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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8714
TAMBRANDS INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-1366500
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
777 Westchester Avenue, White Plains, New York 10604
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(Address of principal executive offices) (Zip code)
Registrant's telephone number,
including area code (914) 696-6000
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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 12 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 .
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, par value $.25 per share: 36,730,296 shares
as of April 29, 1994
Index to Exhibits is set forth at page 8.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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TAMBRANDS INC. AND SUBSIDIARIES
Consolidated Statements of Earnings and Retained Earnings
Three Months Ended March 31, 1994 and 1993
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
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1994 1993
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<S> <C> <C>
Net sales $139,173 $154,348
Cost of products sold 43,921 49,218
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Gross profit 95,252 105,130
Selling, administrative and general expenses:
Marketing, selling and distribution 44,322 40,377
Administrative and general 14,015 14,311
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58,337 54,688
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Operating income 36,915 50,442
Interest, net and other (1,924) 656
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Earnings before provision for income taxes and
cumulative effect of accounting change 34,991 51,098
Provision for income taxes 12,947 18,907
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Earnings before cumulative effect of accounting
change 22,044 32,191
Cumulative effect of accounting change - (10,252)
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Net earnings 22,044 21,939
Retained earnings at beginning of period 430,822 433,851
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452,866 455,790
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Dividends 15,809 14,893
Net issuance of treasury stock (55) 633
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15,754 15,526
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Retained earnings at end of period $437,112 $440,264
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Per share:
Earnings before cumulative effect of accounting
change $0.58 $0.82
Cumulative effect of accounting change - (0.26)
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Net earnings $0.58 $0.56
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Dividends per share $0.42 $0.38
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Average shares of common stock
outstanding during the period 37,715 39,133
</TABLE>
See accompanying notes to consolidated financial statements on page 5.
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TAMBRANDS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1994 and December 31, 1993
(in thousands)
<TABLE>
<CAPTION>
1994
ASSETS (Unaudited) 1993
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<S> <C> <C>
Current Assets:
Cash and cash equivalents $17,958 $15,298
Marketable securities 439 639
Accounts receivable, less allowance
for doubtful accounts of $1,463
in 1994 and $1,453 in 1993 73,062 75,592
Inventories:
Raw materials 8,523 10,140
Finished goods 34,190 27,860
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42,713 38,000
Deferred taxes on income 20,427 20,427
Prepaid expenses and other current assets 23,720 23,806
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Total Current Assets 178,319 173,762
Property, Plant and Equipment 285,404 275,349
Less accumulated depreciation (99,836) (94,953)
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185,568 180,396
Brands, Trademarks, Patents and
Other Intangibles, Net 7,126 8,240
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Total Assets $371,013 $362,398
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current Liabilities:
Short-term borrowings $86,721 $64,368
Accounts payable 25,524 25,793
Accrued expenses 82,674 81,083
Taxes on income 29,197 15,137
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Total Current Liabilities 224,116 186,381
Medium-Term Notes Payable 49,977 30,000
Deferred Taxes on Income 17,364 17,119
Other Liabilities 13,938 13,873
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Total Liabilities 305,395 247,373
Shareholders' Equity:
Common Stock 10,887 10,887
Retained earnings 437,112 430,822
Cumulative foreign currency translation
adjustment (21,057) (20,659)
Treasury stock (359,205) (303,948)
Unamortized value of restricted stock and
pension costs (2,119) (2,077)
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Total Shareholders' Equity 65,618 115,025
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Total Liabilities and Shareholders' Equity $371,013 $362,398
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</TABLE>
See accompanying notes to consolidated financial statements on page 5.
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TAMBRANDS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1994 and 1993
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $22,044 $21,939
Adjustments to reconcile Net earnings to Net
Cash Provided by Operating Activities:
Depreciation and amortization 5,566 4,406
Deferred income taxes 190 (12)
Cumulative effect of accounting change - 10,252
Restructuring and other (937) (1,686)
Change in:
Accounts receivable 2,980 3,802
Inventories (4,435) (5,916)
Prepaid expenses and other current assets 424 414
Taxes on income 14,099 12,588
Accounts payable and accrued expenses (1,118) (12,493)
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Net Cash Provided by Operating Activities 38,813 33,294
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Cash Flows from Investing Activities:
Capital expenditures (10,586) (12,217)
Proceeds from sales of property, plant
and equipment 1,269 213
Proceeds from sales of marketable securities, net - 307
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Net Cash Used in Investing Activities (9,317) (11,697)
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Cash Flows from Financing Activities:
Payment of dividends (15,809) (14,893)
Purchase of shares for treasury (53,752) (2,212)
Short-term debt changes 22,376 (18,259)
Issuance of Medium-Term Notes 19,977 -
Proceeds from exercise of stock options and other 351 1,700
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Net Cash Used in Financing Activities (26,857) (33,664)
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Effect of Exchange Rate Changes on Cash 21 542
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Net Increase (Decrease) in Cash and Cash
Equivalents 2,660 (11,525)
Cash and Cash Equivalents at Beginning
of Period 15,298 21,987
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Cash and Cash Equivalents at End of Period $17,958 $10,462
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</TABLE>
See accompanying notes to consolidated financial statements on page 5.
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Notes to Consolidated Financial Statements
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1. The financial statements reflect all adjustments that, in the opinion of
management, are necessary for a fair presentation of the information
contained therein, and are subject to audit and adjustment at the end of
the fiscal year, with the exception of the Consolidated Balance Sheet at
December 31, 1993, which has been derived from the audited financial
statements at that date.
2. The 1993 Statement of Earnings and Retained Earnings and Statement of Cash
Flows have been restated to reflect the cumulative effect of the adoption
of Statement of Financial Accounting Standards (SFAS) No. 112, "Employers'
Accounting for Postemployment Benefits," effective January 1, 1993.
Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Results of Operations
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First-quarter Net sales decreased 9.8% compared with the same period of the
prior year. The decline was due to lower volumes, principally in the United
States, which resulted primarily from continuing reduction in trade customer
inventories. Additionally, first quarter 1993 included introductory shipments
of a new 20-count package size. Unfavorable foreign exchange translation caused
by weaker European currencies also contributed to lower sales but was somewhat
mitigated by inclusion of operations which were not previously consolidated.
Gross profit as a percent of Net sales was 68.4% for the first quarter, up .3%
from the same period in 1993, primarily as a result of the Company's continued
worldwide manufacturing efficiency programs and capital expenditures for
productivity improvements.
Marketing, selling and distribution expenses were 9.8% above the same period
last year, reflecting primarily the significant increase in advertising support
behind the TAMPAX tampon franchise in the United States. In the first quarter
of 1994, the tampon category in the United States grew, supported by the
Company's advertising campaign. However, the Company's market share was
adversely affected by heavy promotional activity of competitors.
Operating income for the three months decreased by 26.8% from 1993 as a result
of the lower sales and increases in marketing support noted above.
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Interest, net and other was $1.9 million of expense in the first quarter of 1994
versus $.7 million of income in the same period last year. A net loss was
experienced on foreign exchange transactions in the current year as compared
with gains reported in 1993. In addition, interest expense was higher on an
increase in the Company's debt level.
The effective tax rate for the first quarter of 1994 was 37%, unchanged from the
same period in 1993.
Earnings per share were $.58 compared with $.82 in the same period of last year
before the cumulative effect of the adoption of SFAS No. 112. Including the
cumulative effect of the accounting change, first quarter 1993 Earnings per
share were $.56. The increase in Earnings per share was greater than that of
Net earnings because fewer shares were outstanding on average due to the
Company's share repurchase program.
Outlook
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The Company believes that the recent trend by retailers and distributors to
reduce inventories and the related adverse impact on shipments will continue in
future periods. However, the rate of inventory reduction in future periods is
expected to be less than the rate of reduction previously experienced.
Management expects that highly competitive conditions will continue, including
higher levels of promotional activities and new product introductions by
competitors and further growth in private label tampons. The Company intends to
continue the increased advertising and promotional activities in the United
States and Europe to provide support for the TAMPAX tampon franchise. Such
expenditures will exceed 1993 spending levels. In addition, new product
introductions are planned by the Company for the second half of 1994 in both the
United States and Europe.
Financial Condition
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At March 31, 1994, there was a working capital deficit of $45.8 million compared
with a deficit of $12.6 million at December 31, 1993. The reduction in working
capital reflects short-term borrowings utilized for the Company's share
repurchase program.
Cash flows from operating activities in the first quarter amounted to $38.8
million versus $33.3 million in the prior year. The lower Net earnings were
more than offset by an improvement in working capital. Cash flows from
operations were more than adequate to fund the Company's capital expenditure and
dividend requirements.
The level of capital expenditures in the quarter was not materially different
from that of the same period in the prior year. These expenditures related to
the Company's continued investment in equipment to improve productivity and
reduce costs.
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The Company anticipates that its future cash requirements will continue to be
met by its cash flows from operations and the ability to borrow from a variety
of sources.
At March 31, 1994, total Shareholders' equity was $65.6 million compared with
$115.0 million at December 31, 1993. The net increase in Retained earnings of
$6.3 million was offset by $55.8 million related to the acquisition of Common
Stock under the share repurchase program.
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PART II - OTHER INFORMATION
Items 1, 2, 3, 4 and 5 of Part II have been omitted since either the Company's
response to the Item would be negative or the Item is inapplicable.
Item 6. Exhibits and Reports on Form 8-K
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a) Exhibits
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Exhibit
Number Description
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4(1) Description of the rights of security holders set forth in the
Certificate of Incorporation of the Company, as amended through
April 28, 1987, filed April 30, 1987 as Exhibit 4(a) to the
Company's Form S-8 Registration Statement (Reg. No. 33-13902),
incorporated herein by reference.
4(2) Description of the rights of security holders set forth in the
Certificate of Amendment of Certificate of Incorporation of the
Company, dated April 28, 1992, filed May 15, 1992 as Exhibit
4(2) to the Company's Form 10-Q Report for the quarter ended
March 31, 1992, incorporated herein by reference.
4(3) Rights Agreement between the Company and First Chicago Trust
Company of New York, as Rights Agent, dated as of October 24,
1989, which includes the Form of Right Certificate as Exhibit A
and the Summary of Rights to Purchase Common Shares as Exhibit
B, filed October 27, 1989 as Exhibit 1 to the Company's Form 8-A
Registration Statement, incorporated herein by reference.
4(4)(a) Indenture dated as of December 1, 1993 between the Company and
Citibank, N.A., as trustee,
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relating to the Company's Medium-Term Note Program, filed March
31, 1994 as Exhibit 4(4)(a) to the Company's Form 10-K Report
for the year ended December 31, 1993, incorporated herein by
reference.
4(4)(b) Form of Floating Rate Debt Security, filed December 16, 1993 as
Exhibit 4-a to the Company's Report on Form 8-K, incorporated
herein by reference.
4(4)(c) Form of Fixed Rate Debt Security, filed December 16, 1993 as
Exhibit 4-b to the Company's Report on Form 8-K, incorporated
herein by reference.
Exhibits 2, 10, 11, 15, 18, 19, 22, 23, 24 and 99 have been omitted as
inapplicable. Exhibit 27 is not currently required to be filed.
b) Reports on Form 8-K
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The Company filed a Report under Item 5 of Form 8-K on February 4, 1994 in
order to file a press release, issued by the Company on February 2, 1994,
which contained the Company's fourth-quarter 1993 results.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TAMBRANDS INC.
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(Registrant)
/s/ Raymond F. Wright
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Raymond F. Wright
Senior Vice President -
Chief Financial Officer and
Authorized Signatory
Date: May 12, 1994
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