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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file Number 1-10585
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CHURCH & DWIGHT CO., INC.
(Exact name of registrant as specified in its charter)
Incorporated in Delaware I.R.S. Employer Identification No. 13-4996950
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
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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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
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months 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 March 18, 2002, 37,917,394 shares of Common Stock held by non-affiliates
were outstanding with an aggregate market value of approximately $1,138 million.
The aggregate market value is based on the closing price of such stock on the
New York Stock Exchange on March 18, 2002.
As of March 18, 2002, 39,332,332 shares of Common Stock were outstanding.
Documents Incorporated by Reference:
Part III Portions of registrant's Proxy Statement
for the Annual Meeting of Stockholders
to be held on May 9, 2002.
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TABLE OF CONTENTS
PART I
Item Page
1. Business - 1 -
2. Properties - 6 -
3. Legal Proceedings - 7 -
4. Submission of Matters to a Vote of Security Holders - 8 -
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters - 8 -
6. Selected Financial Data - 8 -
7. Management's Discussion and Analysis of Financial Condition and Results of Operations - 8 -
7a. Quantitative and Qualitative Disclosures about Market Risk - 8 -
8. Financial Statements and Supplementary Data - 8 -
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - 9 -
PART III
10. Directors and Executive Officers of the Registrant - 9 -
11. Executive Compensation - 9 -
12. Security Ownership of Certain Beneficial Owners and Management - 9 -
13. Certain Relationships and Related Transactions - 9 -
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K - 9 -
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) Dentifrices and ARM & HAMMER DENTAL
CARE Gum, ARM & HAMMER Carpet Deodorizer, ARM & HAMMER Deodorizing Air
Freshener, ARM & HAMMER Powder and Liquid Laundry Detergent, ARM & HAMMER SUPER
SCOOP(R) and ARM & HAMMER SUPER STOP(R) Cat Litter 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. The Company also owns BRILLO(R) Soap Pads,
ARRID Anti-Perspirant and other consumer products. In 2001, consumer products
represented approximately 84% and specialty products 16% of the Company's sales.
Approximately 90% of the Company's sales revenues are derived from sales in the
United States.
In 2001, the Company acquired two laundry brands, XTRA and Nice'N Fluffy,
as part of the USA Detergents, Inc. acquisition. The acquisition increases
Church & Dwight's laundry product sales to approximately $400 million a year,
making it the third largest company in the $7 billion retail U.S. laundry
detergents business.
On September 28, 2001 the Company completed the acquisition of the
consumer products business of Carter-Wallace in a partnership with the private
equity group, Kelso & Company, for a total purchase price of $739 million. As
part of this transaction, Church & Dwight purchased outright the ARRID
Anti-Perspirant business in the USA and Canada and the Lambert Kay Pet Care
business for $128.5 million. Armkel, LLC, a 50/50 joint venture with Kelso,
purchased the remainder of Carter-Wallace's domestic and international consumer
products business, including TROJAN Condoms, NAIR Depilatories and FIRST
RESPONSE Home Pregnancy Test Kits, for an additional $610.5 million.
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 single business, ARM & HAMMER Baking Soda remains the leading brand of
baking soda 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.
During the fourth quarter of 1997, the Company introduced nationally ARM &
HAMMER SUPER SCOOP(R), The Baking Soda Clumping Litter, which competes in the
fast-growing clumping segment of the cat litter market. Following its success,
the Company launched ARM & HAMMER SUPER STOP(R) Clay Litter in late 1999. In
early 2001, the Company introduced ARM & HAMMER Vacuum Free(TM) Foam Carpet
Deodorizer, a companion product to ARM & HAMMER Carpet Deodorizer.
1
The Company's largest consumer business today, measured by sales volume,
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; powdered and liquid laundry detergents, fabric softener dryer
sheets and a laundry detergent booster.
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 30 percent discount from products
identified by the Company as market leaders. ARM & HAMMER Liquid Laundry
Detergent, is also available in regular and perfume and dye-free forms.
In 1992, the Company completed the national expansion of another laundry
product, ARM & HAMMER Fabric Softener Sheets. This product stops static cling,
and softens and freshens clothes. In 1998, the Company acquired the TOSS `N
SOFT(R) brand of dryer sheets and combined both products under the FRESH &
SOFT(R) brand name.
ARM & HAMMER Baking Soda has long been used as a dentifrice. Its mild
cleansing 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 which are marketed
and sold nationally primarily under the ARM & HAMMER DENTAL CARE brand name. In
1998, the Company introduced ARM & HAMMER DENTAL CARE Gum, a baking soda based
oral care product that is available in four flavors. In 1999, the Company
introduced ARM & HAMMER ADVANCE WHITE, a line of dentifrice for the whitening
segment of the toothpaste market and ARM & HAMMER P.M., the first toothpaste
specifically formulated for nighttime oral care. In 2000, the Company introduced
ARM & HAMMER SENSATION, a toothpaste targeted to 18-34 year olds, ARM & HAMMER
DENTAL CARE Kids Gum and in early 2001, ARM & HAMMER ADVANCE WHITE Gum, a
companion product to the Advance White toothpaste. In 2001, the Company
introduced ARM & HAMMER ADVANCED BREATH CARE, a line of oral deodorization
products, including a mint and mouthwash.
The Company markets and sells, ARM & HAMMER Deodorant Anti-Perspirant with
Baking Soda, and ARM & HAMMER Deodorant with Baking Soda. These products are
available in various scented and unscented stick, aerosol and roll-on forms.
In 1997, the Company acquired a group of five household cleaning brands
from The Dial Corporation. The brands acquired were BRILLO(R) Soap Pads and
other steel wool products, PARSONS(R) and BO-PEEP(R) Ammonia, CAMEO(R) Metal
Polish, RAIN DROPS(R) Water Softener and SNO BOL(R) Cleaners. In 1998, the
Company purchased from The Dial Corporation TOSS `N SOFT(R) Dryer Sheets. During
1999, the Company entered the bathroom cleaner category with the acquisition of
two major brands, CLEAN SHOWER(R) and SCRUB FREE(R). As part of the Scrub Free
transaction, the Company also acquired the DELICARE(R) fine fabric wash brand.
The acquisition of these brands broadens the Company's base of household
cleaning products, and fits well within the Company's current sales, marketing
and distribution activities.
In 2001, the Company acquired two laundry brands, XTRA and Nice'N Fluffy,
as part of the USA Detergents, Inc. acquisition. The acquisition increases
Church & Dwight's laundry product sales to approximately $400 million a year,
making it the third largest company in the $7 billion retail U.S. laundry
detergents business.
On September 28, 2001 the Company completed the acquisition of the
consumer products business of Carter-Wallace in a partnership with the private
equity group, Kelso & Company, for a total purchase price of $739 million. As
part of this transaction, Church & Dwight purchased outright the ARRID
Anti-Perspirant business in the USA and Canada and the Lambert Kay Pet Care
business for $128.5 million. Armkel, LLC, a 50/50 joint venture with Kelso,
purchased the remainder of Carter-Wallace's domestic and international consumer
products business, including TROJAN Condoms, NAIR Depilatories and FIRST
RESPONSE Home Pregnancy Test Kits, for an additional $610.5 million.
Competition
For information regarding competition, see page 8 through 9 of Exhibit 99.
2
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 sales force based regionally throughout the
United States. This sales force utilizes the services of independent food
brokers in each market. The Company's products are strategically located in
Church & Dwight plant and public warehouses and either picked up by customers or
delivered by independent trucking companies.
Specialty Products
Principal Products
The Company's specialty products business primarily consists of the
manufacture, marketing 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 by other manufacturing companies as a
leavening agent for commercial baked goods, as an antacid in pharmaceuticals, as
a carbon dioxide release agent in fire extinguishers, and as an alkaline agent
in swimming pool chemicals, and as a filtration agent in kidney dialysis. A
special grade of sodium bicarbonate, as well as sodium sesquicarbonate, is sold
to the animal feed market as a feed additive for use by dairymen as a buffer, or
antacid, for dairy cattle.
The Company markets and sells MEGALAC Rumen Bypass Fat, 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 under a
long-term license agreement from a British company, Volac Ltd.
In January 1999, the Company formed a joint venture with the Safety-Kleen
Corporation called the ArmaKleen Company. This joint venture distributes Church
& Dwight's proprietary product line of aqueous cleaners along with the Company's
Armex Blast Media line which is designed for the removal of a wide variety of
surface coatings. In 1999, the Company sold the equipment portion of the Armex
blast cleaning business to U.S. Filter Surface Preparation Group, Inc., a U.S.
Filter Company.
The Company markets and sells ammonium bicarbonate and other specialty
chemicals to food and agricultural markets in Europe through its wholly-owned
British subsidiary Brotherton Speciality Products Ltd.
The Company and Occidental Petroleum Corporation are equal partners in a
joint venture named Armand Products Company, which produces and markets
potassium carbonate and potassium bicarbonate. Potassium chemicals are sold,
among others, to the glass industry for use in TV and computer monitor screens.
During 1997, the Company acquired a 40 percent equity interest in
QGN/Carbonor, a Brazilian bicarbonate/carbonate-related chemical company. The
Company exercised its option to increase its interest to 75 percent during 1999.
In 2001, the Company increased its ownership to approximately 85 percent.
Early in 2002, the Company acquired Biovance Technologies, Inc., a small
Oskaloosa, Iowa-based producer of BIO-CHLOR and FERMENTEN, a range of specialty
feed ingredients for dairy cows, which improve feed efficiency and help increase
milk production.
Competition
For information regarding competition, see pages 8 through 9 of Exhibit
99.
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
Raw Materials and Sources of Supply
The Company manufactures sodium bicarbonate for both of its consumer and
industrial businesses at two of its 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 had acquired a number of leases
allowing it to extract these trona deposits. In January 1999, the Company sold
most of these leases to Solvay Minerals, Inc. The Company retains adequate trona
reserves to support the requirements of the sodium bicarbonate business and may
acquire other leases in the future as the need arises.
The Company is party to a partnership agreement with General Chemical
Corporation, which mines and processes certain trona reserves owned by each of
the two companies in Wyoming. Through the partnership and related supply and
services 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 supply of
soda ash from another company.
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.
At the Company's Green River, Wyoming plant, the Company produces laundry
detergent powder employing a process utilizing raw materials readily available
from a number of sources. Therefore, the supply of appropriate raw materials to
manufacture this product is adequate.
During 1995, a liquid laundry detergent manufacturing line was constructed
in the Company's Syracuse, New York Plant. This line was capable of producing
virtually all of the Company's liquid laundry detergent requirements. The
Company, when necessary, would utilize a contract manufacturer to meet higher
demand. As a result of the ARMUS Joint Venture and the subsequent USAD
acquisition, all of the Company's liquid laundry detergent production was
shifted to former USA Detergents' plants. The Syracuse plant was shut down at
the end of the first quarter 2001. These plants have enough capacity to produce
all of Church & Dwight's requirements. The BRILLO product line and the Company's
Dryer Sheets line are manufactured at the Company's London, Ohio plant. ARM &
HAMMER DENTAL CARE Gum, PARSONS(R) Ammonia, CAMEO(R) Metal Polish, RAIN DROPS(R)
Water Softener and SNO BOL(R) Cleaners, are contract manufactured for the
Company under various agreements. Alternative sources of supply are available in
case of disruption or termination of the agreements.
Armkel's raw materials are chemicals, plastics, latex and packaging materials.
These materials are generally available from several sources and have no
significant supply problems. Armkel generally has two or more suppliers for
production materials. Although there are multiple providers of their raw
materials, in certain instances Armkel chose to sole source certain raw
materials in order to gain favorable pricing.
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.
The ArmaKleen Company's industrial liquid cleaning products are contract
manufactured.
Patents and Trademarks
The Company's trademarks, including ARM & HAMMER, are registered with the
United States Patent and Trademark Office and also with the trademark offices of
many foreign countries. The ARM & HAMMER trademark 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.
4
Customers and Order Backlog
A group of three Consumer Products customers accounted for approximately
20% of consolidated net sales in 2001, including a single customer which
accounted for approximately 13%. A group of three customers accounted for
approximately 21% of consolidated net sales in 2000 including a single customer
which accounted for approximately 13%. This group accounted for 20% in 1999.
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 2001,
$21,803,000 was spent on research activities as compared to $19,363,000 in 2000
and $17,921,000 in 1999.
Environment
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 endeavors to take actions
necessary to comply with such regulations. These steps include periodic
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 its compliance with existing
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 presently
anticipated.
Employees
At December 31, 2001, the Company had 2,099 employees. The Company is
party to a labor contract with the United Industrial Workers of North America at
its London, Ohio plant which contract continues until September 28, 2002. The
Company believes that its relations with both its union and non-union employees
are satisfactory. The Company's Winsted, Connecticut plant has approximately 44
employees, who belong to the Paper, Allied Industrial, Chemical, and Energy
Workers International Union. The contract expires in early 2003.
Classes of Similar Products
The Company's operations constitute two operating segments. The table set
forth below shows the percentage of the Company's net sales contributed by each
group of similar products marketed by the Company during the period from January
1, 1997 through December 31, 2001.
% of Net Sales
--------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Consumer Products 84 80 79 81 79
Specialty Products 16 20 21 19 21
5
ITEM 2. PROPERTIES
The Company's executive offices and research and development facilities
are owned by the Company, subject to a New Jersey Industrial Revenue Bond, 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. The
Company is currently constructing an additional 55,000 square feet of
administration space to its Princeton facility that will be completed in 2002.
At Syracuse, New York the Company owns a 16 acre site which included a
group of connected buildings containing approximately 270,000 square feet of
floor space. This plant was used primarily for the manufacture and packaging of
liquid laundry detergent. As previously mentioned, the Company closed the plant
in early 2001 and shifted liquid laundry detergent production to the former USA
Detergents' facilities. The Company is currently demolishing the structures.
This will be completed during 2002.
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 200,000 tons of sodium
bicarbonate per year. This plant also manufactures powder laundry detergent and
cat litter. During 2001, an additional 101,000 square feet of warehouse space
was added.
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 280,000 tons of sodium bicarbonate per year. During
2001, an additional 90,000 square feet of warehouse space was added.
In 1998, the Company purchased a 250,000 square foot manufacturing
facility set on approximately 46 acres in Lakewood, New Jersey. The plant
manufactures and packages the ARM & HAMMER Deodorant Anti-Perspirant product
line, its dentifrice products which was relocated from the Company's Greenville,
South Carolina, facility in 1999, ARM & HAMMER Deodorizing Air Freshener, and
packages ARM & HAMMER Dental Care Gum. In 2000, SCRUB FREE and CLEAN SHOWER
bathroom cleaner production started. Previously it was contract manufactured.
During 2000, the Company sold a portion of the facility it owns in
Greenville, South Carolina. In 2001, the Company completed the sale of the
remaining portion of the facility.
During 1997, the Company acquired from The Dial Corporation a
manufacturing facility in London, Ohio. This facility contains approximately
141,000 square feet of floor space and is located on 6 acres of land. The
facility manufactures and packages BRILLO Soap Pads and ARM & HAMMER FRESH &
SOFT Dryer Sheets.
The Company will complete in 2002, a 50,000 square foot manufacturing
facility in Madera, California that will produce Megalac Rumen Bypass Fats and
related higher-value Megalac products.
As part of the USA Detergents acquisition, the Company acquired three
manufacturing facilities. The Harrisonville, Missouri facility produces
predominately liquid laundry products. It is approximately 510,000 square feet,
which includes a 150,000 square foot warehouse completed in 2001. The facility
is situated on approximately 43 acres of land. The Company also manufactures
liquid laundry products at a 360,000 square foot leased facility in North
Brunswick, New Jersey. The lease expires in 2004, subject to two five-year
extensions. The Company also acquired a 105,000 square foot manufacturing
facility in Chicago, Illinois that manufactures powder laundry detergent. The
facility is situated on a three-acre land parcel who's lease expires in the year
2080.
Adjacent to the Company's North Brunswick facility, the Company leased two
warehouses for the distribution of its consumer products. One warehouse is
approximately 525,000 square feet, whose lease expires at the end of 2010. The
other warehouse is approximately 156,000 square feet, whose lease expires at the
end of 2011.
In conjunction with the anti-perspirant and pet care businesses acquired
from Carter-Wallace, the Company acquired a 45,000 square foot manufacturing
facility in Winsted, Connecticut that manufactures pet care hardware products.
The anti-perspirant products were manufactured in Armkel's Cranbury, New Jersey
facility. The
6
production is currently being transferred to the Company's Lakewood, New Jersey
facility. This should be complete by the end of the third quarter 2002.
Armkel, LLC, in which the Company has a 50% interest, owns and operates a
condom manufacturing facility in Colonial Heights, Virginia. The facility
contains approximately 220,000 square feet of space. Armkel also owns a 754,000
square foot facility in Cranbury, New Jersey that manufactures pharmaceuticals,
toiletries and pet care products. Armkel has decided to close the facility and
transfer production to either Church & Dwight's Lakewood, New Jersey facility or
to a series of contract manufacturers. This transfer will be completed in the
second quarter of 2002. Armkel then plans to sell the facility. In addition,
Armkel leases a 200,000 square food warehouse in Dayton, New Jersey and a 43,000
square foot warehouse in Momence, Illinois. Both facilities will be closed
during 2002.
Armkel also owns or leases facilities outside the United States. They are:
Location Products Manfactured Area (Sq. Feet)
- -------------------------------------------------------------------------------------------------------
Owned:
Manufacturing facilities and offices
Montreal, Canada OTC pharmaceuticals and toiletries 157,000
Folkestone, England Toiletries 76,000
Milan, Italy OTC pharmaceuticals and toiletries 60,000
Mexico City, Mexico Pharmaceuticals 94,400
New Plymouth, New Zealand Condom processing 31,000
Warehouse and Offices
Toronto, Canada 52,000
Leased:
Manufacturing facilities and offices
Barcelona, Spain Toiletries 58,400
Milan, Italy Diagnostics and toiletries 49,100
Folkestone, England Toiletries 21,500
In Ontario, Canada, the Company owns a 26,000 square foot distribution
center which is used for the purpose of warehousing and distribution of products
sold into Canada. The principal office of the Canadian subsidiary is located in
leased offices in Toronto.
Brotherton Speciality Products Ltd. owns and operates a 71,000 square foot
manufacturing facility in Wakefield, England on about 7 acres of land.
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
space and has a capacity of 103,000 tons of potassium carbonate per year.
The Company believes that its manufacturing, distribution and office
facilities are adequate for the conduct of its business at the present time.
Church & Dwight Co., Inc.'s 85% owned subsidiary, QGN, has its
administrative headquarters in Rio de Janeiro, Brazil in leased office space.
QGN owns and operates manufacturing facilities in Camaoari, Feira de Santana,
and Itapura in the state of Bahia and Diadema in the state of Sao Paulo.
ITEM 3. LEGAL PROCEEDINGS.
Litigation
a. On January 17, 2002, a petition for appraisal, Cede & Co., Inc. and GAMCO
Investors, Inc. v. MedPointe Healthcare, Inc., Civil Action No. 19354, was filed
in the Court of Chancery of the State of Delaware demanding a determination of
the fair value of shares of MedPointe. The action was brought by purported
former shareholders of Carter-Wallace in connection with the merger on September
28, 2001 of MCC Acquisition Sub Corporation with and into Carter-Wallace. The
merged entity subsequently changed its name to MedPointe. The petitioners, who
are purported holders of record of approximately 3.1 million shares of
MedPointe, have petitioned for an appraisal of the fair value of their shares in
accordance with Section 262 of the Delaware General Corporation Law.
7
MedPointe and certain former Carter-Wallace shareholders are party to an
indemnification agreement pursuant to which such shareholders will be required
to indemnify MedPointe from a portion of the damages, if any, suffered by
MedPointe in relation to the exercise of appraisal rights by other former
Carter-Wallace shareholders in the merger. Pursuant to the agreement, the
shareholders have agreed to indemnify MedPointe for 40% of any Appraisal Damages
(defined as the recovery greater than the per share merger price times the
number of shares in the appraisal class) suffered by MedPointe in relation to
the merger; provided that if the total amount of Appraisal Damages exceeds
$33,333,333.33, then the indemnifying stockholders will indemnify MedPointe for
100% of any damages suffered in excess of that amount. Armkel, in turn, is party
to an agreement with MedPointe pursuant to which it has agreed to indemnify
MedPointe and certain related parties against 60% of any Appraisal Damages for
which MedPointe remains liable. The maximum liability to Armkel pursuant to the
indemnification agreements and prior to any indemnification from the Company, as
described in the following, is $12 million. The Company is party to an agreement
with Armkel pursuant to which it has agreed to indemnify Armkel for 17.38% of
any Appraisal Damages, up to a maximum of $2.1 million, for which Armkel becomes
liable.
The Company believes that the consideration offered was fair to the former
Carter-Wallace shareholders, and it cannot predict with certainty the outcome of
this litigation.
b. The Company, in the ordinary course of its business, is the subject of, or
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 or results of operation.
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, 2001.
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") This information appears under "Common Stock Price range and
dividends," on page 9 of Exhibit 99 hereto, and on page 9 of Appendix B of the
Proxy Statement, incorporated herein by reference. During 2001, there were no
sales of unregistered securities.
ITEM 6. SELECTED FINANCIAL DATA.
This information appears under "Eleven-Year Financial Summary," on page 33
of Exhibit 99 hereto, and on page 33 of Appendix B of the Proxy Statement,
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. ("MD&A")
This information appears under "MD&A," on pages 1 through 9 of Exhibit 99
hereto, and on pages 1 through 9 of Appendix B of the Proxy Statement,
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This information appears under "Market Risk" in the "Management's
Discussion and Analysis," on pages 5 through 6 of Exhibit 99 hereto, and on
pages 5 through 6 of Appendix B of the Proxy Statement, incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
These statements and data appear on pages 10 through 31 of Exhibit 99
hereto, and on pages 10 through 31 of Appendix B of the Proxy Statement,
incorporated herein by reference.
8
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.
Information required by this item is incorporated by reference to the
Company's definitive proxy statement pursuant to Regulation 14A which will be
filed with the Commission not later than 120 days after the close of the fiscal
year ended December 31, 2001.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this item is incorporated by reference to the
Company's definitive proxy statement pursuant to Regulation 14A which will be
filed with the Commission not later than 120 days after the close of the fiscal
year ended December 31, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item is incorporated by reference to the
Company's definitive proxy statement pursuant to Regulation 14A which will be
filed with the Commission not later than 120 days after the close of the fiscal
year ended December 31, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is incorporated by reference to the
Company's definitive proxy statement pursuant to Regulation 14A which will be
filed with the Commission not later than 120 days after the close of the fiscal
year ended December 31, 2001.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
Consolidated Financial Statements and Independent Auditors' Report
included in Exhibit 99 hereto, and in Appendix B of the Proxy Statement,
incorporated herein by reference:
Consolidated Statements of Income for each of the three
years in the period ended December 31, 2001
Consolidated Balance Sheets as of December 31, 2001 and 2000
Consolidated Statements of Cash Flow for each of the three years in
the period ended December 31, 2001
Consolidated Statements of Stockholders' Equity for each of the
three years in the period ended December 31, 2001
Notes to Financial Statements
Independent Auditors' Report
9
(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, 2001:
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.
(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, (Commission file no. 1-10585) 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, (Commission file no. 1-10585) which
is incorporated herein by reference.
(4) (a) * Credit Agreement, dated as of September 28, 2001, by and
between Church & Dwight Co., Inc., the several banks and other
financial institutions or entities from time to time parties
to the Agreement as Lenders, PNC Bank, National Association,
Fleet National Bank, The Bank of Nova Scotia, National City
Bank and The Chase Manhattan Bank, as administrative agent.
(b) Credit Agreement, dated as of May 23, 2001, by and between
Church & Dwight Co., Inc., the several banks and other
financial institutions or entities from time to time parties
to the Agreement as Lenders, Fleet National Bank, National
City Bank, First Union National Bank, PNC Bank, and The Chase
Manhattan Bank, as administrative agent previously filed with
the Securities and Exchange Commission on the Company's Form
8-K filed on June 5, 2001 (Commission file no. 1-10585) and
incorporated by reference.
(c) 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) Amended and Restated Limited Liability Company Agreement of
Armkel LLC, dated as of August 27, 2001, by and between Church
& Dwight Co., Inc. and Kelso Protection Venture, LLC, a
Delaware limited liability company ("LLC Agreement") and
Amendment Number 1 to the LLC Agreement, dated as of September
24, 2001 previously filed with the Securities and Exchange
Commission on the Company's Form 8-K filed on October 12, 2001
(Commission file no. 1-10585) and are incorporated by
reference.
(b) * Amendment Number 2 to the LLC Agreement, dated as of September
24, 2001.
(c) Amended and Restated Product Line Purchase Agreement, dated as
of July 30, 2001 and effective as of May 7, 2001 by and
between Church & Dwight Co., Inc. and Armkel LLC ("PLPA") and
Amendment Number 1 to the PLPA, dated as of September 28, 2001
previously filed with the Securities and Exchange Commission
on the Company's Form 8-K filed on October 12, 2001
(Commission file no. 1-10585) and are incorporated by
reference.
(d) * Asset Purchase Agreement, dated May 7, 2001, by and between
Armkel LLC and Carter-Wallace, Inc. for the purchase of
certain consumer brands.
(e) 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.
10
(f) Limited Liability Company Operation Agreement of Armus, LLC,
dated as of June 14, 2000, between Church & Dwight Co., Inc.
and USA Detergents, Inc. This document has been previously
filed with the Securities and Exchange Commission on the
Company's Quarterly Report on Form 10-Q, filed on August 14,
2000 and was approved under rule 24b-2 for privileged and
confidential treatment thereof.
(g) Stock Purchase Agreement dated as of June 14, 2000, among USA
Detergents, Inc., Church & Dwight Co., Inc. and Frederick R.
Adler. This document has been previously filed with the
Securities and Exchange Commission on the Company's Quarterly
Report on Form 10-Q, filed on August 14, 2000 and was approved
under rule 24b-2 for privileged and confidential treatment
thereof.
Compensation Plans and Arrangements
(h) * Employment Agreement, dated February 2, 2001, by and between
Church & Dwight Co., Inc. and Jon L. Finley for the position
of President and COO.
(i) * Supplemental Employment Agreement, dated October 5, 2001, by
and between Church & Dwight Co., Inc. and Jon L. Finley.
(j) * Employment Agreement, dated January 3, 2002, by and between
Church & Dwight Co., Inc. and Joseph A. Sipia, Jr.
(k) * Employment Agreement, dated February 26, 2002, by and between
Church & Dwight Co., Inc. and Bradley A. Casper.
(l) 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, (Commission file no. 1-10585)
which is incorporated herein by reference.
(m) 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, (Commission file no. 1-10585)
which is incorporated herein by reference.
(n) Church & Dwight Co., Inc. Executive Deferred Compensation
Plan, effective as of June 1, 1997, (Commission file no.
1-10585) which is incorporated herein by reference.
(o) 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,
(Commission file no. 1-10585) which is incorporated herein by
reference.
(p) 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, (Commission file no.
1-10585) which is incorporated herein by reference.
(q) 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, (Commission file no. 1-10585) which is
incorporated herein by reference.
(r) 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, (Commission file no. 1-10585) which is
incorporated herein by reference.
11
(s) 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, (Commission file no. 1-10585) which is
incorporated herein by reference.
(t) 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, (Commission
file no. 1-10585) which is incorporated herein by reference.
(u) The Compensation Plan for Directors, which was approved by
stockholders at the Annual Meeting of Stockholders on May 9,
1996, and was included in the Company's definitive Proxy
Statement filed with the Commission on April 1, 1996,
(Commission file no. 1-10585) which is incorporated herein by
reference.
*(11) Computation of earnings per share.
*(21) List of the Company's subsidiaries.
*(23) Consent of Independent Auditor.
*(99) Financial Statements.
(b) Reports on Form 8-K
The Company filed an 8-K on October 12, 2001 to announce the
Company's investment in Armkel, LLC and the acquisition of the
Antiperspirant and Pet Care businesses acquired from Carter-Wallace.
The Company filed an 8-K/A on November 9, 2001 to provide pro-forma
financial statements that were not provided with the 8-K filed on
October 12, 2001.
Copies of exhibits will be made available upon request and for a
reasonable charge.
- --------------------------------------------------------------------------------
*filed herewith
12
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, 2001 and 2000, and for each of the
three years in the period ended December 31, 2001, and have issued our report
thereon dated March 11, 2002; such consolidated financial statements and report
are included elsewhere in this Form 10-K. 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
March 11, 2002
13
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
2001 2000 1999
------------------------------------------
Allowance for Doubtful Accounts:
Balance at beginning of year $2,052 $1,552 $1,579
------------------------------------------
Additions:
Charged to expenses and costs 1,950 700 200
Acquisition of subsidiary/product lines 788 -- 122
------------------------------------------
2,738 700 322
Deductions:
Amounts written off 1,105 190 348
Foreign currency translation adjustments 19 10 1
------------------------------------------
1,124 200 349
------------------------------------------
Balance at end of year $3,666 $2,052 $1,552
------------------------------------------
14
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
EXHIBIT 11 - Computation of Earnings Per Share
(In thousands except per share amounts)
2001 2000 1999
--------------------------------------
BASIC:
Net Income $46,984 $33,559 $45,357
Weighted average shares outstanding 38,879 38,321 38,792
Basic earnings per share $1.21 $0.88 $1.17
DILUTED:
Net Income $46,984 $33,559 $45,357
Weighted average shares outstanding 38,879 38,321 38,792
Incremental shares under stock option plans 1,940 1,612 2,251
--------------------------------------
Adjusted weighted average shares outstanding 40,819 39,933 41,043
--------------------------------------
Diluted earnings per share $1.15 $0.84 $1.11
15
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
EXHIBIT 21
LIST OF THE COMPANY'S SUBSIDIARIES
1) Church & Dwight Ltd./Ltee
Incorporated in Canada
2) C & D Chemical Products, Inc.
Incorporated in the State of Delaware,
D/B/A Armand Products Company, a Partnership
3) Brotherton Speciality Products Ltd.
Incorporated in the United Kingdom
4) Quimica Geral do Nordeste S.A. (QGN)
Incorporated in Brazil (85% Interest)
5) Biovance Technologies, Inc.
Incorporated in the state of Delaware
The Company's remaining subsidiaries, if considered in the aggregate as a
single subsidiary, would not constitute a significant subsidiary as of December
31, 2001.
16
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-60149, 33-60147, 33-24553, 33-6150 and 33-44881 on Form S-8 of our reports
dated March 11, 2002 included in the Annual Report on Form 10-K of Church &
Dwight Co., Inc. for the year ended December 31, 2001.
Deloitte & Touche LLP
Parsippany, New Jersey
March 11, 2002
17
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 March 18, 2002.
CHURCH & DWIGHT CO., INC.
By: /s/ Robert A. Davies, III
------------------------------------
Robert A. Davies, III
Chairman 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.
/s/ Robert A. Davies, III Chairman and March 18, 2002
- ------------------------- Chief Executive Officer
Robert A. Davies, III
/s/ Zvi Eiref Vice President Finance and March 18, 2002
- ------------------------- Chief Financial Officer
Zvi Eiref (Principal Financial Officer)
/s/ Gary P. Halker Vice President, Controller and March 18, 2002
- ------------------------- Chief Information Officer
Gary P. Halker (Principal Accounting Officer)
18
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.
/s/ William R. Becklean Director March 18, 2002
- -----------------------
William R. Becklean
/s/ Robert H. Beeby Director March 18, 2002
- -------------------
Robert H. Beeby
/s/ Robert A. Davies, III Chairman March 18, 2002
- -------------------------
Robert A. Davies, III
/s/ Rosina B. Dixon, M.D. Director March 18, 2002
- -------------------------
Rosina B. Dixon, M.D.
/s/ J. Richard Leaman, Jr. Director March 18, 2002
- --------------------------
J. Richard Leaman, Jr.
/s/ Robert D. LeBlanc Director March 18, 2002
- ---------------------
Robert D. LeBlanc
/s/ John D. Leggett, III, Ph.D Director March 18, 2002
- ------------------------------
John D. Leggett, III, Ph.D.
/s/ John F. Maypole Director March 18, 2002
- -------------------
John F. Maypole
/s/ Robert A. McCabe Director March 18, 2002
- --------------------
Robert A. McCabe
/s/ Dwight C. Minton Chairman Emeritus March 18, 2002
- --------------------
Dwight C. Minton
/s/ Burton B. Staniar Director March 18, 2002
- ---------------------
Burton B. Staniar
/s/ John O. Whitney Director March 18, 2002
- -------------------
John O. Whitney
19