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 26, 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
-----------------------------
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 31, 1997, there were 19,445,239 shares of Common Stock
outstanding.
===========================================================================
1 of 9
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
-------------------------------------------------------
(Unaudited)
<TABLE>
<S> Three Months Ended Nine Months Ended
-------------------- --------------------
<C> <C> <C> <C>
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
(In thousands, except 1997 1996 1997 1996
per share data)
======================================================================
Net Sales $146,328 $137,090 $417,799 $393,265
Cost of sales 83,161 78,204 238,991 224,886
------- ------- ------- -------
Gross profit 63,167 58,886 178,808 168,379
Selling, general and
administrative expenses 53,864 51,856 154,775 148,135
------- ------- ------- -------
Income from Operations 9,303 7,030 24,033 20,244
Equity in earnings of
affiliates 1,242 1,061 4,252 3,643
Investment income 328 391 1,136 1,029
Other income/(expense) - (40) 1,397 (357)
Interest expense (252) (74) (421) (317)
------- ------- ------- -------
Income before taxes 10,621 8,368 30,397 24,242
Income taxes 4,194 3,170 11,463 9,065
------- ------- ------- -------
Net Income 6,427 5,198 18,934 15,177
Retained earnings at
beginning of period 190,288 175,120 182,069 169,438
------- ------- ------- -------
196,715 180,318 201,003 184,615
Dividends paid 2,332 2,154 6,620 6,451
------- ------- ------- -------
Retained earnings at
end of period $194,383 $178,164 $194,383 $178,164
====================================================================
- --------------------------------------------------------------------
Weighted average shares -
Primary 19,439 19,566 19,465 19,544
Weighted average shares -
Fully Diluted 20,067 19,566 20,078 19,544
- -------------------------------------------------------------------
Earnings Per Share:
Primary $0.33 $0.27 $0.97 $0.78
Fully Diluted $0.32 $0.27 $0.94 $0.78
===================================================================
</TABLE>
2 of 9
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<S> <C> <C>
September 26, December 31,
1997 1996
------------- ------------
(Dollars in thousands) (Unaudited)
===========================================================================
Assets
===========================================================================
Current Assets
Cash and cash equivalents $ 7,709 $22,902
Short-term investments 5,000 5,011
Accounts receivable 59,845 41,837
Inventories (Note 2) 57,948 48,887
Deferred income taxes 11,018 11,962
Prepaid expenses 4,615 4,920
Current portion of note receivable 3,066 -
-------------------------
Total Current Assets 149,201 135,519
- -------------------------------------------------------------------------
Property, Plant and Equipment (Note 3) 143,322 138,371
Note Receivable from Joint Venture 7,934 11,000
Equity Investment in Affiliates 26,430 16,211
Long-Term Supply Contract 2,910 3,314
Intangibles and Other Assets 21,783 3,556
=========================================================================
Total Assets $351,580 $307,971
=========================================================================
Liabilities and Stockholders' Equity
=========================================================================
Current Liabilities
Accounts payable and accrued expenses $ 93,745 $ 93,375
Income taxes payable 5,098 5,379
Short term borrowings 32,000 -
------------------------
Total Current Liabilities 130,843 98,754
- -------------------------------------------------------------------------
Long-Term Debt 7,500 7,500
Deferred Income Taxes 19,821 20,005
Deferred Liabilities 3,534 2,392
Nonpension Postretirement and
Postemployment Benefits 13,512 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 33,823 33,364
Retained earnings 194,383 182,069
Cumulative translation adjustments (575) (194)
------------------------
250,961 238,569
Less common stock in treasury, at cost -
3,878,455 shares in 1997 and
3,878,435 shares in 1996 (74,042) (72,708)
Due from officers (549) (549)
- -------------------------------------------------------------------------
Total Stockholders' Equity 176,370 165,312
=========================================================================
Total Liabilities and Stockholders' Equity $351,580 $307,971
=========================================================================
</TABLE>
3 of 9
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
------------------------------------
(Unaudited)
<TABLE>
<S> Nine Months Ended
------------------------------
<C> <C>
September 26, September 27,
(Dollars in thousands) 1997 1996
===========================================================================
Cash Flow From Operating Activities
===========================================================================
Net Income $18,934 $15,177
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 10,433 10,313
Deferred income taxes 774 (826)
Equity in joint venture income (4,252) (3,643)
Loss on asset disposals - 224
Other (65) 13
Change in assets and liabilities net of
effect of purchase of new product lines:
Decrease/(increase) in
short-term investments 11 (990)
(Increase) in accounts receivable (18,161) (9,305)
(Increase) in inventories (3,631) (4,236)
Decrease in prepaid expenses 299 1,361
Increase in accounts payable 497 4,148
(Decrease)/increase in income taxes payable (240) 3,475
Increase in other liabilities 646 839
=======================================================================
Net Cash Provided By Operating Activities 5,245 16,550
Cash Flow From Investing Activities
========================================================================
Additions to property, plant and equipment (6,662) (4,005)
Investment in affiliate (10,416) -
Repayment of officer loans - 412
Distributions from joint venture 4,449 4,133
Purchase of other assets (875) -
Acquisition of new product lines (31,439) -
=======================================================================
Net Cash (Used In) Provided By
Investing Activities (44,943) 540
Cash Flow From Financing Activities
=======================================================================
Short-term debt borrowing (repayments) 32,000 (5,000)
Payment of cash dividends (6,620) (6,451)
Proceeds from stock options exercised 1,558 858
Purchase of treasury stock (2,433) (1,320)
=======================================================================
Net Cash Provided By (Used In)
Financing Activities 24,505 (11,913)
Net Change In Cash and Cash Equivalents (15,193) 5,177
Cash And Cash Equivalents At Beginning Of Year 22,902 11,355
=======================================================================
Cash And Cash Equivalents At End Of Period $ 7,709 $16,532
========================================================================
</TABLE>
4 of 9
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
1. The consolidated balance sheet as of September 26, 1997, the
consolidated statements of income and retained earnings for the three and
nine months ended September 26, 1997 and September 27, 1996 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 26, 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 September 26, 1997 are not necessarily indicative of the
operating results for the full year.
<TABLE>
<S> <C> <C>
2. Inventories consist of the following: Sept. 26, Dec. 31,
(in thousands) 1997 1996
===================================================================
Raw materials and supplies $15,890 $13,031
Work in process - 144
Finished goods 42,058 35,712
-------------------
$57,948 $48,887
==================================================================
</TABLE>
<TABLE>
<S> <C> <C>
3. Property, Plant and Equipment
consist of the following: Sept. 26, Dec. 31,
(in thousands) 1997 1996
===================================================================
Land $ 3,263 $ 3,195
Buildings and improvements 66,493 64,810
Machinery and equipment 162,722 155,635
Office equipment and other assets 12,037 11,835
Mineral rights 5,931 5,931
Construction in progress 7,395 1,641
-------------------
257,841 243,047
Less accumulated depreciation
and amortization 114,519 104,676
-------------------
Net Property, Plant and Equipment $143,322 $138,371
==================================================================
</TABLE>
5 of 9
<PAGE>
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>
<S>
Three Months Ended Nine Months Ended
--------------------- ---------------------
<C> <C> <C> <C>
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
(in thousands) 1997 1996 1997 1996
=======================================================================
Net sales $10,004 $ 9,072 $30,866 $29,156
Gross profit 3,344 2,750 10,852 9,170
Net income 2,522 1,896 8,348 6,606
Company's share in
net income 1,261 948 4,174 3,303
Elimination of Company's
share of intercompany
interest expense 113 113 340 340
------------------ -------------------
Equity in joint venture
income $ 1,374 $ 1,061 $ 4,514 $ 3,643
=======================================================================
</TABLE>
On June 3, 1997, the Company acquired a 40% interest in two Brazilian
bicarbonate/carbonate-related chemical companies. The acquisition, costing
approximately $10.4 million, was financed internally and is accounted for
under the equity method of accounting.
5. Primary earnings 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. Fully
diluted earnings per share reflects the impact of common equivalent shares
due to shares issuable for stock options.
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 September 26, 1997
and September 27, 1996 was $.33 and $.27 per share, respectively, and the
Company's diluted EPS for the three months ended September 26, 1997 and
September 27, 1996 was $.32 and $.26 per share, respectively. For the nine
month period basic EPS in 1997 and 1996 was $.97 and $.78 per share,
respectively, and diluted EPS in 1997 and 1996 was $.95 and $.77 per share,
respectively.
7. Acquisition
On August 27, 1997, the Company closed on its previously announced
acquisition of a group of five household cleaning brands from The Dial
Corporation. The cost of the acquisition was approximately $31.4 million
and the brands involved were BRILLO(R) Soap Pads and related products,
PARSONS(R) and BO-PEEP(R) Ammonia, CAMEO(R) Metal Polish, RAIN DROPS(R)
Water Softener and SNO BOL(R) Cleaners. The acquisition was financed
through short-term borrowings.
The allocation of the purchase price in these financial statements is
preliminary and is expected to be finalized by December 31, 1997.
6 of 9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
Results of Operations
- ---------------------
For the quarter ended September 26, 1997, net income was $6.4 million or
$.33 per primary share and $.32 per fully diluted share. This compares
with $5.2 million or $.27 per share for the same period of 1996. For the
first nine months of 1997, net income was $18.9 million or $.97 per primary
share and $.94 per fully diluted share, compared with $15.2 million or $.78
per share for 1996.
Net sales in the quarter were $146.3 million, a $9.2 million or a 6.7%
increase versus 1996. This increase was due to higher sales of ARM &
HAMMER(R) Laundry Detergent products, the addition of the product lines
acquired during the quarter from The Dial Corporation, and the national
introduction of ARM & HAMMER Super Scoop(TM),The Baking Soda Clumping
Litter. These increases were partially offset by lower sales of ARM &
HAMMER Dental Care(R) toothpaste. Specialty Products sales increased as
well, primarily as a result of higher sales of MEGALAC(R) Rumen Bypass Fat,
agricultural grades of sodium bicarbonate and liquid cleaners. These
increases were partially offset by lower sales of performance grades of
sodium bicarbonate.
Net sales for the first nine months were $417.8 million or 6.2% ahead of
1996. The increase is primarily a result of higher sales of ARM & HAMMER
Laundry Detergent products, the third quarter national introduction of ARM
& HAMMER Super Scoop, The Baking Soda Clumping Litter, and the new products
acquired from The Dial Corporation. These increases were partially offset
by lower sales of ARM & HAMMER Carpet and Room Deodorizer. Specialty
Products sales were higher for the same reasons as the current quarter.
The Company's gross margin was 43.2% and 42.8% for the current quarter and
nine month period, respectively. This compares with 43.0% and 42.8% for
the same periods of last year. The slight improvement in the current
quarter is a result of lower manufacturing costs, partially offset by a
less favorable sales mix. The flat margin for the nine month period is a
result of lower manufacturing costs offset by costs associated with the ARM
& HAMMER Dental Care toothpaste buy-one-get-one free promotion and a less
favorable sales mix.
Selling, general and administrative expenses increased $2.0 million in the
current quarter and $6.6 million for the nine month period. Selling
expenses for the quarter decreased slightly as a result of lower promotion
costs for ARM & HAMMER Dental Care toothpaste, partially offset by
introductory costs for ARM & HAMMER Super Scoop, The Baking Soda Clumping
Litter. General and administrative costs increased in the quarter
primarily as a result of higher Information Systems expenses. Selling
expenses for the nine month period increased as a result of higher
advertising, introductory spending for ARM & HAMMER Super Scoop, The Baking
Soda Clumping Litter, and higher test market costs. These increases were
partially offset by lower promotion costs for ARM & HAMMER Dental Care
toothpaste. General and administrative costs increased for the same reason
as the current quarter.
The Company's Armand Products joint venture saw sales increase 10.3% and
5.9% for the current quarter and the nine month period while equity in
joint venture income increased 29.5% and 23.9% as compared to the same
periods of 1996.
Interest expense increased as a result of using short-term debt to finance
the purchase of the five brands from The Dial Corporation.
Other income increased significantly primarily as a result of a settlement
from a long-standing class action suit against the Carbon Dioxide supply
industry and foreign exchange gains.
The effective tax rate for the nine month period was 37.7% as compared to
37.4% for the same period of last year.
Liquidity and Capital Resources
- -------------------------------
The Company considers cash and short-term investments as the principal
measurement of its liquidity. At September 26, 1997, cash, including cash
equivalents and short-term investments totaled $12.7 million compared to
$27.9 million at December 31, 1996.
During the first nine months of 1997, the Company generated $5.2 million of
positive cash flow from operating activities, received $4.4 million in
distributions from its affiliates, borrowed $32.0 million of short-term
debt and received $1.6 million from stock options exercised. Significant
expenditures included the purchase of five brands from The Dial Corporation
for $31.4 million, additions to property, plant and equipment of $6.7
million, the payment of cash dividends of $6.6 million, the purchase of a
40% interest in two Brazilian chemical companies for $10.4 million, and the
purchase of treasury stock of $2.4 million.
7 of 9
<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 26, 1997.
8 of 9
<PAGE>
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, 1997 Zvi Eiref
---------------------- --------------------------------
ZVI EIREF
VICE PRESIDENT FINANCE AND
CHIEF FINANCIAL OFFICER
DATE: November 7, 1997 Gary P. Halker
---------------------- --------------------------------
GARY P. HALKER
VICE PRESIDENT, CONTROLLER AND
CHIEF INFORMATION OFFICER
9 of 9
</PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-26-1997
<CASH> 7,709
<SECURITIES> 5,000
<RECEIVABLES> 61,463
<ALLOWANCES> 1,618
<INVENTORY> 57,948
<CURRENT-ASSETS> 149,201
<PP&E> 257,841
<DEPRECIATION> 114,519
<TOTAL-ASSETS> 351,580
<CURRENT-LIABILITIES> 130,843
<BONDS> 7,500
0
0
<COMMON> 23,330
<OTHER-SE> 153,040
<TOTAL-LIABILITY-AND-EQUITY> 351,580
<SALES> 417,799
<TOTAL-REVENUES> 417,799
<CGS> 238,991
<TOTAL-COSTS> 238,991
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 150
<INTEREST-EXPENSE> 421
<INCOME-PRETAX> 30,397
<INCOME-TAX> 11,463
<INCOME-CONTINUING> 18,934
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,924
<EPS-PRIMARY> .97
<EPS-DILUTED> .94
</TABLE>
