Item 1. Business - ------- --------
General - -------
Tambrands Inc. (the "Company") has been manufacturing and marketing menstrual tampons, which are sold under the trademark TAMPAX(R), since 1936. It is the leading manufacturer and marketer of tampons in the world. The Company operates in one business segment, personal care products. In recent years, the Company has focused on its core TAMPAX tampon business worldwide, has expanded its international operations and has placed an increased emphasis on the development and marketing of new products. The Company has manufacturing operations in seven countries. In 1995, TAMPAX tampons were sold in over 150 countries. The Company's eight largest markets are the United States, the United Kingdom, France, Canada, Spain, CIS (principally Russia and Ukraine), Italy and Belgium.
The Company was incorporated under the laws of the State of Delaware in 1936. The Company's principal executive offices are located at 777 Westchester Avenue, White Plains, New York 10604 (telephone number 914-696-6000).
Recent Developments - -------------------
In the fourth quarter of 1995, the Company relaunched an upgraded version of its original product, the TAMPAX flushable applicator tampon, in the United States, Canada, Latin America and parts of Asia/Pacific. The relaunched product contained significant product enhancements and redesigned, contemporary packaging. In October 1995, the Company announced the U.S. introduction in the first quarter of 1996 of a new product, TAMPAX NATURALS(TM), the only nationally available tampon or pad to be made of 100% cotton. This tampon is made of all natural components and has a flushable, biodegradable applicator.
In February 1996, Tambrands Limited, the Company's principal U.K. subsidiary, entered into an agreement with the U.K. subsidiary of Molnlycke AB for Tambrands Limited to distribute Molnlycke's sanitary pad and panty-liner products on an agency basis in the United Kingdom.
In February 1996, Anne M. Busquet and Janet Hill were elected to the Company's Board of Directors. Mrs. Busquet is President of American Express Relationship Services, a unit of American Express Travel Related Services (diversified financial services) and Mrs. Hill is Vice President of Alexander & Associates, Inc. (management consulting).
Effective December 31, 1995, Susan J. Riley was appointed Senior Vice President - Chief Financial Officer. Also during 1995, Michael S. Krause was appointed Senior Vice President - Global
Operations, and Janey M. Loyd was appointed Vice President - Business Development.
In December 1991, the Company announced a program to restructure its worldwide manufacturing operations to improve efficiency and reduce costs. This program has been completed and included workforce reductions and the consolidation of facilities.
In June 1993, the Company announced that it would provide a $30 million charge ($20 million after-tax) to provide for restructuring of manufacturing and administrative operations and the cost of management changes, including the adoption of a consolidated international management strategy. This program has included workforce reductions and the consolidation of facilities. This program has been completed, with the exception of certain severance payments under committed severance plans, which will be substantially complete by the end of 1996. See Note 6, "Restructuring and Other Charges," included in the Notes to Consolidated Financial Statements incorporated by reference in item 8 of Part II hereof.
The Company's 1995 capital spending programs related to investments in equipment to improve product quality and productivity, modernize production facilities and manufacture and launch new products. See "Management's Discussion and Analysis of Results of Operations and Financial Condition" incorporated by reference in item 7 of Part II hereof. The Company intends to continue its efforts to achieve productivity improvements in order to eliminate excess cost and time from the supply chain and generate funds for reinvestment in growth opportunities.
Products - --------
Menstrual tampons represent all of the Company's net sales. The Company's largest selling tampon is the TAMPAX flushable applicator tampon, which first became commercially available in 1936 and was upgraded and relaunched in 1995.
In addition to this tampon and the new TAMPAX NATURALS tampon, which was introduced in the United States in the first quarter of 1996, the Company manufactures and sells several other tampon products. In 1994, the Company introduced nationally in the United States the new TAMPAX SATIN TOUCH(R) tampon. This tampon offers the ease and comfort of a plastic applicator but has an all- paper applicator that is flushable and biodegradable. SATIN TOUCH is a rounded- end product with a patented, high gloss surface. It was introduced nationally in Canada in 1993 and in Puerto Rico and several Caribbean locations in 1995. In 1994, the Company
introduced the new TAMPAX SATIN(R) tampon in France. This tampon is similar to the SATIN TOUCH tampon and was introduced in 1995 in Spain and Belgium and in Denmark and Finland under the trademark TAMPAX SILKS(TM).
In 1994, the Company introduced nationally in the United Kingdom its TAMPAX TAMPETS(R) tampon. This non-applicator tampon has been sold in Ireland since 1993 and was introduced in 1995 in Australia, Israel and Portugal. A non-applicator tampon was also introduced in Canada under the trademark TAMPAX SOLOS(TM) during 1995.
TAMPAX tampons with plastic applicators are sold in the United States and Canada and, since 1995, in Brazil. TAMPAX COMPAK(R) tampons, with a compact all-plastic applicator, are sold in France, the United Kingdom and several other European countries, as well as in the United States, Canada and several other smaller markets. The Company began marketing an improved COMPAK tampon in 1996 with a shorter tampon and applicator, and a perforated wrapper for applicator disposal.
In 1994, the Company introduced nationally in the United States the new TAMPAX LITES(R) tampon. This tampon, which was introduced in New Zealand in 1995, is especially designed for use on days of light menstruation, when other tampons might be too absorbent for comfortable use. The Company sells TAMPAX comfort shaped flushable applicator tampons, with an all-paper rounded-end applicator and a slimmer design than the Company's original flushable applicator product, in the United States, Australia, New Zealand and Japan.
The Company continues to evaluate the possible introduction of its existing products in additional markets, as well as additional new products and product enhancements.
Marketing and Sales - -------------------
Marketing operations are conducted either directly by the Company and its subsidiaries, or by third-party brokers or sales agents and distributors. Sales are made directly to grocery, discount and drug stores and other comparable outlets, as well as to wholesalers and distributors in those trades. Sales to discount stores, including mass merchandisers and club stores, have been increasing as a percentage of total sales. For the years 1994 and 1995, Wal- Mart, together with its affiliated stores, accounted for approximately 10.3% and 11.1%, respectively, of the Company's net sales worldwide. No single customer (including distributors) of the Company and its subsidiaries accounted for 10% or more of total net sales prior to 1994. The marketplace for consumer products is becoming increasingly global and currently is characterized by growing trade consolidation and expansion across geographic
borders. A small number of significant customers are financed through highly leveraged capital structures, making them particularly sensitive to market interest rate changes and other economic variables. This situation has not had a material effect on the Company's net sales or operating income in 1995 or prior years.
Substantially all sales involve extensions of credit. Credit terms generally are consistent with terms typically extended under local industry practices. In the United States and Canada, the Company typically offers discounts of 2% and 1%, respectively, if payment is received within 30 or 20 days, respectively. In the United Kingdom and most other European markets, discounts generally are not offered and payment terms range from 30 to 90 days. In other markets, credit terms with longer collection periods are common, and in some developing markets discounts for prompt payment are offered. Default rates by the Company's customers in the United States have been at or below industry averages, based on information from the Credit Research Foundation.
In the United States, the Company's internal sales management group directly handles sales to certain large customer accounts. These sales have been increasing as a percentage of total sales. Other sales in the United States and sales in Belgium, Canada, France and the Netherlands are handled through third-party sales brokers, who also may sell other branded consumer products but generally do not carry products that compete with the products of the Company and its subsidiaries. Sales are conducted in the Czech Republic, Poland, Russia, Ukraine and the United Kingdom by the Company's subsidiaries and in the People's Republic of China by its joint venture. Sales are conducted in other countries through third-party distributors and agents. Sales forces of the Company's subsidiaries in the Czech Republic, Poland, Russia, Ukraine and the United Kingdom distribute or act as broker with respect to certain household consumer products for several other companies. Revenues from these sales are increasing as a percentage of the Company's operating income.
The Company believes that the trend by retailers and distributors to reduce inventories and the related adverse impact on shipments will continue in future periods. However, the rate of inventory reduction slowed in 1995, as it had in 1994, from the rate of reduction experienced in 1993. The size of inventories at the trade level varies from month to month, sometimes considerably, due to a number of factors. Trade inventories of the Company's products at the end of 1995 and continuing into the beginning of 1996, as estimated by the Company, were higher than on average during 1995, primarily as a result of bonus pack shipments at the end of 1995 and reductions in market share discussed below under "Competition".
Media advertising is important to the overall success of the TAMPAX tampon brand. In the United States, Canada and Europe, the Company focuses its advertising on women aged 12-34, using a variety of media, including television and print advertisements. In 1996, the Company intends to continue with its aggressive support of the TAMPAX tampon franchise with heightened levels of advertising and promotional activities. The increase in spending is intended primarily to support the Company's new products. The Company's advertising execution is handled on a worldwide basis by one agency, BBDO Worldwide Inc.
The Company also seeks to attract and retain customers through its teen education program, which is designed to help female teenagers understand the various forms of sanitary protection and promotes trial usage of TAMPAX tampons. In developing markets, like Russia and China, the Company uses sampling with young women and physician awareness programs. In the Company's largest markets, the Company conducts school education programs that include videos, lecturers and booklets.
Competition - -----------
Highly competitive conditions prevail in the feminine protection industry for external pads and menstrual tampons, which are directly competitive in both performance and price, the principal methods of competition.
In the United States, there are four other manufacturers whose sales, directly or through subsidiaries, are significant in the total sanitary protection market: Johnson & Johnson, Kimberly-Clark Corporation, Playtex Family Products Corporation and The Procter & Gamble Company. Each of these corporations manufactures and sells external pads or menstrual tampons or both. Each makes and sells products other than external pads and tampons, and the total sales of all products by and the capitalization of each of Johnson & Johnson, Kimberly- Clark and Procter & Gamble are substantially greater than the total sales and capitalization of the Company. These factors may be helpful to the respective competitive positions of these companies in the feminine protection industry. Substantially all of the tampons manufactured by the above-mentioned four companies are sold under these companies' brand names. In addition, there is a small private label segment of the industry. Management believes that the TAMPAX tampon's leading market share position in the U.S. tampon category (approximately 50.5% in dollars and 53.7% in units for the year 1995, according to Nielsen Marketing Research) and strong brand loyalty among consumers (as verified by household panel data obtained by Nielsen Marketing Research), are positive factors in the Company's ability to compete in the feminine protection industry. (Information obtained from Nielsen represents Nielsen estimates only.) During 1995, the level of competitive activity continued to increase in the United States, particularly in the areas of new product introductions and price discounting.
The tampon category and TAMPAX market share softened in the United States in the fourth quarter of 1995. Management believes that the preparation for the launch of the new TAMPAX NATURALS product was a significant factor in this softening, which has continued into the first quarter of 1996. The Company reduced its fourth-quarter U.S. advertising and promotional activity while awaiting the full distribution of the TAMPAX NATURALS product.
Highly competitive conditions prevail in virtually all foreign markets. Competition tends to be fragmented and regional in nature in most of those markets, but tampons produced by, or under license from, Johnson & Johnson and Playtex, and external pads produced by, or under license from, Johnson & Johnson, Kimberly-Clark and Procter & Gamble, are sold in many of the foreign markets where the Company does business. During 1995, Johnson & Johnson marketed applicator tampons manufactured by Playtex in a number of foreign markets where the Company does business. Competitive activity remained at high levels in Europe in 1995. This activity included the continued aggressive marketing of several external pad products.
Management anticipates that the worldwide market for consumer products will continue to be highly competitive and sensitive to price.
Raw Materials - -------------
The principal raw materials used in the Company's business are cotton and rayon for tampons, paper and plastic for tampon applicators, and paperboard for cartons and containers. Most of these raw materials are readily available in the market from many sources. The Company experienced an escalation in 1995 in the cost of many of its raw and packaging materials, including cotton, pulp and paper. Based on the current downward trend of pulp and paper prices, management expects these costs to decline somewhat through the latter part of 1996.
Trademarks and Patents - ----------------------
The Company, directly or through its subsidiaries, owns a number of trademarks, trademark registrations and trademark applications in the United States and other countries, which, in the opinion of management, are significant. The Company's trademark registrations vary in duration and are typically renewable by the Company. Certain features of TAMPAX tampons are the subject of U.S. and foreign patents or patent applications owned by the Company. In management's opinion, certain of these
patents are significant. The duration of the Company's patents ranges from 3 to 18 years (i.e., the patents have expiration dates ranging from the year 1999 ---- to the year 2014).
Research and Development - ------------------------
The Company maintains a research and development laboratory at its facility in Palmer, Massachusetts. Management believes that developing better protecting and more comfortable and convenient products, and products which are environmentally sound, is important to maintaining the Company's competitive position. Research is directed toward these goals. The Company's research and development expenditures have approximated 2% of net sales in each of the past three years.
Employees - ---------
Headcount reductions occurred as a result of the restructuring programs announced in 1991 and 1993. At December 31, 1995, the Company and its subsidiaries employed approximately 3,400 persons.
Foreign and Domestic Operations; Export Sales - ---------------------------------------------
The information regarding foreign and domestic operations of the Company and its subsidiaries set forth on page under the caption "Segment and Geographic Information" in the Notes to Consolidated Financial Statements is incorporated herein by reference.
Over the past three years, sales by the Company's foreign operations accounted for approximately one-half of total unit sales.
In 1995, sales between geographic areas and export sales of the Company were not significant.
Item 2.
Item 2. Properties - ------ ----------
Domestic Properties - -------------------
The Company owns and operates three manufacturing plants in the United States, located in Auburn, Maine; Claremont, New Hampshire; and Rutland, Vermont. Product and process research and development, and certain accounting, data processing and sales and logistics operations are conducted at the Company's Technical Center, located in Palmer, Massachusetts. This facility is a testing center for the development of new products and for the application of advanced manufacturing technology to the Company's products. The Company owns each of these plants and the Technical
Center. The Company leases headquarters office space in White Plains, New York.
The Company's production machinery and equipment and the properties owned by it described above are held free and clear of encumbrances.
During the last fiscal year, the Company's domestic plants were suitable and adequate for the Company's requirements. The Company's domestic plants operate principally on a three-shift basis, and management believes that these plants have sufficient additional capacity to satisfy the anticipated requirements of the Company.
Foreign Properties - ------------------
The Company's foreign subsidiaries own and operate manufacturing plants in France, Ireland, Russia, Ukraine and the United Kingdom. The joint venture in the People's Republic of China, in which the Company has an 80% interest, has contractual rights to use a manufacturing plant there. The Company's subsidiary in Brazil owns a manufacturing plant there which it has leased to another company. The lease has expired and the Company is attempting to sell the plant. The Company's foreign subsidiaries lease office space in Brazil, Canada, France, Mexico, Switzerland and in several other countries. The Company's subsidiary in the United Kingdom leases office space there for the Company's international headquarters.
The production machinery and equipment and properties owned by the Company's foreign subsidiaries described above are held free and clear of encumbrances.
During the last fiscal year, the foreign facilities of the Company's subsidiaries were suitable and adequate for the Company's requirements. In general, these foreign manufacturing facilities operate on a three-shift basis, and management believes that these facilities have sufficient additional capacity to satisfy the anticipated requirements of the Company.
Item 3.
Item 3. Legal Proceedings - ------ -----------------
The Company or a subsidiary is a defendant in a small number of product liability lawsuits based on allegations that toxic shock syndrome ("TSS") was contracted through the use of tampons. A small number of pre-suit claims involving similar TSS allegations have also been asserted. The damages alleged vary from case to case and often include claims for punitive damages. One TSS lawsuit, filed in the United States District Court for the District of Kansas and served on the Company in July 1994, purported to be a federal class action on behalf of all women who had contracted TSS through the use of tampons. In March 1996, the District Court denied plaintiffs' motion for class certification in this lawsuit.
The Company and three of its former officers were named as defendants in certain shareholder lawsuits filed in 1993 in the United States District Court for the Southern District of New York and consolidated under the caption In Re Tambrands Inc. Securities Litigation. The parties stipulated to the - ------------------------------------------- certification of the consolidated lawsuit as a class action on behalf of all purchasers of the Company's common stock during the period December 14, 1992 through April 28, 1993. The complaint alleged that the Company's disclosures during the class period contained material misstatements and omissions concerning its anticipated future earnings and thereby allegedly violated Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. In November 1995, the court approved a settlement of this litigation and dismissed the action against all defendants.
The Company was a nominal defendant in three purported shareholder derivative lawsuits filed in the Supreme Court of the State of New York for Westchester County and consolidated in October 1993 into a single action. Named collectively in the consolidated complaint as individual defendants were the Company's directors (other than Mrs. Busquet, Mr. Fogarty and Mrs. Hill), certain former directors and three of its former officers. The complaint alleged that the officer-defendants exposed the Company to liability in the shareholder class action described in the preceding paragraph and misappropriated corporate opportunities by trading in the Company's stock on the basis of nonpublic information. One of the former officers was also alleged to have received improper reimbursements from the Company for alleged personal expenses. The director-defendants were alleged to have acquiesced in the aforesaid alleged violations and to have received excessive compensation. The complaint sought to recover on behalf of the Company an unspecified amount of damages from the individual defendants. No relief was sought against the Company. In September 1994, the Court granted the defendants' motion to dismiss the complaint for failure to make a demand upon the Board of Directors. Plaintiffs have appealed the dismissal.
The Company is involved, either as a named defendant or as the result of contractual indemnities, in certain litigation arising out of the operations of certain divested subsidiaries.
There are certain other legal proceedings pending against the Company arising out of its normal course of business in which claims for monetary damages are asserted.
While it is not feasible to predict the outcome of these legal proceedings and claims with certainty, management is of the belief that any ultimate liabilities in excess of provisions therefor will not individually or in the aggregate have a material adverse effect on the Company's financial position or results of operations.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders - ------ ---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.
Management of the Registrant - ----------------------------
The names and ages of all executive officers of the Company, the current office held by each, and the period during which each has served as such are set forth in the following table:
Period Served Name Age Current Office In Current Office ---- --- -------------- ----------------- Edward T. Fogarty 59 President and 1994 to date Chief Executive Officer (1)
Michael S. Krause 55 Senior Vice President - 1995 to date Global Operations (2)
Michael K. Lorelli 44 Executive Vice 1994 to date President and President, North America/Latin America (3)
Thomas J. Mason 51 Group Vice President- 1994 to date International (4)
Susan J. Riley 37 Senior Vice President - 1995 to date Chief Financial Officer
Thomas Soper, III 46 Senior Vice President- 1994 to date Corporate Human Resources and Communications (5)
Jerome B. Wainick 55 Vice President-Research 1990 to date and Development
(1) Mr. Fogarty has served as an officer of the Company since May 1994. From prior to March 1991 until May 1994, he was employed by Colgate-Palmolive Company as President - USA/Canada/Puerto Rico.
(2) Mr. Krause has served as an officer of the Company since August 1995. From January 1995 until July 1995, he was employed by the Snacks Division of The Quaker Oats Company as Vice President - Supply Chain. From February 1994 until August 1994, he was employed by Stella Foods Inc. as Executive Vice President - Supply Chain. From prior to March 1991 until February 1994, he was employed by Goody Products, Inc. as Senior Vice President - Operations.
(3) Mr. Lorelli has served as an officer of the Company since October 1994. From January 1993 until October 1994, he was employed by Pizza Hut International, a division of PepsiCo, Inc., as President. From prior to March 1991 until December 1992, he was employed by Pepsi-Cola East, a division of PepsiCo, Inc., as President.
(4) Mr. Mason has served as an officer of the Company since October 1994. From May 1992 until September 1994, he was employed
by Dole Packaged Foods, a division of Dole Food Co., as President. From prior to March 1991 until May 1992, he was employed by Kraft General Foods as Executive Vice President and General Manager, Specialty Products.
(5) Mr. Soper has served as an officer of the Company since October 1994. From prior to March 1991 until September 1994, he was employed by Alexander & Alexander Services Inc. (a provider of risk management, insurance brokerage and human resource management consulting services) as Senior Vice President - Corporate Human Resources.
Each executive officer is appointed by the Board of Directors to serve until the first meeting of directors following the annual meeting of shareholders of the Company. Except as indicated in the footnotes above, the principal occupation and employment during the past five years of each of the above-named executive officers have been as an officer or other member of management of the Company or one or more of its subsidiaries.
PART II -------
Item 5.
Item 5. Market for Registrant's Common Equity and Related - ------- -------------------------------------------------- Shareholder Matters -------------------
The Company's Common Stock is traded on the New York and Pacific Stock Exchanges. The following table provides quarterly dividend and Common Stock price range information for the years 1994 and 1995:
(a) Reflects trading on the New York Stock Exchange.
As of March 15, 1996, there were 6,962 holders of record of the Company's Common Stock.
Item 6.
Item 6. Selected Financial Data - ------ -----------------------
The information required by this item is set forth in a separate section of this Annual Report on Form 10-K under the caption "Selected Financial Data" appearing on page and is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Results of - ------- -------------------------------------------------- Operations and Financial Condition ----------------------------------
The information required by this item is set forth in a separate section of this Annual Report on Form 10-K under the caption "Management's Discussion and Analysis" beginning on page and is incorporated herein by reference.
Item 8.
Item 8. Financial Statements and Supplementary Data - ------- -------------------------------------------
The information required by this item is set forth in a separate section of this Annual Report on Form 10-K as indicated in the "Index to Financial Information" appearing on page and is incorporated herein by reference.
Item 9.
Item 9. Changes in and Disagreements with Accountants on - ------- ------------------------------------------------ Accounting and Financial Disclosure -----------------------------------
None.
PART III --------
Item 10.
Item 10. Directors and Executive Officers of the Registrant - -------- --------------------------------------------------
The information relating to nominees for election as directors of the Company set forth under the caption "Election of Directors" in the Company's definitive Proxy Statement for the annual meeting of shareholders to be held on April 23, 1996 is incorporated herein by reference.
The information on executive officers set forth under the first two paragraphs of the caption "Management of the Registrant" beginning on page 10 hereof is incorporated herein by reference.
Item 11.
Item 11. Executive Compensation - -------- ----------------------
The information regarding executive compensation set forth under the captions "Information Regarding the Board of Directors - Compensation of Directors" and "Executive Compensation and Other Information" in the Company's definitive Proxy Statement for the annual meeting of shareholders to be held on April 23, 1996 is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and - -------- ---------------------------------------------------- Management ----------
The information regarding the security ownership of certain beneficial owners and management set forth under the caption "Security Ownership by Management and Others" in the Company's definitive Proxy Statement for the annual meeting of shareholders to be held on April 23, 1996 is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions - -------- ----------------------------------------------
The information pertaining to certain relationships and related transactions set forth under the captions "Information Regarding the Board of Directors - Compensation of Directors" and "Executive Compensation and Other Information - Compensation Committee Interlocks and Insider Participation" in the Company's definitive Proxy Statement for the annual meeting of shareholders to be held on April 23, 1996 is incorporated herein by reference. The services performed for the Company by Doherty, Wallace,
Pillsbury & Murphy, P.C. were on terms no less favorable to the Company than if such services had been provided by unaffiliated parties.
PART IV -------
Item 14.
Item 14. Exhibits, Financial Statement Schedules, - ------- ---------------------------------------- and Reports on Form 8-K -----------------------
(a) Documents filed as part of this report
1. Financial Statements
The list of financial statements set forth under the caption "Index to Financial Information" on page is incorporated herein by reference.
2. Financial Statement Schedules
The list of financial statement schedules set forth under the caption "Index to Financial Information" on page is incorporated herein by reference. All other schedules have been omitted, as the required information is inapplicable or the information is presented in the financial statements or related notes.
3. Exhibits
Exhibit Number Description ------- -----------
3(1) Certificate of Incorporation of the Company, as amended through April 28, 1987, filed April 30, 1987 as Exhibit 4(a) to the Company's Form S-8 Registration Statement (Reg. No. 33- 13902), incorporated herein by reference.
3(2) Certificate of Amendment of Certificate of Incorporation of the Company, dated April 24, 1990, filed May 15, 1990 as Exhibit 4(2) to the Company's Report on Form 10-Q for the quarter ended March 31, 1990, incorporated herein by reference.
3(3) Certificate of Amendment of Certificate of Incorporation of the Company, dated April 28, 1992, filed May 15, 1992 as Exhibit 4(2) to the Company's Report on Form 10-Q for the quarter ended March 31, 1992, incorporated herein by reference.
3(4) By-Laws of the Company, as amended, filed as Exhibit 3(4) to the Company's Report on Form 10-K for the year 1994, incorporated herein by reference.
4(1) Description of the rights of security holders set forth in the Certificate of Incorporation of the Company, as amended through April 28, 1987, filed April 30, 1987 as Exhibit 4(a) to the Company's Form S-8 Registration Statement (Reg. No. 33- 13902), incorporated herein by reference.
4(2) Description of the rights of security holders set forth in the Certificate of Amendment of Certificate of Incorporation of the Company, dated April 28, 1992, filed May 15, 1992 as Exhibit 4(2) to the Company's Report on Form 10-Q for the quarter ended March 31, 1992, incorporated herein by reference.
4(3) Rights Agreement, dated as of October 24, 1989, between the Company and First Chicago Trust Company of New York, which includes the Form of Right Certificate as Exhibit A and the Summary of Rights to Purchase Common Shares as Exhibit B, filed October 27, 1989 as Exhibit 1 to the Company's Form 8- A Registration Statement, incorporated herein by reference.
4(4)(a) Indenture dated as of December 1, 1993 between the Company and Citibank, N.A., as trustee, relating to the Company's Medium-Term Note Program, filed March 31, 1994 as Exhibit 4(4)(a) to the Company's Form 10-K Report for the year ended December 31, 1993, incorporated herein by reference.
4(4)(b) Form of Floating Rate Debt Security, filed December 16, 1993 as Exhibit 4-a to the Company's Report on Form 8-K, incorporated herein by reference.
4(4)(c) Form of Fixed Rate Debt Security, filed December 16, 1993 as Exhibit 4-b to the Company's Report on Form 8-K, incorporated herein by reference.
Management Contracts and Compensatory Plans and Arrangements (Exhibits 10(1) - 10(22)) ------------------------
10(1)(a) 1981 Long Term Incentive Plan, as amended through November 4, 1988, filed as Exhibit 10(1)(a) to the Company's Report on Form 10-K for the year 1988, incorporated herein by reference.
10(1)(b) Amendment to 1981 Long Term Incentive Plan, dated as of February 27, 1990, filed as Exhibit 10(1)(b) to the Company's Report on Form 10-K for the year 1989, incorporated herein by reference.
10(1)(c) Amendment to 1981 Long Term Incentive Plan, effective as of June 25, 1991, filed as Exhibit 10(1)(c) to the Company's Report on Form 10-K for the year 1991, incorporated herein by reference.
10(1)(d) Amendment to 1981 Long Term Incentive Plan, effective as of June 23, 1992, filed as Exhibit 10(1)(d) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(1)(e) Amendment to 1981 Long Term Incentive Plan, effective as of February 23, 1993, filed as Exhibit 10(1)(e) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(1)(f) Addendum to 1981 Long Term Incentive Plan, filed April 30, 1987 as Exhibit 28(a) to the Company's Form S-8 Registration Statement (Reg. No. 33-13902), incorporated herein by reference.
10(2)(a) 1981 Incentive Stock Option Plan, as amended through April 30, 1987, filed April 30, 1987 as Exhibit 28(a) to the Company's Form S-8 Registration Statement (Reg. No. 33-13902), incorporated herein by reference.
10(2)(b) Amendment to 1981 Incentive Stock Option Plan, dated as of February 27, 1990, filed as Exhibit 10(2)(b) to the Company's Report on Form 10-K for the year 1989, incorporated herein by reference.
10(2)(c) Amendment to 1981 Incentive Stock Option Plan, effective as of June 23, 1992, filed as Exhibit 10(2)(c) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(2)(d) Amendment to 1981 Incentive Stock Option Plan, effective as of February 23, 1993, filed as Exhibit 10(2)(d) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(3)(a) 1991 Stock Option Plan, filed as Exhibit 10(3) to the Company's Report on Form 10-K for the year 1990, incorporated herein by reference.
10(3)(b) First Amendment to 1991 Stock Option Plan, effective as of July 1, 1991, filed as Exhibit 10(3)(b) to the Company's Report on Form 10-K for the year 1991, incorporated herein by reference.
10(3)(c) Second Amendment to 1991 Stock Option Plan, effective as of July 1, 1991, filed as Exhibit 10(3)(c) to the Company's Report on Form 10-K for the year 1991, incorporated herein by reference.
10(3)(d) Third Amendment to 1991 Stock Option Plan, effective as of June 23, 1992, filed as Exhibit 10(3)(d) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(3)(e) Fourth Amendment to 1991 Stock Option Plan, effective as of February 23, 1993, filed as Exhibit 10(3)(e) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(3)(f) Fifth Amendment to 1991 Stock Option Plan, effective as of February 23, 1993, filed as Exhibit 10(3)(f) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(3)(g) Addendum to 1991 Stock Option Plan, filed as Exhibit 10(3)(g) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(3)(h) Sixth Amendment to 1991 Stock Option Plan, effective as of February 1, 1994, filed as Exhibit 10(3)(h) to the Company's Report on Form 10-K for the year 1993, incorporated herein by reference.
10(4)(a) 1989 Restricted Stock Plan, as amended through December 31, 1990, filed as Exhibit 10(4) to the Company's Report on Form 10-K for the year 1990, incorporated herein by reference.
10(4)(b) Amendment to 1989 Restricted Stock Plan, effective as of February 23, 1993, filed as Exhibit 10(4)(b) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(5) Supplemental Executive Retirement Plan, effective July 1, 1986, as amended and restated effective July 1, 1994, filed as Exhibit 10(6) to the Company's Report on Form 10-Q for the quarter ended June 30, 1994, incorporated herein by reference.
10(6) Trust Agreement between the Company and The Northern Trust Company, dated as of October 31, 1988, filed as Exhibit 10(6) to the Company's Report on Form 10-K for the year 1988, incorporated herein by reference.
10(7) Pension Plan for Non-Employee Directors, filed as Exhibit 10(10) to the Company's Report on Form 10-K for the year 1990, incorporated herein by reference.
10(8)(a) 1992 Directors Stock Incentive Plan, filed as Exhibit 10(11) to the Company's Report on Form 10-K for the year 1991, incorporated herein by reference.
10(8)(b) First Amendment to 1992 Directors Stock Incentive Plan, effective as of August 18, 1992, filed as Exhibit 10(8)(b) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(8)(c) Second Amendment to 1992 Directors Stock Incentive Plan, effective as of February 23, 1993, filed as Exhibit 10(8)(c) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(8)(d) Third Amendment to the 1992 Directors Stock Incentive Plan, effective as of August 24, 1993, filed as Exhibit 10(3) to the Company's Report on Form 10-Q/A for the quarterly period ended September 30, 1993, incorporated herein by reference.
10(8)(e) Fourth Amendment to Tambrands Inc. 1992 Directors Stock Incentive Plan, effective as of April 28, 1994, filed as Exhibit 10(7) to the Company's Report on Form 10-Q for the quarter ended June 30, 1994, incorporated herein by reference.
10(8)(f) Fifth Amendment to the Tambrands Inc. 1992 Directors Stock Incentive Plan, effective as of September 1, 1994, filed as Exhibit 10(4) to the Company's Report on Form 10-Q for the
quarter ended September 30, 1994, incorporated herein by reference.
10(9)(a) Employment Protection Agreement between the Company and Mr. Edward T. Fogarty, dated as of May 31, 1994, filed as Exhibit 10(1) to the Company's Report on Form 10-Q for the quarter ended June 30, 1994, incorporated herein by reference;
10(9)(b) Employment Protection Agreement between the Company and Mr. Michael K. Lorelli, dated as of August 31, 1994, filed as Exhibit 10(2) to the Company's Report on Form 10-Q for the quarter ended September 30, 1994, incorporated herein by reference;
10(9)(c) Employment Protection Agreement between the Company and Mr. Thomas J. Mason, dated as of October 18, 1994, filed herewith;
10(9)(d) Employment Protection Agreement between the Company and Mr. Thomas Soper, III, dated as of August 29, 1994, filed herewith;
The Company has agreements similar to the agreements listed as Exhibits 10(9)(c) and 10(9)(d) with its other executive officers.
10(10) Resolution of the Board of Directors of the Company with respect to the compensation of the Chairman of the Board, adopted on April 25, 1995, filed as Exhibit 10(2) to the Company's Report on Form 10-Q for the quarter ended June 30, 1995, incorporated herein by reference.
10(11) Resolution of the Board of Directors of the Company with respect to the compensation of the Board, adopted on December 13, 1994, filed as Exhibit 10(11) to the Company's Report on Form 10-K for the year 1994, incorporated herein by reference.
10(12) 1995 Directors Stock and Deferred Compensation Plan, effective as of July 1, 1995, included as Exhibit A to the Company's Proxy Statement, dated March 10, 1995, for the annual meeting of shareholders held on April 25, 1995, incorporated herein by reference.
10(13) Executive Severance Program of the Company, filed as Exhibit 10(15) to the Company's Report on Form 10-K for the year 1989, incorporated herein by reference.
10(14) 1981 Annual Incentive Plan of the Company, as amended through March 30, 1995, filed as Exhibit 10(1) to the Company's Report on Form 10-Q for the quarter ended March 31, 1995, incorporated herein by reference.
10(15) Letter Agreement between the Company and Mr. Edward T. Fogarty, dated as of April 25, 1994, filed as Exhibit 10(1) to the Company's Report on Form 10-Q for the quarter ended June 30, 1994, incorporated herein by reference.
10(16) Letter Agreement between the Company and Mr. Michael K. Lorelli, dated as of August 30, 1994, filed as Exhibit 10(1) to the Company's Report on Form 10-Q for the quarter ended September 30, 1994, incorporated herein by reference.
10(17) Letter Agreement between the Company and Mr. Thomas Soper, III, dated as of August 29, 1994, filed as Exhibit 10(17) to the Company's Report on Form 10-K for the year 1994, incorporated herein by reference.
10(18) Letter Agreement between the Company and Mr. Thomas J. Mason, dated as of October 18, 1994, filed as Exhibit 10(18) to the Company's Report on Form 10-K for the year 1994, incorporated herein by reference.
10(19) Letter Agreement between the Company and Mr. Michael S. Krause, dated as of July 5, 1995, filed as Exhibit 10(1) to the Company's Report on Form 10-Q for the quarter ended September 30, 1995, incorporated herein by reference.
10(20) Restricted Stock Agreement between the Company and Mr. Edward T. Fogarty, dated May 31, 1994, filed as Exhibit 10(3) to the Company's Report on Form 10-Q for the quarter ended June 30, 1994, incorporated herein by reference.
10(21) Stock Option Agreement between the Company and Mr. Edward T. Fogarty, dated May 31, 1994, filed as Exhibit 10(4) to the Company's Report on Form 10-Q for the quarter ended June 30, 1994, incorporated herein by reference.
10(22) Early Retirement Agreement between the Company and Mr. Raymond F. Wright, dated as of August 1, 1995, filed as Exhibit 10(2) to the Company's Report on Form 10-Q for the quarter
ended September 30, 1995, incorporated herein by reference.
10(23)(a) Commercial Paper Dealer Agreement between the Company and Merrill Lynch Money Markets, Inc., dated November 18, 1992, filed as Exhibit 10(15) (a) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(23)(b) Letter Agreement between the Company and the First National Bank of Chicago, dated as of November 18, 1992, filed as Exhibit 10(15)(b) to the Company's Report on Form 10-K for the year 1992, incorporated herein by reference.
10(23)(c) Amended and Restated Credit Agreement by and among the Company, Tambrands Limited, the signatory banks thereto and The Bank of New York, as agent, dated as of September 6, 1994, filed as Exhibit 10(5) to the Company's Report on Form 10-Q for the quarter ended September 30, 1994, incorporated herein by reference.
10(23)(d) Amendment No. 1, dated as of May 5, 1995, to the Amended and Restated Credit Agreement, dated as of September 6, 1994, by and among the Company, Tambrands Limited, the signatory banks thereto and The Bank of New York, as agent, filed as Exhibit 10(3) to the Company's Report on Form 10-Q for the quarter ended June 30, 1995, incorporated herein by reference.
12 Computation of Ratio of Earnings to Fixed Charges, filed herewith.
21 Subsidiaries of the Company, filed herewith.
23 Independent Auditors' Consent, filed herewith.
24 Powers of attorney, filed herewith.
27 Financial Data Schedules, filed herewith (in electronic format only).
(b) Reports on Form 8-K
The Company filed a Report under Item 5 of Form 8-K on October 27, 1995 in order to file a press release, issued by the Company on October 25, 1995, which contained the Company's third-quarter 1995 results.
TAMPAX, COMPAK, LITES, TAMPAX NATURALS, NATURAL GLIDE, SATIN, SATIN TOUCH, TAMPAX SILKS, SOLOS and TAMPETS are trademarks of Tambrands Inc.
SIGNATURES ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TAMBRANDS INC.
Date: March 28, 1996 By /s/ EDWARD T. FOGARTY ------------------------- Edward T. Fogarty 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.
Signature Title Date --------- ----- ----
/s/ EDWARD T. FOGARTY President and Chief March 28, 1996 - --------------------------- Executive Officer EDWARD T. FOGARTY and Director (Principal Executive Officer)
/s/ SUSAN J. RILEY Senior Vice March 28, 1996 - --------------------------- President-Chief SUSAN J. RILEY Financial Officer (Principal Financial Officer and Principal Accounting Officer)
/s/ HOWARD B. WENTZ, JR. Chairman and March 28, 1996 - --------------------------- Director HOWARD B. WENTZ, JR.
* - --------------------------- Director March 28, 1996 LILYAN H. AFFINITO
Signature Title Date --------- ----- ----
* - --------------------------- Director March 28, 1996 ANNE M. BUSQUET
* - --------------------------- Director March 28, 1996 PAUL S. DOHERTY
* - --------------------------- Director March 28, 1996 JANET HILL
* - --------------------------- Director March 28, 1996 ROBERT P. KILEY
* - --------------------------- Director March 28, 1996 JOHN LOUDON
* - --------------------------- Director March 28, 1996 RUTH M. MANTON
* - --------------------------- Director March 28, 1996 JOHN A. MEYERS
* - --------------------------- Director March 28, 1996 H.L. TOWER
* - --------------------------- Director March 28, 1996 ROBERT M. WILLIAMS
*By /s/ EDWARD T. FOGARTY ------------------------ Edward T. Fogarty Attorney-in-Fact
INDEX TO FINANCIAL INFORMATION ------------------------------
Page Reference ---------
Selected Financial Data................................
Management's Discussion and Analysis of Results of Operations and Financial Condition..........
Financial Statements:
Consolidated Statements of Earnings for the years ended December 31, 1995, 1994 and 1993....................
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993....................
Consolidated Balance Sheets as of December 31, 1995 and 1994..........................
Notes to Consolidated Financial Statements...........................................
Independent Auditors' Report on Consolidated Financial Statements....................
Financial Statement Schedule:
II Valuation and Qualifying Accounts...........
Independent Auditors' Report on Financial Statement Schedule.........................
Supplementary Financial Information and Quarterly Data for the years ended December 31, 1995 and 1994 ....................
TAMBRANDS INC. Selected Financial Data ($ In Thousands, Except Per Share Amounts)
(a) Results and related financial data for 1995 include the Litigation charge and for 1993 and 1991 include Restructuring and other charges.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
1995 vs. 1994
Consolidated Net sales for 1995 were $683.1 million, an increase of 6% from 1994. The increase was primarily due to higher unit sales in the United States, Russia/Ukraine, Canada, Latin America and in Europe with the exception of the United Kingdom. The overall increase in unit sales was principally attributable to the strengthening of the tampon category and Tampax market shares over the prior year in our core markets, with the exception of the United Kingdom where the category has declined but has recently shown improvement. Strong unit sales were augmented by foreign exchange gains but somewhat offset by lower average prices in the United States due to changes in the sales mix.
Gross profit as a percent of Net sales was 66% for 1995 vs. 68% in 1994. The margin reduction in the current year is principally due to a change in the mix of product and package sizes, increasing costs of raw and packaging materials, and manufacturing start-up costs in the United States associated with the fourth-quarter 1995 relaunch of the Tampax flushable line and the production of Tampax Naturals, which will be launched in early 1996. This reduction is partially offset by productivity improvements resulting from our capital spending program.
Marketing, selling and distribution expenses were up 2% compared with the prior year. The increase is primarily due to unfavorable foreign exchange translations and higher marketing expenditures partially offset by lower fourth-quarter advertising and promotional activity in anticipation of the Tampax Naturals launch in the United States.
Administrative and general expenses were 1% lower than last year primarily a result of management's continuing efforts to contain overhead costs. A reduction in the United States was partially offset by higher costs in international markets due to management changes and the growing businesses in Russia and Ukraine.
Operating income of $160.4 million was 6% higher than the prior year. The increased sales volume was partially mitigated by the factors reducing Gross profit discussed above.
Interest, net and other expense decreased slightly in 1995 compared to 1994. A reduction in realized foreign exchange losses was partially offset by higher interest expense resulting from higher average interest rates and overall higher borrowing levels.
In the second quarter of 1995, the Company provided $11.4 million for several legal proceedings related to previously divested non-tampon businesses and for settlement of a securities class action filed in 1993.
The effective tax rate for 1995 was 38.6%, compared to 36.7% for 1994. The higher effective tax rate in 1995 was due primarily to the litigation charge, the cost of which is not fully deductible for tax purposes. Exclusive of the litigation charge, the current effective tax rate would have been 37.5% for 1995.
1995 Earnings per share were $2.33 compared to $2.43 in 1994. The principal reason for the decline is due to the litigation charge that the Company took in the second quarter. Exclusive of the litigation charge, Earnings per share would have been $2.57 compared to $2.43 in 1994.
Outlook
The Company anticipates that the worldwide market for consumer products will continue to be highly competitive and sensitive to price. However, management will continue to evaluate price increase opportunities as appropriate. The Company expects the current level of advertising and promotional activities and new product introductions by competitors to remain strong, along with continued activity in the private label sector.
In the United States, the Company relaunched an upgraded version of its original Tampax tampon line in the fourth quarter of 1995. On October 2, the Company announced the U.S. introduction of a new product, Tampax Naturals, the only nationally available tampon or pad to be made of 100% cotton. Tampax Naturals will be launched in the first quarter of 1996. The preparation for the launch of our new Tampax Naturals product was a significant factor in the softening of the tampon category and Tampax market share in the fourth quarter. The Company reduced its fourth-quarter U.S. advertising and promotional activity while awaiting the full distribution of this new product. In 1996, the Company intends to proceed with its aggressive support of the Tampax tampon franchise with heightened levels of advertising and promotional activities and product line innovations in the United States and international markets.
The cost of manufacturing will continue to be impacted by the escalation of raw material and packaging costs that occurred in 1995. The Company intends to continue with productivity initiatives to help mitigate the effect of these cost increases. Based on the current downward trend of pulp and paper prices, management expects these costs to decline somewhat through the latter part of 1996.
1994 vs. 1993
Consolidated Net sales for 1994 were $644.5 million, an increase of 5% from 1993. The increase was primarily due to higher worldwide unit sales, principally in the United States, driven by stabilization of retail trade inventories and the successful launch of two new products, Tampax Satin Touch and Tampax Lites. Sales volumes were also favorable in Europe where new products were launched in both the United Kingdom and France and in the developing markets of Russia and Ukraine.
Gross profit as a percent of Net sales was 68% for 1994, up from 67% in 1993. The increase in margin reflected the impact of higher sales volume along with the Company's continued support of its worldwide manufacturing efficiency programs and its capital expenditures for productivity improvements.
Marketing, selling and distribution expenses were up 16% compared with the prior year. The higher spending was primarily attributable to increased advertising and promotions worldwide to support the Tampax tampon franchise. This higher brand support was partially offset by reductions in overhead spending. In the United States, the Company regained market share throughout 1994 in the growing tampon category. Total year market share recovered to within 1% of 1993.
A 14% savings was experienced in Administrative and general expenses, principally due to the consolidation of international management units and on- going overhead reduction programs.
Increased sales volume combined with overhead savings was partially offset by increased brand support spending. This resulted in a 4% net improvement in Operating income versus 1993, exclusive of the 1993 restructuring charge.
Interest, net and other reflected a significant increase in expense in 1994 compared to 1993. Foreign exchange transactions resulted in costs in the current year versus gains in 1993. Additionally, interest expense was higher reflecting an increase in the Company's debt level and higher average interest rates.
The effective tax rate for 1994 was 36.7% compared to 37.9% in 1993. The higher effective tax rate in 1993 was primarily due to the restructuring charge, the cost of which was not fully deductible for tax purposes. Exclusive of the restructuring charge, the 1993 effective tax rate was 36.8%.
1994 Earnings per share were $2.43 in comparison to $1.64 in 1993. Earnings per share were the same as the prior year before the impact of the restructuring charge and adoption of SFAS No. 112 in 1993. The increase in Earnings per share was greater than that of Net earnings because fewer shares were outstanding on average in 1994 due to the Company's share repurchase program.
FINANCIAL CONDITION
Cash Flows from Operating Activities
1995 Cash flows from operating activities were $101.9 million compared to $128.9 for 1994. The principal reasons for the decline in Cash flows from operating activities versus the prior year were lower accrued liabilities caused by timing of promotional programs, higher accounts receivable due to strong December shipments and the build of inventories for the Russia/Ukraine developing markets and the U.S. launch of Naturals.
Over the past three years, Cash flows from operating activities were $359.5 million. These funds were used for the payment of dividends, capital expenditures and the repurchase of Common Stock for treasury purposes.
Capital Expenditures
The 1995 capital spending programs related to investments in equipment to improve product quality and productivity, modernize production facilities and manufacture and launch new products. Over the past three years, the Company spent $128.9 million on capital improvements. 1996 spending levels are expected to approximate those of 1995.
Liquidity and Capital Resources
During 1995, the Company continued to utilize its strong debt rating and a favorable financial climate to take advantage of low U.S. interest rates through short-term bank credit lines and a commercial paper program. Additionally, the Company maintains a $150 million medium-term note program of which $70 million was outstanding at December 31, 1995.
Cash flows from operations and the ability to borrow from a variety of sources will provide the Company with the liquidity to continue the investments necessary to meet the Company's long-term strategic goals.
The Company also utilizes cash resources to enhance shareholder value through the payment of dividends and its stock repurchase program. In 1995, cash dividends of $65.3 million were paid. During the year, the Company spent $4.3 million in its Common Stock repurchase program. Since 1989, 7,720,300 shares have been repurchased.
CONSOLIDATED STATEMENTS OF EARNINGS
Tambrands Inc. and subsidiaries
YEARS ENDED DECEMBER 31 (in thousands, except per share amounts) 1995 1994 1993 -------- -------- -------- Net Sales $683,092 $644,513 $611,465 Cost of products sold 231,625 206,111 201,706 -------- -------- -------- Gross profit 451,467 438,402 409,759 Selling, administrative and general expenses: Marketing, selling and distribution 238,558 233,753 202,031 Administrative and general 52,546 53,034 61,378 Restructuring and other charges - - 30,042 -------- -------- -------- 291,104 286,787 293,451 -------- -------- -------- Operating Income 160,363 151,615 116,308 Interest, net and other (9,632) (9,864) 2,344 Litigation charge (11,396) - - -------- -------- -------- Earnings before provision for income taxes and cumulative effect of accounting change 139,335 141,751 118,652 Provision for income taxes 53,813 52,022 44,950 -------- -------- -------- Earnings Before Cumulative Effect of Accounting Change 85,522 89,729 73,702 Cumulative effect of accounting change - - (10,252) -------- -------- -------- Net Earnings $ 85,522 $ 89,729 $ 63,450 ======== ======== ======== Average number of shares outstanding 36,671 36,992 38,632
Per Share Earnings before cumulative effect of accounting change $ 2.33 $ 2.43 $ 1.91 Cumulative effect of accounting change - - (0.27) -------- -------- -------- Net earnings $ 2.33 $ 2.43 $ 1.64 ======== ======== ======== Dividends $ 1.78 $ 1.70 $ 1.56 -------- -------- --------
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Tambrands Inc. and subsidiaries
YEARS ENDED DECEMBER 31 (in thousands) 1995 1994 1993 -------- -------- -------- Cash Flows from Operating Activities Net earnings $ 85,522 $ 89,729 $ 63,450 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 25,667 24,284 18,372 Deferred income taxes 2,158 4,557 (3,400) Cumulative effect of accounting change - - 10,252 Litigation charge 4,425 - - Restructuring and other charges (3,587) (10,417) 14,946 Change in: Accounts receivable (14,737) (2,224) 21,485 Inventories (8,326) 1,503 537 Prepaid expenses and other current assets (591) (1,901) (81) Taxes on income 8,350 5,925 3,426 Accounts payable and accrued expenses 2,974 17,415 (256) -------- -------- -------- Net cash provided by operating activities 101,855 128,871 128,731 -------- -------- -------- Cash Flows from Investing Activities Capital expenditures (44,778) (38,470) (45,636) Proceeds from sales of property, plant and equipment 108 2,093 3,686 Proceeds from sales of marketable securities - 639 1,164 -------- -------- -------- Net cash used in investing activities (44,670) (35,738) (40,786) -------- -------- -------- Cash Flows from Financing Activities Payment of dividends (65,274) (62,721) (60,154) Purchase of shares for treasury (4,326) (71,118) (57,946) Short-term debt changes (17,448) 6,149 (18,308) Reduction of medium-term obligations (1,094) - - Proceeds from medium-term obligations 24,091 29,983 30,000 Proceeds from exercise of stock options and other 5,307 2,422 12,432 -------- -------- -------- Net cash used in financing activities (58,744) (95,285) (93,976) -------- -------- -------- Effect of exchange rate changes on cash (1,182) 730 (658) -------- -------- -------- Net decrease in cash and cash equivalents (2,741) (1,422) (6,689) Cash and cash equivalents at beginning of year 13,876 15,298 21,987 -------- -------- -------- Cash and cash equivalents at end of year $ 11,135 $ 13,876 $ 15,298 ======== ======== ======== Supplemental Cash Flow Information Income taxes paid $ 44,756 $ 49,500 $ 49,567 Interest paid 9,188 4,573 4,574 -------- -------- --------
See accompanying notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
Tambrands Inc. and subsidiaries
YEARS ENDED DECEMBER 31 (in thousands, except per share amounts) 1995 1994 -------- -------- Assets Current assets Cash and cash equivalents $ 11,135 $ 13,876 Accounts receivable, net 98,047 80,593 Inventories 46,736 37,957 Deferred taxes on income 17,724 18,892 Prepaid expenses 12,289 14,385 Other current assets 13,982 11,433 -------- -------- Total current assets 199,913 177,136 Property, plant and equipment, net 216,122 194,315 Intangible and other assets 6,014 7,624 -------- -------- Total assets $422,049 $379,075 ======== ======== Liabilities and Shareholders' Equity Current liabilities Short-term borrowings $ 55,063 $ 70,517 Accounts payable 48,498 31,530 Accrued expenses 73,330 80,381 Taxes on income 27,078 20,732 -------- -------- Total current liabilities 203,969 203,160 Medium-term obligations 80,889 59,983 Deferred taxes on income 22,537 21,450 Postemployment benefits 11,682 12,468 -------- -------- Total liabilities 319,077 297,061
Shareholders' equity Common Stock, authorized 300,000,000 shares, par value $.25 per share; issued 43,547,938 shares 10,887 10,887 Retained earnings 476,252 457,071 Cumulative foreign currency translation adjustment (14,223) (13,621) Treasury stock (368,543) (371,016) Unamortized value of restricted stock and pension costs (1,401) (1,307) -------- -------- Total shareholders' equity 102,972 82,014 -------- -------- Total liabilities and shareholders' equity $422,049 $379,075 ======== ========
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tambrands Inc. and subsidiaries
(dollar amounts in thousands, except per share amounts)
NOTE 1
ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. Where alternatives exist, the choices selected are described below.
Principles of Consolidation
The consolidated financial statements include the accounts of Tambrands Inc. and all majority owned subsidiaries (the "Company"). All significant intercompany accounts and transactions are eliminated.
Foreign Currency Translation
For most foreign subsidiaries, the local currency is the functional currency and gains or losses resulting from translation are accumulated in a separate component of Shareholders' equity. For subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. In such cases, working capital items are translated using current exchange rates and all other balance sheet items are remeasured at historical exchange rates. Any gains or losses from remeasurement are included in earnings.
Cash Equivalents
Highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using the LIFO method for all domestic inventories. All other inventories are stated at FIFO.
Depreciation
Depreciation is computed on the straight-line and accelerated methods over the useful lives of the assets.
Intangibles
Intangible assets are amortized on a straight-line basis over periods not exceeding 40 years.
Financial Instruments
The Company utilizes derivative financial instruments, principally options and forward contracts, for the purpose of reducing its exposure to adverse fluctuations in foreign exchange rates. These contracts hedge actual and anticipated transactions and balances for periods consistent with the Company's committed and expected exposures. Gains and losses on hedges of existing assets or liabilities are included in the carrying amounts of those assets or liabilities and are recognized in income as part of those carrying amounts. Gains and losses on contracts that do not qualify as hedges are recognized in earnings. Unamortized option premiums are deferred and amortized over the period being hedged. The Company does not hold or issue financial instruments for trading purposes.
Advertising Costs
Advertising costs are charged to earnings as incurred.
Earnings Per Share
Earnings per share of Common Stock are based on the average number of shares outstanding during each period. Outstanding stock options do not have a significant dilutive effect.
Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
New Accounting Standards
In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" was issued. In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation" was issued. Management believes that adoption of these Statements will not have a material impact on the Company's financial position and results of operations. These Statements are effective for fiscal years beginning after December 15, 1995.
Reclassifications
Certain reclassifications have been made to prior years' financial statements to conform to the 1995 presentation.
NOTE 2
BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts at December 31 are as follows: 1995 1994 -------- -------- Accounts receivable, net Accounts receivable trade $ 93,603 $ 77,235 Less allowance for doubtful accounts 1,667 1,456 -------- -------- 91,936 75,779 Other 6,111 4,814 -------- -------- $ 98,047 $ 80,593 ======== ======== Other current assets Spare parts inventory $ 10,460 $ 8,753 Other 3,522 2,680 -------- -------- $ 13,982 $ 11,433 ======== ======== Inventories Raw materials $ 17,952 $ 12,967 Finished goods 28,784 24,990 -------- -------- $ 46,736 $ 37,957 ======== ======== Current cost of LIFO inventories $ 30,834 $ 30,617 Stated value of LIFO inventories 15,098 14,713 -------- -------- Excess of current cost over stated value $ 15,736 $ 15,904 ======== ========
1995 1994 --------- --------- Property, plant and equipment, net (at cost) Buildings, leaseholds and improvements $ 63,972 $ 56,522 Machinery, equipment and fixtures 245,931 230,333 Land 3,802 3,808 Construction in progress 39,724 23,794 -------- -------- 353,429 314,457 Less accumulated depreciation 137,307 120,142 -------- -------- $216,122 $194,315 ======== ======== Intangible and other assets Cost $ 12,983 $ 14,066 Less accumulated amortization 6,969 6,442 -------- -------- $ 6,014 $ 7,624 ======== ======== Accrued expenses Promotions $ 20,032 $ 27,723 Salaries and benefits 25,067 25,480 Litigation reserves 5,180 - Restructuring reserves 3,916 5,205 Other liabilities 19,135 21,973 -------- -------- $ 73,330 $ 80,381 ======== ========
NOTE 3
STATEMENT OF EARNINGS INFORMATION 1995 1994 1993 -------- -------- -------- Interest, net and other Net financing: Interest income $ 1,124 $ 1,304 $ 983 Interest expense (9,206) (7,645) (4,890) -------- -------- -------- (8,082) (6,341) (3,907) Net realization on foreign currency transactions (1,743) (3,449) 6,551 Other 193 (74) (300) -------- -------- -------- $ (9,632) $ (9,864) $ 2,344 ======== ======== ======== Depreciation $ 25,127 $ 23,545 $ 17,570 Advertising 63,272 66,484 48,309 Research and development 12,204 10,735 9,881
NOTE 4
BENEFIT PLANS
The Company maintains several non-contributory pension plans covering domestic and foreign employees who meet certain minimum service and age requirements and provides supplemental non-qualified retirement benefits to non-employee directors, certain officers and key employees. Pensions are based upon earnings of covered employees during their periods of credited service. The Company's funding policy for its pensions is to make the annual contributions required by applicable regulations.
The following table sets forth the funded status of the plans and the amounts recognized in the accompanying financial statements.
1995 1994 -------- -------- Plan assets at fair value, primarily stocks and bonds $107,897 $ 86,950 Actuarial present value of benefit obligations: Vested benefits 101,510 87,645 Nonvested benefits 6,510 4,749 -------- -------- Accumulated benefit obligation 108,020 92,394 Effect of projected future salary increases 9,883 7,949 -------- -------- Projected benefit obligation 117,903 100,343 -------- -------- Projected benefit obligation in excess of plan assets 10,006 13,393 Deferred actuarial adjustments (203) 412 Deferred prior service cost (2,913) (3,527) -------- -------- Accrued pension cost included in accrued expenses $ 6,890 $ 10,278 ======== ========
At December 31, 1995 and 1994, the accumulated benefit obligation of the domestic plans exceeded plan assets by $8,460 and $9,962, respectively.
The net cost of pensions included in the Statements of earnings consists of:
1995 1994 1993 -------- -------- -------- Service cost: benefits earned during the period $ 3,940 $ 5,045 $ 4,940 Interest cost on projected benefit obligation 8,389 8,093 7,288 Actual return on plan assets (19,493) 3,375 (12,703) Net amortization and deferral 11,900 (10,289) 6,697 -------- -------- -------- $ 4,736 $ 6,224 $ 6,222 ======== ======== ========
In 1995 and 1994, the discount rates used to determine the projected benefit obligation for the domestic plans were 7.25% and 8.5%, respectively, and the rates of increase in future compensation were 4.5% and 5%, respectively. For the international plans, the discount rates used to determine the projected benefit obligation ranged from 7.5% to 8% in 1995 and was 9% in 1994, and the rates of increase in future compensation ranged from 5% to 6% and 5.5% to 6% in 1995 and 1994, respectively. Expected long-term rates of return on plan assets ranged from 8.5% to 10% in 1995 and 8.5% to 9.25% in 1994. Prior service costs arising from plan amendments are amortized on a straight-line basis over the average remaining service period of employees expected to receive benefits under each plan.
As of January 1, 1993, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," recognizing a charge to earnings of $16,000, amounting to $10,252 after tax or $0.27 per share. In 1992, the Company recognized the full amount of its estimated accumulated postretirement benefit obligation in accordance with the provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The incremental annual cost of accounting for postretirement and postemployment benefits under the new accounting methods is not material. The actuarial assumptions used to measure the cost of postretirement benefits are consistent with those used to measure the cost of the pension plans.
The Company also sponsors a defined contribution 401(k) savings plan available to domestic employees who meet certain minimum age and service requirements. The plan, which is funded principally with the Company's Common Stock, includes provision for a discretionary contribution by the Company of up to 2% of each employee's covered earnings based on Company performance.
NOTE 5
INCOME TAXES
Provision for income taxes for the years ended December 31 has been made as follows:
1995 1994 1993 -------- -------- -------- Current tax expense United States $ 45,597 $ 47,866 $ 44,558 Foreign 6,058 (401) 3,792 -------- -------- -------- 51,655 47,465 48,350 Deferred tax expense United States 754 6,699 (3,915) Foreign 1,404 (2,142) 515 -------- -------- -------- 2,158 4,557 (3,400) -------- -------- -------- $ 53,813 $ 52,022 $ 44,950 ======== ======== ========
Provision has not been made for income taxes on foreign subsidiaries' unremitted earnings to the extent that such earnings have been reinvested in the business; any U.S. income taxes payable on the distribution of available earnings should generally be offset by credits for foreign taxes paid.
Reconciliation of the statutory federal income tax rates to the Company's effective tax rates for the years ended December 31 are as follows:
1995 1994 1993 ---- ---- ---- Statutory federal tax rate 35.0% 35.0% 35.0% State taxes-net of federal benefit 3.5 4.3 3.9 Rate differential on foreign income (3.7) (2.3) (2.3) Effect of litigation charge 1.1 - - Effect of restructuring charge - - 1.1 Other differences 2.7 (0.3) 0.2 ---- ---- ---- Effective tax rate 38.6% 36.7% 37.9% ==== ==== ====
During 1995 and 1994, Shareholders' equity was credited for $343 and $76, respectively, for tax benefits relating to compensation expense for tax purposes in excess of the amounts recognized for financial reporting purposes.
Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
The components of the net deferred tax assets (liabilities) for the years ended December 31 are as follows:
1995 1994 -------- -------- Deferred tax assets: Employee benefits $ 5,620 $ 5,320 Postemployment benefits 4,098 4,208 Intercompany transactions 4,588 4,785 Accrued liabilities 4,446 5,579 Other 4,271 4,830 -------- -------- 23,023 24,722 -------- -------- Deferred tax liabilities: Property, plant and equipment 21,351 19,307 Safe harbor leases 5,973 6,816 Other 512 1,157 -------- -------- 27,836 27,280 -------- -------- $ (4,813) $ (2,558) ======== ========
NOTE 6
RESTRUCTURING AND OTHER CHARGES
In 1993, the Company announced a program to restructure its worldwide operations to improve efficiency and reduce costs. Its previous investments in technology enabled it to operate with reduced manufacturing and administrative overhead and fewer employees. As a result, the Company provided $30,042, or $20,273 after tax, for this restructuring and the cost of management changes caused by the adoption of a consolidated international management strategy. During 1995, the reserve was reduced by $1,289 comprised primarily of international severance payments. At December 31, 1995, the remaining accrual of $3,916 related primarily to committed severance plans which will be substantially complete by December 31, 1996.
NOTE 7
COMMITMENTS AND CONTINGENCIES
The Company's lease of its headquarters in White Plains, New York and European headquarters in the United Kingdom are non-cancelable operating leases. Future minimum lease payments under operating leases with terms in excess of one year amount to $4,407 in 1996, $3,752 in 1997, $3,087 in 1998, $2,164 in 1999 and $1,890 in 2000. Rent expense in 1995, 1994 and 1993 amounted to $5,029, $4,270 and $5,027, respectively.
The Company has been named in product liability litigation and claims arising from the alleged association of tampons with Toxic Shock Syndrome. The cases seek compensatory and punitive damages in various amounts.
The Company and certain of its former officers were named as defendants in a securities class action filed in 1993. In November 1995, the court approved a settlement of this litigation and dismissed the action against all defendants. The Company is involved, either as a named defendant or as the result of contractual indemnities, in several legal proceedings related to previously divested non-tampon businesses. Included in these are a patent infringement action and an environmental matter. In the second quarter of 1995, the Company provided for $11,396 ($8,686 after tax) for expenses related to the class action and other legal proceedings described in this paragraph.
There are certain other legal proceedings pending against the Company arising out of its normal course of business in which claims for monetary damages are asserted.
While it is not feasible to predict the outcome of these legal proceedings and claims with certainty, management is of the belief that any ultimate liabilities in excess of provisions therefor will not individually or in the aggregate have a material adverse effect on the Company's financial position or results of operations.
NOTE 8
OBLIGATIONS
The Company's Short-term borrowings consist of commercial paper and notes payable bearing interest at prevailing market rates and supported by bank lines of credit amounting to $120,000 and $150,000 at December 31, 1995 and 1994, respectively. Commercial paper borrowings at December 31, 1995 and 1994 were $42,672 and $57,201, with average annual year-end interest rates of 5.6% and maturities through the second quarter of the subsequent year. Notes payable at December 31, 1995 and 1994 totaled $10,419 and $13,316 at average annual rates outstanding throughout the year of 7% and 5.7%, respectively. Commitment fees to secure the lines of credit are not material.
During 1995, the Company entered into $14,104 of medium-term obligations. At December 31, 1995, there were $12,869 outstanding of which $1,972 was payable within the next year. These obligations carry interest rates ranging from 7% to 7.9% and have various maturities through June 2003.
At December 31, 1995 and 1994, there were $70,000 and $60,000 of unsecured notes outstanding, respectively. At the end of both years, the notes carried interest rates ranging from 4.7% to 7.4% and had maturities ranging from January 1997 to May 2004.
The annual maturities on all medium-term obligations through the next five years amount to $1,972 in 1996, $12,147 in 1997, $2,319 in 1998, $32,501 in 1999 and $11,737 in 2000.
The terms of the Company's financing arrangements include various covenants which provide, among other things, for limitations on liens and the maintenance of a minimum debt service ratio. The Company was in compliance with such covenants at December 31, 1995.
NOTE 9
FINANCIAL INSTRUMENTS
As part of its risk management program, the Company minimized its exposure to foreign currency fluctuation through the use of forward exchange and option contracts. The Company does not enter into financial instruments for trading or speculative purposes. The agreements entered into are short-term in nature with maturities less than one year and the Company primarily acts as a buyer. The counterparties to these contracts are major financial institutions and the Company does not have significant exposure to any specific one. Management believes that credit risk of loss is remote and in any event would be immaterial.
The Company had forward exchange contracts with notional values of $7,846 and $18,883 at December 31, 1995 and 1994, respectively. The carrying value of these contracts approximated market. At December 31, 1995, the Company had foreign currency options with notional values of $30,373 and an estimated fair value of $322. At December 31, 1994, the Company had foreign currency options with notional values of $31,958 and an estimated fair value of $915. The unamortized premiums are amortized to income over the option periods and amounted to $432 and $520 at December 31, 1995 and 1994, respectively.
The Company only enters into forward exchange contracts which match the periods of the underlying transactions being hedged. The maximum loss on foreign currency options is the amount of premiums paid for those options. Therefore, the Company has no material exposure through the use of any of these financial instruments.
At December 31, 1995, medium-term notes were carried at the discounted value of $69,992 and medium-term obligations were carried at $12,869; both carrying values approximated market. At December 31, 1994, medium-term notes were carried at the discounted value of $59,983 and had an estimated fair value of $54,500.
NOTE 10 SHAREHOLDERS' EQUITY
The changes in Shareholders' equity for the years ended December 31, 1995, 1994 and 1993 are as follows:
Common Stock
The Company has 300 million authorized shares of Common Stock. Changes in outstanding shares for the years ended December 31 are as follows:
1995 1994 1993 ---------- ---------- ---------- Shares outstanding at beginning of year 36,674,030 38,292,952 39,162,634 Purchased for treasury (99,700) (1,718,700) (1,187,100) Issued for stock option and other employee plans from treasury 147,989 99,778 317,418 ---------- ---------- ---------- Shares outstanding at end of year 36,722,319 36,674,030 38,292,952 ---------- ---------- ---------- Shares held in treasury at end of year 6,825,619 6,873,908 5,254,986 ---------- ---------- ----------
Stock Option Plans
The Company has stock option plans which provide for the granting of options to directors, officers and key employees to purchase shares of its Common Stock within ten years, at prices equal to or greater than the fair market value on the date of grant.
Activity for the years 1995, 1994 and 1993 is as follows:
At December 31, 1995 and 1994, respectively, there were options for 1,823,593 and 1,290,051 shares exercisable at exercise prices of $48.95 and $52.73 and there were 2,442,356 and 2,299,071 shares available for granting options.
NOTE 11
SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one industry segment, personal care products. The Company markets these products around the world. Sales are made and credit is granted to drug, grocery, variety and discount stores and other comparable outlets, as well as to wholesalers and distributors in those trades. A small number of significant customers are financed through highly leveraged capital structures, making them particularly sensitive to market interest rate changes and other economic variables.
For the years ended December 31, 1995 and 1994, the Company had a significant customer that accounted for 11.1% and 10.3%, respectively, of the Company's Net sales. No single customer accounted for 10% or more of Net sales in prior years.
In the geographic summary that follows, certain overhead costs are allocated to the geographic areas based on the anticipated benefit to be derived by the area. Restructuring and other charges of $30,042 reduced 1993 Operating income of the United States, Europe, Other international and Unallocated items, net by $2,237, $16,921, $1,781 and $9,103, respectively.
Information for the years ended December 31 are as follows:
1995 1994 1993 -------- -------- -------- Net sales United States $391,011 $381,975 $363,337 Europe 210,567 195,748 182,854 Other international 81,514 66,790 65,274 -------- -------- -------- $683,092 $644,513 $611,465 ======== ======== ======== Operating income United States $134,194 $142,931 $142,399 Europe 43,530 27,112 31,347 Other international 14,135 10,314 2,114 Unallocated items, net (31,496) (28,742) (29,510) Restructuring and other charges - - (30,042) -------- -------- -------- $160,363 $151,615 $116,308 ======== ======== ======== Identifiable assets at December 31 United States $237,054 $212,346 $197,546 Europe 169,665 152,295 153,016 Other international 15,330 14,434 11,836 -------- -------- -------- $422,049 $379,075 $362,398 ======== ======== ========
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Tambrands Inc.:
We have audited the accompanying consolidated balance sheets of Tambrands Inc. and subsidiaries as of December 31, 1995 and 1994 and the related consolidated statements of earnings and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tambrands Inc. and subsidiaries as of December 31, 1995 and 1994 and the results of their operations and cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in the notes to the consolidated financial statements, the Company changed its method for accounting for postemployment benefits in 1993.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut January 23, 1996
SCHEDULE II
TAMBRANDS INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
($ in thousands)
1995 1994 1993 --------- --------- --------
Reserve deducted in the balance sheet from the asset to which it applies
Allowance for doubtful accounts:
Balance at beginning of period $1,456 $1,453 $1,560
Additions charged to cost and expenses 353 93 556
Reclassification of unrecoverable promotional 53 11 (144) allowance & other
Write-off of bad debts (195) (101) (519)
------- ------ ------ Balance at end of period $1,667 $1,456 $1,453 ======= ====== ======
INDEPENDENT AUDITORS' REPORT ----------------------------
The Board of Directors and Shareholders Tambrands Inc.:
Under date of January 23, 1996, we reported on the consolidated balance sheets of Tambrands Inc. and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of earnings and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the annual report on Form 10-K for the year 1995. Our report refers to a change in accounting for postemployment benefits in 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedule as listed in Item 14(a)2 of the annual report on Form 10-K for the year 1995. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.
In our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut January 23, 1996
SUPPLEMENTARY FINANCIAL INFORMATION AND QUARTERLY DATA (unaudited)
(a) Includes the 1995 Litigation charge as described in the notes to the consolidated financial statements.
INDEX TO EXHIBITS -----------------
Exhibit Number Description - ------- -----------
10(9)(c) Employment Protection Agreement between the Company and Mr. Thomas J. Mason, dated as of October 18, 1994.
10(9)(d) Employment Protection Agreement between the Company and Mr. Thomas Soper, III, dated as of August 29, 1994.
12 Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Company.
23 Independent Auditors' Consent.
24 Powers of attorney.
27 Financial Data Schedules (in electronic format only).
The Company will furnish a copy of any exhibit to a shareholder requesting such exhibit in writing upon payment by the shareholder of a fee representing the Company's reasonable expenses in furnishing such exhibit.