<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarter ended September 27, 1996 Commission file No. 1-10585
------------------------------------
CHURCH & DWIGHT CO., INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
Registrant's telephone number, including area code: (609) 683-5900
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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 November 1, 1996, there were 19,515,823 shares of Common Stock
outstanding.
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<PAGE> 2
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
--------------------------- ----------------------------
Sept 27, Sept. 29, Sept. 27, Sept. 29,
(In thousands, except per share data) 1996 1995 1996 1995
==================================================================================================================
<S> <C> <C> <C> <C>
NET SALES $137,090 $120,509 $393,265 $367,452
Cost of sales 78,204 71,274 224,886 215,220
------------------------- ----------------------------
Gross profit 58,886 49,235 168,379 152,232
Selling, general and administrative expenses 51,856 43,830 148,135 140,352
Restructuring Charge - 3,987 - 3,987
------------------------- ----------------------------
INCOME FROM OPERATIONS 7,030 1,418 20,244 7,893
Equity in joint venture income 1,061 1,116 3,643 5,798
Investment income 391 296 1,029 827
Gain on disposal of product lines - 103 - 308
Other income/(expense) (40) 226 (357) 303
Interest expense (74) (264) (317) (1,089)
------------------------- ----------------------------
Income before taxes 8,368 2,895 24,242 14,040
Income taxes 3,170 1,329 9,065 5,689
------------------------- ----------------------------
NET INCOME 5,198 1,566 15,177 8,351
Retained earnings at beginning of period 175,120 170,385 169,438 167,901
------------------------- ----------------------------
180,318 171,951 184,615 176,252
Dividends paid 2,154 2,156 6,451 6,457
------------------------- ----------------------------
Retained earnings at end of period $178,164 $169,795 $178,164 $169,795
==================================================================================================================
- ------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 19,566 19,593 19,544 19,562
- ------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE:
Net income per share $.27 $.08 $.78 $.43
==================================================================================================================
</TABLE>
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<PAGE> 3
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 27, December 31,
1996 1995
------------------------------------
(Dollars in thousands) (Unaudited)
===============================================================================================================
<S> <C> <C>
ASSETS
===============================================================================================================
Current Assets
Cash and cash equivalents $16,532 $11,355
Short-term investments 6,017 5,027
Accounts receivable 53,746 44,427
Inventories (Note 2) 45,592 41,349
Deferred income taxes 13,167 11,704
Prepaid expenses 3,952 5,313
------------------------------------
Total Current Assets 139,006 119,175
- ---------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment (Note 3) 138,234 144,339
Note Receivable from Joint Venture 11,000 11,000
Equity Investment in Joint Venture 10,769 11,258
Long-Term Supply Contract 3,448 3,852
Goodwill 3,556 3,556
===============================================================================================================
Total Assets $306,013 $293,180
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LIABILITIES AND STOCKHOLDERS' EQUITY
===============================================================================================================
Current Liabilities
Short-term borrowings $ - $ 5,000
Accounts payable and accrued expenses 90,971 86,815
Income taxes payable 8,766 5,286
------------------------------------
Total Current Liabilities 99,737 97,101
- ---------------------------------------------------------------------------------------------------------------
Long-Term Debt 7,500 7,500
Deferred Income Taxes 20,211 19,573
Deferred Liabilities 2,193 1,595
Nonpension Postretirement and Postemployment Benefits 13,971 13,729
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 33,258 33,061
Retained earnings 178,164 169,438
Cumulative translation adjustments (643) (686)
------------------------------------
234,109 225,143
Less common stock in treasury, at cost -
3,812,271 shares in 1996 and 3,805,071 shares in 1995 71,159 70,501
Due from officers (549) (960)
- ---------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 162,401 153,682
===============================================================================================================
Total Liabilities and Stockholders' Equity $306,013 $293,180
===============================================================================================================
</TABLE>
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<PAGE> 4
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------
September 27, September 29,
(Dollars in thousands) 1996 1995
=============================================================================================================
CASH FLOW FROM OPERATING ACTIVITIES
=============================================================================================================
<S> <C> <C>
Net Income $15,177 $8,351
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, depletion and amortization 10,313 9,873
Deferred income taxes (826) 678
Equity in joint venture income (3,643) (5,798)
Loss on asset disposals 224 99
Other 13 36
Change in assets and liabilities:
(Increase) in short-term investments (990) (2,055)
(Increase) in accounts receivable (9,305) (482)
(Increase)/decrease in inventories (4,236) 9,392
Decrease/(Increase) in prepaid expenses 1,361 (265)
Increase in accounts payable 4,148 2,252
Increase in income taxes payable 3,475 3,460
Increase in other liabilities 839 1,426
=============================================================================================================
NET CASH PROVIDED BY OPERATING ACTIVITIES 16,550 26,967
CASH FLOW FROM INVESTING ACTIVITIES
- -------------------------------------------------------------------------------------------------------------
Additions to property, plant and equipment (4,005) (16,522)
Proceeds from asset disposals - 230
Repayment of officer loans 412 -
Purchase of officer loans - (2,744)
Distributions from joint venture 4,133 6,720
=============================================================================================================
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 540 (12,316)
CASH FLOW FROM FINANCING ACTIVITIES
- -------------------------------------------------------------------------------------------------------------
Short-term debt repayments (5,000) (5,000)
Payment of cash dividends (6,451) (6,457)
Proceeds from stock options exercised 858 1,275
Purchase of treasury stock (1,320) (512)
=============================================================================================================
NET CASH USED IN FINANCING ACTIVITIES (11,913) (10,694)
NET CHANGE IN CASH AND CASH EQUIVALENTS 5,177 3,957
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 11,355 4,659
=============================================================================================================
CASH AND CASH EQUIVALENTS AT END OF PERIOD $16,532 $8,616
=============================================================================================================
</TABLE>
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<PAGE> 5
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The consolidated balance sheet as of September 27, 1996, the
consolidated statements of income and retained earnings for the nine months
ended September 27, 1996 and September 29, 1995, 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 27,
1996 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, 1995 annual
report to shareholders. The results of operations for the period ended
September 27, 1996 are not necessarily indicative of the operating results for
the full year.
<TABLE>
<CAPTION>
2. Inventories consist of the following: Sept. 27, Dec. 31,
(in thousands) 1996 1995
===============================================================================================================
<S> <C> <C>
Raw materials and supplies $12,424 $11,066
Work in process 113 134
Finished goods 33,055 30,149
---------------------------
$45,592 $41,349
===============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
3. Property, Plant and Equipment consist of the following: Sept. 27, Dec. 31,
(in thousands) 1996 1995
===============================================================================================================
<S> <C> <C>
Land $3,189 $3,188
Buildings and improvements 64,129 63,949
Machinery and equipment 152,803 151,965
Office equipment and other assets 14,680 14,633
Mineral rights 5,020 5,020
Construction in progress 3,898 1,145
---------------------------
243,719 239,900
Less accumulated depreciation and amortization 105,485 95,561
---------------------------
Net Property, Plant and Equipment $138,234 $144,339
===============================================================================================================
</TABLE>
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<PAGE> 6
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.
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<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- --------------------------
Sept. 27, Sept. 29, Sept. 27, Sept. 29,
(in thousands) 1996 1995 1996 1995
=================================================================================================================
<S> <C> <C> <C> <C>
Net sales $9,072 $11,249 $29,156 $38,003
Gross profit 2,750 2,853 9,170 13,414
Net income 1,896 2,006 6,606 10,916
Company's share in net income 948 1,003 3,303 5,458
Elimination of Company's share of intercompany
interest expense 113 113 340 340
---------------------------- --------------------------
Equity in joint venture income $1,061 $1,116 $3,643 $5,798
=================================================================================================================
</TABLE>
5. Restructuring Charge
In 1993, 1994 and 1995, 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 balances included in accounts payable and accrued expenses consist of
the following:
<TABLE>
<CAPTION>
Reserves at Disposals/ Reserves at
(in thousands) December 31, 1995 Payments Sept. 27, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed asset removal and demolition $ 587 $ 44 $ 543
Severance and related 1,765 1,484 281
Other 1,204 82 1,122
- -----------------------------------------------------------------------------------------------------------
$3,556 $1,610 $1,946
</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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<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the quarter ended September 27, 1996, net income was $5.2 million or $.27
per share. This compares with $1.6 million or $.08 per share after a pre-tax
restructuring charge of $4.0 million or the equivalent of $.13 per share, in
the same period of 1995. For the first nine months of 1996, net income was
$15.2 million or $.78 per share compared with $8.4 million or $.43 per share in
1995.
Net sales in the quarter were $137.1 million, representing an increase of $16.6
million or 13.8% versus a year ago. This increase was due to substantially
higher sales of ARM & HAMMER(R) Liquid Laundry Detergent, ARM & HAMMER Dental
Care(R) and ARM & HAMMER Deodorant Anti-Perspirant. Specialty Products sales
were flat.
Net sales for the first nine months of 1996 were $393.3 million, a $25.8
million or 7.0% increase over the first nine months of 1995. The increase is
primarily due to higher sales of ARM & HAMMER Liquid Laundry Detergent, which
was relaunched earlier in the year, as well as higher sales of ARM & HAMMER
Dental Care and the ARM & HAMMER Deodorant Anti-Perspirant line. These
increases were partially offset by lower sales of ARM & HAMMER Carpet
Deodorizer. Specialty Products sales were slightly higher, led by higher sales
of MEGALAC(R) Rumen Bypass Fat, and the continued strong performance of the
Company's Brotherton Speciality Products Ltd. subsidiary in the U.K.
The Company's gross margin was 43.0% for the third quarter and 42.8% for the
nine month period. This compares with 40.9% for the third quarter and 41.4%
for the nine month period of 1995. The gross margin improvement is primarily a
result of higher effective selling prices for liquid detergent, and lower
manufacturing and distribution costs. This improvement was partially offset by
a change in product mix and a third quarter special pack promotion for ARM &
HAMMER Dental Care.
Selling, general and administrative expenses increased $8.0 million in the
current quarter versus a year ago. Increased promotional support behind ARM &
HAMMER Powder and Liquid Laundry Detergent and ARM & HAMMER Dental Care, and
higher advertising support for the personal care product lines were the primary
reasons for the increase. General and administrative expenses continue to be
lower than last year because of various cost reduction programs undertaken by
the Company over the last 12 months. For the nine month period, selling,
general and administrative expenses increased $7.8 million versus last year.
This increase primarily reflects the costs of the relaunch of ARM & HAMMER
Liquid Laundry Detergent. General and administrative costs were lower due to
cost reduction programs referred to earlier.
The Company's Armand Products Company saw sales decline 19.4% in the current
quarter and 23.3% for the nine month period due to new competition coming into
the marketplace, which has been anticipated for some time. Equity income in
the current quarter was slightly below 1995, and 37.2% lower for the nine month
period.
Interest payments were significantly lower for both the third quarter and nine
month period as a result of the repayment of short-term debt, while investment
income increased slightly.
Other expenses in 1996 included foreign exchange losses, primarily due to the
devaluation of the Venezuela bolivar.
The effective tax rate for the nine month period of 1996 was 37.4% as compared
with 40.5% for 1995. This decrease is due to the utilization of foreign
operating loss carryforwards in 1996 for which the benefits were not
recognizable in 1995.
Liquidity and Capital Resources
The Company considers cash and short-term investments as the principal
measurement of its liquidity. At September 27, 1996, cash including cash
equivalents and short-term investments totaled $22.5 million compared to $16.4
million at December 31, 1995.
During the first nine months of 1996, the Company generated $16.6 million of
positive cash flow from operating activities and received $4.1 million in
distributions from its Armand Products joint venture. Significant expenditures
included additions to property, plant and equipment of $4.0 million, the
repayment of its outstanding short-term debt of $5.0 million and the payment of
cash dividends of $6.5 million.
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<PAGE> 8
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 27, 1996.
8 of 9
<PAGE> 9
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: November 7, 1996 Zvi Eiref
------------------------- ---------------------------------------
ZVI EIREF
VICE PRESIDENT FINANCE AND
CHIEF FINANCIAL OFFICER
DATE: November 7, 1996 Gary P. Halker
------------------------- ---------------------------------------
GARY P. HALKER
VICE PRESIDENT, CONTROLLER AND
CHIEF INFORMATION OFFICER
9 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 16,532
<SECURITIES> 6,017
<RECEIVABLES> 55,062
<ALLOWANCES> 1,316
<INVENTORY> 45,592
<CURRENT-ASSETS> 139,006
<PP&E> 243,719
<DEPRECIATION> 105,485
<TOTAL-ASSETS> 306,013
<CURRENT-LIABILITIES> 99,737
<BONDS> 7,500
0
0
<COMMON> 23,330
<OTHER-SE> 139,071
<TOTAL-LIABILITY-AND-EQUITY> 306,013
<SALES> 393,265
<TOTAL-REVENUES> 393,265
<CGS> 224,886
<TOTAL-COSTS> 224,886
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 150
<INTEREST-EXPENSE> 317
<INCOME-PRETAX> 24,242
<INCOME-TAX> 9,065
<INCOME-CONTINUING> 15,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,177
<EPS-PRIMARY> .78
<EPS-DILUTED> .78
</TABLE>
