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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 June 28, 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 July 26, 1996, there were 19,576,723 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
<S> <C> <C> <C> <C>
(In thousands, except per share data) June 28, June 30, June 28, June 30
1996 1995 1996 1995
Net Sales $134,627 $128,980 $256,175 $246,943
Cost of sales 76,896 75,253 146,682 143,946
Gross profit 57,731 53,727 109,493 102,997
Selling, general and
administrative expenses 49,247 47,002 96,279 96,522
Income from Operations 8,484 6,725 13,214 6,475
Equity in joint venture income 1,310 2,253 2,582 4,682
Investment income 326 267 638 531
Gain on disposal of product lines - 103 - 205
Other income/(expense) (304) 46 (317) 77
Interest expense (108) (387) (243) (825)
Income before taxes 9,708 9,007 15,874 11,145
Income taxes 3,577 3,365 5,895 4,360
Net Income 6,131 5,642 9,979 6,785
Retained earnings at
beginning of period 171,138 166,896 169,438 167,901
177,269 172,538 179,417 174,686
Dividends paid 2,149 2,153 4,297 4,301
Retained earnings at end of period $175,120 $170,385 $175,120 $170,385
Weighted average shares outstanding 19,540 19,559 19,533 19,546
Earnings Per Share:
Net income per share $.31 $.29 $.51 $.35
</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
June 28, December 31,
1996 1995
(Dollars in thousands) (Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 9,795 $11,355
Short-term investments 5,048 5,027
Accounts receivable 51,329 44,427
Inventories (Note 2) 46,857 41,349
Deferred income taxes 12,402 11,704
Prepaid expenses 4,903 5,313
Total Current Assets 130,334 119,175
Property, Plant and Equipment (Note 3) 140,245 144,339
Note Receivable from Joint Venture 11,000 11,000
Equity Investment in Joint Venture 10,955 11,258
Long-Term Supply Contract 3,583 3,852
Goodwill 3,556 3,556
Total Assets $299,673 $293,180
Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowings $ - $ 5,000
Accounts payable and accrued expenses 89,486 86,815
Income taxes payable 5,974 5,286
Total Current Liabilities 95,460 97,101
Long-Term Debt 7,500 7,500
Deferred Income Taxes 20,032 19,573
Deferred Liabilities 2,202 1,595
Nonpension Postretirement and
Postemployment Benefits 14,025 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 33,203 33,061
Retained earnings 175,120 169,438
Cumulative translation adjustments (673) (686)
230,980 225,143
Less common stock in treasury, at cost -
3,758,771 shares in 1996 and
3,805,071 shares in 1995 69,977 70,501
Due from officers (549) (960)
Total Stockholders' Equity 160,454 153,682
Total Liabilities and Stockholders' Equity $299,673 $293,180
</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
<S> <C> <C>
June 28, June 30,
(Dollars in thousands) 1996 1995
Cash Flow From Operating Activities
Net Income $ 9,979 $ 6,785
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 6,864 6,434
Deferred income taxes (239) 921
Equity in joint venture income (2,582) (4,682)
Gain on asset disposals - (205)
Other 23 13
Change in assets and liabilities:
(Increase)/decrease in short-term investments (22) 976
(Increase) in accounts receivable (6,901) (7,286)
(Increase)/decrease in inventories (5,506) 3,604
Decrease/(Increase) in prepaid expenses 409 (543)
Increase in accounts payable 2,671 4,196
Increase in income taxes payable 684 1,893
Increase in other liabilities 904 889
Net Cash Provided By Operating Activities 6,284 12,995
Cash Flow From Investing Activities
Additions to property, plant and equipment (2,510) (11,614)
Repayment of officer loans 412 -
Distributions from joint venture 2,885 4,587
Net Cash Provided By (Used In)
Investing Activities 787 (7,027)
Cash Flow From Financing Activities
Short-term debt repayments (5,000) (176)
Payment of cash dividends (4,297) (4,301)
Proceeds from stock options exercised 711 564
Purchase of treasury stock (45) (31)
Net Cash Used In Financing Activities (8,631) (3,944)
Net Change In Cash and Cash Equivalents (1,560) 2,024
Cash And Cash Equivalents At Beginning Of Year 11,355 4,659
Cash And Cash Equivalents At End Of Period $ 9,795 $ 6,683
</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated balance sheet as of June 28, 1996, the consolidated
statements of income and retained earnings for the six months ended June
28, 1996 and June 30, 1995, 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 June 28, 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 June 28, 1996 are not necessarily indicative of the operating
results for the full year.
<TABLE>
<CAPTION>
2. Inventories consist of the following:
<S> <C> <C>
June 28, Dec. 31,
(in thousands) 1996 1995
Raw materials and supplies $12,484 $11,066
Work in process 118 134
Finished goods 34,255 30,149
$46,857 $41,349
</TABLE>
<TABLE>
<CAPTION>
3. Property, Plant and Equipment consist of the following:
<S> <C> <C>
June 28, Dec. 31,
(in thousands) 1996 1995
Land $ 3,188 $ 3,188
Buildings and improvements 63,995 63,949
Machinery and equipment 152,739 151,965
Office equipment and other assets 14,796 14,633
Mineral rights 5,020 5,020
Construction in progress 2,665 1,145
242,403 239,900
Less accumulated depreciation
and amortization 102,158 95,561
Net Property, Plant and Equipment $140,245 $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 Six Months Ended
<S> <C> <C> <C> <C>
June 28, June 30, June 28, June 30,
(in thousands) 1996 1995 1996 1995
Net sales $10,148 $13,456 $20,084 $26,754
Gross profit 3,242 5,114 6,420 10,561
Net income 2,392 4,278 4,710 8,910
Company's share in net income 1,196 2,139 2,355 4,455
Elimination of Company's share
of intercompany interest
expense 114 114 227 227
Equity in joint venture income $1,310 $2,253 $2,582 $4,682
</TABLE>
5. Restructuring Charge
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
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 June 28, 1996
Fixed asset removal
and demolition $ 587 $ 24 $ 563
Severance and related 1,765 1,235 530
Other 1,204 57 1,147
$3,556 $1,316 $2,240
</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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MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the quarter ended June 28, 1996, net income was $6.1 million or $.31 per
share. This compares with $5.6 million or $.29 per share for the same period
of 1995. For the first six months of 1996, net income was $10.0 million or
$.51 per share compared with $6.8 million or $.35 per share for 1995.
Net sales in the quarter were $134.6 million, representing an increase of
$5.6 million or 4.4% versus a year ago. This increase was due to
substantially higher Arm & Hammerr Laundry Detergent sales, as well as
slightly higher U.S. Personal Care and Specialty Products sales. These
gains were partially offset by lower sales of Arm & Hammer Carpet
Deodorizer, and lower Consumer sales in Canada and the U.K.
Net sales for the first six months of 1996 were $256.2 million, a $9.2
million or 3.7% increase over the first six months of 1995. The increase is
primarily a result of the relaunch of ARM & HAMMER Liquid Laundry Detergent
and higher unit volume of the ARM & HAMMER Deodorant Anti-Perspirant line.
These increases were partially offset by lower unit volume of ARM & HAMMER
Powder Laundry Detergent and ARM & HAMMER Carpet Deodorizer. Specialty
Products sales increased as well, led by higher sales of performance and
agricultural grades of sodium bicarbonate, higher sales of MEGALAC 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 for the second quarter was 42.9 % and 42.7% for
the six month period. This compares with 41.7% for both the second quarter
and six month period of 1995. The gross margin improvement is a result of
higher effective selling prices and lower distribution costs, partially
offset by a weaker product mix.
Selling, general and administrative expenses increased $2.2 million in the
current quarter as compared to last year but are slightly lower for the six
month period. Selling expenses increased in the quarter and for the six
month period primarily as a result of increased promotional support for the
relaunch of ARM & HAMMER Liquid Laundry Detergent. This increase was
partially offset by lower advertising and promotional costs for personal
care products. General and administrative expenses were lower because of
various cost reduction programs undertaken by the Company over the last 12
months.
The Company's Armand Products Company joint venture saw sales decline
approximately 25% for both the second quarter and six month periods,
resulting in a $.9 million decrease in equity income in the quarter and a
$2.1 million decrease for the six month period. This is due to new
competition coming into the marketplace, which has been anticipated for some
time.
Interest payments were significantly lower for both the second quarter and
six month period as a result of the repayment of short-term debt while
investment income increased slightly.
Other expenses increased due to foreign exchange losses relating to the
devaluation of the Venezuela bolivar, which occurred in the second quarter
of 1996.
The effective tax rate for the first half of 1996 was 37.1% as compared to
39.1% in the first half of 1995. This decrease is due to the impact of a
reduction of foreign operating losses 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 June 28, 1996, cash, including cash
equivalents and short-term investments totaled $14.8 million compared to
$16.4 million at December 31, 1995.
During the first half of 1996, the Company generated $6.3 million of
positive cash flow from operating activities and received $2.9 million in
distributions from its Armand Products joint venture. Significant
expenditures included additions to property, plant and equipment of
$2.5 million, the repayment of its outstanding short-term debt of $5.0
million and the payment of cash dividends of $4.3 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 9, 1996. The
following nominees were elected to the Company's Board of Directors for a
term of three years.
Nominee For Withhold
Cyril C. Baldwin, Jr. 34,190,467 467,876
William R. Becklean 34,186,659 471,684
Rosina B. Dixon, M.D. 34,181,162 477,181
Dean P. Phypers 34,144,286 514,057
The results of voting on the following additional items were as follows:
Proposal to approve the Church & Dwight Co., Inc. Compensation Plan for
Directors.
For Against Abstained Broker Non-Votes
32,587,015 1,576,182 495,146 0
Approval of the appointment of Deloitte & Touche as independent auditors of
the Company's 1996 financial statements.
For Against Abstained Broker Non-Votes
34,304,869 264,894 88,580 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
3,745,805 27,118,991 841,480 2,952,067
To consider and act upon a stockholder proposal requesting that the Board of
Directors commit to a program to diversify the members of the Board of
Directors.
For Against Abstained Broker Non-Votes
2,982,563 28,077,309 646,404 2,952,067
Item 6. Exhibits and Reports of Form 8-K
(a) No reports on Form 8-K were filed for the three months ended June 28,
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: August 6, 1996 Zvi Eiref
ZVI EIREF
VICE PRESIDENT FINANCE AND
CHIEF FINANCIAL OFFICER
DATE: August 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-28-1996
<CASH> 9,795
<SECURITIES> 5,048
<RECEIVABLES> 52,668
<ALLOWANCES> 1,339
<INVENTORY> 46,857
<CURRENT-ASSETS> 130,334
<PP&E> 242,403
<DEPRECIATION> 102,158
<TOTAL-ASSETS> 299,673
<CURRENT-LIABILITIES> 95,460
<BONDS> 7,500
0
0
<COMMON> 23,330
<OTHER-SE> 137,124
<TOTAL-LIABILITY-AND-EQUITY> 299,673
<SALES> 256,175
<TOTAL-REVENUES> 256,175
<CGS> 146,682
<TOTAL-COSTS> 146,682
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 100
<INTEREST-EXPENSE> 243
<INCOME-PRETAX> 15,874
<INCOME-TAX> 5,895
<INCOME-CONTINUING> 9,979
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,979
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
