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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 March 31, 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 May 5, 2000, there were 38,113,504 shares of Common
Stock outstanding.
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<PAGE>
PART I - FINANCIAL INFORMATION
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
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<S> <C> <C>
March 31, April 2,
(In thousands, except per share data) 2000 1999
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Net Sales $191,632 $174,708
Cost of sales 107,155 97,590
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Gross Profit 84,477 77,118
Advertising, consumer and trade promotion expenses 44,464 44,572
Selling, general and administrative expenses 21,349 21,024
Gain on sale of mineral rights - (11,772)
Impairment and other items - 5,320
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Income from Operations 18,664 17,974
Equity in earnings of affiliates 854 2,020
Investment earnings 319 372
Other income (expense) 250 102
Interest expense (1,377) (605)
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Income before taxes 18,710 19,863
Income taxes 6,923 7,498
Minority interest; net of taxes 55 -
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Net Income 11,732 12,365
Retained earnings at beginning of period 253,885 218,618
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265,617 230,983
Dividends paid 2,718 2,321
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Retained earnings at end of period $262,899 $228,662
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Weighted average shares outstanding - Basic 38,679 38,708
Weighted average shares outstanding - Diluted 40,449 40,724
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Earnings Per Share:
Net income per share - Basic $.30 $.32
Net income per share - Diluted $.29 $.30
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Dividends Per Share: $.07 $.06
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</TABLE>
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
(Dollars in thousands) Mar. 31, 2000 Dec. 31, 1999
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Assets (Unaudited)
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Current Assets
Cash and cash equivalents $ 14,715 $ 19,765
Short-term investments 5,000 4,000
Accounts receivable, less allowances of $1,639 and $1,552 65,775 64,505
Inventories (Note 2) 77,855 72,670
Deferred income taxes 8,347 8,221
Prepaid expenses 6,936 6,622
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Total Current Assets 178,628 175,783
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Property, Plant and Equipment (Net) (Note 3) 183,759 182,219
Note Receivable 3,000 3,000
Equity Investment in Affiliates 23,388 20,177
Long-Term Supply Contracts 4,268 4,105
Goodwill and Other Intangibles 82,766 83,744
Other Assets 9,195 7,278
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Total Assets $485,004 $476,306
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Liabilities and Stockholders' Equity
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Current Liabilities
Short-term borrowings $ 33,259 $ 25,574
Accounts payable and accrued expenses 115,719 106,109
Current portion of long-term debt 685 685
Income taxes payable 12,597 8,240
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Total Current Liabilities 162,260 140,608
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Long-Term Debt 47,930 58,107
Deferred Income Taxes 20,889 20,416
Deferred Liabilities 11,003 11,860
Nonpension Postretirement and Postemployment Benefits 15,351 15,145
Minority Interest 3,639 3,437
Commitments and Contingencies
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 19,449 18,356
Retained earnings 262,899 253,885
Accumulated other comprehensive (loss) (4,309) (4,599)
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324,700 314,303
Common stock in treasury, at cost:
8,482,284 shares in 2000 and 7,805,152 shares in 1999 (100,219) (87,021)
Due from shareholder (549) (549)
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Total Stockholders' Equity 223,932 226,733
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Total Liabilities and Stockholders' Equity $485,004 $476,306
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</TABLE>
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Three Months Ended
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<S> <C> <C>
(Dollars in thousands) Mar. 31, 2000 Apr. 2, 1999
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Cash Flow From Operating Activities
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Net Income $11,732 $12,365
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion and amortization 5,597 4,529
Equity in earnings of affiliates (854) (2,020)
Deferred income taxes 372 (191)
Gain on sale of mineral rights - (11,772)
Disposal of fixed assets - 4,612
Other (8) 117
Change in assets and liabilities:
(Increase) decrease in accounts receivable (1,213) 3,148
(Increase) in inventories (5,038) (5,087)
(Increase) in prepaid expenses (692) (2,223)
Increase in accounts payable 9,490 3,351
Increase in income taxes payable 4,721 7,355
(Decrease) increase in other liabilities (593) 2,348
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Net Cash Provided By Operating Activities 23,514 16,532
Cash Flow From Investing Activities
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(Increase) in short-term investments (1,000) (1,009)
Additions to property, plant and equipment (5,358) (5,415)
Proceeds from sale of mineral rights - 3,000
Distributions from affiliates 323 1,158
Investment in affiliates (2,680) (150)
Purchase of other assets (1,910) (2,157)
Proceeds from note receivable - 360
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Net Cash Used In Investing Activities (10,625) (4,213)
Cash Flow From Financing Activities
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Proceeds (repayments) from short-term borrowing 7,587 (5,500)
Proceeds from stock options exercised 1,408 2,640
Purchase of treasury stock (13,934) (1,652)
Payment of cash dividends (2,718) (2,321)
Long-term debt repayments (10,282) (1,500)
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Net Cash (Used In) Financing Activities (17,939) (8,333)
Net Change In Cash and Cash Equivalents (5,050) 3,986
Cash And Cash Equivalents At Beginning Of Year 19,765 16,189
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Cash And Cash Equivalents At End Of Period $14,715 $20,175
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</TABLE>
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of March 31, 2000, the consolidated
statements of income and retained earnings for the three months ended March 31,
2000 and April 2, 1999 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 31, 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 March 31,
2000 are not necessarily indicative of the operating results for the full year.
<TABLE>
<CAPTION>
<S> <C> <C>
2. Inventories consist of the following: Mar. 31, Dec. 31,
(In thousands) 2000 1999
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Raw materials and supplies $25,500 $25,698
Work in process 23 22
Finished goods 52,332 46,950
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$77,855 $72,670
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</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
3. Property, Plant and Equipment consist of the following: Mar. 31, Dec. 31,
(In thousands) 2000 1999
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Land $ 5,775 $ 5,741
Buildings and improvements 85,761 85,411
Machinery and equipment 222,849 221,783
Office equipment and other assets 15,373 15,434
Software 5,857 5,857
Mineral rights 342 328
Construction in progress 10,258 4,960
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346,215 339,514
Less accumulated depreciation, depletion and amortization 162,456 157,295
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Net Property, Plant and Equipment $183,759 $182,219
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</TABLE>
<PAGE>
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. Impairment and Other Items
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 and accrued expenses consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Reserves at Reserves at
(In thousands) Dec. 31, 1999 (Payments) Mar. 31, 2000
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Severance and other charges $268 $(26) $242
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</TABLE>
6. Segment Information
Segment sales and operating profit for the first quarter of 2000 and 1999 are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Unconsolidated
(In thousands) Consumer Specialty Affiliates Corporate Total
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Net Sales
First quarter 2000 $155,452 $42,190 $(6,010) - $191,632
First quarter 1999 143,108 37,910 (6,310) - 174,708
Operating Profit
First quarter 2000 12,738 6,755 (829) - 18,664
First quarter 1999 7,521 5,967 (1,966) 6,452 17,974
</TABLE>
<TABLE>
<CAPTION>
Product line net sales data for the first quarter periods are as follows:
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<S> <C> <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
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1st Qtr 2000 $77,252 $41,570 $36,630 $25,079 $14,970 $2,141 $(6,010) $191,632
1st Qtr 1999 69,030 40,851 33,227 20,668 15,004 2,238 (6,310) 174,708
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</TABLE>
<PAGE>
7. Comprehensive Income
The following table presents the Company's Comprehensive Income for the three
months ending March 31, 2000 and April 2, 1999:
<TABLE>
<CAPTION>
Three Months Ended
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<S> <C> <C>
March 31, April 2,
(In thousands) 2000 1999
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Net Income $11,732 $12,365
Other Comprehensive Income, net of tax:
Foreign exchange translation adjustments 290 (113)
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Comprehensive Income $12,022 $12,252
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</TABLE>
8. 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.
9. 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
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For the quarter ended March 31,2000, net income was $11.7 million, equivalent to
basic earnings of $.30 per share, from $12.4 million or $.32 per share, in last
years first quarter. Diluted earnings were $.29 per share compared to $.30 per
share last year. This year's results include an unusual pretax gain of $2.1
million from a reduction in deferred compensation liability related to the sharp
decline in the Company's share price during the quarter; last year's results
included a $6.5 million pretax net gain from the sale of mineral reserves
partially offset by plant impairment charges. Excluding the unusual gains in
both years, net income rose 24% to $10.4 million or $.26 per share compared to
$8.4 million or $.21 per share last year.
Sales increased 9.7% to $191.6 million from $174.7 million in the comparable
period last year. This year's number includes two acquisitions completed in
1999: the Brazilian specialty chemicals 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 these acquisitions,
the sales of existing brands and product lines rose approximately 2% for the
quarter. On the consumer products side of the business, deodorizer sales
increased due to strong cat litter growth; laundry and cleaning products rose
due to the newly acquired bathroom cleaner brands; and oral and personal care
products were slightly higher, led by strong toothpaste growth. On the specialty
products side, specialty chemicals increased due to the acquisition of the
Brazilian business, and animal nutrition and specialty cleaner sales were flat.
In the same period last year, sales increased 15% due largely to heavy promotion
spending in support of new consumer products and exceptional growth for the
animal nutrition business.
Gross margin was 44.1% in the quarter, unchanged versus a year ago. This
reflects manufacturing and distribution efficiencies offset by higher raw and
packaging materials for consumer products and plant startup costs.
Advertising, consumer and trade promotion expenses were essentially unchanged
versus 1999. Increases in laundry and household cleaners and deodorizing
products were offset by reductions in oral and personal care products.
Selling, general and administrative expenses increased slightly from $21.0
million to $21.3 million. Higher selling, personnel-related costs and
amortization of intangibles related to the bathroom cleaners acquisition were
virtually offset by reduction in deferred compensation liability.
Earnings from affiliates were lower as a result of a decline in Armand Products
earnings and consolidating the results of the Brazilian subsidiary in 2000.
Interest expense increased from last year as a result of the debt needed to
acquire the bathroom cleaner products and the consolidation of the Brazilian
subsidiary.
The effective tax rate for the quarter was 37.0%, down from 37.7% in last year's
first quarter which reflects the lower tax rate associated with the Brazilian
subsidiary.
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 31,2000, cash including cash equivalents
and short-term investments totaled $19.7 million as compared to $23.8 million at
December 31,1999.
During the first quarter of 2000, the Company generated $23.5 million of cash
flow from operating activities and received $1.4 million from stock option
exercises. Significant expenditures include the purchase of 805,000 shares of
treasury stock for $13.9 million, net debt repayments of $2.7 million, property
plant and equipment additions of $5.4 million and the payment of cash dividends
of $2.7 million.
<PAGE>
Fluid Note Receivable
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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 is 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.
The note was not paid by its maturity date. The Company is proceeding toward the
resolution of the matter, leading to the collection of the note. After reviewing
the value of the collateral, the Company believes the carrying value of the note
is fully recoverable.
Cautionary Note on Forward-Looking Statements
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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 March
31, 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
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<S> <C> <C>
March 31, April 2,
2000 1999
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BASIC:
Net Income $11,732 $12,365
Weighted average shares outstanding 38,679 38,708
Basic earnings per share .30 $.32
DILUTED:
Net Income $11,732 $12,365
Weighted average shares outstanding 38,679 38,708
Incremental shares under stock option plans 1,770 2,016
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Adjusted weighted average shares outstanding 40,449 40,724
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Diluted earnings per share $.29 $.30
</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 8, 2000 Zvi Eiref
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ZVI EIREF
VICE PRESIDENT FINANCE
DATE: May 8, 2000 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 14,715
<SECURITIES> 5,000
<RECEIVABLES> 67,414
<ALLOWANCES> 1,639
<INVENTORY> 77,855
<CURRENT-ASSETS> 178,628
<PP&E> 346,215
<DEPRECIATION> 162,456
<TOTAL-ASSETS> 485,004
<CURRENT-LIABILITIES> 162,260
<BONDS> 47,930
0
0
<COMMON> 46,661
<OTHER-SE> 177,271
<TOTAL-LIABILITY-AND-EQUITY> 485,004
<SALES> 191,632
<TOTAL-REVENUES> 191,632
<CGS> 107,155
<TOTAL-COSTS> 65,813
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 1,377
<INCOME-PRETAX> 18,710
<INCOME-TAX> 6,923
<INCOME-CONTINUING> 11,732
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,732
<EPS-BASIC> 0.30
<EPS-DILUTED> 0.29
</TABLE>
