<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 March 31, 1997
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: 36,969,997 shares
as of April 30, 1997
Index to Exhibits is set forth at page 9.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
TAMBRANDS INC. AND SUBSIDIARIES
Consolidated Statements of Earnings and Retained Earnings
<TABLE>
<CAPTION>
Three Months Ended
March 31
(Unaudited)
-------------------------------------------
1997 1996
------------------- -------------------
(in thousands, except per share amounts)
<S> <C> <C>
Net sales $168,157 $168,989
Cost of products sold 59,419 55,841
------------------- -------------------
Gross profit 108,738 113,148
Selling, administrative and general expenses:
Marketing, selling and distribution 55,796 60,453
Administrative and general 12,999 13,482
------------------- -------------------
68,795 73,935
------------------- -------------------
Operating income 39,943 39,213
Interest, net and other (1,752) (2,117)
------------------- -------------------
Income before provision
for income taxes 38,191 37,096
Provision for income taxes 13,940 13,466
------------------- -------------------
Net income 24,251 23,630
Retained earnings at beginning of period 452,608 476,252
------------------- -------------------
476,859 499,882
------------------- -------------------
Dividends 17,005 16,935
Net change in treasury stock 84 832
------------------- -------------------
17,089 17,767
------------------- -------------------
Retained earnings at end of period $459,770 $482,115
=================== ===================
Net income per share $0.66 $0.64
=================== ===================
Dividends per share $0.46 $0.46
=================== ===================
Average shares of Common Stock
outstanding during the period 36,944 36,775
=================== ===================
</TABLE>
See accompanying notes to consolidated financial statements on page 5.
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<PAGE>
TAMBRANDS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, 1997
(Unaudited) December 31, 1996
-------------------- --------------------
(in thousands)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $7,784 $11,554
Accounts receivable, less allowance
for doubtful accounts of $2,543
in 1997 and $1,776 in 1996 113,225 99,385
Inventories:
Raw materials 8,565 10,537
Finished goods 30,742 29,794
-------------------- --------------------
39,307 40,331
Deferred taxes on income 20,936 20,964
Prepaid expenses and other current assets 22,557 24,362
-------------------- --------------------
Total current assets 203,809 196,596
Property, plant and equipment 359,125 354,742
Less accumulated depreciation (148,976) (147,103)
-------------------- --------------------
210,149 207,639
Intangible and other assets 6,291 5,731
-------------------- --------------------
Total assets $420,249 $409,966
==================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Short-term borrowings $62,952 $64,699
Accounts payable 50,308 47,666
Accrued expenses 77,306 78,862
Taxes on income 35,774 24,535
-------------------- --------------------
Total current liabilities 226,340 215,762
Medium-term obligations 68,569 69,205
Deferred taxes on income 25,409 25,781
Postemployment benefits 3,018 4,530
-------------------- --------------------
Total liabilities 323,336 315,278
Shareholders' equity:
Common Stock 10,887 10,887
Retained earnings 459,770 452,608
Cumulative foreign currency translation adjustment (15,104) (9,606)
Treasury stock (356,992) (358,304)
Unamortized value of restricted stock and pension costs (1,648) (897)
-------------------- --------------------
Total shareholders' equity 96,913 94,688
-------------------- --------------------
Total liabilities and shareholders' equity $420,249 $409,966
==================== ====================
</TABLE>
See accompanying notes to consolidated financial statements on page 5.
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<PAGE>
TAMBRANDS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
March 31
(unaudited)
--------------------------------
1997 1996
------------- -------------
(in thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $24,251 $23,630
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 6,612 7,007
Deferred income taxes 4 (108)
Restructuring and other charges (1,231) (395)
Change in:
Accounts receivable (16,468) (11,861)
Inventories 252 (1,664)
Prepaid expenses and other current assets 1,896 1,785
Taxes on income 11,714 11,717
Accounts payable and accrued expenses 2,732 (8,214)
------------- -------------
Net cash provided by operating activities 29,762 21,897
------------- -------------
Cash Flows from Investing Activities:
Capital expenditures (13,557) (7,200)
Proceeds from sales of property, plant
and equipment 212 34
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Net cash used in investing activities (13,345) (7,166)
------------- -------------
Cash Flows from Financing Activities:
Payment of dividends (17,005) (16,935)
Short-term debt changes 7,600 (2,662)
Medium-term obligation changes (10,683) (215)
Proceeds from exercise of stock options and other 632 3,301
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Net cash used in financing activities (19,456) (16,511)
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Effect of exchange rate changes on cash (731) 33
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Net decrease in cash and cash equivalents (3,770) (1,747)
Cash and cash equivalents at beginning of period 11,554 11,135
------------- -------------
Cash and cash equivalents at end of period $7,784 $9,388
============= =============
</TABLE>
See accompanying notes to consolidated financial statements on page 5.
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<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, 1996, which
has been derived from the audited financial statements at that date.
2. Subsequent event - On April 9, 1997, The Procter & Gamble Company ("P&G") and
the Company announced that P&G will acquire the Company. Under the terms of the
definitive merger agreement unanimously approved by the boards of directors of
both companies, the Company's shareholders will receive $50 per share in cash
for each share of the Company's Common Stock for a total of approximately $1.85
billion. The transaction is subject to certain conditions, including approval by
the Company's shareholders and regulatory clearances.
Item 2. Management's Discussion and Analysis of Financial
- ------- --------------------------------------------------
Condition and Results of Operations
-----------------------------------
Results of Operations
- ---------------------
First-quarter net sales of $168.2 million were flat versus the comparable period
of 1996, as were unit sales. The negative impact of foreign exchange was
partially offset by favorable price and product mix in certain international
markets. For the current quarter, the U.S. tampon category in units increased
2.5 percentage points versus the first quarter of 1996. Tampax U.S. market
share in units for the first quarter of 1997 was 51.9%, down .3 share points
from the comparable period of the prior year.
Gross profit as a percentage of net sales was 64.7% compared to 67% for the
prior year. The lower margin in the current year was primarily due to
transitional operating costs associated with the previously announced
restructuring.
Marketing, selling and distribution expenses were 8% lower in the current year
versus the first quarter of 1996. The decrease is primarily attributable to
comparatively heavy promotional spending in the first quarter of 1996 in support
of the flagship brand relaunch and lower advertising expenditures in the first
quarter of 1997 due to the timing of the Company's new advertising campaign.
Administrative and general expenses were 4% lower than last year due to
continuing efforts to contain overhead costs.
Operating income of $39.9 million represented an increase of 2% over the first
quarter of the prior year. The increase was principally attributable to the
lower marketing, selling and distribution expenses discussed above.
Interest, net and other reflected a $.3 million decrease in expense
from the comparable period of the prior year. The decrease is primarily due to
realized foreign exchange gains.
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The three-month effective tax rate for 1997 was 36.5% compared to 36.3% for the
comparable period of 1996.
Net earnings were $24.3 million($.66 earnings per share) for the first quarter
of 1997 compared to $23.6 million ($.64 earnings per share) for the first
quarter of the prior year.
Outlook
- -------
The worldwide market for consumer products remains highly competitive and
sensitive to price. The Company expects that this trend will continue. The
Company has announced to the trade a price increase in the United States on its
core Tampax brand, which is scheduled for July 1, 1997. The Company anticipates
a continuation of the current high level of advertising and promotional
activities and new product introductions by competitors, along with continued
growth in the private label sector. The Company intends to aggressively proceed
with its support of the Tampax tampon franchise with advertising, promotions and
product line extensions.
Financial Condition
- -------------------
Cash flows from operating activities for the three months ended March 31, 1997
were $29.8 million compared to $21.9 million for the same period of 1996. The
increase was primarily attributable to improved management of accounts payable
and accrued expenses, partially offset by higher accounts receivable. The
current ratio at March 31, 1997 and December 31, 1996 was .9. The Company's
working capital deficit at March 31, 1997 increased to $22.5 million from $19.2
million at the prior year end, principally due to the timing of income tax
payments. The deficit does not impair the Company's ability to borrow and its
credit agreements do not contain any provisions or requirements with respect to
working capital.
The first-quarter 1997 capital spending programs related to investments in
equipment to improve product quality and productivity, modernize production
facilities and manufacture and launch new products. Capital expenditures were
$13.6 million in 1997 compared with $7.2 million in 1996. The full-year 1997
spending levels are expected to approximate those of 1996.
A strong debt rating and favorable financial climate permitted the Company to
borrow at favorable interest rates. Management expects funds generated from
operations and borrowing capacity will be adequate to finance the Company's
business needs, including working capital, shareholder dividends, additions to
property, plant and equipment and completion of the restructuring activities.
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
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<PAGE>
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;
- competitive pressures, including new product developments or
increased advertising or promotional activity by existing or new
competitors or continued 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;
- the costs to the Company associated with the proposed
acquisition of the Company by The Procter & Gamble Company and
other possible negative effects on the Company if such proposed
acquisition were not to be consummated;
- 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
- change 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.
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<PAGE>
PART II - OTHER INFORMATION
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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.
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, 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.
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<PAGE>
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.
3(4)(a) Resolution of the Board of Directors of the Company authorizing
an amendment to the By-Laws of the Company, adopted on January
28, 1997, filed as Exhibit 3(4)(a) to the Company's Report on
Form 10-K for the year 1996, incorporated herein by reference.
3(4)(b) By-laws of the Company, as amended, filed as Exhibit 3(4)(b) to
the Company's Report on Form 10-K for the year 1996,
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 Report on Form 10-Q for the quarter ended
March 31, 1992, incorporated herein by reference.
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<PAGE>
Exhibit
Number Description
- ------- -----------
4 (3) (a) 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 (3) (b) Amendment No. 1, dated as of April 8, 1997, to the Rights
Agreement, dated as of October 23, 1989, between the Company and
First Chicago Trust Company of New York, as Rights Agent, filed
April 10, 1997 as Exhibit 4 to the Company's Report on Form 8-K,
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) First Supplemental Indenture dated as of December 31, 1996,
among the Company, Tampax Corporation, Tambrands Sales Corp. and
Citibank, N.A., as trustee, to 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 as
Exhibit 4(4) (b) to the Company's Form 10-K Report for the year
ended December 31, 1996, incorporated herein by reference.
4 (4) (c) 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) (d) 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.
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<PAGE>
12 Computation of Ratio of Earnings to Fixed Charges, filed
herewith.
27 Financial Data Schedules, filed herewith (in electronic format
only)
Exhibits 2, 10, 11, 15, 18, 19, 22, 23, 24 and 99 have been omitted as
inapplicable.
-11-
<PAGE>
b) Reports on Form 8-K
-------------------
The Company filed a Report under Item 5 of Form 8-K on January 29, 1997 in
order to file a press release, issued by the Company on January 28, 1997, which
contained the Company's fourth-quarter 1996 results.
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<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: May 14, 1997
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<PAGE>
EXHIBIT 12
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 March 31,
-------------------------------------
(in thousands, except ratios) 1997 1996
----------------------- -------------
<S> <C> <C>
Earnings:
Income before income taxes $38,191 $37,096
Fixed charges 2,674 2,491
Earnings $40,865 $39,587
====================== ============
Fixed charges:
Interest portion of operating
lease expense:
Operating lease expense $1,271 $1,056
Assumed interest factor 0.33 0.33
----------------------- -------------
Interest portion of operating
lease expense 419 348
Interest expense $2,255 $2,143
Fixed charges $2,674 $2,491
====================== ============
Ratio of earnings to fixed charges 15.3 15.9
====================== ============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 7784
<SECURITIES> 0
<RECEIVABLES> 115768
<ALLOWANCES> 2543
<INVENTORY> 39307
<CURRENT-ASSETS> 203809
<PP&E> 359125
<DEPRECIATION> (148976)
<TOTAL-ASSETS> 420249
<CURRENT-LIABILITIES> 226340
<BONDS> 68569
10887
0
<COMMON> 0
<OTHER-SE> 86026
<TOTAL-LIABILITY-AND-EQUITY> 420249
<SALES> 168157
<TOTAL-REVENUES> 168157
<CGS> 59419
<TOTAL-COSTS> 59419
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2255
<INCOME-PRETAX> 38191
<INCOME-TAX> 13940
<INCOME-CONTINUING> 24251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24251
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
</TABLE>
