<PAGE>
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 September 29, 1995Commission 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 October 27, 1995, there were 19,608,251 shares of Common Stock
outstanding.
</PAGE>
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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 Nine Months Ended
<C> <C> <C> <C>
Sept. 29, Sept. 30 Sept. 29, Sept. 30
1995 1994 1995 1994
(In thousands, except per share data)
Net Sales $120,509 $132,581 $367,452 $374,748
Cost of sales 71,274 72,458 215,220 209,507
Gross profit 49,235 60,123 152,232 165,241
Selling, general and
administrative expenses 43,830 57,422 140,352 152,357
Restructuring Charge (Note 5) 3,987 5,343 3,987 5,343
Income/(loss) from Operations 1,418 (2,642) 7,893 7,541
Equity in joint venture income 1,116 2,041 5,798 5,856
Investment income 296 199 827 563
Gain on disposal of product lines 103 103 308 308
Other income/(expense) 226 (154) 303 (40)
Interest expense (264) (325) (1,089) (593)
Income/(loss) before taxes 2,895 (778) 14,040 13,635
Income taxes 1,329 (519) 5,689 5,087
Net Income/(loss) 1,566 (259) 8,351 8,548
Retained earnings at beginning
of period 170,385 174,890 167,901 170,434
171,951 174,631 176,252 178,982
Dividends paid 2,156 2,149 6,457 6,500
Retained earnings at end
of period $169,795 $172,482 $169,795 $172,482
Weighted average shares
outstanding 19,593 19,536 19,562 19,760
Earnings Per Share:
Net income per share $.08 ($.01) $.43 $.43
</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
September 29, December 31,
1995 1994
(Dollars in thousands) (Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 8,616 $ 4,659
Short-term investments 5,031 2,976
Accounts receivable 44,975 44,404
Inventories (Note 2) 45,767 55,078
Deferred income taxes 12,270 11,927
Prepaid expenses 5,545 5,268
Total Current Assets 122,204 124,312
Property, Plant and Equipment (Note 3) 144,943 138,460
Note Receivable from Joint Venture 11,000 11,000
Equity Investment in Joint Venture 12,946 13,868
Long-Term Supply Contracts 3,987 4,391
Intangibles, principally Goodwill 3,556 3,556
Total Assets $298,636 $295,587
Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowings $ 20,000 $ 25,000
Accounts payable and accrued expenses 75,331 72,974
Income taxes payable 5,147 1,802
Total Current Liabilities 100,478 99,776
Long-Term Debt 7,500 7,500
Deferred Income Taxes 21,019 19,994
Deferred Income 31 339
Deferred Liabilities 1,550 1,176
Nonpension Postretirement and
Postemployment Benefits 13,914 12,861
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 33,008 32,823
Retained earnings 169,795 167,901
Cumulative translation adjustments (567) (741)
225,566 223,313
Less common stock in treasury, at cost
3,723,843 shares in 1995 and
3,803,659 shares in 1994 68,678 69,372
Due from officers (Note 7) 2,744 -
Total Stockholders' Equity 154,144 153,941
Total Liabilities and Stockholders' Equity $298,636 $295,587
</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
<S> <C> <C>
(Dollars in thousands) September 29, September 30,
1995 1994
Cash Flow From Operating Activities
Net Income $ 8,351 $ 8,548
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 9,873 8,916
Deferred income taxes 678 (2,204)
Equity in joint venture income (5,798) (5,856)
Loss on asset disposals 99 828
Other 36 (235)
Change in assets and liabilities:
(Increase)/decrease in
short-term investments (2,055) 3,001
(Increase) in accounts receivable (482) (8,814)
(Increase)/decrease in inventories 9,392 (9,209)
(Increase) in prepaid expenses (265) (713)
Increase in accounts payable 2,252 10,748
Increase in income taxes payable 3,460 5,410
Increase in other liabilities 1,426 1,220
Net Cash Provided By Operating Activities 26,967 11,640
Cash Flow From Investing Activities
Additions to property, plant and equipment (16,522) (21,546)
Proceeds from asset disposals 230 -
Distributions from joint venture 6,720 7,430
Net Cash Used In Investing Activities (9,572) (14,741)
Cash Flow From Financing Activities
Short-term borrowing/(repayments) (5,000) 22,510
Payment of cash dividends (6,457) (6,500)
Proceeds from sale of common stock - 1,595
Proceeds from stock options exercised 1,275 669
Purchase of Officer Loans (2,744) -
Purchase of treasury stock (512) (14,632)
Net Cash Provided by (Used In)
Financing Activities (13,438) 3,642
Net Change In Cash and Cash Equivalents 3,957 541
Cash And Cash Equivalents At Beginning Of Year 4,659 5,581
Cash And Cash Equivalents At End Of Period $ 8,616 $ 6,122
</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated balance sheet as of September 29, 1995, the
consolidated statements of income and retained earnings for the nine months
ended September 29, 1995 and September 30, 1994, and the consolidated
statements of cash flow for the nine 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 September 29,
1995 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,
1994 annual report to shareholders. The results of operations for the period
ended September 29, 1995 are not necessarily indicative of the operating
results for the full year.
<TABLE>
<CAPTION>
2. Inventories consist of the following:
<S> <C> <C>
Sept. 29, Dec. 31,
(in thousands) 1995 1994
Raw materials and supplies $12,740 $12,237
Work in process 105 103
Finished goods 32,922 42,738
$45,767 $55,078
</TABLE>
<TABLE>
<CAPTION>
3. Property, Plant and Equipment consist of the following:
<S> <C> <C>
Sept. 29, Dec. 31,
(in thousands) 1995 1994
Land $ 3,193 $ 3,107
Buildings and improvements 60,814 59,874
Machinery and equipment 138,961 135,188
Office equipment and other assets 13,630 13,324
Mineral rights 5,020 5,020
Construction in progress 16,597 5,859
238,215 222,372
Less accumulated depreciation and amortization 93,272 83,912
Net Property, Plant and Equipment $144,943 $138,460
</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Equity Investment in Joint Venture
The following table reflects summarized financial information for the Armand
Products Company joint venture. The Company accounts for its 50 percent
interest in the joint venture under the equity method. Product and services
are provided to the Armand Products Company by the joint venture partners at
cost. As a result, the following information would not be indicative of the
financial position or results of operation had the joint venture operated on
a stand-alone basis.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
<S> <C> <C> <C> <C>
(in thousands) Sept. 29, Sept. 30, Sept., 29 Sept. 30,
1995 1994 1995 1994
Net sales $11,249 $11,420 $38,003 $34,244
Gross profit 2,853 4,680 13,414 13,470
Net income 2,006 3,855 10,916 11,031
Company's share in net income 1,003 1,927 5,458 5,516
Elimination of Company's share of
intercompany interest expense 113 114 340 340
Equity in joint venture income $ 1,116 $ 2,041 $ 5,798 $ 5,856
</TABLE>
5. Restructuring Charge
During the third quarter, the Company announced an immediate layoff of
approximately 60 people in an effort to sufficiently reduce operating costs.
These reductions, amounting to $3.5 million, together with the write-off of
fixed assets of $.5 million relating to the expansion of the Princeton, N.J.
headquarter facility, resulted in a pre-tax charge of $4.0 million in the
quarter. It is anticipated that the charge related to the work force
reduction will be fully recognized through operating cash flows over the
ensuing twelve months.
In 1993 and 1994 the Company recorded restructuring charges in connection
with a cost reduction program and the write-off of assets related to
discontinued products and plant consolidations. Components of the outstanding
reserve balance included in accounts payable and accrued expenses consist of
the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(in thousands) Reserves at Restructuring Disposals/ Reserves at
Dec. 31, 1994 Charge Payments Sept. 29, 1995
Fixed asset removal
and demolition $ 992 $ 498 $ 890 $ 600
Severance and related 2,154 3,554 2,757 2,951
Other 1,233 (65) -- 1,168
$4,379 $3,987 $3,647 $4,719
</TABLE>
6. Net income per share is computed based upon the weighted average
number of common shares outstanding during the period. Common equivalent
shares have been excluded because their effect was not material.
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. Due from Officers and Subsequent Event
The Stockholders' Equity section of the September 29, 1995 balance sheet
includes $2.7 million of notes receivable from officers. During the third
quarter, the Company paid off these officer loans which were previously held
by financial institutions and guaranteed by the Company. The original loans
were incurred by the officers in 1993 and 1994 to purchase 100,000 shares of
the Company's Common Stock.
In November 1995, the Board of Directors and Management approved a repurchase
plan whereby 60,000 shares will be purchased from the officers at their cost.
Such repurchase will result in the reduction of the notes receivable of $1.6
million and a pre-tax charge against earnings of approximately $600,000 which
will be recognized in the fourth quarter of 1995. As part of the repurchase,
the officers will pay off their remaining debt to the Company. If such
officers borrow funds to pay off the loans, the Company will guarantee the
loans, but the Company will no longer be responsible for paying the interest
costs. Furthermore, as part of this transaction, the officers agree to the
cancellation of their Employment Severance Agreements with the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the quarter ended September 29, 1995, net income was $1.6 million or $.08
per share. This compares with a net loss of $.3 million or $.01 per share
for the third quarter of 1994. During this most recent quarter, the Company
took a pre-tax charge against earnings of $4.0 million or the equivalent of
$.13 per share relating to a restructuring charge. This primarily involved
the immediate layoff of 60 people and, to a lesser extent, the write-off of
fixed assets. During the third quarter of 1994, the Company also realized a
pre-tax restructuring charge of $5.3 million or the equivalent of $.16 per
share. For the first nine months of 1995, net income was $8.4 million or
$.43 per share as compared with net income of $8.5 million or $.43 per share
for the first nine months of 1994.
Net sales in the third quarter amounted to $120.5 million, a 9.1 percent
decline versus a year ago. This decline is primarily due to volume declines
of ARM & HAMMERR Powder Laundry Detergent with Bleach and ARM & HAMMER
PEROXICARER, which both benefited from introductory volumes during the third
quarter of 1994. The Company also elected to scale back on less profitable
international initiatives in the U.K., Ireland and Mexico. Specialty
Products sales increased, led by continued growth of performance sodium
bicarbonate and continued strong performance of the Company's Brotherton
Speciality Products, Ltd. subsidiary in the U.K.
Net sales for the first nine months were $367.5 million, a 1.9 percent
decline versus the first nine months of 1994. Unit volume gains of ARM &
HAMMER Deodorant Anti-Perspirant, which was introduced in the second quarter
of 1994, were more than offset by unit volume declines of ARM & HAMMER Powder
Laundry Detergent and price discounting of ARM & HAMMER Liquid Laundry
Detergent. Specialty Products sales increased for the first nine months for
the same reasons as the third quarter.
The Company's gross margin was 40.9 percent in the third quarter and 41.4
percent for the first nine months of 1995. This compares with 45.3 percent
and 44.1 percent in the corresponding quarter and nine months of last year.
These lower margins primarily resulted from higher manufacturing costs in
general and increased price discounting of ARM & HAMMER Liquid Laundry
Detergent.
Selling, general and administrative expenses decreased $13.6 million or 23.7
percent in the current quarter compared to the same period a year ago. The
reduction is a result of lower promotion costs of both ARM & HAMMER Powder
and Liquid Laundry Detergent, which had line extension introductions during
the same period a year ago; lower advertising and promotion of ARM & HAMMER
Deodorant Anti-Perspirant and ARM & HAMMER DENTAL CARE in the U.K.; and,
lower litigation costs. Selling, general and administrative expenses
decreased for the first nine months of 1995 versus the same period a year ago
as a result of lower promotion costs of both ARM & HAMMER Powder and Liquid
Laundry Detergent, lower advertising of ARM & HAMMER Baking Soda and lower
litigation costs. These decreases were partially offset by an increase in
advertising and promotion costs of ARM & HAMMER DENTAL CARE.
The Company's Armand Products Company joint venture had higher unit volumes
and lower pricing resulting in slightly lower sales in the current quarter
but an 11 percent increase for the nine month period. In the current
quarter, equity earnings decreased $.9 million, primarily as a result of
higher manufacturing costs and lower prices. For the nine month period,
equity earnings were virtually unchanged versus a year ago.
Investment income was higher in both the current quarter and nine month
period versus the corresponding periods of 1994 due to an increase in the
amounts available for investment. Interest payments were slightly lower in
the current quarter but significantly higher for the nine month period versus
the same period of 1994 as a result of higher short-term borrowings.
The effective tax rate for the first nine months of 1995 was 40.5 percent, up
from 37.3 percent in 1994. The increase reflects the impact of foreign
operating losses for which tax benefits were not recognizable in 1995.
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<PAGE>
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 September 29, 1995, cash, including cash
equivalents and short-term investments totaled $13.6 million.
During the first nine months of 1995, the Company generated $27.0 million of
positive cash flow from operating activities and received $6.7 million in
distributions from its Armand Products joint venture. Significant
expenditures included additions to property, plant and equipment of $16.5
million, the partial repayment of short-term borrowing of $5.0 million, the
payment of cash dividends of $6.5 million and the purchase of officer loans
from banks of $2.7 million.
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<PAGE>
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed for the three
months ended September 29, 1995.
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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: /s/Zvi Eiref
ZVI EIREF
CHIEF FINANCIAL OFFICER
DATE: /s/Gary P. Halker
GARY P. HALKER
VICE PRESIDENT, CONTROLLER
AND CHIEF INFORMATION OFFICER
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-29-1995
<CASH> 8,616
<SECURITIES> 5,031
<RECEIVABLES> 46,069
<ALLOWANCES> 1,094
<INVENTORY> 45,767
<CURRENT-ASSETS> 122,204
<PP&E> 238,215
<DEPRECIATION> 93,272
<TOTAL-ASSETS> 298,636
<CURRENT-LIABILITIES> 100,478
<BONDS> 7,500
<COMMON> 23,330
0
0
<OTHER-SE> 130,814
<TOTAL-LIABILITY-AND-EQUITY> 298,636
<SALES> 367,452
<TOTAL-REVENUES> 367,452
<CGS> 215,220
<TOTAL-COSTS> 215,220
<OTHER-EXPENSES> 3,987
<LOSS-PROVISION> 175
<INTEREST-EXPENSE> 1,089
<INCOME-PRETAX> 14,040
<INCOME-TAX> 5,689
<INCOME-CONTINUING> 8,351
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,351
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
