UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 1994
Commission file number 001-11015
THE DIAL CORP
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 36-1169950
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
DIAL TOWER, PHOENIX, ARIZONA 85077
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (602)-207-4000
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
--------- ----------
As of April 30, 1994, 46,015,567 shares of Common Stock ($1.50 par
value) were outstanding.
THE DIAL CORP
TABLE OF CONTENTS
Page No.
PART I FINANCIAL INFORMATION ---------
Item 1. Financial Statements
Consolidated Balance Sheet - March 31, 1994
and December 31, 1993 2
Statement of Consolidated Income -
Three months ended March 31, 1994 and 1993 3
Statement of Retained Income - Three months
ended March 31, 1994 and 1993 3
Statement of Consolidated Cash Flows - Three
months ended March 31, 1994 and 1993 4
Notes to Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 11-12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
1
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
THE DIAL CORP
CONSOLIDATED BALANCE SHEET
March 31, December 31,
(000 omitted) 1994 1993
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 1,211 $ 10,659
Receivables, less allowance of $24,327
and $22,597 236,054 199,996
Inventories 236,069 216,837
Deferred income taxes 45,322 46,373
Other current assets 42,206 43,082
---------- ----------
560,862 516,947
Funds and agents' receivables restricted for
payment service obligations, after
eliminating $80,000 and 65,000 invested
in Dial commercial paper 479,941 535,657
---------- ----------
Total current assets 1,040,803 1,052,604
Investments restricted for payment service
obligations 638,575 574,094
Property and equipment 782,797 740,724
Other investments and assets 72,151 59,757
Deferred income taxes 129,594 124,096
Intangibles 780,699 729,813
---------- ----------
$3,444,619 $3,281,088
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank loans $ 323 $ 8,935
Accounts payable 205,001 248,975
Accrued compensation 59,526 69,060
Other current liabilities 303,694 272,430
Current portion of long-term debt 2,223 2,295
---------- ----------
570,767 601,695
Payment service obligations 1,195,585 1,147,063
---------- ----------
Total current liabilities 1,766,352 1,748,758
Long-term debt 784,762 624,662
Pensions and other benefits 297,239 295,656
Other deferred items and insurance reserves 96,384 99,834
Minority interests 23,050 35,866
$4.75 Redeemable preferred stock 6,626 6,624
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 384,528 378,814
Retained income 309,778 304,481
Cumulative translation adjustments (13,546) (9,889)
Unearned employee benefits related to:
Employee Equity Trust (154,462) (158,429)
Guarantee of ESOP debt (31,375) (31,511)
Unrealized loss on securities available
for sale (10,382)
Common stock in treasury, at cost, 2,541,719
and 2,536,354 shares (87,167) (86,610)
---------- ----------
470,206 469,688
---------- ----------
$3,444,619 $3,281,088
========== ==========
<FN>
See notes to consolidated financial statements.
2
THE DIAL CORP
STATEMENT OF CONSOLIDATED INCOME
Three months ended March 31, 1994 1993
-------- ---------
(000 omitted)
Revenues $784,902 $ 638,056
-------- ---------
Costs and expenses:
Cost of sales and services 731,963 595,088
Unallocated corporate expense
and other items, net 12,586 12,480
Interest expense 12,369 13,369
Minority interests (100) (158)
-------- ---------
756,818 620,779
-------- ---------
Income before income taxes 28,084 17,277
Income taxes 10,874 6,118
-------- ---------
Income from continuing operations 17,210 11,159
Income from discontinued operations--
Transporation Manufacturing and Service
Parts Group (sold August 12, 1993) 3,472
-------- ---------
Net income $ 17,210 $ 14,631
======== =========
Income per common share (dollars):
Continuing operations $ 0.39 $ 0.25
Discontinued operations 0.08
-------- ---------
Net income per common share $ 0.39 $ 0.33
======== =========
Dividend declared per common share (dollars) $ 0.28 $ 0.28
======== =========
Average outstanding common and equivalent
shares (000 omitted) 43,018 42,927
======== =========
STATEMENT OF RETAINED INCOME
Three months ended March 31, 1994 1993
-------- ---------
(000 omitted)
Balance, beginning of year $304,481 $ 234,655
Net income 17,210 14,631
Dividends on common and preferred stock (12,121) (12,091)
Other 208 107
-------- ---------
Balance, end of period $309,778 $ 237,302
======== =========
<FN>
See notes to consolidated financial statements.
3
THE DIAL CORP
STATEMENT OF CONSOLIDATED CASH FLOWS
Three months ended March 31, 1994 1993
--------- --------
(000 omitted)
Cash flows provided (used) by operating activities:
Net income (loss) $ 17,210 $ 14,631
Adjustments to reconcile net income (loss) to
net cash provided (used) by operations:
Depreciation and amortization 26,926 24,143
Deferred income taxes 3,003 5,043
Income from discontinued operations (3,472)
Gain on sales of businesses and property (270) (272)
Other noncash items, net 2,029 5,152
Change in operating assets and liabilities:
Receivables (36,049) 19,310
Inventories (18,908) (29,035)
Funds and agents' receivables and
payment service obligations, net 109,402 57,218
Accounts payable and accrued compensation (54,779) (57,016)
Other current liabilities 34,778 14,201
Other assets and liabilities, net (21,627) (21,237)
--------- --------
Net cash provided by operating activities 61,715 28,666
--------- --------
Cash flows provided (used) by investing activities:
Capital expenditures (16,997) (20,862)
Acquisitions of businesses
and other assets, net of cash acquired (109,269) (666)
Proceeds from sales and maturities of investments
restricted for payment service obligations 111,092 26,756
Purchases of investments restricted for payment
service obligations (191,421) (99,481)
Proceeds from sales of businesses and property 850 1,268
Investment in and advances from
discontinued operations, net 40,648
Other, net (6) (3)
--------- --------
Net cash used by investing activities (205,751) (52,340)
--------- --------
Cash flows provided (used) by financing activities:
Proceeds from long-term borrowings 70,000
Payments on long-term borrowings (32) (764)
Net change in short-term borrowings 81,419 40,823
Dividends on common and preferred stock (12,121) (12,091)
Minority portion of subsidiary's
special dividend (9,761)
Proceeds from sales of treasury stock 8,668 7,881
Net change in receivables sold (15,000)
Cash payments on interest rate swaps (3,585) (3,134)
--------- --------
Net cash provided by financing activities 134,588 17,715
--------- --------
Net decrease in cash and cash equivalents (9,448) (5,959)
Cash and cash equivalents, beginning of year 10,659 43,917
--------- --------
Cash and cash equivalents, end of period $ 1,211 $ 37,958
========= ========
<FN>
See notes to consolidated financial statements.
4
THE DIAL CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - Basis of Preparation
This information should be read in connection with the financial
statements set forth in The Dial Corp Annual Report to Shareholders for
the year ended December 31, 1993.
Accounting policies utilized in the preparation of the financial
information herein presented are the same as set forth in The Dial
Corp's annual financial statements except as modified for interim
accounting policies which are within the guidelines set forth in
Accounting Principles Board Opinion No. 28. The interim consolidated
financial information is unaudited. In the opinion of management, all
adjustments, consisting only of normal recurring accruals, necessary to
present fairly the financial position as of March 31, 1994, and the
results of operations and cash flows for the three months ended March
31, 1994 and 1993, have been included. Interim results of operations
are not necessarily indicative of the results of operations for the full
year.
Certain reclassifications have been made to prior year's financial
statements to conform to 1994 classifications.
NOTE B - Investments Restricted for Payment Service Obligations
On January 1, 1994, The Dial Corp adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." SFAS No. 115 requires the
classification of securities at acquisition into one of three
categories: held to maturity, available for sale, or trading--with
different reporting requirements for each classification.
At March 31, 1994, investments restricted for payment service
obligations include securities having a fair market value of $549.0
million which were classified as "Available for Sale", and the after-tax
adjustment necessary to mark them to market reduced stockholders' equity
by $10.4 million. This adjustment had no effect on the current results
of operations. The $90.0 million ($87.5 million fair value) balance of
investments restricted for payment service obligations was classified as
"Held to Maturity" and are reported at amortized cost.
5
NOTE C - Other Matters
At March 31, 1994 and December 31, 1993, The Dial Corp and subsidiaries
reclassified $315 million and $225 million, respectively, of short-term
borrowings, supported by unused long-term revolving credit agreements,
as long-term debt.
NOTE D - Income Taxes
A reconciliation of the provision for income taxes and the amount that
would be computed using statutory federal income tax rates on income
before income taxes for the three months ended March 31, is as follows:
1994 1993
---------- ----------
(000 omitted)
Computed income taxes at statutory federal
income tax rate of 35% and 34% $ 9,829 $ 5,874
Nondeductible goodwill amortization 1,028 783
Minority interests (35) (54)
State income taxes 1,775 1,812
Foreign tax differences 123 (75)
Tax-exempt income (984) (348)
Adjustment to estimated annual effective rate (1,000) (1,500)
Other, net 138 (374)
---------- ----------
$ 10,874 $ 6,118
========== ==========
6
NOTE E - Supplementary Information--Revenues and Operating Income
Three months ended March 31,
-------------------------------------------------
Revenues Operating Income
----------------------- -----------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
(000 omitted)
Consumer Products $ 330,340 $ 293,183 $ 30,152 $ 25,659
---------- ---------- ---------- ----------
Services:
Airline Catering and
Other Food Services 172,183 143,584 7,259 6,411
Convention Services 127,671 68,112 12,392 5,988
Travel and Leisure and
Payment Services 154,708 133,177 3,136 4,910
---------- ---------- ---------- ----------
Total Services (1) 454,562 344,873 22,787 17,309
---------- ---------- ---------- ----------
$ 784,902 $ 638,056 52,939 42,968
========== ==========
Unallocated corporate
expense and other
items, net (12,586) (12,480)
---------- ----------
$ 40,353 $ 30,488
========== ==========
<FN>
(1) Dial's payment services subsidiary has been investing
increasing amounts in tax exempt securities. On a fully taxable
equivalent basis, revenues and operating income would be higher by
$1,514,000 for the 1994 quarter and $551,000 for the 1993 quarter.
NOTE F - Subsequent Event
On May 10, 1994, the Board of Directors declared a two for one stock
split to be paid on July 1, 1994, to shareholders of record as of June
1, 1994. The effect of the stock split has not been reflected in the
financial information presented herein.
7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results:
There were no material changes in the nature of The Dial Corp's
business, nor were there any other changes in the general
characteristics of its operations as described and discussed in the
first paragraph of the results section of Management's Discussion and
Analysis of Results of Operations and Financial Condition presented in
The Dial Corp's Annual Report to Shareholders for the year ended
December 31, 1993.
In the first quarter of 1994, revenues were $784.9 million, compared to
$638.1 million in the same period last year.
Income from continuing operations and net income was $17.2 million or
$0.39 per share. This was a per share increase of 56 percent over
1993's income from continuing operations of $11.2 million or $0.25 per
share, and an increase of 18 percent from 1993's net income of $14.6
million or $0.33 per share.
Comparison of First Quarter of 1994 with First Quarter of 1993:
Consumer Products
The Consumer Products Group's revenues were up $37.2 million, or 13
percent from that in the 1993 first quarter. Operating income was up
$4.5 million, or 18 percent over 1993 amounts.
Skin care division revenues and operating income decreased $4.3 million
and $2.2 million, respectively, from the first quarter of 1993, as the
high volume of sales made in late 1993 reduced first quarter 1994 trade
demand.
Food division revenues decreased $1.7 million from those in the first
quarter of 1993, due primarily to volume decreases in the microwaveable
product line. Operating income increased $395,000 from that in the
prior year due to lower manufacturing costs.
The household division revenues and operating income increased $27.4
million and $3.3 million, repsectively, benefiting from the Renuzit
acquisition completed in May of 1993.
Revenues and operating income for the laundry division increased $14.0
million and $1.4 million, repsectively, with Purex liquid detergents
continuing to lead the group.
8
International division revenues and operating income increased $1.7
million and $1.5 million, respectively, from those in the first quarter
of 1993. Operating results in 1993 had been negatively impacted by
expansion and product introduction costs.
Services
Combined Services revenues increased $109.7 million, or 32 percent from
that of the first quarter of 1993, while operating income increased
$5.5 million, or 32 percent over last year's results. Results were
aided by the impact of 1993 acquisitions of convention services
businesses and the first quarter phase-in of the United Airlines flight
kitchens, although the phase-in will not be fully completed until late
May. On a fully taxable equivalent basis, operating income increased
by 36 percent, as Dial's payment services subsidiary has been investing
increasing amounts in tax-exempt securities which have lower pre-tax
yields but produce equal or better income on an after-tax basis.
Airline Catering and Other Food Services. Airline Catering
and Other Food Service revenues increased $28.6 million, or 20 percent
over 1993 operations. Operating income increased $848,000, or 13
percent as the planned phase-in of United Airlines flight kitchens
began. Operating income did not increase at the same rate as revenues
because it takes several months of operations for newly staffed
kitchens to achieve normal efficiency.
Convention Services. Convention Services revenues
increased $59.6 million, or 87 percent while operating income increased
$6.4 million, or 107 percent from 1993 results. Improved results were
due to the new businesses acquired in 1993 and the operating
efficiencies achieved with the merged operations. In addition, several
major shows, which in last year's first quarter had rotated out of
areas served by Convention Services, returned this year.
Travel and Leisure and Payment Services. Revenues for the
Travel and Leisure and Payment Services Group increased $21.5 million
or 16 percent, while operating income declined $1.8 million or 36
percent from the 1993 quarter.
Revenues of the transportation services companies decreased $2.4
million as increased charter and courier express revenues were offset
by a decline in passenger revenues. Ongoing cost control programs
contributed to a $207,000 improvement in operating results.
Cruise revenues increased $2.3 million over 1993, when one vessel had a
four week drydock period. However, a number of cost factors, including
timing issues, caused a $3.0 million increase in seasonal operating
loss.
9
Duty Free and shipboard concession revenues increased by $13.0 million
due primarily to new business. Operating income increased by $1.4
million over that of the 1993 period which had been impacted by
start-up costs associated with new business.
Payment service revenues and operating income increased $4.2 million
and $140,000 from 1993's results. On a fully taxable equivalent basis,
revenues and operating income would be higher by $1.5 million for the
1994 quarter and $551,000 for the 1993 quarter resulting in a $5.2
million increase in revenues and a $1.2 million increase in operating
income.
Unallocated Corporate Expense and Other Items, Net
Unallocated corporate expense and other items, net, increased just
under one percent from that of the first quarter of 1993.
Interest Expense
Interest expense was down $1.0 million from the first quarter of 1993.
The prepayment of certain high-coupon, fixed-rate debt at the end of
the third quarter of 1993 contributed to the decline. Increased debt
levels primarily due to the first quarter payments for the United
Airlines kitchens offset some of the debt restructuring savings.
Liquidity and Capital Resources:
The Dial Corp's total debt at March 31, 1994 was $787 million compared
to $636 million at December 31, 1993. The debt to capital ratio at
March 31, 1994 was 0.61 to 1 compared with 0.55 to 1 at December 31,
1993. The increase in debt was primarily attributable to previously
announced acquisitions made during the quarter together with an
increase in working capital.
There were no other material changes in The Dial Corp's financial
condition nor were there any substantive changes relative to matters
discussed in the Liquidity and Capital Resources section of
Management's Discussion and Analysis of Results of Operations and
Financial Condition as presented in the The Dial Corp Annual Report to
Shareholders for the year ended December 31, 1993.
10
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a)The annual meeting of stockholders of The Dial Corp was held
May 10, 1994.
(b)Not applicable--(i) proxies for the meeting were solicited
pursuant to Regulation 14 under the Securities Exchange Act
of 1934, (ii) there was no solicitation in opposition to
management's nominees as listed in the proxy statement, and
(iii) all such nominees were elected.
(c)Matters voted upon at the annual meeting for which proxies
were solicited pursuant to Regulation 14 under the
Securities Exchange Act of 1934:
1. The election of Directors as follows:
Thomas L. Gossage
Affirmative Vote.............. 39,262,292
Against....................... 0
Withheld...................... 409,538
Abstentions................... 0
Broker non-votes.............. 0
Dennis c. Stanfill
Affirmative Vote.............. 39,257,910
Against....................... 0
Withheld...................... 413,920
Abstentions................... 0
Broker non-votes.............. 0
John W. Teets
Affirmative Vote.............. 39,226,019
Against....................... 0
Withheld...................... 445,811
Abstentions................... 0
Broker non-votes.............. 0
2. The approval of a Management Incentive Plan for the
Corporation.
Affirmative Vote.............. 37,228,712
Against....................... 1,602,538
Withheld...................... 0
Abstentions................... 840,580
Broker non-votes.............. 0
11
3. The approval of a Performance Unit Incentive Plan for
the Corporation.
Affirmative Vote.............. 37,259,764
Against....................... 1,594,929
Withheld...................... 0
Abstentions................... 817,137
Broker non-votes.............. 0
4. The appointment of Deloitte & Touche to audit the
accounts of Dial and its subsidiaries for the fiscal year
1994.
Affirmative Vote.............. 39,320,268
Against....................... 86,957
Withheld...................... 0
Abstentions................... 264,605
Broker non-votes.............. 0
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibit No. 11 - Statement Re Computation of Per Share
Earnings.
(b)No Reports on Form 8-K have been filed by the registrant
during the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
THE DIAL CORP
(Registrant)
May 11, 1994 By /s/ Richard C. Stephan
Richard C. Stephan
Vice President-Controller
(Chief Accounting Officer
and Authorized Officer)
12