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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file Number 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 September 29, 2000, there were 38,139,819 shares of
Common Stock outstanding.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART I - FINANCIAL INFORMATION
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
Sept. 29, Oct. 1, Sept. 29, Oct. 1,
(In thousands, except per share data) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------------
Net Sales $199,847 $185,949 $591,342 $547,022
Cost of sales 109,703 100,975 326,879 301,018
----------------------------- ------------------------------
Gross profit 90,144 84,974 264,463 246,004
Advertising, consumer and trade promotion expenses 47,857 44,459 139,143 136,327
Selling, general and administrative expenses 22,070 22,517 67,098 64,746
Gain on sale of mineral rights - - - (11,772)
Restructuring, impairment and other items 21,911 435 21,911 6,190
----------------------------- ------------------------------
Income/(Loss) from Operations (1,694) 17,563 36,311 50,513
Equity in earnings of affiliates 855 1,372 2,033 5,321
Investment income 399 364 1,584 1,079
Other income/(expense) (274) 47 (161) 214
Interest expense (1,229) (886) (4,083) (2,180)
----------------------------- ------------------------------
Income/(Loss) before taxes (1,943) 18,460 35,684 54,947
Income tax(benefit) expense (869) 6,873 12,489 20,330
Minority Interest; net of taxes 162 208 324 417
----------------------------- ------------------------------
Net Income/(Loss) (1,236) 11,379 22,871 34,200
Retained earnings at beginning of period 272,600 236,790 253,885 218,618
----------------------------- ------------------------------
271,364 248,169 276,756 252,818
Dividends paid 2,679 2,722 8,071 7,371
----------------------------- ------------------------------
Retained earnings at end of period $268,685 $245,447 $268,685 $245,447
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding - Basic 38,235 38,837 38,355 38,780
Weighted average shares outstanding - Diluted 39,636 41,097 39,931 40,887
-------------------------------------------------------------------------------------------------------------------------
Earnings Per Share:
Net income per share - Basic ($0.03) $0.29 $0.60 $0.88
Net income per share - Diluted ($0.03) $0.28 $0.57 $0.84
-------------------------------------------------------------------------------------------------------------------------
Dividends Per Share: $0.07 $0.07 $0.21 $0.19
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
(Dollars in thousands) Sept. 29, 2000 Dec. 31, 1999
--------------------------------------------------------------------------------- ---------------- ---------------
Assets
--------------------------------------------------------------------------------- ---------------- ---------------
Current Assets
Cash and cash equivalents $18,403 $19,765
Short-term investments 3,986 4,000
Accounts receivable, less allowances of $1,571 and $1,552 66,413 64,505
Inventories (Note 2) 62,801 72,670
Deferred income taxes 10,709 8,221
Prepaid expenses 6,358 6,622
---------------- ---------------
Total Current Assets 168,670 175,783
--------------------------------------------------------------------------------- ---------------- ---------------
Property, Plant and Equipment (Note 3) 169,115 182,219
Note Receivable - 3,000
Equity Investment in Affiliates 22,198 20,177
Long-Term Supply Contracts 3,794 4,105
Goodwill and Other Intangibles 84,940 83,744
Other Assets 14,449 7,278
--------------------------------------------------------------------------------- ---------------- ---------------
Total Assets $463,166 $476,306
--------------------------------------------------------------------------------- ---------------- ---------------
Liabilities and Stockholders' Equity
--------------------------------------------------------------------------------- ---------------- ---------------
Current Liabilities
Short-term borrowings $ 33,109 $ 25,574
Accounts payable and accrued expenses 131,355 106,109
Current portion of long-term debt 685 685
Income taxes payable 3,761 8,240
---------------- ---------------
Total Current Liabilities 168,910 140,608
--------------------------------------------------------------------------------- ---------------- ---------------
Long-Term Debt 23,200 58,107
Deferred Income Taxes 16,225 20,416
Deferred Liabilities 11,721 11,860
Nonpension Postretirement and Postemployment Benefits 15,772 15,145
Minority Interest 3,680 3,437
Commitments and Contingencies (Note 10)
Stockholders' Equity
Preferred Stock - $1.00 par value
Authorized 2,500,000 shares, none issued - -
Common Stock - $1.00 par value
Authorized 100,000,000 shares, issued 46,660,988 shares 46,661 46,661
Additional paid-in capital 20,236 18,356
Retained earnings 268,685 253,885
Accumulated other comprehensive income (loss) (7,843) (4,599)
---------------- ---------------
327,739 314,303
Less common stock in treasury, at cost -
8,521,169 shares in 2000 and 7,805,152 shares in 1999 (103,532) (87,021)
Due from shareholder (549) (549)
--------------------------------------------------------------------------------- ---------------- ---------------
Total Stockholders' Equity 223,658 226,733
--------------------------------------------------------------------------------- ---------------- ---------------
Total Liabilities and Stockholders' Equity $463,166 $476,306
--------------------------------------------------------------------------------- ---------------- ---------------
</TABLE>
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
Nine Months Ended
--------------------------------------
<S> <C> <C>
(Dollars in thousands) Sept. 29, 2000 Oct. 1, 1999
----------------------------------------------------------------------------- ------------------- ------------------
Cash Flow From Operating Activities
----------------------------------------------------------------------------- ------------------- ------------------
Net Income $22,871 $34,200
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion and amortization 16,464 14,321
Equity in income from affiliates (2,033) (5,321)
Deferred income taxes (5,398) (1,094)
Gain on sale of mineral rights - (11,772)
Disposal of fixed assets 14,324 4,683
Other (241) 191
Change in assets and liabilities:
(Increase) in accounts receivable (2,245) (2,499)
Decrease/(increase) in inventories 9,622 (5,157)
(Increase) in prepaid expenses (788) (1,579)
Increase in accounts payable 22,896 5,061
(Decrease)/increase in income taxes payable (3,328) 4,614
Increase in other liabilities 810 5,073
----------------------------------------------------------------------------- ------------------- ------------------
Net Cash Provided By Operating Activities 72,954 40,721
Cash Flow From Investing Activities
----------------------------------------------------------------------------- ------------------- ------------------
(Increase)/decrease in short-term investments 14 (2,958)
Additions to property, plant and equipment (14,931) (24,120)
Purchase of USA Detergent common stock (10,360) -
Proceeds from sale of mineral rights - 16,762
Investment in affiliates (2,860) (9,364)
Distributions from unconsolidated affiliates 2,788 2,861
Proceeds from repayment of notes receivable 3,000 3,329
Purchase of other assets (2,590) (3,341)
Goodwill and other intangibles adjustment 1,507 -
Proceeds from sale of fixed assets 863 -
Purchase of intangibles (861) -
----------------------------------------------------------------------------- ------------------- ------------------
Net Cash (Used In) Investing Activities (23,430) (16,831)
Cash Flow From Financing Activities
----------------------------------------------------------------------------- ------------------- ------------------
Long-term debt (repayments) (34,874) (3,817)
Short-term debt borrowing (repayments) 7,602 (7,353)
Payment of cash dividends (8,071) (7,371)
Proceeds from stock options exercised 4,551 5,470
Purchase of treasury stock (20,094) (7,900)
----------------------------------------------------------------------------- ------------------- ------------------
Net Cash (Used In) Financing Activities (50,886) (20,971)
Net Change In Cash and Cash Equivalents (1,362) 2,919
Cash And Cash Equivalents At Beginning Of Year 19,765 16,189
----------------------------------------------------------------------------- ------------------- ------------------
Cash And Cash Equivalents At End Of Period $18,403 $19,108
----------------------------------------------------------------------------- ------------------- ------------------
</TABLE>
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of September 29, 2000, the
consolidated statements of income and retained earnings for the three and
nine months ended September 29, 2000 and October 1, 1999, and the
consolidated statements of cash flow for the nine months ended September
29, 2000 and October 1, 1999 have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments, except for the item in Note 6) necessary to
present fairly the financial position, results of operations and cash flow
at September 29, 2000 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, 1999 annual report to shareholders. The results of operations
for the period ended September 29, 2000 are not necessarily indicative of
the operating results for the full year.
2. Inventories consist of the following:
<TABLE>
<S> <C> <C>
Sept. 29, Dec. 31,
(in thousands) 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
Raw materials and supplies $21,922 $25,698
Work in process 23 22
Finished goods 40,856 46,950
------------------------------
$62,801 $72,670
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3. Property, Plant and Equipment consist of the following:
<TABLE>
<S> <C> <C>
Sept. 29, Dec. 31,
(in thousands) 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
Land $ 5,589 $ 5,741
Buildings and improvements 77,278 85,411
Machinery and equipment 201,507 221,783
Office equipment and other assets 14,819 15,434
Software 5,857 5,857
Mineral rights 322 328
Construction in progress 18,772 4,960
------------------------------
324,144 339,514
Less accumulated depreciation and amortization 155,029 157,295
-----------------------------
Net Property, Plant and Equipment $169,115 $182,219
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4. 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.
5. Recent Accounting Developments
The Company recognizes revenue when product is shipped to trade customers.
The Company has reviewed SEC Staff Accounting Bulletin No.101, Revenue
Recognition in Financial Statements, issued in December 1999, and has
determined it will not have a material effect on the Company's
consolidated financial statements.
<PAGE>
During the third quarter, the Emerging Issues Task Force issued EITF
00-10, "Accounting for Shipping and Handling Fees and Costs". This EITF
issue addresses income statement classification of amounts charged to
customers for shipping and handling, as well as for costs incurred related
to shipping and handling. The issue requires amounts invoiced to customers
that relate to this be included as part of revenue and suggests the
expense classified in cost of sales. The Company's Specialty Products
Division currently offsets amounts charged to customers in cost of sales.
This reclassification is approximately $10 million annually.
The EITF also issued EITF 00-14, "Accounting for Certain Sales
Incentives". This issue addresses the income statement classification for
offers by a vendor directly to end consumers that are exercisable after a
single exchange transaction in the form of coupons, rebate offers, or free
products or services disbursed on the same date as the underlying exchange
transaction. The issue requires the cost of these items to be accounted
for as a reduction of revenues, not included as a marketing expense as the
Company does today. This reclassification is approximately $20 million
annually.
Both EITF issues are effective for the fourth quarter 2000 and there is no
net income impact.
In June 1998, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for
Derivative Instruments and Hedging Activities." This Statement requires
that all derivatives be recorded in the balance sheet as either an asset
or liability measured at fair value. The Statement requires that changes
in a derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. In June 1999, the FASB issued
SFAS No. 137, which deferred the effective date of adoption of SFAS No.
133 for one year. The Company will adopt SFAS No. 133 in the 2001
financial statements. The Company continues to evaluate this Statement
and, based on available information, there does not appear to be a
material impact on the Company's consolidated financial statements.
6. Restructuring, Impairment and Other Items
During the quarter, the Company recorded a pre-tax charge of $21.9 million
relating to three major elements: a $14.3 million book write-down of the
Company's Syracuse N.Y. manufacturing facility, a $2.1 million charge for
potential carrying and site clearance costs, and a $5.5 million severance
charge related to both the Syracuse shutdown and the sales force
reorganization. The Company expects to incur a further $1.9 million in
accelerated depreciation from the plant shutdown and an estimated $3
million in integration costs over the next 9 to 12 months. These
additional charges, most of which will flow through cost of sales, will
bring the total one-time cost to approximately $27 million. The cash
portion of this one-time cost, however, will be less that $5 million after
tax.
During 1999, the Company recorded a pre-tax charge of $6.6 million for
impairment and certain other items relating to a planned plant shutdown
which included the rationalization of both toothpaste and powder laundry
detergent production.
Components of the outstanding reserve balance included in accounts payable
accrued expenses consist of the following:
<TABLE>
<S> <C> <C> <C> <C>
Disposals/
Reserves at Restructuring Adjustments Reserves at
(In thousands) Dec. 31, 1999 Charge Payments Sept. 29, 2000
--------------------------------------------------------------------------------------------------------------------------------
Severance and other charges $268 $ 5,458 $ 17 $5,743
Fixed asset write-down and
Demolition - 16,453 (14,324) 2,129
---------------------------------------------------------------------------------------------------------------------------------
$268 $21,911 ($14,307) $7,872
</TABLE>
7. Segment Information
Segment sales and operating profit/(loss) for the third quarter and year
to date 2000 and 1999 are as follows:
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Unconsolidated
(In thousands) Consumer Specialty Affiliates Corporate Total
-----------------------------------------------------------------------------------------------------------------------------------
Net Sales
Third quarter 2000 $161,021 $44,842 $(6,016) - $199,847
Third quarter 1999 149,683 42,964 (6,698) - 185,949
Year to date 2000 477,763 131,901 (18,322) - 591,342
Year to date 1999 441,546 124,731 (19,255) - 547,022
Operating Profit/(Loss)
Third quarter 2000 14,004 7,056 (843) (21,911) (1,694)
Third quarter 1999 13,035 6,318 (1,355) (435) 17,563
Year to date 2000 40,135 20,059 (1,972) (21,911) 36,311
Year to date 1999 29,897 20,306 (5,272) 5,582 50,513
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Product line net sales data for the third quarter and year to date periods are as follows:
<S> <C> <C> <C> <C> <C> <C> <C>
Laundry and Oral and Uncon-
Household Personal Deodor- Specialty Animal Specialty solidated
Cleaners Care izing Chemicals Nutrition Cleaners Affiliates Total
-----------------------------------------------------------------------------------------------------------------------------------
3rd Qtr 2000 $75,756 $38,534 $46,731 $25,995 $16,974 $1,873 $(6,016) $199,847
3rd Qtr 1999 66,393 40,958 42,332 24,918 15,301 2,745 (6,698) 185,949
YTD 2000 232,757 119,639 125,367 77,777 48,087 6,037 (18,322) 591,342
YTD 1999 204,011 122,759 114,776 72,046 45,470 7,215 (19,255) 547,022
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8. Comprehensive Income
The following table presents the Company's Comprehensive Income for the
three and nine months ending September 29, 2000 and October 1, 1999.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- ----------------------
<S> <C> <C> <C> <C>
Sept. 29 Oct. 1, Sept. 29 Oct. 1,
(in thousands) 2000 1999 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net Income $(1,236) $11,379 $22,871 $34,200
Other Comprehensive Income, net of tax:
Foreign exchange translation adjustments (534) (535) (1,145) (4,331)
Available for Sale securities 252 - (2,099) -
------------------------- ----------------------
Comprehensive Income/(Loss) $(1,518) $10,844 $19,627 $29,869
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9. ARMUS LLC Joint Venture
On June 14, 2000, the Company announced it was forming a joint venture
with USA Detergents which will combine both Companies laundry detergent
businesses. The new venture, named Armus LLC, encompasses Church &
Dwight's ARM & HAMMER Powder and Liquid Laundry Detergents and USA
Detergent's XTRA(R) Powder and Liquid Detergents and Nice'n FLUFFY(R)
Liquid Fabric Softener brands.
Under the terms of the agreement:
a) Church & Dwight purchased 1.4 million shares of USA Detergents common
stock for $10.1 million or $7 per share and agreed to acquire a
further 5% interest for $5 million on or around January 1, 2001.
<PAGE>
b) The two partners will combine the marketing, sales and distribution
of their laundry detergents. Both companies will continue to operate
their own plants and the employees of each company will remain with
their current employer.
c) Church & Dwight will have a majority on the venture's Board and the
General Manager will be a Church & Dwight employee.
d) Church & Dwight's share of the profits will range from 55% to 65%
depending on the venture's profit level.
e) Church & Dwight has an option to purchase USA Detergent's partnership
interest after 5 years and USA Detergents has an option to sell its
interest to C&D after 10 years. In each case, the purchase price will
be computed using a formula based on the venture's earnings for the
two previous years of operations.
The value of USA Detergent's stock on the date of closing was $6.8 million
or $4.75 per share. The stock has been classified as Available for Sale
and is marked to market on each reporting date through other comprehensive
income, net of applicable deferred income taxes.
The Company agreed to purchase additional shares on or about January 1,
2001, i.e. a forward contract, which is marked to market through other
comprehensive income.
As a result of the above joint venture agreement, goodwill of $4.8 million
has been recorded and will be amortized over a period of 10 years.
10. 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.
11. Reclassification
Certain prior year amounts have been reclassified in order to conform with
the current year presentation.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
Results of Operations
---------------------
For the quarter ended September 29, 2000, the Company recorded a net loss of
$(1.2) million, equivalent to basic earnings/(loss) of $(.03) per share, from
$11.4 million or $.29 per share, in last year's third quarter. Diluted
earnings/(loss) were $(.03) per share compared to $.28 per share last year. The
Company recorded a pre-tax charge of $21.9 million or $.35 per share relating to
the planned shutdown of the Syracuse N.Y. manufacturing facility as a result of
the formation of the ARMUS joint venture. Excluding this charge, net income
would have been $12.7 million or $.32 per share. For the first nine months of
2000, net income was $22.9 million or basic earnings of $.60 per share compared
to $34.2 million or $.88 per share last year. Diluted earnings were $.57 per
share compared to $.84 per share last year. The prior year results include a net
pre-tax gain of $5.6 million or $.08 per share from the sale of mineral reserves
partially offset by plant impairment charges relating to a plant closing.
Excluding the one-time items in both years, net income rose 19% to $36.8 million
this year from $30.8 million last year and diluted earnings per share rose 21%
to $.92 per share this year from $.76 per share last year.
Net sales for the quarter increased by 7.5% to $199.8 million from $185.9
million in the same period last year. Consumer product sales increased 7.6%, led
by strong growth in toothpaste, laundry detergent, cat litter and the recently
acquired bathroom cleaner brands. This was partially offset by lower deodorant
and gum sales. Specialty products sales increased 7.2% led by growth in animal
nutrition.
Net sales for the first nine months of 2000 increased 8.1% to $591.3 million,
with consumer products up 8.2% and specialty products up 7.7%. This year's
number includes two acquisitions completed in 1999: the Brazilian specialty
chemical company QGN, in which the Company acquired a controlling interest in
May and the two bathroom cleaners, SCRUB FREE(R) and CLEAN SHOWER(R) acquired in
December. Excluding the product lines acquired last year, sales of established
consumer products increased 1.8% and specialty products .6%. Deodorizing
products increased primarily due to strong Cat Litter sales, while Laundry &
Household Cleaning (exclusive of the bathroom cleaning products) was virtually
unchanged and Oral & Personal Care products were slightly lower.
The Company's gross margin of 45.1% and 44.7% for the quarter and nine-month
period, respectively, was slightly lower versus the same periods of 1999. The
current year's periods benefited from the elimination of co-packers to meet
higher than expected order requirements in 1999 and manufacturing and
distribution efficiencies in 2000, stemming partially from the Greenville plant
shutdown in 1999. These favorable margin improvements were offset by higher raw
and packaging materials for consumer products.
Advertising, consumer and trade promotion expenses were higher for the quarter
and nine month periods. Increased advertising on Deodorizing products, and
expenses associated with the bathroom cleaning products acquired late in 1999
were partially offset by lower expenses for ARM & HAMMER DENTAL CARE GUM and
Deodorant.
Selling, general and administrative expenses decreased $.4 million in the
current quarter and increased $2.4 million for the nine month period. The
decrease in the quarter is largely due to lower selling expenses as the Company
has combined its sales force with USA Detergent as a first step in making ARMUS
operational, supported by a single national broker organization. This decrease
is partially offset by personnel-related costs, and amortization of intangibles
relating to the bathroom cleaners acquisition. The increase for the nine month
period was also due to higher personnel related costs, and amortization of
intangibles, partially offset by lower deferred compensation liability.
During the quarter, the Company recorded a pre-tax charge of $21.9 million
relating to three major elements: a $14.3 million book write-down of the
Company's Syracuse N.Y. manufacturing facility, a $2.1 million charge for
potential carrying and site clearance costs, and a $5.5 million severance charge
related to both the Syracuse shutdown and the sales force reorganization. The
Company expects to incur a further $1.9 million in accelerated depreciation from
the plant shutdown and an estimated $3 million in integration costs over the
next 9 to 12 months. These additional charges, most of which will flow through
cost of sales, will bring the total one-time cost to approximately $27 million.
The cash portion of this one-time cost, however, will be less that $5 million
after tax, and the Company expects to recover this amount from synergies and
other sources by year-end 2001.
During the second quarter the ArmaKleen Company, a 50/50 joint venture between
Church & Dwight and the Safety- Kleen Company recorded a bad debt provision
relating to Safety-Kleen filing chapter 11. This caused the ArmaKleen Company to
record a $1.4 million charge in the quarter, resulting in a $.7 million charge
to Church & Dwight. The Company believes that the debtor in possession financing
in place for Safety-Kleen, along with the relief of its pre-petition debt load,
will enable it to emerge from chapter 11 as a going concern, thereby enabling
the viability of the ArmaKleen Company. Should the Company be wrong in its base
assumption about the viability of the ArmaKleen Company because the business
with Safety-Kleen no longer exists, the results of operations and balance
position of the Company would be adversely affected.
ArmaKleen's results and lower earnings from Armand Products caused earnings from
affiliates to be lower from last year for both the quarter and nine month
periods.
Investment income increased the nine month period due to the receipt of interest
from the Fluid Packaging note.
Interest Expense was higher in both the three and nine month periods due to an
increased amount of debt.
The effective tax rate for the nine months was 35.0%, down from 37.0% from last
year. The decrease in the rate is a result of a lower effective state tax rate
and lower taxes related to foreign activity.
Minority interest represents 25% of the net income associated with the Company's
Brazilian subsidiary.
Liquidity and Capital Resources
-------------------------------
The Company considers cash and short-term investments as the principal
measurement of its liquidity. At September 29, 2000, cash, including cash
equivalents and short-term investments totaled $22.4 million as compared to
$23.8 million at December 31,1999.
During the first nine months of 2000, the Company generated $73.0 million of
cash flow from operating activities, received $3.0 million from Fluid Packaging,
and $4.6 million from stock options exercised. Significant expenditures include
the net repayment of debt of $27.3 million, the purchase of treasury stock of
$20.1 million, additions to property, plant and equipment of $14.9 million, the
purchase of 1.4 million shares of USA Detergent for $10.4 million and cash
dividends of $8.1 million.
ARMUS LLC Joint Venture
-----------------------
On June 14, 2000, the Company announced it was forming a joint venture with USA
Detergents which will combine both Companies laundry detergent businesses. The
new venture, named Armus LLC, encompasses Church & Dwight's ARM & HAMMER Powder
and Liquid Laundry Detergents and USA Detergents' XTRA Powder and Liquid
Detergents and NICE `N FLUFFY Liquid Fabric Softener brands.
Under the terms of the agreement:
1) Church & Dwight purchased 1.4 million shares of USA Detergents common stock
for $10.1 million or $7 per share and agreed to acquire a further 5%
interest for $5 million on or around January 1, 2001.
2) The two partners will combine the marketing, sales and distribution of
their laundry detergents. Both companies will continue to operate their own
plants and the employees of each company will remain with their current
employer.
3) Church & Dwight will have a majority on the venture's Board and the General
Manager will be a Church & Dwight employee.
4) Church & Dwight's share of the profits will range from 55% to 65% depending
on the venture's profit level.
5) Church & Dwight has an option to purchase USA Detergent's partnership
interest after 5 years and USA Detergents has an option to sell its
interest to C&D after 10 years. In each case, the purchase price will be
computed using a formula based on the venture's earnings for the two
previous years of operations.
The value of USA Detergent's stock on the date of closing was $6.8 million or
$4.75 per share. The stock has been classified as Available for Sale and is
marked to market on each reporting date through other comprehensive income, net
of applicable deferred income taxes.
The Company agreed to purchase additional shares on or about January 1, 2001,
i.e. a forward contract, which is marked to market through other comprehensive
income.
As a result of the above joint venture agreement, goodwill of $4.8 million has
been recorded and will be amortized over a period of 10 years.
Fluid Note Receivable
---------------------
In conjunction with the July 1998 purchase of the Lakewood, New Jersey,
manufacturing facility, the Company loaned Fluid Packaging Co., Inc. $3.0
million at an interest rate of 8% per annum. The note was payable no later than
July 15, 1999 and was secured by a pledge of and security interest in 65% of the
capital stock of Allied Mexico, S.A. de C.V., a wholly-owned subsidiary of Fluid
Packaging.
During the second quarter of 2000, the Company received, full payment
for the note, all interest due and partial out of pocket expenses incurred to
collect the note.
Cautionary Note on Forward-Looking Statements
---------------------------------------------
This report contains forward-looking statements relating, among others, to
financial objectives, sales growth and cost reduction programs. Many of these
statements depend on factors outside the Company's control, such as economic
conditions, market growth and consumer demand, competitive products and pricing,
raw material costs and other matters. With regard to new product introductions,
there is particular uncertainty related to trade, competitive and consumer
reactions. If the Company's assumptions are incorrect, or there is a significant
change in some of these key factors, the Company's performance could vary
materially from the forward-looking statements in this report.
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Computation of earnings per share
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed for the three months ended
September 29, 2000.
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
EXHIBIT 11 - Computation of Earnings Per Share
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sept. 29, Oct. 1, Sept. 29, Oct. 1,
2000 1999 2000 1999
------------ ------------ ------------ ------------
BASIC:
Net Income/(Loss) $(1,236) $11,379 $22,871 $34,200
Weighted average shares outstanding 38,235 38,837 38,355 38,780
Basic earnings/(loss) per share $(0.03) $0.29 $0.60 $0.88
DILUTED:
Net Income/(Loss) $(1,236) $11,379 $22,871 $34,200
Weighted average shares outstanding 38,235 38,837 38,355 38,780
Incremental shares under stock option plans 1,401 2,260 1,576 2,107
------------ ------------ ------------ ------------
Adjusted weighted average shares outstanding 39,636 41,097 39,931 40,887
------------ ------------ ------------ ------------
Diluted earnings/(loss) per share $(0.03) $0.28 $0.57 $0.84
</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: November 9, 2000 Zvi Eiref
------------------------------------ ---------
ZVI EIREF
VICE PRESIDENT FINANCE AND
CHIEF FINANCIAL OFFICER
DATE: November 9, 2000 Gary P. Halker
------------------------------------- --------------
GARY P. HALKER
VICE PRESIDENT, CONTROLLER AND
CHIEF INFORMATION OFFICER
