SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1993
Commission File Number 001-11015
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THE DIAL CORP (Exact name of registrant as specified in its charter)
Delaware (State or Other Jurisdiction of Incorporation or
Organization)
36-1169950 (I.R.S. Employer Identification No.)
Dial Tower, Phoenix, Arizona (Address of principal executive offices)
85077 (Zip Code)
Registrant's telephone number, including area code: 602-207-4000
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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, $1.50 par value New York Stock Exchange
Pacific Coast Stock Exchange
$4.75 Preferred Stock (stated New York Stock Exchange
value $100 per share)
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 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. [X]
As of March 11, 1994, 46,005,354 shares of Common Stock ($1,50 par
value) were outstanding and the aggregate market value of the common
Stock (based on its closing price per share on such date) held by
nonaffiliates was approximately $1.98 billion.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Where Incorporated
--------- ------------------
A portion of Proxy Statement for
Annual Meeting of Shareholders
to be held May 10, 1994 Part III
PART I
ITEM 1. BUSINESS
The Dial Corp ("Dial" or "Company"), conducts a consumer
products and services business focused on North American markets
producing annual revenues in excess of $3 billion.
Dial's CONSUMER PRODUCTS segment operates through four
divisions, as follows:
PERSONAL CARE, which manufactures and
markets DIAL, TONE, SPIRIT, PURE & NATURAL
and LIQUID DIAL soaps, and other soap and
personal care products;
LAUNDRY, which manufactures and markets
PUREX and PUREX ULTRA dry detergent, PUREX
heavy duty liquid detergent, TREND, PUREX
TOSS 'N SOFT and other laundry products;
HOUSEHOLD, which manufactures and
markets RENUZIT air fresheners, BRILLO
scouring pads, SNO BOL and SNO DROPS toilet
bowl cleaners, PARSONS ammonia, BRUCE floor
care products and other household items; and
FOOD, which processes and markets ARMOUR
STAR chili, beef stew, corned beef hash and
Vienna sausage, TREET luncheon meat and other
shelf- stable canned foods, LUNCH BUCKET
microwaveable meals and other food products.
Dial's SERVICES business operates in three principal
business segments through subsidiary corporations of Dial, as
follows:
AIRLINE CATERING AND OTHER FOOD
SERVICES, which engages in airline catering
operations, providing in-flight meals to more
than 60 domestic and international airlines,
and operates foodservice facilities ranging
from cafeterias in manufacturing plants to
corporate executive dining rooms to the food
and beverage facilities of the America West
Arena in Phoenix, Arizona;
CONVENTION SERVICES, which provides
exhibit design and construction and
exhibition preparation, installation,
electrical, transportation and management
services to major trade shows, manufacturers,
museums and exhibit halls and other
customers; and
TRAVEL AND LEISURE AND PAYMENT SERVICES,
which engages in airplane fueling and ground
handling, cruise line and hotel/resort
operations, recreation and travel services,
Canadian intercity bus transportation, and
operation of duty-free shops on cruise ships
and at international airports, and offers
money orders, official checks and negotiable
instrument clearing services through a
national network of approximately 43,000
retail agents, mid-size bank customers and
over 4,500 credit unions in the United States
and Puerto Rico.
Dial subsidiaries operate service or production facilities
and maintain sales and service offices in the United States,
Canada and Mexico. The Company also conducts business in other
foreign countries.
Dial had approximately 215 employees at its corporate center
at December 31, 1993, providing management, financial and
accounting, tax, administrative, legal and other services to its
operating units and handling residual matters pertaining to
businesses previously discontinued or sold by the Company. Dial
is managed by a Board of Directors comprised of 10 nonemployee
directors and one employee director and has an executive
management team consisting of six Dial officers and seven
principal executives of significant operating divisions or
companies.
Dial's corporate headquarters and certain Consumer Products
division and subsidiary activities are located in Phoenix,
Arizona, in a modern high-rise building. A portion of the
headquarters building is rented to unaffiliated tenants.
A description of each of the Dial business segments and
recent developments in each follows.
CONSUMER PRODUCTS SEGMENT
CONSUMER PRODUCTS is a leading producer and marketer of
personal care, laundry, household and shelf-stable food products.
This segment is the outgrowth of the Dial personal care and
shelf-stable canned meats unit of Armour and Company, expanded in
recent years to include PUREX household and laundry products,
BORAXO household and industrial specialty products, BRECK hair
care products and RENUZIT air fresheners. The segment
manufactures and markets a variety of products, including bar and
liquid soaps, liquid and powdered detergents, antiperspirants,
hairsprays, shampoos, hair conditioners, bleaches, fabric
softeners, soap pads, air fresheners, floor care products,
household cleaners, fabric sizing, laundry starch products, borax
and industrial specialties products, microwaveable food products
and canned meats.
PERSONAL CARE
Personal Care products are marketed under a number of brand
names, including DIAL, MOUNTAIN FRESH DIAL, TONE, PURE & NATURAL,
SPIRIT and FELS NAPTHA soaps, LIQUID DIAL antibacterial soap,
BORAXO powdered hand soap and DIAL antiperspirant. Personal Care
also markets the BRECK line of hair care products, including hair
sprays, shampoos and hair conditioners. DIAL bar soap is the
nation's leading deodorant soap and LIQUID DIAL soap is the
nation's leading antibacterial liquid soap. SPIRIT bar soap, a
three-in-one combination bar soap that cleans, moisturizes and
provides deodorant protection, is now available nationally. In
late 1993, DIAL PLUS soap, an antibacterial skin care bar soap
with moisturizing ingredients was introduced nationally.
Personal Care also markets hotel amenity products, including
personal-size bar soaps under the DIAL, TONE and PURE & NATURAL
labels, and industrial specialties products, including hand soaps
and soap dispensers, sold under the BORAXO and LURON trademarks,
hand and body surface cleaners for the medical market and hand
cleaners for the automotive market.
LAUNDRY
Laundry products include brands such as PUREX liquid,
powdered and ultra laundry detergents, TREND and ULTRA TREND dry
detergents, DUTCH detergents, PUREX TOSS 'N SOFT and STA PUF
fabric softeners, MAGIC sizing and starch, BORATEEM dry bleach,
STA-FLO starch, and 20 MULE TEAM borax.
In 1993, Laundry introduced several new products and line
extensions, including PUREX liquid detergent with bleach, RINSE
'N SOFT fabric softener, ULTRA TREND detergent and CLASSIC PUREX
detergent and TREND detergent with bleach.
HOUSEHOLD
Household products include brands such as RENUZIT air
fresheners, BRILLO soap pads, SNO BOL and SNO DROPS toilet bowl
cleaners, CAMEO powdered cleanser, PARSONS and BO-PEEP ammonia
and BRUCE floor care products.
The RENUZIT air freshener brand was acquired in the second
quarter of 1993. RENUZIT, a leading brand in the air freshener
category, currently offers products for the continuous-action and
aerosol segments of the air freshener market, including RENUZIT
Adjustable, RENUZIT Aerosol and ROOMMATE products and has
completed its rollout of RENUZIT LONGLAST ELECTRIC product, the
brand's entry into the electric subsegment of the air freshener
category.
In 1993, Household introduced SNO BOL thick toilet bowl
cleaner and a larger DOBIE scouring pad.
FOOD
In the shelf-stable food category, CONSUMER PRODUCTS
processes and markets ARMOUR STAR and TREET canned meats, LUNCH
BUCKET microwaveable meals, APPIAN WAY pizza mix, SUNRISE syrup
and CREAM corn starch. ARMOUR STAR products maintain a leading
market position in the canned meats category. ARMOUR STAR Vienna
sausage, potted meat and dried beef lead their respective
segments on a national basis. ARMOUR STAR canned meats now
account for nearly one-fifth of all canned meat sales in the
United States. During 1993, CONSUMER PRODUCTS introduced ARMOUR
hot dog chili sauce, ARMOUR meatless sloppy joe sauce and ARMOUR
western-style chili, and began test marketing VILLA LORENZO PASTA
FOR ONE microwaveable meals, a seven item line of single-serving
dry pastas with sauce pouches.
CUSTOMERS
CONSUMER PRODUCTS sells to over 15,000 customers, primarily
in the United States, including supermarkets, drug stores,
wholesalers, mass merchandisers, membership club stores and other
outlets. These customers are served by a national sales
organization of approximately 370 employees organized into 6
individual sales regions plus specialized sales operations which
sell to large mass merchandisers, membership club stores, chain
drug stores, vending and military customers.
RAW MATERIALS
Ample sources of raw materials are available with respect to
all major products of the CONSUMER PRODUCTS segment.
COMPETITION
CONSUMER PRODUCTS competes primarily on the basis of price,
brand advertising, customer service, product performance, and
product identity and quality. Its operations must compete with
numerous well-established local, regional and national companies,
some of which are very large and act aggressively in obtaining
and defending their products' market shares and brands.
Principal competitors, in one or more categories, are Procter &
Gamble, Colgate-Palmolive, Lever Brothers Co., American Home Food
Products, G. A. Hormel & Co., The Clorox Company, Church & Dwight
and S.C. Johnson & Son, Inc.
SERVICES SEGMENTS
SERVICES is built around several company groups which are
leading competitors in their businesses, including companies
engaged in airline catering (Dobbs International), contract
foodservices (Restaura), convention services (GES Exposition
Services and Exhibitgroup), payment services (Travelers Express),
airplane fueling and ground handling (Aircraft Service
International), Canadian intercity bus service (Greyhound Lines
of Canada), family cruises (Premier Cruise Lines), airport and
cruise ship duty-free businesses (Greyhound Leisure Services),
and travel services (Jetsave and Crystal Holidays).
SERVICES provides specialized services to both the business
and consumer markets, increasingly in the airline travel and
leisure services areas. Its money order business, travel and
tour operations, restaurants, fast food outlets, gift shops,
national park hotel facilities, cruise ships, and duty-free shops
located at airports and on cruise ships are directed primarily to
the consumer market. Primarily for the business market, in major
cities throughout the United States, SERVICES provides airline
in-flight catering operations as well as contract foodservices in
the form of cafeteria-style operations, private dining rooms,
group catering and machine-vended services; performs services as
decorating contractor at various convention and trade show sites;
designs, fabricates, ships and warehouses displays and exhibits
for trade shows, conventions and other exhibitions; and engages
in aircraft ground-handling services such as aircraft fueling,
cleaning and baggage handling.
AIRLINE CATERING AND OTHER FOOD SERVICES
SERVICES conducts airline catering operations under the
"Dobbs" name through the Dobbs International group of companies.
Dobbs International, which has been conducting airline catering
operations since 1941, will become the nation's largest domestic
in-flight caterer as a result of its agreement made in November
1993 to acquire from United Airlines 15 in-flight catering
kitchens at 12 domestic airports. The acquisition will be
phased-in over a period ending in May 1994. Dobbs International
will be United's exclusive in-flight caterer at the 12 locations
where the kitchens are located. The company also recently
expanded its presence in the United Kingdom by the acquisition in
February 1994 of 4 catering kitchens in England and Scotland. In
1993, Dobbs International's in-flight catering operations
provided in-flight meals to more than 60 domestic and
international airlines at 44 airports in the United States plus
Heathrow Airport, London, England, and Glasgow Airport, Scotland,
and in 1994, as a result of the recent acquisitions, will provide
in-flight meals to more than 60 domestic and international
airlines at 51 airports. Dobbs International has been involved
in a "Quality Improvement Process" for many years and has been
recognized for its innovations by its customers and suppliers.
Other food services are provided through the Restaura group
of companies. The contract foodservice division of Restaura
serves meals to employees at approximately 200 locations,
including employees of major companies such as General Motors,
IBM and Ford, through cafeteria, executive dining rooms and
vending operations. Restaura also acts as the prime
concessionaire for all food and beverage services at the America
West Arena in Phoenix, Arizona, and operates 7 historic lodges in
and around Glacier National Park in Montana and Canada.
CONVENTION SERVICES
Convention services are provided by the Company's GES
Exposition and Exhibitgroup companies. GES Exposition, the
nation's leading supplier of convention services, provides
decorating, exhibit preparation, installation, electrical,
transportation and management services for conventions and
tradeshows. During 1993 Convention services acquired United
Exposition Services Co., Inc., a general-service convention
contractor serving locations primarily in the eastern United
States; Andrews, Bartlett & Associates, Inc., which has major
operations in Chicago, Cleveland, Orlando, New Orleans,
Washington, D.C. and Atlanta; and Gelco Convention Services,
Inc., which operates principally in the southeastern United
States. Exhibitgroup is a leading designer and builder of custom
and rental convention exhibits and displays.
TRAVEL AND LEISURE AND PAYMENT SERVICES
Travel and leisure services directed to the consumer market
are provided by the Premier Cruise Lines, Greyhound Leisure
Services, Jetsave, Crystal Holidays and Greyhound Lines of Canada
business units.
Premier Cruise Lines provides three and four-day BIG RED
BOAT cruises from Port Canaveral, Florida, to the Bahamas and,
commencing in April 1994, from Port Tampa, Florida, to Mexico and
Key West, and offers a seven-day package which combines a cruise
with a three or four-day vacation at Walt Disney World or
Universal Studios and Sea World. Premier operates three cruise
ships, the Star/Ship Oceanic, the Star/Ship Atlantic and the
Star/Ship Majestic. Cruise destinations offer various underwater
diving and snorkeling attractions, historical tours, sandy
beaches and shopping opportunities. Premier has contracted with
Warner Bros. for the right to use Warner Bros.' famous LOONEY
TUNES characters (Bugs Bunny and others) commencing in April 1994
for entertainment on board Premier Cruise Lines' ships.
Premier's status as Official Cruise Line of Walt Disney World
will expire March 31, 1994.
Greyhound Leisure Services operates duty-free shipboard
concessions on 56 cruise ships and also operates duty-free shops
at the Chicago, Miami and Fort Lauderdale/Hollywood Florida
international airports, and in Washington, D.C. Other recreation
and travel services are provided under the Jetsave and Crystal
Holidays names. Jetsave and Crystal Holidays are leading United
Kingdom operators of tour packages and specialty tours throughout
Europe, and from Europe to the United States, Canada and the
Bahamas.
Greyhound Lines of Canada Ltd. ("GLOC"), a Canadian publicly
traded company, is a 69%-owned subsidiary which operates the
largest intercity bus transportation system for passengers,
charter service and courier express in Canada. Routes connect
with those of other intercity bus carriers, providing
interconnecting service to areas of the United States and Canada
not served directly by GLOC. GLOC owns and operates 465
intercity coaches. Brewster Transport Company, Ltd., a
subsidiary of GLOC, operates tour and charter buses in the
Canadian Rockies, engages in travel agency, hotel and snocoach
tour operations and holds a joint venture interest in the Mt.
Norquay ski attraction in Banff, Canada. Brewster owns and
operates 87 intercity coaches, and 13 snocoaches which transport
sightseers on tours of the Columbia Icefield.
The Aircraft Service International group of companies
provides aircraft ground-handling services such as aircraft
fueling, aircraft cleaning and baggage handling for major
domestic and foreign airlines at 28 airports throughout the
United States and in Freeport, Bahamas and London, England.
The Travelers Express group of companies engages in the sale
of money orders to the public through approximately 43,000 agent
locations in the United States and Puerto Rico. Travelers
Express is the nation's leading issuer of money orders, issuing
approximately 236 million money orders in 1993. The United
States Postal Service, which is the second largest issuer, issued
approximately 180 million money orders in 1993. Travelers
Express also provides processing services for more than 4,500
credit unions and other financial institutions which offer share
drafts (the credit union industry's version of a personal check)
or official checks (used by financial institutions in place of
their own bank check or teller check). Republic Money Order
Company, a Travelers Express unit, is a leader in the issuance of
money orders through chain convenience and supermarket stores and
in money order-issuance technology.
Virtually all airport concessions operated by the Company,
other than certain concessions at Hartsfield Atlanta
International Airport, which are scheduled to expire September
30, 1994, were sold to Host International, Inc., during the
second half of 1992.
COMPETITION
SERVICES companies generally compete on the basis of price,
quality, convenience and service, and encounter substantial
competition from a large number of providers of similar services,
including numerous well-known local, regional and national
companies, cruise lines, private money order companies and the
U.S. Postal Service (money orders), many of which have greater
resources than the Company. Dobbs International also competes on
the basis of reliability, appearance of kitchen facilities,
quality of truck fleet and on-time record. Caterair
International Corporation, Sky Chefs, Inc., and Ogden Corporation
are the principal competitors of Dobbs International. Freeman
Decorating Company is the principal competitor of GES Exposition.
GLOC competes primarily on the basis of price and service.
Principal competitors include airlines, private automobiles and
other intercity bus lines.
PATENTS AND TRADEMARKS
United States trademark registrations are for a term of 10
years, renewable every 10 years so long as the trademarks are
used in the regular course of trade; patents are granted for a
term of 17 years. The Dial companies maintain a portfolio of
trademarks representing substantial goodwill in the businesses
using the marks, and own many patents which give them competitive
advantages in the marketplace.
Many trademarks used by CONSUMER PRODUCTS, including DIAL,
PURE & NATURAL, ARMOUR STAR, TONE, TREET, PARSONS, BRUCE, PUREX,
DUTCH, RENUZIT, BRILLO, SNO BOL, BRECK, TREND, PUREX
TOSS N' SOFT, STA PUF, FLEECY WHITE, 20 MULE TEAM, BORAXO, LUNCH
BUCKET, and MAGIC trademarks, and by SERVICES, including the
DOBBS, PREMIER CRUISE LINES, BIG RED BOAT and TRAVELERS EXPRESS
service marks, have substantial importance and value. Use of the
ARMOUR and ARMOUR STAR trademarks by CONSUMER PRODUCTS is
permitted by a license expiring in 2043 granted by ConAgra, Inc.
and use of the 20 MULE TEAM trademark is permitted by a perpetual
license granted by U.S. Borax, Inc. In addition, certain
subsidiaries within SERVICES use the Greyhound and the Image of
the Running Dog marks in connection with their businesses.
CONSUMER PRODUCTS also has the right, pursuant to license
agreements, to operate under certain third-party patents covering
specific technologies.
GOVERNMENT REGULATION
Substantially all of the operations of CONSUMER PRODUCTS and
many of the operations of SERVICES are subject to various federal
laws and agency regulation, in particular, the Food, Drug and
Cosmetic Act, the Food and Drug Administration, the Department of
Agriculture, the Federal Maritime Commission, and various state
laws and regulatory agencies. In addition, other subsidiaries of
Dial are subject to similar laws and regulations imposed by
foreign jurisdictions. Both rates and routes of GLOC are
regulated by federal and provincial authorities of Canada.
ENVIRONMENTAL
Dial and its subsidiaries are subject to various
environmental laws and regulations in the United States, Canada
and other foreign countries where they have operations or own
real estate. Dial cannot accurately predict future expenses or
liability which might be incurred as a result of such laws and
regulations. However, Dial believes that any liabilities
resulting therefrom, after taking into consideration Dial's
insurance coverage and amounts previously provided, should not
have any material adverse effect on Dial's financial position or
results of operations.
EMPLOYEES
EMPLOYMENT AT DECEMBER 31, 1993
EMPLOYEES COVERED BY
APPROXIMATE NUMBER COLLECTIVE BARGAINING
SEGMENT OF EMPLOYEES AGREEMENTS
- ------- ------------------ ---------------------
Consumer Products 4,000 2,100
Airline Catering and
Other Food Services 11,900 5,800
Convention Services 2,500 1,100
Travel and Leisure and
Payment Services 7,600 3,200
Dial believes that relations with its employees are
satisfactory and that collective bargaining agreements expiring
in 1994 will be renegotiated in the ordinary course without
adverse effect on Dial's operations.
SEASONALITY
The first quarter is normally the slowest quarter of the
year for Dial. Consumption patterns, current marketing practices
and competition cause CONSUMER PRODUCTS' revenues and operating
income to be highest in the second and fourth quarters. Due to
increased leisure travel during the summer and year-end holidays,
Dial's airline catering, cruise ship and intercity bus travel
operations experience peak activity at these times. Convention
service companies generally experience increased activity during
the first half of the year.
RESTRUCTURING MATTERS
On August 5, 1993, Dial completed the initial public
offering of 20 million shares of common stock of Motor Coach
Industries International, Inc. (NYSE:MCO), its transportation
manufacturing and service parts subsidiary. The transaction
followed the March 1992 spin-off of GFC Financial Corporation
(NYSE:GFC), a corporation which comprised substantially all of
the financial services and insurance businesses of Dial, and was
the final step in Dial's restructuring plan to focus its
financial and management resources on its consumer products and
services business.
See Note D of Notes to Consolidated Financial Statements for
further information concerning the sale of the Company's
transportation manufacturing and service parts segment and the
spin-off of GFC Financial Corporation.
REINCORPORATION MERGER
At a special meeting of shareholders of The Dial Corp, an
Arizona Corporation ("Arizona Dial"), held on March 3, 1992,
shareholders of Arizona Dial approved a reincorporation merger
proposal to change Arizona Dial's state of incorporation from
Arizona to Delaware by means of a merger in which Arizona Dial
would be merged with and into Dial. The merger was effected on
March 3, 1992.
BUSINESS SEGMENTS
Principal business segment information is set forth in Annex
A attached hereto and made a part hereof.
ITEM 2. PROPERTIES
During December 1993, a subsidiary of Dial acquired the
corporation which owned the remaining 49% interest in a joint
venture which owns Dial's headquarters building.
Dial owns a 200,000-square-foot facility in Scottsdale,
Arizona, which is used by the CONSUMER PRODUCTS segment to
conduct much of its research and certain other activities.
CONSUMER PRODUCTS operates 13 plants in the United States, 1
plant in Mexico, and 7 offices in 7 foreign countries. All of
the plants are owned; 6 of the offices are leased. Principal
manufacturing plants are as follows:
LOCATION SQ. FEET PRODUCTS MANUFACTURED
- -------- -------- ---------------------
Aurora, IL 425,000 Bar Soaps
Fort Madison, IA 453,000 Canned Meats, Microwaveable
Meals
St. Louis, MO 475,000 Bleach, Ammonia, Fabric
Softener, Laundry Detergents
Bristol, PA 253,700 Dry Detergents and Cleansers
Hazelton, PA 232,000 Liquid Detergents, Ammonia,
Scouring Pads, Fabric Softener
Auburndale, FL 208,000 Bleach, Ammonia, Fabric
Softener, Dishwashing
Detergents
Memphis, TN 130,000 Dial Liquid Soap,
Antiperspirants, Shampoos and
Conditioners, Hotel Amenities
(shampoos, conditioners and
hand lotions)
AIRLINE CATERING AND OTHER FOOD SERVICES operates 14
offices, 53 catering kitchens, 37 foodservice facilities and 7
lodges with ancillary foodservice and recreational facilities.
All of the properties are in the United States, except for 2
catering kitchens, 1 foodservice facility and 1 lodge which are
located in foreign countries. Ten of the catering kitchens, 2
hotels and 3 of the foodservice facilities are owned; all other
properties are leased. Five of the hotels are operated pursuant
to a concessionaire agreement.
CONVENTION SERVICES operates 29 offices and 26 exhibit
construction and warehouse facilities. All of the properties are
in the United States. One of the offices and one of the
warehouses are owned; all other properties are leased.
TRAVEL AND LEISURE AND PAYMENT SERVICES operates 54 offices,
191 duty-free shops, 3 cruise ships and 6 hotels with ancillary
foodservice and recreational facilities. All of the properties
are in the United States, except for 9 offices and 3 hotels,
which are located in foreign countries. Travel and Leisure and
Payment Services owns 2 of the hotels, leases 1 of the hotels,
has a partial interest in the other hotel for which it is also
the lessee and operator, and operates 2 of the hotels under
management contract. One of the cruise ships is owned; all other
properties are leased. Approximate passenger capacity of the
cruise ships is 1600, 1500 and 1000 persons, respectively. This
segment also operates certain airport concessions which, as
discussed earlier, are scheduled to expire September 30, 1994.
GLOC operates 10 terminals and 7 garages in Canada. Five
terminals and 6 garages are owned; the other properties are
leased. In addition, bus stop facilities at approximately 600
locations in Canada are provided by commission agents. Principal
properties of GLOC are as follows:
LOCATION SQ. FEET FUNCTION
- -------- -------- --------
Calgary, Alberta 179,000 Terminal and Headquarters
Office
Edmonton, Alberta 63,000 Terminal
London, Ontario 12,000 Terminal
Vancouver, British
Columbia 23,000 Terminal
Winnipeg, Manitoba 21,000 Terminal
Edmonton, Alberta 23,000 Garage
Winnipeg, Manitoba 39,000 Garage
Toronto, Ontario 46,000 Garage
Vancouver, British
Columbia 16,000 Garage
Calgary, Alberta 135,000 Maintenance and Overhaul
Center
Of the property owned by Dial, only the facility in
Auburndale, Florida, is subject to a mortgage with $3,989,000
outstanding at December 31, 1993.
Management believes that Dial's facilities in the aggregate
are adequate and suitable for their purposes and that capacity is
sufficient for current needs.
ITEM 3. LEGAL PROCEEDINGS
During the fourth quarter of 1993, the Company settled the
matter of John E. Washburn, Director of Insurance for the State
of Illinois, as Liquidator of Pine Top Insurance Company vs.
Ralph C. Batastini, et al. The net cost of the settlement is not
material to the Company and is being charged against a previously
provided reserve. The lawsuit was instituted June 20, 1988, in
Circuit Court of Cook County, Illinois. Plaintiff alleged
negligent management on the part of certain directors and
officers of Pine Top Insurance Company ("PTIC"), a discontinued
insurance operation.
On February 14, 1992, Transportation Manufacturing
Corporation, a former subsidiary of Dial ("TMC"), filed a lawsuit
against Chicago Transit Authority ("CTA") in the United States
District Court for the District of New Mexico. The lawsuit
arises from a contract between TMC and CTA for the manufacture
and delivery of 491 wheelchair-lift transit buses. In addition
to relief from any liquidated damages for late deliveries, TMC is
seeking reimbursement for increased costs due to changes, delays
and interferences TMC alleges were caused by CTA. TMC is also
seeking treble damages under the New Mexico Unfair Trade
Practices Act, alleging that CTA breached its covenant of good
faith and fair dealing in the handling of this contract with TMC.
TMC was divested by the Company in connection with its sale of
MCII in August 1993, but the Company retained rights to certain
recoveries, indemnified MCII against certain costs and damages
and continued to direct the litigation pursuant to a Litigation
Cooperation Agreement. On January 12, 1994, TMC and CTA agreed
on a tentative settlement under which the Company would realize
certain recoveries. Settlement documents are being finalized.
The Company and certain subsidiaries are parties either as
plaintiffs or defendants to various other actions, proceedings
and pending claims, certain of which are or purport to be class
actions. The pending cases range from claims for additional
employment benefits to cases involving accidents, injuries,
product liability or business contract disputes, certain of which
involve claims for compensatory, punitive or other damages in
material amounts. Litigation is subject to many uncertainties
and it is possible that some of the legal actions, proceedings or
claims referred to above could be decided against Dial. Although
the amount of liability at December 31, 1993, with respect to
matters where Dial is defendant is not ascertainable, Dial
believes that any resulting liability should not materially
affect Dial's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
No matters were submitted to a vote of securityholders
during the fourth quarter of 1993.
OPTIONAL ITEM. EXECUTIVE OFFICERS OF REGISTRANT.
The names, ages and positions of the executive officers of
the Company as of March 15, 1994, are listed below:
EXECUTIVE
POSITION
NAME AGE OFFICE HELD SINCE
- ---- --- ------ ----------
John W. Teets 60 Chairman, President and 1982
Chief Executive Officer
and Director and
Chairman of Executive
Committee of Registrant
Frederick G. 60 Vice President and 1977
Emerson Secretary of Registrant
Joan F. Ingalls 45 Vice President-Human 1991
Resources of Registrant
F. Edward Lake 59 Vice President-Finance 1987
of Registrant
L. Gene Lemon 53 Vice President and 1979
General Counsel of
Registrant
Richard C. Stephan 54 Vice President- 1980
Controller of Registrant
William L. Anthony 51 Executive Vice 1987
President-Administration
and Controller, Consumer
Products Group of
Registrant
Robert H. Bohannon 49 President and Chief 1993
Executive Officer of
Travelers Express
Company, Inc., a
subsidiary of Registrant
Mark R. Shook 39 Executive Vice 1994
President-General Manager,
Laundry and International
Divisions, Consumer
Products Group of
Registrant
Karen L. Hendricks 46 Executive Vice 1992
President-General Manager,
Personal Care Division,
Consumer Products Group
of Registrant
Frederick J. Martin 59 President of Dobbs 1985
International Services,
Inc., a subsidiary of
Registrant
Andrew S. Patti 53 President and Chief 1986
Operating Officer of the
Consumer Products Group
of Registrant
Norton D. 59 Chairman and Chief 1983
Rittmaster Executive Officer of
GES Exposition
Services, Inc., a
subsidiary of Registrant
Position currently Executive Vice President-
vacant General Manager, Food
Division, Consumer
Products Group of
Registrant
Each of the foregoing officers, with the exceptions set
forth below, has served in the same, similar or other executive
positions with Dial or its subsidiaries for more than the past
five (5) years.
Ms. Ingalls has served in her current, or a similar,
position since 1990, and prior thereto as Executive Director of
Compensation and Benefits of the Registrant.
Mr. Bohannon was elected as President and Chief Executive
Officer of Travelers Express Company, Inc. effective March 15,
1993. Prior thereto, he was a senior officer at Marine Midland
Bank of Buffalo, New York.
Prior to 1992, Ms. Hendricks was employed at Procter &
Gamble as Manager, Worldwide Strategic Planning, Health and
Beauty Aids, and prior thereto, as General Manager, US Vidal
Sassoon Hair Care Company.
Prior to March 1994, Mr. Shook was Executive Vice President-
General Manager, Food and International Divisions, and prior
thereto was Vice President and General Manager of the commercial
markets business unit of Registrant's Consumer Products Group.
The term of office of the executive officers is until the
next annual organization meetings of the Boards of Directors of
Dial or appropriate subsidiaries, all of which are scheduled for
April or May of this year.
The Directors of Dial are divided into three classes, with
the terms of one class of Directors to expire at each Annual
Meeting of Stockholders. The current term of office of John W.
Teets is scheduled to expire at the 1994 Annual Meeting of
Stockholders. Mr. Teets has been nominated for reelection at
that meeting for a term expiring in May 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The principal market on which the common stock of Dial is
traded is the New York Stock Exchange. The common stock is also
listed for trading on the Pacific Exchange, and admitted for
trading on the Midwest, Philadelphia and Cincinnati Exchanges.
The following tables summarize the high and low market prices as
reported on the New York Stock Exchange Composite Tape and the
cash dividends declared for the two years ended December 31,
1993:
SALES PRICE RANGE OF COMMON STOCK
---------------------------------
CALENDAR 1993 1992
QUARTERS HIGH LOW HIGH LOW
- -------- ------------------- -------------------
First $44 1/2 $39 $50 5/8(1) $37 3/8(1)
Second 43 7/8 36 7/8 39 3/8 33 3/8
Third 41 1/8 35 7/8 39 1/2 35 1/2
Fourth 42 1/4 36 3/4 42 37
DIVIDENDS DECLARED ON COMMON STOCK
----------------------------------
CALENDAR QUARTERS 1993 1992(2)
- ----------------- ----- -----
February $ .28 $ .35
May .28 .28
August .28 .28
November .28 .28
----- -----
TOTAL $1.12 $1.19
(1) On March 18, 1992, the spin-off of GFC Financial
Corporation to the Company's stockholders became
effective. The closing price of Dial's shares
immediately prior to the spin-off was $49 and
immediately after the spin-off was $40, as a result of
the special distribution. The high and low prices for
the period January 1 through March 17, 1992, were $50
5/8 and $45 3/8, respectively. The high and low prices
for the period March 18 through March 31, 1992, were
$40 1/4 and $37 3/8, respectively.
(2) The decline in dividends declared per common share in
1992 and 1993 reflects the spin-off of GFC Financial
Corporation.
Regular quarterly dividends have been paid on the first
business day of January, April, July and October.
As of March 11, 1994, there were 49,576 holders of record of
Dial's common stock.
ITEM 6. SELECTED FINANCIAL DATA.
Applicable information is included in Annex A.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
Applicable information is included in Annex A.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
1. Financial Statements--See Item 14 hereof.
2. Supplementary Data--See Condensed Consolidated
Quarterly Results in Annex A.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding Directors of the Registrant is
included in Dial's Proxy Statement for Annual Meeting of
Shareholders to be held on May 10, 1994 ("Proxy Statement"), and
is incorporated herein and made a part hereof. The information
regarding executive officers of the Registrant is found as an
Optional Item in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
The information is contained in the Proxy Statement and is
incorporated herein and made a part hereof.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information is contained in the Proxy Statement and is
incorporated herein and made a part hereof.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) List the following documents filed as a part of the
report:
1. FINANCIAL STATEMENTS. The following are included
in Annex A: Independent Auditors' Report and consolidated
financial statements (Balance Sheet, Income, Cash Flows,
Common Stock and Other Equity, and Notes to Financial
Statements).
2. FINANCIAL STATEMENT SCHEDULES.
Independent Auditors' Report on Schedules
to Consolidated Financial Statements of The
Dial Corp is found on page F-1 of Annex A.
Schedule I--Marketable Securities
--Other Security Investments is found on
page F-2 of Annex A.
Schedule IX--Short-term Borrowings.
This information is included in
Management's Discussion and Analysis
of Results of Operations and
Financial Condition and Note G--
Short-Term Debt in Annex A and
is incorporated herein by
reference.
Schedule X--Supplementary Income Statement
Information is found on page F-3 of Annex A.
3. EXHIBITS.
3.A Copy of Restated Certificate of Incorporation of Dial,
as amended through March 3, 1992, filed as Exhibit
(3)(A) to Dial's 1991 Form 10-K, is hereby incorporated
by reference.
3.B Copy of Bylaws of Dial, as amended through February 21,
1992, filed as Exhibit (3)(B) to Dial's 1991 Form 10-K,
is hereby incorporated by reference.
4.A Instruments with respect to issues of long-term debt
have not been filed as exhibits to this Annual Report
on Form 10-K if the authorized principal amount of any
one of such issues does not exceed 10% of total assets
of the Company and its subsidiaries on a consolidated
basis. The Company agrees to furnish a copy of each
such instrument to the Securities and Exchange
Commission upon request.
4.B Copy of Amended and Restated Credit Agreement dated as
of December 15, 1993, among Dial, the Banks parties
thereto, Bank of America National Trust and Savings
Association as Agent and Reporting Agent and Citibank,
N.A. as Agent and Funding Agent.*
10.A Copy of Employment Agreement between Dial and John W.
Teets dated April 14, 1987, filed as Exhibit (10)(A) to
Dial's 1989 Form 10-K, is hereby incorporated by
reference.+
10.B Sample forms of Contingent Agreements relating to
funding of Supplemental Executive Pensions, filed as
Exhibit (10)(T) to Dial's 1989 Form 10-K, is hereby
incorporated by reference.+
10.C Copy of The Dial Corp Supplemental Pension Plan,
amended and restated as of January 1, 1987, filed as
Exhibit (10)(F) to Dial's 1986 Form 10-K, is hereby
incorporated by reference.+
10.C1 Copy of amendment dated February 21, 1991, to The Dial
Corp Supplemental Pension Plan, filed as Exhibit
(10)(G)(i) to Dial's 1990 Form 10-K, is hereby
incorporated by reference.+
10.D Copy of The Dial Corp 1992 Deferred Compensation Plan
for Directors, adopted November 20, 1980, as amended
through February 21, 1991, filed as Exhibit (10)(H) to
Dial's 1990 Form 10-K, is hereby incorporated by
reference.+
10.E Copy of The Dial Corp Management Incentive Plan.*+
10.F1 Copy of form of Executive Severance Agreement between
Dial and three executive officers, filed as Exhibit
(10)(G)(i) to Dial's 1991 Form 10-K, is hereby
incorporated by reference.+
10.F2 Copy of forms of The Dial Corp Executive Severance
Plans covering certain executive officers, filed as
Exhibit (10)(G)(ii) to Dial's 1992 Form 10-K, is hereby
incorporated by reference.+
10.G Copy of Travelers Express Company, Inc. Supplemental
Pension Plan, filed as Exhibit (10)(L) to Dial's 1984
Form 10-K, is hereby incorporated by reference.+
10.H Copy of Greyhound Dial Corporation 1983 Stock Option
and Incentive Plan, filed as Exhibit (28) to Dial's
Registration Statement on Form S-8 (Registration No.
33-23713), is hereby incorporated by reference.+
10.I Copy of The Dial Corp 1992 Stock Incentive Plan, filed
as Exhibit (10)(J) to Dial's 1991 Form 10-K, is hereby
incorporated by reference.+
10.J Description of Spousal Income Continuation Plan, filed
as Exhibit 10(Q) to Dial's 1985 Form 10-K, is hereby
incorporated by reference.+
10.K Copy of The Dial Corp Director's Retirement Benefit
Plan, filed as Exhibit (10)(R) to Dial's 1988 Form 10-
K, is hereby incorporated by reference.+
10.L Copy of The Dial Corp Performance Unit Incentive
Plan.*+
10.M Copy of The Dial Corp Supplemental Trim Plan, filed as
Exhibit (10)(S) to Dial's 1989 Form 10-K, is hereby
incorporated by reference.+
10.N Copy of Employment Agreement between Greyhound
Exposition Services and Norton Rittmaster dated May 20,
1982, filed as Exhibit (10)(O) to Dial's 1992 Form 10-
K, is hereby incorporated by reference.+
10.O Copy of Greyhound Exposition Services, Inc. Incentive
Compensation Plan, filed as Exhibit (10)(P) to Dial's
1992 Form 10-K, is hereby incorporated by reference.+
10.P Copy of The Dial Corp Performance-Based Stock Plan.*+
10.Q Copy of The Dial Corp Deferred Compensation Plan.*+
11 Statement Re Computation of Per Share Earnings.*
22 List of Subsidiaries of Dial.*
23 Consent of Independent Auditors to the incorporation by
reference into specified registration statements on
Form S-3 or on Form S-8 of their reports contained in
or incorporated by reference into this report.*
24 Power of Attorney signed by directors of Dial.*
*Filed herewith.
+Management contract or compensation plan or arrangement.
Note: The 1993 Annual Report to Securityholders will be
furnished to the Commission when, or before, it is sent
to securityholders.
(b) REPORTS ON FORM 8-K.
A report on Form 8-K dated October 1, 1993, was filed by the
Registrant. The Form 8-K reported under Item 5 the
reclassifications of previously filed financial statements and
other financial information related to the disposition of Dial's
Transportation Manufacturing and Service Parts segment. Included
with the 8-K report as Exhibit No. 28 were financial statements
and other financial information reflecting the restatements
required by such disposition. The financial statements and
financial information contained in Dial's 1992 Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1993, and June 30, 1993, were modified or
superseded to the extent that the information contained in the
Form 8-K modified or superseded such statements and other
information.
SIGNATURES
Pursuant to the requirements of Section 13 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, in Phoenix, Arizona, on the 25th day of March, 1994.
THE DIAL CORP
By: /s/ John W. Teets
John W. Teets
Chairman, 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:
Principal Executive Officer
Date: March 25, 1994 By: /s/ John W. Teets
John W. Teets
Director; Chairman, President
and Chief Executive Officer
Principal Financial Officer
Date: March 25, 1994 By: /s/ F. Edward Lake
F. Edward Lake
Vice President-Finance
Principal Accounting Officer
Date: March 25, 1994 By: /s/ Richard C. Stephan
Richard C. Stephan
Vice President-Controller
Directors
James E. Cunningham
Joe T. Ford
Thomas L. Gossage
Donald E. Guinn
Jess Hay
Judith K. Hofer
Jack F. Reichert
Linda Johnson Rice
Dennis C. Stanfill
A. Thomas Young
Date: March 25, 1994 By: /s/ Richard C. Stephan
Richard C. Stephan
Attorney-in-Fact
ANNEX "A"
THE DIAL CORP
1993 FINANCIAL INFORMATION
THE DIAL CORP
SELECTED FINANCIAL AND OTHER DATA
Year ended December 31, 1993 1992 1991 1990 1989
------------ ------------ ------------ ------------ ------------
OPERATIONS (000 omitted)
Revenues $ 3,000,342 $ 2,874,088 $ 2,827,849 $ 2,851,535 $ 2,744,611
============ ============ ============ ============ ============
Income from continuing operations (1) $ 110,273 $ 74,351 $ 25,755 $ 75,418 $ 40,990
Income (loss) from discontinued operations (2) 32,120 (45,125) (83,363) (59,045) 67,721
------------ ------------ ------------ ------------ ------------
Income (loss) before extraordinary charge
and cumulative effect of change in
accounting principle 142,393 29,226 (57,608) 16,373 108,711
Extraordinary charge for early retirement of debt (21,908)
Cumulative effect of change in
accounting principle - SFAS No. 106 (110,741)
------------ ------------ ------------ ------------ ------------
Net income (loss) $ 120,485 $ (81,515) $ (57,608) $ 16,373 $ 108,711
============ ============ ============ ============ ============
INCOME (LOSS) PER COMMON SHARE (dollars)
Continuing operations (1) $ 2.56 $ 1.74 $ 0.62 $ 1.87 $ 1.02
Discontinued operations (2) 0.75 (1.07) (2.09) (1.49) 1.73
------------ ------------ ------------ ------------ ------------
Income (loss) before extraordinary charge
and cumulative effect of change in
accounting principle 3.31 0.67 (1.47) 0.38 2.75
Extraordinary charge (0.51)
Cumulative effect of change in
accounting principle (2.64)
------------ ------------ ------------ ------------ ------------
Net income (loss) per common share $ 2.80 $ (1.97) $ (1.47) $ 0.38 $ 2.75
============ ============ ============ ============ ============
Dividends declared per common share (3) $ 1.12 $ 1.19 $ 1.40 $ 1.36 $ 1.32
============ ============ ============ ============ ============
Average outstanding common and
equivalent shares (000 omitted) 42,703 42,013 39,911 39,625 39,128
============ ============ ============ ============ ============
FINANCIAL POSITION AT YEAR-END (000 omitted)
Total assets $ 3,281,088 $ 3,156,998 $ 3,493,656 $ 3,417,956 $ 3,411,862
Total debt 635,892 707,111 550,017 543,540 532,258
$4.75 Redeemable preferred stock 6,624 6,620 6,615 6,610 6,605
Common stock and other equity (3) 469,688 390,395 940,721 1,027,382 1,074,969
============ ============ ============ ============ ============
PEOPLE
Stockholders of record 51,300 50,688 56,358 59,623 63,440
Employees of continuing businesses (average) 25,025 26,765 29,042 32,009 31,916
============ ============ ============ ============ ============
<FN>
(1) After deducting restructuring and other charges of $19,800,000 (after-tax) or $0.47 per share in 1992 and
$54,871,000 (after-tax) or $1.37 per share in 1991. See Note C of Notes to Consolidated Financial Statements.
Also after deducting $9,128,000 (after-tax), or $0.22 per share, in 1992 for increased ongoing expense
following adoption of SFAS No. 106 effective as of January 1, 1992. Years prior to 1992 do not include such
expenses.
(2) See Note D of Notes to Consolidated Financial Statements.
(3) The declines in dividends declared per common share in 1993 and 1992 and in common stock and other equity in
1992 reflect the spin-off of GFC Financial as discussed further in Note D of Notes to Consolidated Financial
Statements.
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of The Dial Corp and its subsidiaries has the
responsibility for preparing and assuring the integrity and
objectivity of the accompanying financial statements and other
financial information in this report. The financial statements
were developed using generally accepted accounting principles and
appropriate policies, consistently applied, except for the change
in 1992 to comply with new accounting requirements for
postretirement benefits other than pensions as discussed in Note
L of Notes to Consolidated Financial Statements. They reflect,
where applicable, management's best estimates and judgments and
include disclosures and explanations which are relevant to an
understanding of the financial affairs of the Company.
The Company's financial statements have been audited by Deloitte
& Touche, independent auditors elected by the stockholders.
Management has made available to Deloitte & Touche all of the
Company's financial records and related data, and has made
appropriate and complete written and oral representations and
disclosures in connection with the audit.
Management has established and maintains a system of internal
control that it believes provides reasonable assurance as to the
integrity and reliability of the financial statements, the
protection of assets and the prevention and detection of
fraudulent financial reporting. The system of internal control is
believed to provide for appropriate division of responsibilities
and is documented by written policies and procedures that are
utilized by employees involved in the financial reporting
process. Management also recognizes its responsibility for
fostering a strong ethical climate. This responsibility is
characterized and reflected in the Company's Code of Corporate
Conduct, which is communicated to all of the Company's executives
and managers.
The Company also maintains a comprehensive internal auditing
function which independently monitors compliance and assesses the
effectiveness of the internal controls and recommends possible
improvements thereto. In addition, as part of their audit of the
Company's financial statements, the independent auditors review
and evaluate selected internal accounting and other controls to
establish a basis for reliance thereon in determining the audit
tests to be applied. There is close coordination of audit
planning and coverage between the Company's internal auditing
function and the independent auditors. Management has considered
the recommendations of both internal auditing and the independent
auditors concerning the Company's system of internal control and
has taken actions believed to be cost-effective in the
circumstances to implement appropriate recommendations and
otherwise enhance controls. Management believes that the
Company's system of internal control accomplishes the objectives
discussed herein.
The Board of Directors oversees the Company's financial reporting
through its Audit Committee, which regularly meets with
management representatives and, jointly and separately, with the
independent auditors and internal auditing management to review
accounting, auditing and financial reporting matters.
/s/ Ermo S. Bartoletti
Ermo S. Bartoletti
Vice President - Internal Auditing
/s/ Richard C. Stephan
Richard C. Stephan
Vice President - Controller
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of The Dial Corp:
We have audited the accompanying consolidated balance sheets of
The Dial Corp as of December 31, 1993 and 1992, and the related
consolidated statements of income, common stock and other equity
and of cash flows for each of the three years in the period ended
December 31, 1993. 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 consolidated financial statements present
fairly, in all material respects, the financial position of The
Dial Corp as of December 31, 1993 and 1992, and the results of
its operations and its cash flows for each of the three years in
the period ended December 31, 1993 in conformity with generally
accepted accounting principles.
As discussed in Note L of Notes to Consolidated Financial
Statements, the Company changed its method of accounting for
postretirement benefits other than pensions in 1992.
/s/ Deloitte & Touche
Deloitte & Touche
Phoenix, Arizona
February 25, 1994
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION OF THE DIAL CORP
RESULTS OF OPERATIONS:
Dial is a diversified company which sells products and provides
services in many markets. Because of this diversity, components
of net income are affected, some favorably, others unfavorably,
by general economic conditions and other fluctuations which occur
in the various markets each year. Inflation has not materially
affected operations in recent years.
Dial sold its Transportation Manufacturing and Service Parts
Group in 1993 and spun-off GFC Financial Corporation ("GFC
Financial") in 1992. The Transportation Manufacturing and Service
Parts Group and GFC Financial are presented as discontinued
operations for all periods. Such dispositions are discussed
further in Note D of Notes to Consolidated Financial Statements.
1993 VS. 1992:
Revenues for 1993 were $3 billion compared with $2.9 billion in
1992.
Income from continuing operations was $110.3 million in 1993, or
$2.56 per share. Before restructuring and other charges, income
from continuing operations in 1992 was $94.2 million, or $2.21
per share. After restructuring and other charges of $19.8
million, or $0.47 per share, Dial had income from continuing
operations of $74.4 million, or $1.74 per share, in 1992.
Year ended December 31, 1993 1992
------------ ------------
INCOME FROM CONTINUING OPERATIONS (000 omitted):
BEFORE RESTRUCTURING AND OTHER CHARGES $ 110,273 $ 94,151
Restructuring and other charges (19,800)
------------ ------------
INCOME FROM CONTINUING OPERATIONS $ 110,273 $ 74,351
============ ============
INCOME PER COMMON SHARE FROM
CONTINUING OPERATIONS (dollars):
BEFORE RESTRUCTURING AND OTHER CHARGES $ 2.56 $ 2.21
Restructuring and other charges (0.47)
------------ ------------
INCOME PER COMMON SHARE FROM
CONTINUING OPERATIONS $ 2.56 $ 1.74
============ ============
CONSUMER PRODUCTS. The Consumer Products Group's revenues were up
$144.7 million, or 11 percent from those in 1992. Operating
income was up $20.6 million, or 17 percent over 1992 amounts.
Personal Care Division revenues declined $700,000 due primarily
to a decline in the sales of Breck hair care products. Offsetting
this decline were strong showings by all other personal care
products, especially the Dial label products. Personal Care
Division operating income increased by $6.4 million due primarily
to the increase in Dial product revenues and reduced
manufacturing costs. The Breck decline was substantially offset
by reduced marketing costs.
Food Division revenues increased $11.6 million from those of 1992
due to increases in the canned meat line offset in part by a
decline in microwaveable product revenue. Operating income
increased by $2.3 million primarily due to the favorable sales
mix, the pricing of canned meats and reductions in manufacturing
costs of microwaveable products.
Household and Laundry Division revenues increased $130 million
from 1992, led by strong performances in liquid detergents and
liquid fabric softeners. The addition of Rinse 'n Soft as a new
product in the liquid fabric softener category and the
acquisition of Renuzit during the 1993 second quarter contributed
to the favorable comparisons between periods. Operating income
increased $10.8 million over 1992 amounts, reflecting higher
revenue and improved margins. Margins increased as a result of
reduced marketing expenses associated with a modified everyday
low pricing strategy.
International revenues and operating results increased $3.8
million and $1.1 million, respectively, from those of 1992 due
primarily to an expansion program.
SERVICES. During 1993, Dial redefined its Services business into
three principal segments for financial reporting purposes.
Excluding certain airport concession operations, which were sold
in September, 1992, and excluding the effects of $30 million of
restructuring charges in 1992, combined Services revenues and
operating income increased $109.6 million, or 8 percent, and
$11.3 million, or 9 percent, respectively.
AIRLINE CATERING AND OTHER FOOD SERVICES. Revenues of the
Airline Catering and Other Food Services Group declined $26.2
million from those of 1992, while operating income increased $6.1
million. Airline catering revenues decreased $21.4 million from
those of 1992 due primarily to service cutbacks by major airlines
and the effects of the air fare discounts which had boosted 1992
volume; however, operating income was up $600,000 due to new
customers and stringent cost controls. The contract food service
companies' revenues were down $4.8 million, due primarily to
closing marginal locations in 1992. Operating income increased
$5.5 million from last year's results, due primarily to a gain
from curtailment of a postretirement benefit plan in 1993.
CONVENTION SERVICES. Convention Services Group revenues and
operating income increased $117.6 million and $7.6 million,
respectively, from those in 1992. Growth in existing business,
the inclusion of operations of United Exposition Service Co.,
Inc. and Andrews, Bartlett and Associates, Incorporated, which
were acquired during the second and fourth quarters,
respectively, contributed to the increases.
TRAVEL AND LEISURE AND PAYMENT SERVICES. Revenues for the
Travel and Leisure and Payment Services Group declined $109.9
million, and, excluding the effects of $30 million of
restructuring charges in 1992, operating income declined $11.7
million from 1992 results. The declines were primarily
attributable to the sale, in late September 1992, of most of
Dial's food and merchandise airport terminal concession
operations; as a result, revenues and operating income of sold
and miscellaneous operations declined $113.9 million and $6.8
million, respectively, from those in 1992.
Revenues and operating income for aircraft fueling and other
ground-handling services declined $3.7 million and $100,000,
respectively, due primarily to lower foreign exchange rates.
Revenues and operating income of the transportation services
companies increased $5.5 million and $2.9 million, respectively,
from those of 1992. Continued emphasis on cost control programs,
the acquisition of a small transportation services company in
late 1992 and a gradually recovering Canadian economy contributed
to the improved operating results.
Cruise revenues were down $20.4 million and operating results
decreased $8.3 million from those of 1992 due to lower passenger
counts, increased competition, the major dry-dock of the Oceanic
in the 1993 first quarter and the introduction of a new itinerary
for the Majestic out of Port Everglades during the second quarter
of 1993. Reductions in operating expenses from ongoing cost
reduction programs helped limit the decline in operating results.
Travel tour service revenues and operating income decreased $5
million and $3.9 million, respectively, due to lower results from
the U.K. tour operation which is suffering from a slowly
recovering economy. In addition, passenger volume to Florida for
1993 was down 30% from the volume in 1992.
Duty Free and shipboard concession revenues were up $34.5 million
due primarily to new business. Operating income increased
$900,000 from that of 1992 despite start-up costs associated with
a major new contract.
Payment service revenues decreased $6.9 million due primarily to
reduced money order revenues and lower investment income due to
lower market interest rates and increased investment in
tax-exempt securities. Operating income was $2.7 million ahead of
last year's results due primarily to terminating unprofitable
business even though investment income was lower for the reasons
stated above.
UNALLOCATED CORPORATE EXPENSE AND OTHER ITEMS, NET. Unallocated
corporate expense and other items, net, increased $6.5 million
from that in 1992, due primarily to the expiration in early 1993
of subleases of buses and related amortization of deferred
intercompany and sale-leaseback profit.
INTEREST EXPENSE. Interest expense was down $6.1 million from
that in 1992, due primarily to lower short-term interest rates
and the prepayment of certain high-coupon, fixed-rate debt at the
end of the third quarter of 1993.
1992 VS. 1991:
Revenues for 1992 were $2.9 billion, compared to $2.8 billion in
1991.
Income from continuing operations before restructuring and other
charges described below, was $94.2 million, or $2.21 per share,
compared with $80.6 million, or $1.99 per share, in 1991. After
restructuring and other charges of $19.8 million, or $0.47 per
share, Dial had income from continuing operations of $74.4
million, or $1.74 per share, for the year, compared with $25.8
million, or $0.62 per share, in 1991 after restructuring and
other charges and spin-off transaction costs of $54.9 million, or
$1.37 per share.
Year ended December 31, 1992 1991
------------ ------------
INCOME FROM CONTINUING OPERATIONS (000 omitted):
BEFORE RESTRUCTURING AND OTHER CHARGES $ 94,151 $ 80,626
Restructuring and other charges and, in 1991,
spin-off transaction costs (19,800) (54,871)
------------ ------------
INCOME FROM CONTINUING OPERATIONS $ 74,351 $ 25,755
============ ============
INCOME PER COMMON SHARE FROM
CONTINUING OPERATIONS (dollars):
BEFORE RESTRUCTURING AND OTHER CHARGES $ 2.21 $ 1.99
Restructuring and other charges and, in 1991,
spin-off transaction costs (0.47) (1.37)
------------ ------------
INCOME PER COMMON SHARE FROM
CONTINUING OPERATIONS $ 1.74 $ 0.62
============ ============
The adoption of Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" ("SFAS No. 106") was mandatory for all U.S. public
companies beginning in 1993. The statement requires recognition
of liabilities for postretirement benefits other than pensions
over the period that services are provided by employees, but does
not change the pattern of cash payments for such benefits. Dial
adopted the new standard in 1992, and recorded the cumulative
effect of such initial application rather than amortizing such
amount over 20 years, as permitted by the statement. Accordingly,
results for 1992 include a one-time charge as of January 1, 1992,
for the cumulative effect of the initial application of SFAS No.
106 of $110.7 million (after-tax), or $2.64 per share, and an
ongoing annual expense increase of $9.1 million (after-tax), or
$0.22 per share.
RESTRUCTURING AND OTHER CHARGES. Dial recorded restructuring and
other charges of $19.8 million (after-tax), or $0.47 per share,
in the fourth quarter of 1992, attributable to the Travel and
Leisure and Payment Services Group, primarily to provide for
termination of an unfavorable airport concession contract and
related matters, and to provide for costs to reposition the
cruise line to compete more effectively in the Caribbean market.
In the fourth quarter of 1991, Dial provided for restructuring
and other charges and spin-off transaction costs of $54.9 million
(after-tax), or $1.37 per share. Of this amount, $26 million
(after-tax) was charged to the Travel and Leisure and Payment
Services Group primarily to provide for estimated losses on an
unfavorable airport concession contract and for losses as a
result of the bankruptcy of a large money order agent in its
payment services subsidiary. The remaining provision of $28.9
million (after-tax) was made primarily to provide for transaction
costs arising from the spin-off of GFC Financial and for certain
income tax matters related to prior years.
CONSUMER PRODUCTS. The Consumer Products Group reported a $78.9
million increase in revenues over 1991 amounts, and before the
$6.8 million ongoing expense increase for 1992 resulting from the
adoption of SFAS No. 106, operating income increased $14.8
million over 1991 amounts. The following comments exclude the
effects of the ongoing expense increase for 1992 resulting from
the adoption of SFAS No. 106.
Revenues and operating income of the Personal Care Division were
up $58.9 million and $7 million, respectively, from those of
1991. The increases were due primarily to strong sales volume
performance for Dial Soap and Liquid Dial.
The Food Division revenues declined $25.9 million from those of
1991, due primarily to new pricing strategies for microwaveables
to adopt everyday low prices, increased competition in the
microwaveable meals category and lower meat prices. Operating
income of the Food Division increased $3.2 million as the decline
in revenues was offset by lower ingredient costs and other
efficiencies.
Household and Laundry Division revenues and operating income
increased $33.3 million and $7.7 million, respectively, due to
increased sales of higher margin detergent products.
International revenues increased $12.6 million while operating
income decreased $3.1 million from 1991 amounts. The decline in
operating results was due primarily to expansion and product
introduction costs.
SERVICES. Combined Services companies reported a $32.7 million
decrease in revenues from those of 1991 due primarily to the sale
of most airport concession operations in late September 1992.
Excluding the effects of $30 million and $40 million of
restructuring and other charges in 1992 and 1991, respectively,
and before the $1 million, $700,000 and $1.5 million expense
increases for Airline Catering and Other Food Services,
Convention Services, and Travel and Leisure and Payment Services,
respectively, for 1992 resulting from the adoption of SFAS No.
106, combined Services operating income increased $11.6 million
over 1991 amounts. The following comments exclude the effects of
restructuring and other charges and the ongoing expense increase
for 1992 resulting from the adoption of SFAS No. 106.
AIRLINE CATERING AND OTHER FOOD SERVICES. Revenues of the
Airline Catering and Other Food Services Group were down $19.8
million, while operating income increased $6.3 million from 1991.
Airline catering revenues and operating income were up $27.5
million and $5.5 million, respectively, primarily as a result of
new customers and growth from existing customers, aided in part
by the traffic increase from the air fare discounts in the summer
of 1992. Contract food service revenues declined $47.3 million,
while operating income increased $800,000. The sale or closure of
unprofitable locations in 1992 contributed to the reduction in
contract food revenues.
CONVENTION SERVICES. Revenues and operating income of the
Convention Services Group increased $25.9 million and $4.2
million, respectively, due primarily to growth in existing
convention show services, new customers and somewhat improved
margins.
TRAVEL AND LEISURE AND PAYMENT SERVICES. Revenues for the
Travel and Leisure and Payment Services Group declined $38.8
million and operating income increased $1.1 million from 1991
amounts. The decline in revenues was attributable primarily to
the sale, in late September, of most of Dial's food and
merchandise airport terminal concession operations. Food and
merchandise airport terminal concession and related operations
revenues declined $41.8 million due to the September sale, while
operating income was up $10.8 million from the prior year, aided
by increased traffic from summer air fare discounts up to the
sale date.
Aircraft fueling and other ground-handling services revenues and
operating income increased $8.2 million and $1 million,
respectively, due to new customers and growth from existing
customers.
Revenues and operating income of the transportation services
companies were down $16.2 million and $2.2 million, respectively,
from those of 1991, reflecting a decrease in ridership as the
stagnant Canadian economy continued to lag behind the U.S.
recovery. Cost reduction programs helped limit the decline in
operating income.
Cruise revenues increased $1.4 million from those of 1991 due
primarily to increased onboard revenues, offset partially by
lower passenger counts and per diems. Deep discounting in selling
prices, resulting from continued sluggish demand, contributed to
lower per diems. The heavy discounts in selling prices and higher
promotional costs accounted for the $1 million decrease in
operating income from that of 1991.
Travel tour service revenues and operating income increased $6.7
million and $2.3 million, respectively, from 1991 results due
primarily to the full-year inclusion of Crystal Holidays Limited
which was acquired in mid-1991. In addition, 1991 results were
depressed due to the Persian Gulf War and its aftereffects.
Duty Free and shipboard concession revenues and operating income
were up $8.9 million and $600,000, respectively, from those in
1991 as airport terminal traffic increased and the revenue per
passenger on vessels where duty free shops are operated
increased.
Payment service revenues were down $6 million due primarily to
lower revenue on investments, money order fees and gains on sale
of investments. Operating income was about even with that of 1991
as lower revenues were offset by lower expenses, due primarily to
lower provisions for credit losses.
UNALLOCATED CORPORATE EXPENSE AND OTHER ITEMS, NET. Before the
$4.4 million ongoing expense increase for 1992 resulting from the
adoption of SFAS No. 106, unallocated corporate expense and other
items, net, decreased $500,000 from that of 1991.
INTEREST EXPENSE. Interest expense was down $700,000 from that in
1991, due primarily to lower short-term interest rates and the
repayment of certain higher cost debt, partially offset by higher
average short-term borrowings of commercial paper and promissory
notes. Also, the 1991 period had benefited from a reduction of
interest previously accrued for a federal tax audit.
LIQUIDITY AND CAPITAL RESOURCES:
Dial's total debt at December 31, 1993 was $636 million compared
to $707 million at December 31, 1992. The debt to capital ratio
was 0.55 to 1 and 0.62 to 1 at December 31, 1993 and December 31,
1992, respectively. Capital is defined as total debt plus
minority interests, preferred stock and common stock and other
equity.
During the third quarter of 1993, Dial utilized the proceeds from
the sale of MCII to repurchase approximately 1,000,000 shares of
common stock on the open market and to reduce outstanding
short-term debt. Dial also prepaid $187 million principal amount
of long-term, fixed-rate debt having a weighted average interest
rate of 10%. These prepayments resulted in an extraordinary
charge for early extinguishment of debt of $21.9 million (net of
tax benefit of $11.8 million).
During 1993, Dial filed a $300 million Senior Debt Securities
Shelf Registration with the Securities and Exchange Commission
under which Dial could issue senior notes for various amounts and
at various rates and maturities. During 1993, Dial issued $230
million of debt under the program with maturities of five to
eleven years. Subsequent to December 31, 1993, Dial issued the
remaining $70 million of debt under the senior note program with
maturities of six to fifteen years.
With respect to working capital, in order to minimize the effects
of borrowing costs on earnings, Dial strives to maintain current
assets (principally cash, inventories and receivables) at the
lowest practicable levels while at the same time taking advantage
of the payment terms offered by trade creditors. These efforts
notwithstanding, working capital requirements will fluctuate
significantly from seasonal factors as well as changes in levels
of receivables and inventories caused by numerous business
factors.
Dial satisfies a portion of its working capital and other
financing requirements with short-term borrowings (through
commercial paper, bank note programs and bank lines of credit)
and the sale of receivables. Short-term borrowings are supported
by long-term revolving bank credit agreements or short-term lines
of credit. At December 31, 1993, Dial had a $500 million
long-term revolving credit line in place, of which $257 million
was being used to support $225 million of commercial paper and
promissory notes and the guarantee of a $32 million ESOP loan.
Dial's subsidiaries have agreements to sell $115 million of
accounts receivable under which the purchaser has agreed to
invest collected amounts in new purchases, providing a stable
level of purchased accounts. The commitments to purchase accounts
receivable, which are fully utilized, mature in January of each
year, but are expected to be extended annually by mutual
agreement. The agreements are currently extended to January 1995.
As discussed in Note I of Notes to Consolidated Financial
Statements, in September 1992, Dial sold 5,245,900 shares of
treasury stock to The Dial Corp Employee Equity Trust (the
"Trust") at $38.125 per share. This Trust is being used to fund
certain existing employee compensation and benefit plans over the
scheduled 15-year term of the Trust. The Trust acquired the
shares of common stock from Dial for a promissory note valued at
$200 million at the date of sale. Proceeds from sales of shares
released by the Trust are used to repay Dial's note and thereby
satisfy benefit obligations. At December 31, 1993, a total of
3,923,933 shares remained in the Trust and are available to fund
future benefit obligations.
Capital spending has been reduced by obtaining, where
appropriate, equipment and other property under operating leases.
Dial's capital asset needs and working capital requirements are
expected to be financed primarily with internally generated
funds. Generally, cash flows from operations and the proceeds
from the sale of businesses during the past three years along
with increased proceeds from the exercise of stock options have
been sufficient to finance capital expenditures, the purchase of
businesses and cash dividends to shareholders. Dial expects these
trends to continue with operating cash flows and proceeds from
stock issuances generally being sufficient to finance its
business. Should financing requirements exceed such sources of
funds, Dial believes it has adequate external financing sources
available to cover any such shortfall.
As indicated in Note L of Notes to Consolidated Financial
Statements, although Dial has paid the minimum funding required
by applicable regulations, certain pension plans remain
underfunded while others are overfunded. The deficiency in
funding of the underfunded plans is expected to be reduced
through the payment of the minimum funding requirement over a
period of several years. Unfunded pension and other
postretirement benefit plans require payments over extended
periods of time. Such payments are not likely to materially
affect Dial's liquidity.
As of December 31, 1993, Dial has recorded U.S. deferred income
tax benefits under SFAS No. 109 totaling $170 million, which Dial
believes to be fully realizable in future years. The realization
of such benefits will require average annual taxable income over
the next 15 years (the current Federal loss carryforward period)
of approximately $30 million. Dial's average U.S. pretax reported
income, exclusive of nondeductible goodwill amortization but
after deducting restructuring and other charges, over the past
three years has been approximately $113 million. Furthermore,
approximately $112 million of the deferred income tax benefits
relate to pensions and other postretirement benefits which will
become deductible for income tax purposes as they are paid, which
will occur over many years.
Dial is subject to various environmental laws and regulations of
the United States as well as of the states in whose jurisdictions
Dial operates. As is the case with many companies, Dial faces
exposure to actual or potential claims and lawsuits involving
environmental matters. Dial believes that any liabilities
resulting therefrom should not have a material adverse effect on
Dial's financial position or results of operations.
BUSINESS OUTLOOK AND RECENT DEVELOPMENTS:
In November 1993, Dial announced the finalization of an agreement
to purchase 15 in-flight catering kitchens from United Airlines.
Dial purchased the first four kitchens on December 30, with the
remaining kitchens expected to be phased-in during the first and
second quarters of 1994. In February 1994, Dial announced that
it had reached an agreement to acquire the assets of Steels
Aviation Services Limited, a British airline caterer that
operates four airline catering kitchens in England and Scotland.
Management anticipates financing the acquisitions through cash
flow from operations and long-term debt.
The business outlook holds many uncertainties. Proposed
legislation, health care costs, interest rates, tax law changes,
environmental issues, competitive pressures from within the
marketplace and the unpredictable economic environment, will all
affect the growth and future of Dial. Dial remains aggressive in
its commitment to monitor and reduce costs and expenses,
positioning Dial to continue to produce positive results in the
years ahead.
THE DIAL CORP CONSOLIDATED BALANCE SHEET
December 31, (000 omitted) 1993 1992
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 10,659 $ 43,917
Receivables, less allowance of
$22,597 and $28,708 199,996 126,536
Inventories 216,837 167,930
Deferred income taxes 46,373 46,142
Other current assets 43,082 29,963
------------ ------------
516,947 414,488
Funds and agents' receivables
restricted for payment service
obligations, after eliminating
$65,000 invested in Dial commercial paper 535,657 653,102
------------ ------------
Total current assets 1,052,604 1,067,590
Investments restricted for
payment service obligations 574,094 376,078
Property and equipment 740,724 648,694
Other investments and assets 59,757 79,202
Investment in discontinued operations 248,664
Deferred income taxes 124,096 137,863
Intangibles 729,813 598,907
------------ ------------
$ 3,281,088 $ 3,156,998
============ ============
December 31, (000 omitted) 1993 1992
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank loans $ 8,935 $ 2,492
Accounts payable 248,975 190,895
Accrued compensation 69,060 69,186
Other current liabilities 272,430 241,088
Current portion of long-term debt 2,295 20,936
------------ ------------
601,695 524,597
Payment service obligations 1,147,063 1,085,042
------------ ------------
Total current liabilities 1,748,758 1,609,639
Long-term debt 624,662 683,683
Pension and other benefits 295,656 310,114
Other deferred items and insurance reserves 99,834 118,886
Commitments and contingent liabilities
(Notes B, I, M, N and O)
Minority interests 35,866 37,661
$4.75 Redeemable preferred stock 6,624 6,620
Common stock and other equity:
Common stock, $1.50 par value,
200,000,000 shares authorized,
48,554,362 shares issued 72,832 72,832
Additional capital 378,814 390,790
Retained income 304,481 234,655
Cumulative translation adjustments (9,889) (11,341)
Unearned employee benefits related to:
Employee Equity Trust (158,429) (211,571)
Guarantee of ESOP debt (31,511) (33,584)
Common stock in treasury, at cost,
2,536,354 and 1,647,493 shares (86,610) (51,386)
------------ ------------
Total common stock and other equity 469,688 390,395
------------ ------------
$ 3,281,088 $ 3,156,998
============ ============
<FN>
See Notes to Consolidated Financial Statements.
THE DIAL CORP STATEMENT OF CONSOLIDATED INCOME
Year ended December 31,
(000 omitted, except per share data) 1993 1992 1991
------------ ------------ ------------
REVENUES $ 3,000,342 $ 2,874,088 $ 2,827,849
------------ ------------ ------------
Costs and expenses:
Costs of sales and services 2,725,049 2,621,372 2,591,571
Restructuring and other charges 30,000 64,000
Unallocated corporate expense
and other items, net 50,061 43,519 39,587
Interest expense 49,965 56,049 56,768
Minority interests 3,618 2,814 3,543
------------ ------------ ------------
2,828,693 2,753,754 2,755,469
------------ ------------ ------------
Income before income taxes 171,649 120,334 72,380
Income taxes 61,376 45,983 46,625
------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS 110,273 74,351 25,755
Income (loss) from discontinued operations 32,120 (45,125) (83,363)
------------ ------------ ------------
Income (loss) before extraordinary charge
and cumulative effect of change in
accounting principle 142,393 29,226 (57,608)
Extraordinary charge for early
retirement of debt, net of
tax benefit of $11,833 (21,908)
Cumulative effect, net of tax benefit
of $63,542, to January 1, 1992, of
initial application of SFAS No. 106,
"Employers' Accounting for Postretirement
Benefits Other Than Pensions" (110,741)
------------ ------------ ------------
NET INCOME (LOSS) $ 120,485 $ (81,515) $ (57,608)
============ ============ ============
INCOME (LOSS) PER COMMON SHARE:
Continuing operations $ 2.56 $ 1.74 $ 0.62
Discontinued operations 0.75 (1.07) (2.09)
------------ ------------ ------------
Income (loss) before extraordinary
charge and cumulative effect of
change in accounting principle 3.31 0.67 (1.47)
Extraordinary charge (0.51)
Cumulative effect to January 1, 1992,
of initial application of SFAS No. 106 (2.64)
------------ ------------ ------------
NET INCOME (LOSS) PER COMMON SHARE $ 2.80 $ (1.97) $ (1.47)
============ ============ ============
Dividends declared per common share $ 1.12 $ 1.19 $ 1.40
============ ============ ============
Average outstanding common
and equivalent shares 42,703 42,013 39,911
============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
THE DIAL CORP STATEMENT OF CONSOLIDATED CASH FLOWS
Year ended December 31, (000 omitted) 1993 1992 1991
------------ ------------ ------------
CASH FLOWS PROVIDED (USED) BY
OPERATING ACTIVITIES:
Net income (loss) $ 120,485 $ (81,515) $ (57,608)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operations:
Depreciation and amortization 100,160 100,935 97,016
Deferred income taxes 35,943 18,915 (3,521)
Extraordinary charge for early
retirement of debt 21,908
Cumulative effect of change in accounting
principle 110,741
Restructuring and other charges 30,000 64,000
(Income) loss from
discontinued operations (32,120) 45,125 83,363
(Gain) loss on sale of businesses
and property (2,128) 310 (3,968)
Other noncash items, net 25,752 15,059 (5,538)
Change in operating assets
and liabilities:
Receivables (49,657) 19,764 (30,097)
Inventories (29,692) (4,859) 3,213
Payment service assets
and obligations, net (41,717) (38,425) 10,693
Accounts payable and accrued
compensation 31,825 (22,692) 62
Other current liabilities 539 (78,222) (56,163)
Other assets and liabilities, net (11,991) (38,369) 29,020
------------ ------------ ------------
Net cash provided by operating activities 169,307 76,767 130,472
------------ ------------ ------------
CASH FLOWS PROVIDED (USED) BY
INVESTING ACTIVITIES:
Capital expenditures (114,624) (109,131) (126,260)
Acquisitions of businesses and
other assets, net of cash acquired (216,787) (7,192) (34,495)
Proceeds from sale of shares of the
Transportation Manufacturing and
Service Parts Group 245,700
Proceeds from sale of businesses and property 19,459 54,891 24,777
Investment in and advances from
discontinued operations, net 35,084 (138,563) 27,641
Other, net (288) (347) (2,155)
------------ ------------ ------------
Net cash used by investing activities (31,456) (200,342) (110,492)
------------ ------------ ------------
CASH FLOWS PROVIDED (USED) BY
FINANCING ACTIVITIES:
Proceeds from long-term borrowings 229,358
Payments on long-term borrowings (196,611) (21,557) (83,435)
Extraordinary charge for early
retirement of debt (21,908)
Net change in short-term borrowings (105,338) 178,255 94,740
Dividends on common and preferred stock (48,345) (50,180) (56,597)
Proceeds from sale of treasury stock 43,286 57,949 27,932
Common stock purchased for treasury (38,642) (417) (1,921)
Net change in receivables sold 26,800 (5,200)
Proceeds from interest rate swaps 38,257
Cash payments on interest rate swaps (32,909) (37,027) (38,250)
------------ ------------ ------------
Net cash provided (used) by
financing activities (171,109) 153,823 (24,474)
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents (33,258) 30,248 (4,494)
Cash and cash equivalents, beginning of year 43,917 13,669 18,163
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 10,659 $ 43,917 $ 13,669
============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
THE DIAL CORP STATEMENT OF CONSOLIDATED COMMON STOCK AND OTHER EQUITY
Year ended December 31, (000 omitted) 1993 1992 1991
------------ ------------ ------------
COMMON STOCK:
Balance, beginning and end of year $ 72,832 $ 72,832 $ 72,832
============ ============ ============
ADDITIONAL CAPITAL:
Balance, beginning of year $ 390,790 $ 326,724 $ 326,127
Treasury shares issued in connection
with employee benefit plans (5,300) 2,294 (876)
Net change in unamortized amount
of restricted stock 2,063 1,195 1,473
Treasury shares sold to Employee Equity Trust 38,007
Employee Equity Trust adjustment to market value (8,723) 19,020
Treasury shares sold to ESOP 1,701
Other, net (16) 1,849
------------ ------------ ------------
Balance, end of year $ 378,814 $ 390,790 $ 326,724
============ ============ ============
RETAINED INCOME:
Balance, beginning of year $ 234,655 $ 832,539 $ 946,030
Net income (loss) 120,485 (81,515) (57,608)
Dividends on common and preferred stock (48,345) (50,180) (56,597)
SFAS No. 87 Employers' Accounting
for Pensions adjustment (2,966) (269) 710
Distribution of GFC Financial
to Dial stockholders (467,291)
Other, net 652 1,371 4
------------ ------------ ------------
Balance, end of year $ 304,481 $ 234,655 $ 832,539
============ ============ ============
CUMULATIVE TRANSLATION ADJUSTMENTS:
Balance, beginning of year $ (11,341) $ 2,083 $ 4,809
Unrealized translation loss (279) (20,226) (2,726)
Distribution of GFC Financial
to Dial stockholders 6,802
Disposition of Transportation Manufacturing
and Service Parts Group 1,731
------------ ------------ ------------
Balance, end of year $ (9,889) $ (11,341) $ 2,083
============ ============ ============
UNEARNED EMPLOYEE BENEFITS RELATED
TO EMPLOYEE EQUITY TRUST:
Balance, beginning of year $ (211,571) $ - $ -
Unearned employee benefits (200,000)
Employee benefits funded 44,419 7,449
Adjustment to market value 8,723 (19,020)
------------ ------------ ------------
Balance, end of year $ (158,429) $ (211,571) $ -
============ ============ ============
UNEARNED EMPLOYEE BENEFITS RELATED
TO GUARANTEE OF ESOP DEBT:
Balance, beginning of year $ (33,584) $ (35,414) $ (37,486)
Employee benefits earned 2,073 1,830 2,072
------------ ------------ ------------
Balance, end of year $ (31,511) $ (33,584) $ (35,414)
============ ============ ============
COMMON STOCK IN TREASURY:
Balance, beginning of year $ (51,386) $ (258,043) $ (284,930)
Purchase of shares (38,642) (417) (1,921)
Shares issued in connection
with employee benefit plans 4,167 38,078 28,808
Shares sold to Employee Equity Trust 161,993
Shares sold to ESOP 8,430
Other, net (749) (1,427)
------------ ------------ ------------
Balance, end of year $ (86,610) $ (51,386) $ (258,043)
============ ============ ============
COMMON STOCK AND OTHER EQUITY $ 469,688 $ 390,395 $ 940,721
============ ============ ============
<FN>
See Notes to Consolidated Financial Statements.
THE DIAL CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1993, 1992 and 1991
A. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION-The
consolidated financial statements of The Dial Corp and
subsidiaries ("Dial") include the accounts of Dial and all of its
subsidiaries. Dial sold its Transportation Manufacturing and
Service Parts Group in 1993 and spun-off GFC Financial
Corporation ("GFC Financial") in 1992. The Transportation
Manufacturing and Service Parts Group and GFC Financial are
presented as discontinued operations for all periods. Such
dispositions are discussed further in Note D of Notes to
Consolidated Financial Statements.
The consolidated financial statements are prepared in accordance
with generally accepted accounting principles. Intercompany
accounts and transactions between Dial and its subsidiaries have
been eliminated in consolidation. Certain reclassifications have
been made to the prior years' financial statements to conform to
1993 classifications. Described below are those accounting
policies particularly significant to Dial, including those
selected from acceptable alternatives.
CASH EQUIVALENTS-Dial considers all highly liquid investments
with original maturities of three months or less from date of
purchase as cash equivalents.
INVENTORIES-Generally, inventories are stated at the lower of
cost (first-in, first-out and average cost methods) or market.
PROPERTY AND EQUIPMENT-Property and equipment are stated at cost.
Depreciation is provided principally by use of the straight-line
method at annual rates as follows:
Buildings 2% to 5%
Machinery and other equipment 5% to 33%
Leasehold improvements Lesser of lease term
or useful life
INVESTMENTS RESTRICTED FOR PAYMENT SERVICE
OBLIGATIONS-Investments restricted for payment service
obligations include U.S. Treasury and Government agency
securities, obligations of states and political subdivisions,
debt securities issued by foreign governments, corporate
securities, a corporate note and other debt securities due beyond
one year. These investments are stated at amortized cost, or at
estimated realizable value when there is other than temporary
impairment of value.
Marketable equity securities (common and preferred stocks) are
stated at the lower of aggregate cost or market. A valuation
allowance, representing the excess of cost over market of equity
securities, is included as a reduction of common stock and other
equity. The cost of investment securities sold is determined
using the specific identification method. Realized gains and
losses on the disposition of investment securities and
adjustments to reflect other than temporary impairment of the
value of investment securities are reflected in income.
INTANGIBLES-Intangibles (primarily goodwill) are carried at cost
less accumulated amortization of $113,453,000 at December 31,1993
and $99,602,000 at December 31, 1992. Intangibles of
$166,688,000, which arose prior to October 31, 1970, are not
being amortized. Intangibles arising after October 31, 1970 are
amortized on the straight-line method over the periods of
expected benefit, but not in excess of 40 years. Dial evaluates
the possible impairment of goodwill and other intangible assets
at each reporting period based on the undiscounted projected
operating income of the related business unit.
INCOME TAXES-Income taxes are provided based upon the provisions
of SFAS No. 109, "Accounting for Income Taxes," which, among
other things, requires that recognition of deferred income taxes
be measured by the provisions of enacted tax laws in effect at
the date of the financial statements.
PENSION AND OTHER BENEFITS-Trusteed, noncontributory pension
plans cover substantially all employees. Benefits are based
primarily on final average salary and years of service. Funding
policies provide that payments to pension trusts shall be at
least equal to the minimum funding required by applicable
regulations.
Dial has defined benefit postretirement plans that provide
medical and life insurance for eligible retirees and dependents.
Until 1992, the cost of these benefits was generally expensed as
claims were incurred.
Effective January 1, 1992, Dial adopted the method of accounting
for postretirement benefits other than pensions prescribed by
SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," which requires recognition of liabilities
for such benefits over the period that services are provided by
employees. Dial elected to record the cumulative effect of
initial application of SFAS No. 106 rather than amortizing such
amount over 20 years as permitted by the standard. See Note L of
Notes to Consolidated Financial Statements for further
information.
NET INCOME (LOSS) PER COMMON SHARE-Net income (loss) per common
share is based on net income (loss) after preferred stock
dividend requirements and the weighted average number of common
shares outstanding during each year after giving effect to stock
options considered to be dilutive common stock equivalents. Fully
diluted net income (loss) per common share is not materially
different from primary net income (loss) per common share. The
average outstanding common and equivalent shares does not include
3,923,933 and 5,033,565 shares held by the Employee Equity Trust
(the "Trust") at December 31, 1993 and 1992, respectively. Shares
held by the Trust are not considered outstanding for net income
(loss) per share calculations until the shares are released from
the Trust.
B. ACQUISITIONS OF BUSINESSES AND OTHER ASSETS
Net cash paid, assets acquired and debt and other liabilities
assumed in all acquisitions were as follows:
(000 omitted) 1993 1992 1991
------------ ------------ ------------
Assets acquired:
Before intangibles $ 140,468 $ 9,488 $ 11,935
Intangibles 142,724 34,824
Debt and other liabilities assumed (66,405) (2,296) (12,264)
------------ ------------ ------------
Net cash paid $ 216,787 $ 7,192 $ 34,495
============ ============ ============
During 1993, Dial purchased the Renuzit line of air fresheners
and three convention services companies.
In November 1993, Dial announced the finalization of an agreement
to purchase 15 in-flight catering kitchens from United Airlines.
Dial purchased the first four kitchens on December 30, 1993. The
remaining kitchens are expected to be phased-in during 1994, at
a purchase price of approximately $111,000,000.
In December 1993, Dial acquired the remaining 49% interest in a
joint venture which constructed an office building in Phoenix,
Arizona, that serves as its corporate headquarters complex.
Acquisitions of businesses were accounted for as purchases and
the results of their operations have been included in the
Statement of Consolidated Income from the dates of acquisition.
The results of operations of the acquired companies from the
beginning of the year to the dates of acquisition are not
material.
C. RESTRUCTURING AND OTHER CHARGES-CONTINUING OPERATIONS
Dial recorded restructuring and other charges of $30,000,000
($19,800,000 after-tax, or $0.47 per share) in the fourth quarter
of 1992, attributable to the Travel and Leisure and Payment
Services Group primarily to provide for termination of an
unfavorable airport concession contract and related matters, and
to provide for costs to reposition the cruise line to compete
more effectively in the Caribbean market.
In the fourth quarter of 1991, Dial provided for restructuring
and other charges and spin-off transaction costs of $64,000,000
($54,871,000 after-tax, or $1.37 per share). Of this amount,
$40,000,000 ($25,971,000 after-tax) was charged to the Travel and
Leisure and Payment Services Group primarily to provide for
estimated losses on an unfavorable airport concession contract
and for losses as a result of the bankruptcy of a large money
order agent in its payment services subsidiary. The remaining
provision of $24,000,000 ($28,900,000 after-tax) was made
primarily to provide for transaction costs arising from the
spin-off of GFC Financial and for certain income tax matters
related to prior years.
Such restructuring and other charges and spin-off transaction
costs are summarized below:
(000 omitted) 1992 1991
------------ ------------
Travel and Leisure and Payment Services $ 30,000 $ 40,000
Corporate 10,000
Transaction costs 14,000
------------ ------------
Total pretax charges 30,000 64,000
Income tax benefit (10,200) (17,429)
Tax provision related to prior years 8,300
------------ ------------
Total after-tax charges $ 19,800 $ 54,871
============ ============
D. DISCONTINUED OPERATIONS AND DISPOSITIONS
On August 12, 1993, Dial sold, through an initial public
offering, 20 million shares of common stock of MCII, pursuant to
an underwriting agreement dated August 4, 1993. Transportation
Manufacturing Operations, Inc., Dial's Transportation
Manufacturing and Service Parts subsidiary, was transferred to
MCII in connection with the public offering of MCII shares. The
disposition of MCII, the sale of the Canadian transit bus
manufacturing business in June 1993, and the liquidation,
completed in early 1993, of a trailer manufacturing and transport
services company, concluded the disposal of the Transportation
Manufacturing and Service Parts Group.
At a special meeting on March 3, 1992, shareholders of Dial
approved the spin-off of GFC Financial, which comprised Dial's
commercial lending and mortgage insurance subsidiaries. As a
result of the spin-off, the holders of common stock of Dial
received a Distribution (the "Distribution") of one share of
common stock of GFC Financial for every two shares of Dial common
stock.
In connection with the dispositions, special charges to earnings
were made in 1992 and 1991 to cover restructuring of certain
operations, provisions against Latin American and other loans,
certain tax, spin-off transaction and other costs and, in 1993
and 1991, provisions related primarily to previously discontinued
businesses. In addition, Greyhound Lines, Inc., which was sold in
1987 and filed for bankruptcy on June 4, 1990 as the result of a
work stoppage and strike-related violence, emerged from
bankruptcy in late 1991, resulting in a partial reversal of a
loss provision made in 1990.
The caption "Income (loss) from discontinued operations" in the
Statement of Consolidated Income for the years ended December 31
includes the following:
(000 omitted) 1993 1992 1991
------------ ------------ ------------
Income (loss) from operations:
Transportation Manufacturing
and Service Parts Group,
net of tax provision
(benefit) of $7,685, ($17,666),
and ($5,191) (1) $ 10,193 $ (46,364) $ (14,892)
GFC Financial, net of tax
provision of $1,798 and
$14,833 (2) 5,498 (52,471)
Gain on sale of Transportation
Manufacturing and Service
Parts Group, net of tax
provision of $47,393 40,151
Cumulative effect, net of tax
benefit of $2,458, to
January 1, 1992 of initial
application of SFAS No. 106 (4,259)
Provisions related to previously
discontinued businesses,
net of tax benefit of
$7,776 and $36,065 (18,224) (44,668)
Reversal of excess portion of
Greyhound Lines 1990 loss
provision, net of tax
provision of $14,768 28,668
------------ ------------ ------------
$ 32,120 $ (45,125) $ (83,363)
============ ============ ============
<FN>
(1) After deducting restructuring and other charges of $59,400,000
(after-tax) and $26,400,000 (after-tax) in 1992 and 1991,
respectively.
(2) After deducting restructuring and other charges of $82,729,000
(after-tax) in 1991.
Businesses, other than those described above, with aggregate net
assets of $48,584,000 and $3,713,000 were sold in 1992 and 1991,
respectively.
E. INVENTORIES
Inventories at December 31 consisted of the following:
(000 omitted) 1993 1992
------------ ------------
Raw materials $ 42,056 $ 25,370
Work in process 13,930 13,166
Finished goods and supplies 160,851 129,394
------------ ------------
Inventories $ 216,837 $ 167,930
============ ============
F. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consisted of the following:
(000 omitted) 1993 1992
------------ ------------
Land $ 76,577 $ 67,594
Buildings and leasehold improvements 333,761 296,206
Machinery and other equipment 897,391 790,642
------------ ------------
1,307,729 1,154,442
Less accumulated depreciation 567,005 505,748
------------ ------------
Property and equipment $ 740,724 $ 648,694
============ ============
G. SHORT-TERM DEBT
Dial satisfies its short-term borrowing requirements with bank
lines of credit and by the issuance of commercial paper and
promissory notes.
At December 31, 1993, outstanding commercial paper and promissory
notes were supported by $500,000,000 of credit commitments
available under a long-term revolving bank credit agreement. At
December 31, 1993, $256,666,000 of the long-term revolving bank
credit supported $224,666,000 of commercial paper and promissory
notes, and the guarantee of a $32,000,000 ESOP loan.
Dial's foreign subsidiaries also maintain short-term bank lines
in various currencies, which amount to approximately $12,269,000,
of which $2,335,000 was outstanding at December 31, 1993. The
short-term bank lines are subject to annual renewal and, in most
instances, can be withdrawn at any time at the option of the
banks.
The following information pertains to Dial's commercial paper and
promissory notes (classified as long-term debt) and other
short-term debt:
Weighted Weighted
Average Maximum Average Average
Interest Amount Amount Interest
Rate Outstanding Outstanding Rate
Balance at at End During During During
(000 omitted) End of Year of Year (1) Year Year Year (1)
----------- ----------- ----------- ----------- -----------
1993:
Commercial paper $ 58,666 3.6% $ 261,229 $ 158,227 3.4%
Short-term borrowings
from banks 174,935 3.8% 357,885 225,509 3.7%
1992:
Commercial paper 122,043 4.2% 229,422 168,156 4.2%
Short-term borrowings
from banks 216,896 4.2% 272,277 211,961 4.2%
1991:
Commercial paper 92,191 6.2% 226,775 143,190 6.5%
Short-term borrowings
from banks 68,493 5.4% 172,695 88,273 6.3%
<FN>
(1) Exclusive of the cost of maintaining compensating balances and commitment fees
on long-term revolving bank credit used to support such borrowings and the
effects of interest rate swap agreements, as set forth in Note N of Notes to
Consolidated Financial Statements.
H. LONG-TERM DEBT
Long-term debt at December 31 was as follows:
(000 omitted) 1993 1992
------------ ------------
Senior debt:
Short-term borrowings supported by
long-term revolving bank credit:
Commercial paper (net of $65,000 issued
to Dial's payment services subsidiary) $ 58,666 $ 122,043
Promissory notes 166,000 214,404
Senior notes, 5.8% weighted
average interest rate, due to 2004 279,390 139,216
Guarantee of ESOP debt, floating
rate indexed to LIBOR, 2.9% at
December 31, 1993, due to 2009 32,000 34,000
Real estate mortgages and other obligations,
4.8% weighted average interest
rate, due to 2014 13,984 44,956
------------ ------------
550,040 554,619
Subordinated debt, 10.5%
debentures, due 2006 76,917 150,000
------------ ------------
626,957 704,619
Less current portion 2,295 20,936
------------ ------------
Long-term debt $ 624,662 $ 683,683
============ ============
Interest paid in 1993, 1992 and 1991 was approximately
$55,807,000, $59,962,000 and $69,218,000, respectively. As a
result of Dial's management of its interest rate exposure through
interest rate swap agreements as discussed further in Note N to
the Consolidated Financial Statements, the effective interest
rate on certain debt may differ from that disclosed above.
During the third quarter of 1993, Dial utilized the proceeds from
the sale of MCII to repurchase approximately 1,000,000 shares of
Dial's common stock on the open market and to reduce outstanding
short-term debt. Dial also prepaid $187,250,000 principal amount
of long-term, fixed-rate debt, having a weighted average interest
rate of 10%. These prepayments resulted in an extraordinary
charge (after-tax) of $21,908,000.
During 1993, Dial filed a $300,000,000 Senior Debt Securities
Shelf Registration with the Securities and Exchange Commission
under which Dial could issue senior notes for various amounts and
at various rates and maturities. During 1993, Dial issued
$230,000,000 of debt under the program with maturities of five to
eleven years with a weighted average interest rate of 6.2%.
Subsequent to December 31, 1993, Dial issued the remaining
$70,000,000 of debt under the senior note program with maturities
of six to fifteen years with a weighted average interest rate of
6.1%.
A long-term revolving bank credit is available from participating
banks under an agreement which provides for a total credit of
$500,000,000. Borrowings were available at December 31, 1993 on a
revolving basis until June 30, 1997. Annually, at Dial's request
and with the participating banks' consent, the terms of the
agreement may be extended for a one-year period.
The interest rate applicable to borrowings under the agreement
is, at Dial's option, indexed to the bank prime rate or the
London Interbank Offering Rate ("LIBOR"), plus appropriate
spreads over such indices during the period of the borrowing
agreement. The agreement also provides for commitment fees. Such
spreads and fees can change moderately should Dial's debt ratings
change.
Dial, in the event that it becomes advisable, intends to exercise
its right under the agreement to borrow for the purpose of
refinancing short-term borrowings; accordingly, short-term
borrowings totaling $224,666,000 and $336,447,000 at December 31,
1993 and 1992, respectively, have been classified as long-term
debt.
Annual maturities of long-term debt due in the next five years
will approximate $2,295,000 (1994), $22,185,000 (1995),
$32,167,000 (1996), $226,714,000 (1997) and $32,043,000 (1998).
Included in 1997 is $224,666,000 which represents the maturity of
short-term borrowings assuming they had been refinanced utilizing
the revolving credit facility and the term of the facility was
not extended. However, Dial expects the term of the facility to
be extended.
Canadian revolving credit loans are available to a Canadian
Services subsidiary from banks under agreements which provide for
credit of $7,554,000.
Dial's long-term debt agreements include various restrictive
covenants and require the maintenance of certain defined
financial ratios with which Dial is in compliance.
I. PREFERRED STOCK AND COMMON STOCK AND OTHER EQUITY
At December 31, 1993, there were 48,554,362 shares of common
stock issued and 46,018,008 shares outstanding. At December 31,
1993, 3,923,933 of the outstanding shares were held by The Dial
Corp Employee Equity Trust.
Dial has 442,352 shares of $4.75 Preferred Stock authorized, of
which 388,352 shares are issued. The holders of the $4.75
Preferred Stock are entitled to a liquidation preference of $100
per share and to annual cumulative sinking fund redemptions of
6,000 shares. Dial presently holds 153,251 shares which will be
applied to this sinking fund requirement; therefore, the 235,101
shares held by others are scheduled to be redeemed in the years
2019 to 2058. In addition, Dial has authorized 5,000,000 and
2,000,000 shares of Preferred Stock and Junior Participating
Preferred Stock, respectively.
Dial has one Preferred Stock Purchase Right ("Right") outstanding
on each outstanding share of its common stock. The Rights contain
provisions to protect shareholders in the event of an unsolicited
attempt to acquire Dial which is not believed by the Board of
Directors to be in the best interest of shareholders. The Rights
are represented by the common share certificates and are not
exercisable or transferable apart from the common stock until
such a situation arises. The Rights may be redeemed by Dial at
$0.05 per Right prior to the time any person or group has
acquired 20% or more of Dial's shares. Dial has reserved
1,000,000 shares of Junior Participating Preferred Stock for
issuance in connection with the Rights.
During 1989, Dial arranged to fund its matching contributions to
employees' 401k plans through a leveraged Employee Stock
Ownership Plan ("ESOP"). All eligible employees of Dial and its
participating affiliates, other than certain employees covered by
collective bargaining agreements that do not expressly provide
for participation of such employees in an ESOP, may participate
in the ESOP.
In June 1989, Dial sold 1,138,791 shares of treasury stock to the
ESOP for $35.125 per share. In connection with the spin-off of
GFC Financial in March 1992, the ESOP received one share of
common stock of GFC Financial for every two shares of Dial common
stock held by the ESOP. The ESOP subsequently sold the shares of
GFC Financial on the open market and used the proceeds to
purchase 273,129 shares of Dial's common stock. ESOP shares are
treated as outstanding for net income (loss) per share
calculations.
The ESOP borrowed $40,000,000 to purchase the 1,138,791 shares of
treasury stock in 1989. The ESOP's obligation to repay this
borrowing is guaranteed by Dial; therefore, the unpaid balance of
the borrowing ($32,000,000 at December 31, 1993) has been
reflected in the accompanying balance sheet as long-term debt and
the amount representing unearned employee benefits has been
recorded as a deduction from common stock and other equity. The
liability is being reduced as the ESOP repays the borrowing, and
the amount in common stock and other equity is being reduced as
the employee benefits are charged to expense. The ESOP intends to
repay the loan (plus interest) using Dial contributions and
dividends received on the shares of common stock held by the
ESOP. Information regarding ESOP transactions for the years ended
December 31 is as follows:
(000 omitted) 1993 1992 1991
------------ ------------ ------------
Debt repayment $ 2,000 $ 2,000 $ 2,000
Interest 946 1,199 1,949
Amounts received from Dial for:
Dividends 1,244 1,295 1,348
Capital contributions 1,696 2,026 2,601
Shares are released for allocation to participants based upon the
ratio of the year's principal and interest payments to the sum of
the total principal and interest payments over the life of the
plan. Expense of the ESOP is recognized based upon the greater of
cumulative cash payments to the plan or 80% of the cumulative
expense that would have been recognized under the shares
allocated method, in accordance with Statement of Position 76-3,
"Accounting for Certain Employee Stock Ownership Plans" and
Emerging Issues Task Force Abstract No. 89-8, "Expense
Recognition for Employee Stock Ownership Plans". Under this
method, Dial has recorded expense of $1,782,000, $2,210,000 and
$2,630,000 in 1993, 1992 and 1991, respectively.
ESOP shares at December 31 were as follows:
1993 1992
--------- ---------
Allocated shares 349,534 268,560
Shares not committed for allocation 1,062,386 1,143,360
--------- ---------
1,411,920 1,411,920
========= =========
In September 1992, Dial sold 5,245,900 shares of treasury stock
to The Dial Corp Employee Equity Trust (the "Trust") for a
promissory note valued at $200,000,000 ($38.125 per share). The
Trust is being used to fund certain existing employee
compensation and benefit plans over the scheduled 15-year term.
Through December 31, 1993, the Trust had sold 1,321,967 shares to
fund such benefits. The $200,000,000, representing unearned
employee benefits, was recorded as a deduction from common stock
and other equity, and is being reduced as employee benefits are
funded.
At December 31, 1993, retained income of $75,687,000 was
unrestricted as to payment of dividends by Dial.
J. STOCK OPTIONS
The Board of Directors approved and on March 3, 1992, the
shareholders adopted the 1992 Stock Incentive Plan ("1992 Plan")
for the grant of options and restricted stock to officers,
directors and certain key employees. The Plan replaces the 1983
Stock Option and Incentive Plan ("1983 Plan"). No new awards will
be made under the 1983 Plan except to provide for the adjustments
hereafter described. In connection with the Distribution, each
option, related Limited Stock Appreciation Right ("LSAR") and
related Stock Appreciation Right ("SAR") held by an employee of
Dial who remained an employee of Dial after the Distribution was
adjusted so that the aggregate exercise price and the aggregate
spread before the Distribution were preserved at the time of the
Distribution. For each share of restricted stock held by a Dial
employee who remained an employee of Dial after the Distribution,
such employee received additional shares of restricted stock with
a market value which compensated for the Distribution. Options
and restricted stock held by an employee of Dial that became an
employee of GFC Financial were surrendered in accordance with the
related agreements.
The 1992 Plan provides for the following types of awards: (a)
stock options (both incentive stock options and nonqualified
stock options), (b) SARs, and (c) performance-based and
restricted stock. The Plan authorized the issuance of options for
up to 2 1/2% of the total number of shares of common stock
outstanding as of the first day of each year; provided that any
shares available for grant in a particular calendar year which
are not, in fact, granted in such year shall not be added to
shares available for grant in any subsequent calendar year. In
addition to the limitation set forth above with respect to number
of shares available for grant in any single calendar year, no
more than 5,000,000 shares of common stock shall be cumulatively
available for grant of incentive options over the life of the
Plan. In addition, 500,000 shares of Preferred Stock are reserved
for distribution under the 1992 Plan.
The stock options and SARs outstanding at December 31, 1993 are
granted for terms of ten years; 50% become exercisable after one
year and the balance become exercisable after two years from the
date of grant. Stock options and appreciation rights are
exercisable based on the market value at the date of grant. LSARs
vest fully at date of grant and are exercisable only for a
limited period (in the event of certain tenders or exchange
offers for Dial's common stock). SARs and/or LSARs are issued in
tandem with certain stock options and the exercise of one
reduces, to the extent exercised, the number of shares
represented by the other.
Information with respect to options granted and exercised for the
three years ended December 31, 1993 is as follows:
Average
Option
Price Per
Shares Share
--------- -----------
Options outstanding at December 31, 1990 3,938,658 $ 31.81
Granted 817,690 35.43
Exercised (644,748) 30.55
Cancelled (1) (218,725) 32.29
---------
Options outstanding at December 31, 1991 3,892,875 32.76
Pre spin-off of GFC Financial:
Exercised (623,889) 31.82
Cancelled (1) (37,761) 33.84
Additional options
due to the Distribution, net (2) 493,779 N/A
Post spin-off of GFC Financial:
Granted 985,900 36.90
Exercised (777,473) 25.82
Cancelled (1) (279,330) 25.22
---------
Options outstanding at December 31, 1992 3,654,101 29.52
Granted 970,700 39.70
Exercised (315,979) 26.68
Cancelled (3) (425,452) 35.39
---------
Options outstanding at December 31, 1993 3,883,370 31.65
=========
<FN>
(1) Includes stock options which ceased to be exercisable due to the
exercise of related SARs during 1992 and 1991 (at average exercise
prices indicated) with respect to 134,890 shares ($23.41) and 11,250
shares ($29.85), respectively. Stock appreciation rights expense,
equivalent to the difference between the option price and the
average market price of Dial's stock on the date a right is
exercised (included in the Statement of Consolidated Income under
the caption "Unallocated corporate expense and other items, net"),
totaled $2,293,000 and $150,000 in 1992 and 1991, respectively.
There were no SARs exercised in 1993.
(2) Net of options surrendered by employees of Dial who became employees
of GFC Financial after the Distribution.
(3) Includes options cancelled upon disposition of Transportation
Manufacturing and Service Parts Group.
At December 31, 1993, stock options with respect to 3,883,370
common shares are outstanding at exercise prices ranging from
$18.35 to $42.56 per share, of which 2,653,695 shares are
exercisable at an average price of $28.36 per share.
Performance-based stock awards (75,900 shares awarded in 1993)
vest over a three-year period from the date of grant. The stock
awarded vests only if performance targets relative to the S & P
500 stock index and Dial's proxy comparator group are achieved.
Restricted stock awards (89,625 shares awarded in 1991) vest
generally over periods not exceeding five years from the date of
grant. There were no restricted stock awards in 1993 and 1992.
However, 85,161 shares of restricted stock were allocated to
employees of Dial in 1992 to compensate for the effect of the
Distribution. A holder of the performance-based and restricted
stock has the right to receive dividends and vote the shares but
may not sell, assign, transfer, pledge or otherwise encumber the
stock.
K. INCOME TAXES
Deferred income tax assets (liabilities) included in the
Consolidated Balance Sheet at December 31 related to the
following:
(000 omitted) 1993 1992
------------ ------------
Property and equipment $ (55,954) $ (47,675)
Interest rate swaps 25,043
Pension and other employee benefits 111,797 113,674
Provisions for losses 51,872 57,850
Amortization of intangibles 4,114 (664)
Advertising and promotion costs
capitalized for tax 14,729
Foreign loss carryforward 3,551 2,438
Alternative minimum tax credits 10,148
Deferred state income taxes 11,405 9,219
Other deferred income tax assets 33,460 21,586
Other deferred income tax liabilities (20,505) (25,614)
------------ ------------
154,469 166,005
Foreign deferred tax liabilities included above 16,000 18,000
------------ ------------
United States deferred tax assets $ 170,469 $ 184,005
============ ============
Deferred income tax assets (liabilities) at December 31, 1993,
relating to interest rate swaps, amortization of intangibles and
advertising and promotion costs capitalized for tax, reflect
adjustments in 1993 resulting from the settlement of Internal
Revenue Service examinations for 1985 and 1986.
The consolidated provision (benefit) for income taxes on income
from continuing operations for the years ended December 31
consisted of the following:
(000 omitted) 1993 1992 1991
------------ ------------ ------------
Current:
United States:
Federal $ 12,226 $ 13,644 $ 36,538
State 7,855 8,289 6,784
Foreign 5,352 5,135 6,824
------------ ------------ ------------
25,433 27,068 50,146
------------ ------------ ------------
Deferred:
United States 33,271 16,997 (4,320)
Foreign 2,672 1,918 799
------------ ------------ ------------
35,943 18,915 (3,521)
------------ ------------ ------------
Provision for income taxes $ 61,376 $ 45,983 $ 46,625
============ ============ ============
Income taxes paid in 1993, 1992 and 1991, amounted to
$12,206,000, $35,160,000 and $35,391,000, respectively.
Certain tax benefits related primarily to stock options and
dividends paid to the ESOP are credited to common stock and other
equity and amounted to $1,913,000, $5,382,000 and $1,240,000 in
1993, 1992 and 1991, respectively.
Eligible subsidiaries (including MCII and GFC Financial and
certain of their subsidiaries up to the sale and Distribution
date, respectively) are included in the consolidated federal and
other applicable income tax returns of Dial.
Certain benefits of tax losses and credits, which would not have
been currently available to certain subsidiaries, or MCII and GFC
Financial, on a separate return basis, have been credited to
those subsidiaries, or MCII and GFC Financial, by Dial. These
benefits are included in the determination of the income taxes of
those subsidiaries and MCII and GFC Financial and this policy has
been documented by written agreements.
A reconciliation of the provision for income taxes on income from
continuing operations and the amount that would be computed using
statutory federal income tax rates on income before income taxes
for the years ended December 31 is as follows:
(000 omitted) 1993 1992 1991
------------ ------------ ------------
Computed income taxes
at statutory federal income
tax rate of 35% (1993) and
34% (1992 and 1991) $ 60,077 $ 40,914 $ 24,609
Nondeductible goodwill amortization 3,122 3,140 3,192
Minority interests 1,266 957 1,205
State income taxes 4,303 5,231 4,479
Foreign tax differences 2,346 552 1,747
Tax-exempt income (2,047) (379) (5)
Restructuring and other charges (1,649) 13,060
Adjustment of deferred tax assets
at January 1, 1993 for enacted
change in tax rate (4,386)
Other, net (3,305) (2,783) (1,662)
------------ ------------ ------------
Provision for income taxes $ 61,376 $ 45,983 $ 46,625
============ ============ ============
United States and foreign income before income taxes from
continuing operations for the years ended December 31 is as
follows:
(000 omitted) 1993 1992 1991
------------ ------------ ------------
United States $ 155,426 $ 101,214 $ 55,099
Foreign 16,223 19,120 17,281
------------ ------------ ------------
Income before income taxes $ 171,649 $ 120,334 $ 72,380
============ ============ ============
In the first quarter of 1992, Dial adopted SFAS No. 109,
"Accounting for Income Taxes," which had no material effect on
the consolidated financial statements.
L. PENSIONS AND OTHER BENEFITS
PENSION BENEFITS
Net periodic pension cost for the three years ended December
31, 1993 included the following components:
United States Foreign
----------------------------------- -----------------------------------
(000 omitted) 1993 1992 1991 1993 1992 1991
----------- ----------- ----------- ----------- ----------- -----------
Service cost benefits
earned during the period $ 9,560 $ 9,238 $ 9,149 $ 2,097 $ 2,343 $ 3,135
Interest cost on projected
benefit obligation 19,323 17,647 16,938 6,106 6,238 5,533
Actual return on plan assets (20,405) (19,675) (28,965) (6,390) (6,453) (6,132)
Net amortization and deferral 4,415 4,869 14,505 122 205 (217)
Other items, primarily defined
contribution and multiemployer
plans 8,706 7,372 5,715 1,503 2,550 2,213
----------- ----------- ----------- ----------- ----------- -----------
Net pension cost $ 21,599 $ 19,451 $ 17,342 $ 3,438 $ 4,883 $ 4,532
=========== =========== =========== =========== =========== ===========
Weighted average assumptions used were:
United States Foreign
----------------------------------- -----------------------------------
December 31, 1993 1992 1991 1993 1992 1991
----------- ----------- ----------- ----------- ----------- -----------
Discount rate for obligation 7.75% 9.0% 9.0% 9.0% 9.0% 9.0%
Rate of increase
in compensation levels 5.0% 6.0% 6.0% 7.0% 7.0-8.0% 7.0-8.0%
Long-term rate of return on assets 9.5% 9.5% 9.5% 9.0% 9.0% 9.0%
The following table indicates the plans' funded status and
amounts recognized in Dial's consolidated balance sheet at
December 31, 1993 and 1992:
United States Foreign
--------------------------------------------------- ------------------------
Underfunded and
Overfunded Plans Unfunded Plans Overfunded Plans
------------------------- ------------------------ ------------------------
(000 omitted) 1993 1992 1993 1992 1993 1992
----------- ----------- ----------- ----------- ----------- -----------
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 124,833 $ 94,249 $ 80,767 $ 62,634 $ 49,007 $ 51,818
=========== =========== =========== =========== =========== ===========
Accumulated benefit obligation $ 136,544 $ 102,545 $ 85,700 $ 67,066 $ 50,900 $ 54,010
=========== =========== =========== =========== =========== ===========
Projected benefit obligation $ 175,389 $ 140,591 $ 91,658 $ 72,610 $ 69,174 $ 70,083
Market value of plan assets,
primarily equity and fixed
income securities 177,902 167,384 60,837 27,587 70,684 71,041
----------- ----------- ----------- ----------- ----------- -----------
Plan assets over (under)
projected benefit obligation 2,513 26,793 (30,821) (45,023) 1,510 958
Unrecognized transition
(asset) obligation (6,609) (7,516) 4,987 5,840 (5,073) (6,160)
Unrecognized prior service
cost reduction 1,448 1,381 7,799 5,266 7,296 7,806
Unrecognized net (gain) loss 15,921 (1,086) 6,951 224 4,674 3,109
Additional minimum liability (14,451) (6,868)
----------- ----------- ----------- ----------- ----------- -----------
Prepaid (accrued) pension cost $ 13,273 $ 19,572 $ (25,535) $ (40,561) $ 8,407 $ 5,713
=========== =========== =========== =========== =========== ===========
Dial recorded an additional minimum liability of $14,451,000,
an intangible asset of $8,587,000, a deferred tax asset of
$2,053,000 and a reduction of retained income of $3,811,000 at
December 31, 1993; and, an additional minimum liability of
$6,868,000, an intangible asset of $5,587,000, a deferred tax
asset of $436,000 and a reduction of retained income of
$845,000 at December 31, 1992. There are restrictions on the
use of excess pension plan assets in the event of a defined
change in control of Dial.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Dial and its subsidiaries have defined benefit postretirement
plans that provide medical and life insurance for eligible
employees, retirees and dependents. In addition, Dial retained
the obligations for such benefits for eligible retirees of
Greyhound Lines, Inc. (sold in 1987) and Armour and Company (sold
in 1983). Benefits applicable to retirees of the businesses sold
were recorded as accrued liabilities on an estimated present
value basis at the respective dates of sale.
Effective January 1, 1992, Dial and its U.S. subsidiaries adopted
the provisions of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("OPEB") which
requires that estimated OPEB benefits be accrued during the years
the employees provide services. Dial elected to recognize the
accumulated postretirement benefit obligation as a one-time
charge to income. The accumulated postretirement benefit
obligation is the aggregate amount that would have been accrued
for OPEB benefits in the years prior to adoption of SFAS No. 106
had the new standard been in effect for those years. The adoption
of SFAS No. 106 has no cash impact because the plans are not
funded and the pattern of benefit payments did not change. Dial
expects to adopt SFAS No. 106 for its foreign subsidiaries in
1995, and anticipates that the effect of such adoption will not
be material to the consolidated financial statements.
The status of the plans as of December 31, was as follows:
(000 omitted) 1993 1992
------------ ------------
Accumulated postretirement benefit obligation:
Retirees $ 221,847 $ 209,741
Fully eligible active plan participants 25,107 22,608
Other active plan participants 54,369 49,387
------------ ------------
Accumulated postretirement benefit obligation 301,323 281,736
Unrecognized prior service cost 133
Unrecognized net loss (17,634)
------------ ------------
Accrued postretirement benefit cost $ 283,822 $ 281,736
============ ============
Discount rate for obligation 7.75% 9.0%
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 14.5% in 1993
gradually declining to 5.5% by the year 2002 and remaining at
that level thereafter for retirees below age 65, and 11% in 1993
gradually declining to 5.5% by the year 2002 and remaining at
that level thereafter for retirees above age 65. This is a 1/2%
decrease from the trend rates used for 1993 and later years in
1992's valuations.
A one-percentage-point increase in the assumed health care cost
trend rate for each year would increase the accumulated
postretirement benefit obligation as of December 31, 1993 by
approximately 11% and the ongoing annual expense by approximately
13%.
The net periodic postretirement benefit cost at December 31
includes the following components:
(000 omitted) 1993 1992
------------ ------------
Service cost benefits attributed
to service during the period $ 4,233 $ 4,624
Interest cost on the accumulated
postretirement benefit obligation 23,413 23,658
Net amortization and deferral of
unrecognized past service cost (10)
------------ ------------
Net periodic postretirement benefit cost (1) $ 27,636 $ 28,282
============ ============
Curtailment gains due to termination
of certain benefits $ (5,475)
============
<FN>
(1) Benefit costs applicable to retirees of sold businesses, which are
included in the Statement of Consolidated Income under the caption,
"Unallocated corporate expense and other items, net", totaled
$15,000,000 and $14,700,000 for 1993 and 1992, respectively. Prior
to the adoption of SFAS No. 106, the cost of medical and life
insurance benefits for retirees was $14,174,000 for 1991, including
$12,200,000 interest cost on the accrued liability for sold
businesses.
M. LEASES
Certain airport and other retail facilities, cruise ships,
plants, offices and equipment are leased. The leases expire in
periods ranging generally from one to 30 years and some provide
for renewal options ranging from one to 29 years. Also, certain
leases contain purchase options. Leases which expire are
generally renewed or replaced by similar leases.
At December 31, 1993, future minimum rental payments and related
sublease rentals receivable with respect to noncancellable
operating leases with terms in excess of one year were as
follows:
Operating Leases
----------------------------------------- Rentals
Receivable
Cruise Under
(000 omitted) Ships Other Total Subleases
------------ ------------ ------------ ------------
1994 $ 9,343 $ 46,483 $ 55,826 $ 1,854
1995 9,632 41,137 50,769 486
1996 1,719 37,576 39,295 300
1997 27,354 27,354 140
1998 23,814 23,814 136
Thereafter 111,530 111,530 28
------------ ------------ ------------ ------------
Total $ 20,694 $ 287,894 $ 308,588 $ 2,944
============ ============ ============ ============
At the end of the lease terms, Dial has options to purchase the
cruise ships and certain other leased assets for an aggregate
purchase price of $136,250,000. If the purchase options are not
exercised, Dial will make residual guarantee payments aggregating
$93,207,000 which are refundable to the extent that the lessors'
subsequent sales prices exceed certain levels.
As discussed in Note B of Notes to Consolidated Financial
Statements, in November 1993, Dial entered into an agreement to
purchase 15 in-flight catering kitchens from United Airlines.
Future minimum rental payments for leases related to the kitchens
expected to be phased in during 1994 are as follows: $3,875,000
(1994), $4,267,000 (1995), $4,265,000 (1996), $4,275,000 (1997),
$4,265,000 (1998), and $90,135,000 thereafter. These amounts are
not included in the table of future minimum rental payments at
December 31, 1993.
Information regarding net operating lease rentals for the three
years ended December 31 is as follows:
(000 omitted) 1993 1992 1991
------------ ------------ ------------
Minimum rentals $ 115,386 $ 147,492 $ 156,215
Contingent rentals 35,292 31,451 25,612
Sublease rentals (25,713) (46,644) (48,371)
------------ ------------ ------------
Total rentals, net (1) $ 124,965 $ 132,299 $ 133,456
============ ============ ============
<FN>
(1) Includes net rentals of $7,700,000, $9,419,000 and $8,300,000 for
1993, 1992 and 1991, respectively, for Dial's corporate headquarters
which was leased from a joint venture up to December 1993, when Dial
acquired the remaining interest in the joint venture.
Contingent rentals on operating leases are based primarily on
sales and revenues for buildings and leasehold improvements and
usage for other equipment.
Dial is a 50% partner in a joint venture which owns a resort and
conference hotel in Oakbrook, Illinois. Dial has leased the hotel
through September 1, 2002, and the future rental payments are
included in the table of future minimum rental payments. In
addition, Dial and a third party have agreed to lend the joint
venture $10,000,000 and $5,000,000, respectively, at 8 3/4% on
July 1, 1997 to be secured by a second mortgage on the property
to prepay $15,000,000 of the joint venture's nonrecourse first
mortgage obligation. If the joint venture is unable to repay or
refinance the first mortgage note, Dial has an option to purchase
the note from the lender on September 30, 2002, its due date, at
its then unpaid principal amount which is expected to be
approximately $24,650,000. If the purchase option is not
exercised, Dial will make residual guarantee payments equal to
the greater of $5,000,000 or 150% of any shortfall in fair market
value of the hotel compared to the unpaid principal amount of the
note on such date.
N. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND FAIR
VALUE OF FINANCIAL INSTRUMENTS
FINANCIAL ISNTRUMENTS WITH OFF-BALANCE-SHEET RISK
Dial is a party to financial instruments with off-balance-sheet
risk which are entered into in the normal course of business to
meet its financing needs and to manage its exposure to
fluctuations in interest and foreign exchange rates. These
financial instruments include revolving sale of receivable
agreements, interest rate swap agreements and foreign exchange
forward contracts. The instruments involve, to a varying degree,
elements of credit, interest rate and exchange rate risk in
addition to amounts recognized in the financial statements.
At December 31, 1993, Dial's subsidiaries have agreements to sell
up to $115,000,000 of accounts receivable with a major financial
institution under which the financial institution has agreed to
invest collected amounts in new purchases, providing a stable
level of purchased accounts. The agreements to purchase accounts
receivable, which were fully utilized at December 31, 1993 and
December 31, 1992, mature in January of each year, but are
expected to be extended annually by mutual agreement. They are
currently extended to January 1995. Average monthly proceeds from
the sale of accounts receivable were $103,700,000, $91,200,000
and $90,900,000 during 1993, 1992 and 1991, respectively. Dial's
exposure to credit loss for receivables sold is represented by
the recourse provision under which Dial is obligated to
repurchase uncollectible receivables sold subject to certain
limitations.
Dial enters into interest rate swap agreements as a means of
managing its interest rate exposure. The agreements are with
major financial institutions which are expected to fully perform
under the terms of the agreements thereby mitigating the credit
risk from the transactions. The agreements are contracts to
exchange fixed and floating interest rate payments periodically
over the life of the agreements without the exchange of the
underlying notional amounts. The notional amounts of such
agreements are used to measure interest to be paid or received
and do not represent the amount of exposure to credit loss. The
amounts to be paid or received under the interest rate swap
agreements are accrued consistent with the terms of the
agreements and market interest rates.
At December 31, 1993, Dial had $140,000,000 notional amount of
interest rate swap agreements in effect which exchange floating
rate interest payments for fixed rate interest payments with a
weighted average interest rate of 9.3%. These swap agreements
expire as follows: $100,000,000 (1995), and $40,000,000 (1998).
Dial also had $250,000,000 notional amount of interest rate swap
agreements in effect at December 31, 1993, which exchange fixed
rate interest payments with a weighted average interest rate of
5.6% for floating rate interest payments. These swap agreements,
which were entered into during 1993, expire as follows:
$50,000,000 (1994), and $200,000,000 (2003).
In addition, Dial had $332,600,000 notional amount of interest
rate swap agreements in effect at December 31, 1993 which were
counterswapped, fixing the future net payments owed by Dial
against the cash proceeds received by Dial when the swap
agreements were entered, at discount rates ranging from 7.1% to
10.4%. The swap and related counterswap agreements expire as
follows: $65,000,000 (1994), $67,600,000 (1995), and $200,000,000
(1996), except for $67,600,000 expiring in 1995 and $100,000,000
expiring in 1996, for which the related counterswap agreement
expires in 2000. Following the period that the swap agreements
expire through 2000, Dial will pay a fixed rate of interest in
exchange for a floating rate.
Cash consideration received on the swaps is amortized as an
offset to expense from future net swap payments over the life of
the related swap. Net expense of $13,999,000, $18,856,000 and
$14,048,000 for 1993, 1992 and 1991, respectively, is included in
the Statement of Consolidated Income under the caption,
"Unallocated corporate expense and other items, net." The
unamortized balance ($37,780,000 and $57,709,000 at December 31,
1993 and 1992, respectively) of such consideration is included in
the Consolidated Balance Sheet under the caption, "Other deferred
items and insurance reserves."
Dial also enters into foreign exchange forward contracts to hedge
foreign currency transactions. These contracts are purchased to
reduce the impact of foreign currency fluctuations on operating
results. Dial does not engage in foreign currency speculation.
The contracts do not subject Dial to risk due to exchange rate
movements as gains and losses on the contracts offset gains and
losses on the transactions being hedged. At December 31, 1993,
Dial had approximately $125,000,000 of foreign exchange forward
contracts outstanding. Dial's theoretical risk in these
transactions is the cost of replacing, at current market rates,
these contracts in the event of default by the other party.
Management believes the risk of incurring such losses is remote
as the contracts are entered into with major financial
institutions.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS
No. 107, "Disclosures About Fair Value of Financial Instruments."
The estimated fair value amounts have been determined by Dial
using available market information and valuation methodologies
described below. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein may not be indicative
of the amounts that Dial could realize in a current market
exchange. The use of different market assumptions or valuation
methodologies may have a material effect on the estimated fair
value amounts.
The carrying values of cash and cash equivalents, receivables,
accounts payable and payment service obligations approximate fair
values due to the short-term maturities of these instruments. The
carrying amounts and estimated fair values of Dial's other
financial instruments at December 31, 1993 are as follows:
Carrying Fair
(000 omitted) Amount Value
------------ ------------
Investments restricted for payment
service obligations (1) $ 1,109,751 $ 1,105,788
Equity and debt investments and
notes receivable 16,456 31,423
Total debt (635,892) (654,971)
Interest rate swaps (37,780) (63,778)
Foreign exchange forward contracts - (1,436)
<FN>
(1) Includes $506,941,000 of cash and cash equivalents which are assumed
to approximate fair values due to their short-term maturities.
The methods and assumptions used to estimate the fair values of
the financial instruments are summarized as follows:
Investments restricted for payment service obligations and equity
and debt investments and notes receivable-The fair values of
investments were estimated using either quoted market prices or,
to the extent there are no quoted market prices, market prices of
investments of a similar nature. For notes receivable, the
carrying amounts approximate fair values because the rates on
such notes are floating rates.
Debt-The fair value of debt was estimated by discounting the
future cash flows using rates currently available for debt of
similar terms and maturity. The carrying values of short-term
bank loans, commercial paper and promissory notes were assumed to
approximate fair values due to their short-term maturities.
Interest rate swaps-The fair values were estimated by discounting
the expected cash flows using rates currently available for
interest rate swaps of similar terms and maturities. The fair
value represents the estimated amount that Dial would pay to the
dealer to terminate the swap agreement at December 31, 1993.
Foreign exchange forward contracts (used for hedging purposes)-
The fair value is estimated using quoted exchange rates.
O. LITIGATION AND CLAIMS
Dial and certain subsidiaries are plaintiffs or defendants to
various actions, proceedings and pending claims. Certain of these
pending legal actions are or purport to be class actions. Some of
the foregoing involve, or may involve, compensatory, punitive or
other damages in material amounts. Litigation is subject to many
uncertainties and it is possible that some of the legal actions,
proceedings or claims referred to above could be decided against
Dial. Although the amount of liability at December 31, 1993 with
respect to these matters is not ascertainable, Dial believes that
any resulting liability should not materially affect Dial's
financial condition or results of operations.
Dial is subject to various environmental laws and regulations of
the United States as well as of the states in whose jurisdictions
Dial operates. As is the case with many companies, Dial faces
exposure to actual or potential claims and lawsuits involving
environmental matters. It is Dial's policy to accrue
environmental and clean-up costs when it is probable that a
liability has been incurred and the amount of the liability is
reasonably estimable. Although Dial is a party to certain
environmental disputes, Dial believes that any liabilities
resulting therefrom, after taking into consideration Dial's
insurance coverage and amounts already provided for, should not
have a material adverse effect on Dial's financial position or
results of operations.
P. PRINCIPAL BUSINESS SEGMENTS
For 1993, Dial's Services companies, previously reported as a
single principal business segment, were separated into three
principal business segments for financial reporting purposes.
Prior year data have been restated to reflect this change. The
business activities included in each segment are set forth
elsewhere in this Annual Report.
Operating income by segment represents revenues less costs of
sales and services before unallocated corporate and other
items, net, interest expense, minority interests and income
taxes.
Year ended December 31,
(000 omitted) 1993 1992 1991 1990 1989
------------ ------------ ------------ ------------ ------------
Revenues:
Consumer Products $ 1,420,173 $ 1,275,447 $1,196,499 $ 1,122,726 $ 1,083,179
------------ ------------ ------------ ------------ ------------
Services:
Airline Catering and
Other Food Services 583,487 609,662 629,474 636,225 638,290
Convention Services 356,267 238,694 212,828 208,408 184,634
Travel and Leisure and
Payment Services 640,415 750,285 789,048 884,176 838,508
------------ ------------ ------------ ------------ ------------
Total Services 1,580,169 1,598,641 1,631,350 1,728,809 1,661,432
------------ ------------ ------------ ------------ ------------
$ 3,000,342 $ 2,874,088 $ 2,827,849 $ 2,851,535 $ 2,744,611
============ ============ ============ ============ ============
Operating Income (1):
Consumer Products $ 139,213 $ 118,616 $ 110,605 $ 96,554 $ 80,522
------------ ------------ ------------ ------------ ------------
Services:
Airline Catering and
Other Food Services 44,724 38,605 33,263 24,945 24,752
Convention Services 27,849 20,281 16,795 18,786 9,560
Travel and Leisure and
Payment Services 63,507 45,214 35,615 99,424 88,871
------------ ------------ ------------ ------------ ------------
Total Services 136,080 104,100 85,673 143,155 123,183
------------ ------------ ------------ ------------ ------------
Total principal business segments 275,293 222,716 196,278 239,709 203,705
Unallocated corporate expense
and other items, net (50,061) (43,519) (63,587) (41,916) (52,218)
------------ ------------ ------------ ------------ ------------
$ 225,232 $ 179,197 $ 132,691 $ 197,793 $ 151,487
============ ============ ============ ============ ============
<FN>
(1) After deducting restructuring and other charges of $30,000,000 and $40,000,000 for Travel and Leisure and
Payment Services in 1992 and 1991, respectively, and $24,000,000 charged to unallocated corporate expense in
1991. Also after deducting $6,800,000, $965,000, $749,000, $1,486,000 and $4,400,000 in 1992 for Consumer
Products, Airline Catering and Other Food Services, Convention Services, Travel and Leisure and Payment
Services and Unallocated corporate expense, respectively, for increased ongoing expense following the adoption
of SFAS No. 106 effective as of January 1, 1992. Years prior to 1992 do not include such expenses.
Services
----------------------------------------------------
Airline Travel and
Catering and Leisure and
Consumer Other Food Convention Payment Total Corporate
(000 omitted) Products Services Services Services Services and Other Total
------------ ------------ ------------ ------------ ------------ ------------ ------------
1993:
Assets at year end:
Before
intangibles
and restricted
assets $ 513,293 $ 176,481 $ 118,467 $ 326,432 $ 621,380 $ 306,851 $ 1,441,524
Assets restricted
for payment
service
obligations 1,109,751 1,109,751 1,109,751
Intangibles 340,831 239,116 80,806 62,910 382,832 6,150 729,813
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 854,124 $ 415,597 $ 199,273 $ 1,499,093 $ 2,113,963 $ 313,001 $ 3,281,088
============ ============ ============ ============ ============ ============ ============
Capital expenditures $ 40,605 $ 21,685 $ 11,838 $ 38,859 $ 72,382 $ 1,637 $ 114,624
============ ============ ============ ============ ============ ============ ============
Depreciation
and amortization:
Depreciation $ 28,071 $ 16,019 $ 8,181 $ 26,444 $ 50,644 $ 3,785 $ 82,500
Amortization
of intangibles 5,512 7,168 743 4,237 12,148 17,660
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 33,583 $ 23,187 $ 8,924 $ 30,681 $ 62,792 $ 3,785 $ 100,160
============ ============ ============ ============ ============ ============ ============
1992:
Assets at year end:
Before
intangibles,
restricted
assets and
discontinued
operations $ 413,224 $ 158,593 $ 58,639 $ 337,581 $ 554,813 $ 312,210 $ 1,280,247
Assets restricted
for payment
service
obligations 1,029,180 1,029,180 1,029,180
Investment in
discontinued
operations 248,664 248,664
Intangibles 265,281 246,181 15,933 66,877 328,991 4,635 598,907
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 678,505 $ 404,774 $ 74,572 $ 1,433,638 $ 1,912,984 $ 565,509 $ 3,156,998
============ ============ ============ ============ ============ ============ ============
Capital expenditures $ 45,508 $ 20,718 $ 7,336 $ 34,815 $ 62,869 $ 754 $ 109,131
============ ============ ============ ============ ============ ============ ============
Depreciation
and amortization:
Depreciation $ 25,036 $ 15,662 $ 4,466 $ 33,237 $ 53,365 $ 4,189 $ 82,590
Amortization
of intangibles 6,506 7,100 241 4,498 11,839 18,345
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 31,542 $ 22,762 $ 4,707 $ 37,735 $ 65,204 $ 4,189 $ 100,935
============ ============ ============ ============ ============ ============ ============
1991:
Assets at year end:
Before
intangibles,
restricted
assets and
discontinued
operations $ 400,536 $ 157,792 $ 54,889 $ 436,918 $ 649,599 $ 288,318 $ 1,338,453
Assets restricted
for payment
service
obligations 960,426 960,426 960,426
Investment in
discontinued
operations 580,699 580,699
Intangibles 268,960 252,574 16,174 71,362 340,110 5,008 614,078
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 669,496 $ 410,366 $ 71,063 $ 1,468,706 $ 1,950,135 $ 874,025 $ 3,493,656
============ ============ ============ ============ ============ ============ ============
Capital expenditures $ 53,398 $ 17,261 $ 5,294 $ 41,420 $ 63,975 $ 8,887 $ 126,260
============ ============ ============ ============ ============ ============ ============
Depreciation
and amortization:
Depreciation $ 22,526 $ 15,800 $ 4,177 $ 31,559 $ 51,536 $ 4,710 $ 78,772
Amortization
of intangibles 6,802 7,227 261 3,954 11,442 18,244
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 29,328 $ 23,027 $ 4,438 $ 35,513 $ 62,978 $ 4,710 $ 97,016
============ ============ ============ ============ ============ ============ ============
Q. CONDENSED CONSOLIDATED QUARTERLY RESULTS (UNAUDITED)
First Quarter Second Quarter Third Quarter Fourth Quarter
---------------------- ---------------------- ---------------------- ----------------------
(000 omitted) 1993 1992 1993 1992 1993 1992 1993 1992
----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Revenues:
Consumer Products $ 293,183 $ 269,880 $ 385,140 $ 351,940 $ 345,260 $ 304,783 $ 396,590 $ 348,844
----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Services:
Airline
Catering
and Other
Food Services 143,584 145,019 145,420 151,877 152,522 170,878 141,961 141,888
Convention
Services 68,112 66,112 81,583 57,881 89,944 47,672 116,628 67,029
Travel and
Leisure and
Payment
Services 133,177 184,656 161,852 204,537 182,675 219,835 162,711 141,257
----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Total Services 344,873 395,787 388,855 414,295 425,141 438,385 421,300 350,174
----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
$ 638,056 $ 665,667 $ 773,995 $ 766,235 $ 770,401 $ 743,168 $ 817,890 $ 699,018
=========== ========== =========== =========== =========== =========== =========== ===========
Operating Income:
Consumer Products $ 25,659 $ 22,910 $ 43,443 $ 38,094 $ 35,442 $ 30,050 $ 34,669 $ 27,562
----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Services:
Airline
Catering
and Other
Food Services 6,411 5,298 10,674 9,030 13,584 14,315 14,055 9,962
Convention
Services 5,988 7,390 7,419 4,562 4,972 517 9,470 7,812
Travel and
Leisure and
Payment
Services (1) 4,910 3,022 17,923 19,916 29,375 35,730 11,299 (13,454)
----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Total Services 17,309 15,710 36,016 33,508 47,931 50,562 34,824 4,320
----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Total principal
business
segments 42,968 38,620 79,459 71,602 83,373 80,612 69,493 31,882
Unallocated
corporate
expense and
other items,
net (12,480) (10,220) (12,982) (11,293) (12,401) (10,939) (12,198) (11,067)
----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
$ 30,488 $ 28,400 $ 66,477 $ 60,309 $ 70,972 $ 69,673 $ 57,295 $ 20,815
=========== ========== =========== =========== =========== =========== =========== ===========
Income (Loss):
Continuing
operations (2) $ 11,159 $ 9,934 $ 33,379 $ 29,603 $ 37,184 $ 32,334 $ 28,551 $ 2,480
Discontinued
operations (3) 3,472 2,641 6,294 3,486 22,354 116 (51,368)
Extraordinary
charge (21,908)
Cumulative effect
of change in
accounting
principle (110,741)
----------- ---------- ----------- ----------- ----------- ----------- ---------- -----------
Net income (loss) $ 14,631 $ (98,166) $ 39,673 $ 33,089 $ 37,630 $ 32,450 $ 28,551 $ (48,888)
=========== ========== =========== =========== =========== =========== ========== ===========
Income (Loss) per
Common Share
(dollars):
Continuing
operations (2) $ 0.25 $ 0.24 $ 0.77 $ 0.71 $ 0.87 $ 0.76 $ 0.67 $ 0.03
Discontinued
operations (3) 0.08 0.06 0.15 0.08 0.52 (1.21)
Extraordinary
charge (0.51)
Cumulative
effect of
change in
accounting
principle (2.64)
----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)
per common share $ 0.33 $ (2.34) $ 0.92 $ 0.79 $ 0.88 $ 0.76 $ 0.67 $ (1.18)
=========== ========== =========== =========== =========== =========== =========== ===========
<FN>
(1) After deducting restructuring and other charges of $30,000,000 in the fourth quarter of 1992.
(2) After deducting restructuring and other charges of $19,800,000 (after-tax) or $0.47 per share in the fourth
quarter of 1992.
(3) The third quarter of 1993 includes income from operations of the Transportation Manufacturing and Service Parts
Group of $427,000, or $0.01 per share, and a gain of $40,151,000, or $0.94 per share, attributable to the sale
of the Transportation Manufacturing and Service Parts Group, and is after deducting $18,224,000, or $0.43 per
share, for provisions related to previously discontinued businesses. The first quarter of 1992 includes income
from operations of $1,402,000, or $0.03 per share, and $5,498,000, or $0.13 per share, for Transportation
Manufacturing and Service Parts Group and GFC Financial, respectively, and is after deducting $4,259,000, or
$0.10 per share, for the cumulative effect of initial application of SFAS No. 106. The fourth quarter of 1992 is
after deducting restructuring and other charges of $59,400,000, or $1.41 per share.
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
The Dial Corp:
We have audited the consolidated financial statements of The Dial
Corp as of December 31, 1993 and 1992, and for the three years in
the period ended December 31, 1993, and have issued our report
thereon dated February 25, 1993; such report is included
elsewhere in this Form 10-K. Our audits also included the
financial statement schedules of The Dial Corp listed in Item 14.
These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present
fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche
Deloitte & Touche
Phoenix, Arizona
February 25, 1994
F-1
Schedule I
THE DIAL CORP
MARKETABLE SECURITIES--
OTHER SECURITY INVESTMENTS
(000 omitted)
December 31, 1993
- -----------------------------------------------------------------------
Name of Issue and Title Par Market Book
of Each Issue Value Cost Value Value
- ------------------------- --------- --------- --------- ---------
U. S. Government agencies $ 5,000 $ 5,127 $ 5,126 $ 5,124
Obligations of states and
political subdivisions 240,175 245,531 246,280 245,330
Corporate securities 156,750 163,904 159,823 163,755
Mortgage-backed and other
asset-backed securities 72,896 87,035 73,530 74,393
Other debt securities and
corporate note 94,820 80,939 81,799 85,492
---------
Investments restricted for
payment service obligations $ 574,094
=========
December 31, 1992
- -----------------------------------------------------------------------
Name of Issue and Title Par Market Book
of Each Issue Value Cost Value Value
- ------------------------- --------- --------- --------- ---------
U. S. Government agencies $ 11,598 $ 11,787 $ 12,177 $ 11,748
Obligations of states and
political subdivisions 71,465 74,318 74,944 74,289
Corporate securities 54,400 55,211 54,129 53,970
Mortgage-backed and other
asset-backed securities 171,904 328,117 211,262 225,921
Other debt securities 10,150 10,150 10,150 10,150
---------
Investments restricted for
payment service obligations $ 376,078
=========
F-2
Schedule X
THE DIAL CORP
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(000 omitted)
Year Ended December 31,
-----------------------------
1993 1992 1991
--------- --------- ---------
Maintenance and repairs $ 47,223 $ 45,457 $ 49,108
Advertising costs 120,188 123,697 107,391
All other required items are presented elsewhere in
this document or are less than 1% of revenues.
F-3