SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarter ended July 1, 1994 Commission file No. 1-10585
CHURCH & DWIGHT CO., INC.
(Exact name of registrant as specified in its charter)
Delaware 13-4996950
(State of incorporation) (I.R.S. Employer Identification No.)
469 North Harrison Street, Princeton, N.J. 08543-5297
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (609) 683-5900
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 twelve 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
As of July 29, 1994, there were 19,534,169 shares of Common Stock
outstanding.
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PART I - FINANCIAL INFORMATION
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
(In thousands, except per share data) 1994 1993* 1994 1993*
<S> <C> <C> <C> <C>
Net Sales $130,656 $130,308 $242,167 $254,205
Cost of sales 72,858 69,431 137,049 134,183
Gross profit 57,798 60,877 105,118 120,022
Selling, general and
administrative expenses 49,393 53,264 94,935 104,823
Income from Operations 8,405 7,613 10,183 15,199
Investment income 175 205 364 554
Gain on disposal of product lines 102 106 205 208
Other income/(expense) (50) 158 114 274
Interest expense 244 20 268 129
Equity in joint venture income 2,194 2,143 3,815 3,943
Income before taxes and cumulative
effect of accounting changes 10,582 10,205 14,413 20,049
Income taxes 4,194 3,762 5,606 7,480
Income before cumulative effect
of accounting changes 6,388 6,443 8,807 12,569
Cumulative effect of accounting
changes (Note 4)
(net of income tax effect):
Accrual of postretirement benefits - - - (5,647)
Accrual of postemployment benefits - - - (533)
Accounting for income taxes - - - 2,980
Net Income 6,388 6,443 8,807 9,369
Retained earnings at beginning
of period 170,643 153,534 170,434 152,640
177,031 159,977 179,241 162,009
Dividends paid 2,141 2,029 4,351 4,061
Retained earnings at end of period $174,890 $157,948 $174,890 $157,948
Weighted average shares outstanding 19,673 20,289 19,872 20,302
Earnings Per Share: (Note 6)
Income before cumulative effect
of accounting changes $.32 $.32 $.44 $.62
Cumulative effect of accounting changes:
Accrual of postretirement benefits - - - (.28)
Accrual of postemployment benefits - - - (.03)
Accounting for income taxes - - - .15
Net income per share $.32 $.32 $.44 $.46
* Restated as discussed in Notes 4 and 5.
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 1, December 31,
1994 1993
(Dollars in thousands) (Unaudited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $5,690 $5,581
Short-term investments 1,000 4,000
Accounts receivable 53,606 42,340
Inventories (Note 2) 58,197 52,739
Income taxes receivable - 3,010
Deferred income taxes 9,797 11,149
Prepaid expenses 5,265 4,634
Total Current Assets 133,555 123,453
Property, Plant and Equipment (Note 3) 129,864 122,195
Note Receivable from Joint Venture 11,000 11,000
Equity Investment in Joint Venture 15,150 16,557
Long-Term Supply Contracts 4,754 4,929
Intangibles, principally Goodwill 3,556 3,607
Total Assets $297,879 $281,741
Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowings $26,300 $2,000
Accounts payable and accrued expenses 67,455 66,812
Income taxes payable 2,370 -
Total Current Liabilities 96,125 68,812
Long-Term Debt 7,500 7,644
Deferred Income Taxes 19,382 22,530
Deferred Income 544 749
Deferred Liabilities 1,244 1,282
Nonpension Postretirement and
Postemployment Benefits 11,904 11,357
Stockholders' Equity
Preferred Stock - $1 par value
Authorized 2,500,000 shares, none issued - -
Common Stock - $1 par value
Authorized 100,000,000 shares,
issued 23,330,494 shares 23,330 23,330
Additional paid-in capital 32,725 32,100
Retained earnings 174,890 170,434
Cumulative translation adjustments (741) (494)
230,204 225,370
Less common stock in treasury, at cost
3,796,625 shares in 1994 and 3,251,280
shares in 1993 69,024 56,003
Total Stockholders' Equity 161,180 169,367
Total Liabilities and Stockholders' Equity $297,879 $281,741
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
(Dollars in thousands) July 1, July 2,
1994 1993*
<S> <C> <C>
Cash Flow From Operating Activities
Net Income $8,807 $9,369
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and amortization 6,256 5,602
Provision for postretirement benefits 709 483
Deferred income taxes (1,799) 750
Equity in joint venture income (3,815) (3,943)
Cumulative effect of accounting changes - 3,200
(Gain) on asset disposals (205) (198)
Other (256) 393
Change in assets and liabilities:
(Increase) in accounts receivable (11,280) (10,443)
(Increase) in inventories (5,570) (3,966)
(Increase) in prepaid expenses (641) (172)
Increase in accounts payable 541 2,409
Increase/(Decrease) in income taxes payable 5,348 (978)
Net Cash Provided By (Used in) Operating
Activities (1,905) 2,506
Cash Flow From Investing Activities
Decrease in short-term investments 3,001 1,024
Additions to property, plant and equipment (13,117) (12,259)
Investment in subsidiary (625) (325)
Distributions from joint venture 5,222 3,977
Net Cash Used In Investing Activities (5,519) (7,583)
Cash Flow From Financing Activities
Proceeds from short-term borrowing 24,300 -
Payment of cash dividends (4,351) (4,061)
Proceeds from sale of common stock 1,595 1,935
Proceeds from stock options exercised 458 610
Purchase of treasury stock (14,469) (4,489)
Net Cash Provided by (Used In) Financing
Activities 7,533 (6,005)
Net Change In Cash and Cash Equivalents 109 (11,082)
Cash And Cash Equivalents At Beginning Of Year 5,581 14,044
Cash And Cash Equivalents At End Of Period $5,690 $2,962
* Restated as discussed in Notes 4 and 5.
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated balance sheet as of July 1, 1994, the consolidated
statements of income and retained earnings for the six months ended July 1,
1994 and July 2, 1993, and the consolidated statements of cash flow for
the six months then ended have been prepared by the Company without audit.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flow at July 1, 1994 and for all periods
presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's December
31, 1993 annual report to shareholders. The results of operations for the
period ended July 1, 1994 are not necessarily indicative of the operating
results for the full year.
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<CAPTION>
2. Inventories consist of the following:
(in thousands) July 1, Dec. 31,
1994 1993
<S> <C> <C>
Raw materials and supplies $15,705 $12,690
Work in process 116 103
Finished goods 42,376 39,946
$58,197 $52,739
</TABLE>
<TABLE>
<CAPTION>
3. Property, Plant and Equipment consist of the following:
(in thousands) July 1, Dec. 31,
1994 1993
<S> <C> <C>
Land $3,096 $3,103
Buildings and improvements 57,309 54,125
Machinery and equipment 118,090 108,665
Office equipment and leasehold improvements 12,052 11,974
Mineral rights 5,020 3,145
195,567 181,012
Less accumulated depreciation and amortization 80,163 74,248
115,404 106,764
Construction in progress 14,460 15,431
Net Property, Plant and Equipment $129,864 $122,195
</TABLE>
4. Accounting Changes
The Company adopted three new accounting standards as of January 1, 1993.
Statement of Financial Accounting Standards No. 106 (SFAS 106), "Employers'
Accounting for Postretirement Benefits Other than Pensions" requires the
accrual of the estimated cost of postretirement benefits. The cost of
these benefits was previously expensed on a pay-as-you-go basis. Adoption
of SFAS 106 resulted in an after-tax charge against earnings of $5.6
million or $.28 per share. Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," changed the method by which companies
account for deferred income taxes, and its adoption resulted in an after-tax
credit of $3.0 million or $.15 per share.
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During the fourth quarter of 1993, the Company elected to adopt, effective
as of January 1, 1993, the accounting provisions of Statement of Financial
Accounting Standards No. 112 (SFAS 112), "Employers' Accounting for
Postemployment Benefits". First quarter 1993 results have been restated to
reflect such adoption. This standard requires that the cost of benefits
provided to former or inactive employees be recognized on the accrual basis
of accounting. Previously, the Company recognized postemployment benefit
costs when paid. The cumulative effect of this change resulted in a charge
against earnings of $.5 million or $.03 per share. The combined effect of
adopting the three new accounting standards was a charge against earnings
of $3.2 million, or $.16 per share.
5. Investment in Joint Venture
In financial statements originally issued for periods prior to December 31,
1993, the Company had consolidated its proportionate share of each of the
individual assets, liabilities, revenues and expenses of the Armand Products
Company joint venture. In 1993, the Company restated its financial
statements to reflect the 50 percent interest in the joint venture on the
equity method of accounting for investments. This method reflects the
Company's proportionate share of the joint venture net profit as a
single-line item, "Equity in joint venture income," in the income statement.
Similarly, the Company's investment and cumulative share of profits less
distributions received from the joint venture is reflected as a single-line
item, "Equity investment in joint venture," in the Company's balance sheet.
This change had no effect upon stockholders' equity or the net income of the
Company for any period.
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Summarized income statement data for Armand Products Company is as follows:
Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
(in thousands) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $12,021 $10,853 $22,824 $20,013
Gross profit 4,973 4,854 8,791 8,794
Net income 4,160 4,062 7,176 7,430
Company's share in net income 2,080 2,031 3,588 3,715
Elimination of Company's share of
intercompany interest expense 114 112 227 228
Equity in joint venture income $2,194 $2,143 $3,815 $3,943
</TABLE>
The financial information presented above is based upon the results of
operation of the Armand Products Company, a joint venture partnership.
Product and services are provided to the Armand Products Company by the
joint venture partners at cost. As a result, the above information would
not be indicative of the results of operations had the joint venture
operated on a stand-alone basis.
6. Net income per share is computed based upon the weighted average
number of shares outstanding during the period. Common equivalent shares
have not been included as their effect is not material.
7. Officer Loan Guarantees
In accordance with a long-term compensation plan approved by the Board of
Directors, 70,000 shares of Company common stock were sold to senior
officers in the second quarter of 1994 at a price of $22.63 per share. In
the second quarter of 1993, the Company sold 60,000 shares of common stock
to senior officers at a price of $32.25 per share. The selling price in
both cases was the market price on the date of sale. These transactions,
amounting to $1.6 million and $1.9 million, respectively, were financed by
loans to the individuals by financial institutions. These loans have been
guaranteed by the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the quarter ended July 1, 1994, net income was $6.4 million or
$.32 per share. These results were essentially equal to same time period a
year ago. For the first six months of 1994, net income was $8.8 million or
$.44 per share. This compares with net income of $9.4 or $.46 per share
for the first half of 1993. In the first quarter of 1993, the Company
adopted three new accounting standards; Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
than Pensions," Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" and Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Postemployment Benefits". The net
effect of adopting the new accounting standards was a net charge against
earnings of $3.2 million or $.16 per share.
Net sales in the second quarter amounted to $130.7 million, which were
slightly ahead of a year ago. Volume gains of ARM & HAMMER (registered
trademark) Powder Laundry Detergent, the newly introduced ARM & HAMMER
Deodorant Anti-Perspirant and international sales of ARM & HAMMER DENTAL
CARE (registered trademark) were experienced during the quarter. These gains
were partially offset by lower domestic unit volume of ARM & HAMMER DENTAL
CARE, ARM & HAMMER Baking Soda, which experienced an exceptionally strong
second quarter in 1993 and the reduced price strategy implemented in late
1993 on ARM & HAMMER Powder Laundry Detergent. Specialty Product sales were
essentially unchanged from the same period of a year ago.
Net sales for the first six months of 1994 were $242.2 million,
representing a 4.7 percent decline from a year ago. This is primarily due to
lower domestic unit volume of ARM & HAMMER DENTAL CARE, ARM & HAMMER Baking
Soda, and the price reduction on ARM & HAMMER Powder Laundry Detergent,
partially offset by volume associated with ARM & HAMMER Deodorant
Anti-Perspirant and sales of ARM & HAMMER DENTAL CARE internationally. The
Specialty Products Division net sales were slightly lower than in 1993, as a
result of lower unit volume of MEGALAC (registered trademark) Rumen Bypass
Fat, partially offset by gains of performance sodium bicarbonate.
The Company's gross margin was 44.2 percent in the second quarter and
43.4 percent in the first half of 1994. This compares with 46.7 percent
and 47.2 percent in the corresponding quarter and six months of last year.
The decline can be attributed to the price reduction on ARM & HAMMER Powder
Laundry Detergent and lower volume of high margin ARM & HAMMER DENTAL CARE.
Selling, general and administrative costs decreased by $3.9 million and
$9.9 million in the second quarter and first half of 1994, respectively as
compared with the same periods a year ago. The reduction in costs was
primarily the result of lower advertising and promotion for ARM & HAMMER
DENTAL CARE and reduced spending in the area of systems development. These
lower costs were partially offset by introductory marketing support for
ARM & HAMMER Deodorant Anti-Perspirant.
Other Income/Expense
Investment income decreased in the current quarter and year-to-date as
compared to the corresponding periods of last year as a result of a decrease
in the amounts available for investment. Interest payments were higher in
the current quarter and year-to-date as compared to the same periods of last
year due to an increase in short-term borrowing.
Income Taxes
The effective tax rate for the first half of 1994 was 38.9 percent, up
from 37.3 percent in the first half of 1993. This is primarily due to the
1993 increase of the U.S. corporate statutory tax rate which was enacted
during the third quarter of 1993.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
The Company considers cash and short-term investments as the principal
measurement of its liquidity. At July 1, 1994, cash including cash
equivalents and short-term investments totaled $6.7 million as compared to
$9.6 million at December 31, 1993.
During the first half of 1994, operating activities required $1.9 million
of additional investment primarily in working capital. The Company received
$5.2 million in distributions from its Armand Products joint venture,
increased its short-term borrowings by $24.3 million and received $1.6 million
in connection with the sale of Company stock to senior officers. Significant
expenditures include additions to property, plant and equipment of $13.1
million, the purchase of 669,400 shares of Company common stock for the
treasury totaling $14.5 million and the payment of cash dividends of $4.4
million.
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PART II - Other Information
Item 4. Results of Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May 5, 1994.
The following nominees were elected to the Company's Board of Directors for a
term of three years.
Nominee For Withhold
John D. Leggett, III 41,829,372 290,682
Robert A. McCabe 41,387,649 732,405
Jarvis J. Slade 41,808,269 311,785
The results of voting on the following additional items were as follows:
Approval of the appointment of Deloitte & Touche as independent auditors
of the Company's 1994 financial statements.
For Against Abstained Broker Non-Votes
41,859,032 127,710 133,312 0
To consider and act upon a stockholder proposal requesting that the Board
of Directors take the steps necessary to provide for the election of Directors
annually and not by class.
For Against Abstained Broker Non-Votes
4,093,461 35,164,437 537,908 2,324,248
To consider and act upon a stockholder proposal requesting that the Board
of Directors search for qualified minority candidates for nomination to the
Board of Directors.
For Against Abstained Broker Non-Votes
2,397,088 36,519,432 879,332 2,324,202
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed for the three months
ended July 1, 1994.
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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.
CHURCH & DWIGHT CO.,INC.
(REGISTRANT)
DATE: August 10, 1994 /s/ Anthony P. Deasey
ANTHONY P. DEASEY
VICE PRESIDENT FINANCE
DATE: August 10, 1994 /s/ Mark L. Stolp
MARK L. STOLP
CONTROLLER
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