SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
Form 10Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1995 Commission File
1-8919
CONAIR CORPORATION
(Exact name of registrant as specified on
its charter)
Delaware
11-1950030
(State of other jurisdiction of Incorporation
(I.R.S. Identification Number)
or organization)
150 Milford Road, East Windsor, NJ
08520 (Address of
principal executive offices)
(Zip Code)
Registrant's telephone number including area code:
(609) 426-1300
Not Applicable
Former name, former address and former fiscal year,
if changed
since last year
Indicate by check mark whether this registrant (1) has filed
all reports required to be filed by section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Common Stock $100.00 par value
Authorized Shares 5,000
Issued and Outstanding Shares
as of April 28, 1995 2,814
CONAIR CORPORATION AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION
Item 1: Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1994 (Unaudited),
December 31, 1994 and March 31,
1995 (Unaudited) -1-
Condensed Consolidated Statements of Operations
Three months ended March 31, 1994
and 1995 (Unaudited) -2-
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1994
and 1995 (Unaudited) -3-
Notes to Condensed Consolidated
Financial Statements (Unaudited) -4-
Item 2: Management's Discussion and
Analysis of Financial Condition and
Results
of Operations -6-
PART II OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K -9-
CONAIR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share information)
ASSETS
3/31/94 12/31/94 3/31/95
CURRENT ASSETS (Unaudited) Note
(Unaudited)
Cash, including cash equivalents of $3,687,
$17,176 and $4,575, respectively $ 4,546 $
23,702 $ 8,421
Accounts receivable, net 62,845 80,616
81,548 Inventories (Note 2) 105,788 104,220
141,206
Prepaid expenses 1,298 1,610
2,571
Deferred income taxes 2,885 2,040
2,406
177,362 212,188 236,152
PROPERTY, PLANT AND EQUIPMENT, Net 64,669 66,992
76,223
INVESTMENT AND OTHER ASSETS
Investments in affiliated companies 1,026
464 304
Excess of cost over net assets of
acquired companies 73,196
70,575 96,573
Deferred expenses and other assets 13,693
12,485 13,242
87,915 83,524
110,119 $329,946 $362,704
$422,494
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 48,107 $
50,649 $ 71,502
Income taxes 4,079 8,611
5,568
Current portion of long-term debt 3,625
6,275 7,406
Notes payable - Banks - -
5,412
55,811 65,535 89,888
OTHER LIABILITIES
Long-term debt 101,115 100,405 133,052
Deferred income taxes 19,860 21,310
21,858
120,975 121,715 154,910
STOCKHOLDERS' EQUITY
Convertible preferred stock,
$1.00 par value:
Authorized 10,000 shares
Issued and outstanding - 5,000 shares 5
5 5
Common stock, $100.00 par value;
Authorized - 5,000 shares;
Issued and outstanding - 2,814 281
281 281
Reduction for ESOP loan guarantee (5,000)
- -
Additional paid-in capital 7,633
7,633 7,633
Cumulative translation adjustments 130
(18) 653
Retained earnings 150,111 167,553
169,124
153,160 175,454 177,696
$329,946 $362,704
$422,494
NOTE: The balance sheet at December 31, 1994, has been taken
from the audited financial statements
at that date.
See notes to the condensed consolidated financial statements.
CONAIR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1994 and 1995
(in thousands)
(unaudited)
1994 1995
NET SALES $95,575 $113,826
COST AND EXPENSES:
Cost of goods sold 63,761 75,367
Selling, general and administrative 27,401 32,735
91,162 108,102
INCOME FROM OPERATIONS 4,413 5,724
INTEREST:
Interest expense 1,598 2,323
Interest income (51) (124)
1,547 2,199
INCOME BEFORE INCOME TAXES 2,866 3,525
Income tax provision 1,263
1,579
NET INCOME $1,603 $1,946
See notes to the condensed consolidated financial statements.
CONAIR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended March 31,
1994 1995
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $1,603 $ 1,946
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation 1,655 1,916
Amortization of goodwill 633 663
Amortization of deferred expenses and other assets 616
655 Deferred income taxes 349
379 Tax benefit on dividends paid to ESOP
44 -
Other, net 116 147 Changes
in operating assets and liabilities, net of acquisition:
Accounts receivable 7,399 12,716
Inventories (20,372) (21,224)
Prepaid expenses 455 (153)
Accounts payable and other current liabilities
7,093 3,413
Income taxes (2,677) (4,256)
(3,086) (3,798)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment
(21,639) ( 4,155)
Cost of acquisition, net of cash acquired
- - (34,315) (21,639)
(38,470)
CASH FLOW FROM FINANCING ACTIVITIES:
Increase in short-term debt - 765
Increase in long-term debt
20,000 27,000
Reduction of long-term debt (6,460)
(589)
Dividends declared (125) (375)
13,415 26,801
EFFECT OF EXCHANGE RATE CHANGES ON CASH -
186
DECREASE IN CASH AND CASH EQUIVALENTS (11,310)
(15,281)
CASH AND CASH EQUIVALENTS,
January 1, 15,856 23,702
CASH AND CASH EQUIVALENTS,
March 31, $ 4,546 $ 8,421
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the quarter for:
Interest $ 1,417 $ 2,125
Income taxes $ 3,547 $ 4,985
Acquisition of a business:
Fair value of assets acquired $ - $39,277
Cash Paid $ - $34,315
Liabilities assumed $ - $
4,962
See notes to the condensed consolidated financial statements.
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. FINANCIAL STATEMENTS
The accompanying financial information is submitted in response
to the requirements of Form 10Q and does not purport to be
financial statements prepared in accordance with generally
accepted accounting principles, as they do not include all
disclosures which might be associated with such financial
statements. In the opinion of management, these financial
statements include all adjustments, consisting only of normal
recurring accruals, necessary for a fair statement of the
results for the interim periods presented.
2. INVENTORIES
Inventories are summarized as follows:
March 31, December 31, March 31,
1994 1994 1995
Components and raw materials $ 12,676 $ 12,728
$ 16,117
Finished goods 93,112 91,492 125,089
$ 105,788 $104,220
$141,206
3. ACQUISITION
On February 18, 1995, the Company acquired 100% of the share
capital of Babyliss S.A. ("Babyliss") for approximately
$38,000,000 which purchase price is subject to a maximum
downward adjustment of approximately $4,000,000 based on the
terms of the agreement. Babyliss is a manufacturer and marketer
of personal care appliance products principally in France, the
United Kingdom, Germany, Belgium, the Netherlands and Spain.
Through its distributors, Babyliss products are also marketed
in Scandinavia and several non-European markets including North
America, Africa and East Asia. In connection with this
acquisition, the Company increased its bank revolving credit
line by $37,500,000. This additional debt has mandatory
principal repayments of $5,000,000 on December 15, 1996;
$7,500,000 on December 15, 1997; $10,000,000 on each of December
15, 1998 and December 15, 1999 and $5,000,000 on March 15, 2000.
The interest rate on this facility is variable and is subject to
change based on the leverage and operating performance of the
Company. Approximately, $5,200,000 of additional costs are
expected to be incurred relating to the acquisition of Babyliss
which includes the buyout of minority interest shareholders of
several subsidiaries of Babyliss.
This acquisition will be accounted for by the purchase method of
accounting. The excess of the purchase price over the
estimated fair value of the net assets acquired of approximately
$25,700,000 will be amortized on a straight line basis over 30
years. The purchase price allocation is based on preliminary
estimates of the fair value of the net assets acquired and is
subject to adjustment as additional information becomes
available.
4. PROPERTY, PLANT AND EQUIPMENT
On February 28, 1995, the Company exercised its option to
purchase the portion of its Stamford, Connecticut executive
office facility leased to Leandro P. Rizzuto. The Company
intends to pay the option price of $4,000,000 with $1,012,000
in cash and $2,988,000 through the sale to Mr. Rizzuto of its
facility in Phoenix, Arizona. The selling price of the
Phoenix, Arizona facility is based on an independent appraisal.
The Company will lease the Phoenix, Arizona facility from Mr.
Rizzuto until the construction of its new facility in Glendale,
Arizona is completed. The monthly lease payments are based on
an independent appraisal. This
transaction was completed on May 11, 1995.
CONAIR CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table summarizes net sales of each of the
Company's product groups for the three months ended
March 31, 1994 and 1995.
Three Months Ended March 31,
1994 1995
Product Group (in thousands)
Personal Care Appliances $36,769 $ 51,877
Consumer Electronics 24,305 25,194
CUISINART Products 11,782 13,726
Toiletries and Professional Salon Products 22,719
23,029
$95,575 $113,826
The following table sets forth for the three months ended
March 31, 1994 and 1995 certain consolidated statements of
operations data expressed as a percentage of net sales:
Three Months Ended March 31,
1994 1995
Net sales 100.0% 100.0%
Cost of goods sold
SALES
Net sales for the quarter ended March 31, 1995 increased by
19.1% to $113,826,000 from $95,575,000 in the comparable period
of 1994. The Company's personal care appliance products
accounted for approximately 83% of this increase. Foreign
sales increased approximately 157% principally due to the
inclusion of sales of Babyliss and REVLON products which were
not sold in the first quarter of 1994. Domestic personal care
appliance sales increased approximately 25% primarily due to
sales of CONAIR brand hot air curling irons which were not sold
in the first quarter of 1994 and increased sales of private
label hair dryers. Sales of consumer electronics increased
approximately 4% in the first quarter of 1995. Sales of
Southwestern Bell FREEDOM PHONE products increased
approximately 10% primarily due to increased unit sales of
existing products. Sales of other consumer electronics products
decreased by approximately 3% primarily due to lower average
selling prices on corded phones which was partially offset by
higher unit sales of cordless phones. Sales of
CUISINART products increased approximately 16% in the first
quarter of 1995 primarily due to increased sales of
cookware. Sales of toiletries and professional salon products
were essentially unchanged in the first quarter of 1995 compared
to the first quarter of 1994.
CONAIR CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GROSS MARGINS
Gross margins increased as a percentage of net sales to 33.8% in
the quarter ended March 31, 1995 from 33.3% for the comparable
period in 1994. This increase was primarily due to changes in
the mix of the products sold by the Company, specifically a 41%
increase in the sales of personal care appliance products which
have relatively higher gross profit margins, compared to a 5%
increase in sales of all of the Company's other products.
Higher gross margins on sales of CUISINART products also
contributed to the improvement in gross margins.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses remained
essentially unchanged as a percentage of sales at 28.8% for the
quarter ended March 31, 1995 compared to 28.7% for the
comparable period in the prior year, but increased by 19.5% to
$32,735,000 in the quarter ended March 31, 1995 from $27,401,000
in the first quarter of 1994. The increase of $5,334,000 was
primarily due to selling, general and administrative expenses
of Babyliss, which were not included in expenses for the first
quarter of 1994, increases in variable expenses to support the
increase in sales of other products and increases in advertising
and promotional expenses.
INTEREST
The Company's interest expense of $2,323,000 in the quarter
ended March 31, 1995 increased from $1,598,000 in the first
quarter of 1994. The increase of $725,000 was primarily due to
an increase in the Company's long-term debt primarily to finance
the purchase of its executive office facility and the
acquisition of Babyliss.
INCOME TAXES
The Company's effective income tax rate remained essentially
unchanged at 44.8% in the quarter ended March 31, 1995 as
compared to 44.1% in the corresponding 1994 quarter.
CONAIR CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, the Company's working capital was
$146,264,000 and its current ratio was 2.6 to 1. The Company's
cash balance was $8,421,000 and long-term debt was $133,052,000
at March 31, 1995.
Capital expenditures during 1994 and anticipated capital
expenditures during 1995 are higher than in previous years
because of certain real estate acquisitions and improvements.
Capital expenditures were $29,546,000 in 1994, $20,000,000 of
which represents the purchase price of the Company's executive
office facility in Stamford, Connecticut. Net capital
expenditures for 1995 are anticipated to be approximately
$17,000,000, of which approximately $7,000,000 is for the
completion of the Company's warehouse and distribution facility
in Glendale, Arizona and $1,012,000 is for the exercise of the
Company's option to purchase lease rights in its executive
office facility in Stamford, Connecticut from Leandro P.
Rizzuto, which took place on May 11, 1995 as noted in Note 4
to the condensed consolidated statements.
Historically, approximately 60% of the Company's sales and 70%
of its operating profit are achieved in the second half of the
year. The Company relies on short-term bank debt to finance its
seasonal operating needs which result in a build-up of
receivables and inventory during the first nine months of each
year with a substantial reduction in receivables, inventories
and bank credit during the fourth quarter. As of March 31,
1995, the Company had short-term lines of credit aggregating
$81,500,000, which do not include an additional $25,000,000
available for the period May 15 to November 30 to finance its
seasonal business needs. In addition, the Company had a
long-term revolving credit line of $58,500,000, of which
$20,500,000 was unutilized at March 31, 1995. This revolving
credit line includes an increase, in connection with the
Babyliss acquisition, of $37,500,000. This additional debt
has mandatory principal repayments of $5,000,000 on December 15,
1996, $7,500,000 on December 15, 1997, $10,000,000 on each of
December 15, 1998 and December 15, 1999 and $5,000,000 on
March 15, 2000. The interest rate on this facility is variable
and is subject to change based on the leverage and operating
performance of the Company.
As a result of the Company's acquisition of Babyliss, the
Company has developed a hedging program designed to hedge firm
purchase commitments of goods and services denominated in
foreign currencies.
Effects of Inflation
The Company believes that the relatively moderate rate of
inflation over the past few years has not had a significant
impact on the Company's results of operation.
CONAIR CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(b) On March 6, 1995 the Company filed Form 8K in connection
with its acquisition of Babyliss.
CONAIR CORPORATION AND SUBSIDIARIES
SIGNATURE
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.
CONAIR CORPORATION
(Registrant)
(Date) By: Leandro P. Rizzuto
Chairman of the Board
and President
(Date) By: Patrick P. Yannotta
Sr. Vice President Finance
(Date) By: James A. Porcelli
Vice President
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1995 MAR-31-1994
<PERIOD-END> MAR-31-1995 MAR-31-1994
<CASH> 8,421,000 4,546,000
<SECURITIES> 845,000 340,000
<RECEIVABLES> 81,548,000 62,845,000
<ALLOWANCES> 1,708,000 1,416,000
<INVENTORY> 141,206,000 105,788,000
<CURRENT-ASSETS> 236,152,000 177,362,000
<PP&E> 128,868,000 101,290,000
<DEPRECIATION> 52,645,000 36,621,000
<TOTAL-ASSETS> 422,494,000 329,946,000
<CURRENT-LIABILITIES> 89,888,000 55,811,000
<BONDS> 145,870,000 104,740,000
<COMMON> 281,000 281,000
0 0
5,000 5,000
<OTHER-SE> 177,410,000 152,874,000
<TOTAL-LIABILITY-AND-EQUITY> 422,494,000 329,946,000
<SALES> 113,826,000 95,575,000
<TOTAL-REVENUES> 113,826,000 95,575,000
<CGS> 75,367,000 63,761,000
<TOTAL-COSTS> 108,102,000 91,162,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 112,000 112,000
<INTEREST-EXPENSE> 2,323,000 1,598,000
<INCOME-PRETAX> 3,525,000 2,866,000
<INCOME-TAX> 1,579,000 1,263,000
<INCOME-CONTINUING> 1,946,000 1,603,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,946,000 1,603,000
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