14, 1999, Peter C. Mann, President, Americas Division, entered
into a Loan Agreement with the Company for the amount of $440,000. The loan is
collateralized by a mortgage on certain real estate owned by Mr. Mann. The
principal of the loan is due on or before April 14, 2000. Interest on the unpaid
principal balance accrues at 1% over the Prime Rate, as published in the Wall
Street Journal, and shall be adjusted semi-annually on July 1 and January 1 of
each year. The loan agreement provides for immediate repayment of the unpaid
principal balance upon the occurrence of any one of a number of events.
On December 31, 1998, Donald H. LeSieur, retired as Executive Vice
President, United States and repaid in full the remaining principal balances on
all outstanding loans.
Change in Control Agreement
Claus Blach, Melvin Kopp, Peter C. Mann, John E. Peters, James S. Rigby,
Gilbert Seymann and William Whiteside 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 Agreements were created to provide a continuing rolling five year term
with automatic three year extensions, subject to termination upon the covered
executive's sixty-fifth birthday with the exception of Mr. Kopp whose CIC would
terminate December 31, 2001 or upon the termination of his consulting agreement
with the Company, whichever is earlier. The Agreements define 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 1999, Leonard Block, James A. Block,
Thomas R. Block and Peter M. Block were members of the Office of the Chief
Executive.
<PAGE>58
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 PricewaterhouseCoopers LLP, dated June 8, 1999.
Consolidated Balance Sheets - March 3l, 1999 and 1998,
Consolidated Statements of Income and Retained Earnings for the
Years ended March 3l, 1999, 1998 and 1997,
Consolidated Statements of Comprehensive Income for the Year
ended March 31, 1999, 1998, 1997,
Consolidated Statements of Cash Flows for the Years ended
March 3l, 1999, 1998 and 1997,
Notes to Consolidated Financial Statements
Supplementary Data:
Selected quarterly data for the two years ended March 3l,
1999.
2. Additional Financial Statement Data:
Supplemental Auditors' Reports
3. Financial Statement Schedule: II
Schedules other than those listed above are omitted because they are not
required or not applicable.
4. 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.
<PAGE>59
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Cont'd)
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.
Exhibit 10(d) Employment Agreement effective
November 1, 1997, between Block Drug Company,
Inc. and Peter M. Block, President European
Division.
Exhibit 10(e) Consulting Agreement effective May 1, 1997,
between Block Drug Company, Inc. and Melvin
Kopp, Senior Vice President.
Exhibit 10(f) Form of Award Letter under the
Stock Option Plan, with changes required by
laws of foreign jurisdiction relating to local
labor law consideration 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.
<PAGE>60
Ernst & Young
Wirtschaftsprufungs- und
Steuerberatungsgesellschaft m.b.H.
Praterstra e 23
(Postfach 290)
A-1021 Wien
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying balance sheets of Block Austria G.m.b.H as of
December 31, 1997 and 1998, and the related statements of income, retained
earnings and cash flows for the years then ended (not included herein). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Block Austria G.m.b.H as of
December 31, 1997 and 1998, 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.
Ernst & Young
Wirtschaftsprufungs- und
Steuerberatungsgesellschaft m.b.H.
(Rolf Kapferer) (Elfriede Sixt)
Certified Austrian Public Accountants
Date: April 19, 1999
<PAGE>61
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, 1998 and 1997, and the related statements of income,
retained earnings and cash flows for each of the three years in the period ended
December 31, 1998 (not presented separately herein). 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.
Generally accepted accounting principles require that a Company's financial
statements be consolidated with those of its subsidiaries. The accompanying
financial statements of Stafford-Miller Continental N.V. are not consolidated
with those of its subsidiary Laboratoires Stafford-Miller S.a.r.l.
In our opinion, except for the effects of not consolidating the financial
statements of a subsidiary referred to in the preceding paragraph and described
in Note 1, the financial statements referred to above present fairly in all
materials respects the financial position of Stafford-Miller Continental N.V. at
December 31, 1998 and 1997 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998 in conformity
with accounting principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying additional information
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such additional information has been subjected
to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
Ernst & Young
April 21, 1999
<PAGE>62
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, 1998 and 1997, and the related statements
of income and retained earnings and cash flows for the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Laboratoires Stafford-Miller,
S.A.R.L. at December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended December 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 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, 1999
<PAGE>63
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, 1998 and 1997, and the related statements of operations and
retained earnings and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stafford Miller S.r.l. at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998 in conformity
with accounting principles generally accepted in the United States of America.
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 ended December 31, 1998 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
March 31, 1999
<PAGE>64
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, 1998 and 1997, and the statements of income and retained
earnings and cash flows for the years 1998, 1997 and 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with 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 Nederland B.V. at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years 1998, 1997 and 1996 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, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
Moret Ernst & Young Accountants
April 23, 1999
<PAGE>65
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, 1999 and 1998 and the related statements of
operations and retained earnings and cash flows for each of the three years in
the period ended March 31, 1999 (not presented separately herein). 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, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1999, in conformity with accounting principles generally accepted in
the United States of America.
Our audits have been made primarily for the purpose of expressing an opinion on
the basic financial statements taken as a whole. The accompanying supplementary
information (pages 1 to 16) is presented for purposes of additional analysis and
is not a required part of the basic financial statements. The supplementary
information has been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
Schitag Ernst & Young
Deutsche Allgemeine Treuhand AG
Wirtschaftsprufungsgesellschaft
Beyer Dingler
Wirtschaftsprufer Wirtschaftsprufer
(Independent Public (Independent Public
Accountant) Accountant)
Dusseldorf,
April 23, 1999
<PAGE>66
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, 1998 and 1997, and the related
statements of operations, stockholder's equity and cash flows for the three
years in the period ended December 31, 1998. 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
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Block Drug Company (Japan),
Inc. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with accounting principles generally accepted in the United States of
America.
Arthur Andersen
Osaka, Japan
March 30, 1999
<PAGE>67
SGV & CO
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,
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 December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Block Drug Co. (Philippines),
Inc. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
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 are presented for purposes of additional
analysis and are not 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 relatio to the basic financial statements
taken as a whole.
Sycip, Gorres,Velayo & Co.
Makati City, Philippines
February 11, 1999
<PAGE>68
Schedule II
BLOCK DRUG COMPANY, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended March 31, 1999, 1998 and 1997
Balance Additions
at Charged
Description Beginning to Costs Balance at
of and End of
Period Expenses Deductions Period
======================= ============ ============= ============= ===========
1999
Allowances for
discounts, doubtful $4,446,000 $24,787,000 $24,483,000 $4,750,000
accounts and returns
======================= ============ ============= ============= ===========
1998
Allowances for
discounts, doubtful $4,504,000 $27,095,000 $27,153,000 $4,446,000
accounts and returns
======================= ============ ============= ============= ===========
1997
Allowances for
discounts, doubtful $4,188,000 $27,867,000 $27,551,000 $4,504,000
accounts and returns
======================= ============= ============= ============= ===========
<PAGE>69
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 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>70
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 8th day of June,
1999.
BLOCK DRUG COMPANY, INC.
(Registrant)
PETER ANDERSON
BY Peter Anderson
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 8th day of June, 1999.
Principal Executive Officer:
JAMES A. BLOCK
James A. Block
Chairman of the Board
Principal Financial and Accounting Officer:
PETER ANDERSON
Peter Anderson
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
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>71
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