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UNITED STATES
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 March 27, 1998 Commission file No. 1-10585
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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 April 24, 1998, there were 19,398,123 shares of Common Stock outstanding.
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1
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<CAPTION>
PART I - FINANCIAL INFORMATION
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited)
<CAPTION>
Three Months Ended
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<S> <C> <C>
March 27, March 28,
(In thousands, except per share data) .................. 1998 1997
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Net Sales ............................................... $ 152,011 $ 129,621
Cost of sales ........................................... 87,820 74,761
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Gross profit ............................................ 64,191 54,860
Selling, general and administrative expenses ............ 55,737 48,680
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Income from Operations .................................. 8,454 6,180
Equity in earnings of affiliates ........................ 1,224 1,416
Investment income ....................................... 309 415
Other income ............................................ 34 290
Interest expense ........................................ (572) (82)
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Income before taxes ..................................... 9,449 8,219
Income taxes ............................................ 3,553 2,992
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Net Income .............................................. 5,896 5,227
Retained earnings at beginning of period ................ 197,622 182,069
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203,518 187,296
Dividends paid .......................................... 2,326 2,144
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Retained earnings at end of period ...................... $ 201,192 $ 185,152
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Weighted average shares outstanding - Basic ............. 19,396 19,476
Weighted average shares outstanding - Diluted ........... 19,932 19,923
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Earnings Per Share:
Net income per share - Basic ............................ $ .30 $ .27
Net income per share - Diluted .......................... $ .30 $ .26
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Dividends Per Share: .................................... $ .12 $ .11
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</TABLE>
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<TABLE>
<CAPTION>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
March 27, December 31,
1998 1997
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(Dollars in thousands) (Unaudited)
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Assets
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Current Assets
Cash and cash equivalents $ 16,449 $ 14,949
Short-term investments 2,997 3,993
Accounts receivable, less allowances of $1,583 and $1,532 56,113 49,566
Inventories (Note 2) 68,925 61,275
Current portion of note receivable 4,553 4,131
Deferred income taxes 9,573 9,802
Prepaid expenses 6,283 5,727
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Total Current Assets 164,893 149,443
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Property, Plant and Equipment (Note 3) 147,330 142,343
Note Receivable from Joint Venture 5,782 6,869
Equity Investment in Affiliates 26,630 26,871
Long-Term Supply Contract 2,640 2,775
Intangibles and Other Assets 27,897 22,713
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Total Assets $375,172 $351,014
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Liabilities and Stockholders' Equity
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Current Liabilities
Short-term borrowings $ 42,000 $ 32,000
Accounts payable and accrued expenses 100,703 92,090
Current portion of long-term debt 856 685
Income taxes payable 4,932 1,456
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Total Current Liabilities 148,491 126,231
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Long-Term Debt 6,644 6,815
Deferred Income Taxes 20,069 20,578
Deferred Liabilities 4,670 3,786
Nonpension Postretirement and Postemployment Benefits 14,398 14,263
Commitments and Contingencies
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 34,527 34,097
Retained earnings 201,192 197,622
Cumulative translation adjustments (424) (591)
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258,625 254,458
Common stock in treasury, at cost:
3,960,671 shares in 1998 and 3,893,155 shares in 1997 (77,176) (74,568)
Due from officers (549) (549)
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Total Stockholders' Equity 180,900 179,341
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Total Liabilities and Stockholders' Equity $375,172 $351,014
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</TABLE>
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<TABLE>
<CAPTION>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Three Months Ended
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<S> <C> <C>
March 27, March 28,
(Dollars in thousands) 1998 1997
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Cash Flow From Operating Activities
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Net Income $5,896 $5,227
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, depletion and amortization 4,055 3,449
Deferred income taxes (284) 140
Equity in unconsolidated affiliates (1,224) (1,416)
Other 173 (112)
Change in assets and liabilities:
Decrease in short-term investments 996 1,001
(Increase) in accounts receivable (6,492) (6,693)
(Increase) in inventories (6,461) (5,064)
(Increase) in prepaid expenses (553) (797)
Increase (decrease) in accounts payable 8,558 (2,876)
Increase in income taxes payable 3,602 2,570
Increase in other liabilities 1,017 1,036
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Net Cash Provided By (Used In) Operating Activities 9,283 (3,535)
Cash Flow From Investing Activities
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Additions to property, plant and equipment (6,778) (1,107)
Purchase of new product lines (6,975) -
Distributions from unconsolidated affiliates 1,465 1,398
Purchase of other assets (1,382) -
Proceeds from repayment of notes receivable 665 -
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Net Cash (Used In) Provided By Investing Activities (13,005) 291
Cash Flow From Financing Activities
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short-term borrowing 10,000 -
Payment of cash dividends (2,326) (2,144)
Proceeds from stock options exercised 678 869
Purchase of treasury stock (3,130) (25)
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Net Cash Provided By (Used In) Financing Activities 5,222 (1,300)
Net Change In Cash and Cash Equivalents 1,500 (4,544)
Cash And Cash Equivalents At Beginning Of Year 14,949 22,902
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Cash And Cash Equivalents At End Of Period $16,449 $18,358
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</TABLE>
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated balance sheet as of March 27, 1998, the consolidated
statements of income and retained earnings for the three months ended March 27,
1998 and March 28, 1997 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 27, 1998 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, 1997 annual
report to shareholders. The results of operations for the period ended March 27,
1998 are not necessarily indicative of the operating results for the full year.
<TABLE>
<S> <C> <C>
2. Inventories consist of the following: March 27, Dec. 31,
(in thousands) 1998 1997
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Raw materials and supplies $18,287 $16,848
Finished goods 50,638 44,427
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$68,925 $61,275
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</TABLE>
<TABLE>
<S> <C> <C>
3. Property, Plant and Equipment consist of the following: March 27, Dec. 31,
(in thousands) 1998 1997
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Land $ 3,261 $ 3,258
Buildings and improvements 68,096 68,075
Machinery and equipment 167,360 165,174
Office equipment and other assets 13,322 13,355
Mineral rights 5,931 5,931
Construction in progress 9,828 3,304
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267,798 259,097
Less accumulated depreciation, depletion and amortization 120,468 116,754
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Net Property, Plant and Equipment $147,330 $142,343
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</TABLE>
<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>
<CAPTION>
Three Months Ended
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<S> <C> <C>
March 27, March 28,
(In thousands) 1998 1997
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Net sales $ 9,242 $10,139
Gross profit 3,214 3,434
Net income 2,424 2,606
Company's share in net income 1,212 1,303
Elimination of Company's share of intercompany interest expense 110 113
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Equity in joint venture income $ 1,322 $ 1,416
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</TABLE>
5. Earnings Per Share
Basic EPS is calculated based on income available to common shareholders and the
weighted-average number of shares outstanding during the reported period.
Diluted EPS includes additional dilution from potential common stock issuable
pursuant to the exercise of stock options outstanding. Prior year amounts have
been restated to conform with Statement of Financial Accounting Standards No.
128 "Earnings Per Share".
6. Accounting Change
During the first quarter of 1998, the Company adopted AICPA Statement of
Position 98-1 "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use". The SOP requires companies to capitalize certain
costs of developing computer software. The effect on net income for the first
quarter was approximately $1.9 million or $.10 per share. Had the SOP been
applicable for the first quarter of 1997, the effect on net income would have
been $.4 million or $.02 per share.
7. Acquisitions
On January 26, 1998, the Company's Brotherton Speciality Products subsidiary
purchased Kingston Chemical Ltd., a supplier of potassium based airport de-icing
fluids for approximately $1,700,000.
On January 29, 1998, the Company closed on its previously announced acquisition
of TOSS N' SOFT Dryer Sheets from The Dial Corporation for approximately
$5,300,000.
<PAGE>
8. Comprehensive Income
During June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income". The
statement was effective for fiscal years beginning after December 15, 1997 and
establishes standards for the reporting and displaying of comprehensive income.
The following table presents the Company's Comprehensive Income for the three
months ending March 27, 1998 and March 28, 1997.
<TABLE>
Three Months Ended
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<S> <C> <C>
March 27, March 28,
(In thousands) 1998 1997
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Net Income $5,896 $5,227
Other Comprehensive Income, net of tax:
Foreign exchange transaction adjustments 101 (173)
Tax benefit of stock option exercises 142 -
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Comprehensive Income $6,139 $5,054
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</TABLE>
9. Contingencies
The Company, in the ordinary course of its business, is the subject of, or a
party to, various pending or threatened legal actions. The Company believes that
any ultimate liability arising from these actions will not have a material
adverse effect on its consolidated financial statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the quarter ended March 27, 1998, net income was $5.9 million, equivalent to
basic earnings of $.30 per share, from $5.2 million or $.27 per share, in last
year's first quarter. Diluted earnings were $.30 per share compared to $.26 per
share last year.
Net sales for the quarter were $152.0 million, representing an increase of $22.4
million or 17.3% versus the same period of 1997. The increase is primarily due
to the introduction of two major consumer products, ARM & HAMMER SUPER
SCOOP(TM), The Baking Soda Clumping Litter, in late 1997 and ARM & HAMMER DENTAL
CARE(TM), The Baking Soda Gum, in early 1998. It also includes the sales of
BRILLO(R) Soap Pads and certain other brands acquired in late 1997. With regard
to the established brands, sales of laundry and deodorizer products were strong;
sales of ARM & HAMMER Dental Care and deodorant products, however, declined as
competition in these categories intensified. Specialty chemicals were about even
with the same period last year.
Gross margin was 42.2% in the first quarter, as compared with 42.3% last year.
This change is due to a less favorable sales mix offset by lower manufacturing
costs.
Selling, general and administrative costs increased $7.1 million or 14.5% versus
last year. Selling expenses increased primarily due to support of new products,
namely ARM & HAMMER SUPER SCOOP, ARM & HAMMER DENTAL CARE, The Baking Soda Gum
and BRILLO Soap Pads. General and administrative costs increased slightly versus
last year.
The Company's joint venture, Armand Products Company, saw sales decline 8.8% and
earnings decline 6.6% versus last year.
Interest expense increased versus last year primarily as a result of having
short-term debt to finance the purchase of new product lines. Investment income
decreased due to having a lower amount of average cash available for investment.
The effective tax rate for the quarter was 37.6%, up from 36.4% last year. This
increase in the rate is the result of utilizing foreign operating loss
carry-forwards in 1997.
Liquidity and Capital Resources
The Company considers cash and short-term investments as the principal
measurement of its liquidity. At March 27, 1998, cash, including cash
equivalents and short-term investments totaled $19.4 million as compared to
$18.9 million at December 31, 1997.
During the first quarter of 1998, the Company generated $9.3 million of positive
cash flow from operating activities, increased short-term debt by $10.0 million
and received $1.5 million in distributions from its affiliates. Significant
expenditures include additions to property, plant and equipment of $6.8 million
(including the earlier mentioned software capitalization), the purchase of new
product lines of $7.0 million, purchase of treasury stock of $3.1 million and
the payment of cash dividends of $2.3 million.
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
(11) Computation of earnings per share
b. No reports on Form 8-K were filed for the three months ended March
27, 1998.
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
EXHIBIT 11 - Computation of Earnings Per Share
(In thousands except per share amounts)
(Unaudited)
<TABLE>
Three Months Ended
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<S> <C> <C>
March 27, March 28,
1998 1997
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BASIC:
Net Income $ 5,896 $ 5,227
Weighted average shares outstanding 19,396 19,476
Basic earnings per share $.30 $.27
DILUTED:
Net Income $ 5,896 $ 5,227
Weighted average shares outstanding 19,396 19,476
Incremental shares under stock option plans 536 447
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Adjusted weighted average shares outstanding 19,932 19,923
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Diluted earnings per share $.30 $.26
</TABLE>
<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: May 1, 1998 Zvi Eiref
--------------------- --------------------------------
ZVI EIREF
VICE PRESIDENT FINANCE
DATE: May 1, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-27-1998
<CASH> 16,449
<SECURITIES> 2,997
<RECEIVABLES> 57,696
<ALLOWANCES> 1,583
<INVENTORY> 68,925
<CURRENT-ASSETS> 164,893
<PP&E> 267,798
<DEPRECIATION> 120,468
<TOTAL-ASSETS> 375,172
<CURRENT-LIABILITIES> 148,491
<BONDS> 6,644
0
0
<COMMON> 23,330
<OTHER-SE> 157,570
<TOTAL-LIABILITY-AND-EQUITY> 375,172
<SALES> 152,011
<TOTAL-REVENUES> 152,011
<CGS> 87,820
<TOTAL-COSTS> 87,820
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 572
<INCOME-PRETAX> 9,449
<INCOME-TAX> 3,553
<INCOME-CONTINUING> 5,896
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,896
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
