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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 March 28, 1997 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
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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 May 2, 1997, there were 19,502,459 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)
THREE MONTHS ENDED
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MARCH 28, MARCH 29,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996
- --------------------------------------------------------------------------------
Net Sales $ 129,621 $ 121,548
Cost of sales 74,761 69,786
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Gross profit 54,860 51,762
Selling, general and administrative expenses 48,680 47,032
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Income from Operations 6,180 4,730
Equity in joint venture income 1,416 1,272
Investment income 415 312
Other income (expense) 290 (13)
Interest expense (82) (135)
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Income before taxes 8,219 6,166
Income taxes 2,992 2,318
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Net Income 5,227 3,848
Retained earnings at beginning of period 182,069 169,438
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187,296 173,286
Dividends paid 2,144 2,148
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Retained earnings at end of period $ 185,152 $ 171,138
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Weighted average shares outstanding 19,476 19,526
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Earnings Per Share:
Net income per share $ .27 $ .20
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
MARCH 28, DECEMBER 31,
1997 1996
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(DOLLARS IN THOUSANDS) (UNAUDITED)
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Assets
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Current Assets
<S> <C> <C>
Cash and cash equivalents $ 18,358 $ 22,902
Short-term investments 4,010 5,011
Accounts receivable 48,402 41,837
Inventories (Note 2) 53,887 48,887
Deferred income taxes 11,737 11,962
Prepaid expenses 5,713 4,920
Current portion of note receivable 1,001 --
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Total Current Assets 143,108 135,519
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Property, Plant and Equipment (Note 3) 135,985 138,371
Note Receivable from Joint Venture 9,999 11,000
Equity Investment in Joint Venture 16,229 16,211
Long-Term Supply Contract 3,179 3,314
Goodwill 3,556 3,556
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Total Assets $ 312,056 $ 307,971
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Accounts payable and accrued expenses $ 90,343 $ 93,375
Income taxes payable 7,915 5,379
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Total Current Liabilities 98,258 98,754
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Long-Term Debt 7,500 7,500
Deferred Income Taxes 19,909 20,005
Deferred Liabilities 3,369 2,392
Nonpension Postretirement and Postemployment
Benefits 14,067 14,008
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 33,588 33,364
Retained earnings 185,152 182,069
Cumulative translation adjustments (479) (194)
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241,591 238,569
Less common stock in treasury, at cost-
3,824,135 shares in 1997 and
3,878,435 shares in 1996 72,089 72,708
Due from officers (549) (549)
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Total Stockholders' Equity 168,953 165,312
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Total Liabilities and Stockholders' Equity $ 312,056 $ 307,971
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</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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MARCH 28, MARCH 29,
(DOLLARS IN THOUSANDS) 1997 1996
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CASH FLOW FROM OPERATING ACTIVITIES
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<S> <C> <C>
Net Income $ 5,227 $ 3,848
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation, depletion and amortization 3,449 3,448
Deferred income taxes 140 (334)
Equity in joint venture income (1,416) (1,272)
Other (112) 5
Change in assets and liabilities:
Decrease in short-term investments 1,001 6
(Increase) in accounts receivable (6,693) (10,505)
(Increase) in inventories (5,064) (4,399)
(Increase) decrease in prepaid expenses (797) 35
(Decrease) increase in accounts payable (2,876) 1,438
Increase in income taxes payable 2,570 1,334
Increase in other liabilities 1,036 544
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NET CASH (USED IN) OPERATING ACTIVITIES (3,535) (5,852)
CASH FLOW FROM INVESTING ACTIVITIES
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Additions to property, plant and equipment (1,107) (1,101)
Distributions from joint venture 1,398 1,381
Repayment of officer loans -- 412
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NET CASH PROVIDED BY INVESTING ACTIVITIES 291 692
CASH FLOW FROM FINANCING ACTIVITIES
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Short-term borrowing -- 5,000
Payment of cash dividends (2,144) (2,148)
Proceeds from stock options exercised 869 68
Purchase of treasury stock (25) (45)
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NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITES (1,300) 2,875
NET CHANGE IN CASH AND CASH EQUIVALENTS (4,544) (2,285)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 22,902 11,355
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $18,358 $ 9,070
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</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(Unaudited)
1. The consolidated balance sheet as of March 28, 1997, the consolidated
statements of income and retained earnings for the three months ended March 28,
1997 and March 29, 1996 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 28, 1997 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, 1996 annual
report to shareholders. The results of operations for the period ended March
28, 1997 are not necessarily indicative of the operating results for the full
year.
<TABLE>
<CAPTION>
2. Inventories consist of the following: MARCH 28, DEC. 31,
(in thousands) 1997 1996
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<S> <C> <C>
Raw materials and supplies $14,512 $13,031
Work in Process 84 144
Finished goods 39,291 35,712
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$53,887 $48,887
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</TABLE>
<TABLE>
<CAPTION>
3. PROPERTY, PLANT AND EQUIPMENT CONSIST OF
THE FOLLOWING: MARCH 28, DEC. 31,
(IN THOUSANDS) 1997 1996
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<S> <C> <C>
Land $3,190 $3,195
Buildings and improvements 64,778 64,810
Machinery and equipment 155,635 155,635
Office equipment and other assets 11,853 11,835
Mineral rights 5,931 5,931
Construction in progress 2,486 1,641
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243,873 243,047
Less accumulated depreciation, depletion
and amortization 107,888 104,676
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Net Property, Plant and Equipment $135,985 $138,371
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</TABLE>
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(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
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MARCH 28, MARCH 29,
(IN THOUSANDS) 1997 1996
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<S> <C> <C>
Net sales $10,139 $ 9,936
Gross profit 3,434 3,178
Net income 2,606 2,318
Company's share in net income 1,303 1,159
Elimination of Company's share of intercompany
interest expense 113 113
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Equity in joint venture income $ 1,416 $ 1,272
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</TABLE>
5. 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.
6. Accounting Change
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 - "Earnings per Share" ("SFAS 128")
which specifies the computation, presentation and disclosure requirements for
EPS. SFAS 128 replaces the presentation of primary and fully diluted EPS
pursuant to Accounting Principles Board Opinion No. 15 - "Earnings per Share"
("APB 15") with the presentation of basic and diluted EPS. Basic EPS excludes
dilution and is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. The Company is required to adopt
SFAS 128 with its December 31, 1997 financial statements and restate all
prior-period EPS data. The Company will continue to account for EPS under
APB 15 until that time. Under SFAS 128, the Company's basic EPS for the three
months ended March 28, 1997 and March 29, 1996 was $.27 and $.20 per share,
respectively, and the Company's diluted EPS for the three months ended March
28, 1997 and March 29, 1996 was $.26 and $.20 per share, respectively.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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Results of Operations
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For the quarter ended March 28, 1997, net income was $5.2 million or $.27 per
share. This compares with $3.8 million or $.20 per share for the first quarter
of 1996.
Net sales for the quarter were $129.6 million, representing an increase of $8.1
million or 6.6% versus the same period of 1996. The increase is primarily due
to unit volume gains of ARM & HAMMER(R) Powder Laundry Detergent and higher
sales of ARM & HAMMER Dental Care(R) and ARM & HAMMER Deodorant
Anti-Perspirant. These increases were partially offset by lower sales of
ARM & HAMMER Carpet and Room Deodorizer and ARM & HAMMER Liquid Laundry
Detergent, the latter of which had an extremely strong first quarter in 1996 as
a result of the relaunch to a 4/10-cup product. Specialty Product sales were
essentially unchanged.
Gross margin was 42.3% in the first quarter, as compared with 42.6% in the
first quarter of 1996. This slight decrease is primarily due to the cost of the
ARM & HAMMER Dental Care buy-one get one free promotion. This decrease was
partially offset by lower manufacturing and distribution costs.
Selling, general and administrative expenses increased $1.6 million or 3.5%
versus last year. Selling expenses increased mostly due to higher levels of
advertising of ARM & HAMMER Dental Care and ARM & HAMMER Deodorant
Anti-Perspirant and higher promotional support for ARM & HAMMER Powder Laundry
Detergent. This increase was partially offset by lower promotion costs for
ARM & HAMMER Carpet and Room Deodorizer and ARM & HAMMER Liquid Laundry
Detergent. General and administrative expenses were unchanged versus last year.
The Company's Armand Products Company joint venture saw sales and earnings up
slightly from the first quarter of 1996.
Interest expense decreased slightly as a result of having no short-term debt
outstanding while investment income was higher due to an increase in cash
available for investing.
Other income in the current year resulted from foreign exchange gains.
The effective tax rate for the quarter was 36.4%, down from 37.6% from a year
ago. This is primarily a result of the utilization of foreign operating loss
carry-forwards in the current quarter.
Liquidity and Capital Resources
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The Company considers cash and short-term investments as the principal
measurement of its liquidity. At March 28, 1997, cash, including cash
equivalents and short-term investments totaled $22.4 million as compared to
$27.9 million at December 31, 1996.
During the first quarter of 1997, operating activities required $3.5 million of
additional investment, primarily in working capital. The Company received $1.4
million in distributions from its Armand Products joint venture and $.9 million
of proceeds from stock options exercised. 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
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Item 6. Exhibits and Reports on Form 8-K
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No reports on Form 8-K were filed for the three months ended March 28, 1997.
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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.
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(REGISTRANT)
DATE: May 7, 1997 /s/ Zvi Eiref
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ZVI EIREF
VICE PRESIDENT FINANCE
DATE: May 7, 1997 /s/ Gary P. Halker
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GARY P. HALKER
VICE PRESIDENT, CONTROLLER AND
CHIEF INFORMATION OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-28-1997
<CASH> 18,358
<SECURITIES> 4,010
<RECEIVABLES> 49,912
<ALLOWANCES> 1,510
<INVENTORY> 53,887
<CURRENT-ASSETS> 143,108
<PP&E> 243,873
<DEPRECIATION> 107,888
<TOTAL-ASSETS> 312,056
<CURRENT-LIABILITIES> 98,258
<BONDS> 7,500
0
0
<COMMON> 23,330
<OTHER-SE> 145,623
<TOTAL-LIABILITY-AND-EQUITY> 312,056
<SALES> 129,621
<TOTAL-REVENUES> 129,621
<CGS> 74,761
<TOTAL-COSTS> 74,761
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 82
<INCOME-PRETAX> 8,219
<INCOME-TAX> 2,992
<INCOME-CONTINUING> 5,227
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,227
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
