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 June 30, 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 July 31, 1994, 92,146,468 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 - June 30,
1994 and December 31, 1993 2
Statement of Consolidated Income -
Quarter and six months ended 3-4
June 30, 1994 and 1993
Statement of Retained Income - Six months
ended June 30, 1994 and 1993 5
Statement of Consolidated Cash Flows - Six
months ended June 30, 1994 and 1993 6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-14
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 15
Page 1
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
THE DIAL CORP
CONSOLIDATED BALANCE SHEET
June 30, December 31,
(000 omitted, except number of shares) 1994 1993
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 373 $ 10,659
Receivables, less allowance of $20,832
and $22,597 273,475 199,996
Inventories 217,766 216,837
Deferred income taxes 44,557 46,373
Other current assets 50,935 43,082
------------ ------------
587,106 516,947
Funds and agents' receivables restricted for
payment service obligations, after
eliminating $80,000 and $65,000 invested
in Dial commercial paper 452,457 535,657
------------ ------------
Total current assets 1,039,563 1,052,604
Investments restricted for payment service
obligations 690,713 574,094
Property and equipment 802,633 740,724
Other investments and assets 54,783 59,757
Deferred income taxes 133,599 124,096
Intangibles 808,643 729,813
------------ ------------
$ 3,529,934 $ 3,281,088
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank loans $ 101 $ 8,935
Accounts payable 214,390 248,975
Accrued compensation 77,201 69,060
Other current liabilities 312,396 272,430
Current portion of long-term debt 2,229 2,295
------------ ------------
606,317 601,695
Payment service obligations 1,208,460 1,147,063
------------ ------------
Total current liabilities 1,814,777 1,748,758
Long-term debt 785,871 624,662
Pensions and other benefits 299,309 295,656
Other deferred items and insurance reserves 96,868 99,834
Minority interests 23,192 35,866
$4.75 Redeemable preferred stock 6,628 6,624
Common stock and other equity:
Common stock, $1.50 par value, 200,000,000
shares authorized, 97,108,724 and
48,554,362 shares issued 145,663 72,832
Additional capital 315,241 378,814
Retained income 340,271 304,481
Cumulative translation adjustments (13,777) (9,889)
Unearned employee benefits related to:
Employee Equity Trust (153,468) (158,429)
Guarantee of ESOP debt (31,224) (31,511)
Unrealized loss on securities available
for sale (12,725)
Common stock in treasury, at cost, 5,043,532
and 2,536,354 shares (86,692) (86,610)
------------ ------------
503,289 469,688
------------ ------------
$ 3,529,934 $ 3,281,088
============ ============
<FN>
See notes to consolidated financial statements.
Page 2
THE DIAL CORP
STATEMENT OF CONSOLIDATED INCOME
Quarter ended June 30, 1994 1993
-------- ---------
(000 omitted, except per share data)
Revenues $931,948 $ 773,995
-------- ---------
Costs and expenses:
Cost of sales and services 836,669 694,536
Unallocated corporate expense
and other items, net 12,263 12,982
Interest expense 13,073 13,610
Minority interests 503 692
-------- ---------
862,508 721,820
-------- ---------
Income before income taxes 69,440 52,175
Income taxes 26,047 18,796
-------- ---------
Income from continuing operations 43,393 33,379
Income from discontinued operations--
Transportation Manufacturing and Service
Parts Group (sold August 12, 1993) 6,294
-------- ---------
Net income $ 43,393 $ 39,673
======== =========
Income per common share:
Continuing operations $ 0.50 $ 0.38
Discontinued operations 0.08
-------- ---------
Net income per common share $ 0.50 $ 0.46
======== =========
Dividends declared per common share $ 0.15 $ 0.14
======== =========
Average outstanding common and equivalent shares 86,540 85,854
======== =========
<FN>
See notes to consolidated financial statements.
Page 3
THE DIAL CORP
STATEMENT OF CONSOLIDATED INCOME
Six months ended June 30, 1994 1993
----------- -----------
(000 omitted, except per share data)
Revenues $ 1,716,850 $ 1,412,051
----------- -----------
Costs and expenses:
Cost of sales and services 1,568,632 1,289,624
Unallocated corporate expense
and other items, net 24,849 25,462
Interest expense 25,442 26,979
Minority interests 403 534
----------- -----------
1,619,326 1,342,599
----------- -----------
Income before income taxes 97,524 69,452
Income taxes 36,921 24,914
----------- -----------
Income from continuing operations 60,603 44,538
Income from discontinued operations--
Transportation Manufacturing and Service
Parts Group (sold August 12, 1993) 9,766
----------- -----------
Net income $ 60,603 $ 54,304
=========== ===========
Income per common share:
Continuing operations $ 0.70 $ 0.51
Discontinued operations 0.12
----------- -----------
Net income per common share $ 0.70 $ 0.63
=========== ===========
Dividends declared per common share $ 0.29 $ 0.28
=========== ===========
Average outstanding common and equivalent shares 86,288 85,854
=========== ===========
<FN>
See notes to consolidated financial statements.
Page 4
THE DIAL CORP
STATEMENT OF RETAINED INCOME
Six months ended June 30, 1994 1993
----------- -----------
(000 omitted)
Balance, beginning of year $ 304,481 $ 234,655
Net income 60,603 54,304
Dividends on common and preferred stock (25,131) (24,220)
Other 318 217
----------- -----------
Balance, end of period $ 340,271 $ 264,956
=========== ===========
<FN>
See notes to consolidated financial statements.
Page 5
THE DIAL CORP
STATEMENT OF CONSOLIDATED CASH FLOWS
Six months ended June 30, 1994 1993
--------- ---------
(000 omitted)
Cash flows provided (used) by operating activities:
Net income $ 60,603 $ 54,304
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 55,691 49,644
Deferred income taxes 1,269 5,460
Income from discontinued operations (9,766)
Gain on sale of businesses and property (1,846) (1,251)
Other noncash items, net 2,817 19,024
Change in operating assets and liabilities:
Receivables (73,255) (43,110)
Inventories 2,597 (13,703)
Funds and agents' receivables and
payment service obligations, net 147,368 136,045
Accounts payable and accrued compensation (29,887) (18,642)
Other current liabilities 46,315 (12,217)
Other assets and liabilities, net (32,215) (32,771)
--------- ---------
Net cash provided by operating activities 179,457 133,017
--------- ---------
Cash flows provided (used) by investing activities:
Capital expenditures (43,777) (36,463)
Acquisitions of businesses, and other
assets, net of cash acquired (141,533) (100,891)
Proceeds from sales and maturities of investments
restricted for payment service obligations 187,059 43,730
Purchases of investments restricted for payment
service obligations (319,809) (201,267)
Proceeds from sale of businesses and property 3,397 15,413
Investment in and advances from
discontinued operations, net 57,783
Other, net (10) (7)
--------- ---------
Net cash used by investing activities (314,673) (221,702)
--------- ---------
Cash flows provided (used) by financing activities:
Proceeds from long-term borrowings 70,000 99,963
Payments on long-term borrowings (2,130) (3,957)
Net change in short-term borrowings 84,928 (26,584)
Dividends on common and preferred stock (25,131) (24,220)
Minority portion of subsidiary's
special dividend (9,761)
Proceeds from sales of treasury stock 13,422 14,296
Cash payments on interest rate swaps (6,398) (7,446)
--------- ---------
Net cash provided by financing activities 124,930 52,052
--------- ---------
Net decrease in cash and cash equivalents (10,286) (36,633)
Cash and cash equivalents, beginning of year 10,659 43,917
--------- ---------
Cash and cash equivalents, end of period $ 373 $ 7,284
========= =========
<FN>
See notes to consolidated financial statements.
Page 6
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
June 30, 1994, and the results of operations for the quarters and
six months ended June 30, 1994 and 1993, and the cash flows for the
six months ended June 30, 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 - Stock Split
On May 10, 1994, the Board of Directors declared a two-for-one stock
split which was distributed on July 1, 1994, to shareholders of
record as of June 1, 1994. All references in the financial
statements with regard to number of shares of common stock and
related dividends declared and income per share amounts have been
restated to reflect the stock split.
NOTE C - 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 June 30, 1994, investments restricted for payment service
obligations include securities having a fair market value of $425.5
million which were classified as "Available for Sale", and the
after-tax adjustment necessary to mark them to market reduced
stockholders' equity by $12.7 million. This adjustment had no
effect on the current results of operations. The $265.2 million
($249.5 million fair value) balance of investments restricted for
payment service obligations was classified as "Held to Maturity" and
is reported at amortized cost.
Page 7
NOTE D - Other Matters
At June 30, 1994 and December 31, 1993, Dial reclassified
$318 million and $225 million, respectively, of short-term
borrowings, supported by unused long-term revolving credit
agreements, as long-term debt.
NOTE E - 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 six months ended June 30,
is as follows:
1994 1993
---------- ----------
(000 omitted)
Computed income taxes at statutory federal
income tax rate of 35% and 34%, respectively $ 34,133 $ 23,614
Nondeductible goodwill amortization 2,125 1,625
Minority interests 141 182
State income taxes 4,108 4,476
Foreign tax differences 396 (220)
Tax-exempt income (1,909) (733)
Adjustment to estimated annual effective rate (2,000) (3,000)
Other, net (73) (1,030)
---------- ----------
$ 36,921 $ 24,914
========== ==========
Page 8
NOTE F - Supplementary Information--Revenues and Operating Income
Quarter ended Six months ended
June 30, June 30,
------------------- -----------------------
1994 1993 1994 1993
-------- -------- ---------- ----------
(000 omitted)
Revenues:
Consumer Products $408,115 $385,140 $ 738,455 $ 678,323
-------- -------- ---------- ----------
Services:
Airline Catering and
Other Food Services 225,435 145,420 397,618 289,004
Convention Services 135,736 81,583 263,407 149,695
Travel and Leisure and
Payment Services (1) 162,662 161,852 317,370 295,029
-------- -------- ---------- ----------
Total Services (1) 523,833 388,855 978,395 733,728
-------- -------- ---------- ----------
$931,948 $773,995 $1,716,850 $1,412,051
======== ======== ========== ==========
Operating Income:
Consumer Products $ 49,978 $ 43,443 $ 80,130 $ 69,102
-------- -------- ---------- ----------
Services:
Airline Catering and
Other Food Services 15,824 10,674 23,083 17,085
Convention Services 14,957 7,419 27,349 13,407
Travel and Leisure and
Payment Services (1) 14,520 17,923 17,656 22,833
-------- -------- ---------- ----------
Total Services (1) 45,301 36,016 68,088 53,325
-------- -------- ---------- ----------
Total principal business
segments 95,279 79,459 148,218 122,427
Unallocated corporate
expense and other
items, net (12,263) (12,982) (24,849) (25,462)
-------- -------- ---------- ----------
$ 83,016 $ 66,477 $ 123,369 $ 96,965
======== ======== ========== ==========
<FN>
(1) Dial's payment services subisidiary has been investing increasing amounts
in tax exempt securities. On a fully taxable equivalent basis, revenues and
operating income are higher by $1,422,000 for the 1994 quarter and $966,000
for the 1993 quarter and by $2,936,000 and $1,517,000, respectively, for the
1994 and 1993 six month periods.
Page 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results:
There were no material changes in the nature of Dial'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 Annual
Report to Shareholders for the year ended December 31, 1993.
Comparison of Second Quarter of 1994 with Second Quarter of 1993:
In the second quarter of 1994, revenues increased 20 percent to $931.9
million from $774.0 million in the 1993 quarter.
Second quarter income from continuing operations was $43.4 million in
the quarter, or $0.50 per share. This was a per share increase of 32
percent over 1993's income from continuing operations of $33.4 million,
or $0.38 per share, and an increase of 9 percent from 1993's net income
of $39.7 million, or $0.46 per share.
Consumer Products
The Consumer Products Group's revenues were up $23.0 million or 6
percent from those in the 1993 second quarter. Operating income was up
$6.5 million or 15 percent over 1993 amounts.
Skin Care division revenues and operating income declined $16.1 million
and $2.0 million, respectively, from that in the second quarter of
1993. Soap sales volumes declined largely due to a program to improve
profitability by more efficient use of trade promotion spending, which
resulted in some sales being passed up. Market share of Dial soap is
up year over year reflecting healthy consumer take-away of products.
Operating income was down due to the decline in revenues, offset
partially by reduced marketing expenses and the favorable impact of
other profit improvement projects.
Food division revenues increased $2.1 million from those in the 1993
second quarter. Operating income increased $897,000 compared to that
in the prior year due primarily to lower ingredient costs.
The Household division revenues and operating income increased $18.8
million and $5.1 million, respectively. The comparable 1993 quarter
had Renuzit air freshener results for only part of the period following
its acquisition in mid-May 1993. A strong performance by scouring pads
also contributed to the division's results.
Laundry division revenues and operating income increased $17.2 million
and $1.6 million, respectively from the second quarter of 1993, led by
a strong growth in Purex liquid detergents.
Page 10
International division revenues and operating income increased $1.0
million and $922,000, respectively, from the 1993 second quarter led by
revenue increases from Mexico and Canada. Operating results in 1993
had been negatively impacted by expansion and product introduction
costs.
Services
Combined Services revenues increased $135.0 million, or 35 percent and
operating income increased $9.3 million, or 26 percent in the quarter,
aided by the impact of 1993 acquisitions of convention services
businesses and the continuing phase-in of the United Airlines flight
kitchens during the quarter.
Airline Catering and Other Food Services. Airline Catering
and Other Food Service revenues increased $80.0 million, or 55 percent
and operating income increased $5.2 million or 48 percent over the 1993
quarter, as start-up of newly acquired flight kitchens continued.
Convention Services. Convention Services revenues
increased $54.2 million, or 66 percent while operating income increased
$7.5 million, more than double that in the 1993 quarter. Last year
included only one month of results from the acquisition of United
Exposition Service. Improved results were due primarily to the United
and Andrews, Bartlett acquisitions in 1993 and the operating
efficiencies being achieved with the merged operations.
Travel and Leisure and Payment Services. Revenues for the
Travel and Leisure and Payment Services Group increased $810,000, while
operating income declined $2.9 million or 16 percent on a fully taxable
equivalent basis.
Canadian transportation services companies revenues and operating
income declined $4.4 million and $877,000, respectively, from that in
the 1993 second quarter. The reductions were due primarily to reduced
passenger revenues, offset partially by increased revenues in the
courier express, charter and sightseeing businesses. Ongoing cost
control programs helped limit the decline in operating income.
Cruise revenues were down $2.9 million from 1993's results due to lower
passenger counts. Cruise operating income declined $2.8 million from
1993's levels due largely to the decline in revenues.
Duty Free and shipboard concession revenues increased by $2.0 million
due primarily to increased passenger days associated with new business.
Operating income increased by $186,000.
On a fully taxable equivalent basis, payment services had a $1.9
million increase in revenues and a $320,000 increase in operating
income over the 1993 quarter.
Page 11
Unallocated corporate expense and other items, net
Unallocated corporate expense and other items, net, decreased $719,000
from the second quarter of 1993.
Interest Expense
Interest expense was down $537,000 from that of the second quarter of
1993. The prepayment of certain high-coupon, fixed-rate debt at the
end of the 1993 third quarter contributed to the decline. Increased
debt levels primarily due to the payments for the United Airlines
kitchens and higher short-term interest rates offset some of the debt
restructuring savings.
Comparison of First Six Months of 1994 with
First Six Months of 1993:
Revenues for the first half of 1994 were $1.7 billion, up 22 percent
over 1993's $1.4 billion for the same period.
Income from continuing operations and net income for the six months
ended June 30, 1994, was $60.6 million, or $0.70 per share, a per share
increase of 37 percent over last year's income from continuing
operations of $44.5 million, or $0.51 per share and a per share
increase of 11 percent from 1993's net income of $54.3 million, or
$0.63 per share.
Consumer Products
The Consumer Products Group's revenues were up $60.1 million or 9
percent from that in the 1993 first half. Operating income was up
$11.0 million or 16 percent over 1993 amounts.
Skin Care division revenues and operating income decreased $20.4
million and $4.2 million, respectively, from those in the first half of
1993. While market share is up over 1993, soap sales volumes declined
largely due to a program to improve profitability by more efficient use
of trade promotion spending. Also, the high volume of sales in late
1993 reduced first quarter 1994 trade demand.
Food division revenues increased $327,000 from that in the first six
months of 1993. Operating income increased $1.3 million compared to
the first half of 1993 due primarily to reduced manufacturing costs.
Household division revenues and operating income increased $46.2
million and $8.4 million, respectively, from that in the 1993 first six
months. The acquisition of Renuzit, completed in May of 1993,
contributed to the favorable comparisons between periods. First half
results for scouring pads also contributed to the increases, offset
partially by declines in ammonia products.
Laundry division revenues and operating income increased $31.2 million
and $3.0 million, respectively, led by Purex liquid detergents.
Page 12
International division revenues and operating income increased $2.8
million and $2.5 million, respectively, from the first half of 1993.
Revenue growth resulted from product and business expansion in Mexico
and Canada. Operating results in 1993 had been negatively impacted by
expansion and product introduction costs.
Services
Combined Services revenues and operating income were up $244.7 million
and $14.8 million, respectively, from that of the first half of 1993.
Results were aided by the impact of the 1993 acquisitions of convention
services businesses and the phase-in of the United Airlines flight
kitchens during the 1994 first six months.
Airline Catering and Other Food Services. Airline Catering
and Other Food Service revenues and operating income increased $108.6
million and $6.0 million, respectively, as the start-up of newly
acquired flight kitchens continued during the 1994 first half.
Convention Services. Convention Services revenues
increased $113.7 million while operating income increased $13.9
million, more than double that in the 1993 first six months. Improved
results were due primarily to the United Exposition Service and
Andrews, Bartlett acquisitions during the second and fourth quarters of
1993, respectively, and the operating efficiencies being achieved with
the merged operations.
Travel and Leisure and Payment Services. Revenues for the
Travel and Leisure and Payment Services Group increased $22.3 million,
while operating income declined $5.2 million from the 1993 first half.
On a fully taxable equivalent basis, operating income was only down
$3.8 million.
Revenues and operating income of the Canadian transportation services
companies decreased $6.8 million and $670,000, respectively, from that
of the first six months of 1993 due primarily to declining ridership,
offset partially by increased revenues related to the courier express,
charter and sightseeing operations.
Cruise revenues declined $546,000 from that of the first six months of
1993. Revenues were down due to lower passenger counts. Operating
results declined $5.8 million from 1993's first half due to the decline
in revenues and a number of cost factors, including timing issues and
lower 1993 expenses due to a four week drydock of one vessel.
Duty Free and shipboard concession revenues and operating income
increased by $15.0 million and $1.5 million, respectively, due
primarily to increased passenger days associated with new business. A
favorable product mix and continued emphasis on controlling costs
contributed to the increase in operating income.
Page 13
On a fully taxable equivalent basis, payment services had a $7.0
million increase in revenues and a $1.9 million increase in operating
income.
Unallocated corporate expense and other items, net
Unallocated corporate expense and other items, net, declined $613,000
from that of the first six months of 1993.
Interest Expense
Interest expense was down $1.5 million from the first six months of
1993. As mentioned previously, the decline was due to the prepayment
of certain high-coupon, fixed-rate debt at the end of the 1993 third
quarter, offset partially by increased debt levels related to the
United Airlines kitchens acquisitions during the first half of 1994 and
higher short-term interest rates.
Liquidity and Capital Resources:
The Dial Corp's total debt at June 30, 1994 was $788.2 million compared
to $635.9 million at December 31, 1993. The debt to capital ratio at
June 30, 1994 and December 31, 1993 was 0.60 to 1 and 0.55 to 1,
respectively. The increase in debt was primarily attributable to
previously announced acquisitions made during the first six months of
1994 together with an increase in working capital.
In July 1994, a Shelf Registration with the Securities and Exchange
Commission became effective. Under the Shelf Registration, Dial can
issue up to an aggregate $500 million of debt and/or equity securities.
There is no intention to issue any equity securities at the present
time. The filing increases Dial's financing flexibility in the future.
There were no 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 Dial Corp Annual Report to Shareholders for the
year ended December 31, 1993.
Page 14
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of The Dial Corp was held
May 10, 1994, and matters voted on were reported in the
quarterly report of The Dial Corp on Form 10-Q for the
quarterly period ended March 31, 1994.
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)
August 12, 1994 By /s/ Richard C. Stephan
----------------------
Richard C. Stephan
Vice President-Controller
(Chief Accounting Officer
and Authorized Officer)
Page 15