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, 1995
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
Exchange Act 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, 1995, 93,209,996 shares of Common Stock ($1.50 par
value) were outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE DIAL CORP
CONSOLIDATED BALANCE SHEET
June 30, December 31,
(000 omitted) 1995 1994
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 22,022 $ 33,222
Receivables, less allowance of
$19,849 and $20,453 227,917 232,932
Inventories 226,781 229,273
Deferred income taxes 32,823 42,517
Other current assets 63,909 46,565
---------- ----------
573,452 584,509
Funds, agents' receivables and
current maturities of investments
restricted for payment service
obligations, after eliminating
$80,000 invested in Dial
commercial paper 545,619 659,708
---------- ----------
Total current assets 1,119,071 1,244,217
Investments restricted for
payment service obligations 798,396 692,818
Property and equipment 854,569 813,384
Other investments and assets 91,503 83,255
Deferred income taxes 107,596 126,787
Intangibles 820,984 820,435
---------- ----------
$ 3,792,119 $ 3,780,896
========== ==========
June 30, December 31,
(000 omitted, except number of shares) 1995 1994
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank loans $ 231 $ 931
Accounts payable 216,286 243,982
Accrued compensation 65,485 91,992
Other current liabilities 249,281 258,065
Current portion of long-term debt 47,827 22,830
---------- ----------
579,110 617,800
Payment service obligations 1,408,095 1,438,960
---------- ----------
Total current liabilities 1,987,205 2,056,760
Long-term debt 752,768 721,718
Pension and other benefits 316,163 319,519
Other deferred items and insurance reserves 69,346 96,525
Minority interests 23,634 24,691
$4.75 Redeemable preferred stock 6,594 6,590
Common stock and other equity:
Common stock, $1.50 par value,
200,000,000 shares authorized,
97,108,724 shares issued 145,663 145,663
Additional capital 333,150 308,350
Retained income 436,980 393,233
Cumulative translation adjustments (18,179) (20,910)
Unearned employee benefits (184,987) (176,201)
Unrealized loss on securities
available for sale (7,560) (21,742)
Common stock in treasury, at cost,
4,049,889 and 4,319,624 shares (68,658) (73,300)
---------- ----------
Total common stock and other equity 636,409 555,093
---------- ----------
$ 3,792,119 $ 3,780,896
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
THE DIAL CORP
STATEMENT OF CONSOLIDATED INCOME
Quarter ended June 30, 1995 1994
(000 omitted, except per share data) ---------- ----------
Revenues $ 901,884 $ 931,948
---------- ----------
Costs and expenses:
Costs of sales and services 798,385 836,669
Unallocated corporate expense
and other items, net 10,939 10,552
Interest expense 18,252 14,784
Minority interests 585 503
---------- ----------
828,161 862,508
---------- ----------
Income before income taxes 73,723 69,440
Income taxes 26,257 26,047
---------- ----------
Net Income $ 47,466 $ 43,393
========== ==========
Net Income Per Common Share $ 0.54 $ 0.50
========== ==========
Dividends declared per common share $ 0.15 $ 0.15
========== ==========
Average outstanding common
and equivalent shares 88,348 86,540
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
THE DIAL CORP
STATEMENT OF CONSOLIDATED INCOME
Six months ended June 30, 1995 1994
(000 omitted, except per share data) ---------- ----------
Revenues $ 1,760,081 $ 1,716,850
---------- ----------
Costs and expenses:
Costs of sales and services 1,592,722 1,568,632
Unallocated corporate expense
and other items, net 22,088 21,300
Interest expense 36,679 28,991
Minority interests 648 403
---------- ----------
1,652,137 1,619,326
---------- ----------
Income before income taxes 107,944 97,524
Income taxes 38,971 36,921
---------- ----------
Net Income $ 68,973 $ 60,603
========== ==========
Net Income Per Common Share $ 0.78 $ 0.70
========== ==========
Dividends declared per common share $ 0.30 $ 0.29
========== ==========
Average outstanding common
and equivalent shares 88,211 86,288
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
THE DIAL CORP
STATEMENT OF RETAINED INCOME
Six months ended June 30, 1995 1994
(000 omitted) ---------- ----------
Balance, beginning of year $ 393,233 $ 304,481
Net income 68,973 60,603
Dividends on common and preferred shares (26,445) (25,131)
Other 1,219 318
---------- ----------
Balance, end of period $ 436,980 $ 340,271
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
THE DIAL CORP
STATEMENT OF CONSOLIDATED CASH FLOWS
Six months ended June 30, 1995 1994
(000 omitted) ---------- ----------
CASH FLOWS PROVIDED (USED) BY
OPERATING ACTIVITIES:
Net income $ 68,973 $ 60,603
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 56,186 55,941
Deferred income taxes 19,936 1,269
Other noncash items, net 2,926 (109)
Change in operating assets
and liabilities:
Receivables and inventories (15,976) (70,658)
Payment service assets and
obligations, net 90,490 148,198
Accounts payable and accrued
compensation (56,179) (29,887)
Other assets and liabilities, net (51,195) 16,202
---------- ----------
Net cash provided by operating activities 115,161 181,559
---------- ----------
CASH FLOWS PROVIDED (USED) BY
INVESTING ACTIVITIES:
Capital expenditures (45,332) (43,777)
Purchase of cruise ship previously leased (39,447)
Acquisitions of businesses and
other assets, net of cash acquired (13,136) (141,533)
Proceeds from sale of businesses and property 4,857 3,397
Proceeds from sales of securities classified as
available for sale 270,259 128,184
Proceeds from maturities of securities
classified as available for sale 6,557 6,762
Purchases of securities classified as
available for sale (309,537) (161,900)
Purchases of securities classified as
held to maturity (62,210) (107,898)
Other, net (17) (10)
---------- ----------
Net cash used by investing activities (188,006) (316,775)
---------- ----------
CASH FLOWS PROVIDED (USED) BY
FINANCING ACTIVITIES:
Proceeds from long-term borrowings 40,000 70,000
Payments on long-term borrowings (2,163) (2,130)
Net change in short-term borrowings 18,007 84,928
Dividends on common and preferred stock (26,445) (25,131)
Minority portion of subsidiary's special dividend (9,761)
Proceeds from sales of treasury stock 17,504 13,422
Net change in receivables sold 22,552
Cash payments on interest rate swaps (7,810) (6,398)
---------- ----------
Net cash provided by financing activities 61,645 124,930
---------- ----------
Net decrease in cash and cash equivalents (11,200) (10,286)
Cash and cash equivalents, beginning of year 33,222 10,659
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 22,022 $ 373
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
THE DIAL CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--Basis of Preparation
This information should be read in conjunction with the financial
statements set forth in The Dial Corp Annual Report to
Stockholders for the year ended December 31, 1994.
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 Dial's financial
position as of June 30, 1995, and the results of operations for
the quarters and six months ended June 30, 1995 and 1994, and the
cash flows for the six months ended June 30, 1995 and 1994 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 the prior year's
financial statements to conform to 1995 classifications.
NOTE B--Investments Restricted for Payment Service Obligations
Investments restricted for payment service obligations include
the following debt and equity securities:
June 30, December 31,
1995 1994
----------- -----------
(000 omitted)
Securities available for sale, at
fair value (amortized cost of
$499,593 and $468,307) $ 487,302 $ 433,150
Securities held to maturity, at
amortized cost (fair value of
$320,509 and $243,156) 326,439 264,861
----------- ----------
813,741 698,011
Less current maturities (15,345) (5,193)
----------- ----------
$ 798,396 $ 692,818
=========== ==========
NOTE C--Debt
At June 30, 1995 and December 31, 1994, Dial classified as long-
term debt $294 million and $275 million, respectively, of short-
term borrowings supported by unused commitments under long-term
revolving credit agreements.
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 six months ended June 30,
is as follows:
1995 1994
(000 omitted) ------------ ------------
Computed income taxes at statutory
federal income tax rate of 35% $ 37,780 $ 34,133
Nondeductible goodwill amortization 2,250 2,125
Minority interests 227 141
State income taxes 3,335 4,108
Tax-exempt income (4,792) (1,909)
Adjustment to estimated annual
effective rate (2,000)
Other, net 171 323
----------- -----------
Provision for income taxes $ 38,971 $ 36,921
=========== ===========
NOTE E--Supplementary Information--Revenues and Operating Income
Quarter ended Six months ended
June 30, June 30,
------------------------- --------------------------
1995 1994 1995 1994
(000 omitted) ----------- ----------- ----------- -----------
Revenues:
Consumer Products $ 363,893 $ 408,115 $ 701,755 $ 738,455
Services:
Airline Catering
and Services 206,509 202,225 390,965 353,688
Convention Services 131,588 135,736 285,985 263,407
Travel and Leisure
and Payment
Services (1) 199,894 185,872 381,376 361,300
----------- ----------- ----------- -----------
Total Services (1) 537,991 523,833 1,058,326 978,395
----------- ----------- ----------- -----------
$ 901,884 $ 931,948 $ 1,760,081 $ 1,716,850
=========== =========== =========== ===========
Operating Income:
Consumer Products $ 51,134 $ 49,978 $ 84,936 $ 80,130
Services:
Airline Catering
and Services 17,932 16,540 28,958 24,961
Convention
Services (2) 16,629 14,957 31,630 27,349
Travel and Leisure
and Payment
Services (1) 17,804 13,804 21,835 15,778
----------- ----------- ----------- -----------
Total
Services (1)(2) 52,365 45,301 82,423 68,088
----------- ----------- ----------- -----------
Total principal
business segments 103,499 95,279 167,359 148,218
Unallocated
corporate expense
and other
items, net (10,939) (10,552) (22,088) (21,300)
----------- ----------- ----------- -----------
$ 92,560 $ 84,727 $ 145,271 $ 126,918
=========== =========== =========== ===========
<FN>
(1) Dial's payment services subsidiary is investing increasing amounts in tax-
exempt securities. On a fully taxable equivalent basis, revenues and operating
income would be higher by $3,929,000 for the 1995 quarter and $1,422,000 for the
1994 quarter, and by $7,372,000 and $2,936,000, respectively, for the 1995 and
1994 six month periods.
(2) Operating income for the quarter and six months ended June 30, 1995
includes a one-time gain of $3,477,000 (pre-tax) due to the curtailment of
certain postretirement medical benefits in a convention services subsidiary.
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 Stockholders for the
year ended December 31, 1994.
Comparison of Second Quarter of 1995 with Second Quarter of 1994:
In the second quarter of 1995, revenues decreased 3 percent to
$901.9 million, down from $931.9 million in the 1994 quarter.
Second quarter net income was $47.5 million or $0.54 per share,
up 8 percent on a per share basis from 1994's net income of $43.4
million or $0.50 per share.
Consumer Products
The Consumer Products Group's revenues were down $44.2 million or
11 percent from those of the 1994 second quarter. The revenue
decrease was due to the acceleration of the previously reported
program to effect reductions of trade customers' inventories.
This initiative, coupled with more rapid replenishment as
consumers purchase the products off the shelf, addresses the
retailers' increased emphasis on efficient consumer response.
Operating income increased $1.2 million or 2 percent from that of
the 1994 second quarter. Operating margins improved to 14.1
percent from 12.3 percent in the 1994 second quarter due
primarily to lower trade promotion costs and other savings
resulting principally from the inventory reduction program.
Skin Care division's revenues declined $33.4 million while
operating income increased $5.3 million from those of 1994's
second quarter. Sales volumes were down as a result of the
planned inventory reduction program. Strong operating income
growth in the face of declining revenues was the result of
reductions in trade spending, marketing expenditures and other
cost reduction programs.
The Food division's revenues declined $9.5 million from the 1994
quarter, due to a planned reduction of microwaveable meals and
lower sales of chili and stew. Operating income increased
slightly from that of last year's quarter, as lower manufacturing
and administrative costs more than offset the effects of lower
sales.
The Household division's second quarter revenues were up $6.0
million, driven mainly by Dial's new dishwashing detergent and
Renuzit product introductions, offset partially by a decline in
Renuzit Electric and cleaning products. Renuzit Electric
benefited from strong promotions in 1994 which were not repeated
in 1995. Operating income remained even compared to the second
quarter of 1994, as raw material cost increases and promotion
expenses for new products offset the effects of increased sales.
Laundry division revenues for the second quarter decreased $7.5
million due partially to volume softness in dry detergents. The
discontinuance of low margin business for fabric softeners also
contributed to the decline in revenues while liquid detergent
volumes declined due to promotional shifts to the second half of
1995. Operating income declined $4.7 million due to the reduced
volume, higher raw material costs, and increased marketing and
distribution expenditures in areas other than liquid detergents.
International division's revenues and operating income improved
$100,000 and $300,000, respectively, over those of the 1994
second quarter.
Services
Combined Services revenues were $538 million, $14.2 million (3
percent) greater than the 1994 second quarter's amounts.
Excluding a one-time gain of $3.5 million (pre-tax) on
curtailment of certain postretirement medical benefits in the
Convention Services Segment, combined services posted an 8
percent increase in second quarter operating income.
Airline Catering and Services. The second quarter revenues
of the Airline Catering and Services Group were $206.5 million, a
2 percent increase from the 1994 quarter, with operating income
increasing $1.4 million, or 8 percent, as new contracts awarded
in the first half of 1995 only began to come on stream late in
the second quarter, while the effects of further airline meal
service cutbacks on certain domestic flights of short duration
unfavorably affected the comparisons of revenues and operating
income. Operating margins improved to 8.7 percent from 1994's
8.2 percent, as the United flight kitchens became fully
operational during 1995 versus the start-up and training period
in 1994.
Convention Services. Convention Services revenues decreased
$4.1 million (3 percent). Excluding a one-time gain on
curtailment of certain postretirement medical benefits of $3.5
million (pre-tax), operating income declined 12 percent. On this
same basis, operating margins declined from 11 percent in the
second quarter of 1994 to 10 percent in the 1995 quarter.
Revenues, operating income and margins were impacted by shows not
repeated each year and by changes in the location of certain
shows.
Travel and Leisure and Payment Services. Revenues of these
companies were up $14 million (8 percent) to $199.9 million,
while operating income increased 29 percent to $17.8 million.
Dial's payment services subsidiary continues to invest increasing
amounts in tax-exempt securities. On a fully taxable equivalent
basis, 1995 second quarter revenues and operating income would
have been higher by $3.9 million, while 1994's second quarter
revenues and operating income would have been $1.4 million
higher. Operating margins, on the fully taxable equivalent
basis, increased to 10.7 percent from 8.1 percent.
Canadian transportation services companies' revenues and
operating income increased $12.6 million and $1.4 million,
respectively, during the second quarter. Revenue increases from
a newly acquired tour operator, strong growth in existing package
tour operations, improved hotel occupancy rates, and higher
Courier Express, sightseeing and snowfield revenues were
partially offset by a decrease in charter revenues as a result of
redeployment of the bus fleet to passenger route acquisitions in
mid-1994. Operating income increases are attributed to the
revenue increases as well as cost reduction programs, which more
than offset the expense of terminating a small joint venture.
Duty Free and shipboard concession revenues declined $3 million
from the second quarter of 1994, due primarily to the loss of a
major shipboard concession, fewer passenger days for continuing
business, and lower airport traffic where duty-free shops are
operated. Operating income improved $100,000 as a result of
lower operating expenses and concentration on higher gross margin
products.
Cruise revenues declined $300,000 from 1994's second quarter.
Loss of revenues from the Star/Ship Majestic, which was taken out
of service as Dial commenced a four-year charter arrangement in
February 1995, were largely offset by revenue increases on the
Star/Ship Atlantic and the Star/Ship Oceanic. Operating income
improved $800,000 due to cost reduction efforts and operating one
less vessel.
Travel tour service revenues and operating income improved $1.4
million and $400,000, respectively, over those of the 1994 second
quarter, driven by an increase in passenger volumes as well as
favorable foreign exchange rates.
Revenues and operating income of the food service companies
declined $600,000 and $700,000, respectively, from those of the
1994 second quarter. The decrease in revenues and operating
income is principally due to the sale of a non-core operation,
including certain one-time costs, as well as inclement weather at
Glacier National Park.
On a fully taxable equivalent basis, revenues of payment services
increased $9.5 million over the 1994 second quarter. The revenue
increase is attributed principally to new product lines and
increased investment income due to higher rates, greater funds
invested and increased realized securities gains. Operating
income, on the fully taxable equivalent basis, increased $4.8
million, including the increased realized investment gains and
moderated by higher commission expense for official checks and
other volume related costs.
Interest Expense
Interest expense increased $3.5 million from 1994's second
quarter, primarily because both debt levels and interest rates on
floating-rate debt were higher in 1995 than in 1994. Increased
debt levels were principally due to the purchase of the Star/Ship
Majestic, which had previously been leased, in February 1995.
Income Taxes
The effective tax rate in the 1995 second quarter was 35.6
percent, down from 37.5 percent in 1994. The reduction in the
effective tax rate results primarily from the increased use of
tax-exempt investments by Dial's payment services subsidiary.
Comparison of First Six Months of 1995 to the
First Six Months of 1994:
Revenues for the first six months of 1995 increased nearly 3
percent to $1.8 billion from $1.7 billion in the same period of
1994.
For the first six months of 1995, net income was $69 million, up
from 1994's net income of $60.6 million. On a per share basis,
the 1995 period's net income of $0.78 per share was 11 percent
higher than 1994's $0.70.
Consumer Products
For the first six months of 1995, the Consumer Products Group's
revenues of $701.8 million were down $36.7 million or 5 percent
from those of the 1994 period. The revenue decrease was
primarily due to the acceleration of the previously reported
program to effect reductions of trade customers' inventories.
Operating income of $84.9 million was $4.8 million or 6 percent
higher than that of the 1994 period. Operating margins improved
to 12.1 percent from 10.9 percent in the 1994 period due
primarily to lower trade promotion costs and other savings
resulting principally from the inventory reduction initiative.
Skin Care division's revenues declined $17.5 million while
operating income increased $11.5 million compared to the first
six months of 1994. Sales volumes were down as a result of the
inventory reduction program. Operating income increased as a
result of reductions in trade spending, marketing expenditures
and other cost reduction programs.
The Food division's revenues declined $15 million from the first
six months in 1994 due to a planned reduction of microwaveable
meals and lower sales of chili and stew. Operating income
increased $900,000, as lower manufacturing and administrative
costs more than offset the effects of lower sales.
The Household division's first six months' revenues and operating
income were up $10.3 million and $1 million, respectively, over
the same period in 1994, due primarily to strong sales of Dial's
new dishwashing detergent and Renuzit product introductions,
offset partially by a decline in Renuzit Electric and cleaning
products. Renuzit Electric benefited from strong promotions in
1994 which were not repeated in 1995. Operating income increased
over the 1994 six month period as raw material cost increases and
promotional expenses for new product introductions partially
offset the effects of increased sales.
Laundry division revenues for the first six months of 1995
decreased $12.9 million due to high sales to trade customers in
the fourth quarter of 1994 and volume softness in dry detergents.
Operating income declined $9.4 million as a result of the reduced
volume, higher raw material costs, and increased marketing and
distribution expenditures.
International division's revenues decreased $1.7 million compared
to the first six months of 1994, due principally to the
devaluation of the Mexican peso in the first quarter of 1995.
Despite the revenue declines, operating income increased $800,000
due to a more profitable sales mix.
Services
Combined Services revenues for the first six months of 1995 were
$1.1 billion, $79.9 million (8 percent) greater than that of the
1994 period. Excluding the one-time gain of $3.5 million (pre-
tax) on curtailment of certain postretirement medical benefits in
the Convention Services Segment, combined services posted a 16
percent increase in six month operating income.
Airline Catering and Services. These companies' revenues and
operating income of $391 million and $29 million, respectively,
were up $37.3 million (11 percent) and $4 million (16 percent),
respectively, from those of 1994's first six months. The increase
was due to having all United flight kitchens acquired during 1994
fully operational this year as the start-up of newly acquired
flight kitchens continued during the 1994 first half. Seven new
aircraft service locations and other new business from continuing
locations also contributed to the increase, partially offset by
the effect of further airline meal service cutbacks on certain
domestic flights of short duration. Operating margins improved
to 7.4 percent from 1994's 7.1 percent, as the United flight
kitchens became fully operational during 1995 versus the start-up
and training period in 1994.
Convention Services. Convention Services' first half
revenues of $286 million were 9 percent greater than the 1994
period. Excluding the one-time curtailment gain described above,
operating income increased 3 percent to $28.2 million. Operating
margins decreased to 9.8 percent from 10.4 percent, due largely
to the effects of shows not repeated each year and by changes in
the location of certain shows.
Travel and Leisure and Payment Services. For the first six
months of 1995, revenues of these companies were $381.4 million,
up $20.1 million (nearly 6 percent), while operating income
increased 38 percent to $21.8 million. Dial's payment services
subsidiary continues to invest increasing amounts in tax-exempt
securities. On a fully taxable equivalent basis, revenues and
operating income would have been higher by $7.4 million and $2.9
million, respectively, for the 1995 and 1994 six month periods.
Operating margins, on the fully taxable equivalent basis,
increased to 7.5 percent from 5.1 percent in the 1994 six month
period.
Canadian transportation services companies' revenues increased
$13.6 million over the 1994 six month period while operating
income increased $1.7 million in U. S. dollars. Revenue increases
from a newly acquired tour operator, strong growth in existing
package tour operations, improved hotel occupancy rates, and
higher Courier Express, sightseeing and snowfield revenues were
partially offset by a decrease in charter revenues as a result of
redeployment of the bus fleet to passenger route acquisitions in
mid-1994. Operating income increases are attributed to the
revenue increases as well as cost reduction programs, which more
than offset the expense of terminating a small joint venture.
Duty Free airport and shipboard concession revenues declined $6.9
million from the first half of 1994, due primarily to the loss of
a major shipboard concession and fewer passenger days for
continuing business. Operating income improved $200,000, due
mostly to lower operating expenses.
Cruise revenues were down $2.5 million from 1994's first six
months due to having two ships in drydock for repairs for a total
of 44 ship days during the first quarter of 1995. In addition,
the Star/Ship Majestic was taken out of service in February as
Dial commenced a four-year charter arrangement to lease the ship
to a European operator. Operating results improved $2.8 million
due to favorable occupancy rates, lower expenses resulting from
cost reduction efforts and operating one less vessel.
Travel tour service revenues and operating income improved $2.3
million and $800,000, respectively, over the first six months of
1994, due primarily to favorable foreign exchange rates this
year, which also has had a favorable impact on passenger volumes.
Revenues and operating income of the food service companies were
both down $600,000 from the same period in 1994 due to the sale
of a non-core operation, including certain one-time costs, as
well as inclement weather at Glacier National Park.
On a fully taxable equivalent basis, revenues of payment services
increased $18 million over those of 1994's first six months, due
principally to increased investment income, revenues from new
product lines and increased realized investment gains.
Investment income increased due to higher rates and greater funds
invested than in 1994. On a fully taxable equivalent basis,
operating income increased $6.9 million, including the increased
realized investment gains and moderated principally by higher
commission expense for official checks and other volume related
costs.
Interest Expense
Interest expense for the first six months of 1995 increased $7.7
million over the first six months of 1994, as both debt levels
and interest rates on floating-rate debt were higher than in
1994. Debt level increases are primarily due to the purchase of
the Star/Ship Majestic in February 1995.
Income Taxes
The effective tax rate for the first six months of 1995 was 36.1
percent, down from 37.9 percent in the comparable period of 1994.
The reduction in the effective tax rate results primarily from
the increased use of tax-exempt investments by Dial's payment
services subsidiary.
Liquidity and Capital Resources:
The Dial Corp's total debt at June 30, 1995 was $800.8 million
compared with $745.5 million at December 31, 1994. The debt-to-
capital ratios at June 30, 1995 and December 31, 1994 were 0.55
to 1 and 0.56 to 1, respectively. The increase in debt was
attributable primarily to the purchase of the Star/Ship Majestic,
which was previously leased, in early 1995.
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 Dial Corp Annual
Report to Stockholders for the year ended December 31, 1994.
Recent Developments:
Dial's Consumer Products Group plans to continue programs with
many of its trade customers designed to effect reductions of the
trade customers' inventories over the balance of 1995. These
programs are coupled with more rapid replenishment as consumers
purchase the products off the shelf, to address the retailers'
increased emphasis on efficient consumer response. This will
continue to depress revenues for the Consumer Products Group for
the rest of 1995 while the trade customers' inventories are
reduced, even though consumer purchases are expected to continue
at normal rates. The Consumer Products Group anticipates that
lower trade promotion costs and other savings resulting from the
programs will more than offset the effect of the reduced revenues
in 1995, so that operating income and margins should continue to
increase over 1994 levels.
In July 1995, Dial exercised its option to purchase the Star/Ship
Atlantic cruise ship, previously under a lease agreement, for
$71.7 million.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Dial has been named defendant in three lawsuits (U.S. District
Court, Eastern Division, Virginia (Norfolk Division) Spring 1993;
Circuit Court of Kanawha County West Virginia, July 1995; and
Superior Court of California for the City of Los Angeles, July
1995) filed by several hundred former railroad workers claiming
asbestos-related health conditions. Dial has tolling agreements
in place with some plaintiffs in these lawsuits as well as other
claimants. The claims relate to former subsidiaries and their
production of railroad locomotives. Due to their preliminary
nature, the extent of the claims as they relate to Dial are not
ascertainable at this time, however, Dial does not believe that
any resulting liability should materially affect its financial
position.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of The Dial Corp was held May
9, 1995, 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, 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. 10.A - Copy of Employment
Agreement between The Dial Corp and John W.
Teets dated June 20, 1995.
Exhibit No. 10.B - Copy of The Dial Corp Director's
Charitable Award Program.
Exhibit No. 10.C - Copy of amendment dated August 18,
1993, to The Dial Corp Supplemental Pension Plan.
Exhibit No. 11 - Statement Re Computation of Per Share
Earnings.
Exhibit No. 27 - Financial Data Schedule
(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 14, 1995 By /s/Richard C. Stephan
------------------------
Richard C. Stephan
Vice President-Controller
(Chief Accounting Officer
and Authorized Officer)