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 March 29, 1996 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 April 26, 1996, there were 19,530,823 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
<S> <C> <C>
March 29, 1996 March 31, 1995
(In thousands, except per share data)
Net Sales $121,548 $117,963
Cost of sales 69,786 68,693
Gross profit 51,762 49,270
Selling, general and administrative expenses 47,032 49,520
Income/(Loss) from Operations 4,730 (250)
Equity in joint venture income 1,272 2,429
Investment income 312 264
Gain on disposal of product lines - 102
Other income (expense) (13) 31
Interest expense (135) (438)
Income before taxes 6,166 2,138
Income taxes 2,318 995
Net Income 3,848 1,143
Retained earnings at beginning of period 169,438 167,901
173,286 169,044
Dividends paid 2,148 2,148
Retained earnings at end of period $171,138 $166,896
Weighted average shares outstanding 19,526 19,533
Earnings Per Share:
Net income per share $.20 $.06
</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
March 29, 1996 December 31, 1995
(Dollars in thousands) (Unaudited)
Assets
Current
Cash and cash equivalents $9,070 $11,355
Short-term investments 5,021 5,027
Accounts receivable 54,902 44,427
Inventories (Note 2) 45,739 41,349
Deferred income taxes 11,821 11,704
Prepaid expenses 5,277 5,313
Total Current Assets 131,830 119,175
Property, Plant and Equipment (Note 3) 142,084 144,339
Note Receivable from Joint Venture 11,000 11,000
Equity Investment in Joint Venture 11,149 11,258
Long-Term Supply Contract 3,717 3,852
Goodwill 3,556 3,556
Total Assets $303,336 $293,180
Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowings $10,000 $5,000
Accounts payable and accrued expenses 88,234 86,815
Income taxes payable 6,613 5,286
Total Current Liabilities 104,847 97,101
Long-Term Debt 7,500 7,500
Deferred Income Taxes 19,353 19,573
Deferred Liabilities 1,989 1,595
Nonpension Postretirement and
Postemployment Benefits 13,879 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 33,074 33,061
Retained earnings 171,138 169,438
Cumulative translation adjustments (734) (686)
226,808 225,143
Less common stock in treasury, at cost -
3,802,771 shares in 1996 and
3,805,071 shares in 1995 70,491 70,501
Due from officers (549) (960)
Total Stockholders' Equity 155,768 153,682
Total Liabilities and Stockholders' Equity $303,336 $293,180
</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
<S> <C> <C>
March 29, 1996 March 31, 1995
(Dollars in thousands)
Cash Flow From Operating Activities
Net Income $3,848 $1,143
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 3,448 3,211
Deferred income taxes (334) 313
Equity in joint venture income (1,272) (2,429)
Gain on asset disposals - (102)
Other 5 8
Change in assets and liabilities:
Decrease in short-term investments 6 2,976
(Increase) decrease in accounts receivable (10,505) 1,084
(Increase) decrease in inventories (4,399) 2,677
Decrease (increase) in prepaid expenses 35 (608)
Increase in accounts payable 1,438 1,815
Increase in income taxes payable 1,334 682
Increase in other liabilities 544 340
Net Cash (Used In) Provided By
Operating Activities (5,852) 11,110
Cash Flow From Investing Activities
Additions to property, plant and equipment (1,101) (5,031)
Distributions from joint venture 1,381 2,207
Repayment of officer loans 412 -
Net Cash Provided By (Used In)
Investing Activities 692 (2,824)
Cash Flow From Financing Activities
Short-term borrowing (repayments) 5,000 (4,000)
Payment of cash dividends (2,148) (2,148)
Proceeds from stock options exercised 68 217
Purchase of treasury stock (45) (31)
Net Cash Provided by (Used In)
Financing Activities 2,875 (5,962)
Net Change In Cash and Cash Equivalents (2,285) 2,324
Cash And Cash Equivalents At Beginning Of Year 11,355 4,659
Cash And Cash Equivalents At End Of Period $9,070 $6,983
</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated balance sheet as of March 29, 1996, the consolidated
statements of income and retained earnings for the three months ended March 29,
1996 and March 31, 1995, and the consolidated statements of cash flow for the
three 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 March 29, 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 March
29, 1996 are not necessarily indicative of the operating results for the full
year.
<TABLE>
<CAPTION>
2. Inventories consist of the following:
<S> <C> <C>
March 29, Dec. 31,
(in thousands) 1996 1995
Raw materials and supplies $12,074 $11,066
Work in process 125 134
Finished goods 33,540 30,149
$45,739 $41,349
</TABLE>
<TABLE>
<CAPTION>
3. Property, Plant and Equipment consist of the following:
<S> <C> <C>
March 29, Dec. 31,
(in thousands) 1996 1995
Land $3,188 $3,188
Buildings and improvements 63,955 63,949
Machinery and equipment 152,055 151,965
Office equipment and other assets 14,727 14,633
Mineral rights 5,020 5,020
Construction in progress 1,995 1,145
240,940 239,900
Less accumulated depreciation, depletion and amortization 98,856 95,561
Net Property, Plant and Equipment $142,084 $144,339
</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
<S> <C> <C>
March 29, March 31,
(in thousands) 1996 1995
Net sales $9,936 $13,298
Gross profit 3,178 5,447
Net income 2,318 4,632
Company's share in net income 1,159 2,316
Elimination of Company's share of intercompany
interest expense 113 113
Equity in joint venture income $1,272 $2,429
</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 primarily
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>
<S> <C> <C> <C>
Reserves at Disposals/ Reserves at
(in thousands) December 31, 1995 Payments March 29, 1996
Fixed asset removal and demolition $ 587 $ - $ 587
Severance and related 1,765 839 926
Other 1,204 36 1,168
$3,556 $875 $2,681
</TABLE>
6. Due from Officers
At December 31, 1995, $960,000 was due the Company from officers in connection
with a stock repurchase plan. During the first quarter of 1996, $411,000 was
paid back to the Company by three officers. Two officers borrowed funds to pay
off their loans. The Company agreed to guarantee the loans, but would no
longer be responsible for paying the interest costs. The remaining balance at
March 29, 1996 of $549,000, which is presented in the stockholders' equity
section of the balance sheet, includes a balloon payment due in five years
with interest imputed at 6%.
7. 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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MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the quarter ended March 29, 1996, net income was $3.8 million or $.20 per
share. This compares with $1.1 million or $.06 per share for the first quarter
of 1995.
Net sales for the quarter were $121.5 million, representing an increase of $3.6
million or 3% versus the same period of 1995. The increase is primarily due to
unit volume associated with the relaunch of ARM & HAMMERR Liquid Laundry
Detergent as a 4/10-cup product and the introduction of ARM & HAMMER Deodorant,
a line extension to the Deodorant Anti-Perspirant line. These increases were
partially offset by lower unit volume of ARM & HAMMER Powder Laundry Detergent
and ARM & HAMMER Dental CareR. Specialty Product sales increased as well, led
by continued strong performance of the Company's Brotherton Speciality Products
Ltd. subsidiary in the U.K. and higher sales of performance and agricultural
grades of sodium bicarbonate, along with higher unit volume of MEGALACR Rumen
Bypass Fat.
Gross margin was 42.6% in the first quarter, as compared with 41.8% in the
first quarter of 1995. This increase is a result of higher effective selling
prices and lower distribution costs, partially offset by a weaker product mix.
Selling, general and administrative expenses decreased $2.5 million to 38.7% of
sales in the current quarter as compared to 42.0% last year. Selling expenses
declined mostly due to lower advertising and promotion costs in support of ARM
& HAMMER Dental Care, both in the United States and in the U.K., and ARM &
HAMMER Deodorant Anti-Perspirant. These decreases were largely offset by
increased slotting allowances and promotional support for the relaunch of ARM &
HAMMER Liquid Detergent. General and administrative expenses were lower
because of various cost reduction programs undertaken by the Company over the
last twelve months.
The Company's Armand Products Company joint venture saw sales decline $3.4
million or 25.3% resulting in a $1.2 million decrease in equity earnings
compared to the first quarter of 1995. This is due to new competition coming
into the marketplace, which has been anticipated for some time.
Interest payments were significantly lower in the first quarter as compared to
the first quarter of a year ago as a result of a decrease in short-term
borrowing, while investment income was flat.
The effective tax rate for the current quarter was 37.6%, down from 46.5% from
a year ago. This decrease reflects the impact of a reduction of foreign
operating losses for which tax benefits were not recognizable.
Liquidity and Capital Resources
The Company considers cash and short-term investments as the principal
measurement of its liquidity. At March 29, 1996, cash, including cash
equivalents and short-term investments totaled $14.1 million as compared to
$16.4 million at December 31, 1995.
During the first quarter of 1996, operating activities required $5.9 million of
additional investment primarily in working capital. The Company received $1.4
million in distributions from its Armand Products joint venture and increased
its short-term borrowings by $5.0 million. Significant expenditures include
the payment of cash dividends of $2.1 million and additions to property, plant
and equipment of $1.1 million.
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) (27) Financial Data Schedule
(b) No reports on Form 8-K were filed for the three months ended March 29,
1996.
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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: May 6, 1996 Zvi Eiref
ZVI EIREF
VICE PRESIDENT FINANCE
DATE: May 6, 1996 Gary P. Halker
GARY P. HALKER
VICE PRESIDENT, CONTROLLER AND
CHIEF INFORMATION OFFICER
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-29-1996
<CASH> 9,070
<SECURITIES> 5,021
<RECEIVABLES> 56,192
<ALLOWANCES> 1,290
<INVENTORY> 45,739
<CURRENT-ASSETS> 131,830
<PP&E> 240,940
<DEPRECIATION> 98,856
<TOTAL-ASSETS> 303,336
<CURRENT-LIABILITIES> 104,847
<BONDS> 7,500
<COMMON> 23,330
0
0
<OTHER-SE> 132,438
<TOTAL-LIABILITY-AND-EQUITY> 303,336
<SALES> 121,548
<TOTAL-REVENUES> 121,548
<CGS> 69,786
<TOTAL-COSTS> 69,786
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 135
<INCOME-PRETAX> 6,166
<INCOME-TAX> 2,318
<INCOME-CONTINUING> 3,848
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,848
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
