UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20541
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended June 30, 1996
( ) Transition Report Pursuant to Section 13 or 15 (d) of the Securities Act
of 1934
For the transition period from to
Commission File Number 1-5910
CARTER-WALLACE, INC.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(Exact name of registrant as specified in its charter)
Delaware 13-4986583
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1345 Avenue of the Americas
New York, New York 10105
(Address of principal executive
offices)
Registrant's telephone number, including area code: 212-339-5000
Indicate by check mark whether the 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 (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares of the registrant's Common Stock and Class B common stock
outstanding at June 30, 1996 were 33,960,500 and 12,430,900, respectively.
CARTER-WALLACE, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
JUNE 30, 1996
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Statements of Earnings for
the three months ended June 30, 1996 and 1995 1
Condensed Consolidated Balance Sheets at
June 30, 1996 and March 31, 1996 2
Condensed Consolidated Statements of Cash Flows
for the three months ended June 30, 1996 and 1995 3
Notes to Condensed Consolidated Financial Statements 4
Report by KPMG Peat Marwick LLP on their Limited Review 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 10
Item 6 - Exhibits and Reports on Form 8-K 10
Signatures 11
<TABLE>
PART I - FINANCIAL INFORMATION
CARTER-WALLACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1996 1995
Revenues:
<S> <C> <C>
Net sales $169,889,000 $177,037,000
Other revenues 1,912,000 2,342,000
171,801,000 179,379,000
Cost and expenses:
Cost of goods sold 62,463,000 62,392,000
Advertising, marketing & other
selling expenses 63,728,000 64,617,000
Research & development expenses 6,648,000 6,821,000
General, administrative & other expenses 22,181,000 23,180,000
Provision for condom plant closing - 20,100,000
Interest expense 1,086,000 809,000
156,106,000 177,919,000
Earnings before taxes on income 15,695,000 1,460,000
Provision for taxes on income 6,435,000 599,000
Net earnings $ 9,260,000 $ 861,000
Net earnings per average share
of common stock outstanding $.20 $.02
Cash dividends per share $.04 $.04
Average shares of common
stock outstanding 46,387,000 46,146,000
</TABLE>
<TABLE>
CARTER-WALLACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, March 31,
1996 1996
Assets (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 48,808,000 $ 51,185,000
Short-term investments 12,269,000 20,034,000
Accounts and other receivables
less allowances of $6,654,000
at June 30, 1996 and
$6,716,000 at March 31, 1996 130,078,000 131,931,000
Inventories:
Finished goods 55,558,000 55,427,000
Work in process 13,683,000 13,327,000
Raw materials and supplies 24,996,000 23,450,000
94,237,000 92,204,000
Deferred taxes, prepaid expenses
and other current assets 43,474,000 41,419,000
Total Current Assets 328,866,000 336,773,000
Property, plant and equipment, at cost 270,236,000 261,255,000
Less: accumulated depreciation and
amortization 124,953,000 121,982,000
145,283,000 139,273,000
Intangible assets 129,348,000 131,422,000
Deferred taxes and other assets 110,179,000 111,457,000
Total Assets $713,676,000 $718,925,000
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 39,924,000 $ 38,941,000
Accrued expenses 144,145,000 154,695,000
Notes payable 7,024,000 6,054,000
Total Current Liabilities 191,093,000 199,690,000
Long-Term Liabilities:
Long-term debt 55,433,000 55,928,000
Deferred compensation 13,253,000 13,503,000
Accrued postretirement benefit obligation 69,081,000 68,588,000
Other long-term liabilities 43,953,000 48,320,000
Total Long-Term Liabilities 181,720,000 186,339,000
Stockholders' Equity:
Common stock 34,620,000 34,613,000
Class B common stock 12,585,000 12,592,000
Capital in excess of par value 3,602,000 3,268,000
Retained earnings 317,978,000 310,573,000
Less: Foreign currency translation adj.
and other 18,043,000 18,059,000
Treasury stock, at cost 9,879,000 10,091,000
Total Stockholders' Equity 340,863,000 332,896,000
Total Liabilities and Stockholders' Equity $713,676,000 $718,925,000
</TABLE>
<TABLE>
CARTER-WALLACE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<CAPTION>
1996 1995
Cash flows from operations:
<S> <C> <C> <C>
Net earnings $ 9,260,000 $ 861,000
One-time charge for condom plant closing - 20,100,000
Cash payments for prior years one-time
charges (8,081,000) (7,483,000)
Changes in assets and liabilities (5,681,000) (17,069,000)
Depreciation and amortization 5,724,000 6,354,000
1,222,000 2,763,000
Cash flows used in investing activities:
Additions to property, plant and equipment (9,754,000) (10,661,000)
Decrease in short-term investments 7,700,000 3,285,000
Other investing activities 187,000 183,000
(1,867,000) (7,193,000)
Cash flows used in financing activities:
Dividends paid (1,855,000) (1,847,000)
Increase in borrowings 1,629,000 8,253,000
Payments of debt (1,254,000) (27,000)
Purchase of treasury stock (134,000) (2,815,000)
(1,614,000) 3,564,000
Effect of exchange rate changes on
cash and cash equivalents (118,000) 81,000
Decrease in cash and cash equivalents $ (2,377,000) $ (785,000)
</TABLE>
CARTER-WALLACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 1: Interim Reports
The results of the interim periods are not necessarily indicative of results
expected for a full year's operations. In the opinion of management, all
adjustments necessary for a fair statement of results of these interim periods
have been reflected in these financial statements and, except as separately
disclosed herein, are of a normal recurring nature.
Note 2: Review of Independent Auditors
The financial information included in this report has been reviewed by KPMG Peat
Marwick LLP, independent auditors. A copy of their report on this limited
review is included in this Form.
Note 3: Restructuring of Operations and Facilities
In connection with its restructuring program, the Company incurred one-time
pre-tax charges of $16,500,000 in the year ended March 31, 1996 and $74,060,000
in the year ended March 31, 1995. The restructuring charges of $90,560,000
recorded over the two years consist primarily of estimated employee termination
costs ($30,800,000), estimated plant closing costs including equipment
write-offs ($26,000,000) and costs associated with the planned subleasing of
office space on which the Company holds a long-term lease ($27,800,000).
The total anticipated reduction in the number of worldwide employees will be
approximately 990 including 120 vacancies that will not be filled. Through June
30, 1996, 750 employees have been terminated with employee termination costs of
$26,100,000 applied against the restructuring liability. In addition,
approximately 110 positions have been eliminated as a result of voluntary
resignations.
Net plant closing costs of $25,600,000, as well as $5,800,000 in costs
associated with the subleasing of office space on which the Company holds a
long-term lease have been applied against the restructuring liability.
Approximately $27,900,000 of the $90,560,000 provision for restructuring charges
remains to be utilized in future periods. Substantially all of the $27,900,000
represents expected future cash outlays for subleasing costs and employee
severance.
(Continued)
CARTER-WALLACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(Continued)
Note 4: Closure of the Trenton Condom Manufacturing Facility
In the quarter ended June 30, 1995, the Company incurred a one-time pre-tax
charge of $20,100,000 ($11,860,000 after taxes or $.26 per share) related to the
planned closure of the Company's condom manufacturing plant in Trenton, New
Jersey. Condom production currently performed at Trenton is in the process of
being transferred to the Company's facility in Colonial Heights, VA. This
pre-tax charge was subsequently adjusted by $3,000,000 to $23,100,000 in the
quarter ended March 31, 1996.
Note 5: Felbatol
As previously reported, in the year ended March 31, 1995 the Company incurred
a one-time charge to pre-tax earnings of $37,780,000 related to use restrictions
for Felbatol. This charge was adjusted by $8,200,000 to $45,980,000 in the
quarter ended March 31, 1996. Depending on future sales levels, additional
inventory write-offs may be required. If for any reason the product at some
future date should no longer be available in the market, the Company will incur
an additional one-time charge that would have a material adverse effect on the
Company's results of operations and possibly on its financial condition. Should
the product no longer be available, the Company currently estimates that the
additional one-time charge, consisting primarily of inventory write-offs and
anticipated returns of product currently in the market, will be in the range of
$25,000,000 to $30,000,000 on a pre-tax basis.
Note 6: Litigation
Information regarding Legal Proceedings involving the Company is presented in
Note 20 "Litigation Including Environmental Matters" of the Notes to the
Consolidated Financial Statements on pages 31 to 33 of the Company's 1996 Annual
Report to Stockholders incorporated by reference in the Company's Form 10-K for
the year ended March 31, 1996 and is herein expressly incorporated by reference.
In addition to the legal proceedings outlined in the Company's 1996 Annual
Report to Stockholders, five additional individual product liability actions
have been filed against the Company. In one of these actions the complaint
seeks compensatory damages of $50,000 and punitive damages of $50,000. In the
other actions, the damages sought are unspecified.
The Company continues to believe, based upon opinion of counsel, it has good
defenses to all of the above actions and should prevail.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Carter-Wallace, Inc.:
We have reviewed the condensed consolidated balance sheet of Carter-Wallace,
Inc. and subsidiaries as of June 30, 1996, and the related condensed
consolidated statements of earnings and cash flows for the three-month periods
ended June 30, 1996 and 1995. These condensed consolidated financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data, and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Carter-Wallace, Inc. and
subsidiaries as of March 31, 1996, and the related consolidated statements of
earnings and retained earnings, and cash flows for the year then ended (not
presented herein); and in our report dated May 6, 1996, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of March 31, 1996 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG Peat Marwick LLP
New York, New York
July 25, 1996
</AUDIT-REPORT>
CARTER-WALLACE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Three months ended June 30, 1996 compared to three
months ended June 30, 1995
Consolidated earnings after taxes in the three months ended June 30, 1996 were
$9,260,000 or $.20 per share compared with net earnings of $861,000 or $.02 per
share in the three months ended June 30, 1995. Excluding the one-time charge
for the condom plant closing, net earnings for the three months ended June 30,
1995 were $12,720,000 or $.28 per share.
Net sales decreased $7,148,000 (4.0%) in the current year period as compared to
net sales in the prior year period. The lower sales level resulted primarily
from reduced unit volume in the Health Care segment. Sales of pharmaceutical
products in the Health Care segment continue to be adversely impacted by generic
competition. Sales of Organidin NR may be particularly affected by generic
competition. Unit sales were lower overall in the Consumer Products segment;
however, unit volume for consumer products in international operations exceeded
the prior year level.
Selling price increases, primarily in the Health Care segment, had a postive
effect on sales in comparison with the prior year period. Lower foreign
exchange rates had the effect of decreasing sales in the current year period by
approximately $300,000 versus the prior year period.
Other revenues decreased $430,000 from $2,342,000 in the prior year period to
$1,912,000 in the current year period.
Cost of goods sold as a percentage of net sales increased from 35.2% in the
prior year period to 36.8% in the current year period primarily due to changes
in product mix.
Advertising, marketing and other selling expenses decreased by $889,000 or 1.4%
versus the prior year period due to reduced expenses in the Consumer Products
segment. Spending in the Health Care segment increased versus the prior year
period.
Research and development expenses decreased by $173,000 or 2.5% versus the prior
year period, primarily in the Health Care segment.
General, administrative and other expenses decreased $999,000 or 4.3% versus the
prior year period, primarily due to lower rent expense and reduced compensation
including fringe benefits.
Interest expense increased by $277,000 (34.2%) over the prior year period as a
result of increased borrowings related largely to the expansion of the Colonial
Heights, VA condom facility.
The estimated annual effective tax rate applied in the current year period was
41%, the same rate as in the prior year period.
(Continued)
CARTER-WALLACE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Restructuring of Operations and Facilities
In connection with its restructuring program, the Company incurred one-time
pre-tax charges of $16,500,000 in the year ended March 31, 1996 and $74,060,000
in the year ended March 31, 1995. The restructuring charges of $90,560,000
recorded over the two years consist primarily of estimated employee termination
costs ($30,800,000), estimated plant closing costs including equipment
write-offs ($26,000,000) and costs associated with the planned subleasing of off
ice space on which the Company holds a long-term lease ($27,800,000).
The total anticipated reduction in the number of worldwide employees will be
approximately 990 including 120 vacancies that will not be filled. Through June
30, 1996, 750 employees have been terminated with employee termination costs of
$26,100,000 applied against the restructuring liability. In addition,
approximately 110 positions have been eliminated as a result of voluntary
resignations.
Net plant closing costs of $25,600,000, as well as $5,800,000 in costs
associated with the subleasing of office space on which the Company holds a
long-term lease have been applied against the restructuring liability.
Approximately $27,900,000 of the $90,560,000 provision for restructuring charges
remains to be utilized in future periods. Substantially all of the $27,900,000
represents expected future cash outlays for subleasing costs and employee
severance.
Closure of the Trenton Condom Manufacturing Facility
In the quarter ended June 30, 1995, the Company incurred a one-time pre-tax
charge of $20,100,000 ($11,860,000 after taxes or $.26 per share) related to the
planned closure of the Company's condom manufacturing plant in Trenton, New
Jersey. Condom production currently performed at Trenton is in the process of
being transferred to the Company's facility in Colonial Heights, VA. This
pre-tax charge was subsequently adjusted by $3,000,000 to $23,100,000 in the
quarter ended March 31, 1996.
(Continued)
CARTER-WALLACE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Felbatol
As previously reported, in the year ended March 31, 1995 the Company incurred
a one-time charge to pre-tax earnings of $37,780,000 related to use restrictions
for Felbatol. This charge was adjusted by $8,200,000 to $45,980,000 in the
quarter ended March 31, 1996. Depending on future sales levels, additional
inventory write-offs may be required. If for any reason the product at some
future date should no longer be available in the market, the Company will incur
an additional one-time charge that would have a material adverse effect on the
Company's results of operations and possibly on its financial condition. Should
the product no longer be available, the Company currently estimates that the
additional one-time charge, consisting primarily of inventory write-offs and
anticipated returns of product currently in the market, will be in the range of
$25,000,000 to $30,000,000 on a pre-tax basis.
Liquidity and Capital Resources
Funds provided from operations are used for capital expenditures, acquisitions,
the purchase of treasury stock, the payment of dividends and working capital
requirements. External borrowings are incurred as needed to satisfy cash
requirements relating to seasonal business fluctuations, to finance major
facility expansion programs and to finance major acquisitions.
In the Statements of Cash Flows the change in assets and liabilities in the
current year period is lower than that in the prior year period due primarily
to a smaller increase in deferred taxes.
Cash outlays in the three months ended June 30, 1996 relating to prior years
one-time charges amount to approximately $8,100,000.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Please refer to Note 6 "Litigation" of Notes to Condensed Consolidated Financial
Statements for information regarding legal proceedings.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K have been filed during
the quarter ended June 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Carter-Wallace, Inc.
(Registrant)
Date: July 25, 1996 s/Daniel J. Black
Daniel J. Black
President & Chief
Operating Officer
Date: July 25, 1996 S/Paul A. Veteri
Paul A. Veteri
Vice President, Finance
& Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 48,808,000
<SECURITIES> 12,269,000
<RECEIVABLES> 136,732,000
<ALLOWANCES> 6,654,000
<INVENTORY> 94,237,000
<CURRENT-ASSETS> 713,676,000
<PP&E> 270,236,000
<DEPRECIATION> 124,953,000
<TOTAL-ASSETS> 713,676,000
<CURRENT-LIABILITIES> 191,093,000
<BONDS> 62,457,000
0
0
<COMMON> 47,205,000
<OTHER-SE> 293,658,000
<TOTAL-LIABILITY-AND-EQUITY> 713,676,000
<SALES> 169,889,000
<TOTAL-REVENUES> 171,801,000
<CGS> 62,463,000
<TOTAL-COSTS> 156,106,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,086,000
<INCOME-PRETAX> 15,695,000
<INCOME-TAX> 6,435,000
<INCOME-CONTINUING> 9,260,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,260,000
<EPS-PRIMARY> .20
<EPS-DILUTED> 0
</TABLE>
