THIS IS A CONFIRMING COPY OF AMDENDMENT NO. 1 TO THE REGISTRATION STATEMENT
ON FORM S-1 (FILE NO. 33-90648) OF CONAIR CORPORATION FILED IN PAPER FORM ON
APRIL 17, 1995.
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 17, 1995
REGISTRATION NO. 33-90648
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
CONAIR CORPORATION
(Exact name of registrant specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3634 11-1950030
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
-------------------
150 MILFORD ROAD
EAST WINDSOR, NEW JERSEY 08520
(609) 426-1300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-------------------
LEANDRO P. RIZZUTO
PRESIDENT
CONAIR CORPORATION
1 CUMMINGS POINT ROAD
STAMFORD, CONNECTICUT 06904
(203) 351-9000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES M. DUBIN, ESQ. DENNIS J. BLOCK, ESQ.
CARL L. REISNER, ESQ. AKIKO MIKUMO, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON WEIL, GOTSHAL & MANGES
1285 AVENUE OF THE AMERICAS 767 FIFTH AVENUE
NEW YORK, NEW YORK 10019-6064 NEW YORK, NEW YORK 10153
(212) 373-3000 (212) 310-8000
</TABLE>
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be used
in connection with a United States offering, and one to be used in a concurrent
international offering. The two prospectuses will be identical in all respects
except for the front and back cover pages. Pages to be included in the
international prospectus and not the U.S. prospectus are marked "Alternate
Page."
<PAGE>
CONAIR CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING THE LOCATION IN THE PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS 1 THROUGH 12, PART I, OF FORM S-1
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
------------------------------------------- -------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front and Outside Back Cover Page of
Prospectus; Available Information
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Investment
Considerations
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ Underwriting
6. Dilution................................... Dilution
7. Selling Security Holders................... Not Applicable
8. Plan of Distribution....................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be
Registered................................. Prospectus Summary; Description of Capital
Stock
10. Interests of Named Experts and Counsel..... Inapplicable
11. Information with Respect to the
Registrant................................. Outside Front Cover Page of Prospectus;
Prospectus Summary; The Company; Dividend
Policy; Capitalization; Selected
Financial Information; Unaudited Pro
Forma As Adjusted Condensed Financial
Statements; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Description of Capital Stock;
Certain Transactions; Legal Matters;
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Inapplicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 17, 1995
PROSPECTUS
8,700,000 SHARES
CONAIR CORPORATION
CLASS A COMMON STOCK
All of the shares of Class A Common Stock (the "Shares") offered hereby are
being sold by Conair Corporation, a Delaware corporation (the "Company"). Of
these Shares, shares (the "U.S. Shares") are being offered in the United
States (the "U.S. Offering") by the U.S. Underwriters and shares (the
"International Shares") are being offered concurrently outside the United States
(the "International Offering") by the Managers. The public offering price and
the underwriting discounts and commissions are identical for both the U.S.
Offering and the International Offering (collectively, the "Offering").
Prior to this Offering, there has been no public market for the Class A
Common Stock. It is currently anticipated that the initial public offering price
will be between $14.00 and $16.00 per Share. See "Underwriting" for a discussion
of the factors considered in determining the initial public offering price. The
Company intends to apply for the listing of the Class A Common Stock on the New
York Stock Exchange under the symbol " ".
The Company has two classes of authorized Common Stock, Class A Common
Stock, which is offered hereby, and Class B Common Stock. Holders of shares of
Class A Common Stock are entitled to one vote per share and holders of shares of
Class B Common Stock are entitled to ten votes per share. The holders of shares
of Class A Common Stock are entitled to vote separately as a class to elect 25%
of the entire Board of Directors of the Company. All of the outstanding shares
of Class B Common Stock, which will represent approximately % of the
aggregate voting power of the Company upon completion of this Offering, are
beneficially owned by Mr. Leandro P. Rizzuto, Chairman and President of the
Company.
--------------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER
"INVESTMENT CONSIDERATIONS" IN CONNECTION WITH THE PURCHASE OF THE CLASS A
COMMON STOCK OFFERED HEREBY.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(3)................................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the U.S. Underwriters and the Managers
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses related to this Offering, which are estimated to
be approximately $ .
(3) The Company has granted to the U.S. Underwriters and the Managers 30-day
options to purchase in the aggregate up to 1,300,000 additional Shares
solely to cover over-allotments, if any. If the over-allotment options are
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
--------------
The U.S. Shares are offered by the several U.S. Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
certain conditions. The U.S. Underwriters reserve the right to withdraw, cancel
or modify the U.S. Offering and to reject orders in whole or in part. It is
expected that delivery of the U.S. Shares will be made against payment therefor
on or about , 1995, at the offices of Bear, Stearns & Co. Inc., 245
Park Avenue, New York, New York 10167.
--------------
BEAR, STEARNS & CO. INC. MERRILL LYNCH & CO.
, 1995
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[Space reserved for pictures.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
--------------
CONAIR TM, CUISINART (R), JHERI REDDING (R), PRIMA (R), CONAIRPHONE TM,
INFINITI TM, RIVA TM, ELEGANTE (R), GRANDE FINALE (R) and EURO-COIFFEUR (R) are
trademarks of the Company. The mark BaByliss (R) is owned by Babyliss S.A., a
wholly-owned subsidiary of the Company. RUSK (R) is a registered trademark of
Rusk, Inc., a 50% joint venture between the Company and Mr. Irvine Rusk. The
Southwestern Bell name, FREEDOM PHONE (R) and Bell logo are registered marks of
Southwestern Bell Telecommunications, Inc. The mark REVLON (R) is owned by
Revlon Consumer Products Corporation and the mark VIDAL SASSOON (R) is owned by
Richardson-Vicks, Inc., a subsidiary of Procter & Gamble Co.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements (and Notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information in
this Prospectus assumes that the U.S. Underwriters' and the Managers'
over-allotment options have not been exercised and that the Company's
recapitalization and stock split have been completed. The Company's Class A
Common Stock, par value $.01 per share, and Class B Common Stock, par value $.01
per share, are sometimes collectively referred to in this Prospectus as the
"Common Stock." In this Prospectus, unless the context otherwise requires, all
references to the "Company" mean Conair Corporation and its consolidated
subsidiaries.
THE COMPANY
The Company is a leading designer, manufacturer and marketer of branded
consumer products, including personal care and beauty products, telephones and
small kitchen appliances and cookware. The Company's main product groups,
principal products and brand names are highlighted in the following table:
<TABLE>
<CAPTION>
PRODUCT GROUP PRINCIPAL PRODUCTS BRAND NAMES
- ---------------------------- ---------------------------------- -------------------------
<S> <C> <C>
Personal Care Appliances Hair dryers, curling irons, CONAIR(R)
hairsetters and other beauty and JHERI REDDING(R)
grooming appliances. BaByliss(R)
REVLON(R)*
VIDAL SASSOON(R)*
Consumer Electronics Consumer cordless and corded CONAIRPHONETM
telephones and answering machines. Southwestern Bell
FREEDOM PHONE(R)*
CUISINART(R) Products Food processors, mini choppers, CUISINART(R)
cookware and other small kitchen
appliances.
Toiletries and Professional A retail line of liquid hair care CONAIR(R)
Salon Products products and brushes and a JHERI REDDING(R)
professional line of hair care RUSK(R)
appliances and liquid products. BaByliss(R)
</TABLE>
- ------------
* Pursuant to long-term licenses.
The Company has achieved significant growth principally through successful
introduction of new and enhanced products, long-term brand name licensing and
acquisitions. From 1992 through 1994, the Company's net sales grew at a compound
annual rate of 20.4%. During this period, operating income margins have
increased from 6.0% to 8.0% through low cost manufacturing and sourcing and
reduction of overhead expenses as a percentage of sales. The Company's improved
operating results, together with a substantial reduction in interest expense,
have led to significantly increased earnings.
The Company believes that the following factors have been key to its revenue
and profit growth:
. Strong Market Position--Nearly half of the Company's sales are attributable to
products of which it is either the #1 or #2 seller in the United States. The
Company is the #1 seller of hair dryers, curling irons and high-end food
processors in the United States. The Company is also a leading seller of hair
care appliances in Europe.
. Powerful Brand Names--The Company's CONAIR(R), CUISINART(R), Southwestern Bell
FREEDOM PHONE(R) and JHERI REDDING(R) brand names are widely recognized in the
United States. In 1993, according to a "top brands" survey of mass
merchandisers, the CONAIR(R) name was rated #11 among over 1,200 brands. The
Company recently acquired the BaByliss(R) brand name and
3
<PAGE>
licensed the REVLON(R) and VIDAL SASSOON(R) brand names, which are widely
recognized in international markets.
* Innovative Products--The Company derived 40% of its revenues in 1994 from new
or enhanced products introduced over the last three years. The Company has been
able to introduce new and enhanced products rapidly and inexpensively in
response to changing market trends, consumer preferences and technological
developments.
* Solid Customer Relationships--The Company has long-standing customer
relationships in all principal retail and beauty professional distribution
channels and sells to substantially all of the leading retailers in the United
States, France and the United Kingdom.
* Effective Distribution Techniques--The Company offers retailers the
opportunity to purchase a large number of branded or private label products in
multiple product categories that cover broad price point ranges. This and the
Company's strong brand names enable the Company to capture greater retail shelf
space and solidify its relationship with its customers.
* Quality Products at Competitive Prices--The Company's flexible manufacturing
and sourcing have enabled it to supply competitively priced, quality merchandise
on a timely basis.
* Successful Acquisitions and Licenses--The Company has supplemented its
internal growth through a number of strategic acquisitions and brand licensing
arrangements. The Company acquired certain assets of Cuisinarts, Inc. in 1989
and the capital stock of Babyliss S.A. ("Babyliss") in February 1995.
Significant exclusive long-term licenses include licenses to sell Southwestern
Bell's consumer telephones in the United States and to sell personal care
products in selected international markets under the REVLON(R) and VIDAL
SASSOON(R) brand names. The Company has used its strong design, manufacturing
and marketing capabilities to substantially grow the revenues and profitability
of its acquired businesses.
* Professional Heritage and Presence--The Company's professional heritage and
strong presence in the professional salon industry help the Company stay current
with emerging fashion trends and enhance product acceptance and name brand
recognition by retail customers.
The Company plans to achieve growth domestically through continued new
product introductions in existing and related categories, brand licensing and
acquisitions. The Company believes that there is significant potential for
expansion of its international business. The Company intends to achieve
international growth through strategic acquisitions and brand licensing. On
February 18, 1995, the Company purchased all of the stock of Babyliss, a leading
designer, manufacturer and marketer of personal care appliances to retailers and
professional beauty salons in France, the United Kingdom and other parts of
Western Europe. See "Business--Recent Acquisition." The acquisition of Babyliss
gives the Company immediate access to a strong European distribution capability
and a leading European brand name.
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Shares Offered............................. 8,700,000 shares of Class A Common Stock.
Common Stock Outstanding After the Offering
(1)(2)..................................... shares of Class A Common Stock.
shares of Class B Common Stock.
Use of Proceeds............................ To retire or defease certain long-term debt,
including debt incurred to acquire Babyliss,
and for general corporate purposes.
</TABLE>
- ------------
(1) Does not include outstanding stock options to purchase shares of Class
A Common Stock or restricted stock awards for shares of Class A Common
Stock. See "Management--Employees and Directors Stock Plan."
(2) Includes shares of Class A Common Stock into which the Series A
Convertible Preferred Stock will be converted concurrently with the
Offering.
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial information presented below, except as adjusted
information, is derived from the Company's Consolidated Financial Statements and
the Notes thereto appearing elsewhere in this Prospectus, except income
statement data for the years ended December 31, 1990 and 1991 which are derived
from the Company's consolidated financial statements not included herein. Also
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------
PRO FORMA
AS ADJUSTED
1990 1991 1992 1993 1994 PRO FORMA (1) 1994 (2)
-------- -------- -------- -------- -------- ------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................... $298,502 $330,125 $361,838 $442,562 $524,398 $ 596,690 $ 596,690
Gross profit................ 102,887 114,150 122,827 144,146 166,411 194,023 194,023
Operating income............ 15,133 17,161 21,820 28,474 41,814 48,283 48,283
Net interest expense........ 12,110 13,650 12,374 7,435 8,353 12,711 3,357
Income before provision for
income taxes and
extraordinary items........ 3,023 6,004 9,446 21,039 33,461 35,572 44,926
Income before extraordinary
items (3).................. 1,025 2,916 5,085 12,061 20,487 22,062 28,142
Net income.................. 1,304 2,930 1,219 12,061 20,487 22,062(6) 28,142(6)
Earnings per share before
extraordinary items
(4)(5)...................... $ $ $ $ $ $ $
Earnings per share (4)(5)... $ $ $ $ $ $ $
Weighted average shares
(4).........................
-------- -------- -------- -------- -------- ------------- -----------
</TABLE>
AS OF DECEMBER 31,
----------------------------------------
PRO FORMA
AS ADJUSTED
1994 PRO FORMA (1) 1994 (2)
-------- ------------- -----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Current assets.............. $212,188 $ 240,920 $ 241,264
Current liabilities......... 65,535 83,770 83,770
Total assets................ 362,704 424,991 423,425
Long-term debt.............. 100,405 142,747 20,747
Stockholders' equity........ 175,454 175,454 295,888
- ------------
(1) The pro forma information reflects the consolidated results of operations of
the Company for 1994 and the financial position at December 31, 1994 as if
the Company had completed the acquisition of Babyliss as of January 1, 1994,
in the case of the Income Statement Data, and as of December 31, 1994, in
the case of the Balance Sheet Data. See "Unaudited Pro Forma As Adjusted
Condensed Financial Statements."
(2) The pro forma as adjusted information reflects the consolidated results of
operations of the Company for 1994 and the financial position at December
31, 1994 as if the Company (i) had completed the acquisition of Babyliss,
(ii) had completed the issuance and sale of the Shares and (iii) had applied
the estimated net proceeds therefrom as described herein under "Use of
Proceeds," all as of January 1, 1994, in the case of the Income Statement
Data, and as of December 31, 1994, in the case of the Balance Sheet Data.
(3) For all periods, extraordinary items represent gains or losses on the early
extingishment of debt.
(4) Excludes shares of Class A Common Stock issuable upon exercise of
options outstanding under the Company's stock option plan and shares of
Class A Common Stock issued pursuant to restricted stock awards. See
"Management-- Employees and Directors Stock Plan."
(5) After deduction of dividends on the Company's Series A Convertible Preferred
Stock.
(6) Excludes an extraordinary charge of $1,566,000 (net of tax benefit of
$844,000), including the write-off of deferred financing costs, related to
the early extinguishment of debt.
5
<PAGE>
THE COMPANY
The Company was founded in 1959 by Leandro P. Rizzuto and his parents, who
were hair salon professionals, as a supplier to the professional beauty trade.
In 1968, the Company introduced its first consumer electrical product and has
since become the leading seller of hair dryers in the United States. The Company
has expanded its personal care appliance line to include curling irons,
hairsetters and grooming products and introduced toiletry products for the
retail market. In 1983, the Company commenced selling a line of consumer
telephones under the CONAIRPHONETM brand name. In 1993, the Company entered into
a long-term licensing arrangement with Southwestern Bell Telecommunications,
Inc. ("Southwestern Bell") to market telephones, answering machines and caller
ID devices in the United States under the Southwestern Bell FREEDOM PHONE(R)
brand name. The Company acquired the CUISINART(R) brand name and certain related
operating assets in 1989. In 1993 and 1994, respectively, the Company acquired
exclusive rights to manufacture and market certain personal care appliances for
the retail and professional markets under the REVLON(R) brand name in Europe and
Mexico, and under the VIDAL SASSOON(R) brand name in the Asia Pacific region. In
February 1995, the Company acquired all of the stock of Babyliss S.A.
("Babyliss"), a leading designer, manufacturer and marketer of personal care
appliances to retailers and professional beauty salons in France, the United
Kingdom and other parts of Western Europe.
In 1985, the Company, which had been a public company since 1972, was taken
private in a leveraged buyout and became wholly owned by Mr. Rizzuto. All of the
outstanding indebtedness incurred to finance the buyout was retired or defeased
by the end of 1992.
The Company's principal executive offices are located at 150 Milford Road,
East Windsor, New Jersey 08520, and its telephone number is (609) 426-1300.
INVESTMENT CONSIDERATIONS
Prospective investors should carefully review the following considerations,
in addition to the other information presented in this Prospectus, before
purchasing the Shares offered hereby.
IMPORTANCE OF NEW PRODUCTS
Successful new and enhanced product introductions have been and are expected
to remain key to the Company's business. The Company derived 40% of its 1994
revenues from new or enhanced products introduced over the last three years. The
growth of the Company has been, and will continue to be, dependent upon a number
of factors, including the ability of the Company to introduce new and enhanced
products and design innovations and to acquire brand names and enter new product
categories. There can be no assurance that the Company will continue to respond
in a timely manner to changes in customer preferences or technological changes
or that the Company will continue to successfully introduce new or enhanced
products.
FOREIGN OPERATIONS AND EXPANSION
Many of the Company's products are manufactured in foreign countries,
including Costa Rica, the People's Republic of China ("PRC"), Hong Kong, Taiwan,
Indonesia, Malaysia, Japan, the Philippines, South Korea, Italy, Belgium and
Germany. In 1994, approximately 85% of products sold by the Company, as measured
by the cost of products, were manufactured by approximately 50 foreign
manufacturers and subcontractors, of which approximately 12% were manufactured
by the Company's subsidiary in Costa Rica. The Company's arrangements with such
foreign manufacturers are subject to the risks of doing business abroad,
including risks associated with economic or political instability in countries
in which such manufacturers are located, labor strikes, foreign currency
fluctuations and potential import restrictions, including the possibility of the
loss of most-favored nation status by or retaliatory tariffs imposed on products
of countries such as the PRC.
6
<PAGE>
Although the Company seeks to reduce the risks of foreign production by
diversification of its sourcing, the loss of certain foreign manufacturers,
inability of certain manufacturers to meet the Company's production needs, loss
of access to manufacturers in any particular country and the inability of the
Company to remove its tooling, molds and dies from manufacturing facilities in
foreign countries could have an adverse impact on the Company's business. The
Company is also subject to risks associated with the availability of and time
required for the transportation of products from foreign countries, including
shipping losses, or the loss of sales that may result from delays or
interruptions in shipping.
As a result of its acquisition of Babyliss, the Company will have an
immediate increase in foreign sales and operations. The Company intends to
expand its operations in foreign markets in Europe and elsewhere, and will seek
to expand Babyliss' business in its existing markets and to enter new markets.
There can be no assurance, however, that the Company will be able to
successfully integrate Babyliss or to expand its current operations in
international markets or enter new markets successfully. Furthermore, such
foreign expansion will increase the Company's exposure to the inherent risks of
doing business outside the United States, including the risk of foreign currency
fluctuations.
RELIANCE ON KEY CUSTOMERS
The Company's net sales in the aggregate to its five largest customers
during the fiscal year ended December 31, 1994 were approximately 34%. Two of
the Company's customers, WalMart and Kmart Corp. accounted for approximately 12%
and 11%, respectively, of the Company's net sales during the fiscal year ended
December 31, 1994. Kmart Corp. has accounted for over 10% of the Company's net
sales during each fiscal year since fiscal 1980. Although the Company has
long-established relationships with many of its customers, the Company does not
have long-term contracts with any of its customers. A decrease in business from
any of its major customers could have a material adverse effect on the Company's
results of operations and financial condition. See "Business--Customers and
Distribution."
RETAIL INDUSTRY
The Company sells its products through retailers, including mass
merchandisers, department and drug stores, electronic stores, discount and
variety stores and catalog houses and showrooms. Retail sales depend, in part,
on general economic conditions and a significant decline in such conditions
could have a negative impact on sales by retailers of the types of products
offered by the Company. A significant deterioration in the financial condition
of the Company's major customers, or in the retail environment in general, could
have a material adverse effect on the Company's sales and profitability. See
"Business--Customers and Distribution."
DEPENDENCE ON KEY PERSONNEL
The Company's senior management, in particular Leandro P. Rizzuto, Chairman
and President, Ronald T. Diamond, who manages the Company's consumer appliances
and toiletries product groups, and Barry Haber, who manages the Company's
consumer electronics and CUISINART(R) product groups, has substantial experience
and expertise. The members of the Company's senior management have over 130
years of collective experience in the Company's business. The loss of the
services of any of these individuals could adversely affect the Company. The
Company currently has an Employment Agreement with Mr. Rizzuto for a term
through June 30, 1996 (which is subject to automatic renewals of successive
one-year periods), but it does not have employment agreements with the other
members of its senior management. See "Management--Employment Agreement." The
Company maintains a "key man" life insurance policy for Mr. Rizzuto, but
otherwise does not maintain such insurance with respect to any of its other
senior managers.
7
<PAGE>
COMPETITION
The Company's business is highly competitive. Some of the Company's current
and potential competitors are larger and have greater financial resources than
the Company. The Company's business is not characterized by substantial
regulatory or economic barriers to entry of new competitors. A number of factors
affect competition in the sale of the Company's products. Among these are brand
identification, style, design features, packaging, price, quality, promotion,
sales staff and the level of service provided to customers. The importance of
these competitive factors varies from customer to customer and from product to
product. There can be no assurance that the Company will be able to compete
effectively in all or any of its product groups. See "Business--Competition."
ANTI-TAKEOVER EFFECT OF CAPITAL STRUCTURE; CONTROL BY PRINCIPAL STOCKHOLDER
The Company has two classes of authorized Common Stock, Class A Common
Stock, which is offered hereby, and Class B Common Stock. While holders of Class
A Common Stock are entitled to one vote per share, holders of Class B Common
Stock are entitled to ten votes per share. The Class A Common Stock and the
Class B Common Stock generally vote together as a single class, except that
holders of Class A Common Stock are entitled to vote separately as a class to
elect 25% of the number of directors constituting the entire Board of Directors
of the Company and the holders of Class B Common Stock are entitled to vote
separately as a class to elect the remaining directors. Leandro P. Rizzuto (the
"Principal Stockholder"), as trustee of the Leandro P. Rizzuto Revocable Trust,
beneficially owns all of the outstanding Class B Common Stock and has the right
to vote and dispose of the shares held by the Trust. Upon completion of this
offering, the Principal Stockholder will own approximately % of the
outstanding shares of the Company's Common Stock and hold approximately %
of the aggregate voting power of the Company, which will allow him to control
all actions to be taken by the stockholders, including the election of 75% of
the total number of directors to the Board of Directors. Class B Common Stock is
freely convertible into Class A Common Stock on a one-for-one basis and, at such
time as the Class B Common Stock constitutes less than 20% of the outstanding
shares of Common Stock, all shares of Class B Common Stock will automatically
convert into shares of Class A Common Stock. Mr. Rizzuto will be able, at any
time, to convert a portion of the shares of Class B Common Stock into Class A
Common Stock and obtain the power to elect the directors to be elected by
holders of the Class A Common Stock while retaining sufficient shares of Class B
Common Stock to elect the remainder of the Board of Directors. This voting
control may have the effect of discouraging offers to acquire the Company
because the consummation of any such acquisition would require the consent of
the Principal Stockholder. In addition, the Board of Directors is authorized to
issue shares of preferred stock from time to time with such rights and
preferences as the Board may determine. Preferred stock could be issued in the
future with terms and conditions that could further discourage offers to acquire
the Company. See "Principal Stockholder" and "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Class A Common Stock prevailing from time to time. Sales or
issuances of substantial amounts of Class A Common Stock (including shares
issued upon the exercise of stock options or the conversion of shares of Class B
Common Stock), or the perception that such sales or issuances might occur, could
adversely affect prevailing market prices of the Class A Common Stock. Upon
completion of this Offering, the Company will have outstanding shares of
Class A Common Stock, including the shares of Class A Common Stock
offered hereby, shares of Class A Common Stock issued upon the conversion of
the Company's Series A Convertible Preferred Stock to the Profit Sharing Plan of
the Company, and shares of Class A Common Stock issued pursuant to
restricted stock awards granted under the Company's Employees and Directors
Stock Plan (the "Stock Plan"), and shares of Class B Common Stock. In
addition, options to purchase up to shares of Class A Common Stock have
been
8
<PAGE>
granted under the Stock Plan. Following this Offering, holders of Class B Common
Stock will be eligible to convert their shares into Class A Common Stock and
sell such shares without registration pursuant to, and subject to the volume
limitations of, Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). The Company and its senior executive officers, including
Leandro P. Rizzuto, as beneficial owner of all outstanding shares of Class B
Common Stock, have agreed not to offer, sell, contract to sell, or otherwise
dispose of any shares of Common Stock or rights to acquire such shares or
securities convertible into or exchangeable for Common Stock for a period of 180
days after the date of this Prospectus without the prior written consent of the
representatives of the U.S. Underwriters and the Managers. See "Shares Eligible
for Future Sale," "Management--Employees and Directors Stock Plan" and
"Underwriting."
DILUTION
Purchasers of Shares will experience immediate and substantial dilution in
the net tangible book value per share of Common Stock. See "Dilution."
ABSENCE OF PRIOR MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE VOLATILITY OF
STOCK PRICE
Prior to the Offering, there has been no public market for the Class A
Common Stock. Although the Company intends to apply for the listing of the Class
A Common Stock on the New York Stock Exchange, there can be no assurance that an
active or liquid trading market in the Class A Common Stock will develop upon
completion of the Offering or, if developed, that it will continue. The initial
public offering price of the Class A Common Stock will be determined through
negotiations between the Company and the representatives of the U.S.
Underwriters and the Managers and may not be indicative of the market price for
the Class A Common Stock after the Offering. The market price for shares of
Class A Common Stock may be highly volatile depending on news announcements and
changes in general market conditions. In recent years, the stock market has
experienced extreme price and volume fluctuations. See "Dilution" and
"Underwriting."
9
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Shares
offered hereby, assuming an initial public offering price of $ per Share
and after deducting underwriting discounts and commissions and the expenses
related to the Offering, are estimated to be approximately $ .
The Company intends to use the proceeds of the Offering to reduce its
outstanding long-term debt, including debt incurred to acquire Babyliss, in
order to increase its financial flexibility and facilitate its future growth.
After the application of the proceeds of the Offering, the Company expects to
enter into new or amended long-term credit facilities.
As of December 31, 1994, the Company had long-term indebtedness outstanding
(including the current portion thereof) in the aggregate amount of $106,680,000,
in the form of industrial development bonds, senior and subordinated notes and
mortgage notes. As of March 23, 1995, such indebtedness (including the current
portion thereof) had increased to $131,418,000, approximately $32,000,000 of
which was incurred in connection with the acquisition of Babyliss. Such
indebtedness bears interest at rates ranging from 5.8% to 10% and has varying
final maturity dates depending on the nature of the indebtedness. The Company's
revolving credit facility has a final maturity of March 2000. The two term loans
mature in 1998 and 2004. The various senior and subordinated notes issued by the
Company are due in the years 2001 through 2003. The two issues of industrial
development bonds mature in 1998 and 2001 and the two issues of mortgage notes
mature in 1996 and 1998. For a more complete description of such indebtedness,
see "Capitalization" and Note 7 to the Company's Audited Consolidated Financial
Statements.
Until applied to any of the foregoing uses, the net proceeds of the Offering
will be invested by the Company in short-term interest-bearing deposit accounts,
certificates of deposit or similar financial instruments.
DIVIDEND POLICY
The Company intends to pay quarterly cash dividends on the outstanding
shares of its Common Stock at an initial annual rate of $. per share. Any
determination to pay such cash dividends, however, will be at the discretion of
the Company's Board of Directors and will depend on the Company's results of
operations, financial condition, capital requirements, rights of holders of
preferred stock, contractual restrictions and other factors deemed relevant at
that time by the Company's Board of Directors. Shares of Class A Common Stock
and Class B Common Stock are equal in respect of rights to dividends and other
distributions.
10
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company and its subsidiaries at December 31, 1994, and as adjusted to give
effect to the issuance and sale of the Shares and the application of the
estimated net proceeds as set forth herein under "Use of Proceeds."
<TABLE>
<CAPTION>
DECEMBER 31, 1994
------------------------
AS
ACTUAL ADJUSTED (1)
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current portion:
8.05% Industrial Development Bonds.................................. $ 3,353 $
Mortgage Note Payable............................................... 1,881
Floating Rate Industrial Development Bonds.......................... 1,500
6.25% Promissory Note due 2001...................................... 9,188
7.44% Series A Senior Fixed Rate Notes due 2002..................... 40,000
6.56% Series B Senior Rate Reset Notes due 2002..................... 10,000
10% Subordinated Promissory Note due 2003........................... 6,000
Revolving Credit Loan due 2000 (2).................................. 10,000
5.8% Term Loan due 1998............................................. 3,133
6.5% Mortgage Note due 1998......................................... 1,625
7% Term Loan due 2004............................................... 20,000
New Credit Agreement................................................ 0
-------- ------------
Total long-term debt.............................................. 106,680
-------- ------------
Stockholders' equity:
Preferred Stock, $.01 par value, authorized--5,000,000 shares;
outstanding--none..................................................... -- --
Series A Convertible Preferred Stock, $1.00 par value,
authorized--5,000 shares; outstanding--5,000 shares; none, as
adjusted (3).......................................................... 5
Class A Common Stock, $.01 par value, authorized-- shares;
outstanding--[ ]; [ ] as adjusted (3)(4)(5).................
Class B Common Stock, $.01 par value, authorized-- shares;
outstanding--[ ] shares (5)...................................
Old Common Stock, $100 par value, authorized--5,000 shares;
outstanding--2,814 shares; none, as adjusted (5)...................... 281
Additional paid-in capital (5)........................................ 7,633
Cumulative translation adjustments.................................... (18)
Retained earnings..................................................... 167,553 (6)
-------- ------------
Total stockholders' equity........................................ 175,454
-------- ------------
Total capitalization............................................ $282,134 $
-------- ------------
-------- ------------
</TABLE>
- ------------
(1) See "Use of Proceeds" for the application of the net proceeds from the
issuance and sale of the Shares.
(2) Extended from 1997 to the year 2000 in conjunction with the acquisition of
Babyliss. (See Note 15 to the Consolidated Financial Statements.)
(3) Reflects the conversion of the Company's Series A Convertible Preferred
Stock into shares of Class A Common Stock concurrently with the Offering.
(4) Excludes shares of Class A Common Stock issuable upon exercise of
options outstanding under the Company's stock option plan and shares of
Class A Common Stock issuable under restricted stock awards (see
"Management-- Employees and Directors Stock Plan").
(5) Reflects the recapitalization and stock split of the Company's shares of
Common Stock, par value $100 per share, into shares of Class A Common
Stock, par value $.01 per share, and shares of Class B Common Stock,
par value $.01 per share, and the conversion of 2,814 shares of Common
Stock, par value $100 per share, into shares of Class B Common Stock.
(6) Includes an extraordinary charge of $1,566,000 (net of tax benefit of
$844,000), including the write-off of deferred financing costs, related to
the early extinguishment of debt. See "Use of Proceeds."
11
<PAGE>
DILUTION
The net tangible book value of the Company at December 31, 1994 was
approximately $ , or $ per share of Common Stock. "Net tangible book
value per share" represents the amount of total tangible assets less total
liabilities, divided by the shares of Common Stock assumed to have been
outstanding on December 31, 1994. Without taking into account any changes in net
tangible book value subsequent to December 31, 1994, other than to give effect
to shares of Class A Common Stock into which the Series A Convertible
Preferred Stock will be converted concurrently with the Offering, shares
of Class A Common Stock issued pursuant to restricted stock awards granted under
the Company's stock option plan (see "Management--Employees and Directors Stock
Plan"), the sale by the Company of the Shares and the receipt and application of
the net proceeds therefrom, as set forth in "Use of Proceeds," and without
giving effect to the exercise of options to acquire shares of Class A
Common Stock granted under the Company's stock option plan (see
"Management--Employees and Directors Stock Plan"), the pro forma net tangible
book value of the Company as of December 31, 1994 would have been approximately
$ , or $ per share of Common Stock. This represents an immediate
increase in net tangible book value of $ per share of Common Stock to the
existing stockholder, and an immediate dilution of $ per share of Common
Stock to Shares in the Offering being made hereby, as illustrated in the
following table:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share............... $
--------
Net tangible book value per share at December 31, 1994(1)... $
--------
Increase in net tangible book value per share attributable
to the Offering (2).......................................
--------
Pro forma net tangible book value per share after the
Offering......................................................
--------
Dilution per share to new investors (3)....................... $
--------
--------
</TABLE>
- ------------
(1) Excludes .
(2) After deduction of commissions, fees and estimated offering expenses.
Includes an extraordinary charge of $ (net of tax benefit of
$ ), including the write-off of deferred financing costs, related to
the early extinguishment of debt.
(3) Dilution per share to new investors is determined by subtracting the pro
forma net tangible book value per share after the Offering being made hereby
from the amount of cash paid by a new investor for a share of Common Stock.
The following table summarizes on a pro forma basis at December 31, 1994 the
differences between the Principal Stockholder and new investors with respect to
the number of shares of Class A Common Stock purchased from the Company, the
total consideration paid to the Company and the average consideration paid per
share (at an assumed initial public offering price of $15.00 per share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Principal Stockholder...................... % $ 2,919,000 $
------
New Investors.............................. % $ $
---------- ------- ------------ ------- ------
Total.................................. 100.0% 100.0% $
---------- ------- ------------ ------- ------
---------- ------- ------------ ------- ------
</TABLE>
The foregoing table assumes no exercise of outstanding stock options and
does not give effect to shares of Class A Common Stock into which the
Series A Convertible Preferred Stock will be converted concurrently with the
Offering or shares of Class A Common Stock issued pursuant to restricted
stock awards granted under the Company's stock option plan. At , there
were outstanding options to purchase shares of Class A Common Stock at a
purchase price equal to and restricted stock awards covering shares
had been granted. See "Management-- Employees and Directors Stock Plan."
12
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected financial information presented below, except as adjusted
information, is derived from, and should be read in conjunction with, the
Consolidated Financial Statements (and the Notes thereto) appearing elsewhere
herein. The selected income statement and balance sheet data (other than as
adjusted data) at and for the periods ended December 31 for each of the years
1990 through 1994 are derived from the consolidated financial statements of the
Company, which have been audited by Deloitte & Touche LLP, independent auditors,
and which in the case of the three most recent fiscal years appear elsewhere
herein. The following financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" and "Unaudited Pro Forma As Adjusted Condensed Financial Statements."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
PRO FORMA AS
ADJUSTED
1990 1991 1992 1993 1994 1994 (1)
-------- -------- -------- -------- -------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................................... $298,502 $330,125 $361,838 $442,562 $524,398 $596,690
Cost of goods sold............................. 195,615 215,975 239,011 298,416 357,987 402,667
-------- -------- -------- -------- -------- ------------
Gross profit................................... 102,887 114,150 122,827 144,146 166,411 194,023
Selling, general and administrative............ 87,754 96,989 101,007 115,672 124,597 145,740
-------- -------- -------- -------- -------- ------------
Operating income............................... 15,133 17,161 21,820 28,474 41,814 48,283
Other (income) expense:
Net interest expense........................... 12,110 13,650 12,374 7,435 8,353 3,357
Gain on sale of buildings...................... -- (2,493) -- -- -- --
-------- -------- -------- -------- -------- ------------
12,110 11,157 12,374 7,435 8,353 3,357
Income before provision for income taxes and
extraordinary items........................... 3,023 6,004 9,446 21,039 33,461 44,926
Income tax provision........................... 1,998 3,088 4,361 8,978 12,974 16,784
-------- -------- -------- -------- -------- ------------
Income before extraordinary items (2).......... $ 1,025 $ 2,916 $ 5,085 $ 12,061 $ 20,487 $ 28,142
-------- -------- -------- -------- -------- ------------
-------- -------- -------- -------- -------- ------------
Net income..................................... $ 1,304 $ 2,930 $ 1,219 $ 12,061 $ 20,487 $ 28,142(6)
-------- -------- -------- -------- -------- ------------
-------- -------- -------- -------- -------- ------------
Earnings per share before extraordinary items
(3)(4)(5)...................................... $ $ $ $ $ $
Earnings per share (3)(4)(5)................... $ $ $ $ $ $
Weighted average shares (3)(4).................
-------- -------- -------- -------- -------- ------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------
PRO FORMA AS
ADJUSTED
1990 1991 1992 1993 1994 1994 (1)
-------- -------- -------- -------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets................................. $144,859 $157,629 $161,960 $176,154 $212,188 $241,264
Current liabilities............................ 38,807 42,549 39,628 51,395 65,535 83,770
Total assets................................... 291,745 298,879 297,471 310,118 362,704 423,425
Long-term debt................................. 100,109 100,332 96,151 87,575 100,405 20,747
Stockholders' equity........................... 136,061 138,971 145,030 151,637 175,454 295,888
</TABLE>
- ------------
(1) The pro forma as adjusted information reflects the consolidated results of
operations of the Company for 1994 and the financial position at December
31, 1994 as if the Company (i) had completed the acquisition of Babyliss,
(ii) had completed the issuance and sale of the Shares and (iii) had applied
the estimated net proceeds therefrom as described herein under "Use of
Proceeds," all as of January 1, 1994 in the case of the Income Statement
Data and as at December 31, 1994 for the Balance Sheet Data. See "Unaudited
Pro Forma As Adjusted Condensed Financial Statements."
(2) For all periods, extraordinary items represent gains or losses on the early
extinguishment of debt.
(3) Excludes shares of Class A Common Stock issuable upon exercise of
options outstanding under the Company's stock option plan. See
"Management--Employees and Directors Stock Plan."
(4) Includes shares of Class A Common Stock into which the Company expects
its Series A Convertible Preferred Stock to be converted concurrently with
the Offering.
(5) After deduction of dividends on the Company's Series A Convertible Preferred
Stock.
(6) Excludes an extraordinary charge of $1,566,000 (net of tax benefit of
$844,000), including the write-off of deferred financing costs, related to
the early extinguishment of debt.
13
<PAGE>
UNAUDITED PRO FORMA AS ADJUSTED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma as adjusted condensed financial statements
give effect to the acquisition of Babyliss, the issuance and sale of Shares at
an assumed offering price of $15.00 per share (the mid-point of the initial
public offering range), and the application of proceeds from such sale of Shares
as described herein under "Use of Proceeds", as though each occurred on January
1, 1994 in the case of income statement data and on December 31, 1994 in the
case of balance sheet data.
The condensed historical financial statement data of the Company and
Babyliss as of and for the year ended December 31, 1994 are derived from the
audited financial statements of the Company and Babyliss included elsewhere
herein and should be read in conjunction with those audited financial
statements. In the case of the historical financial statements of Babyliss, such
financial statements appear in the local currency (French Francs) and were
prepared using accounting principles generally accepted in France, as adjusted
to amounts which would have been reported under generally accepted accounting
principles in the United States (although such adjustments were not material).
Such financial statements were translated into U.S. dollars in accordance with
the standards established by Statement of Financial Accounting Standards No 52 -
Foreign Currency Translation.
These pro forma as adjusted condensed financial statements are presented for
illustrative purposes only and, therefore, are not necessarily indicative of the
operating results or financial position that might have been achieved had the
acquisition of Babyliss, the Offering and use of proceeds actually occurred on
January 1, 1994 and December 31, 1994, respectively, nor are they necessarily
indicative of operating results and financial position which may occur in the
future.
The acquisition of Babyliss has been accounted for as a "purchase"
transaction with the purchase price allocated to the estimated fair value of the
assets acquired and liabilities assumed. The excess of the purchase price over
the estimated fair value of the net assets acquired is allocated to goodwill,
which is amortized over 30 years. The allocation of the purchase price and the
estimated fair value of assets and liabilities is based upon preliminary
estimates of the Company's management using the most recent information
available and is subject to adjustment when the final allocation is made using
appraisals and other information not presently available. However, the Company's
management does not believe the final purchase price allocation will be
materially different from the estimates used herein.
14
<PAGE>
UNAUDITED PRO FORMA AS ADJUSTED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA OFFERING PRO FORMA
CONAIR BABYLISS ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
-------- -------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET SALES.................... $524,398 $ 72,292 $ 596,690 $ 596,690
-------- -------- --------- -----------
COST AND EXPENSES:
Cost of goods sold......... 357,987 44,680 402,667 402,667
Selling, general and
administrative............... 124,597 20,280 863(1a) 145,740 145,740
-------- -------- ----------- --------- -----------
482,584 64,960 863 548,407 548,407
-------- -------- ----------- --------- -----------
INCOME FROM OPERATIONS....... 41,814 7,332 (863) 48,283 48,283
INTEREST EXPENSE, NET........ 8,353 1,410` 2,948(1b) 12,711 (9,354)(2a) 3,357
-------- -------- ----------- --------- ----------- -----------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST........ 33,461 5,922 (3,811) 35,572 9,354 44,926
Income tax provision....... 12,974 1,870 (1,334)(1c) 13,510 3,274(2b) 16,784
-------- -------- ----------- --------- ----------- -----------
INCOME BEFORE MINORITY
INTEREST..................... 20,487 4,052 (2,477) 22,062 6,080 28,142
MINORITY INTEREST............ -- 571 (571)(1d) -- --
-------- -------- ----------- --------- ----------- -----------
NET INCOME................... $ 20,487 $ 3,481 $(1,906) $ 22,062 $ 6,080 $ 28,142
-------- -------- ----------- --------- ----------- -----------
-------- -------- ----------- --------- ----------- -----------
EARNINGS PER SHARE........... $ $ $
-------- --------- -----------
-------- --------- -----------
WEIGHTED AVERAGE SHARES
OUTSTANDING................
-------- --------- -----------
-------- --------- -----------
</TABLE>
See notes to the Unaudited Pro Forma As Adjusted Condensed Financial Statements.
15
<PAGE>
UNAUDITED PRO FORMA AS ADJUSTED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1994
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA OFFERING PRO FORMA
CONAIR BABYLISS ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
-------- -------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents................. $ 23,702 $ 1,769 $ (6,000)(1e) $ 19,471 $ (500)(2c) $ 18,971
Accounts receivable,
net......................... 80,616 16,230 96,846 96,846
Inventories............... 104,220 14,594 118,814 118,814
Other..................... 3,650 2,139 5,789 844(2d) 6,633
-------- -------- ----------- --------- ----------- -----------
212,188 34,732 (6,000) 240,920 344 241,264
PROPERTY, PLANT AND
EQUIPMENT, NET.............. 66,992 6,522 73,514 73,514
INVESTMENTS AND OTHER
ASSETS:
Excess of cost over net
assets
of acquired companies..... 70,575 880 25,878(1f) 97,333 97,333
Deferred expenses and
other assets................ 12,949 275 13,224 (1,910)(2c) 11,314
-------- -------- ----------- --------- ----------- -----------
Total assets.......... $362,704 $ 42,409 $ 19,878 $ 424,991 $ (1,566) $ 423,425
-------- -------- ----------- --------- ----------- -----------
-------- -------- ----------- --------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and
other....................... $ 59,260 $ 12,699 $ 71,959 $ 71,959
Current portion of long-
term debt................... 6,275 5,536 11,811 11,811
-------- -------- ----------- --------- ----------- -----------
65,535 18,235 83,770 83,770
OTHER LIABILITIES:
Long term debt............ 100,405 5,342 37,000(1e) 142,747 (122,000)(2e) 20,747
Deferred income taxes..... 21,310 50 21,360 21,360
Other..................... -- 1,660 1,660 1,660
Minority interest......... -- 1,792 (1,792)(1g) -- --
STOCKHOLDERS' EQUITY........ 175,454 15,330 (15,330)(1h) 175,454 120,434(2f) 295,888
-------- -------- ----------- --------- ----------- -----------
Total liabilities &
stockholders' equity........ $362,704 $ 42,409 $ 19,878 $ 424,991 $ (1,566) $ 423,425
-------- -------- ----------- --------- ----------- -----------
-------- -------- ----------- --------- ----------- -----------
</TABLE>
See notes to the Unaudited Pro Forma As Adjusted Condensed Financial Statements.
16
<PAGE>
NOTES TO UNAUDITED PRO FORMA
AS ADJUSTED CONDENSED FINANCIAL STATEMENTS
1. THE PRO FORMA ADJUSTMENTS RELATED TO THE BABYLISS ACQUISITION ARE AS
FOLLOWS:
Income statement
a. To amortize goodwill relative to the Babyliss acquisition using a 30
year life.
b. To reflect interest expense on $37 million of borrowings at the
Company's incremental borrowing rate of 7.32% per annum, and a reduction of
interest income at a rate of 4% on $6 million of cash used to finance the
acquisition of Babyliss.
c. To give tax effect to the above adjustments at the Company's
statutory tax rate.
d. To reflect the assumed purchase of minority interests in certain
Babyliss subsidiaries which the Company is in the process of acquiring.
Balance Sheet
e. To reflect the borrowings and the reduction in cash used to finance
the Babyliss acquisition.
f. To allocate the excess of the purchase price over the fair value of
assets acquired and liabilities assumed to goodwill.
g. To reflect the assumed purchase of minority interests in certain
Babyliss subsidiaries which the Company is in the process of acquiring.
h. To eliminate pre-acquisition equity.
2. THE OFFERING ADJUSTMENTS ARE AS FOLLOWS:
The offering adjustments do not reflect the extraordinary charge of
$1,566,000, net of related tax benefits of $844,000 related to the early
extinguishment of debt as it is directly attributable to the Offering and is
non-recurring.
Income statement
a. To reflect the reduction of interest expense associated with the
repayment of debt from the net proceeds of the Shares offered hereby at an
assumed price as described under "Use of Proceeds" and to eliminate the
amortization of deferred financing costs associated with the repaid debt.
b. To give tax effect to the above adjustments at the Company's
statutory tax rate.
Balance Sheet
c. To reflect prepayment penalties and elimination of deferred financing
costs associated with the repaid debt.
d. To reflect tax benefits of $844,000 related to the early
extinguishment of debt.
e. To reflect the repayment of debt with the net proceeds of the
Offering.
f. To reflect the net proceeds of the Offering at an assumed offering
price and the net loss of $1,566,000, net of tax benefits of $844,000
related to the early extinguishment of debt.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements (and Notes thereto) which appear elsewhere in
this Prospectus.
INTRODUCTION
The Company operates in one industry segment, with revenues primarily
derived from the sale of personal care appliances, mainly hair dryers and
hairstyling devices, consumer electronics, mainly telephones and
telephone-related devices, CUISINART(R) products, such as small kitchen
appliances and cookware and consumer toiletries and professional salon products.
In recent years, the Company has substantially expanded the range of product
categories that it offers through internal growth, as well as licensing
arrangements and acquisitions. Most significantly, in 1993, the Company entered
into a long-term licensing arrangement with Southwestern Bell to market
telephone and telephone-related products in the United States under the
Southwestern Bell FREEDOM PHONE(R) name. This arrangement has enabled the
Company to diversify and broaden the price point coverage of its consumer
electronics products line. In addition, in February 1995, the Company acquired
the stock of Babyliss S.A., a leading designer, manufacturer and marketer of
personal care appliances in France, the United Kingdom and other parts of
Western Europe for approximately $38,000,000 in cash subject to a downward
adjustment. Because the acquisition was consummated in February 1995, it is not
reflected in the historical figures discussed below. See "Business--Recent
Acquisition."
The following table summarizes the net sales of each of the Company's
product groups for the three years ended December 31, 1992, 1993 and 1994.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
PRODUCT GROUP 1992 1993 1994
- ------------------------------------------------------------ -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Personal Care Appliances.................................... $184,244 $208,063 $227,222
Consumer Electronics........................................ 56,648 112,400 149,601
CUISINART(R) Products....................................... 47,311 49,316 56,839
Toiletries and Professional Salon Products.................. 73,635 72,783 90,736
-------- -------- --------
Total....................................................... $361,838 $442,562 $524,398
-------- -------- --------
-------- -------- --------
</TABLE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain
consolidated statements of operations data expressed as a percentage of net
sales:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
--------------------------
YEARS ENDED DECEMBER 31,
--------------------------
1992 1993 1994
------ ------ ------
<S> <C> <C> <C>
Net sales...................................................... 100.0% 100.0% 100.0%
Cost of goods sold............................................. 66.1 67.4 68.3
------ ------ ------
Gross profit................................................... 33.9 32.6 31.7
Selling, general and administrative............................ 27.9 26.2 23.7
------ ------ ------
Operating income............................................... 6.0 6.4 8.0
Interest expense............................................... 3.6 1.7 1.6
Interest income................................................ (0.2) (0.1) --
------ ------ ------
Income before extraordinary items and income taxes............. 2.6 4.8 6.4
Income tax provision........................................... 1.2 2.1 2.5
------ ------ ------
Net income before extraordinary items.......................... 1.4 2.7 3.9
------ ------ ------
------ ------ ------
</TABLE>
18
<PAGE>
OVERVIEW
The Company's growth is primarily driven by new and enhanced products,
augmented by brand licensing and acquisitions. The Company has achieved a
compound annual growth rate of 20.4% in sales from 1992 through 1994.
Approximately half of the sales growth during that period was as a result of the
inclusion of Southwestern Bell FREEDOM PHONE(R) sales in the Company's
consolidated sales after April 1993 and the Company's success in rapidly
increasing sales of Southwestern Bell FREEDOM PHONE(R) products since the
commencement of the licensing arrangement. Excluding sales of these products,
the Company's compound annual growth rate during this period would have been
10.3%.
The Company's gross margins have declined slightly from 1992 to 1994 because
a higher portion of the Company's sales consisted of consumer electronics
products, which generate lower gross margins than most of the Company's other
product categories. Excluding sales of consumer electronics products, the
Company's gross margins would have remained essentially unchanged during this
period.
Despite a decrease in gross margins, the Company's operating profit has
increased as a percentage of sales from 6.0% in 1992 to 8.0% in 1994, primarily
because of the fixed or semi-variable nature of certain of the Company's
expenses and the Company's ability to realize economies of scale. As a result of
improved efficiency, salaries and wages included in selling, general and
administrative expenses declined from 6.7% of sales in 1992 to 5.4% in 1994. In
addition, depreciation and amortization of goodwill and intangibles have
declined as a percentage of sales from 1.7% to 1.2% in the same period. The
Company believes it can continue to increase sales at a higher rate than the
increase in general and administrative expenses that is required to achieve such
sales growth, although the positive impact on improved operating profits may not
be as great as in recent years. The Company's improved operating results,
together with a substantial reduction in interest expense due to refinancings,
has led to significantly improved earnings.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net sales increased by 18.5% to $524,398,000 in 1994 from $442,562,000 in
1993. Each of the Company's product groups contributed to this increase, with
approximately 41% of this increase attributable to increased sales of
Southwestern Bell FREEDOM PHONE(R) products. The significant contribution of
sales of the Southwestern Bell FREEDOM PHONE(R) products was due to sales of new
telephone and telephone-related products, expanded distribution and the
inclusion of a full year of sales of Southwestern Bell FREEDOM PHONE(R) products
in 1994 compared to only nine months commencing in April 1993, when the Company
started selling these products. For the comparable nine-month period in 1994,
sales of the Company's Southwestern Bell FREEDOM PHONE(R) products increased by
approximately 42%. This rate of increase is not indicative of future growth
because 1993 was the Company's first year of sales of the Southwestern Bell
FREEDOM PHONE(R) products. Sales of other consumer electronics products
increased by approximately 5% in 1994, principally due to increased sales of
telephone answering machines. This increase was offset partially by a decrease
in sales of corded phones, reflecting an industry reduction of basic corded
phone sales.
Personal care appliance sales increased by approximately 9% during this
period. The Company's domestic personal care appliance sales increased by 5%. An
8% increase in sales of products sold under the CONAIR(R) brand, such as hair
cutting kits and curling irons, was offset by a 3% reduction in sales of private
label products and higher unit sales of lower priced CONAIR(R) brand hair dryer
models. International sales increased by 50% principally due to sales of
REVLON(R) brand products in Europe which were not sold in 1993 and increased
sales in Canada. Sales of CUISINART(R) products increased by 15% due to new
product introductions and increases in unit sales of existing products. Sales of
consumer toiletries and professional salon products increased by approximately
25% due principally to increased sales of private label toiletry products and
the introduction of the Company's Magical Mane hair shampoo and conditioner,
which was offset by a decrease in sales of professional salon products.
19
<PAGE>
Gross margins decreased as a percentage of net sales to 31.7% in 1994 from
32.6% in 1993. The decrease was primarily due to changes in the mix of products
sold by the Company, as described more fully under "--Overview." Specifically,
this decrease resulted from a disproportionate increase of approximately 33% in
sales of consumer electronics, primarily telephones, which have relatively lower
gross margins as a percentage of sales than the Company's other products,
compared to a 14% increase in sales of all of the Company's other products.
Excluding sales of telephones in both periods, gross margins remained
essentially unchanged as a percentage of sales during this period.
Selling, general and administrative expenses decreased as a percentage of
net sales to 23.7% in 1994 from 26.2% in 1993, but increased by 7.7% to
$124,597,000 in 1994 from $115,672,000 in 1993. The increase of $8,925,000 was
principally due to increases in variable sales expenses to support the increase
in sales in the United States and, to a lesser degree, to an increase in direct
fixed expenses for the Company's new subsidiary in the United Kingdom. The
decline of 2.5% as a percentage of net sales resulted primarily from the fixed
and semi-variable nature of certain costs in this category, including salaries
and wages and, to a lesser extent, depreciation of property, plant and equipment
and amortization of intangibles. In addition, the Company benefitted from a
reduction in its lease costs as a result of the purchase of its executive office
facility in Stamford, Connecticut in March 1994.
The Company's interest expense of $8,511,000 in 1994 increased from
$7,524,000 in 1993. This was as a result of an increase in the Company's
long-term debt, primarily to finance the purchase of its executive office
facility.
The Company's effective income tax rate decreased to 38.8% in 1994 from
42.7% in 1993, primarily due to an increase, as compared to the prior period, in
taxable income relative to the amount of amortized goodwill, which is not
deductible for tax purposes.
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
Net sales increased by 22.3% to $442,562,000 in 1993 from $361,838,000 in
1992. More than approximately 60% of this increase was due to the introduction
of Southwestern Bell FREEDOM PHONE(R) products, which were not sold prior to
1993. Sales of other consumer electronics products increased approximately 10%
due to significant increases in sales of telephone answering machines and
cordless phones. These increases resulted from a combination of new product
introductions and expanded distribution, which were partially offset by a
decrease in sales of corded phones, reflecting reductions in the overall corded
phone market. Sales of personal care appliances increased by approximately 13%
in 1993. Sales in the United States of personal care appliances marketed under
the CONAIR(R) name increased by 13% due principally to increases in unit sales
of hair dryers. An increase of 49% in foreign sales of personal care appliances
was offset by lower growth in the Company's domestic sales of private label
personal care appliances. CUISINART(R) products sales increased in 1993 by
approximately 4% principally due to the successful introduction of a line of
high-end blenders and coffee makers. Sales of consumer toiletries and
professional salon products decreased by approximately 1% in 1993 due primarily
to a reduction in sales of toiletries to one customer.
Gross margins decreased as a percentage of net sales to 32.6% in 1993 from
33.9% in 1992. This decrease resulted primarily from changes in the mix of
products sold by the Company during such periods, and in particular due to the
impact of lower gross margins on sales of Southwestern Bell FREEDOM PHONE(R)
products, which were not sold prior to 1993. Excluding sales of telephones in
both periods, gross margins remained essentially unchanged as a percentage of
sales during this period.
Selling, general and administrative expenses decreased as a percentage of
net sales to 26.2% in 1993 from 27.9% in 1992, but increased by 14.5% to
$115,672,000 in 1993 from $101,007,000 in 1992. The increase of $14,665,000 was
principally due to increases in variable selling expenses to support the higher
level of sales, increases in direct consumer advertising, general increases in
salaries and wages and increases in rent and related expenses due to additional
office space leased at the Company's Stamford, Connecticut executive offices.
The reduction in selling, general and administrative expenses
20
<PAGE>
of 1.7% as a percentage of sales was primarily due to the fixed and
semi-variable nature of certain of these costs, including salaries and wages
and, to a lesser extent, depreciation of property, plant and equipment and
amortization of intangibles.
Interest expense decreased by approximately 42% to $7,524,000 in 1993 from
$12,966,000 in 1992 due to a reduction in long-term debt and a refinancing of
the Company's long-term debt in 1992. Interest income decreased by approximately
85% to $89,000 in 1993 from $592,000 in 1992, primarily due to a reduction in
funds available for short-term investment and lower interest rates.
The Company's effective income tax rate decreased to 42.7% in 1993 from
46.2% in 1992, primarily due to an increase, as compared to the prior period, in
taxable income relative to the amount of amortized goodwill, which is not
deductible for tax purposes and partially offset by a 1% increase in Federal
income tax rates in 1993.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1994, the Company's working capital was $146,653,000 and its
current ratio was 3.2 to 1. The Company's cash balance was $23,702,000 and
long-term debt was $100,405,000 at December 31, 1994. As of December 31, 1993,
the Company had working capital of $124,759,000 and a cash balance of
$15,856,000.
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. Capital expenditures in 1993 were
$7,647,000 compared to $5,858,000 in 1992. Capital expenditures for 1995 are
anticipated to be approximately $20,000,000, of which approximately $7,000,000
is for the completion of the Company's warehouse and distribution facility in
Glendale, Arizona and $4,000,000 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. See "Certain Transactions" below.
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 December 31, 1994, the Company had short-term
lines of credit aggregating $64,400,000, which do not include an additional
$25,000,000 available for the period June 1 to November 30 to finance its
seasonal business needs. In addition, the Company had a long-term revolving
credit line of $21,000,000, of which $11,000,000 was unutilized at December 31,
1994. After the application of the proceeds of the Offering, the Company expects
to enter into a new or amended revolving credit facility. After giving effect to
the Offering, the Company will have substantially reduced its long-term debt and
will have availability of $ under its long and short-term credit
facilities.
In connection with the Babyliss 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.
For the year ended December 31, 1994, the Company's cash flows from
operations included $20,487,000 from net income, $7,239,000 from depreciation
and $4,784,000 from amortization of goodwill and intangibles. This was
supplemented with cash flow from trade creditors in the amount of $9,635,000.
The Company's cash flow has been sufficient to cover the increased investment in
receivables from customers of $10,372,000 and additional inventories of
$18,804,000 for future sales. During
21
<PAGE>
1994, the Company borrowed $24,000,000 in additional long-term debt, which,
together with available cash resources, was used to finance its net capital
additions of $27,621,000 and reduce long-term debt by $3,520,000. The Company
expects to substantially reduce its long-term indebtedness, including debt
incurred to acquire Babyliss, from the proceeds of the Offering. The Company
believes its capital resources are adequate to finance normal growth and service
the Company's debt obligations.
Historically, foreign currency exchange rate fluctuations have not had a
material impact on the results of operations or liquidity of the Company due to
the small proportion of the Company's sales reported and costs incurred in
foreign currencies. The Company hedged certain of its foreign exchange
transactions; however, these transactions were not significant with respect to
the Company's overall operations. As a result of the Company's acquisition of
Babyliss, the Company is reassessing its foreign currency risks and will develop
a hedging program designed to hedge firm purchase commitments of goods and
services denominated in foreign currencies.
In December 1990, the FASB issued SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and in November 1992, the FASB
issued SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The
Company does not presently offer such benefits and, therefore, is not affected
by such pronouncements.
In 1992, the FASB issued SFAS No. 109, "Accounting for Income Taxes," which
was adopted by the Company in 1993. SFAS No. 109 requires determination of
income taxes in accordance with the asset and liability method. The effect of
the adoption of SFAS No. 109 on the Company's Consolidated Financial Statements
in 1993 was not material.
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
operations.
22
<PAGE>
BUSINESS
OVERVIEW
The Company is a leading designer, manufacturer and marketer of branded
consumer products, including personal care and beauty products, telephones and
small kitchen appliances and cookware. The Company's main product groups,
principal products and brand names are highlighted in the following table:
<TABLE>
<CAPTION>
PRODUCT GROUP PRINCIPAL PRODUCTS BRAND NAMES
- ---------------------------- ------------------------------- -------------------------
<S> <C> <C>
Personal Care Appliances Hair dryers, curling irons, CONAIR(R)
hairsetters and other beauty JHERI REDDING(R)
and grooming appliances. BaByliss(R)
REVLON(R)*
VIDAL SASSOON(R)*
Consumer Electronics Consumer cordless and corded CONAIRPHONETM
telephones and answering Southwestern Bell
machines. FREEDOM PHONE(R)*
CUISINART(R) Products Food processors, mini choppers, CUISINART(R)
cookware and other small
kitchen appliances.
Toiletries and Professional A retail line of liquid hair CONAIR(R)
Salon Products care products and brushes and a JHERI REDDING(R)
professional line of hair care RUSK(R)
appliances and liquid products. BaByliss(R)
</TABLE>
- ------------
* Pursuant to long-term licenses.
The Company has achieved significant growth principally through successful
introduction of new and enhanced products, long-term brand name licensing and
acquisitions. From 1992 through 1994, the Company's net sales grew at a compound
annual rate of 20.4%. During this period, operating income margins have
increased from 6.0% to 8.0% through low cost manufacturing and sourcing and
reduction of overhead expenses as a percentage of sales. The Company's improved
operating results, together with a substantial reduction in interest expense,
have led to significantly increased earnings.
BUSINESS STRATEGY
The Company's strategy is to achieve further revenue and profit growth by:
(i) introducing new products and product enhancements in response to changing
market trends, consumer preferences and technological developments; (ii)
leveraging the Company's market position and strong brand names and broadening
distribution to increase the Company's share of retailers' shelf space; (iii)
pursuing strategic acquisitions and brand licensing; (iv) expanding sales
internationally; and (v) pursuing continued cost reductions and quality
enhancements.
The key elements of this strategy are described below:
CREATE NEW PRODUCTS AND ENHANCEMENTS. The Company derived 40% of its
revenues in 1994 from new or enhanced products introduced over the last three
years. The Company will continue to create and introduce new products and
enhancements in response to changing market trends, consumer preferences and
technological developments. In creating new or enhanced products, the Company
looks for concepts and features that are not offered by existing products and
which the Company can produce at reasonable cost and sell at a price that
reflects the product's added value. The Company uses its advanced computer
design technology and product prototyping capabilities, close coordination of
sales, marketing, design and development personnel and its established
distribution network to introduce new and enhanced products rapidly and
inexpensively. In addition, the Company's professional heritage and strong
presence in the professional salon industry help it stay current with emerging
fashion trends and bring products to the retail market on a timely basis.
23
<PAGE>
LEVERAGE MARKET POSITION AND BRAND NAMES. Nearly half of the Company's sales
are attributable to products of which it is either the #1 or #2 seller in the
United States. The Company is the #1 seller of hair dryers, curling irons and
high-end food processors in the United States. The Company is also a leading
seller of hair care appliances in Europe. The Company's CONAIR(R), CUISINART(R)
and JHERI REDDING(R) brand names, as well as its licensed Southwestern Bell
FREEDOM PHONE(R) brand name, enjoy wide recognition and awareness among
retailers and consumers in the United States. In a recent survey of top brands
in the United States conducted by Discount Store News, the CONAIR(R) brand name
was rated the #11 "power brand" among over 1,200 brands that were evaluated in
23 retail merchandise categories. The Company will continue to leverage its
brand names to achieve rapid and extensive distribution of its new products and
product line extensions. Recognizing the importance of brand name awareness, the
Company intends to use the BaByliss(R) name and its licensed brand names,
REVLON(R) in Europe and Mexico and VIDAL SASSOON(R) in the Asia Pacific region,
as an integral part of its international expansion strategy. The Company
believes that the ongoing promotion of these licensed brand names by Revlon and
Procter & Gamble, respectively, will also enhance the Company's product
distribution in these new markets.
INCREASE PENETRATION AND DISTRIBUTION. The Company sells to substantially
all of the leading retailers in the United States and believes its distribution
strategy will foster customer retention and increased market penetration. The
recent acquisition of Babyliss provides the Company with similar customer
strength in France and the United Kingdom and an established, well-regarded
European distribution system which will accelerate the Company's growth in that
region. The Company seeks to capture greater retail shelf space and strengthen
its customer relationships by offering retailers (i) a diversified portfolio of
products in several categories, (ii) both brand name products and private label
programs, (iii) products that cover a broad range of price points and (iv) new
and enhanced products. In addition, the Company intends to maintain its high
level of customer service which emphasizes timely delivery, high quality
products, product merchandising and responsiveness to individual customer needs.
As retailers consolidate their supply sources, the Company believes that they
are more likely to purchase products from suppliers, such as the Company that
provide a high level of customer service and offer products in multiple
categories and with multiple price points.
PURSUE STRATEGIC ACQUISITIONS AND BRAND LICENSING. The Company has
supplemented its internal growth through a number of strategic acquisitions and
brand name licensing such as (i) the purchase of certain assets of Cuisinarts
and the expansion of its product offerings, (ii) an exclusive long-term license
for Southwestern Bell's consumer telephone business in the United States, (iii)
an exclusive long-term license to market and sell personal care products under
the REVLON(R) and VIDAL SASSOON(R) brand names in certain international markets,
and (iv) the acquisition of Babyliss. In addition, the Company has used its
strong design, manufacturing and marketing capabilities to substantially grow
businesses and brands that it has acquired. The Company plans to combine its
marketing, product and sourcing expertise with Babyliss' brand name, product
line and distribution system in order to grow and enhance Babyliss' revenues and
profits. In addition, the Company plans to use Babyliss' established
distribution system and brand name to market certain of its other personal care
and professional products, including Revlon licensed products, in Europe. As
part of its growth strategy, the Company plans to pursue additional strategic
acquisitions or alliances and brand licenses to provide synergies with or
complement its existing business.
EXPAND INTERNATIONAL PRESENCE AND SALES. The Company believes that
international markets offer significant potential for expanding its business.
For instance, the Company believes that international markets represent
approximately two-thirds of the potential worldwide market for hair dryers. The
Babyliss acquisition has substantially advanced the Company's international
growth by providing it with a leading European brand name and product offerings
and an extensive distribution system. The Company plans to grow its Babyliss
operations by expanding into new markets and introducing new products currently
marketed in the United States. The Company also believes it will be able to
accelerate the growth of its REVLON(R) licensed products, which it started
selling in mid-1994, by using
24
<PAGE>
Babyliss' distribution system. The Babyliss product line complements the
Company's licensed REVLON(R) products and, together with the Company's existing
European private label program, should allow the Company to capture greater
retail shelf space. The Company believes that its low cost, high quality
manufacturing and design capabilities will enable the Company to increase the
profitability of its Babyliss operations.
In other international markets where its brands are less recognized, the
Company will use licensed brand names such as REVLON(R) and VIDAL SASSOON(R).
The Company expects to begin sales of certain personal care appliances under the
VIDAL SASSOON(R) name in Asia in 1995. In the long-term, the Company intends to
introduce products into the international markets from its other product groups
using its growing distribution network. The Company may also seek additional
acquisition opportunities or joint ventures to augment its international brand
offerings and distribution channels.
REDUCE MANUFACTURING AND SOURCING COSTS AND ENHANCE QUALITY. The Company's
flexible manufacturing and sourcing have enabled it to supply competitively
priced, quality merchandise on a timely basis. Most of the Company's products
are manufactured by third-party subcontractors located in Asia and at its
facility in Costa Rica where manufacturing costs are generally recognized as
being less than in the United States. Further, the Company uses its pooled
purchasing strength to lower the cost of raw materials and components for itself
and its suppliers. The Company intends to continue to supply high quality
merchandise in order to achieve sales growth and customer satisfaction. The
Company emphasizes quality control and direct Company oversight of both internal
and subcontracted production processes. The Company maintains employees in Asia,
Canada, Costa Rica, Europe and the United States to supervise manufacturing
processes and/or conduct quality control and product and component testing.
PRODUCTS
PERSONAL CARE APPLIANCES
The Company's personal care appliances, which accounted for 43% of its 1994
sales, include hair dryers, curling irons, curling brushes, hairsetters, body
massagers, lighted make-up mirrors, heating pads, men's grooming appliances and
hair trimmers. Babyliss sells a similar line of hair care appliances and also
sells a line of body care appliances including facial saunas, massagers, foot
spas and hair removal devices. See "--Recent Acquisition" and "--International"
for a fuller discussion of Babyliss.
The Company's personal care appliances are marketed in the United States
principally under the CONAIR(R) brand name, which is a leading brand name in
this product category. In a recent survey of top brands in the United States
conducted by Discount Store News, the CONAIR(R) brand was rated the #11 "power
brand" among over 1,200 brands that were evaluated in 23 merchandise categories
in the retail trade. The designation "power brand" denotes a brand's strength
and performance among mass merchandisers and preference among consumers. The
Company also produces private label appliances for a number of major retail
chains, including several of the leading mass merchandisers in the United
States. By selling its own brand as well as its private label appliances, the
Company is able to offer its customers products with broad price point coverage.
For each year since 1992, the Company has received the Supplier of the Year
award from members of the Suppliers Performance Awards by Retail Categories
(SPARC), recognizing the Company as the #1 supplier to the retail trade.
The principal personal care appliance product of the Company is hair dryers.
The Company introduced the pistol-grip hair dryer in the United States in 1971,
and has since become the leading domestic seller of hair dryers. The Company is
also a leading seller of hair care appliances in Europe. The Company believes
that it is recognized as a major new product innovator in this area. The Company
markets numerous types of hair dryers, including pistol grip, Euro-style, travel
and compact dryers and diffusers. In 1991, the Company introduced its Euro-style
dryer product line, which achieved the highest first year revenues of any hair
dryer in the Company's history.
25
<PAGE>
The Company is also the #1 seller of curling iron products in the United
States. The Company has sold and marketed several innovative curling products,
such as the cordless curling iron introduced in 1987, the "Big Curls" iron
introduced in late 1992, which sold over one million pieces in its first full
year of sales and, recently, a new generation of hot-air curling irons.
Sales of hair dryers in the United States were approximately $315 million in
1994, and are increasing at an annual rate of 2%. The Company believes that
approximately 63% of United States hair dryer sales are made to "replacement"
consumers. Accordingly, the Company expects that its revenues from hair dryers
will grow at a slower rate than its revenues from other products. The Company
believes that the CONAIR(R) brand name and its ability to implement product and
design innovations will enable it to maintain its leading position. In addition,
the Company is seeking increased growth in international hair dryer sales and
believes that its acquisition of Babyliss will significantly contribute to that
growth.
The Company's personal care appliances are sold through all principal retail
distribution channels, including mass merchandisers, department stores,
telemarketers, warehouse clubs, drug stores, supermarkets, catalog houses and
showrooms and mail order houses. See "--Customers and Distribution." The Company
believes that the strength of its retail accounts has facilitated acceptance by
its retail customers of the Company's new personal care product lines and
categories. In addition, the Company believes that its recognition in this
industry will facilitate its entry into other personal and beauty care appliance
categories such as ladies' or men's shavers.
CONSUMER ELECTRONICS
The Company's consumer electronics products include standard or basic
telephones, cordless telephones, telephone answering devices and combination
cordless telephone/answering machines. In 1983, the Company commenced selling a
line of consumer telephones under the CONAIRPHONETM brand name and is now the
second largest seller of corded trimline telephones in the United States,
following AT&T. The Company positions its CONAIRPHONETM and PRIMA(R) telephones
as among the least expensive nationally branded telephone products. In 1993, the
Company entered into a licensing arrangement with Southwestern Bell (see
"--License Agreements"), pursuant to which it acquired the exclusive right to
market in the United States cordless and corded one and two-line residential
telephones, answering machines and caller ID devices under the Southwestern Bell
FREEDOM PHONE(R) trademarks and the Bell logo. This licensing arrangement
enables the Company to provide broad price point and product type coverage in
rapidly growing segments of the telephone and telephone-related products market.
Southwestern Bell FREEDOM PHONE(R) is a well-established consumer telephone
brand, with a reputation for quality and reliability.
The Company's consumer electronics products are sold in drugstores, discount
department stores, warehouse clubs, mass merchandisers, electronics stores,
catalog houses and showrooms and mail order houses. See "--Customers and
Distribution." The rapid expansion of the Company's consumer electronics sales,
including the sales of its Southwestern Bell products, has been assisted by the
Company's presence in most of their distribution channels.
CUISINART(R) PRODUCTS
The Company markets small kitchen appliances and cookware under the
CUISINART(R) brand name, including food processors, stainless steel cookware,
accessories and other kitchen appliances such as pasta makers, hand mixers,
chopper/grinders, toasters, blenders and coffee makers. The Company is the #1
seller of high-end food processors in the United States. The Company markets its
CUISINART(R) product line through exclusive distribution channels (principally,
prestigious department stores, specialty shops and gourmet shops, as well as
exclusive catalog order houses), which supports the line's quality image. The
Company expects to further enhance the reputation of its CUISINART(R) products
by sponsoring a series of cooking programs on public television in which
CUISINART(R) products will be
26
<PAGE>
available for use by instructors from the Culinary Institute of America. See
"--Customers and Distribution."
The Company acquired the CUISINART(R) brand name and related net operating
assets from the bankruptcy estate of Cuisinarts in December 1989 for
approximately $17 million. Since the acquisition, the Company has significantly
increased Cuisinarts' revenues and profitability by introducing new products and
product line extensions and improving distribution and supply channels, which
had been severely damaged by its predecessor's financial failure. Since 1990,
the annual compound growth of the Company's sales in this product category has
been approximately 24%. New product introductions included pasta makers,
toasters, hand mixers, blenders and coffee makers. In 1990, the categories which
were covered by the CUISINART(R) product line accounted for only 15% of total
unit sales of all kitchen electrics categories. By 1994, the categories covered
by this product line accounted for 52% of such sales. By offering new
CUISINART(R) products, the Company has strengthened its relationships with
customers such as Federated Department Stores, May Company and Dayton Hudson.
The Company has also expanded the types of distribution channels for its
CUISINART(R) products by marketing its products to exclusive catalog houses.
TOILETRIES AND PROFESSIONAL SALON PRODUCTS
Consumer Toiletries
The Company manufactures and markets consumer toiletries principally under
the JHERI REDDING(R) and CONAIR(R) brand names, including shampoos, conditioners
and hair treatments, and styling aids such as gels and mousses. The Company also
markets hair brushes under the CONAIR(R) brand name. The Company's branded
products are manufactured at the Company's facilities in Rantoul and Highland
Park, Illinois, which also manufactures private label products for its 50% joint
venture with Irvine Rusk, retailers and major health and beauty care companies.
The Company employs a niche strategy in its consumer toiletries business,
which emphasizes salon-type styling and finishing products. The Company's
consumer toiletries and other products are sold through similar distribution
channels, which enables the Company to capitalize on the reputation of its
personal care appliances and consumer electronics products to market and
distribute these products. This, and the Company's niche strategy, results in
minimal direct advertising and promotional expenditures. See "--Customers and
Distribution."
Professional Salon Products
For over 35 years, the Company has been a leading innovator in the
manufacture and marketing of high quality advanced and sophisticated products
designed to meet the needs of professionals in the hair-styling industry. The
Company believes that its introduction and promotion of the pistol grip hair
dryer to the professional hairstyling trade was a major factor in establishing
blow drying as a key element of hairdressing. The Company's professional salon
products include appliances (hair dryers, curling irons and curling brushes),
liquids (shampoos, conditioners, hairsprays, gels, mousses and perms) and
sundries (tipping caps and shears). The Company is a leading seller of
appliances to the professional hairstyling trade, with its professional hair
dryers being the #1 selling professional hair dryers and curling irons in the
industry. The Company's professional salon products are principally marketed
under its CONAIR(R) and JHERI REDDING(R) brand names, as well as its exclusively
professional brands INFINITITM, RIVATM, ELEGANTE(R), GRANDE FINALE(R) and EURO-
COIFFEUR(R). Babyliss also markets a professional line of hair care appliances
and has a significant presence in the European professional beauty trade. The
Company believes that the acquisition of Babyliss will enable it to expand its
range of domestic professional salon products.
The Company works closely with beauty professionals to provide new products
that meet their needs. The Company utilizes the services of part-time
independent educators, who conduct product
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<PAGE>
testing, as well as training and product demonstrations for beauty
professionals. The Company also conducts product testing and evaluation at its
in-house salon. In addition, the Company has, through its Rusk joint venture,
developed new products exclusively for salons such as its anti-curl treatment
which straightens curly hair without using harsh chemicals that are
characteristic of other hair straighteners. Rusk also employs its own staff of
professional educators who help promote Rusk's line of professional beauty salon
products.
The Company's professional salon products are distributed to professional
salons primarily through beauty and barber supply dealers, as well as directly
to chain beauty stores. Through its Rusk joint venture, the Company markets an
additional line of professional salon products under the RUSK(R) brand name.
The Company's history and continued leading presence in the appliance
section of this market is important to its success in the retail sales of its
personal care appliances and toiletries. The Company believes that its high
quality brand image is enhanced when consumers see beauty professionals using
the Company's appliances and toiletries and believes its presence in the
professional hairstyling industry strengthens its ability to design new products
and adapt styles for the retail marketplace.
PRODUCT DEVELOPMENT AND INNOVATION
Successful new and enhanced product development and introduction has been
and is expected to remain key to the Company's business. The Company creates and
introduces new products and innovations in response to changing market trends,
consumer preferences and technological developments. The Company derived 40% of
its revenues in 1994 from new or enhanced products introduced over the last
three years. The Company uses its advanced computer design technologies and
product prototyping capabilities, close co-ordination of sales, marketing,
design and development personnel and its established distribution network to
introduce new and enhanced products rapidly and inexpensively. In addition, the
Company's professional heritage and strong presence in the professional salon
industry help it to stay current with emerging fashion trends and bring products
to the retail market on a timely basis. The Company has also developed and
enhanced the product categories it has acquired or licensed to successfully grow
these businesses.
The Company's new products and product enhancements range from minor changes
in colors or features to significant new functional capability. In creating new
or enhanced products, the Company looks for concepts and features that are not
offered by existing products and which the Company can produce at reasonable
cost and sell at a price that reflects the product's added value. The Company
introduced its Euro-style hair dryer line in 1991 and the innovative "Big Curls"
iron in 1992. New products introduced by the Company in 1994 include the hot-air
curling iron, ladies' shavers and the Company's Magical Mane hair shampoo and
conditioner. In 1995, the Company expects to market value-priced, high quality
speaker-phones. In the Consumer Electronics Show held in January 1995, the
Company was recognized with several Innovations in Design awards for its design
and engineering excellence. These included awards for its ergonomic "S" Series
line of cordless telephone and cordless answering systems and telephone
answering systems with an industry first--the CallkeeperTM metallic answering
system. Since its acquisition of the CUISINART(R) brand name, the Company has
introduced new products such as toasters, coffee makers, blenders and hand
mixers to this line of products. In 1995, the Company expects to launch a new
line of CUISINART(R) coffee makers, as well as espresso machines and coffee
grinders and mills, and to market a line of non-stick cookware.
RECENT ACQUISITION
On February 18, 1995, the Company completed the acquisition of the
outstanding capital stock of Babyliss for a purchase price of approximately
$38,000,000, subject to a maximum downward adjustment of approximately
$4,000,000. Babyliss is a leading designer, manufacturer and marketer of
personal care appliances and skin and body care products to retailers and the
professional beauty trade
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<PAGE>
in France, the United Kingdom and other parts of Western Europe. In 1994,
Babyliss had consolidated net sales of $72,292,000 and an operating profit of
$7,332,000.
Babyliss sells its products primarily in France, Belgium, the Netherlands,
the United Kingdom, Germany, Sweden and Spain, accounting for approximately %
of its 1994 consolidated net sales. Babyliss markets its products principally
under the widely recognized BaByliss(R) brand name through substantially all of
the European distribution channels for such products. Babyliss also supplies
products to the professional beauty trade in Europe, with sales accounting for
approximately 10% of its 1994 consolidated net sales. Babyliss obtains
approximately 70% of its product from outside suppliers as finished products,
many of whom are the same suppliers as those used by the Company. In addition,
approximately 30% of the products sold by Babyliss and its subsidiaries are
assembled at Babyliss' Belgian assembly facility. The Company believes that the
acquisition of Babyliss will create efficiencies in manufacturing and sourcing
and will provide a research and development staff that will assist the Company
in designing products that meet the technical requirements for European markets.
The general managers of Babyliss' subsidiaries in the United Kingdom, the
Netherlands, Germany and Belgium own minority interests in such subsidiaries.
The Company is currently negotiating the purchase of these minority interests
and anticipates that the aggregate purchase price for such interests will not be
material to the Company.
While the Company believes that Babyliss can be integrated with the Company
successfully, there can be no assurance that these expectations will be
realized. The current president of Babyliss has agreed to continue in the
employment of Babyliss for a two year period. The Company believes that this
will facilitate the transition to the Company's ownership. In addition, the
Company has performed certain business and legal review of Babyliss and its
subsidiaries. Despite such investigation, there can be no assurance that there
do not exist liabilities which could have a material adverse effect on Babyliss
or the Company.
INTERNATIONAL
The Company believes that international markets offer significant potential
for expanding its business. For instance, the Company believes that
international markets represent approximately two-thirds of the potential
worldwide market for hair dryers. In addition, while the domestic market for
hair dryers is primarily replacement-oriented, the Company believes that the
worldwide market for such products is less mature. International sales represent
the fastest growing portion of the Company's revenues. Such sales, which have
been primarily in Canada, Western Europe and Mexico, grew at a compound annual
rate of 22% from 1992 to 1994 and represented approximately 5% of net sales in
1994. Giving effect to the acquisition of Babyliss, the Company's international
sales on a pro forma basis would have been % in 1994. The Company's
international strategy is to (i) expand Babyliss' operations into new markets
and capture greater retail shelf space, (ii) complement Babyliss' product
offerings with the Company's REVLON(R) and other consumer appliance products,
(iii) use internationally recognized licensed brand names, such as VIDAL
SASSOON(R), in certain foreign markets and (iv) introduce products from the
Company's other product groups into the Company's international distribution
channels.
Through Babyliss, the Company is a leading designer, manufacturer and
marketer of personal care appliances in Europe. Babyliss provides the Company
with a leading European brand name and product offerings and an extensive
distribution system. The Company plans to grow its Babyliss operations by
expanding into new markets and introducing new products currently marketed in
the United States. The Company also believes it will be able to accelerate the
growth of its REVLON(R) licensed products, which it started selling in mid-1994,
by using Babyliss' extensive European distribution system. The Babyliss product
line complements the Company's licensed REVLON(R) products and, together with
the Company's existing European private label program, should allow the Company
to capture greater retail shelf space by offering retailers (i) a diversified
portfolio of products in several categories, (ii) both brand name products and
private label programs and (iii) products that cover a full range of price
points. The Company believes that its low cost, high quality manufacturing and
design capabilities will enable the Company to increase the profitability of its
Babyliss operations.
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<PAGE>
The Company intends to introduce personal care products under the REVLON(R)
name in Mexico and the VIDAL SASSOON(R) name in certain countries in the Asia
Pacific region in 1995. By using brand names that are well-recognized in the
relevant local market, the Company will be able to penetrate new markets without
incurring the substantial start-up costs normally associated with establishing a
brand name in a new market. In addition, the Company will be able to benefit
from the advertising and promotion activities undertaken by the licensors of
licensed brand names. The Company may seek additional acquisition opportunities
or joint ventures to augment its international brand offerings and distribution
channels.
CUSTOMERS AND DISTRIBUTION
The Company sells to substantially all of the largest retailers in the
United States and is a leading supplier in its product categories to mass
merchandisers. The Company's domestic customers include Kmart Corp., WalMart,
Target, Williams-Sonoma, Federated Department Stores, Price/Costco, Best Buy and
Sally Beauty Supply. The Company assists its retail customers with their
merchandising strategy, including designing product displays to achieve
favorable product placement, which is an important factor in the Company's
distribution strategy. The Company also supports its customers through a variety
of programs, including inventory control and management information systems and
the availability of electronic data interchange (EDI). In 1994, over 60% of the
Company's sales were processed through the EDI system through which certain
customers electronically place orders with the Company.
The Company's net sales to its two largest retail accounts, WalMart and
Kmart Corp. accounted for approximately 12% and 11%, respectively, of the
Company's net sales for the year ended December 31, 1994. WalMart and Kmart
Corp. accounted for approximately 11% of the Company's net sales during 1993.
By operating its own manufacturing facilities and closely monitoring the
operations of its subcontractors, the Company is able to provide timely shipment
of its products and adjust production requirements to meet the needs of its
retail customers. See "--Manufacturing and Sourcing." In order to respond
efficiently to the demands of its retail customers, the Company utilizes both
direct shipments of its products from overseas to its retail customers, as well
as shipments out of the Company's domestic warehouse inventory. The Company's
three distribution facilities, in East Windsor, New Jersey, Phoenix, Arizona,
and Rantoul, Illinois (see "--Properties"), facilitate prompt delivery response
to reorders and stock-outs. During 1994, the Company utilized temporary
facilities in independent warehouses during peak inventory periods. The Company
recently commenced construction of a 350,000 square foot state-of-the-art
warehouse and distribution facility in Glendale, Arizona to increase its
distribution capacity and replace its Phoenix facility. The Glendale facility is
scheduled for completion by the end of 1995.
The recent acquisition of Babyliss provides the Company with similar
customer relationships in France and an established and well-regarded European
distribution system. Babyliss customers include leading department stores,
hypermarket chains and drug stores such as Galeries Lafayette, Harrods, Boots
and Argos. Outside the United States and certain European markets, the Company
may establish its own distribution network or appoint existing distributors to
market its products. In 1993, the Company opened its own sales office in the
United Kingdom. The Company plans to consolidate this operation with Babyliss'
United Kingdom operations. The Company and Babyliss have negotiated distribution
arrangements with distributors, in the case of the Company, in Greece, Ireland,
Scandinavia and Mexico and, in the case of Babyliss, the People's Republic of
China, Japan and Spain, to sell its personal care appliance products.
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<PAGE>
SALES AND MARKETING
The Company believes that its sales and marketing ability has been key to
its success. Sales strategies vary across product lines and reflect the needs of
retail customers and consumers.
The Company's products, with the exception of its professional salon
products, are sold in the United States and Canada through over 400 independent
sales representatives who are supervised by the Company's internal sales staff
and paid on a commission basis. The Company's internal sales staff is organized
by its product groups and consists of a total of eight sales managers, 25
regional sales managers and 29 related support staff. The Company's sales
managers are actively involved in servicing all retail accounts. Sales managers
and representatives assist the Company's customers with merchandising and
inventory management. Each regional sales manager supervises the activities of
the independent sales representatives. A significant portion of the Company's
sales, including those to WalMart and Kmart Corp., are managed as house accounts
serviced by its own sales force, on which no commissions are paid. The Company's
professional salon products are principally distributed through beauty and
barber supply dealers. These sales are conducted for the Company by independent
sales organizations and the Company's own sales personnel.
The Company maintains a customer service department in its East Windsor, New
Jersey and Phoenix, Arizona facilities, which provide toll-free customer service
telephone numbers for end-users of its products. This customer service
department assists with product operation, answers any other product-related
queries and arranges repairs for products under warranty. Calls are monitored
and recorded to assure consistent quality. The customer service line enables the
Company to have direct contact with, and obtain feedback from, end-users of the
Company's products.
The Company conducts a wide variety of advertising and promotional
activities. It participates with its retail customers in extensive co-operative
advertising programs in order to maximize product sell-through, which the
Company believes is the most cost-effective means of advertising. The Company
has supplemented its co-operative advertising with national television and print
advertising for its branded products, particularly products that are
demonstrably different from those of its competitors. The Company has spent
approximately $137 million on product promotion over the past five years,
including co-operative advertising, magazine advertising, television advertising
and infomercials. With its licensed international brands, REVLON(R) and VIDAL
SASSOON(R), the Company believes it will be able to benefit from the name
recognition and promotional activities of the beauty products and cosmetics
which are sold by Revlon and Procter & Gamble, respectively, under these names.
The Company's unique packaging is a powerful point-of-purchase sales tool
because consumers typically purchase personal and beauty care products without
the assistance of knowledgeable retail sales staff. To more effectively promote
its products and illustrate product features and usage, the Company also
utilizes point-of-sale displays, in-store demonstrations, promotions and product
analysis.
The Company's advertising and promotional efforts are supported by its
in-house creative services department. The creative staff designs and produces
the packaging, sales material and advertisements for all product groups. All
work is created and executed on a state-of-the-art computer system.
Babyliss has also spent significant amounts on advertising, promotion and
marketing. Babyliss maintains a permanent retail sales staff of persons and
hires approximately [100] demonstrators at the points of sale. Babyliss also
maintains [34] independent sales and demonstration stands in major department
stores in France which are staffed by its own personnel. Babyliss uses
inspectors who travel in a geographic region and visit stores and supervise
demonstrators. The professional marketing is headed by one full-time employee
and [eight] independent salesmen working on a commission basis.
MANUFACTURING AND SOURCING
The Company manufactures its products in its own production facilities in
Costa Rica and Illinois and through third-party subcontractors in the People's
Republic of China, Hong Kong, Taiwan,
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Indonesia, Japan, Malaysia, Philippines, South Korea, Italy, Belgium and
Germany. The management, coordination and control of third-party subcontracting
operations are centralized at the offices of its wholly-owned subsidiary in Hong
Kong. The Company also owns an assembly plant in Belgium which manufactures
approximately 30% of Babyliss' products. The remainder of Babyliss' products are
manufactured by third-party subcontractors in Asia, some of which also supply
the Company. The Company believes that it will be able to reduce the cost of
certain Babyliss products by using its sourcing expertise and applying
purchasing leverage to Babyliss' existing suppliers. The Company selects
subcontractors which are capable of producing sufficient quantities of superior
quality products at competitive costs and on acceptable delivery schedules.
Substantially all tooling and molds utilized by subcontractors in the
manufacturing of the products of the Company are owned by the Company. The
Company also has the right to use all tools owned or controlled by Southwestern
Bell for the manufacture, sale and marketing of the Southwestern Bell FREEDOM
PHONE(R) products. In 1994, approximately 85% of the Company's products, as
measured by the cost of products, were sourced overseas from owned or
subcontracted facilities.
The Company's Hong Kong subsidiary coordinates the Company's sourcing
program in Asia. It provides materials, component and packaging procurement,
production supervision and scheduling, engineering support, quality assurance
and control and shipment tracking services. The Hong Kong subsidiary employs
approximately 170 employees and independent consultants in this program.
The Company owns a vertically-integrated, personal care appliance
manufacturing plant in Costa Rica, which started production in 1989. Because of
the facility's proximity to the United States, deliveries of products to markets
in the United States, Canada, Mexico and Latin America can be timely made on
relatively short notice. Capabilities of the Costa Rica facility include plastic
injection molding, production of water immersion detection plugs, heaters and
line cords and final assembly. The Costa Rica facility is located in a free
trade zone and receives tax benefits and reductions in duties for imports into
the United States; furthermore, exports from the Costa Rica facility to Mexico
and Central America enjoy favorable duty treatment. In 1994, approximately 12%
of the Company's products, as measured by the cost of products, were
manufactured in this facility.
During 1989, the Company purchased a manufacturing facility in Rantoul,
Illinois to produce toiletry products. The Rantoul facility supplies
substantially all of the current liquid product requirements of the Company's
consumer toiletries and professional salon products group, and manufactures
private label products for major health and beauty care companies such as Revlon
Professional and Biersdorf. The facility has the capability to produce a wide
variety of products ranging from permanent wave products and shampoos to
hairsprays and gels. The facility runs automated aerosol, liquid and stick
filling and tableting lines, as well as powder, paste and gel-filling
operations. This facility is registered with the Food and Drug Administration as
a manufacturer and distributor of cosmetics, drugs and medical products. In
November 1993, the Company started production of private label toiletry and
household maintenance products such as "ice-melt" and trial-size packettes for
its Northstar division at a leased manufacturing facility in Highland Park,
Illinois.
Quality assurance is particularly important to the Company. The Company
maintains rigid quality controls and extensively tests its products. The
Company's personnel perform source inspections of the Company's suppliers, and
laboratory approval is required before any products are released for
distribution. The Company conducts quality control and product and component
testing in each of its manufacturing facilities. The Company also maintains a
permanent quality control staff in its Hong Kong operations and the People's
Republic of China to assure the quality of products produced by the Company's
independent suppliers and raw materials suppliers. The Company has personnel
stationed in other countries in Asia, such as Malaysia, Indonesia and Taiwan, to
work closely with and constantly monitor the quality of products manufactured by
its subcontractors and to expedite orders. In-house research and development and
testing of the Company's liquid products is supplemented by independent research
and development laboratories and testing salons.
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<PAGE>
COMPETITION
The Company believes that the markets for all of its product categories are
highly competitive and that competition is based on several factors, including
price, quality, access to retail shelf space, product features and enhancements,
brand names, new product introduction and marketing support and distribution
capabilities.
The Company competes with established companies, a number of which have
substantially greater resources than those of the Company. The Company's
business is not characterized by substantial regulatory or economic barriers to
entry of new competitors. In addition, the general availability of offshore
manufacturing capacity allows easy access by new market entrants. There can be
no assurance that the Company will be able to compete successfully against
current and future sources of competition or that the competitive pressures
faced by the Company will not adversely affect its profitability or financial
performance.
The Company believes that its ability to compete successfully is based on
the wide recognition of its own brand names and licensed brands, its ability to
design, develop, manufacture and market competitively priced products, its broad
product coverage within each product category, its attention to retailer and
consumer needs and its access to major channels of distribution.
RAW MATERIALS
The Company purchases component parts and raw materials for its
manufacturing operations from numerous suppliers and does not believe that it is
dependent on any single supplier for any specific raw material or any
significant portion of its raw material purchases. Accordingly, the Company
believes that the loss of any supplier of raw materials to the Company would not
have a material adverse effect on the Company. The Company has not experienced
any material shortage of component parts or materials in recent years.
SEASONALITY
The Company's business is subject to certain seasonal fluctuations, with net
sales in the second half of the year generally benefitting from increased levels
of retail purchasing in the late summer for "back to school" sales and in the
fall for the Christmas selling period. Historically, approximately 60% of the
Company's sales and 70% of its operating profit are achieved in the second half
of the year.
TRADEMARKS AND PATENTS
CONAIR(R), BaByliss(R), CUISINART(R) and JHERI REDDING(R) are registered
trademarks of the Company. The Company also holds a large number of other
trademarks and patents registered in the United States for various products and
designs. The Company believes that none of its product lines is dependent upon
any single patent, group of patents or other intellectual property rights.
The Southwestern Bell name, FREEDOM PHONE(R) and Bell logo are registered
marks of Southwestern Bell Telecommunications, Inc. The mark REVLON(R) is owned
by Revlon Consumer Products Corporation and the mark VIDAL SASSOON(R) is owned
by Richardson-Vicks, Inc., a subsidiary of Procter & Gamble Co.
The Company recently received a letter from Braun AG in Germany asserting
that a "volumizing pic" attachment included with a hair dryer model currently
being distributed by the Company in the United Kingdom falls within the scope of
a patent application Braun has filed with the European Patent Office. Braun
stated that it expects the patent to issue before the end of June 1995. The
Company believes that Braun's claim is unfounded. The model in question, in any
event, is in the process of being replaced by a new, improved model. The Company
believes that the new model is not covered by Braun's patent application.
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The Company has also recently received correspondence from counsel
representing Premier Networks, Inc. ("PNI") asserting that certain of the
Company's telephone products infringe patents held by PNI. The Company believes
that PNI's claim is unfounded.
LICENSE AGREEMENTS
In 1993, the Company acquired exclusive rights under a Licensing and
Distribution Agreement with Southwestern Bell Telecommunications, Inc. to
manufacture and market single and dual-line telephones, including accessories
and ancillary items, such as answering machines and caller ID machines, under
the Southwestern Bell FREEDOM PHONE(R) name and the Bell logo. The Licensing and
Distribution Agreement covers the retail market in the United States and its
possessions and is for a total term of 25 years, with an initial term of 15
years, renewable at the Company's option for two successive terms of five years
each.
The Company entered into licensing arrangements in 1993 and 1994,
respectively, to acquire the exclusive rights to manufacture and distribute
personal care appliances, professional products and accessories such as hair
dryers, curling appliances, lighted mirrors and personal hair products (other
than liquids) under the REVLON(R) and VIDAL SASSOON(R) names, respectively. The
REVLON(R) agreement, which was entered into in 1993 with Revlon Consumer
Products Corporation, grants the Company exclusive rights for Western Europe,
Scandinavia and Mexico for an initial term of 20 years, renewable at the
Company's option for two consecutive 10-year periods. The VIDAL SASSOON(R)
license entered into by the Company in 1994 with Richardson-Vicks, Inc., a
subsidiary of Procter & Gamble Co., extends to countries in the Asia Pacific
region and is for a term of 20 years, expiring in 2013.
Each of the three license agreements described above require the Company to
pay royalties based on a percentage of sales or a prescribed minimum fee,
whichever is higher. In each case, the failure to pay such royalties permits the
licensor to terminate the licenses. In addition, both the REVLON(R) and VIDAL
SASSOON(R) licenses are terminable by the licensor if the Company fails to meet
certain sales targets. The Company has paid all royalties due and owing under
each of the license agreements and has no reason to believe that it will not be
able to continue to meet such obligations in the future.
PROPERTIES
The following table sets forth certain information concerning the Company's
properties as of March 24, 1995:
<TABLE>
<CAPTION>
BUILDING OWNED/
LOCATION AREA LEASED DESCRIPTION
- ------------------------- -------- ------ ------------------------------------------------
<S> <C> <C> <C>
(SQ.FT.)
East Windsor, NJ 431,000 Owned Executive offices, warehouse/distribution and
repair facility
Rantoul, IL 273,000 Owned Manufacturing and distribution facility
Zona Industrial De 233,000 Owned Costa Rica manufacturing facility and warehouse
Cartago, Costa Rica
Stamford, CT 165,000 Owned Executive offices
Phoenix, AZ 124,000 Owned Warehouse/distribution facility and offices
Wandre, Belgium 46,000 Owned Assembly facility, warehouse and offices
Valenciennes, France 37,000 Owned Warehouse/distribution facility
Highland Park, IL 67,000 Leased Manufacturing facility
Toronto, Ontario, Canada 34,000 Leased Warehouse/distribution facility and offices
Breda, Netherlands 19,300 Leased Warehouse and offices
Hong Kong 16,500 Leased Continental Conair Ltd. offices
Dusseldorf, Germany 13,500 Leased Warehouse and offices
Montrouge, France 8,600 Leased Babyliss S.A. offices
</TABLE>
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<PAGE>
The Belgian plant owned by the Company is located on land in which the
Company has a leasehold interest which expires January 31, 2006. The Company has
the option to renew this leasehold interest for successive five year periods.
Also, during 1992, 1993 and 1994, temporary facilities in independent
warehouses were utilized to service the Company during peak inventory periods.
The Company's facilities are generally modern and efficient and in satisfactory
working condition. The Company also owns 100 acres of vacant land in Glendale,
Arizona, on which it has commenced construction of a 350,000 square foot
state-of-the-art warehouse and distribution facility. Construction of this
facility is scheduled to be completed by the end of 1995.
LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation that arises in the
normal course of its business operations. The Company does not believe it is
presently a party to litigation that will have a material adverse effect on its
business or operations. See "--Trademarks and Patents."
EMPLOYEES
As of February 28, 1995, the Company and its subsidiaries, including
Babyliss, employed approximately 3,200 persons. The Company's employees are not
represented by any labor union. The Company considers its relationship with its
employees to be satisfactory.
REGULATION
The Company is subject to federal, state and local regulations in the United
States and in the foreign countries in which it has operations concerning
occupational safety and health, trade-related issues and consumer products
safety. In addition, the Company, like most manufacturing enterprises, is
subject to a variety of federal, state and local statutes and regulations
governing environmental matters, including, but not limited to the Resource
Conservation and Recovery Act and the Clean Air Act. Because the Company's
operations generate hazardous materials, which are disposed of at off-site
facilities, it is possible that the Company could be named as a potentially
responsible party under the Comprehensive Environmental Response Compensation
and Liability Act for costs associated with investigating and remediating any
contamination at such sites. To date, the Company has not, to the best of its
knowledge, been named as a potentially responsible party. The Company has not
experienced significant difficulty in complying with such statutes or
regulations, and compliance has not had an adverse effect on the Company's
business.
In the United States, Canada and Europe, most governmental authorities
require Underwriters Laboratory, Inc. or other comparable safety regulation
certification prior to marketing consumer electrical appliances in those
jurisdictions. All of the personal care appliances marketed by the Company have
such certifications or the equivalent thereof. Certain of the products sold by
the Company in the United States are subject to the cosmetic purity and
labelling provisions of the Fair Packaging and Labelling Act and certain rules
and regulations of the Federal Food and Drug Administration.
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MANAGEMENT
The following table sets forth certain information regarding the executive
officers and directors of the Company as of April , 1995:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------- ---- ---------------------------------------------------
<S> <C> <C>
DIRECTORS
Leandro P. Rizzuto(3) 57 Director, Chairman and President
Melvin L. Braun(1) 73 Director
Maurice Lucas 61 Director and Executive Vice President
John P. Lomenzo(1)(2) 79 Director
Walter Margulies(3) 86 Director and Secretary
David Sommer(1)(2) 77 Director
Uzi Zucker 59 Director
SENIOR EXECUTIVE OFFICERS
Ronald T. Diamond 43 Senior Vice President, Consumer Appliances and
Consumer Toiletries
Barry Haber 44 Senior Vice President, Consumer Electronics and
Cuisinarts
Eugene C. Marotta 42 Senior Vice President, Professional
John J. Mayorek 47 Senior Vice President, Administration
Patrick P. Yannotta 58 Senior Vice President, Finance
EXECUTIVE OFFICERS
Paul M. Ackels 55 Vice President, Cuisinarts, Marketing
Ann Marie Cioffi 46 Vice President, Human Resources
Ralph R. Coccaro 44 Vice President, Professional, Marketing
John Denis 47 Vice President, Consumer Toiletries, Sales and
Marketing
John T. Errett 64 Vice President, Strategic Services
Jean-Pierre Feldblum President, Babyliss, S.A.
Maryellen Flynn 55 Vice President, Creative Services
Stuart D. Fox 52 Vice President, Sales, Retail Appliances
Barbara Hodges-Leinhart 49 Vice President, Quality Control and Research and
Development-Rantoul
Kevin R. Hudak 41 Senior Group Controller
John B. Kilroy 52 Vice President, Treasurer
Frank Lindsey 45 Vice President, Consumer Appliances, Marketing
Richard A. Margulies 48 Vice President, Legal and Assistant Secretary
Jaime M. Morozowski 43 Vice President, Consumer Toiletries, Marketing
Jules Nachtigal 56 Vice President, Consumer Toiletries, Research and
Development
Thomas M. Perko 46 Vice President, Consumer Electronics, Sales
James A. Porcelli 40 Vice President, Corporate Controller
Denis Rizzuto 31 Vice President, Private Label Liquids, Sales and
Marketing
John A. Rusk 51 Vice President, Purchasing and Planning
Kenneth Russo 40 Vice President, Professional, Sales
Ludwig Salce 61 Vice President, Perm Development
Anthony P. Solomita 33 Vice President, Consumer Electronics, Marketing
Jack W. Wilson II 41 Vice President, Cuisinarts, Sales
</TABLE>
- ------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Executive Committee of the Board of Directors.
(3) Member of the Compensation Committee of the Board of Directors.
36
<PAGE>
Leandro P. Rizzuto is the founder of Conair and has served as the Company's
Chairman and President for more than the past five years. He was elected to the
Board of Directors of the Company's predecessor in 1959. He is the father of
Denis Rizzuto and a cousin of John T. Errett.
Melvin L. Braun was elected to the Board of Directors of the Company in
1987. He was a partner in the accounting firm of Deloitte & Touche LLP (and its
predecessor firms) from 1960 until his retirement in 1987. Mr. Braun is also a
member of the Board of Directors of Shorewood Packaging Corp.
Maurice Lucas has served as a member of the Company's Board of Directors
since 1973 and Executive Vice President of the Company for more than the past
five years.
John P. Lomenzo, a director of the Company since 1975, is a former Secretary
of State of New York and has been a partner in the law firm of Field, Lomenzo &
Turret, P.C. for more than the past five years.
Walter Margulies, a director and Secretary of the Company, has been a
partner in the law firm of Margulies & Margulies, P.C., General Counsel to the
Company, for more than the past five years. Mr. Margulies became a director of
the Company in 1966 and is the father of Richard A. Margulies.
David Sommer was elected to the Board of Directors of the Company in 1980.
Mr. Sommer is a retired Senior Vice President of Rite Aid Corporation. Mr.
Sommer is also a member of the Board of Directors of Cytologics, Inc.
Uzi Zucker became a director of the Company in 1985. He is a Senior Managing
Director of Bear, Stearns & Co. Inc. and a member of the Board of Directors of
the parent company, The Bear Stearns Companies Inc. In the United States, Mr.
Zucker is also a director of Carnival Corporation and Titan Pharmaceuticals Inc.
In Israel, Mr. Zucker is Chairman of the Board of Alliance Tire Company (1992)
Ltd. and a director of The Jerusalem Economic Corporation Ltd., Industrial
Buildings Corp. Ltd., Tnuport Ltd. and Mivnat Ltd.
Ronald T. Diamond has served as Senior Vice President, Consumer Appliances
and Consumer Toiletries for more than the past five years.
Jean-Pierre Feldblum has served as the President of Babyliss [for more than
the past five years].
Barry Haber has served as Senior Vice President, Consumer Electronics and
Cuisinarts since June 1990. Prior to that, he was Senior Vice President and
General Manager of the Consumer Electronics Division.
Eugene C. Marotta has served as Senior Vice President, Professional Division
for more than the past five years.
John J. Mayorek has served as a Senior Vice President, Administration for
more than the past five years.
Patrick P. Yannotta has served as Senior Vice President, Finance since
December 1993. From December 1985 to December 1993, he was Vice President,
Finance.
Paul M. Ackels has served as Vice President, Cuisinarts, Marketing since May
1990 and was Vice President, Sales, Hamilton Beach, Inc. from June 1988 to
February 1990.
Ann Marie Cioffi has served as Vice President, Human Resources since June
1990. From 1986 to June 1990, she was Corporate Director, Human Resources.
Ralph R. Coccaro has served as Vice President, Professional, Marketing since
October 1994. Prior to joining the Company, he was Director of Marketing for
ABBA Pure & Natural Products from August 1993 to September 1994. Prior to that,
he was Senior Vice President, Business Development for
37
<PAGE>
Sebastian International Inc. from January 1993 to August 1993 and for the prior
two years Vice President, Sales and Marketing. Prior to that, he was General
Manager of Berner Company.
John Denis has served as Vice President, Consumer Toiletries, Sales and
Marketing for more than the past five years.
John T. Errett has served as Vice President, Strategic Services for more
than the past five years. Mr. Errett is a cousin of Leandro P. Rizzuto.
Maryellen Flynn has served as Vice President, Creative Services since April
1993. Prior to that, she was a consultant to Shiseido International Co. from May
1992 to March 1993 and Vice President, Co-Creative Director for Grey Advertising
from 1986 to 1992.
Stuart D. Fox was appointed Vice President, Sales, Retail Appliances
effective January 1, 1995 and prior to that was Vice President, Sales for
Hamilton Beach--Proctor/Silex, Inc. from January 1984 to December 1994.
Barbara Hodges-Leinhart has served as Vice President, Quality Control and
Research and Development-Rantoul for more than the past five years.
Kevin R. Hudak has served as Senior Group Controller since January 1994. He
was Divisional Controller from June 1990 to December 1993 and Special Assistant
to the President from September 1989 to June 1990.
John B. Kilroy has served as Vice President, Treasurer since December 1993
and was appointed Treasurer of the Company in August 1990. He served as Director
of Corporate Finance for Betz Laboratories, Inc. from 1973 to 1989.
Frank Lindsey has served as Vice President, Consumer Appliance, Marketing
for more than the past five years.
Richard A. Margulies has served as Vice President, Legal since August 1990
and was Corporate Counsel prior to that. Mr. Margulies is the son of Walter
Margulies, a Director and Secretary of the Company.
Jaime M. Morozowski has served as Vice President, Consumer Toiletries,
Marketing for more than the past five years.
Jules Nachtigal has served as Vice President, Consumer Toiletries, Research
and Development for more than the past five years.
Thomas M. Perko has served as Vice President, Consumer Electronics, Sales
since January 1993. Prior to that, he was National Sales Manager, Consumer
Electronics from November 1990 to December 1994 and prior to that was Regional
Sales Manager, Consumer Electronics.
James A. Porcelli was appointed Vice President, Corporate Controller in
December 1994. Mr. Porcelli served as Corporate Controller of the Company from
December 1985 to December 1994.
Denis Rizzuto has served as Vice President, Private Label Liquids since
December 1992. Prior to that, he was Director of Sales/Marketing of Private
Label Liquids from September 1989 to December 1992. Mr. Rizzuto is the son of
Leandro P. Rizzuto.
John A. Rusk has served as Vice President, Purchasing and Planning for more
than the past five years.
Kenneth Russo has served as Vice President, Professional, Sales since
September 1994. Prior to that he was Director of Marketing, Professional from
July 1989 through August 1994.
Ludwig Salce has served as Vice President, Perm Development since February
1993. Prior to joining the Company, he was Director, Perm Technology of Zotos
International, Inc.
38
<PAGE>
Anthony P. Solomita was appointed Vice President, Consumer Electronics,
Marketing in December 1994. From 1993 to 1994, he was Director of Marketing,
Consumer Electronics and from 1990 to 1992, he was Marketing Manager, Consumer
Electronics.
Jack W. Wilson II has served as Vice President, Cuisinarts, Sales since
October 1992 and was National Sales Manager, Cuisinarts from November 1990 to
September 1992. Prior to that, he was Regional Sales Manager, Consumer
Electronics.
BOARD COMMITTEES, COMPENSATION AND TERMS OF OFFICE
The Board of Directors currently maintains an Executive Committee, an Audit
Committee and a Compensation Committee. Messrs. Lomenzo and Sommer are members
of the Executive Committee, Messrs. Braun, Lomenzo and Sommer are members of the
Audit Committee and Messrs. Margulies and Rizzuto are members of the
Compensation Committee. Mr. Rizzuto is President of the Company. Directors
receive $3,000 for each meeting of the Board of Directors and $1,000 for each
Executive, Audit and Compensation Committee meeting attended. Directors who are
also officers, as well as directors who are also consultants or legal advisors
to the Company, receive no additional compensation for services rendered as a
director. All directors hold office until the next meeting of the stockholders
of the Company and until their successors are elected and qualified. Approval of
the Company's independent directors will be required in connection with
transactions between the Company and related parties.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to the
Company's chief executive officer and each of the four most highly compensated
executive officers of the Company whose aggregate cash compensation exceeded
$100,000, in each case for all services rendered during the fiscal years ended
December 31, 1992, 1993 and 1994:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION
--------------------------- ------------------------
OTHER RESTRICTED SECURITIES
NAME ANNUAL STOCK UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS OPTIONS
- ---------------------------- ---- ---------- -------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Leandro P. Rizzuto.......... 1994 $1,000,000 $ -- $51,200
Chairman and President 1993 1,750,000 300,000 53,400
1992 1,750,000 -- 56,300
Ronald T. Diamond........... 1994 446,000 200,000 17,300
Senior Vice President, 1993 398,000 150,000 20,200
Consumer Appliances and 1992 356,000 100,000 24,300
Consumer Toiletries
Barry Haber................. 1994 356,000 150,000 20,600
Senior Vice President, 1993 316,000 125,000 23,600
Consumer Electronics and 1992 280,700 100,000 25,700
Cuisinarts
John J. Mayorek............. 1994 275,600 108,800 14,900
Senior Vice President, 1993 250,600 35,000 18,800
Administration 1992 228,600 25,000 22,000
Richard A. Margulies........ 1994 259,800 65,000 18,900
Vice President, Legal and 1993 229,800 60,000 22,500
Assistant Secretary 1992 204,800 50,000 31,100
</TABLE>
- ------------
(1) Includes amounts paid or reimbursed by the Company to purchase life and
disability insurance under its Executive Life and Disability Insurance
Program which benefits officers of the Company, amounts paid by the Company
for medical reimbursement under the Company's Executive Medical
Reimbursement Plan which benefits officers and amounts set aside for these
individuals under the Company's Profit Sharing Plan and Employee Stock
Ownership Plan. (The Company's Employee Stock Option Ownership Plan was
merged into the Profit Sharing Plan, effective December 31, 1994.)
39
<PAGE>
EMPLOYMENT AGREEMENT
The Company and Leandro P. Rizzuto are parties to an employment agreement
dated June 20, 1985, for a term through June 30, 1996, subject to automatic
renewals of successive one-year periods, pursuant to which the Company employs
Mr. Rizzuto as Chairman and President of the Company at a base annual salary and
incentive compensation to be determined annually by the Executive Committee of
the Board of Directors. Mr. Rizzuto receives insurance and other benefits in
accordance with the Company's practice.
EMPLOYEES AND DIRECTORS STOCK PLAN
The Conair Corporation Employees and Directors Stock Plan (the "Plan") was
adopted by action of the Company's Board of Directors on December 15, 1994, and
approved by the Company's sole common stockholder on December 22, 1994. A
maximum of 2.5 million shares of Class A Common Stock (subject to adjustment as
described below) have been reserved by the Company for issuance under the Plan
pursuant to options and restricted stock awards under the Plan.
The Plan is administered by a committee of the Company's Board of Directors
(the "Committee"), the composition of which may be intended to satisfy the
provisions of Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
and section 162(m) of the Internal Revenue Code of 1986 (the "Code"), to the
extent applicable. The fact that a Committee member may fail to qualify under
either of the foregoing requirements will not invalidate any award which is
otherwise validly made under the Plan. The Company's Board of Directors has
appointed Messrs. Margulies and Rizzuto to be members of the Committee.
During the 10-year period ending in 2004, the Committee has authority,
subject to the terms of the Plan, (i) to exercise all powers granted to it under
the Plan, (ii) to construe, interpret and implement the Plan and any agreements
executed pursuant thereto, (iii) to prescribe, amend and rescind rules and
regulations relating to the Plan, (iv) to make all necessary or advisable
administrative determinations and (v) to correct any defect, supply any omission
and reconcile any inconsistency in the Plan.
Under the Plan, the Committee may grant "incentive stock options" ("ISOs")
within the meaning of Code section 422, "nonqualified stock options" ("NQSOs")
and restricted stock awards to officers, directors (including non-employee
directors) and executive, managerial or professional employees of the Company
and any of its affiliates (as defined in the Plan), except that ISOs may be
granted only to employees of the Company and its subsidiaries. There are
approximately eligible employees and directors. In any year, no person may
be granted options under the Plan covering more than 250,000 shares of Class A
Common Stock.
To the extent an option intended to be an ISO fails for any reason to
qualify as an ISO, such option shall be regarded as a NQSO if such option meets
the Plan's requirements for NQSOs. To the extent that the aggregate fair market
value (as defined in the Plan) of Class A Common Stock with respect to which
ISOs granted under the Plan and all other option plans of the Company
(determined as of the date of grant) or its subsidiaries exercisable for the
first time by an individual during any calendar year exceeds $100,000, such
options shall be treated as NQSOs.
Options may be exercisable during the term of the option at such times, in
such amounts, in accordance with such terms and conditions, and subject to such
restrictions, as may be determined by the Committee; provided, that no option
may be exercisable over a period greater than ten years from the date of grant
(five years in the case of an ISO granted to an individual who, at the time of
grant, owns shares possessing 10% or more of the total combined voting power of
all classes of stock of the Company, and its subsidiaries (a "10%
Stockholder")); and, provided, further, that options shall not be exercisable
for 12 months following a hardship distribution subject to applicable Treasury
regulations under Code section 401(k). The Committee may, with the grantee's
consent, cancel any award and issue a new award in substitution therefor,
provided that the substituted award satisfies all applicable Plan
40
<PAGE>
requirements as of the date made. Option agreements may provide that the Company
shall have a right of first refusal with respect to any shares of Class A Common
Stock.
The exercise price of an option (the "Option Price") may not be less than
100% of the fair market value of the Class A Common Stock for which it will be
exercisable on the date of grant (110% in the case of an ISO granted to a 10%
Stockholder).
Unless an applicable plan agreement provides otherwise, all of a grantee's
outstanding options terminate upon his termination of service with the Company
for any reason, except that: (i) if the grantee's service terminates other than
for cause (as defined in the Plan) or on account of the grantee's death, the
grantee's vested options remain exercisable until 90 days following termination
of service, or, if earlier, the date such options terminate (other than on
account of termination of service), and (ii) if the grantee's service terminates
on account of death, or if he dies within the period described in (i), his
vested options remain exercisable until one year after the grantee's death, or,
if earlier, the date such options terminate (other than on account of
termination of service).
The Committee may grant restricted stock awards, in such amounts and subject
to such terms and conditions as the Committee shall determine. The vesting of a
restricted stock award granted under the Plan may be conditioned upon the
completion of a specified period of service, upon the attainment of specified
performance goals and/or upon such other criteria as the Committee may
determine. Unless the applicable plan agreement provides otherwise or the
Committee otherwise determines, restricted stock awards terminate upon
termination of the grantee's service for the Company. Unless an applicable plan
agreement otherwise provides, a grantee may vote and receive dividends on
restricted stock awarded under the Plan and any stock received as a dividend on
or in connection with a stock split of a restricted stock award shall be subject
to the same restrictions as such restricted stock. No restricted stock award may
vest more than ten years after grant.
The Company's Board of Directors may amend, suspend or discontinue the Plan
at any time except that, no amendment shall impair any rights under any
outstanding award without the grantee's consent and except that (with certain
exceptions) unless an amendment is approved (at a meeting held within 12 months
before or after the date of such amendment) by the holders of a majority of the
issued and outstanding shares of Class A Common Stock entitled to vote, no such
amendment may (i) materially increase the benefits accruing to grantees under
the Plan, (ii) materially increase the maximum number of shares as to which
awards may be granted under the Plan or as to which options may be granted under
the Plan in any year, (iii) materially change the requirements as to eligibility
for participation in the Plan, (iv) provide for the grant of options having an
Option Price less than the fair market value of Class A Common Stock on the date
of grant, (v) permit an option to be exercisable, or a restricted stock award to
vest, more than ten years after grant or (vi) extend the term of the Plan beyond
ten years.
Awards may be transferred by a grantee only by will or by the laws of
descent and distribution, and options may be exercised during the grantee's
lifetime only by the grantee.
The Committee may require a grantee to remit, or may deduct from payments
due to a grantee, an amount sufficient to satisfy all governmental withholding
tax requirements. Under Plan rules, a grantee may elect to satisfy any
withholding tax requirements by delivery of unrestricted shares of Class A
Common Stock or, with Committee permission, by withholding shares otherwise
issuable pursuant to the award giving rise to the withholding obligation.
41
<PAGE>
Since the adoption of the Plan, ISOs and NQSOs to purchase an aggregate of
shares of Class A Common Stock have been granted to the following
participants:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
NAME/GROUP OF OPTIONEES OPTIONS GRANTED PRICE(S)
- --------------------------------------------------- --------------- ---------------
<S> <C> <C>
All current executive officers as a group [ 300,000] [$10.50]
All directors who are not executive officers
[Any nominee of a director]
[Any associate of any of the foregoing]
Each other person who has received 5% of the
options granted
All other employees as a group
</TABLE>
Prior to the Offering, the Company intends to grant restricted stock awards,
with a five year vesting period, for up to 100,000 shares of Class A Common
Stock to certain executive officers.
Generally, under applicable provisions of the Code, the profit realized by a
grantee upon exercise of a NQSO is taxed as ordinary income to the grantee. The
Company is entitled to a compensation deduction in the same amount and at the
same time.
An optionee who holds the stock received on exercise of an ISO for at least
two years from the date the option was granted and at least one year from the
receipt of stock on exercise generally pays no tax until the stock is sold, at
which time any profit or loss realized is long-term capital gain or loss, as the
case may be; the Company gets no tax deduction at any time. The spread at
exercise of an ISO is effectively treated as a tax preference item in the
exercise year, for purposes of calculating the grantee's alternative minimum
tax.
An optionee who sells the stock received on exercise of an ISO within two
years after the option was granted or within one year of receipt of the stock is
taxed on the profit up to the date of exercise (which is ordinary income) and
the Company is entitled to a corresponding tax deduction; the income and
deduction items are recognized by the grantee and the Company, respectively, in
the year the stock is sold. Appreciation or depreciation after the date of
exercise is taxable to the grantee as capital gain or loss, respectively, and is
nondeductible by the Company.
Generally, on exercise of an NQSO, the amount by which the fair market value
of the shares of the Class A Common Stock on the date of exercise exceeds the
purchase price of such shares will be taxable to the Plan participant as
ordinary income, and will be deductible for tax purposes by the Company or its
Affiliates in the year in which the Plan participant recognizes income.
The Company may be required to withhold tax on the amount of the income
recognized by the optionee upon exercise of an NQSO and upon transfer of stock
received on exercise of an ISO.
Generally, at the time a restricted stock award vests, the grantee of the
award will realize ordinary income in an amount equal to the fair market value
of the restricted stock and any cash delivered at the time of vesting, and the
Company will be entitled to a corresponding deduction. However, if an employee
makes a special tax election to recognize income with respect to the restricted
stock award on the date of grant, the amount of ordinary income will be
determined on such date. Dividends paid to the holder before the award vests
will also be ordinary income to the employee and deductible as such by the
Company.
In 1993, Code section 162(m) was enacted, which precludes a publicly-held
corporation from deducting compensation in excess of $1 million per year paid to
each of the Company's chief executive officer and the four most highly
compensated other employees of the Company at the end of the Company's taxable
year. There are exceptions for qualified performance based compensation
(including certain stock options), and for awards relating to periods prior to
the time the corporation became publicly-held, if certain conditions are met.
Although the Company intends that amounts relating to stock options to be
awarded under the Plan will be fully deductible, there can be no assurance such
awards will satisfy the applicable requirements. Restricted stock awards
generally do not generate qualified performance based compensation, within the
meaning of Code section 162(m) and amounts paid in respect thereof may not be
fully deductible.
42
<PAGE>
CERTAIN TRANSACTIONS
The Company and Leandro P. Rizzuto are parties to an employment agreement,
dated June 20, 1985, for a term through June 30, 1996, subject to automatic
renewals of successive one year periods, pursuant to which the Company employs
Mr. Rizzuto as Chairman and President of the Company at a base annual salary and
incentive compensation to be determined annually by the Executive Committee of
the Board of Directors. Mr. Rizzuto's base salary and incentive compensation
will be subject to upward adjustments at the discretion of the Board.
In 1986, the Company leased its Stamford, Connecticut executive office
facility from Leandro P. Rizzuto, President and sole common stockholder of the
Company. In 1993, such lease was at a cost of $2,622,500 under a net lease
requiring the Company to pay all taxes, charges and expenses. The rental was
determined by an independent appraisal. On March 15, 1994, the Company acquired
this facility from Leandro P. Rizzuto for $20 million. The purchase price was
based on an independent appraisal. A 10-year unsecured loan in the amount of $20
million was obtained by the Company to finance this acquisition. The interest
rate on this loan is 7%. The Company leased back to Mr. Rizzuto a portion of the
facility for a period of 99 years subject to the Company's option, for a period
of 10 years, to buy back the lease rights. The option price for the Company to
repurchase the lease rights is $4 million for the first five years, escalating
to $6.4 million over the remaining five years. The initial option price was
determined based on an independent appraisal. On February 28, 1995, the Company
exercised this option. The Company intends to pay the option price in part,
through the sale to Mr. Rizzuto of its facility in Phoenix, Arizona, the value
of which will be determined through an independent appraisal, and the balance in
cash.
The Company occasionally charters a jet that is beneficially owned by
Leandro P. Rizzuto. In 1992, 1993 and 1994, the Company paid $376,200, $350,100
and $323,200, respectively, to Mr. Rizzuto as charter payments. These payments
approximate amounts charged by Mr. Rizzuto to unaffiliated parties.
On October 20, 1992, the Company received $10 million upon the issuance to
Leandro P. Rizzuto of a $10 million par value 10% Subordinated Promissory Note
due April 27, 2003. Interest is payable semi-annually on June 15 and December
15. The principal balance is due at maturity. These notes are subordinated to
the Series A Senior Fixed Rate Notes, the Series B Senior Rate Reset Notes and
certain bank credit facilities of the Company. In 1993, the Company prepaid $4
million of this loan at par and the Company expects to repay the $6 million
balance at par with a portion of the proceeds of this Offering.
On July 1, 1994, the Company purchased from Leandro P. Rizzuto his 50%
interest in Rusk, Inc. at his cost of $575,000. Rusk, Inc. is a marketer of
upscale, professional-only hair care products.
In 1992, 1993 and 1994, the Company paid $69,000 each year to Melvin L.
Braun for consulting fees. Mr. Braun is a director of the Company.
In 1992, 1993 and 1994, the Company paid $75,000 each year to John P.
Lomenzo for legal fees. Mr. Lomenzo is a director of the Company.
Maurice Lucas, an officer and director of the Company, is a principal
stockholder of L&R Distributors, Inc., an independent New York based distributor
of hair care and personal care products. In 1992, 1993 and 1994, L&R
Distributors, Inc. purchased products from the Company in the amounts of
$1,701,000, $1,401,000 and $1,668,000, respectively. The prices charged to L&R
Distributors, Inc. were consistent with the amounts charged by the Company to
other independent distributors.
In 1992, 1993 and 1994, the Company paid approximately $54,000, $43,000 and
$43,000, respectively, to the law firm of Margulies & Margulies, P.C. for legal
fees. Walter Margulies, a director of the Company, and Richard A. Margulies, a
Vice President of the Company, are partners in this law firm. Richard Margulies
now works full-time for the Company.
43
<PAGE>
On October 20, 1992, the Company sold 5,000 shares of its Series A
Convertible Preferred Stock to the Profit Sharing Plan of the Company for the
sum of $5 million. On July 1, 1993 these shares were sold by the Profit Sharing
Plan to the Conair Employee Stock Ownership Plan for the sum of $5 million.
Effective as of December 31, 1994, the Conair Employee Stock Ownership Plan was
merged into the Company's Profit Sharing Plan, with the result that the Series A
Convertible Preferred Stock are currently held by the Company's Profit Sharing
Plan.
PRINCIPAL STOCKHOLDER
Leandro P. Rizzuto, 1 Cummings Point Road, Stamford, Connecticut 06904, as
trustee of the Leandro P. Rizzuto Revocable Trust, beneficially owns all of the
Company's outstanding stock as of the date of this Prospectus. Mr. Rizzuto has
the right to vote and dispose of the shares held by the Trust. No other
director, executive officer or other person beneficially owns any shares of
Common Stock.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue (i) [ ] million shares of Common Stock,
par value $.01 per share, divided into two classes, one designated Class A
Common Stock, with 50 million shares authorized and the other class designated
Class B Common Stock, with [ ] million shares authorized, (ii) 5 million shares
of Preferred Stock, par value $.01 per share and (iii) 5,000 shares of Series A
Convertible Preferred Stock, par value $1.00 per share.
The following description is a summary and is subject to the detailed
provisions of the Company's Amended and Restated Certificate of Incorporation
(the "Restated Certificate of Incorporation") and By-laws, does not purport to
be complete and is qualified by reference thereto.
COMMON STOCK
All currently outstanding shares of the Class B Common Stock are, and the
Shares offered hereby will be, fully paid and nonassessable. The holder of the
Company's currently outstanding shares of Class B Common Stock does not have,
and holders of the Shares will not have, any preemptive rights to subscribe for
or purchase any additional securities issued by the Company. No redemption or
sinking fund provisions are associated with the Class A Common Stock or Class B
Common Stock. Cumulative voting is not permitted by holders of either the Class
A Common Stock or Class B Common Stock.
Voting. Holders of Class A Common Stock are entitled to one vote per share
and holders of Class B Common Stock are entitled to ten votes per share on all
matters submitted to a vote of the stockholders of the Company. Except as
described below, proposals submitted to a vote of the stockholders of the
Company will be voted on by holders of Class A Common Stock and Class B Common
Stock voting together as a single class (or, if any holders of Preferred Stock
are entitled to vote together with the holders of Class A Common Stock and Class
B Common Stock as a single class with such holders of Preferred Stock).
The holders of Class A Common Stock are entitled to vote separately as a
class to elect 25% of the total number of directors constituting the entire
Board of Directors of the Company. If 25% of the total number of directors
constituting the entire Board of Directors is not a whole number, then it is
rounded up to the nearest whole number of directors that is at least 25% of such
membership. Holders of Class B Common Stock are entitled to vote separately as a
class to elect the remaining directors.
In accordance with Section 242 of the Delaware General Corporation Law, the
holders of a majority of all outstanding shares of Class A Common Stock or Class
B Common Stock, voting as separate classes, must also approve amendments to the
Restated Certificate of Incorporation that alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely, provided that any proposed amendment to the Restated Certificate of
Incorporation that would increase or decrease the aggregate number of authorized
shares of Class B Common Stock or Preferred Stock shall not be deemed to be
amendments that would adversely affect the holders of Class A Common Stock.
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The Principal Stockholder holds shares of Class B Common Stock constituting
approximately % of the voting power of the outstanding Common Stock, which
will allow him to control all actions to be taken by the stockholders, including
the election of 75% of the total number of directors constituting the Board of
Directors. Mr. Rizzuto will be able to convert a portion of the shares of Class
B Common Stock into Class A Common Stock and obtain the power to elect the
directors to be elected by the holder of the Class A Common Stock while
retaining sufficient shares of Class B Common Stock to elect the remainder of
the Board of Directors. See "Investment Considerations-- Anti-Takeover Effect of
Capital Structure; Control by Principal Stockholder."
The Company's Restated Certificate of Incorporation provides that, so long
as any shares of Class B Common Stock are outstanding, any action that can be
taken at a meeting of the stockholders may be taken by written consent in lieu
of the meeting if the Company receives consents signed by stockholders having
the minimum number of votes that would be necessary to approve the action at a
meeting at which all shares entitled to vote on the matter were present. This
would permit the Principal Stockholder to take all actions required to be taken
by the stockholders without providing the other stockholders the opportunity to
make nominations or raise other matters at a meeting.
Dividends. Holders of Class A Common Stock and Class B Common Stock are
entitled to receive cash dividends at the same rate if, as and when such
dividends are declared by the Board of Directors of the Company from funds
legally available therefor after payment of dividends required to be paid on the
Preferred Stock, if any. In the case of any dividend paid other than in cash,
holders of Class A Common Stock and Class B Common Stock are entitled to receive
such dividend pro rata on a per share basis.
If a dividend or distribution payable in Class A Common Stock is made on the
Class A Common Stock, the Company must also make a pro rata and simultaneous
dividend or distribution on the Class B Common Stock payable in shares of Class
B Common Stock. Conversely, if a dividend or distribution payable in Class B
Common Stock is made on the Class B Common Stock, the Company must also make a
pro rata and simultaneous dividend or distribution on the Class A Common Stock
payable in shares of Class A Common Stock.
Restrictions on Transfer. No person holding shares of Class B Common Stock
(a "Class B Holder") may transfer such shares, whether by sale, assignment,
gift, bequest, appointment or otherwise, except to a Permitted Transferee (as
defined in the Restated Certificate of Incorporation), which, in general,
consists of the following: (1) if the Class B Holder is a natural person: (i)
the spouse of a Class B Holder; provided, that, upon divorce any shares of Class
B Common Stock held by the spouse shall immediately and automatically be
converted into Class A Common Stock on a share-for-share basis, except to the
extent that, and for so long as, the Class B Holder retains the power to vote or
direct the vote of such shares, (ii) a lineal descendent (which shall include
descendants by birth or adoption) of a great grandparent of a Class B Holder (a
"Descendant"), (iii) the trustee of a trust for the benefit of a Class B Holder
or a Descendant, (iv) an organization established by a Class B Holder to which
contributions are deductible for federal income, estate or gift tax purposes (a
"Charitable Organization"), (v) any partnership in which all of the partners
are, and all of the partnership interests are owned by, a Class B Holder and/or
such Class B Holder's spouse or Descendants or (vi) any corporation that is
wholly owned by a Class B Holder and/or such Class B Holder's spouse or
Descendants; (2) in the case of an estate of a deceased Class B Holder, or an
estate of a bankrupt or insolvent Class B Holder, any person determined to be a
Permitted Transferee of such Class B Holder pursuant to clause (1) above; (3) in
the case of a Class B Holder that is a trust (other than an irrevocable trust)
or a Charitable Organization, the person transferring Class B Common Stock to
such trust or Charitable Organization or any Permitted Transferee of such
transferor determined pursuant to clause (1) above, and in the case of an
irrevocable trust, any person to whom or for whose benefit principal may be
distributed either during or at the end of the term of such trust, whether by
power of appointment or otherwise; or (4) in the case of a Class B Holder that
is a partnership or a
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corporation, any partner of such partnership or a shareholder of such
corporation, respectively, or any Permitted Transferee of such partner or
shareholder determined pursuant to clause (1) above.
Conversion. Class A Common Stock has no conversion rights. Class B Common
Stock is convertible into Class A Common Stock, in whole or in part, at any time
and from time to time at the option of the holder, on the basis of one share of
Class A Common Stock for each share of Class B Common Stock converted. In the
event of a transfer of shares of Class B Common Stock to any person other than a
Permitted Transferee, each share of Class B Common Stock so transferred
automatically shall be converted into one share of Class A Common Stock. Each
share of Class B Common Stock shall also automatically convert into one share of
Class A Common Stock if, on the record date for any annual meeting of the
stockholders, the number of shares of Class B Common Stock then outstanding is
less than 20% of the aggregate number of shares of Class A Common Stock and
Class B Common Stock then outstanding.
Liquidation. Holders of Class A Common Stock and Class B Common Stock share
with each other on a ratable basis as a single class in the net assets of the
Company available for distribution in respect of Class A Common Stock and Class
B Common Stock in the event of liquidation.
Further Issuances of Class B Common Stock. Except pursuant to any
subdivision of the Class B Common Stock by way of a stock split, stock dividend,
reclassification, recapitalization or otherwise, any issuances by the Company of
shares of Class B Common Stock after the Offering shall require the affirmative
vote of a holder of a majority of the outstanding shares of the Class B Common
Stock.
Other Terms. Neither the Class A Common Stock nor the Class B Common Stock
may be subdivided or combined in any manner unless the other class is subdivided
or combined in the same proportion.
PREFERRED STOCK
The Board of Directors is empowered under the Company's Restated Certificate
of Incorporation and without further stockholder action by resolution to divide
any and all shares of the Preferred Stock into series and to fix and determine
the relative rights, preferences, privileges and restrictions of the shares of
any series so established, except that, the Board of Directors may not issue any
shares of Preferred Stock that have the right (i) to vote for the election of
any directors under ordinary circumstances or (ii) under any circumstances to
elect 50% or more of the Company's directors, unless holders of a majority of
the outstanding shares of Class B Common Stock have approved the issuance of
such shares of Preferred Stock. This requirement for the approval of holders of
Class B Common Stock reinforces the ability of the holders of Class B Common
Stock to control all actions to be taken by the stockholders, including the
election of 75% of the total number of directors constituting the Board of
Directors. The issuance of Preferred Stock by the Board of Directors could
affect the rights of holders of shares of Common Stock. For example, issuance of
the Preferred Stock could result in a class of securities outstanding that will
have certain preferences with respect to dividends and in liquidation over the
Common Stock, and may enjoy certain voting rights, contingent or otherwise, in
addition to that of the Common Stock, and could result in the dilution of the
voting rights, net income per share and net book value of the Common Stock.
Shares of Preferred Stock issued by the Board of Directors could be utilized,
under certain circumstances, as a method of preventing a takeover of the
Company. Under the Company's Restated Certificate of Incorporation, the Company
is authorized to issue, and has issued, 5,000 shares of Series A Convertible
Preferred Stock. There are no agreements or understandings for the issuance of
any other shares of Preferred Stock.
SERIES A CONVERTIBLE PREFERRED STOCK
General. All of the authorized shares of Series A Convertible Preferred
Stock of the Company (the "Series A Stock") have been issued and are owned by
Maurice Lucas, Walter Margulies and Leandro P. Rizzuto, as trustees of the
Profit Sharing Plan of the Company.
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Ranking. The Series A Stock ranks prior to the Common Stock and the shares
of any classes or series of capital stock other than the Common Stock, which by
their terms are junior to the Series A Stock as to dividend rights and rights
upon liquidation, winding up or dissolution (the "Junior Stock"). The Series A
Stock ranks pari passu with or junior to any class or series of capital stock
designated as being on a parity with ("Parity Stock") or senior to,
respectively, the Series A Stock.
Dividend Rights. The holders of Series A Stock are entitled to receive, if,
when and as declared by the Board of Directors, out of funds legally available
therefor, cash dividends at an annual rate of $100.00 per share. Dividends on
the Series A Stock are payable, if declared, quarterly in four equal
installments on or about the 15th day of January, April, July and October in
each year. If the date for the payment of any dividend is not a business day,
then such dividend is payable on the next succeeding business day. Dividends are
cumulative and accrue on a day-to-day basis whether or not declared and whether
or not earned after the date of issuance.
Unless all dividends on the Series A Stock have been paid or declared and
funds set apart for payment thereof, no Series A Stock, Parity Stock or Junior
Stock may be redeemed, purchased or otherwise acquired by the Company or any of
its subsidiaries, and no dividend or other distribution (other than in Junior
Stock) may be paid or declared and set aside for payment or made upon any Junior
Stock.
Liquidation Value. The holders of Series A Stock are entitled to receive per
share in preference to the holders of Junior Stock the sum of $1,000.00, plus
any accrued but unpaid dividends in the event of any dissolution of the Company,
before any distribution is made to holders of Junior Stock. Upon such
dissolution, such preferential amounts with respect to the Series A Stock and
any Parity Stock, if not paid in full, will be distributed pro rata in
proportion to the respective amounts which the Series A Stock and such Parity
Stock are entitled.
Voting Rights. The holders of the Series A Stock are not entitled to any
voting rights, except as required by law and as set forth below.
A vote of holders of at least a majority of the shares of Series A Stock,
voting separately as a class, is required for any amendment, alteration or
repeal of any provisions of the Restated Certificate of Incorporation of the
Company, which materially and adversely affects any of the preferences, rights,
powers or privileges of the Series A Stock or the holders thereof.
An affirmative vote of at least a majority of the total number of
outstanding shares of Series A Stock and of any series of Preferred Stock having
the right to vote as a class on such matter, voting as a class, is required to
increase the authorized amount of the Preferred Stock or the Series A Stock.
Redemption at the Option of the Company. The Company may, at its election,
redeem shares of the Series A Stock in whole or in part on the occurrence of any
of the following events: (i) a change in tax law with respect to the
deductibility of any dividends paid on the Series A Stock, (ii) at any time
following October 1, 1995 when the fair market value of the Series A Stock, as
appraised by an independent financial expert, equals or exceeds $1,500.00 per
share, or (iii) the termination of the Profit Sharing Plan of the Company.
The redemption price is $1,000.00 per share, plus an amount equal to the
accrued but unpaid dividends thereon to the redemption date. The Company may pay
the redemption price in cash, in shares of Class A Common Stock or Readily
Marketable Securities (as defined), or in a combination of the foregoing.
Redemption at the Option of the Holder. At the option of the holder of the
shares of Series A Stock, the Company must, subject to any contractual
restrictions on its ability to do so, redeem such shares at the redemption
price, in cash or, if the Company so elects, in shares of Class A Common Stock
or Readily Marketable Securities, or a combination of the foregoing.
Any holder of the shares of Series A Stock may exercise this option (i) when
it is necessary to provide for distributions required to be made to participants
under, or to satisfy an investment election
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provided to participants in accordance with, the Profit Sharing Plan, or any
successor plan, or (ii) when necessary to meet diversification requirements set
forth in the Internal Revenue Code of 1986, as amended.
Conversion of Series A Stock. Any holder of shares of Series A Stock may
convert such shares into shares of Class A Common Stock at any time and from
time to time. The number of shares of Class A Common Stock issued upon
conversion upon each share of Series A Stock is equal to $1,000.00 divided by
the Conversion Price, i.e., $ , which Conversion Price is subject to
adjustment. Adjustments are permitted if the Company declares a dividend on the
Common Stock in shares of its capital stock, subdivides, combines or
reclassifies the Common Stock, or the Company sells Common Stock to its common
stockholders at a price per share less than the Current Market Price (as
defined), or the Company makes a distribution to its common stockholders of debt
securities, assets or rights to subscribe for securities of the Company.
In addition, if, after the date the Company would be allowed a deduction for
federal income tax purposes in the full amount of the dividends paid on the
Series A Stock, the Series A Stock is transferred to any person other than any
successor trustee under the Profit Sharing Plan, the shares of Series A Stock so
transferred shall be automatically converted into shares of Class A Common Stock
on the terms described in the preceding paragraph.
The Company expects that its Series A Stock will be converted into
shares of Class A Common Stock concurrently with the Offering.
CERTAIN PROVISIONS OF DELAWARE LAW
Section 203 of the Delaware General Corporation Law prohibits certain
transactions between a Delaware corporation and an "interested stockholder,"
which is defined as a person who, together with any affiliates or associates of
such person, beneficially owns, directly or indirectly, 15% or more of the
outstanding voting shares of a Delaware corporation. This provision prohibits
certain business combinations (defined broadly to include mergers,
consolidations, sales or other dispositions of assets having an aggregate value
in excess of 10% of the consolidated assets of the corporation, and certain
transactions that would increase the interested stockholder's proportionate
share ownership in the corporation) between an interested stockholder and a
corporation for a period of three years after the date the interested
stockholder becomes an interest stockholder, unless (i) the business combination
is approved by the corporation's board of directors prior to the date the
interested stockholder becomes an interested stockholder; (ii) the interested
stockholder acquired at least 85% of the voting stock of the corporation (other
than stock held by directors who are also officers or by certain employee stock
plans) in the transaction in which it became an interested stockholder; or (iii)
the business combination is approved by a majority of the board of directors and
by the affirmative vote of 66 2/3% of the outstanding voting stock which is not
owned by the interested stockholder.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Class A Common Stock is Chemical
Bank.
OTHER
Special meetings of stockholders may be called by the Board of Directors,
the Chairman of the Board or the President. The Company's By-laws provide that
the Board of Directors has the power to fill newly created directorships and
vacancies in the Board.
In addition, the Company's By-laws provide that a stockholder must provide
advance notice of nominations of directors to be made at, and of business
proposed to be brought before, a stockholders meeting. The failure to deliver
proper notice within the periods specified in the By-laws will result in the
denial to the stockholder of the right to make such nominations or propose such
action at the meeting.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding [ ]
shares of Class A Common Stock, including the shares of Class A Common
Stock offered hereby, shares of Class A Common Stock issued upon the
conversion of the Company's Series A Convertible Preferred Stock to the Profit
Sharing Plan of the Company, and shares of Class A Common Stock issued
pursuant to restricted stock awards granted under the Company's Employees and
Directors Stock Plan, and [ ] million shares of Class B Common Stock. The
shares of Class A Common Stock offered hereby will be freely tradeable and
the remaining shares of Class A Common Stock outstanding and the [ ] million
shares of Class B Common Stock will be "restricted securities" for the purposes
of the Securities Act. Such restricted securities (including the Class B Common
Stock which are immediately convertible into Class A Common Stock) will be
eligible for resale 180 days after the completion of this Offering pursuant to,
and subject to the volume and manner of sale limitations of, Rule 144 under the
Securities Act.
The Company and its senior executive officers, including Leandro P. Rizzuto,
as beneficial owner of all outstanding shares of Class B Common Stock, have
agreed pursuant to certain agreements (the "Lock-up Agreements") not to offer,
sell, contract to sell or otherwise dispose of any shares of Common Stock or
rights to acquire such shares or securities convertible into or exchangeable for
Common Stock, other than sales contemplated hereby or pursuant to employee stock
option plans in effect on the date of this Prospectus for a period of 180 days
after the date of this Prospectus without the prior written consent of the
representatives of the U.S. Underwriters and the Managers.
The Company has agreed that it will not file any registration statement
under the Securities Act, except for a registration on Form S-8 with respect to
[ ] shares of Class A Common Stock issuable under the Company's employee
benefit plans in effect on the date of this Prospectus, during the 180-day
period after the date of this Prospectus without the prior written consent of
the representatives of the U.S. Underwriters and the Managers. The Company may
file a registration statement on Form S-8 under the Securities Act to register
shares of Class A Common Stock issued pursuant to the Company's employee stock
option plans in effect as of the date of this Prospectus. See "Management--
Employees and Directors Stock Plan." Shares of Class A Common Stock covered by
this registration statement will be eligible for sale in the public market after
the effective date of the registration statement, subject, where applicable, to
the Lock-up Agreements.
In general, under Rule 144, as currently in effect, a shareholder (or
shareholders whose securities are aggregated) who (together with predecessor
holders who were not "affiliates" of the Company (as such term is defined in
Rule 144 under the Securities Act, "Affiliates")) has beneficially owned Common
Stock which is treated as "restricted securities" (as defined in Rule 144) for
at least two years from the date such restricted securities were acquired from
the Company or an Affiliate, is entitled to sell, within any three-month period,
a number of shares that does not exceed the greater of 1% of the Company's Class
A Common Stock then outstanding or the average weekly trading volume in the
Company's Class A Common Stock during the four calendar weeks preceding the date
on which notice of such sale was filed under Rule 144. Sales under Rule 144 are
also subject to certain provisions relating to the manner and notice of sale and
availability of current public information about the Company. In addition,
Affiliates of the Company must comply with the restrictions and requirements of
Rule 144 (other than the two-year holding period requirements) in order to sell
Class A Common Stock that are not restricted securities (such as Class A Common
Stock acquired by Affiliates in the Offering).
Furthermore, under Rule 144(k), if a period of at least three years has
elapsed between the later of the date restricted securities were acquired from
the Company or an Affiliate, a holder of such restricted securities who is not
an Affiliate at the time of the sale and has not been an Affiliate for at least
three months prior to such sale would be entitled to sell the shares immediately
without regard to the volume limitations and other conditions described above.
Prior to the Offering, there has been no public market for the Class A
Common Stock. No prediction can be made as to the effect, if any, that market
sales of Class A Common Stock or the availability of shares for sale will have
on the market price of the Class A Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of Class A Common Stock in the public
market could adversely affect prevailing market prices and could impair the
Company's future ability to raise capital through the sale of its equity
securities.
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UNDERWRITING
The underwriters of the U.S. Offering named below (the "U.S. Underwriters"),
for whom Bear, Stearns & Co. Inc., and Merrill Lynch, Pierce, Fenner & Smith
Incorporated are acting as representatives, have severally agreed with the
Company, subject to the terms and conditions of the U.S. Underwriting Agreement
(the form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part), to purchase from the Company the aggregate
number of U.S. Shares set forth opposite their respective names below:
NUMBER OF
NAME OF U.S. UNDERWRITER U.S. SHARES
- --------------------------------------------------------------- -------------
Bear, Stearns & Co. Inc. ......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................
-------------
Total...............................................
-------------
-------------
The Managers of the concurrent International Offering named below (the
"Managers"), for whom Bear, Stearns International Limited and Merrill Lynch
International Limited are acting as lead Managers, have severally agreed with
the Company, subject to the terms and conditions of the International
Underwriting Agreement (the form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part), to subscribe and pay
for the aggregate number of International Shares set forth opposite their
respective names below:
NUMBER OF
INTERNATIONAL
NAME OF MANAGER SHARES
- --------------------------------------------------------------- -------------
Bear, Stearns International Limited............................
Merrill Lynch International Limited............................
-------------
Total......................................................
-------------
-------------
The nature of the respective obligations of the U.S. Underwriters and the
Managers is such that all of the U.S. Shares and all of the International Shares
must be purchased if any are purchased. Those obligations are subject, however,
to various conditions, including the approval of certain matters by counsel. The
Company has agreed to indemnify the U.S. Underwriters and the Managers against
certain liabilities, including liabilities under the Securities Act, and, where
such indemnification is unavailable, to contribute to payments that the U.S.
Underwriters and the Managers may be required to make in respect of such
liabilities.
The Company has been advised that the U.S. Underwriters propose to offer the
U.S. Shares in the United States and the Managers propose to offer the
International Shares outside the United States, initially at the public offering
price set forth on the cover page of this Prospectus and to certain selected
dealers at such price less a concession not to exceed $ per share; that the
U.S. Underwriters and the Managers may allow, and such selected dealers may
reallow, a concession to certain other dealers not to exceed $ per share;
and that after the commencement of the Offering, the public offering price and
the concessions may be changed.
The Company has granted the U.S. Underwriters and the Managers options to
purchase in the aggregate up to 1,300,000 additional shares of Class A Common
Stock solely to cover over-allotments, if any. The options may be exercised in
whole or in part at any time within 30 days after the date of this
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Prospectus. To the extent the options are exercised, the U.S. Underwriters and
the Managers will be severally committed, subject to certain conditions, to
purchase the additional shares in proportion to their respective purchase
commitments as indicated in the preceding tables.
Pursuant to an agreement between the U.S. Underwriters and the Managers (the
"Agreement Between"), each U.S. Underwriter has agreed that, as part of the
distribution of the U.S. Shares and subject to certain exceptions, (a) it is not
purchasing any U.S. Shares for the account of anyone other than a U.S. Person
(as defined below) and (b) it has not offered or sold, and will not offer, sell,
resell or deliver, directly or indirectly, any U.S. Shares or distribute any
prospectus relating to the U.S. Offering outside the United States or Canada or
to anyone other than a U.S. Person or a dealer who similarly agrees. Similarly,
pursuant to the Agreement Between, each Manager has agreed that, as part of the
distribution of the International Shares and subject to certain exceptions, (a)
it is not purchasing any of the International Shares for the account of any U.S.
Person and (b) it has not offered or sold, and will not offer, sell, resell or
deliver, directly or indirectly, any of the International Shares or distribute
any prospectus relating to the International Offering in the United States or to
any U.S. Person or a dealer who does not similarly agree. As used herein, "U.S.
Person" means any resident or citizen of the United States, any corporation,
pension, profit sharing or other trust, or other entity organized under or
governed by the laws of the United States or of any political subdivision
thereof (other than the foreign branch of any U.S. Person), any estate or trust,
the income of which is subject to United States federal income taxation
regardless of the source of its income, and any United States branch of a person
other than a U.S. Person. The term "United States" means the United States of
America, its territories, its possessions and other areas subject to its
jurisdiction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the Managers of such number of shares of Class A Common Stock
as may be mutually agreed upon. The price of any shares so sold shall be the
public offering price as then in effect for the Class A Common Stock being sold
by the U.S. Underwriters and the Managers, less an amount not greater than the
selling concession allocable to such Class A Common Stock. To the extent that
there are sales between the U.S. Underwriters and the Managers pursuant to the
Agreement Between, the number of shares initially available for sale by the U.S.
Underwriters or by the Managers may be more or less than the amount specified on
the cover page of this Prospectus.
Each U.S. Underwriter and each Manager has represented and agreed that (a)
it has not offered or sold, and will not offer or sell, in the United Kingdom by
means of any document, any shares of Class A Common Stock other than to persons
whose ordinary business it is to buy or sell shares or debentures, whether as
principal or agent (except under circumstances which do not constitute an offer
to the public within the meaning of the Companies Act 1985 of Great Britain);
(b) it has complied and will comply with applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the Class A
Common Stock in, from or otherwise involving the United Kingdom; and (c) it has
only issued or passed on, and will only issue or pass on to any person in the
United Kingdom, any documents received by it in connection with the issue of
Class A Common Stock if that person is of a kind described in Article 9(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1988 (as amended) or in other circumstances exempted from the restrictions on
advertising in the Financial Services Act 1986.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the initial public offering price set forth on the cover
page hereof.
The Company and its senior executive officers, including Leandro P. Rizzuto,
as beneficial owner of all outstanding shares of Class B Common Stock, have
agreed that, for a period of 180 days after the date of this Prospectus, they
will not, without the prior written consent of the representatives of the U.S.
Underwriters and the Managers, offer, sell, contract to sell or otherwise
dispose of any shares of Class A Common Stock or rights to require such shares
or securities convertible into or exchangeable for
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Class A Common Stock other than the sale of the Shares offered hereby or
pursuant to employee stock option plans in effect on the date of this
Prospectus.
The U.S. Underwriters and the Managers have reserved, for sale at the
initial public offering price, up to Shares which may be sold to the
Company's officers, employees, customers, suppliers and other persons associated
with the Company. However, the U.S. Underwriters and the Managers are not
obligated to sell any such Shares to such persons. The number of Shares
available for sale to the general public will be reduced to the extent such
persons purchase such reserved Shares. Any reserved Shares not so purchased will
be offered by the U.S. Underwriters and the Managers on the same basis as the
other Shares offered hereby.
Prior to this Offering, there has been no public market for the Company's
Class A Common Stock. Consequently, the initial public offering price will be
determined through negotiations among the Company and the representatives of the
U.S. Underwriters and the Managers. Among the factors to be considered in making
such determination will be the prevailing market conditions, the Company's
financial and operating history and condition, its prospects and prospects for
the industry in which it does business in general, the management of the
Company, the general condition of the equity securities market and the demand
for securities considered comparable to those of the Company.
Mr. Uzi Zucker, a director of the Company, is a Senior Managing Director of
Bear, Stearns & Co. Inc. ("Bear Stearns") and a member of the board of directors
of the parent company, The Bear Stearns Companies Inc. Bear Stearns is one of
the investment banking firms serving as a U.S. Underwriter in the U.S. Offering.
In addition, Bear, Stearns International Limited is one of the Managers in the
International Offering.
LEGAL MATTERS
The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Paul, Weiss, Rifkind, Wharton & Garrison. Certain
legal matters will be passed upon for the Underwriters by Weil, Gotshal & Manges
(a partnership including professional corporations).
EXPERTS
The financial statements included in this Prospectus, the related financial
statement schedule included elsewhere in the Registration Statement, and the
financial statements from which the Selected Financial Data included in this
Prospectus have been derived have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein and elsewhere
in the Registration Statement. Such financial statements, financial statement
schedule and Selected Financial Data have been included herein and elsewhere in
the Registration Statement in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
The financial statements of the Babyliss Group and its subsidiaries included
in this Prospectus have been audited by Deloitte Touche Tohmatsu, independent
auditors, and by Albert Almeras and Pierre Loeper, statutory auditors, as stated
in their report appearing herein. Such financial statements have been included
herein in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
52
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form S-1 (together with all
amendments and exhibits thereto, the "Registration Statement") under the
Securities Act. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain parts of which are contained in the exhibits and schedules
thereto as are omitted in accordance with the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document to which reference is made are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference. The
Company is subject to the informational requirements of the Exchange Act, and in
accordance therewith files reports and other information with the Commission.
The Registration Statement, including the exhibits and schedules thereto, and
the reports and other information filed by the Company pursuant to the Exchange
Act, may be inspected and copied at the public reference facilities of the
Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and Northwest Atrium Center,
500 West Madison Street (Suite 1400), Chicago, Illinois 60661. Copies of such
materials also may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
Following the consummation of the Offering, the Company intends to furnish
to its stockholders annual reports containing audited financial statements
reported upon by independent auditors and quarterly reports containing unaudited
financial information for each of the first three fiscal quarters.
53
<PAGE>
CONAIR CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Conair Corporation and Subsidiaries
Independent Auditors' Report................................................. F-2
Consolidated Balance Sheets as of December 31, 1993 and 1994................. F-3
Consolidated Statements of Operations for the years ended December 31, 1992,
1993 and 1994................................................................ F-4
Consolidated Statements of Stockholders' Equity for the years ended December
31, 1992, 1993 and 1994...................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1992,
1993 and 1994................................................................ F-6
Notes to Consolidated Financial Statements for the years ended December 31,
1992, 1993 and 1994.......................................................... F-7
The Babyliss Group and Subsidiaries
Independent Auditors' Report................................................. F-17
Combined Balance Sheet as at December 31, 1994............................... F-18
Combined Income Statement for the year ended December 31, 1994............... F-19
Notes to Combined Financial Statements for the year ended December 31,
1994......................................................................... F-20
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
CONAIR CORPORATION
East Windsor, New Jersey
We have audited the accompanying consolidated balance sheets of Conair
Corporation and subsidiaries as of December 31, 1994 and 1993 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Conair Corporation and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets as of December 31, 1992,
1991 and 1990 and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 1991 and
1990 (none of which are presented herein); and we expressed unqualified opinions
on those consolidated financial statements. In our opinion, the information set
forth in the selected financial data for each of the five years in the period
ended December 31, 1994, appearing on page 13, is fairly stated in all material
respects in relation to the consolidated financial statements from which it has
been derived.
Deloitte & Touche LLP
New York, New York
February 11, 1995
(February 28, 1995 as to Note 15)
F-2
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1994
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
1993 1994
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 15,856 $ 23,702
Accounts receivable, net of allowance for doubtful accounts of $1,337
and $1,458, respectively........................................... 70,244 80,616
Inventories.......................................................... 85,416 104,220
Prepaid expenses..................................................... 1,753 1,610
Deferred income taxes................................................ 2,885 2,040
-------- --------
176,154 212,188
-------- --------
PROPERTY, PLANT AND EQUIPMENT--At cost, net of accumulated depreciation
and amortization....................................................... 44,685 66,992
-------- --------
INVESTMENTS AND OTHER ASSETS:
Investments in affiliated companies.................................. 1,141 464
Excess of cost over net assets of acquired companies................. 73,829 70,575
Deferred expenses and other assets................................... 14,309 12,485
-------- --------
89,279 83,524
-------- --------
$310,118 $362,704
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other current liabilities....................... $ 41,014 $ 50,649
Income taxes......................................................... 6,756 8,611
Current portion of long-term debt.................................... 3,625 6,275
-------- --------
51,395 65,535
-------- --------
OTHER LIABILITIES:
Long-term debt....................................................... 87,575 100,405
Deferred income taxes................................................ 19,511 21,310
-------- --------
107,086 121,715
-------- --------
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $1.00 par value--authorized 10,000
shares; issued and outstanding, 5,000 shares....................... 5 5
Common stock, $100 par value--authorized, 5,000 shares; issued and
outstanding, 2,814 shares.............................................. 281 281
Reduction for ESOP Loan Guarantee.................................... (5,000) --
Additional paid-in capital........................................... 7,633 7,633
Cumulative translation adjustments................................... 129 (18)
Retained earnings.................................................... 148,589 167,553
-------- --------
151,637 175,454
-------- --------
$310,118 $362,704
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
NET SALES................................................... $361,838 $442,562 $524,398
-------- -------- --------
COSTS AND EXPENSES:
Cost of goods sold........................................ 239,011 298,416 357,987
Selling, general and administrative....................... 101,007 115,672 124,597
-------- -------- --------
340,018 414,088 482,584
-------- -------- --------
INCOME FROM OPERATIONS...................................... 21,820 28,474 41,814
-------- -------- --------
OTHER (INCOME) EXPENSE:
Interest expense.......................................... 12,966 7,524 8,511
Interest income........................................... (592) (89) (158)
-------- -------- --------
12,374 7,435 8,353
-------- -------- --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM........... 9,446 21,039 33,461
Income tax provision........................................ 4,361 8,978 12,974
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM............................ 5,085 12,061 20,487
EXTRAORDINARY ITEM:
Loss on repurchase and redemption of debt
(net of income taxes)................................... (3,866) -- --
-------- -------- --------
NET INCOME.................................................. $ 1,219 $ 12,061 $ 20,487
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON REDUCTION
STOCK FOR ESOP ADDITIONAL CUMULATIVE TOTAL
--------------- -------------- LOAN PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT GUARANTEE CAPITAL EARNINGS ADJUSTMENTS EQUITY
------ ------- ------ ------ --------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1992........ -- $ -- 2,814 $281 $ -- $2,638 $135,841 $ 211 $ 138,971
Net income..................... -- -- -- -- -- -- 1,219 -- 1,219
Cumulative translation
adjustments..................... -- -- -- -- -- -- -- (41) (41)
Dividends declared............. -- -- -- -- -- -- (119) -- (119)
Shares issued.................. 5,000 5 -- -- -- 4,995 -- -- 5,000
------ ------- ------ ------ --------- ----- -------- --- -----------
BALANCE, December 31, 1992...... 5,000 5 2,814 281 -- 7,633 136,941 170 145,030
Net income..................... -- -- -- -- -- -- 12,061 -- 12,061
Cumulative translation
adjustments..................... -- -- -- -- -- -- -- (41) (41)
Reduction for ESOP loan
guarantee....................... -- -- -- -- (5,000) -- -- -- (5,000)
Dividends declared............. -- -- -- -- -- -- (500) -- (500)
Tax benefit on dividends paid
to ESOP......................... -- -- -- -- -- -- 87 -- 87
------ ------- ------ ------ --------- ----- -------- --- -----------
BALANCE, December 31, 1993...... 5,000 5 2,814 281 (5,000) 7,633 148,589 129 151,637
Net income..................... -- -- -- -- -- -- 20,487 -- 20,487
Cumulative translation
adjustments..................... -- -- -- -- -- -- -- (147) (147)
ESOP loan guarantee
adjustment...................... -- -- -- -- 5,000 -- -- -- 5,000
Dividends declared............. -- -- -- -- -- -- (1,699) -- (1,699)
Tax benefit on dividends paid
to ESOP......................... -- -- -- -- -- -- 176 -- 176
------ ------- ------ ------ --------- ----- -------- --- -----------
BALANCE, December 31, 1994...... 5,000 $ 5 2,814 $281 $ -- $7,633 $167,553 $ (18) $ 175,454
------ ------- ------ ------ --------- ----- -------- --- -----------
------ ------- ------ ------ --------- ----- -------- --- -----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1992 1993 1994
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................... $ 1,219 $12,061 $20,487
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation............................................... 5,323 6,500 7,239
Amortization of goodwill................................... 3,060 2,532 2,960
Loss on repurchase and redemption of debt (before income
tax benefit)............................................. 6,137 -- --
Amortization of deferred expenses and other assets......... 1,511 282 1,824
Deferred income taxes...................................... (571) 3,177 2,644
Tax benefit on dividends paid to ESOP...................... -- 87 176
Other--net................................................. (142) (161) (1,101)
Changes in operating assets and liabilities:
Accounts receivable...................................... 2,829 (12,182) (10,372)
Inventories.............................................. (11,972) (6,872) (18,804)
Prepaid expenses......................................... (695) 834 143
Accounts payable and other current liabilities........... (4,954) 6,402 9,635
Income taxes............................................. (983) 2,647 1,855
------- ------- -------
762 15,307 16,686
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint venture.................................. -- -- (575)
Additions to property, plant and equipment................... (5,858) (7,647) (29,546)
Proceeds from sale of affiliate.............................. -- -- 2,500
------- ------- -------
(5,858) (7,647) (27,621)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase and redemption of debt............................ (96,107) -- --
Reduction of long-term debt.................................. (3,017) (39,313) (3,520)
Proceeds from issuance of long-term debt..................... 90,500 28,455 24,000
Proceeds from issuance of convertible preferred stock........ 5,000 -- --
Dividends declared........................................... -- (500) (1,699)
------- ------- -------
(3,624) (11,358) 18,781
------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... (8,720) (3,698) 7,846
CASH AND CASH EQUIVALENTS, January 1,.......................... 28,274 19,554 15,856
------- ------- -------
CASH AND CASH EQUIVALENTS, December 31,........................ $19,554 $15,856 $23,702
-------
------- -------
------- -------
-------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized)....................... $13,289 $ 7,450 $ 7,698
-------
------- -------
------- -------
-------
Income taxes............................................... $ 3,644 $ 3,067 $ 8,299
-------
------- -------
------- -------
-------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
1. SIGNIFICANT ACCOUNTING POLICIES
Consolidation--The accompanying consolidated financial statements include
the accounts of Conair Corporation and its subsidiaries (the "Company"), all of
which are wholly-owned. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Fair Value of Financial Instruments--During October 1994, the Financial
Accounting Standards Board issued SFAS 119, "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments". This statement
requires the disclosure of estimated fair values for all financial instruments
for which it is practicable to estimate fair value.
For instruments including cash and cash equivalents, accounts receivable and
payable, accruals and short-term debt, it was assumed that the carrying amount
approximated fair value because of their short maturity. The carrying amount of
long-term debt which bears interest at floating rates is also assumed to
approximate the fair value.
The fair value of long-term debt with fixed interest rates is estimated
based on the quoted market price for similar issues. As of December 31, 1994,
the carrying amount and the fair value of such long-term debt were $93,299,000
and $89,903,000, respectively. The fair value amounts are not necessarily
indicative of the amounts for which the debt could be liquidated.
Cash Equivalents--Cash equivalents consist principally of commercial paper
and time deposits having original maturity of less than 90 days, and amounted to
$4,096,000 and $17,176,000 at December 31, 1993 and 1994, respectively.
Inventories--Inventories are stated at the lower of cost (first-in,
first-out) or market.
Income Taxes--The Company has adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." SFAS No. 109 requires the
Company to compute deferred income taxes based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect in the years in which differences are expected to reverse. The
effect of the adoption of SFAS No. 109 on the Consolidated Financial Statements
of the Company in 1993 was not material.
Property, Plant and Equipment--Depreciation and amortization of property,
plant and equipment are computed primarily on the straight-line method over the
estimated useful lives of the related assets.
Excess of Cost Over Net Assets of Acquired Companies--The excess of cost
over net assets of acquired companies is being amortized on the straight-line
basis over periods of up to 40 years and is shown net of accumulated
amortization of $25,945,000 and $27,897,000 at December 31, 1993 and 1994,
respectively. The Company's policy of reviewing the recoverability of goodwill
is based on projections of undiscounted future income from operations.
Deferred Expenses and Other Assets--Deferred expenses and other assets
include various intangible assets acquired in the Company's purchase of certain
net assets of Cuisinarts. These assets are being amortized on the straight-line
basis over periods ranging from 3 to 40 years and are shown net of accumulated
amortization of $7,738,000 and $10,101,000 at December 31, 1993 and 1994,
respectively.
F-7
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
1. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Foreign Currency Translation--Gains and losses arising from the translation
of foreign subsidiary financial statements are excluded from the determination
of net income and included in a separate component of stockholders' equity.
2. LICENSING AND DISTRIBUTION AGREEMENT
On March 16, 1993, the Company signed a Licensing and Distribution Agreement
with Southwestern Bell Telecommunications, Inc. under which it received an
exclusive license to market one and two-line residential telephones--including
cordless telephones, answering machines and caller ID devices--to be sold to
U.S. retailers. The Company markets telephones under the CONAIRPHONE name as
well as the BELL logo, the Southwestern Bell name and the FREEDOM PHONE
trademark. This agreement became effective on April 9, 1993 after approval from
the Federal Trade Commission.
3. EXTRAORDINARY ITEM
In 1992, the Company repurchased portions of its 14% senior subordinated
debentures and 14 1/2% subordinated debentures which were carried at $12,500,000
and $17,368,000, respectively. On November 19, 1992, the $27,184,000 par value
14% of senior subordinated debentures and $34,721,000 par value of 14 1/2%
subordinated debentures which remained outstanding were redeemed by the Company.
The loss resulting from the repurchase and redemption in 1992 was approximately
$3,866,000, net of income tax benefit of $2,271,000. Such loss includes the
difference between the repurchase price and the carrying value which includes
the related deferred financing expenses.
4. INVENTORIES
Inventories are summarized as follows:
DECEMBER 31,
-------------------
1993 1994
------- --------
(IN THOUSANDS)
Components and raw materials........................... $11,441 $ 12,728
Finished goods......................................... 73,975 91,492
------- --------
$85,416 $104,220
------- --------
------- --------
F-8
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
5. PROPERTY, PLANT AND EQUIPMENT
The major classes of these assets are as follows:
DECEMBER 31,
ESTIMATED -------------------
USEFUL LIFE 1993 1994
----------- ------- --------
(IN THOUSANDS)
Land...................................... $ 5,160 $ 9,160
Buildings................................. 15-40 years 21,416 37,615
Building improvements..................... 7-20 years 1,355 1,582
Furniture and fixtures.................... 5-10 years 7,670 8,255
Machinery and equipment................... 3-11 years 37,987 44,632
Construction in progress.................. 455 2,345
------- --------
74,043 103,589
Less accumulated depreciation and
amortization.............................. 29,358 36,597
------- --------
$44,685 $ 66,992
------- --------
------- --------
6. SHORT-TERM DEBT
At December 31, 1994, the Company had available short-term lines of credit
with banks in the United States and abroad aggregating $64,400,000. The trade
credit lines are available for letters of credit and bankers' acceptances which
are secured by an interest in the goods underlying such borrowings and the trade
receivables resulting from the sale of such goods. During the years ended
December 31, 1992, 1993 and 1994, the Company had short-term borrowings of up to
$17,400,000, $35,000,000 and $32,000,000, respectively, to finance its seasonal
business needs. The average borrowings during 1992, 1993 and 1994 were
$3,890,000, $15,739,000 and $11,581,000, respectively, and the approximate
weighted average interest rates were 4.5%, 4.9% and 5.5%, respectively. At
December 31, 1992, 1993 and 1994, the Company had no borrowings against these
lines. The Company has various informal compensating balance arrangements with
its banks which do not legally restrict withdrawal of funds.
F-9
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
7. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31,
-------------------
1993 1994
------- --------
(IN THOUSANDS)
8.05% Industrial Development Bonds(a).................. $ 3,833 $ 3,353
Mortgage Note Payable(b)............................... 1,934 1,881
Floating Rate Industrial Development Bonds(c).......... 1,875 1,500
6.25% Promissory Note due 2001(d)...................... 10,500 9,188
7.44% Series A Senior Fixed Rate Notes due 2002(e)..... 40,000 40,000
6.56% Series B Senior Rate Reset Notes due 2002(f)..... 10,000 10,000
10% Subordinated Promissory Note due 2003(g)........... 6,000 6,000
Revolving Credit Loan due 1997(h)...................... 6,000 10,000
5.8% Term Loan due 1998(i)............................. 3,933 3,133
10% ESOP Loan Guarantee(j)............................. 5,000 --
6.5% Mortgage Note due 1998(k)......................... 2,125 1,625
7.0% Term Loan due 2004(l)............................. -- 20,000
------- --------
91,200 106,680
Less current portion of long-term debt................. 3,625 6,275
------- --------
$87,575 $100,405
------- --------
------- --------
- ------------
(a) On December 16, 1986, the Company completed a $9,600,000 industrial
development bond financing which was used to fund the building of an
office/warehouse/distribution center located in East Windsor, New Jersey.
The bonds, which mature on December 15, 2001, are payable in monthly
installments of $110,186 which began January 15, 1988 until December 15,
1990; $60,186 commencing January 15, 1991 until June 15, 1992; $39,912
commencing July 15, 1992 until November 15, 2001; $79,812 on December 15,
2001. The bonds may be redeemed prior to maturity on December 15, 1996. This
indebtedness is collateralized by the land and building purchased with the
proceeds which have a net carrying value of $9,317,000 at December 31, 1994.
The bonds contain certain restrictions relating to net income and net worth.
Interest is payable monthly.
(b) On May 15, 1991, the Company completed a variable rate mortgage in the
amount of $2,060,000 due June 1, 1996 payable in monthly installments, which
began June 1, 1991. The opening rate of interest was 9.125% and will be
reset annually at 3% over the rate on one-year U.S. Treasury Bills. The
indebtedness was collateralized by the land and building at the existing
facility in Phoenix, Arizona which have a net carrying value of $1,674,000
at December 31, 1994. The interest rate at December 31, 1994 was 7.75%.
(c) On April 13, 1989, the Company assumed $5,307,692 of floating rate
Industrial Development Revenue Bonds in the purchase of its toiletry
products manufacturing facility in Rantoul, Illinois. The bonds, which
mature on December 1, 1998, are payable annually which began December 11,
1989 for $230,769; December 1, 1990 for $2,076,923; $375,000 commencing
December 1, 1991 until December 1, 1998. Interest is payable quarterly at
70% of the prime rate. This indebtedness is collateralized by the land and
building which have a net carrying value of $5,504,000 at December 31, 1994.
The interest rate at December 31, 1994 was 5.95%.
(Footnotes continued on following page)
F-10
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
7. LONG-TERM DEBT--(CONTINUED)
(Footnotes continued from preceding page)
(d) On June 11, 1992, the Company received a $10,500,000 loan which matures on
November 15, 2001 and had an interest rate of 9.7%. Interest is payable
quarterly commencing August 15, 1992. Semi-annual principal payments of
$656,250 began on May 15, 1994. The loan was refinanced in 1993 reducing its
interest rate to 6.25%. The loan is collateralized by a pledge of a portion
of the stock of one of the Company's subsidiaries.
(e) On October 20, 1992, the Company issued $40,000,000 Series A Senior Fixed
Rate Notes. The notes mature on December 28, 2002, and have an interest rate
of 7.44% per annum to be paid on the 28th day of each December, March, June
and September. The principal payments are due as follows: $2,750,000 on
December 28, 1995; $4,000,000 on December 28, 1996; and $5,500,000
commencing with December 28, 1997 and every December 28th thereafter until
December 28, 2001 and a final payment of $5,750,000 on December 28, 2002.
The notes contain covenants requiring the Company to, among other things,
maintain certain levels of tangible net worth, liquidity and leverage. The
loan is collateralized by a pledge of a portion of the stocks of the
Company's subsidiaries.
(f) On October 20, 1992, the Company issued $10,000,000 Series B Senior Rate
Reset Notes. The notes mature on December 28, 2002, and have an interest
rate initially set at 6.56% to be paid on the 28th day of each December,
March, June and September. The reset date is October 20, 1996 and the reset
rate is based on the U.S. Treasury rate equal to the remaining average life
of the Series B Notes plus 1.75% per annum. The principal payments are
scheduled to commence with a payment of $1,500,000 on December 28, 1996 and
every December 28th thereafter and ending on December 28, 2001 and a final
payment of $1,000,000 on December 28, 2002. The notes contain covenants
requiring the Company to, among other things, maintain certain levels of
tangible net worth, liquidity and leverage. The loan is collateralized by a
pledge of a portion of the stocks of the Company's subsidiaries.
(g) On October 20, 1992, the Company issued a 10% Subordinated Promissory Note
due April 27, 2003. Interest payments are payable semi-annually on June 15
and December 15. In 1993, the Company repaid $4,000,000 of this loan at par.
The principal balance is due at maturity. (See Note 14)
(h) On October 20, 1992, the Company entered into a Bank Credit Agreement with a
syndicate of domestic banks providing for a $20,000,000 revolving credit
loan. This loan was restructured in 1993 and the availability under the
Revolving Credit line was increased to $30,000,000 ($21,000,000 at December
31, 1994). Interest rates on this facility are at variable rates subject to
changes in short-term interest rates and changes in leverage and operating
performance of the Company. The loan commitment of $21,000,000 is scheduled
to be reduced by the following amounts: $6,000,000 on December 15, 1995 and
$7,500,000 on December 15, 1996 and December 15, 1997. The Agreement
contains covenants requiring the Company to, among other things, maintain
certain levels of tangible net worth, liquidity and leverage. The loan is
collateralized by a pledge of a portion of the stocks of the Company's
subsidiaries. The interest rate at December 31, 1994 was 7.5%. (See Note
15.)
(i) On November 24, 1993, the Company completed a term loan in the amount of
$4,000,000 due November 1, 1998 payable in monthly installments which began
December 1, 1993. The interest rate on this loan is 5.8%. The loan was used
to prepay $4,000,000 of principal due on its 10% Subordinated Promissory
Note due in 2003. The Company's obligations under this loan are unsecured.
(Footnotes continued on following page)
F-11
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
7. LONG-TERM DEBT--(CONTINUED)
(Footnotes continued from preceding page)
(j) On December 31, 1994 as a result of the merger of the Conair Corporation
Employee Stock Ownership Plan with the Profit Sharing Plan of Conair
Corporation, this debt obligation was satisfied and the Loan Guarantee is no
longer outstanding.
(k) On February 1, 1993, the Company completed a fixed rate mortgage in the
amount of $2,500,000 due on February 1, 1998. Repayment of principal is at
the rate of $125,000 per quarter commencing on June 30, 1993. Interest is
payable monthly. The proceeds of this loan were used to expand the
distribution capacity of the Rantoul, Illinois facility. This indebtedness
is collateralized by the land and building, which have a net carrying value
of $5,504,000 at December 31, 1994.
(l) On March 15, 1994, the Company obtained a ten year term loan in the amount
of $20,000,000. This loan was used to finance the acquisition of its
executive office facility in Stamford, Connecticut. The loan is unsecured
and has a fixed interest rate of 7%. Principal repayments on the loan begin
on June 1, 1996 with a payment of $625,000 and variable sums are due
semi-annually on June 1 and December 1 until a final payment of $4,000,000
at maturity on February 28, 2004.
The various debt covenants place limitations on the payment of preferred
dividends and prohibit the payment of dividends on common stock pending the
receipt of an equity issuance in excess of $20,000,000. The Company is in
compliance with all covenants under its debt obligations at December 31, 1994.
At December 31, 1994, projected maturities of long-term debt are as follows:
AMOUNT
--------------
YEAR ENDING DECEMBER 31, (IN THOUSANDS)
- ---------------------------------------------------------------
1995........................................................... $ 6,275
1996........................................................... 12,039
1997........................................................... 21,966
1998........................................................... 11,775
1999........................................................... 10,791
Thereafter..................................................... 43,834
--------------
$106,680
--------------
--------------
All of the Company's Serial Zero Coupon Senior Notes were retired or
defeased in 1989.
8. CAPITAL STOCK
On October 19, 1992, pursuant to the written consent of the sole stockholder
of the Company, the Company's Certificate of Incorporation was amended to
provide for the authorization of an aggregate of 15,000 shares of capital stock,
consisting of 5,000 authorized shares of common stock, par value $100 per share,
and 10,000 shares of preferred stock, par value $1.00 per share.
On October 20, 1992, the Company sold 5,000 shares of Convertible Preferred
Stock to the Profit Sharing Plan of Conair Corporation for the sum of
$5,000,000. These shares receive a cumulative dividend at an annual rate of $100
per share payable on the fifteenth day of January, April, July and October of
each year. The shares may be redeemed, under certain conditions, at the option
of the Company. The shares are presently convertible into 69 shares of common
stock.
F-12
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
9. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1992 1993 1994
------- ----------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current Tax Expense:
U.S. Federal............................... $ 3,214 $ 3,121 $ 6,318
State and local............................ 88 317 369
Foreign.................................... 2,324 2,344 3,643
------- ----------- -------
Total Current................................ 5,626 5,782 10,330
Deferred Tax Expense (Benefit):
U.S. Federal............................... (1,265) 3,196 2,644
------- ----------- -------
$ 4,361 $ 8,978 $12,974
------- ----------- -------
------- ----------- -------
</TABLE>
The following table reconciles taxes on income to the Federal statutory rate
of 34% for the year ended December 31, 1992 and 35% for the years ended December
31, 1993 and 1994.
YEARS ENDED DECEMBER 31,
---------------------------
1992 1993 1994
------ ------ -------
(IN THOUSANDS)
Computed tax at statutory rate................... $3,222 $7,390 $11,752
State and local income taxes, net of Federal
income tax benefit............................. 58 209 240
Amortization of excess of cost over net assets of
acquired companies............................... 963 971 1,040
Other, net....................................... 118 408 (58)
------ ------ -------
$4,361 $8,978 $12,974
------ ------ -------
------ ------ -------
Deferred tax liabilities (assets) are comprised of the following at December
31:
1992 1993 1994
------- ------- -------
(IN THOUSANDS)
Deferred Tax Liabilities:
Depreciation................................ $ 1,100 $ 1,338 $ 1,012
Unremitted earnings of foreign
subsidiaries.................................. 15,562 18,173 20,298
------- ------- -------
16,662 19,511 21,310
------- ------- -------
Deferred Tax Assets:
Vacation.................................... (330) (308) (203)
Bad Debt.................................... (573) (590) (223)
Inventory................................... (586) (557) (356)
Warranty.................................... (1,041) (919) (919)
Other....................................... (683) (511) (339)
------- ------- -------
(3,213) (2,885) (2,040)
------- ------- -------
Net Deferred Tax Liabilities.................. $13,449 $16,626 $19,270
------- ------- -------
------- ------- -------
F-13
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
10. COMMITMENTS AND CONTINGENCIES
The Company was contingently liable for letters of credit amounting to
approximately $24,661,000 at December 31, 1994.
In 1993, the Company leased a 60,000 sq. ft. manufacturing facility in
Highland Park, IL for a term beginning November 1, 1993 and continuing until
December 31, 1996. The rent during this term is $162,266 per year. The lease is
a net lease requiring the Company to pay all taxes, charges and expenses.
In January 1993, the Company entered into a five-year lease of computer
equipment for approximately $1,700,000. Monthly lease payments in the first year
were $13,288 and in subsequent years increase to $40,874.
In 1994, the Company, through its wholly-owned subsidiary, Continental
Conair Limited, renewed its lease of a 16,500 sq. ft. facility in Kowloon, Hong
Kong. The term of the renewal is three years with rent of $525,000 per year. The
lease is a net lease requiring the Company to pay all taxes, charges and
expenses.
11. EMPLOYEE BENEFIT PLAN
The Company provides for a non-contributory employee benefit program
consisting of a defined contribution plan which covers substantially all U.S.
full-time employees. Company contributions, approved by the Board of Directors
(not in excess of amounts deductible for Federal income tax purposes) are paid
into a trust. Total contributions to this plan charged to expense for the years
ended December 31, 1992, 1993 and 1994 were $1,268,000, $1,285,000 and
$1,022,000, respectively.
On June 1, 1993, the Company formed a new employee benefit plan, an Employee
Stock Ownership Plan (ESOP). On July 1, 1993, the ESOP acquired the Convertible
Preferred Stock from the Profit Sharing Plan of Conair Corporation. The ESOP
issued a 10% $5,000,000 note payable to the Profit Sharing Plan. The ESOP note
was guaranteed by the Company. Total contributions to this plan charged to
expense for the years ended December 31, 1993 and 1994 were $100,000 and
$500,000, respectively.
On December 31, 1994, the Company merged the Conair Corporation ESOP with
the Profit Sharing Plan of Conair Corporation. As a result of this transaction,
the Profit Sharing Plan acquired the Convertible Preferred Stock and the
obligations under the ESOP note and its corresponding guarantee by the Company
were satisfied.
12. INTERNATIONAL OPERATIONS AND OTHER
The Company operates in one industry segment and is engaged in the design,
manufacture, assembly and marketing of personal care consumer products and
consumer electronic and kitchen appliances.
During the years ended December 31, 1992, 1993 and 1994, sales to the
largest customer aggregated approximately $41,212,000, $50,147,000 and
$62,811,000, respectively. Sales to the Company's second largest customer in
1992, 1993 and 1994 were $55,938,000, $50,828,000 and $59,362,000, respectively.
No other customer represented sales in excess of 10% of consolidated revenues.
Continental Conair Limited, a wholly-owned subsidiary, is located in Hong
Kong. Sales of this subsidiary to unaffiliated customers for the years ended
December 31, 1992, 1993 and 1994 were $44,150,000, $36,200,000 and $38,197,000,
respectively; operating income was $8,711,000, $6,536,000
F-14
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
12. INTERNATIONAL OPERATIONS AND OTHER--(CONTINUED)
and $6,872,000, respectively; and identifiable assets at December 31, 1992, 1993
and 1994 were $26,873,000, $28,466,000 and $27,183,000, respectively. Conair
Costa Rica, S.A., a wholly-owned subsidiary, is located in Costa Rica. Sales of
this subsidiary to unaffiliated customers for the years ended December 31, 1993
and 1994 were $13,223,000 and $10,483,000, respectively; operating income was
$3,316,000 and $2,235,000, respectively; and identifiable assets at December 31,
1993 and 1994 were $18,615,000 and $20,281,000, respectively. Conair Costa Rica,
S.A. sales to unaffiliated customers were not significant in 1992.
International sales were approximately $12,826,000, $19,160,000 and
$28,804,000 for 1992, 1993, and 1994, respectively.
13. CONDENSED UNAUDITED QUARTERLY RESULTS OF OPERATIONS
Condensed unaudited quarterly results of operations for the years ended
December 31, 1993 and 1994 are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
1993 (IN THOUSANDS)
- ------------------------------------------------
<S> <C> <C> <C> <C>
Net sales....................................... $83,987 $93,472 $132,108 $ 132,995
Gross profit.................................... 28,694 30,495 41,422 43,535
Net income...................................... 907 1,213 4,555 5,386
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
1994 (IN THOUSANDS)
----
<S> <C> <C> <C> <C>
Net sales...................................... $95,575 $117,060 $157,197 $ 154,566
Gross profit................................... 31,814 37,554 48,384 48,659
Net income..................................... 1,603 3,634 7,403 7,847
</TABLE>
14. RELATED PARTY TRANSACTIONS
Conair Corporation and Leandro P. Rizzuto are parties to an employment
agreement, dated June 20, 1985, for a term through June 30, 1996, subject to
automatic renewals of successive one-year periods, pursuant to which the Company
employs Mr. Rizzuto as Chairman and President of the Company at a base annual
salary and incentive compensation to be determined annually by the Executive
Committee of the Board of Directors. Mr. Rizzuto's base salary and incentive
compensation will be subject to upward adjustments at the discretion of the
Board of Directors.
In 1993, the Company leased its Stamford, Connecticut executive office
facility from Leandro P. Rizzuto at a cost of $2,622,500 under a net lease
requiring the Company to pay all taxes, charges and expenses. On March 15, 1994,
the Company acquired this facility from Leandro P. Rizzuto, for $20,000,000. The
purchase price was based on an independent appraisal. A ten-year unsecured loan
in the amount of $20,000,000 was obtained by the Company to finance this
acquisition. The interest rate on this loan is 7%. Principal repayments on this
loan begin on June 1, 1996 with the payment of $625,000 and variable sums are
due semi-annually on June 1 and December 1 until a final payment of $4,000,000
at maturity on February 28, 2004. The Company leased back to Mr. Rizzuto a
portion of the facility for a period of ninety-nine years subject to the
Company's option, for a period of ten years, to buy back the lease rights. The
option price for the Company to repurchase the lease rights is $4 million
F-15
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
14. RELATED PARTY TRANSACTIONS--(CONTINUED)
for the first five years, escalating to $6.4 million over the remaining five
years. The initial option price was determined based on an independent
appraisal.
The Company occasionally charters a jet that is beneficially owned by
Leandro P. Rizzuto. In 1992, 1993 and 1994 the Company paid $376,200, $350,100
and $323,200, respectively, to Mr. Rizzuto as charter payments. These payments
approximate amounts charged by Mr. Rizzuto to unaffiliated parties.
On October 20, 1992 the Company received $10,000,000 upon the issuance to
Leandro P. Rizzuto of a $10,000,000 par value 10% Subordinated Promissory Note
due April 27, 2003. Interest is payable semi-annually on June 15 and December
15. The principal balance is due at maturity. These notes are subordinated to
the Series A Senior Fixed Rate Notes, the Series B Senior Rate Reset Notes and
the Bank Credit Facilities. In 1993, the Company prepaid $4,000,000 of this loan
at par.
On July 1, 1994, the Company purchased from Leandro P. Rizzuto his 50%
interest in Rusk, Inc. at his cost of $575,000. Rusk, Inc. is a marketer of
upscale, professional-only hair care products.
In 1992, 1993 and 1994, the Company paid $69,000 each year for consulting
fees to a Director of the Company.
In 1992, 1993 and 1994, the Company paid $75,000 each year for legal fees to
a Director of the Company.
An officer and director of the Company is an officer and principal
stockholder of L&R Distributors, Inc., an independent New York based distributor
of hair care and personal care products. In 1992, 1993 and 1994, L&R
Distributors, Inc. purchased products from the Company in the amounts of
$1,701,000, $1,401,000 and $1,668,000, respectively. The prices charged to L&R
Distributors, Inc. were consistent with the amounts charged by the Company to
other independent distributors.
In 1992, 1993, and 1994, the Company paid approximately $54,000, $43,000 and
$43,000, respectively, to a law firm for legal fees. A director and a vice
president of the Company are partners in this law firm.
15. SUBSEQUENT EVENTS
On February 18, 1995, the Company acquired 100% of the common stock of
Babyliss, S.A. for approximately $38,000,000 which is subject to a maximum
downward adjustment of approximately $4,000,000 based on the terms of the
agreement. Babyliss, S.A. 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.
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 in part,
through the sale to Mr. Rizzuto of its facility in Phoenix, Arizona, the value
of which will be determined through an independent appraisal, and the balance in
cash.
F-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
THE BABYLISS AND CRISTAL COMPANIES
We have audited the combined balance sheet of the BaByliss and Cristal
Companies as at December 31, 1994 and the combined statement of income for the
year then ended. These financial statements are the responsibility of the
BaByliss and Cristal Companies management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally
accepted in France which do not materially differ from auditing standards
generally accepted in the United States. Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.
In our opinion, these combined financial statements present fairly, in all
material respects, the financial position of the BaByliss and Cristal Companies
at December 31, 1994, and the results of its operations for the year ended in
accordance with accounting principles generally accepted in France.
Albert ALMERAS and Pierre LOEPER DELOITTE TOUCHE TOHMATSU
French Statutory Auditors International Reporting Auditors
Paris, France Paris, France
F-17
<PAGE>
BABYLISS AND CRISTAL COMPANIES
COMBINED BALANCE SHEET AS AT DECEMBER 31, 1994
('000 FRENCH FRANCS)
<TABLE>
<CAPTION>
DEC. 31, 1994
-------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and Marketable Securities............................................... 9,463
Accounts Receivable.......................................................... 88,210
Less Allowance Doubtful Accounts............................................. (1,428)
-------------
Accounts Receivable, Net..................................................... 86,782
Inventories.................................................................. 78,021
Prepaid expenses and other short term receivables............................ 9,454
Deferred Income Taxes........................................................ 701
-------------
184,421
-------------
PROPERTY, PLANT AND EQUIPMENT, NET
Property, Plant and Equipment 58,722
Less Accumulated Depreciation................................................ (38,414)
-------------
20,308
-------------
INVESTMENT AND OTHER ASSETS
Investment in Affiliated Companies........................................... 1
Unamortized goodwill......................................................... 7,295
Deferred Expenses and Other Assets........................................... 2,623
-------------
9,919
-------------
214,648
-------------
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short Term Debt.............................................................. 26,005
Accounts Payable............................................................. 39,956
Other Current Liabilities.................................................... 27,435
-------------
93,396
-------------
OTHER LIABILITIES
Long Term Debt............................................................... 17,830
Other Liabilities............................................................ 8,877
Deferred Income Taxes........................................................ 35
-------------
26,742
-------------
MINORITY INTEREST.............................................................. 9,726
-------------
STOCKHOLDERS' EQUITY
Common Stock................................................................. 2,433
Cumulative Translation Adjustment............................................ (958)
Retained Earnings............................................................ 83,309
-------------
84,784
-------------
214,648
-------------
-------------
</TABLE>
F-18
<PAGE>
BABYLISS AND CRISTAL COMPANIES
COMBINED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1994
('000 FRENCH FRANCS)
<TABLE>
<CAPTION>
1994
---------
<S> <C>
Net Sales........................................................................ 402,252
Cost of Sales.................................................................... (248,711)
---------
Gross Margin................................................................. 153,541
---------
Distribution Costs............................................................... (6,720)
Commercial Costs................................................................. (19,966)
Marketing Costs.................................................................. (21,068)
General and Administrative Costs................................................. (64,960)
---------
Total Operational Costs...................................................... (112,714)
---------
OPERATING PROFIT................................................................. 40,827
Net Financial Costs............................................................ (7,519)
Royalties...................................................................... 7
Extraordinary Profit (Loss).................................................... (860)
---------
PROFIT BEFORE TAX................................................................ 32,455
Employees' Profit Sharing...................................................... (1,452)
Income Taxes................................................................... (10,995)
Deferred Taxes................................................................. 364
---------
COMBINED NET RESULT.............................................................. 20,372
MINORITY INTEREST................................................................ (1,044)
---------
GROUP SHARE...................................................................... 19,328
---------
---------
</TABLE>
F-19
<PAGE>
COMBINATION AS AT DECEMBER 31, 1994
CONTENTS
<TABLE>
<S> <C>
1. ACCOUNTING POLICIES, VALUATION METHODS AND COMBINATION AND CONSOLIDATION POLICIES
1.1 Combination and consolidation policies
1.2 Accounting policies and valuation methods
2. INFORMATION CONCERNING THE COMPANIES INCLUDED IN THE COMBINED FINANCIAL STATEMENTS
3. ANALYSIS OF THE BALANCE SHEET--ASSETS
3.1 Cash and Marketable Securities
3.2 Accounts Receivable
3.3 Inventories
3.4 Prepaid Expenses and Other Short Term Receivables
3.5 Deferred Income Taxes
3.6 Property Plant and Equipment
3.7 Investments in Affiliated Companies
3.8 Unamortized Goodwill
3.9 Deferred Expenses and Other Assets
4. ANALYSIS OF THE BALANCE SHEET--LIABILITIES AND
STOCKHOLDERS' EQUITY
4.1 Other Current Liabilities
4.2 Long Term Debt
4.3 Deferred Income Taxes
4.4 Minority interests
4.5 Stockholders' equity
5. INCOME STATEMENT
5.1 Net Sales
5.2 Personnel Costs
5.3 Exceptional Profit (Loss)
5.4 Income tax
6. COMMITMENTS AND CONTINGENCIES
7. STATEMENT OF CASH FLOWS
8. EVENTS AFTER BALANCE SHEET DATE
</TABLE>
F-20
<PAGE>
1. ACCOUNTING POLICIES, VALUATION METHODS AND
COMBINATION AND CONSOLIDATION POLICIES
1.1 COMBINATION AND CONSOLIDATION POLICIES
All companies in which the BaByliss S.A. holds a participating interest
(direct or indirect) of more than 50% or companies in which BaByliss S.A. has
the majority of the voting rights (direct or indirect) have been consolidated
using the full consolidation method. All significant inter-company accounts and
transactions have been eliminated.
The combined financial statements of the BaByliss and Cristal Companies
include the consolidated financial statements of BaByliss S.A. and the
consolidated financial statements of Cristal S.A. The combined financial
statements have been prepared as a result of the stockholders' common ownership
of these entities as a result of the acquisition of the shares of BaByliss S.A.
and Cristal S.A., as from February 18, 1995 by the American Company, Conair
Corporation (see footnote 8). In particular, in order to present the total
investment of Conair on a combined basis in BaByliss S.A. and Cristal S.A., the
stockholders' current account of Cristal S.A. (21,951 KF) purchased by Conair as
from February 18, 1995 (see footnote 8) has been eliminated in the attached
combined balance sheet as of December 31, 1994.
All amounts in these financial statements have been expressed in thousands
of French francs (1,000 FF or KF) unless indicated otherwise.
All companies included in the consolidation and combination have a twelve
month period ending December 31, 1994.
Goodwill arising on various acquisitions has been recorded as goodwill in
the balance sheet, and is being amortized over a period of five to twenty years,
except for the goodwill on the acquisition of the Faco shares, which has been
capitalized and which is not being depreciated. This is justified by the value
of the intangible elements of Faco, such as "Know How" and patent rights.
The financial statements of foreign subsidiaries included in the
consolidation and combination have been translated to French francs using the
year-end closing rate method. The resulting exchange difference on the opening
equity is excluded from net income and is included in a separate component of
Stockholders' Equity. The exchange rates used were as follows:
DEC. 31, 1994
-------------
Belgian franc......................................... 0.1680
Pound sterling........................................ 8.3500
German mark........................................... 3.4500
Swiss franc........................................... 4.0800
Spanish peseta........................................ 0.0406
Dutch guilder......................................... 3.0800
The closing rate method has been consistently applied in the past and the
impact on the translation of opening stockholders' equity amounts to 268 KF.
1.2 ACCOUNTING POLICIES AND VALUATION METHODS
The financial statements have been prepared in accordance with accounting
principles generally accepted in France.
F-21
<PAGE>
Property, plant and equipment is depreciated over the following useful
lives, computed primarily on the straight-line method, which has been
consistently applied in the past:
Buildings.......................................... 20 to 25 years
Commercial fittings................................ 5 to 10 years
Plant and machinery................................ 3 to 5 years
Vehicles........................................... 3 to 5 years
Office equipment................................... 3 to 10 years
Office furniture................................... 3 to 10 years
Inventory is carried at the lower of cost, with cost determined on a
weighted average historical cost, or its net realizable value.
Deferred taxation is calculated using the liability method, however deferred
tax assets on recoverable losses and on deferred depreciation have not been
taken into account.
Revenues are recognised when the sale is consummated which coincides with
the shipments of goods.
Gains and losses arising from the Revenues are recognised when the sale is
consummated which coincides with the shipments of goods.
2. INFORMATION CONCERNING THE COMPANIES INCLUDED IN THE COMBINED FINANCIAL
STATEMENTS
BaByliss S.A., a company with common stock with a nominal value of 2,229 KF
owns the following participating interests in the following companies as at
December 31, 1994:
Faco S.A., a company governed by Belgian law, with common
stock with a nominal value of 25,000,000 Belgian francs,
registered office 25, Avenue de l'Independance, Wandre,
Belgium....................................................... 59.36%
BaByliss UK Limited, a company governed by English law, with
common stock with a nominal value of 80,000 Pounds sterling,
registered office Mill Lane, Alton, Hampshire................. 69%
BaByliss Germany GmbH, a company governed by German law, with
common stock with a nominal value of 100,000 German marks
registered office at Dusseldorf, Germany...................... 75%
Sofac S.A., a company governed by French law, with common
stock with a nominal value of 2,000 KF, registered office
Rue Louis Dacquin, 59200 Rouvignies......................... 100%
Nyhar B.V., a company governed by Dutch law, with common stock
with a nominal value of 50,000 Dutch guilders, registered
office at Breda, The Netherlands.............................. 75%
BaByliss Spain, a company governed by Spanish law, with common
stock with a nominal value of 20,000,000 Spanish pesetas...... 50%
Continental Products S.A., a company governed by French law,
with common stock with a nominal value of 500 KF.............. 49.5%
F-22
<PAGE>
The above mentioned companies were already included in the consolidation of
the BaByliss S.A. group as at December 31, 1993, with the exception of the
following two companies:
50% of the outstanding shares of Nyhar B.V. were acquired in 1994. The
results of Nyhar B.V. have been consolidated for 25% for the period up to
and including the date of the additional acquisition and for 75% for the
remaining period up to and including December 31, 1994.
25.2% of the outstanding shares of Sofac S.A. were acquired in 1994. The
results of Sofac S.A. have been consolidated for 74.8% for the period up to
and including the date of the additional acquisition and for 100% for the
remaining period up to and including December 31, 1994.
The combined financial statements include the above mentioned consolidated
financial statements of BaByliss S.A. as well as the consolidated financial
statements of Cristal S.A. (a company governed by Swiss law, with common stock
with a nominal value of SF 50,000) with Blitog SA (a company governed by Swiss
law, with common stock with a nominal value of SF 50,000), which is owned by
Cristal S.A. for 100%.
3. ANALYSIS OF THE BALANCE SHEET--ASSETS
3.1 CASH AND MARKETABLE SECURITIES
'000 FF
-------
BaByliss S.A....................................................... 3,364
Nyhar.............................................................. 1,450
Blitog............................................................. 1,239
Faco............................................................... 605
Continental Products............................................... 489
BaByliss Spain..................................................... 495
Cristal............................................................ 317
BaByliss UK........................................................ 228
BaByliss Germany................................................... 111
Sofac.............................................................. 29
Cash transfer (in progress)........................................ 1,136
-------
TOTAL........................................................ 9,463
-------
-------
3.2 ACCOUNTS RECEIVABLE
'000 FF
-------
The net book value of trade receivables, after recording
allowances for doubtful receivables of 1,428 KF, is............. 86,782
-------
-------
All inter-company accounts receivable have been eliminated.
3.3 INVENTORIES
'000 FF
-------
Inventories amount to............................................. 82,691
Less an allowance for slow moving and obsolete inventory.......... (4,670)
-------
Giving a net book value of........................................ 78,021
-------
-------
Profits included in the inventories as at December 31, 1994 resulting from
inter-company transactions have been eliminated.
F-23
<PAGE>
3.4 PREPAID EXPENSES AND OTHER SHORT TERM RECEIVABLES
'000 FF
-------
These items comprise:
Other Short Term Receivables
(after elimination of inter company items)..................... 4,707
and prepaid expenses for:
BaByliss UK...................................................... 1,905
BaByliss S.A..................................................... 1,502
Nyhar B.V........................................................ 496
Cristal.......................................................... 385
BaByliss Germany................................................. 276
Faco............................................................. 132
Blitog........................................................... 33
Sofac............................................................ 18
-------
TOTAL........................................................ 9,454
-------
-------
3.5 DEFERRED INCOME TAXES
Deferred income taxes resulting from temporary differences between the
accounting and tax profit calculation have been taken into account at the
nominal tax rates prevailing as at December 31, 1994, in each of the individual
countries. The deferred tax asset has not been offset with the deferred tax
liability. In calculating the deferred tax asset, carryforward losses and
deferred depreciation have not been taken into account.
'000 FF
-------
As at December 31, 1994 the deferred tax asset amounts to.......... 701
-------
-------
3.6 PROPERTY PLANT AND EQUIPMENT
'000 FF
--------
As at December 31, 1994 the gross investment in Property Plant
and Equipment amounts to....................................... 58,722
The accumulated depreciation as of that date amounts to.......... (38,414)
--------
Resulting in a net book value of................................. 20,308
--------
--------
3.7 INVESTMENTS IN AFFILIATED COMPANIES
'000 FF
-------
The investments in affiliated companies represent a minority
participating interest of BaByliss UK, valued at its
acquisition costs of............................................. 1
-
-
3.8 UNAMORTIZED GOODWILL
Goodwill arising on various other acquisitions has been recorded as goodwill
in the balance sheet, and is being amortized over a period of five to twenty
years, except for the goodwill on the acquisition of
F-24
<PAGE>
the Faco shares, which has been capitalized and which is not being amortized.
This is justified by the value of the intangible elements of Faco, such as "Know
How" and patent rights.
'000 FF
-------
As at December 31, 1994 the net book value of this
goodwill amounts to.............................................. 7,295
-------
-------
3.9 DEFERRED EXPENSES AND OTHER ASSETS
'000 FF
-------
The deferred expenses and other assets consist of:
Capitalised Research & Development expenses...................... 1,152
Long term receivables............................................ 378
Expenses to be deferred over a period of maximum 5 years......... 314
Miscellaneous other assets....................................... 779
-------
TOTAL........................................................ 2,623
-------
-------
4. ANALYSIS OF THE BALANCE SHEET--LIABILITIES AND STOCKHOLDERS' EQUITY
4.1 OTHER CURRENT LIABILITIES
'000 FF
-------
The other current liabilities include:
Tax and social security liabilities............................. 21,091
Provision for guarantees........................................ 4,584
Provision for risks and charges................................. 1,760
-------
TOTAL....................................................... 27,435
-------
-------
4.2 LONG TERM DEBT
The long term debt includes debt with a repayment date of more than 5 years
of 1,452 KF.
'000 FF
-------
As at December 31, 1994 the total of long term debt amounts to.... 17,830
-------
-------
4.3 DEFERRED INCOME TAXES
Deferred income taxes resulting from temporary differences between the
accounting and tax profit calculation have been taken into account at the
nominal tax rates prevailing as at December 31, 1994, in each of the individual
countries. The deferred tax liability has not been offset with the deferred tax
asset.
'000 FF
-------
As at December 31, 1994 the deferred tax liability amounts to...... 35
--
--
F-25
<PAGE>
4.4 MINORITY INTERESTS
'000 FF
-------
The breakdown of the minority interests as at December 31, 1994
is as follows:
Faco............................................................. 5,539
BaByliss UK...................................................... 2,050
Nyhar............................................................ 1,723
BaByliss Spain................................................... 563
BaByliss Germany................................................. 251
Continental Products............................................. (400)
-------
TOTAL........................................................ 9,726
-------
-------
4.5 STOCKHOLDERS' EQUITY
'000 FF
-------
Shareholder's equity amounts to........................... 84,784
-------
-------
This amount includes the Common Stock of:
BaByliss S.A............................................ 2,229
Cristal................................................. 204
-------
TOTAL............................................... 2,433
The Cumulative Translation Adjustment represents the
translation differences on the opening equities of the
foreign subsidiaries.................................... (958)
The Retained Earnings on a combined basis amount to....... 83,309
-------
TOTAL............................................... 84,784
-------
-------
5. INCOME STATEMENT
5.1 NET SALES
'000 FF
-------
Net sales for the year, after eliminating inter-group sales,
amount to........................................................ 402,252
The split up of these sales by company in a percentage of
net sales is as follows:
France............................................................. 41%
The Netherlands.................................................... 17%
Belgium............................................................ 14%
United Kingdom..................................................... 13%
Germany............................................................ 12%
Spain.............................................................. 2%
Switzerland........................................................ 1%
Cost of Sales amounts to 248,711 KF, resulting in a gross margin of 153,541
KF or 38%.
5.2 PERSONNEL COSTS
Consolidated personnel costs in 1994 amount to 48,247 KF.
F-26
<PAGE>
The average number of employees for the years ended December 31, 1994 is as
follows:
1994
----
BaByliss S.A......................................................... 63
Faco................................................................. 70
BaByliss UK.......................................................... 16
BaByliss Germany..................................................... 15
Sofac................................................................ 17
Nyhar................................................................ 17
BaByliss Spain....................................................... 4
----
TOTAL.......................................................... 202
----
----
5.3 EXTRAORDINARY PROFIT (LOSS)
'000 FF
-------
Exceptional charge for corporate income tax on disallowed royalty
expenses for BaByliss Germany..................................... (1,015)
Minority interest on the results of Nyhar before the acquisition
of the majority of the outstanding shares....................... (1,993)
Other exceptional charges......................................... (1,037)
Exceptional income on the cession of the shares of the former
group company Harny............................................. 215
Correction of minority interests Continental Products and Sofac... 625
Other exceptional income.......................................... 737
Exceptional income Cristal........................................ 1,608
-------
Total Extraordinary Profit (Loss)........................... (860)
-------
-------
5.4 INCOME TAXES
The income tax charge for the year ended December 31, 1994 amounts to 10,995
KF and the deferred tax charge on temporary differences amounts to 364 KF.
6. COMMITMENTS AND CONTINGENCIES
'000 FF
-------
Commitments given
Commitments in respect of capital leases (plant and
equipment)........................................................ 754
Commitments in respect of capital leases (real estate).......... 22,809
Unmatured discounted bills...................................... 6,537
Guarantee for trading goodwill Faco............................. 15,086
Mortgage over building.......................................... 5,645
Pledge over vehicle............................................. 1,008
-------
TOTAL....................................................... 51,839
-------
-------
Commitments received
Personal guarantees from Board members.......................... 1,800
Commitments in respect of capital leases (real estate).......... 17,500
Commitments in respect of capital leases (plant and
equipment)........................................................ 202
Bank guarantee given............................................ 42
-------
TOTAL....................................................... 19,544
-------
-------
F-27
<PAGE>
7. COMBINED STATEMENT OF CASH FLOWS
('000 FRENCH FRANCS)
<TABLE>
<CAPTION>
1994
------------------
<S> <C>
Net income attributable to the Group..................................... 19,328
Depreciation and amortization............................................ 7,682
Provisions and allowances................................................ 7,872
Reversal of depreciation, amortization, provisions and allowances........ (8,036)
Gains on disposals of non-current assets................................. (83)
Minority interests in net income for the year............................ 1,044
Deferred taxation........................................................ (364)
-------
Cash generated from operations....................................... 27,443
-------
Change in inventories.................................................... (11,471)
Change in trade receivables.............................................. (22,419)
Change in other receivables.............................................. (1,002)
Change in trade payables................................................. 7,379
Change in tax and social security liabilities............................ 8,335
Change in other liabilities.............................................. (503)
-------
Change in operating receivables and payables......................... (19,681)
-------
Net cash generated by operations..................................... 7,762
-------
Acquisition of intangible assets......................................... (5,910)
Acquisition of property, plant and equipment............................. (8,196)
Change in deferred charges............................................... 220
-------
Acquisition of non-current assets and deferred charges............... (13,886)
-------
Disposal of property, plant and equipment................................ 4,332
Disposal of long-term investments........................................ 683
-------
Disposal of non-current assets....................................... 5,015
Change in long-term loans payable........................................ 9,327
-------
Net cash generated by investing activities........................... 456
-------
Impact of foreign exchange movements..................................... (658)
Impact of changes in minority interests on reserves...................... (1,553)
Impact of changes in companies included in the consolidation............. 533
-------
Total................................................................ (1,678)
-------
Total change in net cash position.................................... 6,540
-------
-------
Change in cash........................................................... (2,911)
Change in short-term loans payable....................................... 9,451
-------
Total change in net cash position.................................... 6,540
-------
-------
</TABLE>
8. EVENTS AFTER BALANCE SHEET DATE
As at February 18, 1995 all the common stock of BaByliss S.A. and Cristal
S.A. have been acquired by the American Company, Conair Corporation.
F-28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY U.S. UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
-------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary................... 3
The Company.......................... 6
Investment Considerations............ 6
Use of Proceeds...................... 10
Dividend Policy...................... 10
Capitalization....................... 11
Dilution............................. 12
Selected Financial Information....... 13
Unaudited Pro Forma As Adjusted
Condensed Financial Statements....... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations........................ 18
Business............................. 23
Management........................... 36
Certain Transactions................. 43
Principal Stockholder................ 44
Description of Capital Stock......... 44
Underwriting......................... 50
Legal Matters........................ 52
Experts.............................. 52
Available Information................ 53
Index to Consolidated Financial
Statements........................... F-1
UNTIL , 1995 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
8,700,000 SHARES
CONAIR CORPORATION
CLASS A COMMON STOCK
----------------
PROSPECTUS
----------------
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[INTERNATIONAL PROSPECTUS--ALTERNATE PAGES]
SUBJECT TO COMPLETION, DATED APRIL 17, 1995
PROSPECTUS
8,700,000 SHARES
CONAIR CORPORATION
CLASS A COMMON STOCK
All of the shares of Class A Common Stock (the "Shares") offered hereby are
being sold by Conair Corporation, a Delaware corporation (the "Company"). Of
these Shares, shares (the "International Shares") are being offered
outside the United States (the "International Offering") by the Managers and
shares (the "U.S. Shares") are being offered concurrently in the United
States (the "U.S. Offering") by the U.S. Underwriters. The public offering price
and the underwriting discounts and commissions are identical for both the
International Offering and the U.S. Offering (collectively, the "Offering").
Prior to this Offering, there has been no public market for the Class A
Common Stock. It is currently anticipated that the initial public offering price
will be between $ and $ per Share. See "Underwriting" for a discussion
of the factors considered in determining the initial public offering price. The
Company intends to apply for the listing of the Class A Common Stock on the New
York Stock Exchange under the symbol " ".
The Company has two classes of authorized Common Stock, Class A Common
Stock, which is offered hereby, and Class B Common Stock. Holders of shares of
Class A Common Stock are entitled to one vote per share and holders of shares of
Class B Common Stock are entitled to ten votes per share. The holders of shares
of Class A Common Stock are entitled to vote separately as a class to elect 25%
of the entire Board of Directors of the Company. All of the outstanding shares
of Class B Common Stock, which will represent approximately % of the
aggregate voting power of the Company upon completion of this Offering, are
beneficially owned by Mr. Leandro P. Rizzuto, Chairman and President of the
Company.
--------------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER
"INVESTMENT CONSIDERATIONS" IN CONNECTION WITH THE PURCHASE OF THE CLASS A
COMMON STOCK OFFERED HEREBY.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(3)................................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Managers and the U.S. Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses related to this Offering, which are estimated to
be approximately $ .
(3) The Company has granted to the Managers and the U.S. Underwriters 30-day
options to purchase in the aggregate up to 1,300,000 additional Shares
solely to cover over-allotments, if any. If the over-allotment options are
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
--------------
The International Shares are offered by the several Managers, subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
certain conditions. The Managers reserve the right to withdraw, cancel or modify
the International Offering and to reject orders in whole or in part. It is
expected that delivery of the Managers Shares will be made against payment
therefor on or about , 1995, at the offices of Bear, Stearns & Co.
Inc., 245 Park Avenue, New York, New York 10167.
--------------
BEAR, STEARNS INTERNATIONAL LIMITED
MERRILL LYNCH INTERNATIONAL LIMITED
, 1995
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[INTERNATIONAL PROSPECTUS--ALTERNATE PAGES]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY MANAGER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
-------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary................... 3
The Company.......................... 6
Investment Considerations............ 6
Use of Proceeds...................... 10
Dividend Policy...................... 10
Capitalization....................... 11
Dilution............................. 12
Selected Financial Information....... 13
Unaudited Pro Forma As Adjusted
Condensed Financial Statements..... 14
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.......... 18
Business............................. 23
Management........................... 36
Certain Transactions................. 43
Principal Stockholder................ 44
Description of Capital Stock......... 44
Underwriting......................... 50
Legal Matters........................ 52
Experts.............................. 52
Available Information................ 53
Index to Consolidated Financial
Statements........................... F-1
UNTIL , 1995 (25 DAYS AFTER INTERNATIONAL LIMITED
THE DATE OF THIS PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
8,700,000 SHARES
CONAIR CORPORATION
CLASS A COMMON STOCK
----------------
PROSPECTUS
----------------
BEAR, STEARNS
INTERNATIONAL LIMITED
MERRILL LYNCH
INTERNATIONAL LIMITED
, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses incurred by the
Registrant in connection with the sale and distribution of the securities being
registered hereby, other than underwriting discounts and commissions. All
amounts are estimated except the Securities and Exchange Commission registration
fee and the New York Stock Exchange listing fee.
AMOUNT
-------
SEC registration fee............................................. $55,172
NASD filing fee.................................................. 16,500
New York Stock Exchange listing fee..............................
Blue Sky fees and expenses....................................... 15,000
Accounting fees and expenses.....................................
Legal fees and expenses..........................................
Printing and engraving expenses..................................
Registrar and transfer agent's fees..............................
Miscellaneous fees and expenses..................................
-------
Total........................................................ $
-------
-------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "Delaware GCL")
permits the Registrant's board of directors to indemnify any person against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding in which such person
is made a party by reason of his being or having been a director, officer,
employee or agent of the Registrant, in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act"). The statute provides that indemnification pursuant to
its provisions is not exclusive of other rights of indemnification to which a
person may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors, or otherwise.
The Registrant's Restated Certificate of Incorporation and By-laws provides
for indemnification of its directors and officers to the fullest extent
permitted by law.
As permitted by sections 102 and 145 of the Delaware GCL, the Registrant's
Restated Certificate of Incorporation eliminates a director's personal liability
for monetary damages to the Registrant and its stockholders arising from a
breach or alleged breach of a director's fiduciary duty except for liability
under section 174 of the Delaware GCL or liability for any breach of the
director's duty of loyalty to the Registrant or its stockholders, for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law or for any transaction which the director derived an improper
personal benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In October 1992, the Registrant sold 5,000 shares of its Series A
Convertible Preferred Stock to the Profit Sharing Plan of the Registrant at a
price of $1,000 per share. These shares were issued without registration under
the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) The exhibits listed in the following Exhibit Index are filed as part of
the Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------
<C> <S>
1.1***** --Form of U.S. Underwriting Agreement
1.2***** --Form of International Underwriting Agreement
3.1***** --Amended and Restated Certificate of Incorporation of the Company
3.2***** --By-Laws of the Company
4.1***** --Form of Certificate for Class A Common Stock
4.2*** --Amended and Restated Credit Agreement among the Company, Continental Conair
Limited and the banking institutions named therein dated October 1, 1994
4.3*** --First Amendment to the Amended and Restated Credit Agreement among the Company,
Continental Conair Limited and the banking institutions named therein dated
February 17, 1995
5.1***** --Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
10.1**** --Conair Corporation Employees and Directors Stock Plan
10.2** --Employment Agreement between Conair Corporation and Leandro P. Rizzuto dated
June 20, 1985.
10.3**** --Contract of Sale between Leandro P. Rizzuto and the Company dated March 14,
1994.
10.4**** --Lease between the Company and Leandro P. Rizzuto dated March 14, 1994
10.5*** --English translation of original French language Stock Purchase Agreement dated
January 22, 1995 between the Company and Jean-Pierre Feldblum
10.6*** --English translation of original French language Stock Purchase Agreement dated
January 22, 1995 between the Company and Financiere de l'Europe Occidentale
10.7*** --English translation of original French language amendment dated February 18,
1995 to Stock Purchase Agreement dated January 22, 1995 between the Company and
Financiere de l'Europe Occidentale
11.1***** --Statement regarding computation of per share earnings
21.1* --(Revised) Subsidiaries of the Company
23.1* --Consent of Deloitte & Touche LLP
23.2* --Consent of Deloitte Touche Tohmatsu
23.3* --Consent of Albert Almeras and Pierre Loeper
23.4 --Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in its opinion
filed as Exhibit 5.1)
</TABLE>
- ------------
* Filed herewith.
** Incorporated herein by reference to exhibits to Amendment No. 2 to the
Registrant's S-1 Registration Statement dated June 13, 1985 (File No.
2-97868).
*** Incorporated herein by reference to exhibits to the Company's Current
Report on Form 8-K (File No. 1-8919).
**** Previously filed.
***** To be filed by amendment.
(b) Index to financial statement schedule.
Schedule II--Valuation and Qualifying Accounts
II-2
<PAGE>
All other schedules have been omitted because they are not required or
because the required information is contained in the financial statements or the
notes thereto.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) It will provide to the Underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Stamford,
State of Connecticut, on the 17th day of April 1995.
CONAIR CORPORATION
By: /s/ RICHARD A. MARGULIES
..................................
Richard A. Margulies
Vice President, Legal
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------ -------------------------------------- ---------------
<C> <S> <C>
* Chairman of the Board and President April 17, 1995
.................................... (Principal Executive Officer) and
(Leandro P. Rizzuto) Director
* Senior Vice President, Finance April 17, 1995
.................................... (Principal Financial Officer and
(Patrick P. Yannotta) Principal Accounting Officer)
* Director April 17, 1995
....................................
(Melvin L. Braun)
* Director and Executive Vice President April 17, 1995
....................................
(Maurice Lucas)
* Director April 17, 1995
....................................
(John P. Lomenzo)
* Director April 17, 1995
....................................
(Walter Margulies)
* Director April 17, 1995
....................................
(David Sommer)
* Director April 17, 1995
....................................
(Uzi Zucker)
</TABLE>
*By: /s/ RICHARD A. MARGULIES
.........................
Richard A. Margulies
Attorney-in-Fact
II-4
<PAGE>
SCHEDULE II
CONAIR CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------- ------------ ----------------------------------- ----------------- ----------
ADDITIONS
(1) (2)
-----------------------------------
CHARGED TO CHARGED TO
BALANCE PROFIT AND LOSS OTHER DEDUCTIONS FROM BALANCE AT
DESCRIPTION AT BEGINNING OR INCOME ACCOUNTS--DESCRIBE RESERVES--DESCRIBE END
- -------------------------------- ------------ --------------- ----------------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful
accounts........................ $1,337,000 $ 427,000 $-- $ 306,000(A) $1,458,000
------------ --------------- ------- ----------------- ----------
------------ --------------- ------- ----------------- ----------
Accrued sales returns........... $5,951,000 $20,175,000 $-- $17,382,000 $8,744,000(B)
------------ --------------- ------- ----------------- ----------
------------ --------------- ------- ----------------- ----------
YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful
accounts........................ $1,370,000 $ 727,000 $-- $ 760,000(A) $1,337,000
------------ --------------- ------- ----------------- ----------
------------ --------------- ------- ----------------- ----------
Accrued sales returns........... $5,559,000 $12,132,000 $-- $11,740,000 $5,951,000(B)
------------ --------------- ------- ----------------- ----------
------------ --------------- ------- ----------------- ----------
YEAR ENDED DECEMBER 31, 1992
Allowance for doubtful
accounts........................ $1,375,000 $ 425,000 $-- $ 430,000(A) $1,370,000
------------ --------------- ------- ----------------- ----------
------------ --------------- ------- ----------------- ----------
Accrued sales returns........... $6,167,000 $13,663,000 $-- $14,271,000 $5,559,000(B)
------------ --------------- ------- ----------------- ----------
------------ --------------- ------- ----------------- ----------
</TABLE>
- ------------
<TABLE>
<C> <S>
(A) Accounts considered uncollectible and charged against reserve--net of recoveries.
(B) Deducted from accounts receivable.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
-----------------
SEQUENTIAL PAGE
EXHIBITS NUMBER
- -------- ---------------
<C> <S> <C>
1.1***** --Form of U.S. Underwriting Agreement
1.2***** --Form of International Underwriting Agreement
3.1***** --Amended and Restated Certificate of Incorporation of the Company
3.2***** --By-Laws of the Company
4.1***** --Form of Certificate for Class A Common Stock
4.2*** --Amended and Restated Credit Agreement among the Company, Continental Conair
Limited and the banking institutions named therein dated October 1, 1994
4.3*** --First Amendment to the Amended and Restated Credit Agreement among the Company,
Continental Conair Limited and the banking institutions named therein dated
February 17, 1995
5.1***** --Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
10.1**** --Conair Corporation Employees and Directors Stock Plan
10.2** --Employment Agreement between Conair Corporation and Leandro P. Rizzuto dated
June 20, 1985.
10.3**** --Contract of Sale between Leandro P. Rizzuto and the Company dated March 14,
1994.
10.4**** --Lease between the Company and Leandro P. Rizzuto dated March 14, 1994
10.5*** --English translation of original French language Stock Purchase Agreement dated
January 22, 1995 between the Company and Jean-Pierre Feldblum
10.6*** --English translation of original French language Stock Purchase Agreement dated
January 22, 1995 between the Company and Financiere de l'Europe Occidentale
10.7*** --English translation of original French language amendment dated February 18,
1995 to Stock Purchase Agreement dated January 22, 1995 between the Company and
Financiere de l'Europe Occidentale
11.1***** --Statement regarding computation of per share earnings
21.1* --(Revised) Subsidiaries of the Company
23.1* --Consent of Deloitte & Touche LLP
23.2* --Consent of Deloitte Touche Tohmatsu
23.3* --Consent of Albert Almeras and Pierre Loeper
23.4 --Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in its opinion
filed as Exhibit 5.1)
</TABLE>
- ------------
* Filed herewith.
** Incorporated herein by reference to exhibits to Amendment No. 2 to the
Registrant's S-1 Registration Statement dated June 13, 1985 (File No.
2-97868).
*** Incorporated herein by reference to exhibits to the Company's Current
Report on Form 8-K (File No. 1-8919).
**** Previously filed.
***** To be filed by amendment.
<TABLE>
<CAPTION>
Exhibit 21.1
------------
SUBSIDIARIES OF THE COMPANY
---------------------------
Jurisdiction of
Name of Subsidiary Incorporation
------------------ -----------------
<S> <C>
Babyliss, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
Conair Consumer Products Inc. . . . . . . . . . . . . . . . . . . . . . Ontario, Canada
Conair Costa Rica, S.A. . . . . . . . . . . . . . . . . . . . . . . . . Costa Rica
Conair Japan Corporation . . . . . . . . . . . . . . . . . . . . . . . Japan
Conair UK Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . England and Wales
Continental Conair Limited . . . . . . . . . . . . . . . . . . . . . . Hong Kong
Continental Products, S.A. . . . . . . . . . . . . . . . . . . . . . . France
Cristal Gesellschaft fur Beteiligungen
und Finanzierungen S.A. . . . . . . . . . . . . . . . . . . . . . . Switzerland
Cuisinarts-Sanyei Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . Japan
HERC Consumer Products, LLC . . . . . . . . . . . . . . . . . . . . . . Illinois
Rusk, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California
</TABLE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Stockholders of
CONAIR CORPORATION
East Windsor, New Jersey
We consent to the use in Amendment No. 1 to Registration Statement No.
33-90648 of Conair Corporation on Form S-1 of our report dated February 11, 1995
(February 28, 1995 as to Note 15), appearing in the Prospectus, which is a part
of such Registration Statement, and to the references to us under the headings
"Selected Financial Information" and "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of Conair Corporation,
listed in Item 16(b). This financial statement schedule is the responsibility of
the Corporation's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Deloitte & Touche LLP
New York, New York
April 17, 1995
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders of
CONAIR CORPORATION
East Windsor, New Jersey
We consent to the use in Amendment No. 1 to Registration Statement No. 33-90648
of Conair Corporation on Form S-1 of our report dated April 7, 1995, appearing
in the Prospectus, which is a part of such Registration Statement, and to the
references to us under the heading "Experts" in such Prospectus.
Deloitte Touche Tohmatsu
International Reporting Auditors
Paris, France
April 17, 1995
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders of
CONAIR CORPORATION
East Windsor, New Jersey
We consent to the use in Amendment No. 1 to Registration Statement No. 33-90648
of Conair Corporation on Form S-1 of our report dated April 7, 1995, appearing
in the Prospectus, which is a part of such Registration Statement, and to the
references to us under the heading "Experts" in such Prospectus.
Albert ALMERAS and Pierre LOEPER
French Statutory Auditors
Paris, France
April 17, 1995
