1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-10585 -------- CHURCH & DWIGHT CO., INC. (Exact name of registrant as specified in its charter) DELAWARE 13-4996950 (State of incorporation) (I.R.S. Employer Identification No.) 469 NORTH HARRISON STREET, PRINCETON, NEW JERSEY 08543-5297 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (609) 683-5900 -------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock, $1 par value New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None -------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of February 23, 1996, 19,527,123 shares of Common Stock held by non-affiliates were outstanding with an aggregate market value of approximately $398 million. The aggregate market value is based on the closing price of such stock on the New York Stock Exchange on February 23, 1996. DOCUMENTS INCORPORATED BY REFERENCE: PARTS II AND IV Portions of registrant's 1995 Annual Report to Stockholders. PART III Portions of registrant's Notice of Annual Meeting to be held on May 9, 1996 and Proxy Statement. ================================================================================
2 TABLE OF CONTENTS PART I <TABLE> <CAPTION> ITEM PAGE <S> <C> 1. Business - 1 - 2. Properties - 6 - 3. Legal Proceedings - 6 - 4. Submission of Matters to a Vote of Security Holders - 6 - PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters - 7 - 6. Selected Financial Data - 7 - 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - 7 - 8. Financial Statements and Supplementary Data - 7 - 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - 7 - PART III 10. Directors and Executive Officers of the Registrant - 7 - 11. Executive Compensation - 7 - 12. Security Ownership of Certain Beneficial Owners and Management - 7 - 13. Certain Relationships and Related Transactions - 7 - PART IV 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K - 8 - </TABLE>
3 PART I ITEM 1. BUSINESS The Company was founded in 1846 and is the world's leading producer of sodium bicarbonate, popularly known as baking soda, a versatile chemical which performs a broad range of functions such as cleaning, deodorizing, leavening and buffering. The Company specializes in sodium bicarbonate and sodium bicarbonate-based products, along with other products which use the same raw materials or technology or are sold into the same markets. The Company sells its products, primarily under the ARM & HAMMER(R) trademark, to consumers through supermarkets, drug stores and mass merchandisers; and to industrial customers and distributors. ARM & HAMMER is the registered trademark for a line of consumer products which includes ARM & HAMMER Baking Soda, ARM & HAMMER DENTAL CARE(R), ARM & HAMMER Carpet Deodorizer, ARM & HAMMER Deodorizing Air Freshener, ARM & HAMMER Powder and Liquid Laundry Detergent and ARM & HAMMER Deodorant Anti-Perspirant with Baking Soda. The ARM & HAMMER trademark is also used for a line of chemical products, the most important of which are sodium bicarbonate, ammonium bicarbonate, sodium sesquicarbonate, ARM & HAMMER MEGALAC(R) Rumen Bypass Fat and ARMEX(R) Blast Media. In 1995, consumer products represented 78% and specialty products 22% of the Company's sales. The Company does approximately 95% of its business in the U.S. and Canada. CONSUMER PRODUCTS PRINCIPAL PRODUCTS The Company's founders first marketed baking soda in 1846 for use in home baking. The ARM & HAMMER trademark was adopted in 1867. Today, this product is known for a wide variety of uses in the home, including as a refrigerator and freezer deodorizer, scratchless cleaner and deodorizer for kitchen surfaces and cooking appliances, bath additive, dentifrice, cat litter deodorizer, and swimming pool pH stabilizer. The Company estimates that a majority of U.S. households have a box of baking soda on hand. Although no longer the Company's largest brand, ARM & HAMMER Baking Soda remains the leading brand in terms of consumer recognition of the brand name and its reputation for quality and value. The deodorizing properties of baking soda have since led to the development of several other household products; ARM & HAMMER Carpet Deodorizer and ARM & HAMMER Deodorizing Air Freshener are both available in a variety of fragrances. In 1992, the Company launched ARM & HAMMER Cat Litter Deodorizer, a scented baking soda product targeted to cat-owning households and veterinarians. The Company's largest consumer business today is in the laundry detergent market. The ARM & HAMMER brand name has been associated with this market since the last century when ARM & HAMMER Super Washing Soda was first introduced as a heavy-duty laundry and household cleaning product. The Company today makes products for use in various stages of the laundry cycle. ARM & HAMMER Laundry Detergents, in both powder and liquid forms, have been available nationally since the early 1980's. The Company markets these brands as value products, priced at a 15 to 20 percent discount from market leaders. In 1993, ARM & HAMMER Powder Laundry Detergent was restaged with a new formulation containing ACTIVATED BAKING SODA(TM). At the same time, the Company introduced ARM & HAMMER Free Powder Laundry Detergent, a perfume- and dye-free formulation. Similarly, a companion product, ARM & HAMMER Liquid Laundry Detergent, was converted to a new concentrated formula in 1993, and is also available in regular and perfume- and dye-free forms. Late in 1995, this product was reformulated to a newer level of concentration and is still available in regular and perfume- and dye-free forms. - 1 -
4 In 1992, the Company completed the national expansion of another laundry product, ARM & HAMMER FRESH & SOFT(R) Dryer Sheets. This product stops static cling, and softens and freshens clothes. ARM & HAMMER Super Washing Soda is promoted as a detergent booster and bleach substitute. ARM & HAMMER Baking Soda has long been used as a dentifrice. Its mild action cleans and polishes teeth, removes plaque and leaves the mouth feeling fresh and clean. These properties have led to the development of a complete line of sodium bicarbonate-based dentifrice products: ARM & HAMMER DENTAL CARE, The Baking Soda Tooth Powder; ARM & HAMMER DENTAL CARE, The Baking Soda Toothpaste; ARM & HAMMER DENTAL CARE Gel; ARM & HAMMER DENTAL CARE Tartar Control Formula; and ARM & HAMMER DENTAL CARE Tartar Control Gel. Both the Toothpaste and Tooth Powder have been in national distribution since 1988. ARM & HAMMER DENTAL CARE Gel and ARM & HAMMER DENTAL CARE Tartar Control Formula were introduced in the latter part of 1990 and 1991, respectively. ARM & HAMMER Tartar Control Gel was launched nationally in 1992. Late in 1994, ARM & HAMMER PEROXICARE(R), a baking soda and peroxide toothpaste was introduced nationally. Tartar Control PEROXICARE was introduced in the second quarter of 1995. Early in 1994, the Company launched nationally a new personal care product, ARM & HAMMER Deodorant Anti-Perspirant with Baking Soda. This new product is available in scented and unscented stick and roll-on forms. During the first quarter of 1996, the Company will introduce nationally a line extension of its deodorant anti-perspirant product. ARM & HAMMER Deodorant with Baking Soda will be available in a variety of scented stick forms. COMPETITION The markets for retail consumer products are highly competitive. ARM & HAMMER Baking Soda competes with generic and private label brands of grocery chains. ARM & HAMMER DENTAL CARE products, ARM & HAMMER Carpet Deodorizer, ARM & HAMMER Deodorant AntiPerspirant and ARM & HAMMER Deodorizing Air Freshener compete with other nationally advertised brands. The Company's laundry products, ARM & HAMMER Powder Laundry Detergent, ARM & HAMMER Liquid Laundry Detergent, ARM & HAMMER Super Washing Soda, and ARM & HAMMER FRESH & SOFT Dryer Sheets, all have small shares in large markets dominated by major consumer packaged goods companies. All of the Company's products are competitively priced and receive strong support in the form of trade and consumer promotion. In addition, the Company advertises certain products on national television. DISTRIBUTION The Company's consumer products are primarily marketed throughout the United States and Canada and sold through supermarkets, mass merchandisers and drugstores. The Company employs a regional sales force which operates primarily through independent food brokers in each market. The products are stored in public warehouses and either picked up by customers or distributed by independent trucking companies. SPECIALTY PRODUCTS PRINCIPAL PRODUCTS The Company's specialty products business primarily consists of the manufacture and sale of sodium bicarbonate in a range of grades and granulations for use in industrial and agricultural markets. In industrial markets, sodium bicarbonate is used as a leavening agent for commercial baked goods, an antacid in pharmaceuticals, a carbon dioxide release agent in fire extinguishers, and as an alkaline agent in swimming pool chemicals, detergents and various textile and tanning applications. A special grade of sodium bicarbonate, as well as sodium sesquicarbonate, is sold to the animal feed market for use as a buffer, or antacid, for dairy cattle. - 2 -
5 The Company is the sole U.S. producer of ammonium bicarbonate, which is primarily used as a leavening agent in the food industry, and produces other chemicals related to sodium bicarbonate. During 1994, the Company increased its ownership position in Brotherton Chemicals Ltd., a British producer of ammonium bicarbonate and other chemicals sold to the food and agricultural markets, from 95% to 100%. MEGALAC Rumen Bypass Fat is a nutritional supplement made from natural oils which allows cows to maintain energy levels during the period of high-milk production, resulting in improved milk yields and minimal weight loss. The product and the trademark MEGALAC are licensed from a British company, Volac Ltd. ARMEX Blast Media is a small but developing product line of formulations designed for the removal of a wide variety surface coatings. This product which is used in conjunction with the Company's ACCUSTRIP SYSTEM(TM) Delivery Device provides an environmentally safe alternative to existing processes such as sand blasting and chemical stripping. In 1986, the Company along with a subsidiary of Occidental Petroleum Corporation formed Armand Products Company, an equally owned joint venture partnership that produces and markets potassium carbonate and potassium bicarbonate. Potassium chemicals have some characteristics akin to the Company's existing product line, and the Company hopes to develop new applications in much the same way it broadened the uses of sodium bicarbonate. COMPETITION The sodium bicarbonate industry continues to be affected by competition from domestic sodium bicarbonate producers and imports. In agricultural markets, sodium bicarbonate also competes with several alternative buffer products. During 1992, the structure of the sodium bicarbonate industry changed as two competitors merged and closed one production site in the process. North American Chemicals continues to gain market penetration in the commodities sector of the sodium bicarbonate market with nahcolite, a naturally-occurring form of low-grade sodium bicarbonate. The Company's position in this market has essentially remained the same despite these adverse conditions. The Company competes primarily on the basis of its product quality, grade availability and reliability of supply from a two-plant manufacturing system. Pricing is a major competitive factor for animal feed and other less specialized grades of sodium bicarbonate. In 1994, two competitors added a combined total of 50,000 tons of potassium carbonate capacity, thus ending Armand Products position as the sole North American producer of potassium carbonate. A third competitor, with a capacity of 25,000 tons, started production late in 1995. These events have been anticipated for some time, but it is impossible to predict the extent to which these developments will impact this business. DISTRIBUTION The Company markets sodium bicarbonate and other chemicals to industrial and agricultural customers throughout the United States and Canada. Distribution is accomplished through regional sales offices and manufacturer's representatives augmented by the sales personnel of independent distributors throughout the country. - 3 -
6 RAW MATERIALS AND SOURCES OF SUPPLY The Company manufactures sodium bicarbonate for its consumer and industrial markets at its two plants located at Green River, Wyoming and Old Fort, Ohio. The production of sodium bicarbonate requires two basic raw materials, soda ash and carbon dioxide. The primary source of soda ash used by the Company is the mineral, trona, which is found in abundance in southwestern Wyoming, near the Company's Green River plant. The Company has acquired a number of leases allowing it to extract these trona deposits. The Company is party to a partnership agreement with General Chemical Corporation who mines and processes certain trona reserves owned by each of the two Companies in Wyoming. Through the partnership and related agreements, the Company obtains a substantial amount of its soda ash requirements, enabling the Company to achieve some of the economies of an integrated business capable of producing sodium bicarbonate and related products from the basic raw material. The Company also has an agreement for the long term supply of trona from another company. The Company presently uses light soda ash in the manufacture of its ARM & HAMMER Powder Laundry Detergent in its Syracuse, New York plant. Light soda ash is obtained under a one-year supply agreement which is automatically renewable on a year to year basis. This agreement terminates upon one year's written notice by either company. At the Syracuse plant and the Green River, Wyoming plant, the Company also produces laundry detergent powder employing a process utilizing raw materials readily available from a number of sources. The partnership agreement and other supply agreements between the Company and General Chemical terminate upon two years notice by either company. The Company believes that alternative sources of supply are available. The Company obtains its supply of the second basic raw material, carbon dioxide, in Green River and Old Fort, under long-term supply contracts. The Company believes that its sources of carbon dioxide, and other raw and packaging materials, are adequate. During 1995, a liquid laundry detergent manufacturing line was constructed in the Company's Syracuse, New York Plant. This new line is capable of producing all of the Company's liquid laundry detergent requirements. Prior to this, all of the Company's ARM & HAMMER Liquid Laundry Detergent was contract manufactured. ARM & HAMMER FRESH & SOFT Dryer Sheets, ARM & HAMMER Deodorizing Air Freshener and ARM & HAMMER Deodorant Anti-perspirant are also contract manufactured for the Company under various agreements. Alternative sources of supply are available in case of disruption or termination of the agreements. The main raw material used in the production of potassium carbonate is liquid potassium hydroxide. Armand Products obtains its supply of liquid potassium hydroxide under a long-term supply arrangement. PATENTS AND TRADEMARKS The Company's ARM & HAMMER trademark is registered with the United States Patent and Trademark Office and also with the trademark offices of many foreign countries. It has been used by the Company since the late 1800's, and is a valuable asset and important to the successful operation of the Company's business. SEASONALITY It appears that the Company's sales are principally affected by marketing and promotion activities rather than seasonal factors. - 4 -
7 CUSTOMERS AND ORDER BACKLOG No material part of the Company's business is dependent upon either a single customer or a few customers. The time between receipt of orders and shipment is generally short, and as a result, backlog is not significant. RESEARCH & DEVELOPMENT The Company's Research and Development Department is engaged in work on product development, process technology and basic research. During 1995, $18,544,000 was spent on research activities as compared to $20,594,000 in 1994 and $21,172,000 in 1993. ENVIRONMENT Similar to other manufacturers, the Company's operations are subject to federal, state and local regulations governing air emissions, waste and steam discharges, and solid and hazardous waste management activities. The Company continues to take all steps required to comply with such regulations. These steps include annual environmental audits of each Company facility. The audits, conducted by an independent engineering concern with expertise in the area of environmental compliance, include site visits at each location, as well as a review of documentary information, to determine compliance with such federal, state and local regulations. The Company believes that existing promulgated environmental regulations will not have any material adverse effect with regard to the Company's capital expenditures, earnings or competitive position. No material capital expenditures relating to environmental control are anticipated. EMPLOYEES At December 31, 1995 , the Company had 941 employees. The Company is party to a labor contract with the United Steelworkers of America covering approximately ninety hourly employees at its Syracuse, New York plant which continues until July 1, 1997. Labor relations have been good. LINES OF BUSINESS AND CLASSES OF PRODUCTS The Company's operations constitute one business segment. The chart set forth below shows the percentage of the Company's net sales contributed by each group of products marketed by the Company during the period from January 1, 1991 through December 31, 1995. <TABLE> <CAPTION> % of Net Sales ------------------------------------------------ 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> Consumer Products 78 80 81 82 83 Specialty Products 22 20 19 18 17 </TABLE> - 5 -
8 ITEM 2. PROPERTIES The executive offices and research and development facilities are owned by the Company and are located on 22 acres of land in Princeton, New Jersey, with approximately 72,000 square feet of office and laboratory space. In addition, the Company leases space in two buildings adjacent to this facility which contain approximately 90,000 square feet of office space. The Company also leases regional sales offices in various locations throughout the United States. At Syracuse, New York the Company owns a 16 acre site on which a group of connected buildings containing approximately 270,000 square feet of floor space are located. This plant is used primarily for the manufacture and packaging of consumer products. Adjacent to this, the Company also owns a one acre site where it manufactures ammonium bicarbonate in a 14,000 square foot building. During 1996, the Company will cease production of ammonium bicarbonate and import its requirements from its Brotherton Chemicals Ltd. U.K. subsidiary and other manufacturers. The Company's plant in Green River, Wyoming is located on 112 acres of land owned by the Company. The plant and related facilities contain approximately 273,000 square feet of floor space. The plant was constructed in 1968 and has since been expanded to a current capacity of 190,000 tons of sodium bicarbonate per year. The Company's plant in Old Fort, Ohio is located on 75 acres of land owned by the Company. The plant and related facilities contain approximately 208,000 square feet of floor space. The plant was completed in 1980 and has since been expanded to a capacity of 240,000 tons of sodium bicarbonate per year. The last expansion was completed in the second quarter of 1995. The Company maintains an operating facility in Taylors, South Carolina, for the manufacturing and packaging of its dentifrice products in a 117,000 square foot building. The facility is located on 6 acres of land owned by the Company. In Ontario, Canada, the Company owns a 26,000 square foot distribution center which was previously the site of a packaging plant servicing Canadian markets. In 1994, the manufacturing activities were transferred to the Company's United States facilities. The principal office of the Canadian subsidiary (which is leased) is located in Toronto. Brotherton Chemicals Ltd. operates a 71,000 square foot manufacturing facility in Wakefield, England on about 7 acres of land. The Company's Venezuela subsidiary, Industrias Bicarbon De Venezuela S.A., recently completed construction of a new 11,000 ton sodium bicarbonate plant. The plant became operational in mid 1995. The Armand Products partnership, in which the Company has a 50% interest, owns and operates a potassium carbonate manufacturing plant located in Muscle Shoals, Alabama. This facility contains approximately 53,000 square feet of floor space and has a capacity of 103,000 tons of potassium carbonate per year. ITEM 3. LEGAL PROCEEDINGS The Company is subject to claims and litigation in the ordinary course of its business, but does not believe that any such claim or litigation will have a material adverse effect on the business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the last quarter of the year ended December 31, 1995. - 6 -
9 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded on the New York Stock Exchange (symbol: "CHD"). Refer to Page 17 of the Annual Report which is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Refer to Page 13 of the Annual Report which, in so far as the data for the years 1991 through 1995 are concerned, is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Refer to Financial Review Pages 14-17 of the Annual Report which are incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Refer to Pages 18-31 of the Annual Report which are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT This item is omitted because the Company will file with the Commission a definitive proxy statement pursuant to Regulation 14A not later than 120 days after the close of the fiscal year ended December 31, 1995, which proxy statement is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION This item is omitted because the Company will file with the Commission a definitive proxy statement pursuant to Regulation 14A not later than 120 days after the close of the fiscal year ended December 31, 1995, which proxy statement is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT This item is omitted because the Company will file with the Commission a definitive proxy statement pursuant to Regulation 14A not later than 120 days after the close of the fiscal year ended December 31, 1995, which proxy statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS This item is omitted because the Company will file with the Commission a definitive proxy statement pursuant to Regulation 14A not later than 120 days after the close of the fiscal year ended December 31, 1995, which proxy statement is incorporated herein by reference. - 7 -
10 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS The following financial statements are incorporated herein by reference to the Annual Report to Security Holders: <TABLE> <CAPTION> Page of Annual Report ------------- <S> <C> Consolidated Statements of Income for each of the three 18 years in the period ended December 31, 1995 Consolidated Balance Sheets as of December 31, 1994 and 1995 19 Consolidated Statements of Cash Flow for each of the three 20 years in the period ended December 31, 1995 Consolidated Statements of Stockholders' Equity for each of 21 the three years in the period ended December 31, 1995 Notes to Financial Statements 22-31 Independent Auditors' Report 32 </TABLE> (a) 2. FINANCIAL STATEMENT SCHEDULE Included in Part IV of this report: Independent Auditors' Report on Schedule For each of the three years in the period ended December 31, 1995: Schedule II - Valuation and Qualifying Accounts Other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto. - 8 -
11 (a) 3. EXHIBITS (3) (a) Restated Certificate of Incorporation including amendments has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1989, which is incorporated by reference. (b) By-Laws have previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1985, which is incorporated herein by reference. (4) The Company is party to a Loan Agreement dated May 31, 1991 with the New Jersey Economic Development Authority. The principal amount of the loan thereunder is less than ten percent of the Company's consolidated assets. The Company will furnish a copy of said agreement to the Commission upon request. (10) (a) Supply Agreement between Church & Dwight Co., Inc. and ALCAD Partnership for supply of soda ash. This document is not attached hereto but has been separately submitted to the Securities and Exchange Commission which has approved the Company's application under rule 24b-2 for privileged and confidential treatment thereof. COMPENSATION PLANS AND ARRANGEMENTS (b) Indemnification Agreement for directors, and certain officers, employees, agents and fiduciaries, which was approved by stockholders at the Annual Meeting of Stockholders on May 7, 1987, and was included in the Company's definitive Proxy Statement dated April 6, 1987 which is incorporated herein by reference. (c) Stockholder Rights Agreement dated April 27, 1989, between Church & Dwight Co., Inc. and Chemical Bank, formerly Manufacturers Hanover Trust Company, has been previously filed on April 28, 1989 with the Securities and Exchange Commission on the Company's Form 8-K, which is incorporated herein by reference. (d) The Company's 1983 Stock Option Plan, which was approved by stockholders at the Annual Meeting of Stockholders on May 5, 1983, and was included in the Company's definitive Proxy Statement dated April 4, 1983 which is incorporated herein by reference. (e) Restricted Stock Plan for Directors which was approved by stockholders at the Annual Meeting of Stockholders on May 7, 1987, and was included in the Company's definitive Proxy Statement dated April 6, 1987 which is incorporated herein by reference. (f) Church & Dwight Co., Inc. Deferred Compensation Plan and Agreement for Officers Amended and Restated as of January 1, 1988 has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1987, which is incorporated herein by reference. (g) Deferred Compensation Plan for Directors has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1987, which is incorporated herein by reference. (h) Employment Service Agreement with Senior Management of Church & Dwight Co., Inc. has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1990, which is incorporated herein by reference. - 9 -
12 (i) The Stock Option Plan for Directors which was approved by stockholders in May 1991, authorized the granting of options to non-employee directors. The full text of the Church & Dwight Co.,Inc. Stock Option Plan for Directors was contained in the definitive Proxy Statement filed with the Commission on April 2, 1991 and incorporated herein by reference. (j) A description of the Company's Incentive Compensation Plan has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1992, which is incorporated herein by reference. (k) Church & Dwight Co., Inc. Executive Stock Purchase Plan has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1993, which is incorporated herein by reference. (l) The 1994 Incentive Stock Option Plan has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1994, which is incorporated herein by reference. (11) Computation of earnings per share. (13) 1995 Annual Report to Stockholders. (21) List of the Company's subsidiaries. (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed during the fourth quarter of the year ended December 31,1995. Copies of exhibits will be made available upon request and for a reasonable charge. (d) FINANCIAL STATEMENTS OF SUBSIDIARIES NOT CONSOLIDATED Armand Products Corporation Statements of Income and Partners' Capital for each of the three years in the period ended December 31, 1995. Armand Products Corporation Balance Sheets as of December 31, 1994 and 1995. Armand Products Corporation Statements of Cash Flow for each of the three years in the period ended December 31, 1995. - 10 -
13 INDEPENDENT AUDITORS' REPORT To The Board of Directors and Stockholders of Church & Dwight Co., Inc. Princeton, New Jersey We have audited the consolidated financial statements of Church & Dwight Co., Inc. and subsidiaries as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, and have issued our report thereon dated January 24, 1996; such consolidated financial statements and report are included in your 1995 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of Church & Dwight Co., Inc. and subsidiaries, listed in Item 14. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Parsippany, New Jersey January 24, 1996 - 11 -
14 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (In thousands) <TABLE> <CAPTION> 1995 1994 1993 ALLOWANCE FOR DOUBTFUL ACCOUNTS: -------------------------- <S> <C> <C> <C> Balance at beginning of year $ 912 $ 752 $ 777 -------------------------- Additions: Charged to expenses and costs 478 700 184 -------------------------- Deductions: Amounts written off 86 539 208 Foreign currency translation adjustment -- 1 1 -------------------------- 86 540 209 -------------------------- BALANCE AT END OF YEAR $1,304 $ 912 $ 752 -------------------------- </TABLE> - 12 -
15 ARMAND PRODUCTS COMPANY ( A PARTNERSHIP) STATEMENTS OF EARNINGS AND CHANGES IN PARTNER'S CAPITAL (Dollars in thousands) <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, 1995 1994 1993 - ----------------------------------------------------------------------------------- <S> <C> <C> <C> NET SALES $ 50,539 $ 47,254 $ 39,701 Cost of Sales 33,242 29,108 23,688 ---------------------------------- Gross Profit 17,297 18,146 16,013 Selling, General and Administrative Expenses 2,754 2,568 2,466 ---------------------------------- INCOME FROM OPERATIONS 14,543 15,578 13,547 Interest Income 235 170 163 Interest Expense (908) (908) (693) - ----------------------------------------------------------------------------------- NET INCOME $ 13,870 $ 14,840 $ 13,017 - ----------------------------------------------------------------------------------- PARTNERS' CAPITAL: - ----------------------------------------------------------------------------------- Balance, Beginning of Year $ 27,737 $ 33,115 $ 35,964 Net Income 13,870 14,840 13,017 Return of Capital to Partners (5,600) (5,500) (2,000) Distributions to Partners (13,490) (14,718) (13,866) - ----------------------------------------------------------------------------------- BALANCE, END OF YEAR $ 22,517 $ 27,737 $ 33,115 - ----------------------------------------------------------------------------------- </TABLE> See notes to financial statements
16 ARMAND PRODUCTS COMPANY (A PARTNERSHIP) BALANCE SHEETS (Dollars in thousands) <TABLE> <CAPTION> DECEMBER 31, 1995 1994 - ---------------------------------------------------------------------- ASSETS - ---------------------------------------------------------------------- <S> <C> <C> Cash and cash equivalents $ 771 $ 3,004 Accounts receivable (net of allowance of $150 in 1995 and $150 in 1994) 5,596 6,100 Inventories 1,143 1,329 ---------------------- TOTAL CURRENT ASSETS 7,510 10,433 - ---------------------------------------------------------------------- Property, plant and equipment (net) 27,718 28,070 Long-term supply contract 1,650 3,850 Intangibles 154 191 - ---------------------------------------------------------------------- TOTAL ASSETS $37,032 $42,544 - ---------------------------------------------------------------------- LIABILITIES AND PARTNERS' CAPITAL - ---------------------------------------------------------------------- Accounts payable $ 3,088 $ 3,464 Accrued liabilities 427 343 ---------------------- TOTAL CURRENT LIABILITIES 3,515 3,807 - ---------------------------------------------------------------------- Notes payable - Church & Dwight Company 11,000 11,000 Partners' capital 22,517 27,737 - ---------------------------------------------------------------------- TOTAL LIABILITIES AND PARTNERS' CAPITAL $37,032 $42,544 - ---------------------------------------------------------------------- </TABLE> See notes to financial statements
17 ARMAND PRODUCTS COMPANY (A PARTNERSHIP) STATEMENTS OF CASH FLOW (Dollars in thousands) <TABLE> <CAPTION> YEARS ENDED DECEMBER 31, 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------- CASH FLOW FROM OPERATING ACTIVITIES: - -------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> NET INCOME $ 13,870 $ 14,840 $ 13,017 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,693 1,823 1,656 Supply contract amortization 2,200 2,200 2,200 Amortization of intangibles 37 38 38 Change in assets and liabilities net of effects of disposals: Decrease(increase) in accounts receivable 504 (900) (193) Decrease(increase) in inventories 186 505 (858) (Decrease)increase in accounts payable and accrued liabilities (292) 1,348 (145) - -------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 18,198 19,854 15,715 CASH FLOW FROM INVESTING ACTIVITIES: - -------------------------------------------------------------------------------------------------------------- Additions to property, plant and equipment (1,341) (927) (2,535) - -------------------------------------------------------------------------------------------------------------- CASH FLOW FROM FINANCING ACTIVITIES: - -------------------------------------------------------------------------------------------------------------- Return of capital to partners (5,600) (5,500) (2,000) Distributions to partners (13,490) (14,718) (13,866) - -------------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (19,090) (20,218) (15,866) - -------------------------------------------------------------------------------------------------------------- NET CHANGE IN CASH AND CASH EQUIVALENTS (2,233) (1,291) (2,686) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,004 4,295 6,981 - -------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 771 $ 3,004 $ 4,295 - -------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-- Cash paid during the year for interest (net of amounts capitalized) $ 908 $ 681 $ 689 - -------------------------------------------------------------------------------------------------------------- </TABLE> See notes to financial statements
18 ARMAND PRODUCTS COMPANY (A PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1. ORGANIZATION Armand Products Company (the "Partnership") was organized under the Uniform Partnership Act of the State of Delaware on October 1, 1986 to engage in the manufacture and sale of potassium carbonate and related products. The Partnership shall continue to exist indefinitely, although its termination may be effected by either of the Partners pursuant to the terms of the Partnership Agreement. The two partners, Occidental Petroleum Corporation and Church & Dwight Co., Inc. each own a 50% interest in the partnership. The financial statements reflect the activities of Armand Products Company, and do not include any assets, liabilities, revenues or expenses attributable to the activities of the individual Partners. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Cash and cash equivalents - Cash equivalents consist of highly liquid short-term investments which mature within three months of purchase. B. Inventories - Inventories consist of finished goods valued at the lower of cost or market using the first-in, first-out method. C. Property, plant and equipment - Property, plant and equipment and additions thereto are stated at cost. Depreciation is provided on a straight-line basis over the estimated lives of the assets. D. Long-term supply contract - The long-term supply contract represents advance payments under a multi-year contract with Occidental Electrochemical Corporation ("OEC")(See note 5) for the purchase of raw materials. Such advance payments are amortized on a straight-line basis over a ten year period. E. Intangibles - Intangibles represent purchased technology, customer list, business data and a covenant not to compete related to the Partnership's potassium bicarbonate business. Intangibles are being amortized over a period of ten years. F. Income taxes - The Partnership is not considered a taxable entity for federal and state income tax purposes. Accordingly, no provision has been made for income taxes, as it is the responsibility of the individual Partners. G. Allocation of profits and losses - The Partnership Agreement calls for profits and losses to be divided equally between the Partners. H. Revenue recognition - The Partnership recognizes revenues when product is shipped to customers.
19 I. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 3. FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying amounts and estimated fair values of the Partnership's financial instruments at December 31, 1995 and 1994. Statements of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments", defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. <TABLE> <CAPTION> (dollars in thousands) 1995 1994 ---------------------- ---- ---- Carrying Fair Carrying Fair Amount Value Amount Value ------ ----- ------ ----- <S> <C> <C> <C> <C> Financial Assets: Cash and cash equivalents $771 $771 $3,004 $3,004 Financial Liabilities: Note payable to Church & Dwight Company $11,000 $11,000 $11,000 $11,000 - ------------------------------------------------------------------------------------------------------ </TABLE> The following methods and assumptions were used to estimate the fair value of each class of financial instruments reflected in the Balance Sheet. Cash and Cash Equivalents The Partnership has included as part of cash equivalents short-term highly liquid investments that are classified as trading securities. The cost of the investments can be specifically identified and approximates fair value because of the short maturity of the instruments. Note Payable from Church & Dwight Company The note payable represents a loan from Church & Dwight Company. The Partnership believes that the note payable represents fair market value because the terms and collateral would be similar to other instruments available in the marketplace.
20 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following at December 31, 1995 and 1994: (dollars in thousands) <TABLE> <CAPTION> 1995 1994 ---- ---- <S> <C> <C> Machinery and equipment $32,812 $32,747 Building and improvements 4,070 4,070 Construction in progress 2,026 750 ------- ------- 38,908 37,567 Less accumulated depreciation 11,190 9,497 ------- ------- Property, plant and equipment (net) $27,718 $28,070 ======= ======= </TABLE> 5. RELATED PARTY TRANSACTIONS Pursuant to the Partnership and related agreements, each of the Partners, Oxy Carbonate, Inc. ("Oxy") and C&D Chemical Products, Inc. ("C&D"), either directly or through affiliated companies, provide specific services on behalf of the Partnership. In 1986, the Partnership entered into a long-term supply agreement with OEC for a key raw material. Under the terms of the supply agreement, the Partnership expects to obtain its requirements of this raw material for a ten year period. In 1992, Church & Dwight Company, a company related to C&D through common ownership, loaned the Partnership $11 million. The note, which is secured by plant and equipment owned by the Partnership, bears interest at a rate of 8.25 percent and is due in installments from January 1998 through June 2000. Annual maturities of the note payable are as follows: (dollars in thousands) <TABLE> <S> <C> 1998 $ 4,125 1999 5,500 2000 1,375 ------- $11,000 ======= </TABLE>
21 The following summarizes the transactions and balances between the Partnership and each of the Partners as of December 31, 1995, 1994 and 1993 (in thousands): <TABLE> <CAPTION> 1995 1994 1993 ---- ---- ---- <S> <C> <C> <C> Sales to Oxy $ 5,889 $ 3,440 $ 1,679 Sales to C&D 1,206 842 719 Purchases from Oxy 26,056 23,596 19,912 Administrative costs reimbursed to Oxy 487 411 375 Administrative costs reimbursed to C&D 2,049 2,025 2,056 Interest charged by C&D 908 908 908 Accounts receivable due from Oxy 514 881 598 Accounts receivable due from C&D 185 87 201 Accounts payable due to Oxy 2,456 2,362 1,713 Accounts payable due to C&D 817 962 482 Note Payable to C&D 11,000 11,000 11,000 </TABLE>
22 INDEPENDENT AUDITOR'S REPORT To the Partners of Armand Products Company Princeton, New Jersey We have audited the accompanying balance sheets of Armand Products Company (a partnership) as of December 31, 1995 and 1994, and the related statements of earnings, and changes in partners' capital, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Parsippany, New Jersey January 24, 1996
23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, on February 21, 1996. CHURCH & DWIGHT CO., INC. By: /s/ Robert A. Davies, III ------------------------------------- Robert A. Davies, III President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. <TABLE> <S> <C> <C> /s/ Robert A. Davies, III President and February 21, 1996 - ------------------------------ Robert A. Davies, III Chief Executive Officer /s/ Zvi Eiref Vice President Finance, and February 21, 1996 - ------------------------------ Zvi Eiref Chief Financial Officer (Principal Financial Officer) /s/ Gary P. Halker Vice President February 21, 1996 - ------------------------------ Gary P. Halker Controller and Chief Information Officer (Principal Accounting Officer) </TABLE>
24 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. <TABLE> <S> <C> <C> /s/ Cyril C. Baldwin, Jr. Director February 21, 1996 - ------------------------------ Cyril C. Baldwin, Jr. /s/ William R. Becklean Director February 21, 1996 - ------------------------------ William R. Becklean /s/ Robert H. Beeby Director February 21, 1996 - ------------------------------ Robert H. Beeby /s/ Robert A. Davies, III Director February 21, 1996 - ------------------------------ Robert A. Davies, III /s/ Rosina B. Dixon, M.D. Director February 21,1996 - ------------------------------ Rosina B. Dixon, M.D. /s/ J. Richard Leaman, Jr. Director February 21, 1996 - ------------------------------ J. Richard Leaman, Jr. /s/ John D. Leggett, III, Ph.D Director February 21, 1996 - ------------------------------ John D. Leggett, III, Ph.D. /s/ Robert A. McCabe Director February 21, 1996 - ------------------------------ Robert A. McCabe /s/ Dwight C. Minton Chairman February 21, 1996 - ------------------------------ Dwight C. Minton /s/ Dean P. Phypers Director February 21, 1996 - ------------------------------ Dean P. Phypers /s/ Jarvis J. Slade Director February 21, 1996 - ------------------------------ Jarvis J. Slade /s/ John O. Whitney Director February 21, 1996 - ------------------------------ John O. Whitney </TABLE>
25 EXHIBIT INDEX ------------- Exhibit No. Description ----------- ----------- (3) (a) Restated Certificate of Incorporation including amendments has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1989, which is incorporated by reference. (b) By-Laws have previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1985, which is incorporated herein by reference. (4) The Company is party to a Loan Agreement dated May 31, 1991 with the New Jersey Economic Development Authority. The principal amount of the loan thereunder is less than ten percent of the Company's consolidated assets. The Company will furnish a copy of said agreement to the Commission upon request. (10) (a) Supply Agreement between Church & Dwight Co., Inc. and ALCAD Partnership for supply of soda ash. This document is not attached hereto but has been separately submitted to the Securities and Exchange Commission which has approved the Company's application under rule 24b-2 for privileged and confidential treatment thereof. COMPENSATION PLANS AND ARRANGEMENTS (b) Indemnification Agreement for directors, and certain officers, employees, agents and fiduciaries, which was approved by stockholders at the Annual Meeting of Stockholders on May 7, 1987, and was included in the Company's definitive Proxy Statement dated April 6, 1987 which is incorporated herein by reference. (c) Stockholder Rights Agreement dated April 27, 1989, between Church & Dwight Co., Inc. and Chemical Bank, formerly Manufacturers Hanover Trust Company, has been previously filed on April 28, 1989 with the Securities and Exchange Commission on the Company's Form 8-K, which is incorporated herein by reference. (d) The Company's 1983 Stock Option Plan, which was approved by stockholders at the Annual Meeting of Stockholders on May 5, 1983, and was included in the Company's definitive Proxy Statement dated April 4, 1983 which is incorporated herein by reference. (e) Restricted Stock Plan for Directors which was approved by stockholders at the Annual Meeting of Stockholders on May 7, 1987, and was included in the Company's definitive Proxy Statement dated April 6, 1987 which is incorporated herein by reference. (f) Church & Dwight Co., Inc. Deferred Compensation Plan and Agreement for Officers Amended and Restated as of January 1, 1988 has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1987, which is incorporated herein by reference. (g) Deferred Compensation Plan for Directors has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1987, which is incorporated herein by reference. (h) Employment Service Agreement with Senior Management of Church & Dwight Co., Inc. has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1990, which is incorporated herein by reference.
26 EXHIBIT INDEX ------------- Exhibit No. Description ----------- ----------- (i) The Stock Option Plan for Directors which was approved by stockholders in May 1991, authorized the granting of options to non-employee directors. The full text of the Church & Dwight Co.,Inc. Stock Option Plan for Directors was contained in the definitive Proxy Statement filed with the Commission on April 2, 1991 and incorporated herein by reference. (j) A description of the Company's Incentive Compensation Plan has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1992, which is incorporated herein by reference. (k) Church & Dwight Co., Inc. Executive Stock Purchase Plan has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1993, which is incorporated herein by reference. (l) The 1994 Incentive Stock Option Plan has previously been filed with the Securities and Exchange Commission on the Company's Form 10-K for the year ended December 31, 1994, which is incorporated herein by reference. (11) Computation of earnings per share. (13) 1995 Annual Report to Stockholders. (21) List of the Company's subsidiaries. (27) Financial Data Schedule