<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 MARCH 31, 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 May 10,
1995 was 2,134,919.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS March 31 December 31
1995 1994
------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,194,131 $ 10,125,568
Accounts receivable-less allowance for
doubtful accounts of $1,650,000
and $1,300,000, respectively 23,440,258 18,692,993
Inventories 39,195,156 34,688,184
Prepaid expenses and other current assets 680,098 1,958,917
------------ -------------
Total current assets 71,509,643 65,465,662
------------ -------------
Property, plant and equipment, net 25,379,867 24,806,283
Intangibles arising from acquisitions, net 9,594,690 9,669,506
Other assets 5,022,901 5,015,394
------------ -------------
Total assets $111,507,101 $104,956,845
------------ -------------
------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 247,672 $ 334,754
Accounts payable 15,044,865 14,931,062
Accrued liabilities 15,266,584 10,703,484
Income taxes payable 1,272,358 683,532
------------ -------------
Total current liabilities 31,831,479 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 40,046,624 40,070,395
------------ -------------
Total liabilities 75,835,321 70,753,591
------------ -------------
Shareholders' equity:
Common stock $1 par value, authorized 5,000,000
shares; issued 3,294,272 shares 3,294,272 3,294,272
Additional paid-in capital 6,197,744 6,189,986
Foreign currency translation adjustment (546,242) (546,242)
Retained earnings 47,902,832 46,203,176
------------ -------------
56,848,606 55,141,192
Less: Treasury stock, at cost, 1,194,646 shares and
1,187,638 shares, respectively (19,219,317) (18,637,618)
Receivables for stock options exercised (1,957,509) (2,300,320)
------------ -------------
Total shareholders' equity 35,671,780 34,203,254
------------ -------------
Total liabilities and shareholders' equity $111,507,101 $104,956,845
------------ -------------
------------ -------------
</TABLE>
1
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31 March 31
1995 1994
----------- -----------
<S> <C> <C>
Net sales $50,697,539 $45,513,286
Cost of goods sold 19,538,749 18,064,066
Selling and administrative expenses 27,171,527 23,919,726
----------- -----------
46,710,276 41,983,792
----------- -----------
Operating income 3,987,263 3,529,494
----------- -----------
Interest expense 958,214 1,016,717
Interest income (81,956) (19,079)
----------- -----------
Interest expense, net 876,258 997,638
----------- -----------
Earnings before income taxes 3,111,005 2,531,856
Income taxes 1,275,000 1,038,000
----------- -----------
Net earnings $ 1,836,005 1,493,856
----------- -----------
----------- -----------
Weighted average common shares outstanding (A) 2,464,000 2,421,000
----------- -----------
----------- -----------
Earnings per common share (A) $ 0.75 $ 0.62
Dividends per common share (A) $ 0.065 $ 0.056
----------- -----------
----------- -----------
<FN>
(A) Adjusted to reflect a 4-for-3 stock split effective June 15, 1994.
</TABLE>
2
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31 MARCH 31
1995 1994
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,836,005 $ 1,493,856
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,041,301 960,260
Provision for doubtful accounts 138,000 138,000
Other non-cash operating items 140,014 177
Changes in operating assets and liabilities:
Accounts receivable (4,885,265) (4,770,857)
Inventories (4,506,972) 445,557
Prepaid expenses and other current assets 1,278,819 118,203
Other assets (7,507) 222,574
Accounts payable 113,803 (383,004)
Accrued liabilities 4,700,250 2,571,235
Income taxes payable 588,826 799,340
Other liabilities (73,146) (158,187)
------------ -----------
Net cash provided by operating activities 364,128 1,437,154
------------ -----------
Cash flows used in investing activities:
Property, plant and equipment additions (1,540,070) (904,443)
------------ -----------
Net cash used in investing activities (1,540,070) (904,443)
------------ -----------
Cash flows used in financing activities:
Principal payments of long-term debt (110,853) (344,285)
Proceeds from issuance of common stock upon
exercise of options 254,600 12,674
Decrease in receivables for stock
options exercised 202,811 3,250
Purchase of treasury stock (828,554) (257,808)
Dividends paid (273,499) ( 237,331)
------------ -----------
Net cash used in financing activities (755,495) (823,500)
------------ -----------
Net decrease in cash and cash equivalents (1,931,437) (290,789)
Cash and cash equivalents beginning of year 10,125,568 5,815,233
------------ -----------
Cash and cash equivalents at end of period $ 8,194,131 $ 5,524,444
------------ -----------
------------ -----------
</TABLE>
3
<PAGE>
DEL LABORATORIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 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
March 31, 1995 and December 31, 1994, the results of operations for the three
months ended March 31, 1995 and 1994 and statements of cash flows for the three
months ended March 31, 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 March 31, 1995 and December 31, 1994 were as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw Materials $17,402,843 $15,533,967
Work In Process 3,891,909 3,797,247
Finished Goods 17,900,404 15,356,970
----------- -----------
$39,195,156 $34,688,184
----------- -----------
----------- -----------
</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.
4
<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 March 31, 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 March 31, 1995, accounts receivable were $23,440,000, an increase of
$4,747,000 from the December 31, 1994 level. At March 31, 1994, accounts
receivable were $20,804,000 an increase of $4,633,000 from the December 31,
1993 level. The increase is primarily attributable to an increased level
of sales during the first quarter of 1995.
Inventories at March 31, 1995 were $39,195,000, an increase of $4,507,000
from the December 31, 1994 level. The inventory increase is primarily in
the cosmetics division. The increase is necessary to meet production
schedules and should return to a lower level at the end of the second
quarter 1995.
Accrued liabilities at March 31, 1995 increased by $4,563,000 from the
December 31, 1994 level. This increase is primarily attributable to
increased advertising and sales promotional activity during the first
quarter of 1995 versus the fourth quarter of 1994. For the comparable 1994
period, accrued liabilities increased by $2,454,000.
(2) RESULTS OF OPERATIONS
SALES
Sales for the first quarter of 1995 were $50.7 million, 11.4% above the
$45.5 million of sales for the first quarter of 1994.
The first quarter 1995 results reflect a sales increase for both the
cosmetics and pharmaceutical divisions.
COST OF SALES
Cost of sales for the first quarter of 1995, as a percentage of net sales,
was 38.5%, compared with 39.7% in the corresponding period of 1994.
The decrease in first quarter 1995 cost of sales over the comparable period
in 1994 is attributable to a changing mix of business during the quarter.
5
<PAGE>
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses were $27.2 million, or 53.6% of net sales in
the first quarter of 1995, and were $23.9 million, or 52.6% of net sales for the
corresponding 1994 period.
NET INTEREST EXPENSE
Net interest expense for the first quarter of 1995 was $876,000 compared with
$998,000 incurred in the first 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 first quarter of 1995 and 1994.
NET EARNINGS
Net earnings for the first quarter of 1995 were $1,836,000, 22.9% above the
$1,494,000 reported for the first 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. The parties are now engaged
in settlement discussions. The Company intends to contest the case vigorously
in the event that settlement discussions are unsuccessful.
Management is of the opinion that the outcome 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 financial
position.
6
<PAGE>
PART II - OTHER INFORMATION
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.
4 Instruments defining the - Not Applicable
rights of security holders,
including indentures.
10 Material Contracts 1 Amendment, dated April
14, 1995 to Employment
Agreement with Charles J.
Hinkaty
2 Amendment, dated April
14, 1995 to Employment
Agreement with Harvey P.
Alstodt
3 Amendment, dated April
14, 1995 to Employment
Agreement with William
McMenemy
4 Amendment, dated April
14, 1995 to Employment
Agreement with Melvyn C.
Goldstein
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
99 Additional exhibits. - Not Applicable
(b) REPORTS ON FORM 8-K
Not Applicable.
7
<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: May 12, 1995 Dan K. Wassong
- - --------------------------- -------------------------------
Dan K. Wassong
Chairman, President and
Chief Executive Officer
Date: May 12, 1995 Melvyn C. Goldstein
- - --------------------------- -------------------------------
Melvyn C. Goldstein
Vice President of Finance
and Principal Financial Officer
8
<PAGE>
Part II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
ITEM NO. 10 - EXHIBIT NO. 1
April 14, 1995
Mr. Charles Hinkaty
c/o Del Laboratories, Inc.
565 Broad Hollow Road
Farmingdale, New York 11735
Dear Mr. Hinkaty:
This will confirm that your Employment Agreement, as amended and extended,
is further extended to March 31, 1998.
In all other respects the Employment Agreement, as amended and extended,
shall continue in full force and effect.
Please signify your agreement with the foregoing by counter-signing the
copy of this letter and returning it to me.
Very truly yours,
DEL LABORATORIES, INC.
By:
---------------------
Dan K. Wassong
Chairman of the Board
ACCEPTED AND AGREED:
- - ---------------
Charles Hinkaty
9
<PAGE>
Part II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
ITEM NO. 10 - EXHIBIT NO. 2
April 14, 1995
Mr. Harvey P. Alstodt
c/o Del Laboratories, Inc.
565 Broad Hollow Road
Farmingdale, New York 11735
Dear Mr. Alstodt:
This will confirm that your Employment Agreement, as amended and extended,
is further extended to March 31, 1998.
In all other respects the Employment Agreement, as amended and extended,
shall continue in full force and effect.
Please signify your agreement with the foregoing by counter-signing the
copy of this letter and returning it to me.
Very truly yours,
DEL LABORATORIES, INC.
By:
---------------------
Dan K. Wassong
Chairman of the Board
ACCEPTED AND AGREED:
- - -----------------
Harvey P. Alstodt
10
<PAGE>
Part II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
ITEM NO. 10 - EXHIBIT NO. 3
April 14, 1995
Mr. William McMenemy
c/o Del Laboratories, Inc.
565 Broad Hollow Road
Farmingdale, New York 11735
Dear Mr. McMenemy:
This will confirm that your Employment Agreement, as amended and extended,
is further extended to March 31, 1998.
In all other respects the Employment Agreement, as amended and extended,
shall continue in full force and effect.
Please signify your agreement with the foregoing by counter-signing the
copy of this letter and returning it to me.
Very truly yours,
DEL LABORATORIES, INC.
By:
---------------------
Dan K. Wassong
Chairman of the Board
ACCEPTED AND AGREED:
- - ----------------
William McMenemy
11
<PAGE>
Part II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
ITEM NO. 10 - EXHIBIT NO. 4
April 14, 1995
Mr. Melvyn C. Goldstein
c/o Del Laboratories, Inc.
565 Broad Hollow Road
Farmingdale, New York 11735
Dear Mr. Goldstein:
This will confirm that your Employment Agreement, as amended and extended,
is further extended to March 31, 1998.
In all other respects the Employment Agreement, as amended and extended,
shall continue in full force and effect.
Please signify your agreement with the foregoing by counter-signing the
copy of this letter and returning it to me.
Very truly yours,
DEL LABORATORIES, INC.
By:
---------------------
Dan K. Wassong
Chairman of the Board
ACCEPTED AND AGREED:
- - -------------------
Melvyn C. Goldstein
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 8194131
<SECURITIES> 0
<RECEIVABLES> 23440258
<ALLOWANCES> 1650000
<INVENTORY> 39195156
<CURRENT-ASSETS> 71509643
<PP&E> 25379867
<DEPRECIATION> 16288161
<TOTAL-ASSETS> 111507101
<CURRENT-LIABILITIES> 31831479
<BONDS> 40046624
<COMMON> 3294272
0
0
<OTHER-SE> 32377508
<TOTAL-LIABILITY-AND-EQUITY> 111507101
<SALES> 50697539
<TOTAL-REVENUES> 50697539
<CGS> 19538749
<TOTAL-COSTS> 46710276
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 876258
<INCOME-PRETAX> 3111005
<INCOME-TAX> 1275000
<INCOME-CONTINUING> 1836005
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1836005
<EPS-PRIMARY> .75
<EPS-DILUTED> 0
</TABLE>
