<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
---------- -----------
COMMISSION FILE NO. 1-5439
DEL LABORATORIES, INC.
----------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-1953103
------------------------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
565 BROAD HOLLOW ROAD, FARMINGDALE, NEW YORK 11735
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 293-7070
_________________________
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 Common Stock, $1 par value, outstanding as of August 8,
1995 was 4,211,864.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Assets June 30 December 31
------ 1995 1994
--------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,931,060 $ 10,125,568
Accounts receivable-less allowance for
doubtful accounts of $1,900,000
and $1,300,000, respectively 26,612,918 18,692,993
Inventories 41,163,866 34,688,184
Prepaid expenses and other current assets 1,379,469 1,958,917
------------- -------------
Total current assets 74,087,313 65,465,662
------------- -------------
Property, plant and equipment, net 26,613,574 24,806,283
Intangibles arising from acquisitions, net 9,519,874 9,669,506
Other assets 4,223,314 5,015,394
------------- -------------
Total assets $ 114,444,075 $ 104,956,845
------------- -------------
------------- -------------
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt $ 160,591 $ 334,754
Accounts payable 16,597,697 14,931,062
Accrued liabilities 17,071,113 10,703,484
Income taxes payable 1,927,708 683,532
------------- -------------
Total current liabilities 35,757,109 26,652,832
Other liabilities 2,103,680 2,176,826
Deferred income taxes 1,853,538 1,853,538
Long-term debt, less current portion 40,033,003 40,070,395
------------- -------------
Total liabilities 79,747,330 70,753,591
------------- -------------
Shareholders' equity:
Common stock $1 par value, authorized
10,000,000 shares; issued
6,588,544 shares (A) 6,588,544 6,588,544
Additional paid-in capital (A) 2,856,546 2,895,714
Foreign currency translationadjustment (636,296) (546,242)
Retained earnings 49,465,851 46,203,176
------------- -------------
58,274,645 55,141,192
Less: Treasury stock, at cost, 2,372,380 shares
and 2,375,276 shares, respectively (A) (21,674,064) (18,637,618)
Receivables for stock options exercised (1,903,836) (2,300,320)
Total shareholders' equity 34,696,745 34,203,254
------------- -------------
Total liabilities and shareholders' equity $ 114,444,075 $ 104,956,845
------------- -------------
------------- -------------
<FN>
(A) Adjusted to reflect a 2-for-1 stock split effective June 16, 1995.
</TABLE>
1
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30 JUNE 30
1995 1994 1995 1994
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $52,655,828 $46,806,245 $103,353,368 $92,319,531
----------- ----------- ------------ -----------
Cost of goods sold 21,586,955 18,291,424 41,125,704 36,355,490
Selling and
administrative expenses 27,327,125 25,179,970 54,498,652 49,099,696
----------- ----------- ------------ -----------
48,914,080 43,471,394 95,624,356 85,455,186
----------- ----------- ------------ -----------
Operating income 3,741,748 3,334,851 7,729,012 6,864,345
----------- ----------- ------------ -----------
Interest expense 955,670 1,018,889 1,913,884 2,035,606
Interest income (97,871) (39,251) (179,827) (58,330)
----------- ----------- ------------ -----------
Interest expense, net 857,799 979,638 1,734,057 1,977,276
----------- ----------- ------------ -----------
Earnings before income taxes 2,883,949 2,355,213 5,994,955 4,887,069
Income taxes 1,182,000 965,000 2,457,000 2,003,000
----------- ----------- ------------ -----------
Net earnings $ 1,701,949 $ 1,390,213 $3,537,955 $ 2,884,069
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Weighted average common
shares outstanding (A) 4,965,000 4,784,000 4,952,000 4,792,000
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Earnings per common share
(A) $ 0.34 $ 0.30 $ 0.72 $ 0.61
Dividends per common share
(A) $ 0.033 $ 0.032 $ 0.065 $ 0.060
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
<FN>
(A) Adjusted to reflect a 2-for-1 stock split effective June 16, 1995.
</TABLE>
2
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30 JUNE 30
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash $ 3,537,955 $ 2,884,069
provided by operating activities:
Depreciation and amortization 2,042,835 1,920,011
Provision for doubtful accounts 276,000 276,000
Other non-cash operating items 10,474 (6,637)
Changes in operating assets and liabilities:
Accounts receivable (8,195,925) (4,034,152)
Inventories (6,475,682) 1,492,079
Prepaid expenses and other current assets 579,448 16,121
Income taxes receivable - 130,349
Other assets 792,080 (646,445)
Accounts payable 1,666,635 (442,733)
Accrued liabilities 6,504,779 2,171,733
Income taxes payable 1,244,176 301,851
Other liabilities (73,146) (158,187)
-------------- ------------
Net cash provided by operating activities 1,909,629 3,904,059
-------------- ------------
Cash flows used in investing activities:
Property, plant and equipment additions (3,700,494) (2,226,859)
-------------- ------------
Net cash used in investing activities (3,700,494) (2,226,859)
-------------- ------------
Cash flows used in financing activities:
Principal payments of long-term debt (211,554) (454,757)
Proceeds from issuance of common stock
upon exercise of options 1,799,286 297,916
Decrease in receivables for stock
options exercised 256,484 15,234
Purchase of treasury stock (4,835,730) (542,271)
Decrease in notes payable -- (1,600,000)
Dividends paid (412,129) (372,960)
-------------- ------------
Net cash used in financing activities (3,403,643) (2,656,838)
-------------- ------------
Net decrease in cash and cash equivalents (5,194,508) (979,638)
Cash and cash equivalents beginning of year 10,125,568 5,815,233
-------------- ------------
Cash and cash equivalents at end of period $ 4,931,060 $ 4,835,595
-------------- ------------
-------------- ------------
</TABLE>
3
<PAGE>
DEL LABORATORIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
(UNAUDITED)
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as of
June 30, 1995 and December 31, 1994, the results of operations for the three and
six months ended June 30, 1995 and 1994 and statements of cash flows for the six
months ended June 30, 1995 and 1994.
Results for an interim period are not necessarily indicative of results for the
entire year and such results are subject to year-end adjustments and independent
audit.
Classification of inventories at June 30, 1995 and December 31, 1994 were as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw Materials $18,821,399 $15,533,967
Work In Process 3,887,690 3,797,247
Finished Goods 18,454,777 15,356,970
---------- ----------
$41,163,866 $34,688,184
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---------- ----------
</TABLE>
Earnings per common share is computed under the "modified treasury stock method"
which assumes the exercise of all outstanding options and warrants and the use
of the proceeds thereof to acquire up to 20% of the outstanding common stock of
the Company. Excess proceeds not utilized for the purchase of such shares are
assumed utilized, first to reduce outstanding debt and then any remainder is
assumed invested in interest bearing securities with net earnings increased for
the hypothetical interest expense savings or interest income, net of taxes.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(1) LIQUIDITY AND CAPITAL RESOURCES
Under its institutional debt covenants, the Company is permitted a level of
short-term borrowings not to exceed $15,000,000. Presently, the Company
has arrangements with banks which provide up to $27,500,000 of short-term
lines of credit at the prime rate of interest. There were no short-term
borrowings at June 30, 1995 and December 31, 1994.
The Company believes that currently available funds, anticipated funds from
operations and existing credit facilities will be adequate for its
foreseeable needs.
At June 30, 1995, accounts receivable were $26,613,000, an increase of
$7,920,000 from the December 31, 1994 level. At June 30, 1994, accounts
receivable were $19,930,000 an increase of $3,758,000 from the December 31,
1993 level. The increase is primarily attributable to an increased level
of sales during the second quarter of 1995.
Inventories at June 30, 1995 were $41,164,000, an increase of $6,476,000
from the December 31, 1994 level. The inventory increase is primarily in
the cosmetics division. The strong demand for cosmetics products has
necessitated maintaining high levels of inventory in support of production
scheduling and shipping requirements.
Accrued liabilities at June 30, 1995 increased by $6,368,000 from the
December 31, 1994 level. This increase is primarily attributable to
increased advertising and sales promotional activity during the first half
of 1995 versus the fourth quarter of 1994.
(2) RESULTS OF OPERATIONS
SALES
Sales for the second quarter of 1995 were $52.7 million, 12.5% above the
$46.8 million of sales for the second quarter of 1994.
The second quarter 1995 results reflect a sales increase in the cosmetics
division. The pharmaceutical division had a level of sales equal to that
of the second quarter of 1994.
COST OF SALES
Cost of sales for the second quarter of 1995, as a percentage of net sales,
was 41.0%, compared with 39.1% in the corresponding period of 1994.
The increase in second quarter 1995 cost of sales over the comparable
period in 1994 is primarily attributable to a changing mix of business
during the quarter within the cosmetics division and the level sales
performance of the pharmaceutical division.
<PAGE>
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses were $27.3 million, or 51.9% of net
sales in the second quarter of 1995, and were $25.2 million, or 53.8% of
net sales for the corresponding 1994 period.
NET INTEREST EXPENSE
Net interest expense for the second quarter of 1995 was $858,000 compared
with $980,000 incurred in the second quarter of 1994. The decreased
interest expense is attributable to reduced borrowings and increased
interest income.
PROVISION FOR INCOME TAXES
The provision for income taxes is 41% of earnings before income taxes in
both the second quarter of 1995 and 1994.
NET EARNINGS
Net earnings for the second quarter of 1995 were $1,702,000, 22.4% above
the $1,390,000 reported for the second quarter of 1994.
LEGAL MATTERS
The Company has been notified that it has been identified as a potentially
responsible party with respect to environmental remediation activities
required at a site in Pennsylvania. The total cost to the Company of
remediation activities that it may be required to undertake cannot yet be
quantified, although the Company is one of over 900 potentially responsible
parties that have been identified at the site. No dollar amount can be
assigned to remediation costs because of inherent uncertainties. It is the
Company's policy to meet all regulatory requirements for the protection of
the environment and to take prompt remedial action where necessary.
On July 22, 1994, the Equal Employment Opportunity Commission filed suit
against the Company in the United States District Court for the Eastern
District of New York alleging employment discrimination in violation of
Title VII of the Civil Rights Act of 1964, as amended. The Company has
denied that it has engaged in any unlawful employment discrimination as
alleged. On August 3, 1995 the Court approved settlement of the case.
See "Item 5 - Other Information" for further information regarding the
settlement.
Management is of the opinion that the settlement of this litigation and, on
the basis of currently available information, the environmental matter
referred to above will not have a material adverse effect on the Company's
results of operations or financial condition.
<PAGE>
PART II - OTHER INFORMATION
Item 4. The following matters were approved by stockholders at the 1995 Annual
Meeting of Stockholders on May 25, 1995.
<TABLE>
<CAPTION>
Abstentions
or Brokers
Votes For Votes Against Non-Votes
--------- ------------- -----------
<S> <C> <C> <C>
1. Amendment of Certificate
of Incorporation 1,825,890 41,967 12,083
</TABLE>
In addition, Charles J. Hinkaty and Robert H. Haines were each elected as
Directors for a three year term.
Item 5. On August 3, 1995, the United States District Court for the Eastern
District of New York approved a consent decree between the Company and
the Equal Employment Opportunity Commission ("EEOC"). The consent
decree resolves and fully releases the Company from all claims brought
by the EEOC in a complaint filed in July 1994 alleging sexual
discrimination by the Company against certain present and former
employees of the Company. The Company denies that it engaged in any
unlawful conduct and the consent decree expressly acknowledges that
the settlement does not constitute an admission by the Company of any
violation of any law, rule or regulation relating to employment
discrimination. The consent decree will be in effect through December
31, 1997.
Pursuant to the consent decree, the Company agreed to pay 15 former
employees a total sum of $1,185,000. The consent decree also incorporated
the Company's revised sexual harassment policy which includes a revised
complaint procedure. Under the revised policy there are alternative
persons and an outside organization to whom complaints of sexual harassment
may be reported. There is also a committee of two outside members of the
Board of Directors to which complaints of sexual harassment involving
officers or executives of the Company may be reported. This committee will
have responsibility for overseeing the investigation of such complaints.
The Company also will provide training of all its employees regarding the
Company's sexual harassment policy and related matters.
The Company is of the opinion that the consent decree will have no material
effect on the Company's results of operations or financial condition.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBIT INDEX
ITEM NO. EXHIBIT EXHIBIT NO. DESCRIPTION
-------- ------- ----------- -----------
2 Plan of acquisition - Not Applicable
reorganization, arrange-
ment, liquidation, or
succession.
3 Articles of Incorporation 1 Certificate of
Amendment and By-Laws
filed with the
Secretary of State of
Delaware on
June 1, 1995
4 Instruments defining the - Not Applicable
rights of security holders,
including indentures.
11 Statement re: computation - Not Applicable
of per share earnings.
15 Letter re: unaudited interim - Not Applicable
financial information.
18 Letter re: change in account- - Not Applicable
ing principles.
19 Report furnished to security - Not Applicable
holders.
22 Published report regarding - Not Applicable
matters submitted to vote of
security holders.
24 Power of Attorney - Not Applicable
27 Financial Data Schedule 2 ----
99 Additional exhibits - Not Applicable
(b) REPORTS ON FORM 8-K
Not Applicable.
<PAGE>
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.
DEL LABORATORIES, INC.
----------------------
(Registrant)
Date: August , 1995 /s/ Dan K. Wassong
----------------------------- ------------------------
Dan K. Wassong
Chairman, President and
Chief Executive Officer
Date: August , 1995 /s/ Melvyn C. Goldstein
----------------------------- ------------------------
Melvyn C. Goldstein
Vice President of Finance
and Principal Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 4,931,060
<SECURITIES> 0
<RECEIVABLES> 266,12,918
<ALLOWANCES> 1,900,000
<INVENTORY> 411,63,866
<CURRENT-ASSETS> 74,087,313
<PP&E> 26,613,574
<DEPRECIATION> 17,214,878
<TOTAL-ASSETS> 114,444,075
<CURRENT-LIABILITIES> 35,757,109
<BONDS> 40,033,003
<COMMON> 6,588,544
0
0
<OTHER-SE> 28,108,201
<TOTAL-LIABILITY-AND-EQUITY> 114,444,075
<SALES> 103,353,368
<TOTAL-REVENUES> 103,353,368
<CGS> 41,125,704
<TOTAL-COSTS> 95,624,356
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,734,057
<INCOME-PRETAX> 5,994,955
<INCOME-TAX> 2,457,000
<INCOME-CONTINUING> 3,537,955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,537,955
<EPS-PRIMARY> .72<F1>
<EPS-DILUTED> 0
<FN>
<F1>Adjusted to reflect a 2-for-1 stock split effective June 16, 1995
</FN>
</TABLE>
