Edgar Filing: DIAL CORP /NEW/

e10-q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2001

Commission file number 1-11793

THE DIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)


DELAWARE (State or Other Jurisdiction of Incorporation or Organization)		51-0374887 (I.R.S. Employer Identification No.)












15501 NORTH DIAL BOULEVARD SCOTTSDALE, ARIZONA (Address of Principal Executive Offices)		85260-1619 (Zip Code)

Registrant’s Telephone Number, Including Area Code: (480) 754-3425

Indicate by check mark whether the registrant (1) has filed all Exchange Act reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

The number of shares of Common Stock, $.01 par value, outstanding as the close of business on April 28, 2001 was 94,896,063.

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

THE DIAL CORPORATION
CONSOLIDATED BALANCE SHEETS


			(Unaudited)
			March 31,			December 31,
(in thousands, except share data)			2001			2000

ASSETS




Current Assets:




	Cash and cash equivalents		$	4,577		$	6,844




	Receivables, less allowance of $6,382 and $5,983			134,865			168,170




	Inventories			173,548			162,783




	Deferred income taxes			18,171			18,910




	Other current assets			18,112			21,036

		Total current assets		349,273			377,743




Property and equipment, net				282,972			301,027




Deferred income taxes				53,809			55,425




Intangibles, net				621,881			614,458




Other assets				33,959			33,318

			$	1,341,894		$	1,381,971

LIABILITIES AND STOCKHOLDERS’ EQUITY




Current Liabilities:




	Trade accounts payable		$	112,203		$	139,702




	Short-term borrowings			115,762			125,776




	Other current liabilities			118,394			129,377

		Total current liabilities		346,359			394,855




Long-term debt				469,270			469,271




Pension and other benefits				215,455			217,035




Other liabilities				6,698			6,903

		Total liabilities		1,037,782			1,088,064

Stockholders’ Equity:




	Preferred stock, $.01 par value, 10,000,000 shares authorized; no shares issued and outstanding			—			—




	Common stock, $.01 par value, 300,000,000 shares authorized; 105,712,924 and 105,679,849 shares issued			1,057			1,057




	Additional capital			407,497			402,024




	Retained income			163,045			153,600




	Accumulated other comprehensive loss			(3,922	)		(3,465	)




	Employee benefits			(48,620	)		(45,128	)




	Treasury stock, 10,812,255 and 10,772,046 shares held			(214,945	)		(214,181	)

		Total stockholders’ equity		304,112			293,907

			$	1,341,894		$	1,381,971

See Notes to Consolidated Financial Statements.

THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME


			(Unaudited)
			Quarter Ended

(in thousands, except per share data)			March 31, 2001			April 1, 2000

Net sales			$	401,480		$	373,124

Costs and expenses:




	Cost of products sold			205,366			188,511




	Selling, general and administrative expenses			163,679			141,431

	Total costs and expenses			369,045			329,942




Operating income				32,435			43,182




Interest and other expenses				13,872			9,639




Net (income) loss of joint ventures				(1,999	)		721

Income before income taxes				20,562			32,822




Income taxes				7,464			11,324

NET INCOME			$	13,098		$	21,498

NET INCOME PER SHARE —BASIC			$	0.14		$	0.23

NET INCOME PER SHARE —DILUTED			$	0.14		$	0.23

Weighted average basic shares outstanding				91,291			93,979




	Weighted average equivalent shares			294			631

Weighted average diluted shares outstanding				91,585			94,610





NET INCOME			$	13,098		$	21,498




Other comprehensive income (loss) net of tax:




		Foreign currency translation adjustment		(457	)		131




		Minimum pension liability		—			(245	)

COMPREHENSIVE INCOME			$	12,641		$	21,384

See Notes to Consolidated Financial Statements.

THE DIAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS


			(Unaudited)
			Quarter Ended

(in thousands)			March 31, 2001			April 1, 2000

CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:




Net income			$	13,098		$	21,498




Adjustments to reconcile net income to net cash provided by operating activities:




	Depreciation			10,029			9,395




	Amortization			3,709			3,024




	Deferred income taxes			2,355			5,205




	Change in operating assets and liabilities:




		Receivables		33,305			16,861




		Inventories		(10,765	)		(17,693	)




		Trade accounts payable		(27,499	)		(30,716	)




		Income taxes payable		4,997			(21,068	)




		Other assets and liabilities, net		(14,826	)		(15,917	)

Net cash provided (used) by operating activities				14,403			(29,411	)

CASH FLOWS USED BY INVESTING ACTIVITIES:




Capital expenditures				(3,241	)		(6,284	)




Investment in and loans to joint ventures				—			(3,264	)

Net cash used by investing activities				(3,241	)		(9,548	)

CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:




Net change in long-term borrowings				(1	)		109,699




Common stock purchased for treasury				—			(83,143	)




Net change in short-term bank loans				(10,014	)		91,644




Dividends paid on common stock				(3,653	)		(7,533	)




Cash proceeds from stock options				239			526




Net change in receivables sold				—			(73,177	)

Net cash provided (used) by financing activities				(13,429	)		38,016

Net decrease in cash and cash equivalents				(2,267	)		(943	)




Cash and cash equivalents, beginning of period				6,844			6,126

CASH AND CASH EQUIVALENTS, END OF PERIOD			$	4,577		$	5,183

See Notes to Consolidated Financial Statements.

THE DIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Preparation

The accompanying consolidated financial statements include the accounts of The Dial Corporation and all majority-owned subsidiaries. This information should be read in conjunction with the financial statements set forth in The Dial Corporation Annual Report to Stockholders for the year ended December 31, 2000.

Accounting policies utilized in the preparation of the financial information herein presented are the same as set forth in Dial’s annual financial statements except as modified for interim accounting policies which are within the guidelines set forth in Accounting Principles Board Opinion No. 28, “Interim Financial Reporting.” The interim consolidated financial statements are unaudited. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position as of March 31, 2001 and the results of operations and cash flows for the quarter ended March 31, 2001 and April 1, 2000 have been included. Interim results of operations are not necessarily indicative of the results of operations for the full year.

Note 2. Special Charges

Third Quarter 2000 Special Charges

On October 18, 2000, we announced a special charge related to the Specialty Personal Care business, the Dial/Henkel joint ventures, and severance costs for prior management. We recorded $73.9 million ($48.9 million after tax or $0.53 per share) related to this special charge during 2000. We do not anticipate that any additional charges to net income will be recorded in 2001 with respect to this special charge. The current period activity relating to the Third Quarter 2000 Special Charges is summarized below:


		Beginning					Amount of				Ending
		reserves at		Cash spent			reversed		Amount charged		reserves at
(in thousands)		12/31/00		during period			charges		against assets		3/31/01

Employee separations		$	2,063	$	(470	)	$	—	$	—	$	1,593




Discontinued product inventories and related charges			9,200		(1,010	)		—		—		8,190




Other exit costs			135		(38	)		—		—		97

	Total	$	11,398	$	(1,518	)	$	—	$	—	$	9,880

The income statement classification of amounts recorded with respect to the Third Quarter 2000 Special Charges have been previously disclosed and no additional amounts were charged to net income in the first quarter of 2001.

We have sold or disposed of a portion of the discontinued product inventories and expect to sell or dispose of the remainder in 2001. In addition, reserves were established to fund promotional activity for our customers to discontinue SKU’s currently in our customers’ inventories and for expected returns and deductions from our customers. Cash requirements for the special charges currently are expected to be funded from normal operations.

operating requirements and other factors referred to in Exhibit 99 to this Form 10-Q could cause actual operating benefits to differ materially from anticipated results.

Second Quarter 2000 Restructuring

On June 28, 2000, we announced a restructuring charge designed to improve profitability and operational efficiencies. We recorded charges totaling $23.9 million ($14.9 million after tax or $0.16 per share) during 2000 to close our Bristol, Pennsylvania dry detergent plant, to consolidate the manufacturing and distribution functions of our Specialty Personal Care business, and to restructure our domestic and international sales organization. We do not anticipate that any additional charges to net income will be recorded in 2001 with respect to this restructuring charge. The current period activity relating to the Second Quarter 2000 Restructuring is summarized below:


		Beginning							Ending
		reserves at		Cash spent			Amount charged		reserves at
(in thousands)		12/31/00		during period			against assets		3/31/01

Employee separations		$	828	$	(160	)	$	—	$	668




Asset writedowns and discontinued product inventories			—		—			—		—




Other exit costs			859		(419	)		—		440

	Total	$	1,687	$	(579	)	$	—	$	1,108

The income statement classification of amounts recorded with respect to the Second Quarter 2000 Restructuring have been previously disclosed and no additional amounts were charged in the first quarter of 2001.

We sold or disposed of all of the discontinued product inventory by the end of the first quarter of 2001. The remaining reserves relating to employees separations and other exits costs are expected to be utilized in 2001. The Bristol, Pennsylvania dry detergent facility was sold in April 2001. Cash requirements for the restructuring currently are expected to be funded from normal operations.

Note 3. Acquisitions

During the second quarter of 2000, Dial acquired three businesses for $119.2 million in cash. The acquisitions included the Coast(R) bar soap business in the United States, the Plusbelle(R) hair care business in Argentina and the Zout(R) stain remover business in the United States. The purchase price for Zout may increase if a specified level of gross sales of Zout product is achieved in each of the three years following the acquisition date. The total combined net sales of these acquisitions was $30.4 million during the first quarter of 2001.

The Coast, Plusbelle and Zout acquisitions were accounted for using the purchase method of accounting. A portion of the purchase prices have been allocated to assets acquired of $11.1 million and liabilities assumed of $1.3 million based on estimated fair values at the date of acquisition while the balance of $109.4 million was recorded as goodwill. We continue to gather and analyze certain information required to complete the allocation of the purchase price of these acquisitions. Further adjustments to the allocation of the purchase price may arise as a result of the finalization of the ongoing study.

Note 4. Dial/Henkel Joint Venture

In April 1999, we formed Dial/Henkel LLC, a joint venture with Henkel KGaA of Düsseldorf, Germany (“Henkel”). Dial and Henkel each own 50% of this joint venture. The joint venture was formed to develop and market a range of enhanced laundry products in North America. In July 1999, the joint venture acquired the Custom Cleaner home dry-cleaning business. Our portion of the cumulative net loss of the joint venture has been included in Dial’s consolidated results since the joint venture formation date.

During the third quarter of 2000, the Dial/Henkel LLC joint venture decided to discontinue operations of Purex Advanced. As a result, Purex Advanced has been reflected as a discontinued operation within the Dial/Henkel LLC joint venture financial statements. In December 2000, we reorganized our joint venture arrangements with Henkel. Specifically, Dial and Henkel continue to own a limited U.S. joint venture equally; however, the only business conducted by this joint venture going forward will be the Custom Cleaner home dry-cleaning business.

We account for this joint venture under the equity method of accounting. Our share of the joint venture’s income in the first quarter of 2001 results primarily from lower than expected costs associated with the discontinued Purex Advanced business.

Included on Dial’s consolidated balance sheets are the following:


(in thousands)	March 31, 2001		December 31, 2000

Amounts due to joint venture	$	3,712	$	5,968

Note 5. Inventories

Inventories consisted of the following:


		March 31,		December 31,
(in thousands)		2001		2000

Raw materials and supplies		$	46,572	$	48,484




Work in process			8,926		8,387




Finished goods			118,050		105,912

	Total inventories	$	173,548	$	162,783

Note 6. Debt

Short-term debt consisted of the following:


	March 31,		December 31,
(in thousands)	2001		2000

Argentina bank loan repricing monthly and subject to call by the bank at the end of each month		—		14,009




Short-term bank borrowing, interest rate of 7.5% at March 31, 2000		6,640		—




Current portion of State of Arizona Economic Development Loan due beginning July of 2000 over 10 years		123		70


		March 31,		December 31,
(in thousands)		2001		2000





Borrowing on the short-term revolving Credit Agreement, interest rates from 5.75% to 5.94% at March 31, 2001			108,999		—




Commercial paper issuances supported by the short-term revolving Credit Agreement			—		111,697

	Total short-term debt	$	115,762	$	125,776

Long-term debt consisted of the following:


		March 31,		December 31,
(in thousands)		2001		2000

State of Arizona Economic Development Loan due beginning July of 2000 over 10 years		$	856	$	910




$200 million 6.5% Senior Notes due 2008, net of issue discount			198,414		198,361




Borrowings on the long-term revolving Credit Agreement, interest rates from 5.75% to 5.94% at March 31, 2001			270,000		—




Commercial paper supported by long-term revolving Credit Agreement			—		270,000

	Total long-term debt	$	469,270	$	469,271

In the second quarter of 2000 we entered into a new $450 million credit facility that replaced our $350 million facility that was established in July 1999. Our credit facility was intended to serve as a backstop facility for our commercial paper program. However, due to market conditions and the placement of our short term debt rating on watch by Moody’s Investors Service, we have not been able to access the commercial paper market in the first quarter of 2001. As a result, we have been making borrowings under our credit facility. Borrowings under our credit facility are on a revolving basis under commitments available until July 2005 for up to $270 million and under commitments available until July 2001 for up to $180 million. We will need to refinance approximately $75 million of short term debt drawn under the $180 million commitment that expires in July 2001 and are considering a variety of financing options. The interest rate applicable to borrowings under our credit facility is, at our option, indexed to the bank prime rate or the London Interbank Offering Rate (“LIBOR”), plus appropriate spreads over such indices during the term of the credit facility. Our credit facility also requires us to pay commitment fees to the banks making commitments under the credit facility. These spreads and fees are subject to adjustment if our debt ratings change.

The financial covenants of the credit agreement require us to maintain minimum net worth of at least 80% of such net worth as of the date of the agreement plus 25% of net income subsequent thereto plus certain other additions to net worth. The covenants also require us to maintain a maximum ratio of three-to-one for funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA). The following table reflects the maximum ratio of funded debt to EBITDA permitted under Dial’s credit facility:


Date	Maximum Ratio

March 31, 2001		3.50 to 1.00




June 30, 2001		3.25 to 1.00




Thereafter		3.00 to 1.00

Dial was in compliance with all covenants under the credit facility at March 31, 2001. As previously disclosed, we are reviewing strategic alternatives with respect to our Specialty Personal Care business, while working aggressively to improve the performance of this business. At this time, we believe that if a decision is made in the future to divest of this business, a write-down of assets to their estimated market value would be required. If this takes place, we will need our lenders’ waiver or amendment of our minimum net worth covenant because the estimated resulting write-down of assets would violate this covenant.

Note 7. Segments of an Enterprise

For organizational, marketing and financial reporting purposes, we have organized into four business segments: (i) Domestic Branded, (ii) Specialty Personal Care, (iii) International, and (iv) Commercial Markets and Other. The segments were identified based on the types of products sold, the customer base and method of distribution.

The Domestic Branded business segment consists of four aggregated operating segments that manufacture and market nondurable consumer packaged goods through grocery store, drug store and mass merchandiser retail outlets. It is comprised of the Personal Cleansing, Laundry Care, Air Fresheners and Food Products operating segments. Our subsidiary, ISC International, Ltd., a manufacturer of translucent soaps, is included in the Domestic Branded segment.

During the third quarter of 2000, we began reflecting our Specialty Personal Care business as a separate reportable segment. Prior to the third quarter of 2000, this business was included with our Domestic Branded segment. This change occurred as a result of recurring differences in economic characteristics between Dial’s Specialty Personal Care and Domestic Branded businesses. Our previous segment disclosures have been restated to reflect this presentation.

The Specialty Personal Care business segment includes the following three brands: Freeman, Sarah Michaels, and Nature’s Accents. We acquired Freeman, a leading manufacturer and marketer of skin, hair, bath, body and foot care products utilizing natural ingredients all sold under the Freeman brand name, on July 1, 1998. We also acquired Sarah Michaels, a leading marketer of premium specialty bath and body products, including body washes, body mists, luxury soaps, hand and body lotions, loofahs, sponges and brushes distributed under the Sarah Michaels brand name, on September 14, 1998. These two acquisitions were combined with our Nature’s Accents line of translucent soaps and specialty care products to create the Specialty Personal Care franchise. The Nature’s Accents product line was discontinued in the third quarter of 2000.

The International business segment consists of our sale of consumer products outside of the United States, principally in Argentina, Canada, Mexico, Puerto Rico and the Caribbean.

Our Commercial Markets and Other business sells branded and nonbranded, through the commercial channel to hotels, hospitals, schools and other institutional customers. In addition, this business segment includes sales of soap pellets and chemicals, principally glycerin and fatty acids, that are by-products of the soap making process.

Information as to our operations in different business segments is set forth below. The calculation of Operating Income for each segment includes an allocation of general and administrative expenses based on each segment’s share of consolidated net sales. The accounting policies of the business segments are the same as those described in the summary of significant accounting policies in Note 2 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2000.


					Specialty			Commercial
			Domestic		Personal			Markets &
(in thousands)			Branded		Care			Other		International		Total

Net Sales:




	Quarter ended:




		March 31, 2001	$	321,662	$	10,242		$	13,869	$	55,707	$	401,480




		April 1, 2000		293,714		24,771			16,121		38,518		373,124




Operating Income (Loss):




	Quarter ended:




		March 31, 2001		33,742		(3,786	)		1,474		1,005		32,435




		April 1, 2000		39,693		(1,034	)		2,386		2,137		43,182




Assets at:




		March 31, 2001		903,195		241,751			14,385		182,563		1,341,894




		December 31, 2000		912,193		259,026			12,237		198,515		1,381,971

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

Forward looking statements

Some statements contained in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. Words such as “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. These forward-looking statements may include, but are not limited to, the expected repayment of debt in 2001 of approximately $80 to $90 million, not including any possible proceeds from future asset sales that may also be used to reduce debt; the potential write-down of assets in the estimated range of $150 to $170 million if we decide to divest the Specialty Personal Care business; our belief that the EEOC litigation will not have a material adverse effect on our operating results or financial condition; our intended efforts pursuant to our SFX01 initiative; our expected annual pre-tax operating benefits and savings as a result of the special charges taken in the second and third quarters of 2000; our expected capital expenditures in 2001 of $40.0 million; our expected trade promotion expenses in 2001 of $390 million; our expected costs for coupons and rebates in 2001 of $16.0 million and our expected cost of free products in 2001 of $10.4 million. These statements are based upon management’s beliefs, as well as on assumptions made by and information currently available to management, and involve various risks and uncertainties that are beyond our control. Our actual results could differ materially from those expressed in any forward-looking statements made by, or on behalf of, us.

Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Statements in this Quarterly Report on Form 10-Q, including the Notes to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Results of Operations and Financial Condition”, describe factors, among others, that could contribute to or cause such differences. Additional risk factors that could cause actual results to differ materially from those expressed in such forward-looking statements are set forth in Exhibit 99 which is attached as an exhibit and incorporated by reference into this Quarterly Report on Form 10-Q. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Announcement of SFX01

As previously disclosed, management has outlined an initiative labeled “SFX01”. The three step initiative can be summarized as follows:

	S	We intend to Stabilize our strong businesses.

	F	We intend to Fix marginal businesses or jettison them.

	X	Once stabilized and fixed, we intend to eXplore our options as a company, which include:

	•		Continuing as an independent company.

	•		Merging with one or more companies to form a larger company to more effectively compete in the consumer products industry.

	•		Selling our company, either in whole or in part.

We expect to complete this initiative during 2001.

We currently are exploring, and will continue to explore, strategic alternatives available to Dial. Decisions made in the course of SFX01 could result in Dial recording additional special or restructuring charges or additional asset writedowns.

Restructuring and Special Charges

Third Quarter 2000 Special Charges


		Beginning					Amount of				Ending
		reserves at		Cash spent			reversed		Amount charged		reserves at
(in thousands)		12/31/00		during period			charges		against assets		3/31/01

Employee separations		$	2,063	$	(470	)	$	—	$	—	$	1,593




Discontinued product inventories and related charges			9,200		(1,010	)		—		—		8,190




Other exit costs			135		(38	)		—		—		97

	Total	$	11,398	$	(1,518	)	$	—	$	—	$	9,880

The expected timing and estimated amount of costs and projected savings are based on management’s judgment in light of circumstances and estimates at the time the judgements were made. Accordingly, such estimates may change as future events evolve. Among other matters, unforeseen changes in operating requirements and other factors referred to in Exhibit 99 to this Form 10-Q could cause actual operating benefits to differ materially from anticipated results.

Second Quarter 2000 Restructuring

On June 28, 2000, we announced a restructuring charge designed to improve profitability and operational efficiencies. We recorded charges totaling $23.9 million ($14.9 million after tax or $0.16 per share) during 2000 to close our Bristol, Pennsylvania dry detergent plant, to consolidate the manufacturing and distribution functions of our Specialty Personal Care busniess, and to restructure our domestic and international sales organization. We do not anticipate that any additional charges to net

income will be recorded in 2001 with respect to this restructuring charge. The current period activity relating to the Second Quarter 2000 Restructuring is summarized below:


		Beginning							Ending
		reserves at		Cash spent			Amount charged		reserves at
(in thousands)		12/31/00		during period			against assets		3/31/01

Employee separations		$	828	$	(160	)	$	—	$	668




Asset writedowns and discontinued product inventories			—		—			—		—




Other exit costs			859		(419	)		—		440

	Total	$	1,687	$	(579	)	$	—	$	1,108

Adjustments to List Prices and Trade Allowances

Beginning in the first quarter of 2001, we adjusted our list prices and trade promotion spending on selected personal cleansing and laundry care products to more closely align with our shelf pricing strategies. In the first quarter of 2001, this resulted in a reduction in net sales and trade spending of approximately $10.0 million. As a result of this change, our gross margin was reduced by approximately 130 basis points and selling, general and administrative expenses as a percentage of sales was reduced by approximately 140 basis points. Because the reduction in list price is offset by a reduction in trade promotion spending, there is no effect on our net earnings.

Comparison of the First Quarter of 2001 with the First Quarter of 2000

Net sales for the quarter increased 7.6% to $401.5 million from $373.1 million in the same period in 2000 primarily as a result of 9.5% increase in our Domestic Branded segment and an increase in our International segment of 44.6%, offset in part by a 58.7% decrease in our Specialty Personal Care segment and a 14.0% decrease in our Commercial Markets and Other segment. First quarter 2001 net sales included $30.4 million from acquisitions of the Coast, Plusbelle and Zout businesses.

Net sales in our Domestic Branded segment increased 9.5% to $321.7 million from $293.7 million in the same period last year. Net sales information for the businesses included in our Domestic Branded segment is set forth below:


		First Quarter				Increase/(Decrease)

(in millions)		2001		2000		Amount			Percentage

Personal Cleansing		$	97.9	$	85.6	$	12.3			14.4	%




Laundry Care			123.2		112.5		10.7			9.5	%




Air Fresheners			58.4		50.8		7.6			15.0	%




Food Products			42.2		44.8		(2.6	)		(5.8	%)

	Total Domestic Branded	$	321.7	$	293.7	$	28.0			9.5	%

The increase in Personal Cleansing resulted primarily from the acquisition of Coast in 2000 and the introduction of Dial Complete. The increase in Laundry Care is primarily due to an increase in Purex liquid detergent and the inclusion of results from the Zout acquisition, offset in part by softness in our non-Purex branded dry detergent business. The increase in Air Fresheners is primarily due to new product introductions. The decline in Armour resulted primarily from weakened demand and residual excess trade inventory in distribution channels.

Net sales in our Specialty Personal Care segment decreased 58.7% to $10.2 million from $24.8 million in the same period last year primarily due to discontinuation of both the Nature’s Accents product line and other unprofitable SKU’s associated with a special charge taken in the third quarter of 2000. Historically, approximately 65% of the total net sales of our Specialty Personal Care business are recorded in the third and fourth quarters. We currently anticipate that net sales of our Specialty Personal Care segment will be lower in the second quarter of 2001 compared to the same period last year as a result of the factors discussed above.

Net sales in our International segment increased 44.6% to $55.7 million from $38.5 million primarily as a result of the inclusion of the results of the Plusbelle acquisition in Argentina, partially offset by lower sales in Mexico caused by difficulties encountered in the outsourcing of our sales administrative function.

Net sales in our Commercial Markets and Other segment decreased 14.0% to $13.9 million from $16.1 million primarily as a result of softness in our amenities business and decreased sales of products through secondary channels.

Our gross margin, including the list price adjustment described above, decreased by 70 basis points to 48.8% from 49.5% in the same period in 2000. Gross margin increased 60 basis points to 50.1%, excluding the impact of the adjustment in list prices. This improvement is primarily due to a favorable sales mix, offset in part by higher energy costs.

Selling, general and administrative expenses are up 15.7% to $163.7 million from $141.4 million in the same period in 2000. This increase primarily resulted from an increase in marketing expenses to support our core domestic brands and new product launches.

Interest and other expenses increased 43.9% to $13.9 million from $9.6 million in the same period in 2000. The increase was primarily due to increased borrowings to fund acquisitions of the Coast, Plusbelle and Zout businesses, our prior investments in the Dial/Henkel joint ventures and our stock repurchase program in 2000.

Our share of the income in the Dial/Henkel joint venture was $2.0 million in the first quarter, primarily resulting from lower than expected costs associated with the discontinued Purex Advanced business.

Our effective income tax rate increased to 36.3% from 34.5% in the same period in 2000. This increase is primarily attributable to higher non-recurring Foreign Sales Corporation benefits in 2000, an increase in the amount of non-deductible goodwill and lower pre-tax income.

Net income was $13.1 million or $0.14 per diluted share, versus $21.5 million, or $0.23 per diluted share in the first quarter of 2000. This decrease in net income is primarily attributable to the factors explained above.

Liquidity and Capital Resources

Total debt decreased $10.0 million to $585.0 million from $595.0 million at December 31, 2000. The decrease in total debt was funded from cash flow from operations.

Cash flow from operations in the first quarter of 2001, was $14.4 million compared to cash used of $29.4 million in the same period in 2000. The increase in cash provided from operations is primarily attributable to an improvement in working capital offset in part by a decrease in net income. Debt repayment in 2001 is expected to be approximately $80 to $90 million, not including any possible proceeds from future asset sales that may also be used to reduce debt.

Capital expenditures for the first quarter of 2001 were $3.2 million. Capital spending in 2001 is expected to approximate $40.0 million. These expenditures will be concentrated primarily on equipment and information systems that provide opportunities to reduce manufacturing, logistic and administrative costs. Our spending plans are dependent on the availability of funds, as well as identification of projects with sufficient returns. As a result, there can be no assurance as to the quantity and the type of capital spending in the future.

In the second quarter of 2000 we entered into a new $450 million credit facility that replaced our $350 million facility that was established in July 1999. Our credit facility was intended to serve as a backstop facility for our commercial paper program. However, due to market conditions and the placement of our short term debt rating on watch by Moody’s Investors Service, we have not been able to access the commercial paper market in the first quarter of 2001. As a result, we have been making borrowings under our credit facility. Borrowings under our credit facility, are on a revolving basis under commitments available until July 2005 for up to $270 million and under commitments available until July 2001 for up to $180 million. We will need to refinance approximately $75 million of short term debt drawn under the $180 million commitment that expires in July 2001 and are considering a variety of financing options. The interest rate applicable to borrowings under our credit facility is, at our option, indexed to the bank prime rate or the London Interbank Offering Rate (“LIBOR”), plus appropriate spreads over such indices during the term of the credit facility. Our credit facility also requires us to pay commitment fees to the banks making commitments under the credit facility. These spreads and fees are subject to adjustment if our debt ratings change.


Date	Maximum Ratio

March 31, 2001		3.50 to 1.00




June 30, 2001		3.25 to 1.00




Thereafter		3.00 to 1.00

Dial was in compliance with all covenants under the credit facility at March 31, 2001. As previously disclosed, we are reviewing strategic alternatives with respect to our Specialty Personal Care business, while working aggressively to improve the performance of this business. At this time, we believe that if a decision is made in the future to divest of this business, a write-down of assets to their estimated market value would be required. Based on current estimates, such a writedown would be in the range of $150 to $170 million after tax. If this takes place, we will need our lenders’ waiver or amendment of our minimum net worth covenant because the estimated resulting write-down of assets would violate this covenant.

Recent Accounting Pronouncements

The Financial Accounting Standards Board issued a Proposed Statement of Accounting Standards, “Business Combinations and Intangible Assets – Accounting for Goodwill”. The proposed Statement

would prohibit goodwill amortization and establish a new method of testing goodwill for impairment. The proposed statement would also prohibit the pooling of interest method of accounting for business combinations and establish a new accounting standard for goodwill acquired in a business combination. The provisions of the proposed Statement would be effective for fiscal quarters beginning after the issuance of a final Statement. The impact of the Statement may be significant if it is issued as currently proposed, as we would be required to test our goodwill for impairment under new standards and would no longer recognize goodwill amortization expense. In first quarter 2001, we incurred $2.9 million in goodwill amortization compared to $2.3 million in the first quarter of 2000.

In May 2000, the Financial Accounting Standards Board’s Emerging Issues Task Force (“EITF”) released Issue No. 00-14, “Accounting for Certain Sales Incentives”. This issue addresses the recognition, measurement, and income statement classification for certain sales incentives, including coupons, rebates and free products. The consensus on EITF 00-14 will be effective for Dial in the first quarter of 2002. The implementation of this consensus will require us to change the way we classify certain sales incentives that are currently recorded as selling, general and administrative expense. The cost of coupons and rebates, which is anticipated to be approximately $16.0 million in 2001, will be recorded as a reduction of net sales. The cost of free products, which is anticipated to be approximately $10.4 million in 2001, will be recorded as cost of products sold.

In April 2001, the EITF reached a consensus on Issue No. 00-25, “Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor’s Products”. The issue addresses the accounting and income statement classification of costs, other than those directly addressed in Issue 00-14, that are incurred by a vendor (typically a manufacturer or distributor) to or on behalf of a customer (typically a retailer) in connection with the customer’s purchase or promotion of the vendor’s products. This Issue addresses the recognition and measurement of such costs and whether a vendor should classify such costs in its income statement when incurred as a reduction of revenues or as an expense item.

We currently record all of the consideration we provide to our customers to promote our products as trade promotion expense. Such costs include consideration given to customers for space in their stores (slotting fees), consideration given to obtain favorable display positions in the retailer’s stores and other promotional activity. For income statement purposes, we currently record all trade promotion expense as Selling, general and administrative expense. The consensus on EITF 00-25 will be effective for Dial in the first quarter of 2002. The implementation of this consensus will require that most or all of the these types of trade promotion costs be recorded as a reduction of sales rather than as selling, general and administrative expenses. We expense these promotional activities in the period during which the related product ships. In 2001, we expect to incur approximately $390 million of trade promotion expense.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On May 21, 1999, we were served with a complaint filed by the U.S. Equal Employment Opportunity Commission (the “EEOC”) in the U.S. District Court for the Northern District of Illinois, Eastern Division. This action is entitled Equal Employment Opportunity Commission v. The Dial Corporation, Civil Action No. 99 C 3356. The EEOC alleges that Dial has engaged in a pattern and practice of discrimination against a class of female employees by subjecting them to sexual or sex-based harassment and failing to take prompt remedial action after these employees complained about this alleged harassment. The EEOC is seeking to enjoin Dial from this alleged harassment, to require us to train our managerial employees regarding the requirements of Title VII of the Civil Rights Act of 1964 and to recover unspecified compensatory and punitive damages. We have denied the EEOC’s allegations. Discovery has been completed and we have filed dispositive motions. Based upon our insurance coverage for this lawsuit, we currently do not believe that this lawsuit will have a material adverse effect on our operating results or financial condition. However, assurances cannot be given regarding the ultimate outcome of this matter.

Item 6. Exhibits and Reports on Form 8-K

(A) Exhibits

99.

Private Securities Litigation Reform Act of 1995 Safe Harbor Compliance Statement for Forward-Looking Statements.

(B) Reports on Form 8-K

		We filed a Current Report on Form 8-K, dated March 28, 2001, reporting that Dial issued a press release announcing that Conrad A. Conrad, Executive Vice president and CFO, will present to investors at the Bank of America Securities Consumer Conference. The press release also announced that Dial was comfortable with the First Call earnings per share estimate for the first quarter 2001 and for the full year.

		We filed a Current Report on Form 8-K, dated April 5, 2001, reporting that Dial issued a press release relating to the earnings release conference call held on Wednesday April 25, 2001.

		We filed a Current Report on Form 8-K, dated April 26, 2001, reporting that Dial issued a press release relating to its financial results for the first quarter of 2001, and its outlook for the remainder of 2001.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

The Dial Corporation
(Registrant)

May 10, 2001

/s/ Conrad A. Conrad
Conrad A. Conrad
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Authorized Officer)

/s/ John F. Tierney
John F. Tierney
Senior Vice President and Controller
(Principal Accounting Officer and Authorized Officer)

EXHIBIT INDEX


Exhibit No.		Description

99.		Private Securities Litigation Reform Act of 1995 Safe Harbor Compliance Statement for Forward-Looking Statements.