SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarter ended March 31, 1995 Commission file No. 1-10585 CHURCH & DWIGHT CO., INC. (Exact name of registrant as specified in its charter) Delaware 13-4996950 (State of incorporation) (I.R.S. Employer Identification No.) 469 North Harrison Street, Princeton, N.J. 08543-5297 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (609) 683-5900 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of April 28, 1995, there were 19,544,095 shares of Common Stock outstanding. 1 of 8
PART I - FINANCIAL INFORMATION CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited)
<TABLE> <CAPTION> <S> <C> <C> Three Months Ended (In thousands, except per share data) March 31, April 1, 1995 1994 Net Sales $117,963 $111,511 Cost of sales 68,693 64,191 Gross profit 49,270 47,320 Selling, general and administrative expenses 49,520 45,542 Income/(Loss) from Operations (250) 1,778 Equity in joint venture income 2,429 1,621 Investment income 264 189 Gain on disposal of product lines 102 103 Other income 31 164 Interest expense (438) (24) Income before taxes 2,138 3,831 Income taxes 995 1,412 Net Income 1,143 2,419 Retained earnings at beginning of period 167,901 170,434 169,044 172,853 Dividends paid 2,148 2,210 Retained earnings at end of period $166,896 $170,643 Weighted average shares outstanding 19,533 20,071 Earnings Per Share: Net income per share $.06 $.12 </TABLE>
2 of 8 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
<TABLE> <CAPTION> <S> <C> <C> March 31, December 31, 1995 1994 (Dollars in thousands) (Unaudited) Assets Current Assets Cash and cash equivalents $6,983 $4,659 Short-term investments - 2,976 Accounts receivable 43,386 44,404 Inventories (Note 2) 51,908 54,683 Deferred income taxes 11,807 11,927 Prepaid expenses 6,402 5,663 Total Current Assets 120,486 124,312 Property, Plant and Equipment (Note 3) 140,506 138,460 Note Receivable from Joint Venture 11,000 11,000 Equity Investment in Joint Venture 14,091 13,868 Long-Term Supply Contracts 4,256 4,391 Intangibles, principally Goodwill 3,556 3,556 Total Assets $293,895 $295,587 Liabilities and Stockholders' Equity Current Liabilities Short-term borrowings $21,000 $25,000 Accounts payable and accrued expenses 74,844 72,974 Income taxes payable 2,489 1,802 Total Current Liabilities 98,333 99,776 Long-Term Debt 7,500 7,500 Deferred Income Taxes 20,193 19,994 Deferred Income 236 339 Deferred Liabilities 1,293 1,176 Nonpension Postretirement and Postemployment Benefits 13,085 12,861 Stockholders' Equity Preferred Stock - $1 par value Authorized 2,500,000 shares, none issued - - Common Stock - $1 par value Authorized 100,000,000 shares, issued 23,330,494 shares 23,330 23,330 Additional paid-in capital 32,835 32,823 Retained earnings 166,896 167,901 Cumulative translation adjustments (608) (741) 222,453 223,313 Less common stock in treasury, at cost - 3,787,799 shares in 1995 and 3,803,659 shares in 1994 69,198 69,372 Total Stockholders' Equity 153,255 153,941 Total Liabilities and Stockholders' Equity $293,895 $295,587 </TABLE>
3 of 8 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
<TABLE> <CAPTION> <S> <C> <C> Three Months Ended March 31, April 1, (Dollars in thousands) 1995 1994 Cash Flow From Operating Activities Net Income $1,143 $2,419 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 3,211 3,143 Deferred income taxes 313 (2,054) Equity in joint venture income (2,429) (1,621) Gain on asset disposals (102) (103) Other 8 (87) Change in assets and liabilities: Decrease in short-term investments 2,976 2,000 (Increase) decrease in accounts receivable 1,084 (3,102) (Increase) decrease in inventories 2,805 (2,280) (Increase) in prepaid expenses (736) (1,164) Increase (decrease) in accounts payable 1,815 (1,714) Increase in income taxes payable 682 5,584 Increase in other liabilities 340 225 Net Cash Provided By Operating Activities 11,110 1,246 Cash Flow From Investing Activities Additions to property, plant and equipment (5,031) (5,763) Distributions from joint venture 2,207 1,517 Net Cash Used In Investing Activities (2,824) (4,246) Cash Flow From Financing Activities Short-term borrowing/(repayments) (4,000) 8,000 Payment of cash dividends (2,148) (2,210) Proceeds from stock options exercised 217 124 Purchase of treasury stock (31) (2,427) Net Cash Provided by (Used In) Financing Activities (5,962) 3,487 Net Change In Cash and Cash Equivalents 2,324 487 Cash And Cash Equivalents At Beginning Of Year 4,659 5,581 Cash And Cash Equivalents At End Of Period $6,983 $6,068 </TABLE>
4 of 8 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The consolidated balance sheet as of March 31, 1995, the consolidated statements of income and retained earnings for the three months ended March 31, 1995 and April 1, 1994, and the consolidated statements of cash flow for the three months then ended have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flow at March 31, 1995 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1994 annual report to shareholders. The results of operations for the period ended March 31, 1995 are not necessarily indicative of the operating results for the full year.
<TABLE> <CAPTION> <S> <C> <C> 2. Inventories consist of the following: March 31, Dec. 31, (in thousands) 1995 1994 Raw materials and supplies $12,068 $12,237 Work in process 131 103 Finished goods 39,709 42,343 $51,908 $54,683 </TABLE>
<TABLE> <CAPTION> <S> <C> <C> 3. Property, Plant and Equipment consist of the following: March 31, Dec. 31, (in thousands) 1995 1994 Land $3,110 $3,107 Buildings and improvements 59,895 59,874 Machinery and equipment 135,722 135,188 Office equipment and other assets 13,355 13,324 Mineral rights 5,020 5,020 Construction in progress 10,433 5,859 227,535 222,372 Less accumulated depreciation and amortization 87,029 83,912 Net Property, Plant and Equipment $140,506 $138,460 </TABLE>
5 of 8 4. Equity Investment in Joint Venture The following table reflects summarized financial information for the Armand Products Company joint venture. The Company accounts for its 50 percent interest in the joint venture under the equity method. Product and services are provided to the Armand Products Company by the joint venture partners at cost. As a result, the following information would not be indicative of the financial position or results of operation had the joint venture operated on a stand-alone basis.
<TABLE> <CAPTION> <S> <C> <C> Three Months Ended March 31, April 1, (in thousands) 1995 1994 Net sales $13,298 $10,803 Gross profit 5,447 3,818 Net income 4,632 3,016 Company's share in net income 2,316 1,508 Elimination of Company's share of intercompany interest expense 113 113 Equity in joint venture income $2,429 $1,621 </TABLE>
5. Restructuring Charge In 1993 and 1994 the Company recorded restructuring charges in connection with a cost reduction program and the write-off of assets related to discontinued products and plant consolidations. Components of the outstanding reserve balances included in accounts payable and accrued expenses consist of the following:
<TABLE> <CAPTION> <S> <C> <C> <C> Reserves at Disposals/ Reserves at (in thousands) December 31, 1994 Payments March 31, 1995 Fixed asset removal and demolition $992 $144 $848 Severance and related 2,154 1,062 1,092 Other 1,233 - 1,233 $4,379 $1,206 $3,173 </TABLE>
6. Net income per share is computed based upon the weighted average number of common shares outstanding during the period. Common equivalent shares have been excluded because their effect was not material. 6 of 8
MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations For the quarter ended March 31, 1995, net income was $1.1 million or $.06 per share. This compares with $2.4 million or $.12 per share for the first quarter of 1994. Net sales for the quarter were $118.0 million, representing an increase of $6.5 million or 5.8% versus the same period of 1994. The increase is primarily due to unit volume associated with ARM & HAMMER (registered trademark) Deodorant Anti-Perspirant, which was in the early stages of its national introduction a year ago, and increased unit volume of ARM & HAMMER Powder Laundry Detergent. These increases were partially offset by lower sales of ARM & HAMMER Liquid Laundry Detergent and lower unit volume of ARM & HAMMER DENTAL CARE (registered trademark). Specialty Product sales increased as well, led by a strong performance of the Company's Brotherton Speciality Products Ltd. subsidiary in the U.K., offset by weakness in the agricultural business due to a very competitive low-end marketplace. Gross margin was 41.8% in the first quarter, as compared with 42.4% in the first quarter of 1994. This decline is primarily due to a weaker product mix associated with lower unit volume of ARM & HAMMER DENTAL CARE, and to a lesser extent, higher manufacturing costs. Selling, general and administrative expenses were up $4.0 million or 8.7% in the current quarter compared to a year ago mostly due to higher levels of advertising and promotion in support of ARM & HAMMER DENTAL CARE and ARM & HAMMER Deodorant Anti-Perspirant. This increase was somewhat offset by lower promotion costs associated with concentrated ARM & HAMMER Liquid Laundry Detergent which was first being introduced in the same period last year. The Company's Armand Products Company joint venture had a very strong quarter with sales increasing by 23% resulting in a $.8 million increase in equity earnings compared to the first quarter of 1994. Interest payments were significantly higher in the first quarter as compared to the first quarter of a year ago as a result of an increase in short-term borrowing, while investment income was flat. The effective tax rate for the current quarter was 46.5%, up from 36.9% from a year ago. This increase reflects the impact of foreign operating losses for which tax benefits were not recognizable. Liquidity and Capital Resources The Company considers cash and short-term investments as the principal measurement of its liquidity. At March 31, 1995, cash including cash equivalents and short-term investments totaled $7.0 million as compared to $7.6 million at December 31, 1994. During the first quarter of 1995, the Company generated $11.1 million of positive cash flow from operating activities and received $2.2 million in distributions from its Armand Products joint venture. Significant expenditures included additions to property, plant and equipment of $5.0 million, the payment of cash dividends of $2.1 million, and the repayment of $4.0 million of short-term borrowings.
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K No reports on Form 8-K were filed for the three months ended March 31, 1995. 7 of 8
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CHURCH & DWIGHT CO.,INC. (REGISTRANT) DATE: May 5, 1995 /s/ Anthony P. Deasey ANTHONY P. DEASEY VICE PRESIDENT FINANCE DATE: May 5, 1995 /s/ Mark L. Stolp MARK L. STOLP CONTROLLER 8 of 8
<TABLE> <S> <C> <ARTICLE> 5 <MULTIPLIER> 1,000 <S> <C> <PERIOD-TYPE> 3-MOS <FISCAL-YEAR-END> DEC-31-1995 <PERIOD-START> JAN-1-1995 <PERIOD-END> MAR-31-1995 <CASH> 6,983 <SECURITIES> 0 <RECEIVABLES> 44,351 <ALLOWANCES> 965 <INVENTORY> 51,908 <CURRENT-ASSETS> 120,486 <PP&E> 227,535 <DEPRECIATION> 87,029 <TOTAL-ASSETS> 293,895 <CURRENT-LIABILITIES> 98,333 <BONDS> 7,500 <COMMON> 23,330 <PREFERRED-MANDATORY> 0 <PREFERRED> 0 <OTHER-SE> 129,925 <TOTAL-LIABILITY-AND-EQUITY> 293,895 <SALES> 117,963 <TOTAL-REVENUES> 117,963 <CGS> 68,693 <TOTAL-COSTS> 68,693 <OTHER-EXPENSES> 0 <LOSS-PROVISION> 67 <INTEREST-EXPENSE> 438 <INCOME-PRETAX> 2,138 <INCOME-TAX> 995 <INCOME-CONTINUING> 1,143 <DISCONTINUED> 0 <EXTRAORDINARY> 0 <CHANGES> 0 <NET-INCOME> 1,143 <EPS-PRIMARY> .06 <EPS-DILUTED> .06 </TABLE>