Delaware
|
13-4996950
|
(State
or other jurisdiction
|
(I.R.S.
Employer Identification No.)
|
of
incorporation or organization)
|
469
North Harrison Street, Princeton, N.J. 08543-5297
|
(Address
of principal executive office)
|
Large accelerated filer | x | Accelerated filer | o | ||
Non-accelerated filer | o | Smaller reporting company | o |
Item
|
Page
|
|
1.
|
3
|
|
2.
|
25
|
|
3.
|
33
|
|
4.
|
34
|
1.
|
34
|
|
1A.
|
34
|
|
5.
|
34
|
|
6.
|
35
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
27,
|
June
29,
|
June
27,
|
June
29,
|
|||||||||||||
(Dollars
in thousands, except per share data)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Net
Sales
|
$ | 593,959 | $ | 546,472 | $ | 1,146,826 | $ | 1,060,807 | ||||||||
Cost
of sales
|
351,479 | 329,779 | 680,240 | 644,238 | ||||||||||||
Gross
Profit
|
242,480 | 216,693 | 466,586 | 416,569 | ||||||||||||
Marketing
expense
|
79,170 | 66,102 | 132,655 | 111,954 | ||||||||||||
Selling,
general and administrative expenses
|
81,427 | 74,041 | 159,286 | 145,922 | ||||||||||||
Income
from Operations
|
81,883 | 76,550 | 174,645 | 158,693 | ||||||||||||
Equity
in earnings of affiliates
|
2,152 | 1,760 | 4,532 | 4,020 | ||||||||||||
Investment
earnings
|
1,957 | 1,520 | 4,526 | 3,153 | ||||||||||||
Other
income (expense), net
|
100 | 523 | 2,298 | 109 | ||||||||||||
Interest
expense
|
(10,638 | ) | (14,216 | ) | (23,143 | ) | (29,417 | ) | ||||||||
Income
before minority interest and income taxes
|
75,454 | 66,137 | 162,858 | 136,558 | ||||||||||||
Income
taxes
|
29,684 | 25,611 | 60,895 | 50,938 | ||||||||||||
Minority
interest
|
5 | (7 | ) | 7 | (12 | ) | ||||||||||
Net
Income
|
$ | 45,765 | $ | 40,533 | $ | 101,956 | $ | 85,632 | ||||||||
Weighted
average shares outstanding - Basic
|
66,574 | 65,804 | 66,459 | 65,687 | ||||||||||||
Weighted
average shares outstanding - Diluted
|
71,067 | 70,322 | 70,944 | 70,179 | ||||||||||||
Net
income per share - Basic
|
$ | 0.69 | $ | 0.62 | $ | 1.53 | $ | 1.30 | ||||||||
Net
income per share - Diluted
|
$ | 0.66 | $ | 0.59 | $ | 1.46 | $ | 1.25 | ||||||||
Dividends
Per Share
|
$ | 0.08 | $ | 0.07 | $ | 0.16 | $ | 0.14 |
June
27,
|
December
31,
|
|||||||
(Dollars
in thousands, except share and per share data)
|
2008
|
2007
|
||||||
Assets
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$ | 255,933 | $ | 249,809 | ||||
Accounts
receivable, less allowances of $4,039 and $4,548
|
272,071 | 247,898 | ||||||
Inventories
|
219,244 | 213,651 | ||||||
Deferred
income taxes
|
13,267 | 13,508 | ||||||
Note
receivable – current
|
1,324 | 1,263 | ||||||
Prepaid
expenses and other assets
|
14,783 | 9,224 | ||||||
Total
Current Assets
|
776,622 | 735,353 | ||||||
Property,
Plant and Equipment (Net)
|
339,971 | 350,853 | ||||||
Note
Receivable
|
2,342 | 3,670 | ||||||
Equity
Investment in Affiliates
|
10,094 | 10,324 | ||||||
Long-term
Supply Contracts
|
2,126 | 2,519 | ||||||
Tradenames
and Other Intangibles
|
654,257 | 665,168 | ||||||
Goodwill
|
688,399 | 688,842 | ||||||
Other
Assets
|
77,658 | 75,761 | ||||||
Total
Assets
|
$ | 2,551,469 | $ | 2,532,490 | ||||
Liabilities
and Stockholders' Equity
|
||||||||
Current
Liabilities
|
||||||||
Short-term
borrowings
|
$ | 15,618 | $ | 115,000 | ||||
Accounts
payable and accrued expenses
|
316,512 | 303,071 | ||||||
Current
portion of long-term debt
|
45,459 | 33,706 | ||||||
Income
taxes payable
|
6,130 | 6,012 | ||||||
Total
Current Liabilities
|
383,719 | 457,789 | ||||||
Long-term
Debt
|
678,651 | 707,311 | ||||||
Deferred
Income Taxes
|
169,591 | 162,746 | ||||||
Other
Long Term Liabilities
|
85,681 | 87,769 | ||||||
Pension,
Postretirement and Postemployment Benefits
|
33,455 | 36,416 | ||||||
Minority
Interest
|
203 | 194 | ||||||
Total
Liabilities
|
1,351,300 | 1,452,225 | ||||||
Commitments
and Contingencies
|
||||||||
Stockholders'
Equity
|
||||||||
Preferred
Stock-$1.00 par value
|
||||||||
Authorized
2,500,000 shares, none issued
|
-- | -- | ||||||
Common
Stock-$1.00 par value
|
||||||||
Authorized
300,000,000 shares, issued 69,991,482
|
69,991 | 69,991 | ||||||
Additional
paid-in capital
|
142,605 | 121,902 | ||||||
Retained
earnings
|
983,199 | 891,868 | ||||||
Accumulated
other comprehensive income
|
44,146 | 39,128 | ||||||
1,239,941 | 1,122,889 | |||||||
Common
stock in treasury, at cost:
|
||||||||
3,425,715
shares in 2008 and 3,747,719 shares in 2007
|
(39,772 | ) | (42,624 | ) | ||||
Total
Stockholders’ Equity
|
1,200,169 | 1,080,265 | ||||||
Total
Liabilities and Stockholders’ Equity
|
$ | 2,551,469 | $ | 2,532,490 |
Six
Months Ended
|
||||||||
June
27,
|
June
29,
|
|||||||
(Dollars
in thousands)
|
2008
|
2007
|
||||||
Cash
Flow From Operating Activities
|
||||||||
Net
Income
|
$ | 101,956 | $ | 85,632 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
31,651 | 29,033 | ||||||
Equity
in earnings of affiliates
|
(4,532 | ) | (4,020 | ) | ||||
Distributions
from unconsolidated affiliates
|
4,184 | 3,224 | ||||||
Deferred
income taxes
|
5,708 | 12,442 | ||||||
Gain
on sale of subsidiary
|
(2,986 | ) | -- | |||||
Asset
impairment charges and other asset write-offs
|
6,710 | 1,264 | ||||||
Non
cash compensation expense
|
6,698 | 6,450 | ||||||
Unrealized
gain on diesel hedge contract
|
(3,566 | ) | - - | |||||
Unrealized
foreign exchange gain and other
|
(2,380 | ) | (747 | ) | ||||
Change
in assets and liabilities:
|
||||||||
Accounts
receivable
|
(21,750 | ) | (10,510 | ) | ||||
Inventories
|
(5,714 | ) | (14,850 | ) | ||||
Prepaid
expenses
|
(1,811 | ) | (3,508 | ) | ||||
Accounts
payable and accrued expenses
|
11,463 | (30,855 | ) | |||||
Income
taxes payable
|
4,024 | 6,679 | ||||||
Excess
tax benefit on stock options exercised
|
(3,451 | ) | (5,039 | ) | ||||
Other
liabilities
|
4,140 | (57 | ) | |||||
Net
Cash Provided By Operating Activities
|
130,344 | 75,138 | ||||||
Cash
Flow From Investing Activities
|
||||||||
Additions
to property, plant and equipment
|
(16,656 | ) | (25,395 | ) | ||||
Proceeds
from sale of subsidiary
|
11,235 | -- | ||||||
Acquisitions
(net of cash acquired)
|
-- | (208 | ) | |||||
Return
of capital from equity affiliates
|
-- | 400 | ||||||
Proceeds
from note receivable
|
1,263 | -- | ||||||
Contingent
acquisition payments
|
(562 | ) | (692 | ) | ||||
Other
|
(152 | ) | (137 | ) | ||||
Net
Cash Used In Investing Activities
|
(4,872 | ) | (26,032 | ) | ||||
Cash
Flow From Financing Activities
|
||||||||
Long-term
debt repayment
|
(16,907 | ) | (73,158 | ) | ||||
Short-term
debt (repayments) borrowings - net
|
(99,382 | ) | 16,385 | |||||
Bank
overdrafts
|
-- | (1,956 | ) | |||||
Proceeds
from stock options exercised
|
6,020 | 8,500 | ||||||
Excess
tax benefit on stock options exercised
|
3,451 | 5,039 | ||||||
Payment
of cash dividends
|
(10,625 | ) | (9,191 | ) | ||||
Deferred
financing costs
|
(2,666 | ) | -- | |||||
Net
Cash Used In Financing Activities
|
(120,109 | ) | (54,381 | ) | ||||
Effect
of exchange rate changes on cash and cash equivalents
|
761 | 1,686 | ||||||
Net
Change in Cash and Cash Equivalents
|
6,124 | (3,589 | ) | |||||
Cash
and Cash Equivalents at Beginning Of Period
|
249,809 | 110,476 | ||||||
Cash
and Cash Equivalents at End Of Period
|
$ | 255,933 | $ | 106,887 |
SUPPLEMENTAL
CASH FLOW INFORMATION
|
Six
Months Ended
|
|||||||
June
27,
|
June
29,
|
|||||||
(Dollars
in thousands)
|
2008
|
2007
|
||||||
Cash
paid for:
|
||||||||
Interest
(net of amounts capitalized)
|
$ | 21,133 | $ | 28,169 | ||||
Income
taxes (net of refunds)
|
$ | 42,952 | $ | 30,551 | ||||
Supplemental
disclosure of non-cash investing activities:
|
||||||||
Property,
plant and equipment expenditures included in Accounts
Payable
|
$ | 571 | $ | 850 |
Number
of Shares
|
Amounts
|
|||||||||||||||||||||||||||||||
(In
thousands)
|
Common
Stock
|
Treasury
Stock
|
Common
Stock
|
Treasury
Stock
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Comprehensive
Income
|
||||||||||||||||||||||||
December
31, 2007
|
69,991 | (3,748 | ) | $ | 69,991 | $ | (42,624 | ) | $ | 121,902 | $ | 891,868 | $ | 39,128 | ||||||||||||||||||
Net
income
|
- | - | - | - | - | 101,956 | - | $ | 101,956 | |||||||||||||||||||||||
Translation
adjustments
|
- | - | - | - | - | - | 5,131 | 5,131 | ||||||||||||||||||||||||
Interest
rate agreements (net of taxes)
|
- | - | - | - | - | - | (113 | ) | (113 | ) | ||||||||||||||||||||||
Comprehensive
income
|
$ | 106,974 | ||||||||||||||||||||||||||||||
Cash
dividends
|
- | - | - | - | - | (10,625 | ) | - | ||||||||||||||||||||||||
Stock
based compensation expense and stock
option plan transactions (including tax benefit)
|
- | 312 | - | 2,768 | 13,683 | - | - | |||||||||||||||||||||||||
Directors'
deferred compensation plan (See Note 6)
|
- | - | - | - | 6,580 | - | - | |||||||||||||||||||||||||
Other
stock issuances
|
- | 10 | - | 84 | 440 | - | - | |||||||||||||||||||||||||
June
27, 2008
|
69,991 | (3,426 | ) | $ | 69,991 | $ | (39,772 | ) | $ | 142,605 | $ | 983,199 | $ | 44,146 |
1.
|
Basis
of Presentation
|
2.
|
Recently
Adopted Accounting Pronouncements
|
June
27, 2008
|
||||||||||||||||
(In
thousands)
|
Carrying
Amount
|
Quoted
Prices in Active Markets for Identical Assets
(Level
1)
|
Significant
Other Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
||||||||||||
Assets
|
||||||||||||||||
Deferred
compensation related investments
|
$ | 31,139 | $ | - | $ | 31,139 | $ | - | ||||||||
Diesel
hedge contract
|
$ | 3,566 | $ | - | $ | 3,566 | $ | - | ||||||||
$ | 34,705 | $ | - | $ | 34,705 | $ | - | |||||||||
Liabilities
|
||||||||||||||||
Interest
rate collars
|
$ | 2,091 | $ | - | $ | 2,091 | $ | - | ||||||||
$ | 2,091 | $ | - | $ | 2,091 | $ | - |
3.
|
Inventories
consist of the following:
|
June
27,
|
December
31,
|
|||||||
(In
thousands)
|
2008
|
2007
|
||||||
Raw
materials and supplies
|
$ | 56,978 | $ | 53,516 | ||||
Work
in process
|
9,949 | 9,169 | ||||||
Finished
goods
|
152,317 | 150,966 | ||||||
$ | 219,244 | $ | 213,651 |
4.
|
Property,
Plant and Equipment consist of the
following:
|
June
27
|
December
31,
|
|||||||
(In
thousands)
|
2008
|
2007
|
||||||
Land
|
$ | 11,112 | $ | 11,343 | ||||
Buildings
and improvements
|
146,594 | 147,114 | ||||||
Machinery
and equipment
|
429,113 | 436,104 | ||||||
Office
equipment and other assets
|
39,038 | 40,380 | ||||||
Software
|
33,423 | 33,336 | ||||||
Mineral
rights
|
1,663 | 1,490 | ||||||
Construction
in progress
|
23,688 | 15,915 | ||||||
684,631 | 685,682 | |||||||
Less
accumulated depreciation and amortization
|
344,660 | 334,829 | ||||||
Net
Property, Plant and Equipment
|
$ | 339,971 | $ | 350,853 |
5.
|
Earnings
Per Share (“EPS”)
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
27,
|
June
29,
|
June
27,
|
June
29,
|
|||||||||||||
(In
thousands)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Basic
|
$ | 66,574 | $ | 65,804 | $ | 66,459 | $ | 65,687 | ||||||||
Dilutive
effect of stock options
|
1,259 | 1,289 | 1,251 | 1,264 | ||||||||||||
Dilutive
effect of convertible debentures
|
3,234 | 3,229 | 3,234 | 3,228 | ||||||||||||
Diluted
|
$ | 71,067 | $ | 70,322 | $ | 70,944 | $ | 70,179 | ||||||||
Anti-dilutive
stock options outstanding - not included in the calculation of earnings
per share
|
$ | 1,030 | $ | 556 | $ | 1,148 | $ | 632 |
6.
|
Stock-Based
Compensation
|
Options
(000)
|
Weighted-Average
Exercise Price
|
Weighted-Average
Remaining Contractual Term
|
Aggregate
Intrinsic Value ($000)
|
|||||||||||||
Outstanding
at January 1, 2008
|
4,231 | $ | 30.24 | |||||||||||||
Granted
|
665 | 55.68 | ||||||||||||||
Exercised
|
(312 | ) | 19.00 | |||||||||||||
Cancelled
|
(35 | ) | 36.16 | |||||||||||||
Outstanding
at June 27, 2008
|
4,549 | $ | 34.67 | 6.6 | $ | 96,549 | ||||||||||
Exercisable
at June 27, 2008
|
2,374 | $ | 24.99 | 4.7 | $ | 73,319 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
27,
|
June
29,
|
June
27,
|
June
29,
|
|||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Intrinsic
Value of Stock Options Exercised (in millions)
|
$ | 5.1 | $ | 3.2 | $ | 11.1 | $ | 15.5 | ||||||||
Stock
Compensation Expense Related To Stock Option Awards (in
millions)
|
$ | 4.1 | $ | 3.4 | $ | 6.4 | $ | 6.2 | ||||||||
Issued
Stock Options (in thousands)
|
655 | 600 | 665 | 600 | ||||||||||||
Average
Fair Value of Stock Options Issued
|
$ | 16.65 | $ | 16.85 | $ | 16.64 | $ | 16.85 | ||||||||
Assumptions
Used:
|
||||||||||||||||
Risk-free
interest rate
|
3.7 | % | 5.1 | % | 3.7 | % | 5.1 | % | ||||||||
Expected
life in years
|
6.6 | 6.2 | 6.6 | 6.2 | ||||||||||||
Expected
volatility
|
22.5 | % | 25.0 | % | 22.5 | % | 25.0 | % | ||||||||
Dividend
yield
|
0.6 | % | 0.6 | % | 0.6 | % | 0.6 | % |
7.
|
Goodwill
and Other Intangible Assets
|
June
27, 2008
|
December
31, 2007
|
|||||||||||||||||||||||
(In
thousands)
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
Net
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
Net
|
||||||||||||||||||
Amortizable intangible
assets:
|
||||||||||||||||||||||||
Tradenames
|
$ | 122,079 | $ | (33,275 | ) | $ | 88,804 | $ | 107,066 | $ | (31,154 | ) | $ | 75,912 | ||||||||||
Customer
Relationships
|
130,640 | (17,465 | ) | 113,175 | 131,366 | (13,758 | ) | 117,608 | ||||||||||||||||
Patents/Formulas
|
27,220 | (13,396 | ) | 13,824 | 27,220 | (11,816 | ) | 15,404 | ||||||||||||||||
Non
Compete Agreement
|
1,143 | (751 | ) | 392 | 1,143 | (695 | ) | 448 | ||||||||||||||||
Total
|
$ | 281,082 | $ | (64,887 | ) | $ | 216,195 | $ | 266,795 | $ | (57,423 | ) | $ | 209,372 | ||||||||||
Unamortizable
intangible assets - carrying value
|
||||||||||||||||||||||||
Tradenames
|
$ | 438,062 | $ | 455,796 |
(In
thousands)
|
Consumer
Domestic
|
Consumer
International
|
SPD
|
Total
|
||||||||||||
Balance
December 31, 2007
|
$ | 633,030 | $ | 33,224 | $ | 22,588 | $ | 688,842 | ||||||||
Subsidiary
Divestiture (see Note 13)
|
-- | -- | (971 | ) | (971 | ) | ||||||||||
Additional
Unilever contingent consideration (see Note 11e)
|
528 | -- | -- | 528 | ||||||||||||
Balance
June 27, 2008
|
$ | 633,558 | $ | 33,224 | $ | 21,617 | $ | 688,399 |
8.
|
Short-term
Borrowings and Long-Term Debt
|
June
27,
|
December
31,
|
|||||||
(In
thousands)
|
2008
|
2007
|
||||||
Short-term
borrowings
|
||||||||
Securitization
of accounts receivable
|
$ | 15,000 | $ | 115,000 | ||||
International
debt
|
618 | -- | ||||||
Total
short-term borrowings
|
$ | 15,618 | $ | 115,000 | ||||
Long-term
debt
|
||||||||
Term
Loan facility
|
$ | 374,216 | $ | 391,069 | ||||
Convertible
debentures due on August 15, 2033
|
99,894 | 99,948 | ||||||
Senior
subordinated notes (6%) due December 22, 2012
|
250,000 | 250,000 | ||||||
Total
long-term debt
|
724,110 | 741,017 | ||||||
Less:
current maturities
|
45,459 | 33,706 | ||||||
Net
long-term debt
|
$ | 678,651 | $ | 707,311 |
(In
thousands)
|
||||
Due
by June 30, 2009
|
$ | 45,459 | ||
Due
by June 30, 2010
|
98,345 | |||
Due
by June 30, 2011
|
105,445 | |||
Due
by June 30, 2012
|
96,914 | |||
Due
by June 30, 2013
|
278,053 | |||
Due
June 30, 2014 and subsequent
|
99,894 | |||
$ | 724,110 |
9.
|
Comprehensive
Income
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
27,
|
June
29,
|
June
27,
|
June
29,
|
|||||||||||||
(In
thousands)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Net
Income
|
$ | 45,765 | $ | 40,533 | $ | 101,956 | $ | 85,632 | ||||||||
Other
Comprehensive Income, Net of Tax:
|
||||||||||||||||
Foreign Exchange
Translation Adjustments (Net of Divestiture)
|
8,011 | 7,993 | 5,131 | 9,045 | ||||||||||||
Interest Rate Hedge
Agreements
|
2,213 | 156 | (113 | ) | 83 | |||||||||||
Comprehensive
Income
|
$ | 55,989 | $ | 48,682 | $ | 106,974 | $ | 94,760 |
10.
|
Pension
and Postretirement Plans
|
Pension
Costs
|
Pension
Costs
|
|||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
27,
|
June
29,
|
June
27,
|
June
29,
|
|||||||||||||
(In
thousands)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Components
of Net Periodic Benefit Cost:
|
||||||||||||||||
Service
cost
|
$ | 710 | $ | 722 | $ | 1,433 | $ | 1,348 | ||||||||
Interest
cost
|
1,908 | 1,858 | 3,845 | 3,566 | ||||||||||||
Expected
return on plan assets
|
(2,148 | ) | (2,021 | ) | (4,327 | ) | (3,877 | ) | ||||||||
Amortization
of prior service cost
|
3 | 4 | 7 | 7 | ||||||||||||
Recognized
actuarial loss
|
(9 | ) | 52 | (18 | ) | 103 | ||||||||||
Net
periodic benefit cost
|
$ | 464 | $ | 615 | $ | 940 | $ | 1,147 | ||||||||
Postretirement
Costs
|
Postretirement
Costs
|
|||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
27,
|
June
29,
|
June
27,
|
June
29,
|
|||||||||||||
(In
thousands)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Components
of Net Periodic Benefit Cost:
|
||||||||||||||||
Service
cost
|
$ | 187 | $ | 197 | $ | 374 | $ | 379 | ||||||||
Interest
cost
|
366 | 367 | 733 | 721 | ||||||||||||
Amortization
of prior service cost
|
12 | 9 | 23 | 19 | ||||||||||||
Recognized
actuarial loss
|
-- | 6 | -- | 11 | ||||||||||||
Net
periodic benefit cost
|
$ | 565 | $ | 579 | $ | 1,130 | $ | 1,130 |
11.
|
Commitments,
contingencies and guarantees
|
a.
|
The
Company has a partnership with a supplier of raw materials which mines and
processes sodium mineral deposits. This agreement
terminates upon two years’ written notice by either
company. The Company has an annual commitment to purchase
240,000 tons at the prevailing market price and purchases the majority of
its sodium raw material requirements from the partnership. The
Company is not engaged in any other material transactions with the
partnership or the Company’s
partner.
|
b.
|
The
Company’s distribution of condoms under the TROJAN and other trademarks is
regulated by the U.S. Food and Drug Administration (FDA). Certain of the
Company’s condoms and similar condoms sold by its competitors contain the
spermicide nonoxynol-9 (N-9). The World Health Organization and other
interested groups have issued reports suggesting that N-9 should not be
used rectally or for multiple daily acts of vaginal intercourse, given the
ingredient’s potential to cause irritation to human membranes. In 2005,
the FDA issued non-binding draft guidance concerning the labeling of
condoms in general and those with N-9 in particular. The Company filed a
response recommending alternative labeling to the FDA and has engaged in
further discussions with the FDA since that time. While awaiting further
FDA guidance, the Company implemented an interim label statement change
cautioning against rectal use and more-than-once-a-day vaginal use of
condoms with N-9 and launched a public information campaign to communicate
these messages to the affected communities. The Company believes that its
present labeling for condoms with N-9 is compliant with the overall
objectives of the FDA’s draft guidance and that condoms with N-9 will
remain a viable contraceptive choice for those couples who wish to use
them. The Company cannot predict the nature of the labeling
that ultimately will be required by the FDA. If the FDA or state
governments eventually promulgate rules that prohibit or restrict the use
of N-9 in condoms (such as new labeling requirements), the Company could
incur costs from obsolete products, packaging or raw materials, and sales
of condoms could decline, which, in turn, could decrease the Company’s
operating income.
|
c.
|
As
of June 27, 2008, the Company has commitments to acquire approximately
$92.7 million of raw material, packaging supplies and services from its
vendors at market prices.
|
d.
|
The
Company has $4.5 million of outstanding letters of credit drawn on several
banks which guarantee payment for such things as finished goods inventory,
insurance claims and one year of rent on a warehouse in the event of the
Company’s insolvency.
|
e.
|
In
connection with the Company’s October 2003 acquisition of Unilever’s oral
care brands in the United States and Canada in October 2003, the Company
is required to make additional performance-based payments of a minimum of
$5.0 million and a maximum of $12.0 million over the eight year period
following the acquisition. The Company made cash payments of
$0.5 million, and accrued a payment of $0.3 million in the first six
months of 2008. The payment and accrual were accounted for as
additional purchase price. The Company has paid approximately
$8.6 million, exclusive of the $0.3 million accrual, in additional
performance-based payments since the
acquisition.
|
f.
|
The
Company filed suit against Abbott Laboratories, Inc (“Abbott”) in April
2005 claiming infringement of certain patents resulting from Abbott’s
manufacture and sale of its Fact Plus pregnancy diagnostic test
kits. Following a trial in February 2008, the jury found that
the Company’s patents were valid and willfully infringed by Abbott during
the period from April 1999 through September 2003 and awarded damages to
the Company in the amount of $14.6 million. On June 23, 2008, the District
Court issued an opinion finding that Abbott’s conduct had been willful and
doubled the damages awarded to the Company to $29.2 million before
prejudgment interest. There remains a post-trial motion pending with the
District Court with respect to the damages awarded at trial. The Company
will vigorously contest the motion. In June 2007, Abbott filed suit
against the Company claiming infringement of certain patents that are
licensed to Abbott, also in relation to pregnancy diagnostic test
kits. The Company intends to continue its vigorous defense of
this action.
|
g.
|
The
Company, in the ordinary course of its business, is the subject of, or a
party to, various pending or threatened legal actions. The
Company believes that any ultimate liability arising from these actions
will not have a material adverse effect on its financial
position.
|
12.
|
Related
Party Transactions
|
13.
|
Gain
on Sale of Business
|
14.
|
Plant
Shutdown
|
15.
|
Segment
Information
|
Segment
|
Products
|
Consumer
Domestic
|
Household
and personal care products
|
Consumer
International
|
Primarily
personal care products
|
SPD
|
Specialty
chemical products
|
(in
thousands)
|
Consumer Domestic
(3)
|
Consumer International
(3)
|
SPD
|
Corporate
|
Total
|
|||||||||||||||
Net
Sales(1)
|
||||||||||||||||||||
Second
Quarter 2008
|
$ | 411,592 | $ | 112,809 | $ | 69,558 | $ | - | $ | 593,959 | ||||||||||
Second
Quarter 2007
|
$ | 383,337 | $ | 101,794 | $ | 61,341 | $ | - | $ | 546,472 | ||||||||||
First
Six Months of 2008
|
$ | 794,336 | $ | 212,503 | $ | 139,987 | $ | - | $ | 1,146,826 | ||||||||||
First
Six Months of 2007
|
$ | 753,171 | $ | 188,533 | $ | 119,103 | $ | - | $ | 1,060,807 | ||||||||||
Income
before Minority Interest and Income Taxes(2)
|
||||||||||||||||||||
Second
Quarter 2008
|
$ | 56,095 | $ | 11,490 | $ | 5,717 | $ | 2,152 | $ | 75,454 | ||||||||||
Second
Quarter 2007
|
$ | 47,730 | $ | 11,526 | $ | 5,121 | $ | 1,760 | $ | 66,137 | ||||||||||
First
Six Months of 2008
|
$ | 123,926 | $ | 18,742 | $ | 15,658 | $ | 4,532 | $ | 162,858 | ||||||||||
First
Six Months of 2007
|
$ | 100,495 | $ | 22,395 | $ | 9,648 | $ | 4,020 | $ | 136,558 |
(1)
|
Intersegment
sales from Consumer International to Consumer Domestic were $1.4 million
and $1.7 million for the second quarter ended June 27, 2008 and June 29,
2007, respectively. Intersegment sales from Consumer International to
Consumer Domestic were $3.5 million and $2.9 million for the six months
ended June 27, 2008 and June 29, 2007,
respectively.
|
(2)
|
In
determining Income Before Minority Interest and Income Taxes, interest
expense, investment earnings, and other income (expense)were allocated to
the segments based upon each segment’s relative operating profit. The
Corporate segment income consists of equity in earnings of
affiliates.
|
(3)
|
As
of January 1, 2008, the Company modified its organizational structure,
resulting in a change in classification of certain Consumer Domestic
export sales to Consumer International. Therefore, 2007 results
have been restated to reflect a reclassification in sales of $2.9 million
and $5.4 million for the three and six months ended June 29, 2007,
respectively. In addition, Income Before Minority Interest and
Income Taxes of $0.6 million and $0.9 million for the three and six months
ended June 29, 2007, respectively, has been reclassified from the Consumer
Domestic to the Consumer International
Segment.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
27,
|
June
29,
|
June
27,
|
June
29,
|
|||||||||||||
(In
thousands)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Household
Products
|
$ | 266,521 | $ | 244,804 | $ | 509,348 | $ | 481,182 | ||||||||
Personal
Care Products
|
145,071 | 138,533 | 284,988 | 271,989 | ||||||||||||
Total
Consumer Domestic
|
411,592 | 383,337 | 794,336 | 753,171 | ||||||||||||
Total
Consumer International
|
112,809 | 101,794 | 212,503 | 188,533 | ||||||||||||
Total
SPD
|
69,558 | 61,341 | 139,987 | 119,103 | ||||||||||||
Total
Consolidated Net Sales
|
$ | 593,959 | $ | 546,472 | $ | 1,146,826 | $ | 1,060,807 |
For
the Three Months Ended June 27, 2008
|
||||||||||||||||||||
Guarantor
|
Non-Guarantor
|
Total
|
||||||||||||||||||
Parent
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||||
Net
Sales
|
$ | 478,597 | $ | 31,138 | $ | 127,987 | $ | (43,763 | ) | $ | 593,959 | |||||||||
Cost
of sales
|
307,039 | 13,631 | 74,572 | (43,763 | ) | 351,479 | ||||||||||||||
Gross
Profit
|
171,558 | 17,507 | 53,415 | - | 242,480 | |||||||||||||||
Marketing
expenses
|
61,123 | - | 18,047 | - | 79,170 | |||||||||||||||
Selling,
general and administrative expenses
|
57,439 | 4,885 | 19,104 | - | 81,428 | |||||||||||||||
Income
from Operations
|
52,996 | 12,622 | 16,264 | - | 81,882 | |||||||||||||||
Equity
in earnings of affiliates
|
17,304 | - | 1,609 | (16,761 | ) | 2,152 | ||||||||||||||
Investment
earnings
|
1,402 | - | 555 | - | 1,957 | |||||||||||||||
Intercompany
dividends/interest
|
2,587 | - | (2,587 | ) | - | - | ||||||||||||||
Other
income (expense), net
|
(411 | ) | - | 511 | - | 100 | ||||||||||||||
Interest
expense
|
(9,908 | ) | - | (730 | ) | - | (10,638 | ) | ||||||||||||
Income before minority interest
and taxes
|
63,970 | 12,622 | 15,622 | (16,761 | ) | 75,453 | ||||||||||||||
Minority
interest
|
- | - | 4 | - | 4 | |||||||||||||||
Income
before income taxes
|
63,970 | 12,622 | 15,618 | (16,761 | ) | 75,449 | ||||||||||||||
Income
taxes
|
18,205 | 4,745 | 6,734 | - | 29,684 | |||||||||||||||
Net
Income
|
$ | 45,765 | $ | 7,877 | $ | 8,884 | $ | (16,761 | ) | $ | 45,765 |
For
the Three Months Ended June 29, 2007
|
||||||||||||||||||||
Guarantor
|
Non-Guarantor
|
Total
|
||||||||||||||||||
Parent
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||||
Net
Sales
|
$ | 446,411 | $ | 33,768 | $ | 111,701 | $ | (45,408 | ) | $ | 546,472 | |||||||||
Cost
of sales
|
298,258 | 14,199 | 62,730 | (45,408 | ) | 329,779 | ||||||||||||||
Gross
Profit
|
148,153 | 19,569 | 48,971 | - | 216,693 | |||||||||||||||
Marketing
expenses
|
49,155 | - | 16,947 | - | 66,102 | |||||||||||||||
Selling,
general and administrative expenses
|
53,170 | 3,590 | 17,281 | - | 74,041 | |||||||||||||||
Income
from Operations
|
45,828 | 15,979 | 14,743 | - | 76,550 | |||||||||||||||
Equity
in earnings of affiliates
|
25,468 | - | 1,229 | (24,937 | ) | 1,760 | ||||||||||||||
Investment
earnings
|
697 | 224 | 599 | - | 1,520 | |||||||||||||||
Intercompany
dividends/interest
|
(10,861 | ) | 9,846 | 1,015 | - | - | ||||||||||||||
Other
income (expense), net
|
532 | - | (9 | ) | - | 523 | ||||||||||||||
Interest
expense
|
(12,244 | ) | - | (1,972 | ) | - | (14,216 | ) | ||||||||||||
Income before minority interest
and taxes
|
49,420 | 26,049 | 15,605 | (24,937 | ) | 66,137 | ||||||||||||||
Minority
interest
|
- | - | (7 | ) | - | (7 | ) | |||||||||||||
Income
before income taxes
|
49,420 | 26,049 | 15,612 | (24,937 | ) | 66,144 | ||||||||||||||
Income
taxes
|
8,887 | 9,638 | 7,086 | - | 25,611 | |||||||||||||||
Net
Income
|
$ | 40,533 | $ | 16,411 | $ | 8,526 | $ | (24,937 | ) | $ | 40,533 |
For the Six Months Ended June 27, 2008 | ||||||||||||||||||||
Guarantor
|
Non-Guarantor
|
Total
|
||||||||||||||||||
Parent
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||||
Net
Sales
|
$ | 923,949 | $ | 63,608 | $ | 245,494 | $ | (86,225 | ) | $ | 1,146,826 | |||||||||
Cost
of sales
|
595,278 | 27,326 | 143,861 | (86,225 | ) | 680,240 | ||||||||||||||
Gross
Profit
|
328,671 | 36,282 | 101,633 | - | 466,586 | |||||||||||||||
Marketing
expenses
|
103,093 | - | 29,562 | - | 132,655 | |||||||||||||||
Selling,
general and administrative expenses
|
104,251 | 10,426 | 44,609 | - | 159,286 | |||||||||||||||
Income
from Operations
|
121,327 | 25,856 | 27,462 | - | 174,645 | |||||||||||||||
Equity
in earnings of affiliates
|
41,725 | - | 3,489 | (40,682 | ) | 4,532 | ||||||||||||||
Investment
earnings
|
3,050 | 216 | 1,260 | - | 4,526 | |||||||||||||||
Intercompany
dividends/interest
|
(6,453 | ) | 10,030 | (3,577 | ) | - | - | |||||||||||||
Other
income (expense), net
|
950 | - | 1,348 | - | 2,298 | |||||||||||||||
Interest
expense
|
(20,993 | ) | - | (2,150 | ) | - | (23,143 | ) | ||||||||||||
Income before minority interest
and taxes
|
139,606 | 36,102 | 27,832 | (40,682 | ) | 162,858 | ||||||||||||||
Minority
interest
|
- | - | 7 | - | 7 | |||||||||||||||
Income
before income taxes
|
139,606 | 36,102 | 27,825 | (40,682 | ) | 162,851 | ||||||||||||||
Income
taxes
|
37,650 | 13,574 | 9,671 | - | 60,895 | |||||||||||||||
Net
Income
|
$ | 101,956 | $ | 22,528 | $ | 18,154 | $ | (40,682 | ) | $ | 101,956 |
For
the Six Months Ended June 29, 2007
|
||||||||||||||||||||
Guarantor
|
Non-Guarantor
|
Total
|
||||||||||||||||||
Parent
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||||
Net
Sales
|
$ | 872,686 | $ | 65,553 | $ | 210,685 | $ | (88,117 | ) | $ | 1,060,807 | |||||||||
Cost
of sales
|
583,657 | 27,615 | 121,083 | (88,117 | ) | 644,238 | ||||||||||||||
Gross
Profit
|
289,029 | 37,938 | 89,602 | - | 416,569 | |||||||||||||||
Marketing
expenses
|
85,023 | - | 26,931 | - | 111,954 | |||||||||||||||
Selling,
general and administrative expenses
|
105,866 | 7,236 | 32,820 | - | 145,922 | |||||||||||||||
Income
from Operations
|
98,140 | 30,702 | 29,851 | - | 158,693 | |||||||||||||||
Equity
in earnings of affiliates
|
53,046 | - | 2,916 | (51,942 | ) | 4,020 | ||||||||||||||
Investment
earnings
|
1,659 | 443 | 1,051 | - | 3,153 | |||||||||||||||
Intercompany
dividends/interest
|
(22,134 | ) | 18,768 | 3,366 | - | - | ||||||||||||||
Other
income (expense), net
|
588 | - | (479 | ) | - | 109 | ||||||||||||||
Interest
expense
|
(25,902 | ) | - | (3,515 | ) | - | (29,417 | ) | ||||||||||||
Income before minority interest
and taxes
|
105,397 | 49,913 | 33,190 | (51,942 | ) | 136,558 | ||||||||||||||
Minority
interest
|
- | - | (12 | ) | - | (12 | ) | |||||||||||||
Income
before income taxes
|
105,397 | 49,913 | 33,202 | (51,942 | ) | 136,570 | ||||||||||||||
Income
taxes
|
19,765 | 18,468 | 12,705 |