ITEM 1. BUSINESS.
The Dial Corp ("Dial" or "Corporation"), conducts a consumer products and services business focused on North American markets producing annual revenues in excess of $3.5 billion.
Dial's CONSUMER PRODUCTS segment operates in four major categories, as follows:
SKIN CARE, which manufactures and markets DIAL, TONE, SPIRIT, PURE & NATURAL and LIQUID DIAL soaps, and other soap and personal care products;
LAUNDRY, which manufactures and markets PUREX and TREND dry and liquid detergents, PUREX TOSS 'N SOFT sheet fabric softeners, PUREX RINSE 'N SOFT and PUREX STA PUF liquid fabric softeners, and other laundry products;
HOUSEHOLD, which manufactures and markets RENUZIT air fresheners, DIAL dish detergents, BRILLO scouring pads, SNO BOL toilet bowl cleaners, PARSONS and BO-PEEP ammonia, BRUCE floor care products, CAMEO powdered cleanser and other household items; and
FOOD, which processes and markets ARMOUR STAR chili, beef stew, corned beef hash and Vienna sausage, TREET luncheon meat, LUNCH BUCKET microwaveable meals, and other shelf-stable canned and packaged foods.
Dial's SERVICES business operates in three principal business segments through subsidiary corporations of Dial, as follows:
AIRLINE CATERING AND SERVICES, which engages in airline catering operations, providing in-flight meals to domestic and international airlines, and provides airplane fueling and ground handling services;
CONVENTION SERVICES, which provides exhibit design and construction and exhibition preparation, installation, electrical, transportation and management services to major trade shows, manufacturers, museums, and exhibit halls and other customers; and
TRAVEL AND LEISURE AND PAYMENT SERVICES, which engages in cruise line and hotel/resort operations, recreation and travel services, Canadian intercity bus transportation, and operation of duty-free shops on cruise ships and at international airports; offers money orders through a national network of retail agents and provides official checks and negotiable instrument clearing services to mid-size bank customers and credit unions in the United States and Puerto Rico; and operates restaurants, fast food outlets and contract foodservice facilities and concessions ranging from cafeterias in manufacturing plants to corporate executive dining rooms to the food and beverage facilities of the Phoenix, Arizona, America West Arena.
Dial subsidiaries operate service or production facilities and maintain sales and service offices in the United States, Canada and Mexico. The Corporation also conducts business in certain other foreign countries.
Dial had approximately 200 employees at its corporate center at December 31, 1994, providing management, financial and accounting, tax, administrative, legal and other services to its operating units and handling residual matters pertaining to businesses previously discontinued or sold by the Corporation. Dial is managed by a Board of Directors comprised of 9 nonemployee directors and one employee director and has an executive management team consisting of six Dial officers and seven principal executives of significant operating divisions or companies.
Dial's corporate headquarters and certain Consumer Products division and subsidiary activities are located in Phoenix, Arizona, in a modern high- rise building. A portion of the headquarters building is rented to unaffiliated tenants.
A description of each of the Dial business segments and recent developments in each follows.
CONSUMER PRODUCTS SEGMENT CONSUMER PRODUCTS is a leading producer and marketer of skin care, laundry, household and shelf-stable food products. This segment originated as the grocery products division of Armour and Company, expanded in recent years to include PUREX household and laundry products, BORAXO household and industrial specialty products, BRECK hair care products and RENUZIT air fresheners and other consumer products. The segment manufactures and markets a variety of products, including bar and liquid soaps, liquid and powdered detergents, antiperspirants, hairsprays, shampoos, hair conditioners, bleaches, fabric softeners, soap pads, air fresheners, floor care products, household cleaners, fabric sizing, laundry starch products, borax and industrial specialties products, microwaveable food products, and canned meat products, and packaged food products.
SKIN CARE Skin Care products are marketed under a number of brand names, including DIAL, MOISTURIZING DIAL PLUS, MOUNTAIN FRESH DIAL, TONE, PURE & NATURAL, SPIRIT and FELS NAPTHA soaps, LIQUID DIAL antibacterial soap, BORAXO powdered hand soap and DIAL antiperspirant. Skin Care also markets the BRECK line of hair care products, including hairsprays, shampoos and hair conditioners. DIAL bar soap is the nation's leading deodorant soap and LIQUID DIAL soap is the nation's leading antibacterial liquid soap. SPIRIT bar soap, a three-in-one combination bar that cleans, moisturizes and provides deodorant protection, is distributed nationally, as is TONE, a complexion and moisturizing bar with cocoa butter, and many of the Corporation's other skin care products. In 1994, Skin Care began national shipments of DIAL For Kids bar and liquid soaps and continued the national expansion of MOISTURIZING DIAL PLUS soap. Skin Care also markets hotel amenity products, including personal-size bar soaps under the DIAL, TONE and PURE & NATURAL labels, and industrial specialties products, including hand soaps sold under the BORAXO, 20 MULE TEAM, LURON and LUROSEP trademarks, hand and body cleansers for the medical market and hand cleaners for the automotive market.
LAUNDRY Laundry products include brands such as PUREX liquid, powdered and ultra laundry detergents, TREND and ULTRA TREND dry detergents, TREND liquid detergent, DUTCH and INSTANT FELS dry detergents, PUREX TOSS 'N SOFT sheet fabric softeners, RINSE 'N SOFT and STA PUF liquid fabric softeners, MAGIC sizing and starch, PUREX bleaches, BORATEEM dry bleach, STA-FLO starch, 20 MULE TEAM BORAX laundry additive and other brands. In 1994, Laundry launched a new product, GEM detergent, and expanded and restaged several products, including PUREX Heavy Duty Liquid with bleach alternative, PUREX Free and Clear liquid laundry detergent, ULTRA TREND with bleach alternative and ULTRA TREND detergent.
HOUSEHOLD Household products include brands such as RENUZIT air fresheners, BRILLO soap pads, SNO BOL toilet bowl cleaners, CAMEO powdered cleanser, PARSONS and BO-PEEP ammonia and BRUCE floor care products. The RENUZIT air freshener brand was acquired in the second quarter of 1993. RENUZIT, a leading brand in the air freshener category, offers products for the continuous-action and aerosol segments of the air freshener market, including RENUZIT Adjustable, RENUZIT Aerosol, RENUZIT ROOMMATE liquid air fresheners and RENUZIT LONGLAST ELECTRIC air freshener in the electric subsegment of the air freshener category. RENUZIT LongLast Carpet & Room Deodorizer, RENUZIT LongLast Mist Home Fragrance Spray and RENUZIT LongLast InVent car air freshener were introduced in 1994. During the fourth quarter of 1994, Household introduced a line of DIAL dish detergents, consisting of DIAL dish powder and gel detergents for use in automatic dishwashers and a liquid DIAL dish soap which also kills germs on hands.
FOOD In the shelf-stable food category, CONSUMER PRODUCTS processes and markets ARMOUR STAR and TREET canned meats, LUNCH BUCKET microwaveable meals, APPIAN WAY pizza mix, SUNRISE syrup and CREAM corn starch. ARMOUR STAR products maintain a strong number two market position in the canned meats category. ARMOUR STAR Vienna sausage, potted meat and sliced dried beef lead their respective segments on a national basis, and ARMOUR STAR canned meats now account for nearly one-fifth of all canned meat sales in the United States. During 1994, CONSUMER PRODUCTS introduced two line extensions, Low-Fat TREET and Turkey Loaf luncheon loaves, to the ARMOUR STAR canned meat line of products; and a new product, ARMOUR STAR BIG ONES meat sticks, is being introduced to compete in the meat sticks category.
CUSTOMERS CONSUMER PRODUCTS sells to thousands of customers, primarily in the United States, including supermarkets, drug stores, wholesalers, mass merchandisers, membership club stores and other outlets. These customers are served by a national sales organization of approximately 370 employees organized into 6 individual sales regions plus specialized sales operations which sell to large mass merchandisers, membership club stores, chain drug stores, vending and military customers.
RAW MATERIALS Ample sources of raw materials are available with respect to all major products of the CONSUMER PRODUCTS segment.
COMPETITION CONSUMER PRODUCTS competes primarily on the basis of price, brand advertising, customer service, product performance, and product identity and quality. Its operations must compete with numerous well-established local, regional and national companies, some of which are very large and act aggressively in obtaining and defending their products' market shares and brands. Principal competitors, in one or more categories, are Procter & Gamble, Colgate-Palmolive, Lever Brothers Co., American Home Food Products, G. A. Hormel & Co., The Clorox Company, Church & Dwight and S.C. Johnson & Son, Inc.
SERVICES SEGMENTS SERVICES is built around several company groups which are leading competitors in their businesses, including companies engaged in airline catering (Dobbs International Services), airplane fueling and ground handling (Aircraft Service International), convention services (GES Exposition Services, Exhibitgroup), payment services (Travelers Express), contract foodservices (Restaura), Canadian intercity bus passenger and package express service (Greyhound Lines of Canada), family cruises (Premier Cruise Lines), airport and cruise ship duty-free businesses (Greyhound Leisure Services), and travel services (Brewster Transport, Jetsave, Crystal Holidays).
AIRLINE CATERING AND SERVICES Airline catering, and aircraft fueling and other ground-handling operations are conducted through the Dobbs International Services and Aircraft Service International groups of companies. Dobbs International, which has been conducting airline catering operations since 1941, became the nation's largest domestic in-flight caterer as a result of its 1994 acquisitions from United Airlines of 15 in-flight catering kitchens at 12 domestic airports. Dobbs International is now United's exclusive in-flight caterer at 12 locations where the kitchens are located. The company also expanded its presence in the United Kingdom by the acquisition in February 1994 of 3 catering kitchens in England and one in Scotland. At the end of 1994, Dobbs International's in-flight catering operations provided in-flight meals to more than 60 domestic and international airlines at 48 airports in the United States and 5 airports in foreign countries. Dobbs International has been involved in a "Quality Improvement Process" for many years and has been recognized for its innovations by its customers and suppliers. The Aircraft Service International group ("ASIG") of companies provides aircraft ground-handling services such as aircraft fueling, aircraft cleaning and baggage handling for major domestic and foreign airlines at 30 airports throughout the United States and in Freeport, Bahamas and London, England. In 1994 ASIG won a 5-year contract to provide into-plane fueling services to Delta Air Lines at Atlanta's Hartsfield Airport. Dobbs International and ASIG are focused on meeting the outsourcing needs of the airline industry, providing a lower-cost alternative to those airlines which are committed to reduce costs and operate profitably.
CONVENTION SERVICES Convention services are provided by the Corporation's GES Exposition and Exhibitgroup companies. GES Exposition, the nation's leading supplier of convention services, provides decorating, exhibit preparation, installation, electrical, transportation and management services for conventions and tradeshows. In early 1994, GES Exposition expanded its electrical service activities with the purchase of Expo-Tech Electrical & Plumbing Services, Inc., with operations in Detroit, Philadelphia, Texas, Florida and the West Coast. GES Exposition, in December 1994 entered into a long-term agreement to become the official contractor for the Interface Group, the world's largest independent producer of tradeshows and conferences, including COMDEX, the largest tradeshow in North America. In January 1995, GES Exposition acquired 2 Canadian companies, Panex Show Services Limited and Stampede Display and Convention Services Limited, that provide tradeshow and exposition services in Canada. During 1993 GES Exposition acquired United Exposition Services Co., Inc., Andrews, Bartlett & Associates, Inc., and Gelco Convention Services, Inc., which broadened its operations in the eastern and southeastern United States, including Chicago, Cleveland, Orlando, New Orleans, Washington, D.C. and Atlanta. Exhibitgroup is a leading designer and builder of convention exhibits and displays, with manufacturing facilities in 7 U.S. cities.
TRAVEL AND LEISURE AND PAYMENT SERVICES Travel and leisure services are provided by the Premier Cruise Lines, Greyhound Leisure Services, Jetsave, Crystal Holidays, Greyhound Lines of Canada and Brewster Transport business units. Premier Cruise Lines provides three-day and four-day BIG RED BOAT cruises from Port Canaveral, Florida, to the Bahamas and specializes in seven-day vacations which combine a cruise with a three-day or four-day Orlando theme park vacation at Walt Disney World or Universal Studios and Sea World. Premier operates two cruise ships, the 38,772-ton Star/Ship Oceanic and the 35,143-ton Star/Ship Atlantic. Cruise destinations offer various underwater diving and snorkeling attractions, historical tours, sandy beaches and shopping opportunities. Since April 1994 famous LOONEY TUNES characters (Bugs Bunny and others) have provided entertainment on board Premier Cruise Lines' ships, under a licensing agreement with Warner Bros. In February 1995, Premier Cruise Lines exercised its option to purchase the 17,042-ton Star/Ship Majestic, which had been used to offer cruises from ports other than Port Canaveral, and leased it to a European cruise company under a 4-year bareboat charter agreement. Greyhound Leisure Services operates duty-free shopping concessions on 49 cruise ships and also operates duty-free shops at the Chicago, Miami and Fort Lauderdale/Hollywood Florida international airports. Other recreation and travel services are provided under the Jetsave and Crystal Holidays names. Jetsave and Crystal Holidays are leading United Kingdom operators of tour packages and specialty tours throughout Europe, and from Europe to the United States, Canada and the Bahamas. Greyhound Lines of Canada Ltd. ("GLOC"), a Canadian publicly traded company, is a 69%-owned subsidiary which operates the largest intercity bus transportation system for passengers, charter service and package express in Canada. Routes connect with those of other intercity bus carriers, providing interconnecting service to areas of the United States and Canada not served directly by GLOC. GLOC owns and operates 446 intercity coaches. Brewster Transport Company, Ltd., a subsidiary of GLOC, operates tour and charter buses in the Canadian Rockies, engages in travel agency, hotel and snocoach tour operations and holds a joint venture interest in the Mt. Norquay ski facility in Banff, Alberta, Canada. Brewster owns and operates 79 intercity coaches, 16 buses, and 13 snocoaches which transport sightseers on tours of the glaciers of the Columbia Icefield. In July 1994, Brewster purchased the Cascade Inn, which it had been leasing and operating; the Cascade Inn is located adjacent to Brewster's Mount Royal Hotel in Banff. The Travelers Express group of companies engages in the sale of money orders to the public through approximately 41,000 agent locations in the United States and Puerto Rico. Travelers Express is the nation's leading issuer of money orders, issuing over 251 million money orders in 1994. Travelers Express also provides processing services for approximately 5,000 credit unions and other financial institutions which offer share drafts (the credit union industry's version of a personal check) or official checks (used by financial institutions in place of their own bank check or cashier's check). Republic Money Order Company, a Travelers Express unit, is a leader in the issuance of money orders through chain, convenience and supermarket stores and in money order-issuance technology. In January 1995, Travelers Express acquired an automated bill payment product and related assets from BUYPASS Corporation, a leading point-of-sale processing company, and entered into an operating relationship with that company to provide an electronic processing service for in-person utility bill payment. The Restaura group of companies' contract foodservice division serves meals to workers at approximately 200 locations, including employees of major companies such as General Motors, IBM and Ford, through cafeteria, executive dining rooms and vending operations. Restaura also acts as the prime concessionaire for all food and beverage services at the Phoenix, Arizona, America West Arena and operates 7 historic lodges in and around Glacier National Park in Montana and Canada.
COMPETITION SERVICES companies generally compete on the basis of price, quality, convenience and service, and encounter substantial competition from a large number of providers of similar services, including numerous well-known local, regional and national companies, cruise lines, private payment service companies and the U.S. Postal Service (money orders), many of which have greater resources than the Corporation. Dobbs International also competes on the basis of reliability, condition of kitchen facilities and truck fleet, and on-time record. Caterair International Corporation, Sky Chefs, Inc./LSG, and Gate Gourmet (a SwissAir unit) are the principal competitors of Dobbs International. Freeman Decorating Company is the principal competitor of GES Exposition on a national basis. GLOC competes primarily on the basis of price and service. Principal competitors include airlines, private automobiles and other intercity bus lines.
PATENTS AND TRADEMARKS United States patents are currently granted for a term of 17 years from the date of issue. The Dial companies own a number of patents which give them competitive advantages in the marketplace, including a number of patents owned by Travelers Express for automated money order dispensing systems which provide significant marketplace advantage. These patents cover security, automated reporting and control, and other features which are important in the issuance of money orders. CONSUMER PRODUCTS also has the right, pursuant to license agreements, to operate under certain third- party patents covering specific technologies. United States trademark registrations are for a term of 10 years, renewable every 10 years so long as the trademarks are used in the regular course of trade. The Dial companies maintain a portfolio of trademarks representing substantial goodwill in the businesses using the marks. Many trademarks used by CONSUMER PRODUCTS, including DIAL, PURE & NATURAL, ARMOUR STAR, TONE, TREET, PARSONS, BRUCE, CAMEO, PUREX, DUTCH, RENUZIT, BRILLO, SNO BOL, BRECK, TREND, PUREX TOSS N' SOFT, STA PUF, FLEECY WHITE, 20 MULE TEAM, BORAXO, LUNCH BUCKET, and MAGIC, and by SERVICES, including the DOBBS, PREMIER CRUISE LINES, BIG RED BOAT and TRAVELERS EXPRESS service marks, have substantial importance and value. Use of the ARMOUR and ARMOUR STAR trademarks by CONSUMER PRODUCTS is permitted by a license expiring in 2043 granted by ConAgra, Inc. and use of the 20 MULE TEAM trademark is permitted by a perpetual license granted by U.S. Borax, Inc. In addition, in connection with their businesses, certain subsidiaries within SERVICES use the Greyhound and the Image of the Running Dog marks, which are owned by the Corporation.
GOVERNMENT REGULATION Substantially all of the operations of CONSUMER PRODUCTS and many of the operations of SERVICES are subject to various federal laws and agency regulation, in particular, the Food, Drug and Cosmetic Act, the Food and Drug Administration, the Department of Agriculture, the Federal Maritime Commission, and various state laws and regulatory agencies. In addition, other subsidiaries of Dial are subject to similar laws and regulations imposed by foreign jurisdictions. Both rates and routes of GLOC are regulated by federal and provincial authorities of Canada.
ENVIRONMENTAL Dial is subject to various environmental laws and regulations of the United States as well as of the states in whose jurisdictions Dial operates. As is the case with many companies, Dial faces exposure to actual or potential claims and lawsuits involving environmental matters. Although Dial is a party to certain environmental disputes, Dial believes that any liabilities resulting therefrom, after taking into consideration amounts already provided for, but exclusive of any potential insurance recovery, should not have a material adverse effect on Dial's financial position or results of operations.
EMPLOYEES
EMPLOYMENT AT DECEMBER 31, 1994
EMPLOYEES COVERED BY APPROXIMATE NUMBER OF COLLECTIVE BARGAINING SEGMENT EMPLOYEES AGREEMENT ------- --------------------- ---------------------
Consumer Products 4,000 1,900
Airline Catering and Services 14,600 8,600
Convention Services 2,700 1,200
Travel and Leisure and Payment Services 7,600 3,400
Dial believes that relations with its employees are satisfactory and that collective bargaining agreements expiring in 1995 will be renegotiated in the ordinary course without adverse effect on Dial's operations.
SEASONALITY The first quarter is normally the slowest quarter of the year for Dial. Consumption patterns, marketing practices and competition cause CONSUMER PRODUCTS' revenues and operating income to be highest in the second and fourth quarters. Due to increased leisure travel during the summer and year-end holidays, Dial's airline catering, cruise ship and intercity bus travel operations experience peak activity at these times. Convention service companies generally experience increased activity during the first half of the year. As a result of these factors, 1994 quarterly earnings per share of Dial as a percentage of the full year's earnings were approximately 12% (first quarter), 31% (second quarter), 32% (third quarter), and 24% (fourth quarter).
RESTRUCTURING MATTERS On August 5, 1993, Dial completed the initial public offering of of all of the stock of Motor Coach Industries International, Inc., formerly its transportation manufacturing and service parts segment. The sale followed the March 1992 spin-off of all of the stock of GFC Financial Corporation (now the FINOVA Group, Inc.), a corporation which had comprised substantially all of the financial services and insurance businesses of Dial, and was the final step in Dial's restructuring plan to focus its financial and management resources on its consumer products and services business. See Note D of Notes to Consolidated Financial Statements for further information concerning the 1993 sale of the Corporation's transportation manufacturing and service parts segment and the 1992 spin-off of GFC Financial Corporation.
SHELF REGISTRATION In July 1994, the Corporation filed a shelf registration with the Securities and Exchange Commission covering $500 million of debt and equity securities. To date, no securities have been offered under the registration.
BUSINESS SEGMENTS Principal business segment information is set forth in Annex A attached hereto and made a part hereof.
ITEM 2.
ITEM 2. PROPERTIES. Dial's modern headquarters building, a 24-story, approximately 484,000 square foot building in Phoenix, Arizona, is owned by a joint venture between two subsidiaries of Dial. Dial owns a 200,000 square foot facility in Scottsdale, Arizona, which is used by the CONSUMER PRODUCTS segment to conduct much of its research, technical, administrative and other activities. CONSUMER PRODUCTS operates 13 plants in the United States, 1 plant in Mexico, and 4 offices in 4 foreign countries. All of the plants are owned; 3 of the offices are leased. Principal manufacturing plants are as follows:
LOCATION SQ. FEET PRODUCTS MANUFACTURED -------- -------- ---------------------
Aurora, IL 425,000 Bar Soaps
Fort Madison, IA 453,000 Canned Meats, Microwaveable Meals
St. Louis, MO 475,000 Bleach, Ammonia, Fabric Softener, Laundry Detergents
Bristol, PA 253,700 Dry Detergents and Cleansers
Hazelton, PA 232,000 Liquid Detergents, Ammonia, Scouring Pads, Fabric Softener
Auburndale, FL 208,000 Bleach, Ammonia, Fabric Softener, Dishwashing Detergents
Memphis, TN 130,000 Dial Liquid Soap, Shampoos and Conditioners, Antiperspirants, Hotel Amenities (shampoos, conditioners and hand lotions)
AIRLINE CATERING AND SERVICES operates 37 offices (27 of which are also airplane-fueling locations) and 67 catering kitchens. All of the properties are in the United States, except for 2 office/airplane-fueling locations and 5 catering kitchens which are located in foreign countries. Twelve of the catering kitchens are owned; all other properties are leased. CONVENTION SERVICES operates 31 offices and 32 exhibit construction and warehouse facilities. All of the properties are in the United States. One of the offices and one of the warehouses are owned; all other properties are leased. TRAVEL AND LEISURE AND PAYMENT SERVICES operates 29 offices, 29 foodservice facilities, 5 retail stores, 161 duty-free shops, 2 cruise ships, 8 warehouses and 9 hotels/lodges with ancillary foodservice and recreational facilities, and an icefield tour facility. All of the properties are in the United States, except for 8 offices, 1 foodservice facility, the icefield tour facility and 2 hotels, which are located in foreign countries; approximately 140 duty-free shops are operated in international waters on board cruise ships. Travel and Leisure and Payment Services owns 3 hotels and has a partial interest in one hotel for which it is also the lessee and operator; five of the hotels are operated pursuant to a concessionaire agreement. One of the cruise ships, 1 warehouse and 3 of the foodservice facilities are owned; all other properties are leased. Additionally, Travel and Leisure and Payment Services owns a cruise ship which is leased to a European cruise company under a 4-year bareboat charter agreement that expires in February 1999. GLOC operates 10 terminals and 8 garages in Canada. Five terminals and 7 garages are owned; the other properties are leased. In addition, bus stop facilities at approximately 580 locations in Canada are provided by commission agents. Principal properties of GLOC are as follows:
LOCATION SQ. FEET FUNCTION -------- -------- --------
Calgary, Alberta 179,000 Terminal and Headquarters Office
Edmonton, Alberta 63,000 Terminal
London, Ontario 12,000 Terminal
Vancouver, British Columbia 23,000 Terminal
Winnipeg, Manitoba 21,000 Terminal
Edmonton, Alberta 23,000 Garage
Winnipeg, Manitoba 39,000 Garage
Toronto, Ontario 46,000 Garage
Vancouver, British Columbia 16,000 Garage
Calgary, Alberta 135,000 Maintenance and Overhaul Center
Of the property owned by Dial, only the facility in Auburndale, Florida, is subject to a mortgage, with $3,494,000 outstanding at December 31, 1994. Management believes that Dial's facilities in the aggregate are adequate and suitable for their purposes and that capacity is sufficient for current needs.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS. In 1994, the matter of Transportation Manufacturing Corporation ("TMC") vs. the Chicago Transit Authority ("CTA"), which had been filed in the United States District Court for the District of New Mexico, was settled by Dial and TMC on favorable financial and other terms. The lawsuit arose from a contract between TMC, a former subsidiary of Dial, and CTA for the manufacture and delivery of 491 wheelchair-lift transit buses. TMC was divested by Dial in connection with its sale of MCII in August 1993, but Dial retained rights to certain damage claims, indemnified MCII against certain potential costs and damages arising from counterclaims and continued to direct the litigation pursuant to a Litigation Cooperation Agreement.
The Corporation and certain subsidiaries are parties either as plaintiffs or defendants to various other actions, proceedings and pending claims, certain of which are or purport to be class actions. The pending cases range from claims for additional employment benefits to cases involving accidents, injuries, product liability or business contract disputes, certain of which involve claims for compensatory, punitive or other damages in material amounts. Litigation is subject to many uncertainties and it is possible that some of the legal actions, proceedings or claims referred to above could be decided against Dial. Although the amount of liability at December 31, 1994, with respect to matters where Dial is defendant is not ascertainable, Dial believes that any resulting liability should not materially affect Dial's financial position or results of operations.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS. No matters were submitted to a vote of securityholders during the fourth quarter of 1994.
OPTIONAL ITEM. EXECUTIVE OFFICERS OF REGISTRANT. The names, ages and positions of the executive officers of the Corporation as of March 15, 1995, are listed below:
EXECUTIVE POSITION NAME AGE OFFICE HELD SINCE ---- --- ------ ----------
John W. Teets 61 Chairman, President and 1982 Chief Exeutive Officer and Director and Chairman of Executive Committee of Registrant
Frederick G. 61 Vice President and 1977 Emerson Secretary of Registrant
Joan F. Ingalls 46 Vice President-Human 1991 Resources of Registrant
L. Gene Lemon 54 Vice President and 1979 General Counsel of Registrant
Ronald G. Nelson 53 Vice President-Finance 1994 and Treasurer of Registrant
Richard C. Stephan 55 Vice President- 1980 Controller of Registrant
William L. Anthony 52 Executive Vice 1987 President-Administration and Controller, Consumer Products Group of Registrant
Robert H. Bohannon 50 President and Chief 1993 Executive Officer of Travelers Express Company, Inc., a subsidiary of Registrant
John E. Greenwell 47 Senior Vice President- 1994 General Manager, Food Division, Consumer Products Group of Registrant
Frederick J. 60 President of Dobbs 1985 Martin International Services, Inc., a subsidiary of Registrant
Andrew S. Patti 54 President and Chief 1986 Operating Officer of the Consumer Products Group of Registrant
Norton D. 60 Chairman and Chief 1983 Rittmaster Executive Officer of GES Exposition Services, Inc., a subsidiary of Registrant
Mark R. Shook 40 Executive Vice 1994 President-General Manager, Soap and Detergent Division, Consumer Products Group of Registrant
Each of the foregoing officers, with the exceptions set forth below, has served in the same, similar or other executive positions with Dial or its subsidiaries for more than the past five (5) years.
Ms. Ingalls has served in her current, or a similar, position since 1990, and prior thereto as Executive Director of Compensation and Benefits of the Registrant.
Prior to July 1994, Mr. Nelson was Vice President-Treasurer of the Registrant.
Mr. Bohannon was elected as President and Chief Executive Officer of Travelers Express Company, Inc. in 1993. Prior thereto, he was a senior officer at Marine Midland Bank of Buffalo, New York.
Prior to May 1994, Mr. Greenwell was Vice President Marketing of the Food Division in Registrant's Consumer Products Group, and prior to 1992 was Director of Marketing of the Household and Laundry Division of Registrant's Consumer Products Group.
Since 1991, Mr. Shook has been an Executive Vice President-General Manager of one or more divisions in Registrant's Consumer Products Group, and prior thereto was Vice President and General Manager of the commercial markets business unit of Registrant's Consumer Products Group.
The term of office of the executive officers is until the next annual organization meetings of the Boards of Directors of Dial or appropriate subsidiaries, all of which are scheduled for April or May of this year.
The Directors of Dial are divided into three classes, with the terms of one class of Directors to expire at each Annual Meeting of Stockholders. The current term of office of John W. Teets is scheduled to expire at the 1997 Annual Meeting of Stockholders.
PART II ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal market on which the common stock of Dial is traded is the New York Stock Exchange. The common stock is also listed for trading on the Pacific Exchange, and admitted for trading on the Midwest, Philadelphia and Cincinnati Exchanges. The following tables summarize the high and low market prices as reported on the New York Stock Exchange Composite Tape and the cash dividends declared for the two years ended December 31, 1994:
Sales Price Range of Common Stock --------------------------------- Calendar 1994(1) 1993(1) Quarters High Low High Low -------- ---- --- ---- ---
First $22.6875 $19.75 $22.25 $19.50
Second 24.00 20.25 21.9375 18.4375
Third 23.75 19.75 20.5625 17.9375
Fourth 23.25 19.25 21.125 18.375
Dividends Declared on Common Stock ---------------------------------- 1994(1) 1993(1) ------- -------
February $ .14 $ .14
May .15 .14
August .15 .14
November .15 .14 ----- ----- TOTAL $0.59 $0.56
(1) On May 10, 1994, the Corporation's Board of Directors declared a 2-for-1 stock split which was paid on July 1, 1994, to stockholders of record as of June 1, 1994. All Dial common stock sales price and dividend information has been restated to reflect the stock split.
Regular quarterly dividends have been paid on the first business day of January, April, July and October. As of March 10, 1995, there were 54,947 holders of record of Dial's common stock.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA. Applicable information is included in Annex A.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
Applicable information is included in Annex A.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 1. Financial Statements--See Item 14 hereof.
2. Supplementary Data--See Condensed Consolidated Quarterly Results in Annex A.
ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information regarding Directors of the Registrant is included in Dial's Proxy Statement for Annual Meeting of Shareholders to be held on May 9, 1995 ("Proxy Statement"), and is incorporated herein and made a part hereof. The information regarding executive officers of the Registrant is found as an Optional Item in Part I hereof.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION. The information is contained in the Proxy Statement and is incorporated herein and made a part hereof.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information is contained in the Proxy Statement and is incorporated herein and made a part hereof.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8- K.
(a) The following documents are filed as a part of the report: FINANCIAL STATEMENTS. The following are included in Annex A: Independent Auditors' Report and consolidated financial statements (Balance Sheet, Income, Cash Flows, Common Stock and Other Equity, and Notes to Financial Statements).
EXHIBITS. 3.A Copy of Restated Certificate of Incorporation of Dial, as amended through March 3, 1992, filed as Exhibit (3)(A) to Dial's 1991 Form 10-K, is hereby incorporated by reference.
3.B Copy of Bylaws of Dial, as amended through February 21, 1992, filed as Exhibit (3)(B) to Dial's 1991 Form 10-K, is hereby incorporated by reference.
4.A Instruments with respect to issues of long-term debt have not been filed as exhibits to this Annual Report on Form 10-K if the authorized principal amount of any one of such issues does not exceed 10% of total assets of the Corporation and its subsidiaries on a consolidated basis. The Corporation agrees to furnish a copy of each such instrument to the Securities and Exchange Commission upon request.
4.B Copy of Amended and Restated Credit Agreement dated as of December 15, 1993, among Dial, the Banks parties thereto, Bank of America National Trust and Savings Association as Agent and Reporting Agent and Citibank, N.A. as Agent and Funding Agent, filed as Exhibit 4.B to Dial's 1993 Form 10-K, is hereby incorporated by reference.
4.B1 Copy of First Amendment to Amended and Restated Credit Agreement dated as of September 23, 1994.*
10.A Copy of Employment Agreement between Dial and John W. Teets dated April 14, 1987, filed as Exhibit (10)(A) to Dial's 1989 Form 10-K, is hereby incorporated by reference.+
10.B Sample forms of Contingent Agreements relating to funding of Supplemental Executive Pensions, filed as Exhibit (10)(T) to Dial's 1989 Form 10-K, is hereby incorporated by reference.+
10.C Copy of Dial's Supplemental Pension Plan, amended and restated as of January 1, 1987, filed as Exhibit (10)(F) to Dial's 1986 Form 10-K, is hereby incorporated by reference.+
10.C1 Copy of amendment dated February 21, 1991, to Dial's Supplemental Pension Plan, filed as Exhibit (10)(G)(i) to Dial's 1990 Form 10-K, is hereby incorporated by reference.+
10.D Copy of Dial's Deferred Compensation Plan for Directors, adopted November 20, 1980, as amended through February 21, 1991, filed as Exhibit (10)(H) to Dial's 1990 Form 10-K, is hereby incorporated by reference.+
10.E Copy of The Dial Corp Management Incentive Plan, filed as Exhibit 10.E to Dial's 1993 Form 10-K, is hereby incorporated by reference.+
10.F1 Copy of form of Executive Severance Agreement between Dial and three executive officers, filed as Exhibit (10)(G)(i) to Dial's 1991 Form 10-K, is hereby incorporated by reference.+
10.F2 Copy of forms of The Dial Corp Executive Severance Plans covering certain executive officers, filed as Exhibit (10)(G)(ii) to Dial's 1992 Form 10-K, is hereby incorporated by reference.+
10.G Copy of Travelers Express Company, Inc. Supplemental Pension Plan, filed as Exhibit (10)(L) to Dial's 1984 Form 10-K, is hereby incorporated by reference.+
10.H1 Copy of Dial's 1983 Stock Option and Incentive Plan, filed as Exhibit (28) to Dial's Registration Statement on Form S-8 (Registration No. 33-23713), is hereby incorporated by reference.+
10.H2 Copy of amendment, effective August 1, 1994, to Dial's 1983 Stock Option and Incentive Plan.*+
10.I1 Copy of The Dial Corp 1992 Stock Incentive Plan, filed as Exhibit (10)(J) to Dial's 1991 Form 10-K, is hereby incorporated by reference.+
10.I2 Copy of amendment, effective August 1, 1994, to The Dial Corp 1992 Stock Incentive Plan.*+
10.J Description of Spousal Income Continuation Plan, filed as Exhibit 10(Q) to Dial's 1985 Form 10-K, is hereby incorporated by reference.+
10.K Copy of Dial's Director's Retirement Benefit Plan, filed as Exhibit (10)(R) to Dial's 1988 Form 10-K, is hereby incorporated by reference.+
10.L Copy of The Dial Corp Performance Unit Incentive Plan, filed as Exhibit 10.L to Dial's 1993 Form 10-K, is hereby incorporated by reference.+
10.M Copy of The Dial Corp Supplemental TRIM Plan.*+
10.N Copy of Employment Agreement between GES Exposition Services and Norton Rittmaster dated May 20, 1982, filed as Exhibit (10)(O) to Dial's 1992 Form 10-K, is hereby incorporated by reference.+
10.O Copy of GES Exposition Services' Incentive Compensation Plan, filed as Exhibit (10)(P) to Dial's 1992 Form 10-K, is hereby incorporated by reference.+
10.P Copy of The Dial Corp Performance-Based Stock Plan, filed as Exhibit 10.P to Dial's 1993 Form 10-K, is hereby incorporated by reference.+
10.Q Copy of The Dial Corp Deferred Compensation Plan, filed as Exhibit 10.Q to Dial's 1993 Form 10-K, is hereby incorporated by reference.+
10.R Copy of form of The Dial Corp 1983 Stock Option and Incentive Plan Amended and Restated Restricted Stock Agreements dated August 12, 1994, between Dial and six executive officers.*+
10.S Copy of form of The Dial Corp 1992 Stock Incentive Plan Restricted Stock Agreements dated August 12, 1994, between Dial and six executive officers.*+
11 Statement Re Computation of Per Share Earnings.*
21 List of Subsidiaries of Dial.*
23 Consent of Independent Auditors to the incorporation by reference into specified registration statements on Form S-3 or on Form S-8 of their reports contained in or incorporated by reference into this report.*
24 Power of Attorney signed by directors of Dial.*
27 Financial Data Schedule.*
*Filed herewith. +Management contract or compensation plan or arrangement.
Note: The 1994 Annual Report to Securityholders will be furnished to the Commission when, or before, it is sent to securityholders.
(b) REPORTS ON FORM 8-K. The Corporation filed no reports on Form 8-K during the period for which this report is filed.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Phoenix, Arizona, on the 27th day of March, 1995.
THE DIAL CORP
By: /s/ John W. Teets John W. Teets Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Principal Executive Officer
Date: March 27, 1995 By: /s/ John W. Teets John W. Teets Director; Chairman, President and Chief Executive Officer
Principal Financial Officer
Date: March 27, 1995 By: /s/ Ronald G. Nelson Ronald G. Nelson Vice President-Finance and Treasurer
Principal Accounting Officer
Date: March 27, 1995 By: /s/ Richard C. Stephan Richard C. Stephan Vice President-Controller
Directors
Joe T. Ford Thomas L. Gossage Donald E. Guinn Jess Hay Judith K. Hofer Jack F. Reichert Linda Johnson Rice Dennis C. Stanfill A. Thomas Young
Date: March 27, 1995 By: /s/ Richard C. Stephan Richard C. Stephan Attorney-in-Fact
ANNEX "A"
THE DIAL CORP
1994 FINANCIAL INFORMATION
THE DIAL CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 1994, 1993 and 1992
A. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation. The consolidated financial statements of The Dial Corp ("Dial") include the accounts of Dial and all of its subsidiaries. Dial sold its Transportation Manufacturing and Service Parts Group in 1993 and spun-off GFC Financial Corporation ("GFC Financial") in 1992. The Transportation Manufacturing and Service Parts Group and GFC Financial are presented as discontinued operations for all periods. Such dispositions are discussed further in Note D of Notes to Consolidated Financial Statements.
The consolidated financial statements are prepared in accordance with generally accepted accounting principles. Intercompany accounts and transactions between Dial and its subsidiaries have been eliminated in consolidation. Certain reclassifications have been made to the prior years' financial statements to conform to 1994 classifications. Described below are those accounting policies particularly significant to Dial, including those selected from acceptable alternatives.
Cash Equivalents. Dial considers all highly liquid investments with original maturities of three months or less from date of purchase as cash equivalents.
Inventories. Generally, inventories are stated at the lower of cost (first-in, first-out and average cost methods) or market.
Property and Equipment. Property and equipment are stated at cost.
Depreciation is provided principally by use of the straight-line method at annual rates as follows:
Buildings 2% to 5% Machinery and other equipment 5% to 33% Leasehold improvements Lesser of lease term or useful life
Funds and Agents' Receivables and Investments Restricted for Payment Service Obligations. Dial's payment service operations generate funds from the sale of money orders and other payment instruments (classified as "Payment service obligations"). The proceeds of such sales are invested by Dial's payment services subsidiary, in accordance with applicable state laws, in highly liquid debt instruments, (classified, along with cash on hand and cash in transit from agents, as "Funds and agents' receivables restricted for payment service obligations"), which before consolidating eliminations, included investment grade commercial paper issued by Dial and supported along with the rest of Dial's outstanding commercial paper by a credit commitment under a long-term revolving bank credit agreement, as described in Note I of Notes to Consolidated Financial Statements; and in a portfolio of high-quality investments (98 percent have ratings of A- or higher or are collateralized by federal agency securities), including federal, state and municipal obligations, asset-backed securities and corporate debt securities (classified as "Investments restricted for payment service obligations"). These investments are restricted by state regulatory agencies for use by Dial's payment services subsidiary to satisfy the liability to pay, upon presentment, the face amount of such payment service obligations and, accordingly such assets are not available to satisfy working capital or other financing requirements of Dial.
Effective January 1, 1994, Dial adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115 requires the classification of securities at acquisition into one of three categories: available for sale, held to maturity or trading, with different reporting requirements for each classification. See Note F of Notes to Consolidated Financial Statements for a discussion of the classification and reporting of these securities at December 31, 1994.
Intangibles. Intangibles are carried at cost less accumulated amortization. Intangibles which arose prior to November 1, 1970, are not being amortized. Intangibles arising on or after November 1, 1970 are amortized on the straight-line method over the estimated lives or periods of expected benefit, but not in excess of 40 years. Dial evaluates the possible impairment of goodwill and other intangible assets at each reporting period based on the undiscounted projected operating income of the related business unit.
Pension and Other Benefits. Trusteed, noncontributory pension plans cover substantially all employees. Benefits are based primarily on final average salary and years of service. Funding policies provide that payments to pension trusts shall be at least equal to the minimum funding required by applicable regulations.
Dial has defined benefit postretirement plans that provide medical and life insurance for eligible retirees and dependents. Until 1992, the cost of these benefits was generally expensed as claims were incurred.
Effective January 1, 1992, Dial adopted the method of accounting for postretirement benefits other than pensions prescribed by SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which requires recognition of liabilities for such benefits over the period that services are provided by employees. Dial elected to record the cumulative effect of initial application of SFAS No. 106 rather than amortizing such amount over 20 years as permitted by the standard. See Note M of Notes to Consolidated Financial Statements for further information.
Effective January 1, 1994, Dial adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The adoption of SFAS No. 112 had no material effect on the consolidated financial statements.
Foreign Currency Translation. In accordance with SFAS No. 52, the assets and liabilities of Dial's foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the balance sheet date, with resulting unrealized translation gains and losses accumulated in a separate component of stockholders' equity. Income and expense items are converted into U.S. dollars at average rates of exchange prevailing during the year.
Derivatives. Amounts receivable or payable under interest rate derivatives are recognized as interest income or expense. Gains and losses from foreign exchange forward contracts which hedge identifiable foreign currency commitments are deferred and are recognized in income in the same period as the hedged transaction.
Stock Split. On May 10, 1994, Dial's Board of Directors declared a two-for-one stock split which was paid on July 1, 1994, to stockholders of record as of June 1, 1994. Unless otherwise noted, all references in the financial statements with regard to number of shares of common stock and related dividends declared and income per share amounts have been restated to reflect the stock split.
Net Income (Loss) Per Common Share. Net income (loss) per common share is based on net income (loss) after preferred stock dividend requirements and the weighted average number of common shares outstanding during each year after giving effect to stock options considered to be dilutive common stock equivalents. Fully diluted net income (loss) per common share is not materially different from primary net income (loss) per common share. The average outstanding common and equivalent shares does not include shares held by the Employee Equity Trust (the "Trust"). Shares held by the Trust are not considered outstanding for net income (loss) per share calculations until the shares are released from the Trust.
B. ACQUISITIONS OF BUSINESSES AND OTHER ASSETS During 1994, Dial completed its acquisition of the final eleven of fifteen airline catering kitchens from United Airlines ("UAL") and also acquired several small services companies. The first four UAL flight catering kitchens were purchased by Dial on December 30, 1993. Also in December 1993, Dial acquired the remaining 49% interest in a joint venture which owns the office building in Phoenix, Arizona, that serves as Dial's corporate headquarters complex. During 1993, Dial also purchased a consumer products line and three convention services companies. Acquisitions in 1992 were not material.
Net cash paid, assets acquired and debt and other liabilities assumed in all acquisitions for the years ended December 31 were as follows:
All acquisitions were accounted for as purchases. The purchase prices, including acquisition costs, were allocated to the net tangible and intangible assets acquired based on estimated fair values at the dates of the acquisitions. The difference between the purchase prices and the related fair values of net assets acquired represents goodwill which is being amortized on a straight-line basis over 40 years. The fair value of patents and other intangible assets included in the acquisitions is amortized over their estimated useful lives. The results of the acquired operations have been included in the Statement of Consolidated Income from the dates of acquisition. The results of operations of the acquired companies from the beginning of the year to the dates of acquisition are not material.
In February 1995, Dial exercised its option to purchase a cruise ship, previously under a lease agreement, for $39,500,000. Dial has entered into a four-year charter arrangement to lease the ship to a European operator. In April 1994, Dial notified the lessor of its intention to purchase Dial's other leased cruise ship for $71,000,000 when the current lease agreement expires in October 1995.
C. RESTRUCTURING AND OTHER CHARGES--CONTINUING OPERATIONS Dial recorded restructuring and other charges of $30,000,000 ($19,800,000 after-tax, or $0.24 per share) in the fourth quarter of 1992, attributable to the Travel and Leisure and Payment Services Group primarily to provide for termination of an unfavorable airport concession contract and related matters, and to provide for costs to reposition the cruise line to compete more effectively in the Caribbean market.
D. DISCONTINUED OPERATIONS AND DISPOSITIONS On August 12, 1993, Dial sold, through an initial public offering, 20 million shares of common stock of Motor Coach Industries International, Inc. ("MCII"), pursuant to an underwriting agreement dated August 4, 1993. Transportation Manufacturing Operations, Inc., Dial's Transportation Manufacturing and Service Parts subsidiary, was transferred to MCII in connection with the public offering of MCII shares. The disposition of MCII, the sale of the Canadian transit bus manufacturing business in June 1993, the sale of certain bus installment sale receivables in early 1993 and the liquidation, completed in early 1993, of a trailer manufacturing and transport services company, concluded the disposal of the Transportation Manufacturing and Service Parts Group.
At a special meeting on March 3, 1992, shareholders of Dial approved the spin-off of GFC Financial, which comprised Dial's commercial lending and mortgage insurance subsidiaries. As a result of the spin-off, the holders of common stock of Dial received a Distribution (the "Distribution") of one share of common stock of GFC Financial for every two shares (pre-split) of Dial common stock.
In connection with the dispositions, special charges to earnings were made in 1992 to cover restructuring of certain operations and other costs while, in 1993, these provisions related primarily to previously discontinued businesses.
The caption "Income (loss) from discontinued operations" in the Statement of Consolidated Income for the years ended December 31 includes the following:
In addition to those classified as discontinued operations and described above, businesses with aggregate net assets of $48,584,000 were sold in 1992.
E. INVENTORIES Inventories at December 31 consisted of the following:
F. INVESTMENTS IN DEBT AND EQUITY SECURITIES Effective January 1, 1994, Dial adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115 requires the classification of securities at acquisition into one of three categories: available for sale, held to maturity or trading. Dial has no securities classified in the trading category. Securities are included in the Consolidated Balance Sheet under the caption, "Investments restricted for payment service obligations" except for those securities expected to be sold or mature within one year which are included under the caption, "Funds and agents' receivables restricted for payment service obligations."
Although Dial's investment portfolio exposes Dial to certain credit risks, Dial believes the high quality of its investments (more than 98% of the investments at December 31, 1994 have ratings of A- or higher or are collateralized by federal agency securities) reduces this risk substantially. Dial regularly monitors the credit and market risk (the possibility that market changes may make financial instruments less valuable) and takes steps to mitigate the likelihood of these exposures resulting in actual loss.
Securities Available for Sale. Securities that are being held for indefinite periods of time, including those securities which may be sold in response to needs for liquidity or changes in interest rates, are classified as securities available for sale and are carried at fair value, with the net, after-tax, unrealized holding gain or loss reported as a separate component of common stock and other equity, with no effect on current results of operations. At December 31, 1994, the unrealized loss of $21,742,000 (net of tax benefit of $13,415,000) was included in the Consolidated Balance Sheet as a separate component of stockholders' equity under the caption, "Unrealized loss on securities available for sale." The increase in the unrealized loss during 1994 was principally due to increases in interest rates.
A summary of securities available for sale at December 31, 1994 is as follows:
Maturities of securities available for sale at December 31, 1994 are as follows:
Actual maturities may differ from contractual maturities because the borrowers have the right to call or prepay certain obligations, sometimes without penalties. Mortgage-backed and other asset-backed securities not due at a single maturity date are included in the table above based on average maturity dates. Gross realized gains and losses on sales were $2,500,000 and $500,000, respectively, based on the specific identification method of determining cost.
Securities Held to Maturity. Securities classified as held to maturity consist of securities that management has the ability and intent to hold to maturity, are carried at amortized cost, and are summarized as follows at December 31, 1994:
Maturities of securities held to maturity at December 31, 1994 are as follows:
Actual maturities may differ from contractual maturities because the borrowers have the right to call or prepay certain obligations, sometimes without penalties. There were no sales or transfers of securities held to maturity to another category of securities during the year ended December 31, 1994.
G. PROPERTY AND EQUIPMENT Property and equipment at December 31 consisted of the following:
H. INTANGIBLES Intangibles at December 31 consisted of the following:
I. DEBT Long-term debt at December 31 was as follows:
Interest paid in 1994, 1993 and 1992 was approximately $47,695,000, $55,807,000 and $59,962,000, respectively.
In July 1994, a Shelf Registration filed with the Securities and Exchange Commission became effective. Under the Shelf Registration, Dial can issue up to an aggregate $500,000,000 of debt and equity securities. No debt has been issued under the program and there is no intention to issue any equity securities at the present time. The filing increases Dial's future financing options.
During 1993, Dial filed a $300,000,000 Senior Debt Securities Shelf Registration with the Securities and Exchange Commission under which Dial was able to issue senior notes for various amounts and at various rates and maturities. During 1993, Dial issued $230,000,000 of debt under the program with maturities of five to eleven years with a weighted average interest rate of 6.2%. In early 1994, Dial issued the remaining $70,000,000 of debt under the senior note program with maturities of six to fifteen years with a weighted average interest rate of 6.1%.
During the third quarter of 1993, Dial utilized the proceeds from the sale of MCII to repurchase approximately 2,000,000 shares of Dial's common stock on the open market and to reduce outstanding debt, including prepaying $187,250,000 principal amount of long-term, fixed-rate debt, having a weighted average interest rate of 10%. These prepayments resulted in an extraordinary charge (after-tax) of $21,908,000.
As discussed further in Note O of Notes to Consolidated Financial Statements, Dial has entered into a) interest rate swap agreements ("pay-fixed swaps") which convert floating interest rates on existing and anticipated short-term borrowings into fixed interest rates and b) interest rate swap agreements ("receive-fixed swaps") which convert fixed interest rates on a portion of the Senior notes and other debt into floating interest rates. During the fourth quarter of 1994, Dial reclassified expenses related to certain interest rate swap agreements to interest expense from unallocated corporate expense and other items, net. As a result, interest expense was increased and unallocated corporate expense was reduced by $5,983,000, $7,327,000 and $7,321,000 for 1994, 1993 and 1992, respectively. Including this reclassification the net effect of interest rate swap agreements was to increase interest expense by $2,863,000, $6,112,000 and $7,321,000 for 1994, 1993 and 1992, respectively. The weighted average interest rate on total debt, inclusive of the effect of interest rate swap agreements, was 6.55%, 7.53% and 8.24% for 1994, 1993 and 1992, respectively.
Dial satisfies its short-term borrowing requirements with bank lines of credit and by the issuance of commercial paper and promissory notes. Outstanding commercial paper, promissory notes and the guarantee of ESOP debt are supported by a $500,000,000 credit commitment available under a long-term revolving bank credit agreement. Borrowings under the agreement were available at December 31, 1994 on a revolving basis until June 30, 1999. Annually, at Dial's request and with the participating banks' consent, the terms of the agreement may be extended for a further one-year period.
The interest rate applicable to borrowings under the agreement is, at Dial's option, indexed to the bank prime rate or the London Interbank Offering Rate ("LIBOR"), plus appropriate spreads over such indices during the period of the credit agreement. The agreement also provides for commitment fees. Such spreads and fees will change moderately should Dial's debt ratings change.
Dial, in the event that it becomes advisable, intends to exercise its right under the agreement to borrow for the purpose of refinancing short-term borrowings; accordingly, short-term borrowings totaling $274,903,000 and $224,666,000 at December 31, 1994 and 1993, respectively, have been classified as long-term debt.
Annual maturities of long-term debt due in the next five years will approximate $22,830,000 (1995), $32,729,000 (1996), $2,639,000 (1997), $32,589,000 (1998) and $277,189,000 (1999). Included in the 1999 amount is $274,903,000 which represents the maturity of short-term borrowings assuming they had been refinanced utilizing the revolving credit facility and the term of the facility was not extended. However, Dial expects the term of the facility to be extended.
Canadian revolving credit loans are available to a Canadian Services subsidiary from banks under agreements which provide for credit of $35,645,000 (stated in U. S. dollar equivalent).
Dial's long-term debt agreements include various restrictive covenants and require the maintenance of certain defined financial ratios with which Dial is in compliance.
J. PREFERRED STOCK AND COMMON STOCK AND OTHER EQUITY At December 31, 1994, there were 97,108,724 shares of common stock issued and 92,789,100 shares outstanding. At December 31, 1994, a total of 6,898,358 of the outstanding shares were held by The Dial Corp Employee Equity Trust.
Dial has 442,352 shares of $4.75 Preferred Stock authorized, of which 382,352 shares are issued. The holders of the $4.75 Preferred Stock are entitled to a liquidation preference of $100 per share and to annual cumulative sinking fund redemptions of 6,000 shares. Dial presently holds 147,288 shares which will be applied to this sinking fund requirement; therefore, the 235,064 shares held by others are scheduled to be redeemed in the years 2019 to 2058. In addition, Dial has authorized 5,000,000 and 2,000,000 shares of Preferred Stock and Junior Participating Preferred Stock, respectively.
Dial has one Preferred Stock Purchase Right ("Right") outstanding on each outstanding share of its common stock. The Rights contain provisions to protect stockholders in the event of an unsolicited attempt to acquire Dial which is not believed by the Board of Directors to be in the best interest of stockholders. The Rights are represented by the common share certificates and are not exercisable or transferable apart from the common stock until such a situation arises. The Rights may be redeemed by Dial at $0.05 per Right prior to the time any person or group has acquired 20% or more of Dial's shares. Dial has reserved 1,000,000 shares of Junior Participating Preferred Stock for issuance in connection with the Rights.
During 1989, Dial arranged to fund its matching contributions to employees' 401k plans through a leveraged Employee Stock Ownership Plan ("ESOP"). All eligible employees of Dial and its participating affiliates, other than certain employees covered by collective bargaining agreements that do not expressly provide for participation of such employees in an ESOP, may participate in the ESOP.
In June 1989, Dial sold 2,277,582 shares of treasury stock to the ESOP for $17.56 per share. In connection with the spin-off of GFC Financial in March 1992, the ESOP received one share of common stock of GFC Financial for every two shares (pre-split) of Dial common stock held by the ESOP. The ESOP subsequently sold the shares of GFC Financial on the open market and used the proceeds to purchase 546,258 shares of Dial's common stock. ESOP shares are treated as outstanding for net income (loss) per share calculations.
The ESOP borrowed $40,000,000 to purchase the 2,277,582 shares of treasury stock in 1989. The ESOP's obligation to repay this borrowing is guaranteed by Dial; therefore, the unpaid balance of the borrowing ($30,000,000 at December 31, 1994) has been reflected in the accompanying balance sheet as long-term debt and the amount representing unearned employee benefits has been recorded as a deduction from common stock and other equity. The liability is being reduced as the ESOP repays the borrowing, and the amount in common stock and other equity is being reduced as the employee benefits are charged to expense. The ESOP intends to repay the loan (plus interest) using Dial contributions and dividends received on the shares of common stock held by the ESOP. Information regarding ESOP transactions for the years ended December 31 is as follows:
Shares are released for allocation to participants based upon the ratio of the year's principal and interest payments to the sum of the total principal and interest payments over the life of the plan. Expense of the ESOP is recognized based upon the greater of cumulative cash payments to the plan or 80% of the cumulative expense that would have been recognized under the shares allocated method, in accordance with Statement of Position 76-3, "Accounting for Certain Employee Stock Ownership Plans" and Emerging Issues Task Force Abstract No. 89-8, "Expense Recognition for Employee Stock Ownership Plans." Under this method, Dial has recorded expense of $1,684,000, $1,782,000 and $2,210,000 in 1994, 1993 and 1992, respectively.
ESOP shares at December 31 were as follows:
In September 1992, Dial sold 10,491,800 shares of treasury stock to The Dial Corp Employee Equity Trust (the "Trust") for a $200,000,000 ($19.06 per share) promissory note. The Trust is being used to fund certain existing employee compensation and benefit plans over the scheduled 15-year term. Through December 31, 1994, the Trust had sold 3,593,442 shares to fund such benefits. The $200,000,000, representing unearned employee benefits, was recorded as a deduction from common stock and other equity, and is being reduced as employee benefits are funded.
At December 31, 1994, retained income of $86,259,000 was unrestricted as to payment of dividends by Dial.
K. STOCK OPTIONS The Board of Directors approved and on March 3, 1992, the stockholders adopted the 1992 Stock Incentive Plan ("1992 Plan") for the grant of options and restricted stock, including performance-based stock, to officers, directors and certain key employees. The Plan replaces the 1983 Stock Option and Incentive Plan ("1983 Plan"). No new awards will be made under the 1983 Plan. In connection with the Distribution, each option, related Limited Stock Appreciation Right ("LSAR") and related Stock Appreciation Right ("SAR") held by an employee of Dial who remained an employee of Dial after the Distribution was adjusted so that the aggregate exercise price and the aggregate spread before the Distribution were preserved at the time of the Distribution. For each share of restricted stock held by a Dial employee who remained an employee of Dial after the Distribution, such employee received additional shares of restricted stock with a market value which compensated for the Distribution.
The 1992 Plan provides for the following types of awards: (a) stock options (both incentive stock options and nonqualified stock options), (b) SARs, and (c) restricted stock, including performance-based stock. The Plan authorizes the issuance of options for up to 2 1/2% of the total number of shares of common stock outstanding as of the first day of each year; provided that any shares available for grant in a particular calendar year which are not, in fact, granted in such year shall not be added to shares available for grant in any subsequent calendar year. In addition to the limitation set forth above with respect to number of shares available for grant in any single calendar year, no more than 10,000,000 shares of common stock shall be cumulatively available for grant of incentive options over the life of the Plan. In addition, 1,000,000 shares of Preferred Stock are reserved for distribution under the 1992 Plan.
The stock options, SARs and LSARs outstanding at December 31, 1994 are granted for terms of ten years; 50% become exercisable after one year and the balance become exercisable after two years from the date of grant. Stock options and appreciation rights are exercisable based on the market value at the date of grant. LSARs vest fully at date of grant and are exercisable only for a limited period (in the event of certain tenders or exchange offers for Dial's common stock). SARs and/or LSARs are issued in tandem with certain stock options and the exercise of one reduces, to the extent exercised, the number of shares represented by the other.
Information with respect to options granted and exercised for the years ended December 31 is as follows:
At December 31, 1994, stock options with respect to 6,004,118 shares are exercisable at an average price of $15.49 per share.
Performance-based stock awards (184,100 and 151,800 shares awarded in 1994 and 1993, respectively) vest over a three-year period from the date of grant. The stock awarded vests only if performance targets relative to the S & P 500 stock index and Dial's proxy comparator group are achieved. Restricted stock awards (266,352 shares awarded in 1994) vest over periods not exceeding five years from the date of grant. There were no restricted stock awards in 1993 and 1992. However, 170,322 shares of restricted stock were allocated to employees of Dial in 1992 to compensate for the effect of the Distribution. A holder of the performance-based and restricted stock has the right to receive dividends and vote the shares but may not sell, assign, transfer, pledge or otherwise encumber the stock.
L. INCOME TAXES Deferred income tax assets (liabilities) included in the Consolidated Balance Sheet at December 31 related to the following:
The consolidated provision for income taxes on income from continuing operations for the years ended December 31 consisted of the following:
Income taxes paid in 1994, 1993 and 1992 amounted to $62,127,000, $12,206,000 and $35,160,000, respectively.
Certain tax benefits related primarily to stock options and dividends paid to the ESOP are credited to common stock and other equity and amounted to $1,939,000, $1,913,000 and $5,382,000 in 1994, 1993 and 1992, respectively.
Eligible subsidiaries (including MCII and GFC Financial and certain of their subsidiaries up to the sale and Distribution date, respectively) are included in the consolidated federal and other applicable income tax returns of Dial.
Certain benefits of tax losses and credits, which would not have been currently available to certain subsidiaries, or MCII and GFC Financial, on a separate return basis, have been credited to those subsidiaries, or MCII and GFC Financial, by Dial. These benefits are included in the determination of the income taxes of those subsidiaries and MCII and GFC Financial and this policy has been documented by written agreements.
A reconciliation of the provision for income taxes on income from continuing operations and the amount that would be computed using statutory federal income tax rates on income before income taxes for the years ended December 31 is as follows:
United States and foreign income before income taxes from continuing operations for the years ended December 31 was as follows:
M. PENSION AND OTHER BENEFITS Pension Benefits. Net periodic pension cost for the years ended December 31 included the following components:
Weighted average assumptions used were:
The following table indicates the plans' funded status and amounts recognized in Dial's consolidated balance sheet at December 31:
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 13.5% in 1994 and 14.5% in 1993 gradually declining to 5.5% by the year 2002 and remaining at that level thereafter for retirees below age 65, and 10% in 1994 and 11% in 1993 gradually declining to 5.5% by the year 2002 and remaining at that level thereafter for retirees above age 65.
A one-percentage-point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation as of December 31, 1994 by approximately 10% and the ongoing annual expense by approximately 13%.
The net periodic postretirement benefit cost for the years ended December 31 includes the following components:
N. LEASES Certain retail facilities, plants, offices and equipment are leased. The leases expire in periods ranging generally from one to 27 years and some provide for renewal options ranging from one to 37 years. Leases which expire are generally renewed or replaced by similar leases.
At December 31, 1994, Dial's future minimum rental payments and related sublease rentals receivable with respect to noncancellable operating leases with terms in excess of one year were as follows:
Excluding the cruise ships discussed below, at the end of the lease terms Dial has options to purchase certain leased assets for an aggregate purchase price of $26,100,000. If the purchase options are not exercised, Dial will make residual guarantee payments aggregating $18,500,000 which are refundable to the extent that the lessors' subsequent sales prices exceed certain levels.
As discussed in Note B of Notes to Consolidated Financial Statements, in February 1995 Dial purchased a cruise ship previously under a lease agreement and has entered into a four-year charter arrangement to lease the ship to a European operator. In addition, in April 1994 Dial notified the lessor of its intention to purchase Dial's other leased cruise ship when the current lease agreement expires in October 1995. The table above includes $10,200,000 of rental payments due in 1995 related to these cruise ships.
Information regarding net operating lease rentals for the years ended December 31 is as follows:
Contingent rentals on operating leases are based primarily on sales and revenues for buildings and leasehold improvements and usage for other equipment.
Dial is a 50% partner in an unconsolidated joint venture which owns a resort and conference hotel in Oakbrook, Illinois. Dial has leased the hotel through September 1, 2002, and the future rental payments are included in the table of future minimum rental payments. In addition, Dial and a third party have agreed to lend the joint venture $10,000,000 and $5,000,000, respectively, at 8 3/4% on July 1, 1997 to be secured by a second mortgage on the property to prepay $15,000,000 of the joint venture's nonrecourse first mortgage obligation. If the joint venture is unable to repay or refinance the first mortgage note, Dial has an option to purchase the note from the lender on September 30, 2002, its due date, at its then unpaid principal amount which is expected to be approximately $24,650,000. If the purchase option is not exercised, Dial will make residual guarantee payments equal to the greater of $5,000,000 or 150% of any shortfall in fair market value of the hotel compared to the unpaid principal amount of the note on such date. Dial accounts for its interest in the joint venture using the equity method.
O. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS Financial Instruments with Off-Balance-Sheet Risk. Dial is a party to financial instruments with off-balance-sheet risk which are entered into in the normal course of business to meet its financing needs and to manage its exposure to fluctuations in interest rates and foreign exchange rates. These financial instruments include revolving sale of receivable agreements, interest rate swap agreements and foreign exchange forward contracts. The instruments involve, to a varying degree, elements of credit, market, interest rate and exchange rate risk in addition to amounts recognized in the financial statements. Dial does not hold or issue financial instruments for trading purposes.
At December 31, 1994, Dial has agreements to sell undivided participating interests in a defined pool of trade accounts receivable from customers of Dial's consumer products and airline catering and services subsidiaries in an amount not to exceed $115,000,000 (increased to $140,000,000 in February 1995) as a means of accelerating cash flow. As collections reduce accounts receivable included in the pool, Dial sells participating interests in new receivables, providing a stable level of purchased accounts. Dial's expense of selling receivables amounted to approximately $4,900,000, $4,000,000 and $3,800,000 in 1994, 1993 and 1992, respectively. Such amounts are deducted in arriving at operating income. Under the terms of the agreement Dial has retained substantially the same risk of credit loss as if the receivables had not been sold as Dial is obligated to repurchase uncollectible receivables sold and replace those receivables with new accounts receivable. The agreements to sell accounts receivable, which were fully utilized at December 31, 1994 and December 31, 1993, mature in February of each year, but are expected to be extended annually by mutual agreement. They are currently extended to February 1996. The average balance of proceeds from the sale of accounts receivable was $101,700,000, $103,700,000 and $91,200,000 during 1994, 1993 and 1992, respectively.
Dial enters into interest rate swap agreements as a means of managing its interest rate expense. The agreements are contracts to exchange fixed and floating interest rate payments periodically over the life of the agreements without the exchange of the underlying notional amounts. The notional amounts of such agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. The amounts to be paid or received under the interest rate swap agreements are accrued consistent with the terms of the agreements and market interest rates. Dial maintains formal procedures for entering into interest rate swap transactions and management regularly monitors and reports to the Board of Directors on interest rate swap activity. The agreements are with major financial institutions which are expected to fully perform under the terms of the agreements, thereby mitigating the credit risk from the transactions in the event of nonperformance by the counterparties. In addition, Dial continuously monitors the credit ratings of the counterparties and the likelihood of default is considered remote.
The following table indicates the types of swaps used and their weighted average interest rates in effect at December 31. The floating rate portion of the interest rate swaps is based on LIBOR. Changes in the LIBOR interest rates could significantly affect the floating rate information and future cash flows.
Dial has also entered into certain interest rate swap agreements in which Dial agreed to pay a fixed rate which exceeded the current market interest rate for identical instruments. The discounted present value of this rate "premium" was paid to Dial in cash at inception of the agreements. Dial has been amortizing these cash proceeds over the term of the swaps. Dial entered into such agreements to provide for an alternative cash source and for income tax planning purposes. In every case, Dial simultaneously entered into an exactly paired (with identical notional amount and term) agreement in which it agreed to receive a fixed rate. The result in each case was a pair of offsetting swaps which fixed, at a market discount rate, the future net payments to be made by Dial. The use of these paired swaps has not created any unusual risk to Dial.
At December 31, 1994, Dial had $267,600,000 notional amount of such paired interest rate swap agreements which fixed the future net payments owed by Dial against the cash proceeds received by Dial when the swap agreements were entered, at discount rates ranging from 7.1% to 10.2% over the original terms of the paired agreements which expire as follows: $67,600,000 (1995), and $200,000,000 (1996). The terms of certain of these agreements have been extended which will result in additional pay-fixed swaps of $67,600,000 commencing in 1995 and $100,000,000 commencing in 1996, all of which will expire in 2000. These swaps will have a weighted average pay rate of 8.6% and a weighted average receive rate, based on LIBOR at December 31, 1994, of 7.0%.
Cash consideration received on the paired swaps is amortized as an offset to expense from net swap payments over the life of the related swap. Net expense related to these paired swaps of $7,500,000, $6,700,000 and $11,500,000 for 1994, 1993 and 1992, respectively, is included in the Statement of Consolidated Income under the caption, "Unallocated corporate expense and other items, net." The unamortized balance of the cash consideration received on the paired swaps ($22,300,000 and $35,200,000 at December 31, 1994 and 1993, respectively) is included in the Consolidated Balance Sheet under the caption, "Other deferred items and insurance reserves."
Dial also enters into foreign exchange forward contracts to hedge identifiable foreign currency commitments including intercompany transactions with Dial's foreign subsidiaries. These contracts are purchased to reduce the impact of foreign currency fluctuations on operating results. Dial does not engage in foreign currency speculation. While the hedging instruments are subject to the risk of loss from changes in exchange rates, these losses would generally be offset by gains on the exposures being hedged. Gains and losses on those hedging instruments that are designated and effective as hedges of firmly committed foreign currency transactions are deferred and recognized in income in the same period as the hedged transaction. Dial's theoretical risk in these transactions is the cost of replacing, at current market rates, these contracts in the event of default by the other party. Management believes the risk of incurring such losses is remote as the contracts are entered into with major financial institutions.
The table below summarizes by major currency the contractual amounts (stated in U.S. dollar equivalent) to purchase foreign currencies at December 31, 1994. The contracts mature through January 1996, with 40% of such contracts expiring in January 1995. Contracts to sell foreign currencies are not material.
Fair Value of Financial Instruments. The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments." The estimated fair value amounts have been determined by Dial using available market information and valuation methodologies described below. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein may not be indicative of the amounts that Dial could realize in a current market exchange. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.
The carrying values of cash and cash equivalents, receivables, accounts payable and payment service obligations approximate fair values due to the short-term maturities of these instruments. The amortized cost and fair value of investments in debt and equity securities are disclosed in Note F of Notes to Consolidated Financial Statements. The carrying amounts and estimated fair values of Dial's other financial instruments at December 31 are as follows:
The methods and assumptions used to estimate the fair values of the financial instruments are summarized as follows:
Debt--The fair value of debt was estimated by discounting the future cash flows using rates currently available for debt of similar terms and maturity. The carrying values of short-term bank loans, commercial paper and promissory notes were assumed to approximate fair values due to their short-term maturities.
Interest rate swaps--The fair values were estimated by discounting the expected cash flows using rates currently available for interest rate swaps of similar terms and maturities. The fair value represents the estimated amount that Dial would pay to the dealer to terminate the swap agreement at December 31, 1994.
Foreign exchange forward contracts--The fair value is estimated using quoted exchange rates of these or similar instruments.
P. LITIGATION AND CLAIMS Dial and certain subsidiaries are plaintiffs or defendants to various actions, proceedings and pending claims. Certain of these pending legal actions are or purport to be class actions. Some of the foregoing involve, or may involve, compensatory, punitive or other damages in material amounts. Litigation is subject to many uncertainties and it is possible that some of the legal actions, proceedings or claims referred to above could be decided against Dial. Although the amount of liability at December 31, 1994, with respect to these matters is not ascertainable, Dial believes that any resulting liability should not materially affect Dial's financial position or results of operations.
Dial is subject to various environmental laws and regulations of the United States as well as of the states in whose jurisdictions Dial operates. As is the case with many companies, Dial faces exposure to actual or potential claims and lawsuits involving environmental matters. Although Dial is a party to certain environmental disputes, Dial believes that any liabilities resulting therefrom, after taking into consideration amounts already provided for, but exclusive of any potential insurance recovery, should not have a material adverse effect on Dial's financial position or results of operations.
Q. PRINCIPAL BUSINESS SEGMENTS For 1994, Dial's principal business segments have been reclassified to include airplane fueling and ground handling activities along with airline catering as the Airline Catering and Services segment, in recognition of recent industry developments and the fact that all of Dial's airline related activities are now being jointly managed. The airplane fueling and ground handling operations were previously part of the Travel and Leisure and Payment Services segment, which now includes other foodservice operations, previously classified with airline catering as the Airline Catering and Other Food Services segment. Prior year data have been restated to reflect this change. The business activities included in each segment are set forth elsewhere in this Annual Report.
Operating income by segment represents revenues less costs of sales and services. Unallocated corporate and other items, net, are then deducted from total operating income of principal business segments to arrive at total operating income.
R. CONDENSED CONSOLIDATED QUARTERLY RESULTS (UNAUDITED)
EXHIBIT INDEX
3.A Copy of Restated Certificate of Incorporation of Dial, as amended through March 3, 1992, filed as Exhibit (3)(A) to Dial's 1991 Form 10-K, is hereby incorporated by reference.
3.B Copy of Bylaws of Dial, as amended through February 21, 1992, filed as Exhibit (3)(B) to Dial's 1991 Form 10-K, is hereby incorporated by reference.
4.A Instruments with respect to issues of long-term debt have not been filed as exhibits to this Annual Report on Form 10-K if the authorized principal amount of any one of such issues does not exceed 10% of total assets of the Corporation and its subsidiaries on a consolidated basis. The Corporation agrees to furnish a copy of each such instrument to the Securities and Exchange Commission upon request.
4.B Copy of Amended and Restated Credit Agreement dated as of December 15, 1993, among Dial, the Banks parties thereto, Bank of America National Trust and Savings Association as Agent and Reporting Agent and Citibank, N.A. as Agent and Funding Agent, filed as Exhibit 4.B to Dial's 1993 Form 10-K, is hereby incorporated by reference.
4.B1 Copy of First Amendment to Amended and Restated Credit Agreement dated as of September 23, 1994.*
10.A Copy of Employment Agreement between Dial and John W. Teets dated April 14, 1987, filed as Exhibit (10)(A) to Dial's 1989 Form 10-K, is hereby incorporated by reference.+
10.B Sample forms of Contingent Agreements relating to funding of Supplemental Executive Pensions, filed as Exhibit (10)(T) to Dial's 1989 Form 10-K, is hereby incorporated by reference.+
10.C Copy of Dial's Supplemental Pension Plan, amended and restated as of January 1, 1987, filed as Exhibit (10)(F) to Dial's 1986 Form 10-K, is hereby incorporated by reference.+
10.C1 Copy of amendment dated February 21, 1991, to Dial's Supplemental Pension Plan, filed as Exhibit (10)(G)(i) to Dial's 1990 Form 10-K, is hereby incorporated by reference.+
10.D Copy of Dial's Deferred Compensation Plan for Directors, adopted November 20, 1980, as amended through February 21, 1991, filed as Exhibit (10)(H) to Dial's 1990 Form 10-K, is hereby incorporated by reference.+
10.E Copy of The Dial Corp Management Incentive Plan, filed as Exhibit 10.E to Dial's 1993 Form 10-K, is hereby incorporated by reference.+
10.F1 Copy of form of Executive Severance Agreement between Dial and three executive officers, filed as Exhibit (10)(G)(i) to Dial's 1991 Form 10-K, is hereby incorporated by reference.+
10.F2 Copy of forms of The Dial Corp Executive Severance Plans covering certain executive officers, filed as Exhibit (10)(G)(ii) to Dial's 1992 Form 10-K, is hereby incorporated by reference.+
10.G Copy of Travelers Express Company, Inc. Supplemental Pension Plan, filed as Exhibit (10)(L) to Dial's 1984 Form 10-K, is hereby incorporated by reference.+
10.H1 Copy of Dial's 1983 Stock Option and Incentive Plan, filed as Exhibit (28) to Dial's Registration Statement on Form S-8 (Registration No. 33-23713), is hereby incorporated by reference.+
10.H2 Copy of amendment, effective August 1, 1994, to Dial's 1983 Stock Option and Incentive Plan.*+
10.I1 Copy of The Dial Corp 1992 Stock Incentive Plan, filed as Exhibit (10)(J) to Dial's 1991 Form 10-K, is hereby incorporated by reference.+
10.I2 Copy of amendment, effective August 1, 1994, to The Dial Corp 1992 Stock Incentive Plan.*+
10.J Description of Spousal Income Continuation Plan, filed as Exhibit 10(Q) to Dial's 1985 Form 10-K, is hereby incorporated by reference.+
10.K Copy of Dial's Director's Retirement Benefit Plan, filed as Exhibit (10)(R) to Dial's 1988 Form 10-K, is hereby incorporated by reference.+
10.L Copy of The Dial Corp Performance Unit Incentive Plan, filed as Exhibit 10.L to Dial's 1993 Form 10-K, is hereby incorporated by reference.+
10.M Copy of The Dial Corp Supplemental TRIM Plan.*+
10.N Copy of Employment Agreement between GES Exposition Services and Norton Rittmaster dated May 20, 1982, filed as Exhibit (10)(O) to Dial's 1992 Form 10-K, is hereby incorporated by reference.+
10.O Copy of GES Exposition Services' Incentive Compensation Plan, filed as Exhibit (10)(P) to Dial's 1992 Form 10-K, is hereby incorporated by reference.+
10.P Copy of The Dial Corp Performance-Based Stock Plan, filed as Exhibit 10.P to Dial's 1993 Form 10-K, is hereby incorporated by reference.+
10.Q Copy of The Dial Corp Deferred Compensation Plan, filed as Exhibit 10.Q to Dial's 1993 Form 10-K, is hereby incorporated by reference.+
10.R Copy of form of The Dial Corp 1983 Stock Option and Incentive Plan Amended and Restated Restricted Stock Agreements dated August 12, 1994, between Dial and six executive officers.*+
10.S Copy of form of The Dial Corp 1992 Stock Incentive Plan Restricted Stock Agreements dated August 12, 1994, between Dial and six executive officers.*+
11 Statement Re Computation of Per Share Earnings.*
21 List of Subsidiaries of Dial.*
23 Consent of Independent Auditors to the incorporation by reference into specified registration statements on Form S-3 or on Form S-8 of their reports contained in or incorporated by reference into this report.*
24 Power of Attorney signed by directors of Dial.*
27 Financial Data Schedule.*
* Filed herewith.
+ Management contract or compensation plan or arrangement.
Note: The 1994 Annual Report to Securityholders will be furnished to the Commission when, or before, it is sent to securityholders.