<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
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 June 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-8714
TAMBRANDS INC.
--------------
(Exact name of registrant as specified in its charter)
Delaware 13-1366500
-------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
777 Westchester Avenue, White Plains, New York 10604
- ---------------------------------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number,
including area code (914) 696-6000
--------------
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 _____.
-----
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: 36,862,909 shares
as of July 31, 1996
Index to Exhibits is set forth at page 10.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
TAMBRANDS INC. AND SUBSIDIARIES
Consolidated Statements of Earnings and Retained Earnings
Three and Six Months Ended June 30, 1996 and 1995
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $161,307 $176,338 $330,296 $343,285
Cost of products sold 54,068 58,428 109,909 113,732
------------ ------------ ------------ ------------
Gross profit 107,239 117,910 220,387 229,553
Selling, administrative and general expenses:
Marketing, selling and distribution 72,178 66,604 132,631 125,288
Administrative and general 12,336 13,907 25,818 27,622
------------ ------------ ------------ ------------
84,514 80,511 158,449 152,910
------------ ------------ ------------ ------------
Operating income 22,725 37,399 61,938 76,643
Interest, net and other (2,294) (2,594) (4,411) (5,028)
Litigation charge - (11,396) - (11,396)
------------ ------------ ------------ ------------
Earnings before provision for income taxes 20,431 23,409 57,527 60,219
Provision for income taxes 7,416 10,372 20,882 24,360
------------ ------------ ------------ ------------
Net earnings 13,015 13,037 36,645 35,859
Retained earnings at beginning of period 482,115 463,761 476,252 457,071
------------ ------------ ------------ ------------
495,130 476,798 512,897 492,930
------------ ------------ ------------ ------------
Dividends 16,949 16,112 33,884 32,256
Net issuance of treasury stock 86 (54) 918 (66)
------------ ------------ ------------ ------------
17,035 16,058 34,802 32,190
------------ ------------ ------------ ------------
Retained earnings at end of period $478,095 $460,740 $478,095 $460,740
============ ============ ============ ============
Net earnings per share $0.35 $0.36 $1.00 $0.98
============ ============ ============ ============
Dividends per share $0.46 $0.44 $0.92 $0.88
============ ============ ============ ============
Average shares of Common Stock
outstanding during the period 36,835 36,656 36,803 36,667
</TABLE>
See accompanying notes to consolidated financial statements on page 5.
-2-
<PAGE>
<TABLE>
<CAPTION>
TAMBRANDS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
(in thousands)
1996
(Unaudited) 1995
------------ ------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $9,591 $11,135
Accounts receivable, less allowance
for doubtful accounts of $1,634
in 1996 and $1,667 in 1995 123,443 98,047
Inventories:
Raw materials 12,680 17,952
Finished goods 38,461 28,784
------------ ------------
51,141 46,736
Deferred taxes on income 18,259 17,724
Prepaid expenses and other current assets 27,427 26,271
------------ ------------
Total current assets 229,861 199,913
Property, plant and equipment 360,672 353,429
Less accumulated depreciation (145,180) (137,307)
------------ ------------
215,492 216,122
Intangible and other assets 5,839 6,014
------------ ------------
Total assets $451,192 $422,049
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Short-term borrowings $83,041 $55,063
Accounts payable 53,699 48,498
Accrued expenses 78,139 73,330
Taxes on income 23,232 27,078
------------ ------------
Total current liabilities 238,111 203,969
Medium-term obligations 69,852 80,889
Deferred taxes on income 22,983 22,537
Postemployment benefits 11,262 11,682
------------ ------------
Total liabilities 342,208 319,077
Shareholders' equity:
Common Stock 10,887 10,887
Retained earnings 478,095 476,252
Cumulative foreign currency translation adjustment (15,779) (14,223)
Treasury stock (362,189) (368,543)
Unamortized value of restricted stock and pension costs (2,030) (1,401)
------------ ------------
Total shareholders' equity 108,984 102,972
------------ ------------
Total liabilities and shareholders' equity $451,192 $422,049
============ ============
</TABLE>
See accompanying notes to consolidated financial statements on page 5.
-3-
<PAGE>
<TABLE>
<CAPTION>
TAMBRANDS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995
(in thousands)
(Unaudited)
1996 1995
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $36,645 $35,859
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 14,135 12,403
Deferred income taxes (17) 1,489
Litigation charge (391) 8,686
Restructuring and other charges (467) (2,551)
Change in:
Accounts receivable (26,417) (25,850)
Inventories (4,906) (10,705)
Prepaid expenses and other current assets (772) 768
Taxes on income (3,196) (369)
Accounts payable and accrued expenses 10,983 1,081
------------ ------------
Net cash provided by operating activities 25,597 20,811
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures (14,818) (18,359)
Proceeds from sales of property, plant
and equipment 106 427
------------ ------------
Net cash used in investing activities (14,712) (17,932)
------------ ------------
Cash Flows from Financing Activities:
Payment of dividends (33,884) (32,256)
Purchase of shares for treasury -- (4,326)
Short-term debt changes 16,792 25,106
Issuance of medium-term obligations 176 5,555
Proceeds from exercise of stock options and other 4,602 1,414
------------ ------------
Net cash used in financing activities (12,314) (4,507)
------------ ------------
Effect of exchange rate changes on cash (114) (696)
------------ ------------
Net decrease in cash and cash equivalents (1,544) (2,324)
Cash and cash equivalents at beginning of period 11,135 13,876
------------ ------------
Cash and cash equivalents at end of period $9,591 $11,552
============ ============
</TABLE>
See accompanying notes to consolidated financial statements on page 5.
-4-
<PAGE>
Notes to Consolidated Financial Statements
- ------------------------------------------
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, 1995, which has been derived from the audited financial
statements at that date.
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
- ---------------------
Net sales for the second quarter of 1996 were $161.3 million, a decrease of 9%
from the same period in the prior year. The decline is primarily attributable
to a 16% reduction in unit sales in the United States resulting from intense
competitive activity, particularly in the form of retail price promotions. The
reduced volume was partially offset by selective price increases in certain
international markets and in the United States. Net sales for the six months
ended June 30, 1996 were $330.3 million, 4% below the same period of the
preceding year. The reduction was primarily due to 9% lower unit sales in the
United States resulting from intense competitive activity as discussed above.
The lower volume was partially offset by price increases in the United States
and certain international markets. During the second quarter of 1996, the U.S.
tampon category in units remained relatively flat versus the same period of the
prior year. Tampax U.S. market share in units during the second quarter of 1996
was below the comparable period of 1995 by 4.6 percentage points primarily due
to strong competitive activity, particularly in the form of retail price
promotions.
Gross profit as a percentage of Net sales was 66.5% and 66.7% for the second
quarter and six months, respectively, versus 66.9% for each of the corresponding
periods of 1995. The lower margin in the current year is primarily the result of
the unfavorable volumes discussed above, partially offset by pricing
improvements.
-5-
<PAGE>
Marketing, selling and distribution expenses were 8% and 6% above the second
quarter and first half of 1995, respectively. The increase in the second
quarter principally reflects promotional support for the launch of Tampax
Naturals in the United States and the launch of a non-applicator tampon in
France. The same factors contributed to the elevated spending levels for the
six-month period of the current year, which were also attributable in part to
support for the relaunched Tampax flushable line in the first quarter of 1996.
The increase in brand support was partially offset by income from the
distribution of third-party products, primarily in Russia and Eastern
Europe.
Administrative and general expenses declined 11% and 7% in the second quarter
and six months of 1996, respectively, versus the same period of 1995. The
decrease is the result of management's continuing efforts to contain overhead
costs.
Operating income for the three- and six-month periods was 39% and 19%,
respectively, below the corresponding periods of 1995. The decrease was
principally attributable to the lower sales volume and increased promotional
activities, partially mitigated by favorable pricing, as discussed above.
Interest, net and other was favorable by 12% for both the second quarter and
first half of 1996, compared to the corresponding periods of the prior year. The
decrease is primarily due to a reduction in realized foreign exchange losses
from the prior year.
The effective tax rate was 36% for each of the three- and six- month periods of
1996, versus 44% and 40% for the comparable periods of 1995, respectively. The
lower effective tax rate was principally due to the litigation charge taken in
1995, which was not fully deductible, and the additional utilization of foreign
tax credits in the current year.
Earnings per share were $.35 and $1.00 for the second quarter and six months of
1996, respectively, versus $.36 and $.98 for the comparable periods of the prior
year. Earnings per share in 1995 would have been $.59 and $1.21 for the three-
and six-month periods, respectively, excluding the litigation charge taken in
the previous year.
-6-
<PAGE>
Outlook
- -------
In the early part of the third quarter of 1996, the worldwide market for
consumer products continued to be highly competitive and sensitive to price. The
Company expects that this will continue throughout the remainder of 1996.
However, management will continue to evaluate price increase opportunities as
appropriate. The Company anticipates a continuation of the current high level of
advertising and promotional activities and new product introductions by
competitors, along with continued activity in the private label sector. As
previously announced, full-year 1996 earnings are likely to be below 1995
earnings, which were $2.57 per share before the litigation charge taken in the
second quarter of that year.
The Company intends to continue to support the Tampax tampon franchise
aggressively with promotions, advertising and product line extensions in the
United States and international markets.
The cost of manufacturing continues to be impacted by the prior escalation of
raw material and packaging costs. Based on the current downward trend of pulp
and paper prices, management expects these costs to moderate somewhat through
the latter part of 1996 and the first part of 1997. The Company intends to
continue its efforts to achieve productivity improvements in order to eliminate
excess cost from the supply chain.
Financial Condition
- -------------------
At June 30, 1996, there was a working capital deficit of $8.3 million, compared
to a deficit of $4.1 million at the prior-year end. Cash flows from operating
activities for the six months ended June 30, 1996 were $25.6 million, versus
$20.8 million in the comparable period of 1995. The increase in cash flows from
operating activities is primarily attributable to higher accounts payable and
lower inventory levels, partially offset by the timing of tax payments.
Capital expenditures of $14.8 million in the six months ended June 30, 1996
represent the Company's continued investment in equipment to improve product
quality and productivity, modernize production facilities, and manufacture and
launch new products. The spending levels in 1996 are expected to approximate
those of 1995.
The Company anticipates that its future cash requirements will be met by its
cash flows from operations and the ability to borrow from a variety of sources.
-7-
<PAGE>
Information Concerning Forward-Looking Statements
- -------------------------------------------------
Statements contained in this Quarterly Report other than matters of historical
fact are forward-looking statements, and are made based on management's
expectations and beliefs concerning future developments and their potential
effect on the Company. There can be no assurance that future developments will
be in accordance with management's expectations or that the effect of future
developments on the Company will be those anticipated by management. Among the
factors that could cause actual results to differ materially from such forward-
looking statements are the following:
- the market reception given the Company's new products, including
TAMPAX NATURALS;
- competitive pressures, including new product developments or
increased advertising or promotional activity by existing or new
competitors or growth in the private label tampon segment;
- changes in the market for raw or packaging materials, which
could impact the Company's manufacturing costs;
- changes in the pricing of the products of the Company or its
competitors;
- changes in consumer preferences affecting the usage of tampons;
- the loss of a significant customer;
- the costs and uncertainties associated with implementation of
actions resulting from the Company's ongoing evaluation of its
business strategies and organizational structures;
- production delays or inefficiencies;
- the costs and other effects of legal and administrative cases
and proceedings, settlements and investigations;
- real or perceived safety or quality issues with respect to the
Company's products, whether arising from tampering or otherwise;
and
- changes in U.S. or international economic or political
conditions, such as inflation or fluctuations in interest or
foreign exchange rates.
While the Company periodically reassesses material trends and
uncertainties affecting the Company's results of operations and financial
condition in connection with its preparation of management's discussion and
analysis of results of operations and financial condition contained in its
quarterly and annual reports, the Company does not intend to review or revise
any particular forward-looking statement in light of future events.
-8-
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- ------- -----------------
The Company or a subsidiary is a defendant in a small number of product
liability lawsuits based on allegations that toxic shock syndrome ("TSS") was
contracted through the use of tampons. A small number of pre-suit claims
involving similar TSS allegations have also been asserted. The damages alleged
vary from case to case and often include claims for punitive damages.
The Company is involved, either as a named defendant or as the result of
contractual indemnities, in certain litigation arising out of the operations of
certain divested subsidiaries.
There are certain other legal proceedings pending against the Company arising
out of its normal course of business in which claims for monetary damages are
asserted.
While it is not feasible to predict the outcome of these legal proceedings and
claims with certainty, management is of the belief that any ultimate liabilities
in excess of provisions therefor will not individually or in the aggregate have
a material adverse effect on the Company's financial position or results of
operations.
Items 2, 3 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 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
At the Annual Meeting of Shareholders held on April 23, 1996, the shareholders
of the Company elected 12 directors for a one-year term. The number of votes
cast at such meeting with respect to this matter is as follows:
-9-
<PAGE>
Votes Votes Votes Broker
Matter For Against Withheld Abstentions Non-Votes
- ------ --- ------- -------- ----------- ---------
Election of
Directors
- ---------
Lilyan H. Affinito 30,691,194 214,203
Anne M. Busquet 30,693,482 211,915
Paul S. Doherty 30,229,926 675,471
Edward T. Fogarty 30,695,827 209,570
Janet Hill 30,695,276 210,121
Robert P. Kiley 30,696,060 209,337
John Loudon 30,018,638 886,759
Ruth M. Manton 30,684,384 221,013
John A. Meyers 30,693,255 212,142
H.L. Tower 30,699,404 205,993
Howard B. Wentz, Jr. 30,695,422 209,975
Robert M. Williams 30,678,723 226,674
Further information regarding this matter is set forth in the Company's proxy
statement, dated March 11, 1996, and is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
a) Exhibits
--------
Exhibit
Number Description
------ -----------
3(1) 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.
3(2) Certificate of Amendment of Certificate of Incorporation
of the Company, dated April 24, 1990, filed May 15, 1990
as Exhibit 4(2) to the Company's Report on Form 10-Q for
the quarter ended March 31, 1990, incorporated herein by
reference.
3(3) 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 Report on Form 10-Q for
the quarter ended March 31, 1992, incorporated herein by
reference.
-10-
<PAGE>
Exhibit
Number Description
------ -----------
3(4) By-Laws of Company, as amended, filed March 31, 1995 as
Exhibit 3(4) to the Company's Report on Form 10-K for
the year ended December 31, 1994, incorporated herein by
reference.
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, 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, filing December 16,
1993 as Exhibit 4-a to the Company's Report on Form 8-K,
incorporated herein by refernce.
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.
-11-
<PAGE>
Exhibit
Number Description
------ -----------
10(1) Tambrands Inc. 1996 Non-Employee Director Stock Unit
Plan, effective as of April 23, 1996, filed herewith.
12 Computation of Ratio of Earnings to Fixed Charges, filed
herewith.
27 Financial Data Schedules, filed herewith (in electronic
format only).
Exhibits 2, 11, 15, 18, 19, 22, 23, 24 and 99 have been omitted as inapplicable.
b) Reports on Form 8-K
-------------------
The Company filed a Report under Item 5 of Form 8-K on April 24, 1996 in
order to file a press release, issued by the Company on April 23, 1996, which
contained the Company's first-quarter 1996 results.
The Company filed a Report under Item 5 of Form 8-K on June 13, 1996 in
order to file a press release, issued by the Company on June 12, 1996, which
contained the Company's expectations for earnings for the second quarter of 1996
and the full year.
-12-
<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.
TAMBRANDS INC.
______________________
(Registrant)
/s/ Susan J. Riley
________________________
Susan J. Riley
Senior Vice President -
Chief Financial Officer
and Authorized Signatory
Date: August 14, 1996
-13-
<PAGE>
EXHIBIT 10(1)
TAMBRANDS INC.
1996 NON-EMPLOYEE DIRECTOR STOCK UNIT PLAN
------------------------------------------
Section 1. Establishment of Plan; Purpose.
- --------- ------------------------------
The Plan is hereby established to permit Eligible Directors, in recognition
of their prior and/or expected contributions to the Company, to receive Units in
the manner hereinafter provided. The Plan is intended to enable the Company to
attract, retain and motivate the best qualified directors and to enhance the
long-term mutuality of interest between the Eligible Directors and the
shareholders of the Company.
Section 2. Definitions.
- --------- -----------
When used in this Plan, the following terms shall have the definitions set
forth in this Section:
"Board" shall mean the Board of Directors of the Company.
-----
"Common Stock" shall mean the common stock of the Company, par value
------------
twenty-five cents ($0.25), any common stock into which such common stock may be
changed, and any common stock resulting from any reclassification of such common
stock.
"Company" shall mean Tambrands Inc.
-------
"Director" shall mean any member of the Board regardless of whether such
--------
person is an Eligible Director.
"Disability" shall mean permanent and total disability within the meaning
----------
of Section 22(e) of the Internal Revenue Code of 1986, as amended.
"Election Grant" shall mean a Grant of Units to an Eligible Director first
--------------
elected to the Board after January 1, 1996.
"Eligible Director" shall mean a Director who is not an employee of the
-----------------
Company or any Subsidiary.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
------------
<PAGE>
"Fair Market Value" on any date shall mean the mean between the high and
-----------------
low sales price of a Share on such date as reported in the principal
consolidated transaction reporting system for the New York Stock Exchange (or,
if the Common Stock is not listed on the New York Stock Exchange, on such other
national exchange or the over-the-counter market on which the Common Stock is
principally traded).
"Grant" shall mean a grant of Units under Section 3.
-----
"Retirement" shall mean termination of service as a Director in accordance
----------
with the Company's mandatory retirement policy for Directors, as in effect from
time to time.
"Service Termination Date" shall have the meaning ascribed thereto under
------------------------
Section 4.2.
"Share" shall mean a share of Common Stock.
-----
"Subsidiary" shall mean any entity of which the Company possesses directly
----------
or indirectly fifty percent (50%) or more of the total combined voting power of
all classes of stock of such entity.
"Unit" shall mean a contractual obligation of the Company to pay cash in an
----
amount equal to the value of one Share (or, in certain circumstances, to deliver
a Share at the election of the Eligible Director in accordance with the terms
and conditions set forth in Section 4.3) to an Eligible Director or the
beneficiary or estate of such Eligible Director as provided herein. An Eligible
Director shall have no rights as a stockholder with respect to any Share covered
by any Unit unless and until such Eligible Director shall have become the holder
of record of any Share related thereto.
Section 3. Units
- --------- -----
3.1. Conversion of Retirement Benefits. Each Eligible Director in
---------------------------------
office on January 1, 1996 shall receive a Grant of that number of Units as
are equal to the quotient of
(i) the present value of the retirement benefits payable to such
Eligible Director under the terms of the Company's Pension Plan
for Directors, based
2
<PAGE>
on the Eligible Director's actual age and the actuarial
assumptions used for calculating the present value of a
participant's retirement benefits under the Company's Pension
Plan for Employees and assuming that
(A) the Eligible Director has completed the service required to
obtain the maximum benefit payable thereunder and
(B) the Eligible Director terminates service as a Director at
age 65, divided by
(ii) the Fair Market Value of a Share on the date of the annual
--
meeting of shareholders to be held in 1996.
Fractional Units shall be credited, but shall be rounded to the nearest
hundredth percentile, with amounts equal to or greater than .005 rounded up and
amounts less than .005 rounded down. An Eligible Director's rights and
interests in the Units awarded under this Section 3.1 shall be immediately
vested and nonforfeitable.
3.2. Election Awards. (a) Election Grant; Standard Vesting Requirements.
--------------- ---------------------------------------------
Each Eligible Director first elected to the Board on or after January 1, 1996
shall be awarded an Election Grant of 1,000 Units effective as of the later of
(i) the annual meeting of shareholders of the Company held in 1996 and (ii) the
- -- --
date such Eligible Director first becomes a Director (the "Commencement Date");
provided that, if any such Eligible Director ceases to be a Director for any
- -------------
reason other than death, Disability or Retirement prior to the fifth anniversary
of the Commencement Date, such Eligible Director shall forfeit to the Company
any and all rights and interests in the Units credited to him or her without any
compensation therefor. After completing five years of service as a Director fol
lowing his or her Commencement Date, an Eligible Director's rights and interests
in his or her Units shall be fully vested and nonforfeitable.
(b) Death, Disability or Retirement. In the event that an Eligible
-------------------------------
Director shall cease to be a Director prior to the fifth anniversary of the
Commencement Date due to death, Disability or Retirement, the rights and
interest of such Eligible Director (or in the case of the Eligible Director's
death, the Eligible Director's beneficiary or beneficiaries) in the Units which
are the subject of such
3
<PAGE>
Election Grant shall become fully vested and nonforfeitable.
(c) Change of Control. Upon the occurrence of a Change of Control,
-----------------
each Eligible Director's rights and interest in Units which have not previously
vested under this Section 3 shall become vested and nonforfeitable regardless of
the period of the Eligible Director's service since the date such Units were
granted. A "Change in Control" shall mean the occurrence of any of the
following events:
(1) an acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (A) the then
-
outstanding Shares or (B) the combined voting power of the then
-
outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting
Securities"), but excluding (w) any acquisition directly from the
-
Company, other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself
acquired directly from the Company, (x) any acquisition by the Company,
-
(y) any acquisition by an employee benefit plan (or related trust)
-
sponsored or maintained by the Company and (z) any acquisition by any
-
corporation pursuant to a reorganization, merger, consolidation or
similar corporate transaction (in each case, a "Corporate
Transaction"), if such Corporate Transaction is an Exempt Corporate
Transaction (as defined below); or
(2) the approval by the shareholders of the Company of a Corporate
Transaction or, if consummation of such Corporate Transaction is
subject, at the time of such approval by shareholders, to the consent
of any government or governmental agency, the obtaining of such consent
(either explicitly or implicitly by consummation); excluding, however,
such a Corporate Transaction (an "Exempt Corporate Transaction")
pursuant to which (A) all or substantially all of the individuals and
-
entities who are the beneficial owners, respectively, of the
outstanding Shares and Outstanding Company Voting Securities
immediately prior to such
4
<PAGE>
Corporate Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock
of the corporation resulting from such Corporate Transaction and the
combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors, in
substantially the same proportions as their ownership, immediately
prior to such Corporate Transaction, of the outstanding Shares and
Outstanding Company Voting Securities, as the case may be, and (B) no
-
Person (other than the Company, any employee benefit plan (or related
trust) of the Company or the corporation resulting from such Corporate
Transaction and any Person beneficially owning, immediately prior to
such Corporate Transaction, directly or indirectly, 20% or more of the
outstanding Shares or Outstanding Company Voting Securities, as the
case may be) will beneficially own, directly or indirectly, 20% or more
of, respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the combined
voting power of the then outstanding securities of such corporation
entitled to vote generally in the election of directors; or
(3) the approval by the shareholders of the Company of (A) a complete
-
liquidation or dissolution of the Company or (B) the sale or other
-
disposition of all or substantially all of the assets of the Company
other than pursuant to an Exempt Corporate Transaction.
3.3. Dividend Equivalents. Whenever a dividend other than a dividend
--------------------
payable in the form of Shares is declared with respect to the Shares, the number
of Units credited to an Eligible Director shall be increased by the number of
Units determined by dividing
(i) the product of
-
(A) the number of Units credited to such Eligible Director on the
-
related dividend record date and
(B) the amount of any cash dividend declared by the Company on a Share
-
(or, in the case of any dividend distributable in property other
5
<PAGE>
than Common Shares, the per share value of such dividend, as
determined by the Company for purposes of Federal income tax
reporting) by
(ii) the Fair Market Value on the related dividend payment date.
In the case of any dividend declared on Shares which is payable in Shares, the
number of Units credited to an Eligible Director shall be increased by the
number of Units equal to the product of
(i) the number of Units credited to such Eligible Director on the related
dividend record date and
(ii) the number of Shares (including any fraction thereof) distributable
as a dividend on a Share.
3.4. Capital Adjustments. In the event of any change in the number
-------------------
or kind of outstanding Shares by reason of any recapitalization, reorganization,
merger, consolidation, stock split or any similar change affecting the Shares,
other than a stock dividend as provided above, the Board shall make an
appropriate adjustment in the number of Units credited for the benefit of each
Eligible Director.
4. Distributions in Respect of Units.
---------------------------------
4.1. No Payment on Units While a Director. No amount shall be paid
------------------------------------
to any Eligible Director in respect of any Units until such time as such
Eligible Director has ceased to be a member of the Board.
4.2 Timing of Payment. An Eligible Director may elect, at any time
-----------------
and from time to time, but in no event later than six months prior to the date
as of which his or her service as an Eligible Director terminates (the "Service
Termination Date"), whether
(i) to receive a distribution of the value of his or her Units in a single
lump sum payment or in such number of annual installments, not to exceed ten, as
the Eligible Director shall elect; and
(ii) whether the lump sum distribution or first installment shall be made
6
<PAGE>
(A) as soon as practicable after the Service Termination Date;
(B) on the first day of the calendar month beginning more than six months
after the Service Termination Date; or
(C) on the first anniversary of the Service Termination Date.
Any election shall be filed in writing with the Secretary of the Company and
shall be effective when received by the Secretary; provided that, if an Eligible
-------------
Director's Service Termination Date occurs within six months of the date an
election is received it shall be deemed to be ineffective and the last election
filed more than six months before the Service Termination Date shall be deemed
to be effective.
4.3. Form of Payment. Any payment to be made to an Eligible Director
---------------
shall be made in cash, except that, if an Eligible Director elects to commence
receipt of his or her distribution at least six months after his Service
Termination Date, the Eligible Director may elect to receive payment with
respect to all or a portion of his or her Units in Shares; provided that, any
-------------
fractional Shares to be delivered in respect of Units shall be settled in cash
based upon the Fair Market Value on the date such Shares would otherwise have
been delivered to the Eligible Director or the Eligible Director's beneficiary.
Any election to receive Shares in lieu of cash shall be filed in writing with
the Secretary of the Corporation prior to the date as of which the distribution
is to be made, and shall become irrevocable on such date; provided that, an
-------------
election to receive Shares shall have no force or effect until at least six
months after the Service Termination Date.
4.4. Default Provisions. If an Eligible Director fails to specify a
------------------
commencement date for a distribution in accordance with Section 4.2, such
distribution shall be made in cash and commence on the first anniversary of the
Eligible Director's Service Termination Date. If an Eligible Director fails to
specify whether a distribution shall be made in a lump-sum payment or a number
of installments, such distribution shall be made in a lump-sum payment. If an
Eligible Director who could have elected to receive Shares instead of cash
pursuant to Section 4.3 does not specify that any portion of his or her
distribution should be in Shares, the distribution in respect of such Director
shall be made entirely in cash.
7
<PAGE>
4.5. Payment Rules as to Installments. In the case of any distribution
--------------------------------
being made in annual installments, each installment after the first installment
shall be paid on the first business day of each subsequent calendar year until
the entire amount shall have been paid. The value of any installment payment
payable in cash shall be an amount equal to the product of
(i) the number Units then standing to the credit of an Eligible Director
(which shall be net of the number of Units with respect to which any
prior installment payments have been made);
(ii) the Fair Market Value of a Share on the last business day immediately
prior to the date as of which such installment is payable; and
(iii) a fraction, the numerator of which is one and the denominator of which
is the number of installments (including the then current installment)
remaining to be paid.
4.6. Payment of Units Upon Death. In the event of the death of an
---------------------------
Eligible Director, any payment due in respect of the Eligible Director's Units
shall be made to the beneficiary designated in writing by such Eligible Director
and filed with the Secretary of the Company, or, in the absence of such
designation, to the Eligible Director's estate. Any such payment shall be made
at the same time and subject to the same conditions as would have applied had
the Eligible Director survived and the date of his or her death been treated as
the Eligible Director's Service Termination Date, unless the Eligible Director
shall have specified that an alternative form of payment permitted under the
Plan should apply in the event of his or her death.
Section 5. Administration.
--------------
5.1. Rules; Interpretation; Determinations. The Plan shall be
-------------------------------------
administered by the Board; provided, however, that the Plan shall be
administered such that
(i) any Director participating in the Plan shall continue to be deemed to
be a "disinterested person" under Rule 16b-3 under the Exchange Act
("Rule 16b-3") for purposes of such Director's ability to serve on any
committee charged with administering any of the Company's stock based
8
<PAGE>
incentive plans for executive officers intended to qualify for the
exemptive relief available under Rule 16b-3; and
(ii) the Units shall be treated, to the extent necessary to assure or
facilitate compliance with the provisions of Section 16 under the
Exchange Act, as exempt from the definition of a derivative security
under Rule 16a-1(c)(3) as promulgated by the Securities and Exchange
Commission under the Exchange Act.
Subject to the foregoing, the Board shall have full authority to interpret and
administer the Plan, to establish, amend and rescind rules for carrying out the
Plan and to make all other determinations and to take all other actions that it
deems necessary or desirable for administering the Plan. Each determination,
interpretation or other action made or taken by the Board shall be final and
binding for all purposes and upon all persons. The Board may delegate its
powers and functions hereunder to a duly appointed committee of the Board and
such committee shall have the powers granted to the Board and the rights
afforded to the Board and/or its members pursuant to the Plan.
5.2. Agents and Expenses. The Board may appoint agents (who may be
-------------------
employees of the Company) to assist in the administration of the Plan and may
grant authority to such persons to execute agreements or other documents on its
behalf. The Board may employ such legal counsel, consultants and agents as it
may deem desirable for the administration of the Plan, and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. All expenses incurred in the
administration of the Plan, including, without limitation, for the engagement of
any counsel, consultant or agent, shall be paid by the Company.
5.3. Indemnification. No member or former member of the Board or any
---------------
agent designated pursuant to Section 5.2 shall be liable for any action or
determination made in good faith with respect to the Plan. To the maximum
extent permitted by applicable law, each member or former member of the Board or
any designated agent shall be indemnified and held harmless by the Company
against any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim with the approval of the Company) arising out
of any act or omission to act in con-
9
<PAGE>
nection with the Plan, unless arising out of such person's willful misconduct.
Section 6. Amendment and Termination.
- --------- -------------------------
The Board may amend the Plan at any time; provided that, to the extent the
-------- ----
Units must qualify for the exemption from treatment as a derivative security
under Rule 16a-1(c)(3) to assure or facilitate the continued compliance of the
plan and the Company's other equity based plans with the requirements of Section
16, the Board may not accelerate the times at which Shares may be delivered
under the Plan. Notwithstanding the foregoing, no amendment or termination of
the Plan shall materially and adversely affect any rights of any Director under
any Grant previously made pursuant to the Plan.
Section 7. General Provisions
- --------- ------------------
7.1. Nontransferable Grants. Grants made under the Plan may not be
----------------------
assigned or transferred, in whole or in part, either directly or by operation of
law (except in the event of an Eligible Director's death by will or applicable
laws of descent and distribution), including, but not by way of limitation, by
execution, levy, garnishment, attachment, pledge, bankruptcy or in any other
manner, and no such right or interest of any Eligible Director in the Plan shall
be subject to any obligation or liability of such Eligible Director.
7.2. No Right to Remain as a Director. This Plan shall not impose any
--------------------------------
obligations on the Company to retain any Eligible Director as a Director nor
shall it impose any obligation on the part of any Eligible Director to remain as
a Director of the Company.
7.3. No Right to Specific Assets. Nothing contained in the Plan and no
---------------------------
action taken pursuant to the Plan shall create or be construed to create a trust
of any kind or any fiduciary relationship between the Company and any Director,
the executor, administrator or other personal representative or designated
beneficiary of such Director, or any other persons. Any reserves that may be
established by the Company in connection with Units granted under this Plan
shall continue to be treated as the assets of the Company for Federal income tax
purposes and remain subject to the claims of the Company's creditors. To the
extent
10
<PAGE>
that any Eligible Director or the executor, administrator, or other personal
representative of such Eligible Director, acquires a right to receive any
payment from the Company pursuant to this Plan, such right shall be no greater
than the right of an unsecured general creditor of the Company.
7.4. Listing of Shares and Related Matters. If at any time the Board shall
-------------------------------------
determine in its discretion that the listing, registration or qualification of
the Shares covered by this Plan upon any national securities exchange or under
any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the delivery of Shares under this Plan, no Shares will be delivered
unless and until such listing, registration, qualifi cation, consent or approval
shall have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Board.
7.5. Non-Exclusivity. Neither the adoption of this Plan by the Board nor
---------------
the grant of Units hereunder shall be construed as creating any limitations on
the power of the Board to adopt such other compensatory arrangements as it may
deem desirable, including, without limitation, the granting or issuance of stock
options, Shares and/or other incentives otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
instances.
7.6. No Limit on Corporate Action. The existence of this Plan and the
----------------------------
Shares and Units granted hereunder shall not affect in any way the right or
power of the Board or the shareholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting Common Stock, the dissolution or liquidation of the Company or any
sale or transfer of all or part of its assets or business, or any other
corporate act or proceeding.
7.7. Severability of Provisions. If any provision of this Plan shall be
--------------------------
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be construed and
enforced as if such provision had not been included.
11
<PAGE>
7.8. Incapacity. Any benefit payable to or for the benefit of a minor, an
----------
incompetent person or other person incapable of receipting therefor shall be
deemed paid when paid to such person's guardian or to the party provid ing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge any liability or obligation of the Board, the Company and
all other part ies with respect thereto.
7.9. Retired Directors. Nothing in this Plan shall be construed to limit
-----------------
or in any way impair the right of any person who served as a member of the Board
of Directors who terminated service with the Company prior to January 1, 1996
(or any beneficiary of any such Director) to receive payment of cash retirement
benefits under the Pension Plan for Directors, as in effect on December 31,
1995.
7.10. Notices. Each Eligible Director shall be responsible for furnishing
-------
the Secretary of the Company with the current and proper address for the mailing
of notices and delivery of payments pursuant to the Plan. Any notices required
or permitted to be given shall be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States mail, first-class
and prepaid. If any item mailed to such address is returned as undeliverable to
the addressee, mailing will be suspended until the Eligible Director or his or
her beneficiary furnishes the proper address.
7.11. Voting Rights. The Company shall have the right, but not the
-------------
obligation, to establish a grantor trust to assist it in meeting its obligations
under the Plan to fund the benefits payable to Directors hereunder. If the
Company shall establish and fund such a trust using Shares, the Company shall
cause the trustee of such trust to accept direction from each Eligible Director
as to how to vote that number of Shares held by the trust that corresponds to
the number of Units credited to the account of such Eligible Director.
7.12 Headings and Captions. The headings and captions herein are
---------------------
provided for reference and convenience only, shall not be considered part of
this Plan, and shall not be employed in the construction of this Plan.
7.13. Controlling Law. The Plan shall be construed and enforced according
---------------
to the laws of the State of Delaware.
12
<PAGE>
Tambrands Inc.
FORM 10-Q
PART II, Item 6., Exhibit 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
The following table sets forth the Company's ratio of earnings to fixed charges
for the periods indicated.
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
------------------------------- -----------------------------
(in thousands, except ratios) 1996 1995 1996 1995
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Earnings:
Income before income taxes $ 20,431 $ 23,409 $ 57,527 $ 60,219
Fixed charges 2,521 2,908 5,012 5,474
------------ ------------ ------------ -------------
EARNINGS $ 22,952 $ 26,317 $ 62,539 $ 65,693
============ ============ ============ =============
Fixed charges:
Interest portion of operating
lease expense:
Operating lease expense $ 1,133 $ 1,372 $ 2,189 $ 2,819
Assumed interest factor 0.33 0.33 0.33 0.33
------------ ------------ ------------ -------------
Interest portion of operating
lease expense 374 453 722 930
Interest expense 2,147 2,455 4,290 4,544
------------ ------------ ------------ -------------
FIXED CHARGES $ 2,521 $ 2,908 $ 5,012 $ 5,474
============ ============ ============ =============
RATIO OF EARNINGS TO FIXED CHARGES 9.1 9.1 12.5 12.0
============ ============ ============ =============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SECOND
QUARTER 10Q 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 9,591 9,591
<SECURITIES> 0 0
<RECEIVABLES> 125,077 125,077
<ALLOWANCES> (1,634) (1,634)
<INVENTORY> 51,141 51,141
<CURRENT-ASSETS> 229,861 229,861
<PP&E> 360,672 360,672
<DEPRECIATION> (145,180) (145,180)
<TOTAL-ASSETS> 451,192 451,192
<CURRENT-LIABILITIES> 238,111 238,111
<BONDS> 69,852 69,852
0 0
0 0
<COMMON> 10,887 10,887
<OTHER-SE> 98,097 98,097
<TOTAL-LIABILITY-AND-EQUITY> 451,192 451,192
<SALES> 161,307 330,296
<TOTAL-REVENUES> 161,307 330,296
<CGS> 54,068 109,909
<TOTAL-COSTS> 54,068 109,909
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (2,294) (4,411)
<INCOME-PRETAX> 20,431 57,527
<INCOME-TAX> 7,416 20,882
<INCOME-CONTINUING> 13,015 36,645
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 13,015 36,645
<EPS-PRIMARY> 0.35 1.00
<EPS-DILUTED> 0.35 1.00
</TABLE>
