UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(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, 1996
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 ,
1996 was .
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Assets June 30 December 31
------ 1996 1995
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,244,847 $ 8,563,375
Accounts receivable-less allowance for
doubtful accounts of $1,550,000
and $1,700,000, respectively 31,533,878 24,626,182
Inventories 37,781,008 37,077,909
Prepaid expenses and other current assets 1,103,720 1,282,464
------------- -------------
Total current assets 76,663,453 71,549,930
------------- -------------
Property, plant and equipment, net 27,204,772 26,840,799
Intangibles arising from acquisitions, net 9,127,950 9,259,050
Other assets 5,774,448 5,474,214
------------- -------------
Total assets $ 118,770,623 $ 113,123,993
============= =============
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt $ 35,598 $ 70,395
Accounts payable 15,771,988 15,147,737
Accrued liabilities 17,222,342 14,494,724
Income taxes payable 323,435 1,395,607
------------- -------------
Total current liabilities 33,353,363 31,108,463
Other liabilities 3,632,432 3,632,432
Deferred income taxes 361,863 361,863
Long-term debt, less current portion 40,000,000 40,000,000
------------- -------------
Total liabilities 77,347,658 75,102,758
------------- -------------
Shareholders' equity:
Common stock $1 par value, authorized 10,000,000
shares; issued 6,588,544 shares 6,588,544 6,588,544
Additional paid-in capital 4,993,878 5,027,940
Foreign currency translation adjustment (425,895) (492,831)
Retained earnings 56,953,097 52,659,920
------------- -------------
68,109,624 63,783,573
Less: Treasury stock, at cost, 2,418,927 shares
and 2,410,554 shares, respectively (24,941,167) (23,867,674)
Receivable for stock options exercised (1,745,492) (1,894,664)
------------- -------------
Total shareholders' equity 41,422,965 38,021,235
------------- -------------
Total liabilities and shareholders' equity $ 118,770,623 $ 113,123,993
============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30 JUNE 30
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 58,059,573 $ 52,655,828 $ 114,153,182 $ 103,353,368
------------- ------------- ------------- -------------
Cost of goods sold 24,216,446 21,586,955 47,031,614 41,125,704
Selling and administrative expenses 29,288,933 27,327,125 57,649,137 54,498,652
------------- ------------- ------------- -------------
53,505,379 48,914,080 104,680,751 95,624,356
------------- ------------- ------------- -------------
Operating income 4,554,194 3,741,748 9,472,431 7,729,012
------------- ------------- ------------- -------------
Interest expense 951,169 955,670 1,902,756 1,913,884
Interest income (120,245) (97,871) (202,088) (179,827)
------------- ------------- ------------- -------------
Interest expense, net 830,924 857,799 1,700,668 1,734,057
------------- ------------- ------------- -------------
Earnings before income taxes 3,723,270 2,883,005 7,771,763 5,994,955
Income taxes 1,526,000 1,182,000 3,186,000 2,457,000
------------- ------------- ------------- -------------
Net earnings $ 2,197,270 $ 1,701,949 $ 4,585,763 $ 3,537,955
============= ============= ============= =============
Weighted average common
shares outstanding 4,876,000 4,965,000 4,875,000 4,952,000
============= ============= ============= =============
Earnings per common share $ 0.45 $ 0.34 $ 0.94 $ 0.72
============= ============= ============= =============
Dividends per common share $ 0.035 $ 0.033 $ 0.070 $ 0.065
============= ============= ============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30 JUNE 30
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,585,763 $ 3,537,955
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 2,397,554 2,042,835
Provision for doubtful accounts 276,000 276,000
Other non-cash operating items 177,657 10,474
Changes in operating assets and liabilities:
Accounts receivable (7,183,696) (8,195,925)
Inventories (703,099) (6,475,682)
Prepaid expenses and other current assets 178,744 579,448
Other assets and other liabilities (300,234) 792,080
Accounts payable 624,251 1,666,635
Accrued liabilities 2,727,619 6,504,779
Income taxes payable (1,072,172) 1,244,176
Other liabilities -- (73,146)
------------ ------------
Net cash provided by operating activities 1,708,387 1,909,629
------------ ------------
Cash flows used in investing activities:
Property, plant and equipment additions (2,630,427) (3,700,494)
------------ ------------
Net cash used in investing activities (2,630,427) (3,700,494)
------------ ------------
Cash flows used in financing activities:
Principal payments of long-term debt (34,795) (211,554)
Proceeds from issuance of common stock
upon exercise of options 465,735 1,799,286
Decrease in receivable for stock
options exercised 149,172 256,484
Purchase of treasury stock (1,538,342) (4,835,730)
Dividends paid (438,258) (412,129)
------------ ------------
Net cash used in financing activities (1,396,488) (3,403,643)
------------ ------------
Net decrease in cash and cash equivalents (2,318,528) (5,194,508)
Cash and cash equivalents beginning of year 8,563,375 10,125,568
------------ ------------
Cash and cash equivalents at end of period $ 6,244,847 $ 4,931,060
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
DEL LABORATORIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(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, 1996 and December 31, 1995, the results of operations for the three and
six months ended June 30, 1996 and 1995 and statements of cash flows for the six
months ended June 30, 1996 and 1995.
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, 1996 and December 31, 1995 were as
follows:
1996 1995
---- ----
Raw Materials $22,291,289 $15,645,998
Work In Process 4,025,536 3,888,456
Finished Goods 11,464,183 17,543,455
----------- -----------
$37,781,008 $37,077,909
=========== ===========
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, 1996 and December 31, 1995.
The Company has, from time to time, acquired shares of its common stock
pursuant to a plan approved by the Board of Directors in 1987. During
the first six months of 1996, the Company purchased 54,823 shares at an
average cost of $28.06 per share, and such shares were placed in
treasury. The shares purchased during the first six months of 1996 were
from open market purchases and from employees who held shares issued
pursuant to the Company's stock option plan.
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, 1996, accounts receivable were $31,534,000, an increase of
$6,908,000 from the December 31, 1995 level. At June 30,1995, accounts
receivable were $26,613,000, an increase of $7,920,000 from the
December 31, 1994 level. The increase is primarily attributable to the
increased level of sales during the second quarter of 1996.
Inventories at June 30, 1996 were $37,781,000, an increase of $703,000
from the December 31, 1995 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 product
scheduling and shipping requirements.
Accounts payable and accrued liabilities at June 30, 1996 increased by
$3,352,000 from the December 31, 1995 level. For the comparable 1995
period, accounts payable and accrued liabilities increased by
$8,034,000.
(2) RESULTS OF OPERATIONS
Sales
Sales for the quarter ended June 30, 1996 were $58.1 million, 10.3%
above the $52.7 million of sales for the quarter ended June 30, 1995.
Sales for the six months ended June 30, 1996 were $114.2 million,
10.4% above the $103.4 million of sales for the six months ended June
30, 1995.
Sales in the Company's cosmetics division rose by approximately 12%
and 11% for the quarter and six months ended June 30, 1996,
respectively. Sales in the pharmaceutical division rose by
approximately 6% and 9% for the quarter and six months ended June 30,
1996, respectively.
Cost of Sales
Cost of sales for the quarter ended June 30, 1996, as a percentage of
net sales, was 41.7%, compared with 41.0 % in the corresponding period
of 1995. Cost of sales for the six months ended June 30, 1996, as a
percentage of net sales, was 41.2% compared with 39.8% in the
corresponding period of 1995.
The increased cost of sales as a percentage of net sales for both the
three months and six months ended June 30, 1996 is primarily
attributable to the mix of business within the cosmetics and
pharmaceutical divisions.
<PAGE>
Selling and Administrative Expenses
Selling and administrative expenses were 50.4% of net sales for the quarter
ended June 30, 1996 versus 51.9% in the corresponding period in 1995. For the
six months ended June 30, 1996, selling and administrative expenses were 50.5%
of net sales compared with 52.7% in the corresponding period in 1995. A
combination of increased net sales and a leveling of advertising and promotional
expenditures are the primary reasons for the decreased percentages in both the
quarter and the six months.
Net Interest Expense
Net interest expense for the quarter ended June 30, 1996 was $831,000 compared
with $858,000 incurred in the quarter ended June 30, 1995. Net interest expense
for the six months ended June 30, 1996 was $1,701,000 compared with $1,734,000
for the six months ended June 30, 1995. The decreased net interest expense is
primarily attributable to increased interest income in the 1996 period.
Provision for Income Taxes
In both the quarter and six months ended June 30, 1996 and 1995, the Company is
providing for income taxes at the expected effective rate of 41%.
Net Earnings
Net earnings for the quarter ended June 30, 1996 were $2,197,000, 29.1% above
the $1,702,000 reported for the quarter ended June 30, 1995. For the six months
ended June 30, 1996, net earnings were $4,586,000, 29.6% above the $3,538,000
reported for the six months ended June 30, 1995.
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. Although no dollar amount can be assigned to
remediation costs because of inherent uncertainties, on the basis of currently
available information, management has determined that such costs will not have a
material adverse effect on the Company's financial position. 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.
In July 1994, the Equal Employment Opportunity Commission ("EEOC") filed suit
against the Company in the United States District Court for the Eastern District
of New York alleging sexual discrimination against certain present and former
employees of the Company in violation of Title VII of the Civil Rights Act of
1964, as amended. On August 3, 1995, the Court approved a consent decree between
the Company and the EEOC settling the case. The Company denied 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 Board of
Directors determined that the settlement was in the best interest of the Company
and its shareholders, considering the expense that would have resulted from
continued litigation and the time and attention of management and employees that
would necessarily have been required.
Pursuant to the settlement, the Company agreed to pay 15 former employees a
total sum of $1,185,000. The settlement also incorporated the Company's revised
sexual harassment policy which includes a revised complaint procedure.
On August 9, 1995, two stockholder derivative actions were filed in the Court of
Chancery of the State of Delaware against members of the Company's Board of
Directors and a former director, as well as the Company as a nominal defendant.
The actions, which have been consolidated, allege breach of fiduciary duty and
waste of corporate assets by the directors in connection with matters alleged in
the lawsuit brought by the EEOC (as described above) and the investigation and
settlement of that lawsuit. The consolidated stockholder derivative action seeks
to compel the directors to account to the Company for amounts paid in connection
with the defense and settlement of the lawsuit brought by the EEOC and seeks
certain other relief. The Company believes that this derivative action is
without merit. Counsel for the directors has filed a motion to dismiss the
action, which is currently pending before the court.
The Company is of the opinion, on the basis of currently available information,
that none of the matters referred to above will have a material effect on the
Company's results of operations or financial condition.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
<TABLE>
<CAPTION>
Item No. Exhibit Exhibit No. Description
- -------- ------- ----------- -----------
<S> <C> <C> <C>
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 Secretary of State
of Delaware, on June 4, 1996
4 Instruments defining the - Not Applicable
rights of security holders,
including indentures.
10 Material Contracts - Not Applicable
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
</TABLE>
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-Q/A report to be signed on its behalf by
the undersigned thereunto duly authorized.
DEL LABORATORIES, INC.
-----------------------------------
(Registrant)
Date: December 16, 1996 /s/ Dan K. Wassong
- ------------------------------------ -----------------------------------
Dan K. Wassong
Chairman, President and
Chief Executive Officer
Date: December 16, 1996 /s/ Melvyn C. Goldstein
- ------------------------------------ -----------------------------------
Melvyn C. Goldstein
Vice President of Finance
and Principal Financial Officer
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
DEL LABORATORIES, INC.
--------------------
Pursuant to Section 242 of the
General Corporation Law
--------------------
THE UNDERSIGNED, Chairman of the Board and Secretary, respectively, of
Del Laboratories, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certify as follows:
FIRST: Article SIXTH of the Restated Certificate of Incorporation of
the Corporation is hereby amended to read in its entirety as follows:
"SIXTH: The number of directors constituting the Board
of Directors shall not be less than three nor more than ten.
The Board of Directors shall be divided into three classes
in as near as may be equal numbers, one class to be elected
each year for a term of three years and until the successors
of such class are duly elected and qualify. The number of
directors shall be fixed from time to time by the Board of
Directors, provided that no reduction in the number of
directors shall cause the termination of service of a
director before the end of the term for which he or she was
last elected."
<PAGE>
SECOND: Article TENTH of the Restated Certificate of Incorporation of
the Corporation is hereby amended to read in its entirety as follows:
"TENTH: If it should be deemed advisable in the
judgment of the Board of Directors that the Corporation be
dissolved, the Board, after the adoption of a resolution to
that effect by not less than a majority of the number of
directors then constituting the full Board, at any meeting
called for that purpose, shall cause notice to be mailed to
each shareholder entitled to vote thereon of the adoption of
the resolution and of a meeting of stockholders to take
action upon such resolution. At such meeting of
stockholders, the affirmative vote of not less than 80% of
the issued and outstanding shares of Common Stock of the
Corporation shall be required to authorize such
dissolution."
THIRD: The foregoing amendments have been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
3rd day of June, 1996.
/s/ Dan K. Wassong
------------------------
Dan K. Wassong
Chairman of the Board
Attest:
/s/ Robert H. Haines
- --------------------------
Robert H. Haines
Secretary
- 2 -
