SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER
33-7264
FIRST BRANDS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1171404
State of Incorporation (IRS Employer
Identification No.)
83 Wooster Heights Rd., Building 301
P.O. Box 1911
Danbury, Connecticut 06813-1911
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-731-2300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS Outstanding at December, 31 1994
---------------------------- --------------------------------
Common Stock, $.01 par value 20,975,857 shares
<PAGE>
FIRST BRANDS CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Income
For the Three Month Periods
Ended December 31, 1994 and 1993 ......................................... 3
Consolidated Condensed Statements of Income
For the Six Month Periods
Ended December 31, 1994 and 1993 ......................................... 4
Consolidated Condensed Balance Sheets -
December 31, 1994 and June 30, 1994 ...................................... 5
Consolidated Condensed Statement of Stockholders'
Equity - For the Six Month Period
Ended December 31, 1994 .................................................. 6
Consolidated Condensed Statements of Cash
Flows - For the Six Month Periods
Ended December 31, 1994 and 1993 ......................................... 7
Notes to Consolidated Condensed Financial
Statements ............................................................. 8-10
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition ...................... 11-13
Independent Accountants' Report ........................................... 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ................................................. 15
Items 2 - 6 ............................................................... 15
SIGNATURE ................................................................. 19
</TABLE>
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<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1994 1993
----------- ------------
(in thousands - except per share amounts)
<S> <C> <C>
Net sales .......................................... $ 233,008 $ 270,393
Cost of goods sold ............................... 143,781 166,722
Selling, general and
administrative expenses ......................... 59,178 63,160
Amortization and other depreciation .............. 3,836 5,462
Interest expense and amortization of debt discount
and expense .................................... 4,573 5,880
Discount on sale of receivables .................. 742 1,019
Other income (expense), net ...................... (591) (267)
---------- ----------
Income before provision for income taxes
and extraordinary loss ........................... 20,307 27,883
Provision for income taxes ......................... 8,465 11,491
---------- ----------
Income before extraordinary loss ................... 11,842 16,392
Extraordinary loss relating to the repurchase
of subordinated note, net of taxes ............... (4,493) --
---------- ----------
Net income ......................................... $ 7,349 $ 16,392
========== ==========
Net income per common share and common
equivalent share (Note 6):
Income before extraordinary loss......... $ 0.55 $ 0.74
Extraordinary loss............................. (0.21) --
-------- -------
Net income..................................... $ 0.34 $ 0.74
======= =======
Weighted average common and common
equivalent shares outstanding (Note 6) .......... 21,449 22,162
====== ======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1994 1993
----------- ------------
(in thousands - except per share amounts)
<S> <C> <C>
Net sales .......................................... $ 497,175 $ 550,206
Cost of goods sold ............................... 304,607 339,780
Selling, general and
administrative expenses ......................... 126,339 128,452
Amortization and other depreciation .............. 8,118 10,612
Interest expense and amortization of debt discount
and expense .................................... 9,540 11,770
Discount on sale of receivables .................. 1,936 2,024
Other income (expense), net ...................... (242) (288)
---------- ----------
Income before provision for income taxes
and extraordinary loss ........................... 46,393 57,280
Provision for income taxes ......................... 19,477 24,516
---------- ----------
Income before extraordinary loss ................... 26,916 32,764
Extraordinary loss relating to the repurchase
of subordinated note, net of taxes ............... (4,493) --
---------- ----------
Net income ......................................... $ 22,423 $ 32,764
========== ==========
Net income per common share and common
equivalent share (Note 6):
Income before extraordinary loss................ $ 1.24 $ 1.48
Extraordinary loss.............................. (.21) --
------- ------
Net income...................................... $ 1.03 $ 1.48
====== ======
Weighted average common and common
equivalent shares outstanding (Note 6) ............. 21,751 22,097
====== ======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
(in thousands) 1994 1994
------------------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash and cash equivalents .......................... $ 20,462 $ 13,384
Accounts and notes receivable - net ................ 103,173 89,769
Inventories ........................................ 145,397 155,737
Deferred tax assets ................................ 33,330 26,239
Prepaid expenses ................................... 4,995 5,756
----------- -----------
Total current assets ............................. 307,357 290,885
Property, plant and equipment (net of accumulated
depreciation of $81,966 and $87,584) ............. 266,683 266,357
Patents, trademarks, proprietary technology
and other intangibles (net of accumulated
amortization of $165,390 and $193,429) ........... 204,020 232,666
Deferred charges and other assets (net of
accumulated amortization of $49,440 and $48,479) . 29,587 24,077
----------- -----------
Total assets ............................. $ 807,647 $ 813,985
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable ...................................... $ 518 $ 156
Current maturities of long-term debt ............... 48 48
Accrued income and other taxes ..................... 29,225 35,640
Accounts payable ................................... 42,171 60,510
Accrued liabilities ................................ 138,193 141,753
----------- -----------
Total current liabilities ..................... 210,155 238,107
Long-term debt ..................................... 182,673 153,430
Deferred taxes payable ............................. 55,423 44,177
Deferred gain on sale of assets .................... 3,341 5,393
Other long-term obligations ........................ 13,543 12,148
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value, 10,000,000
shares authorized; none issued ................... -- --
Common stock, $0.01 par value,
50,000,000 shares authorized; issued
22,027,857 shares at December 31, 1994
and 22,005,656 shares at June 30, 1994 ........... 220 220
Capital in excess of par value ..................... 117,572 117,085
Cumulative foreign currency translation adjustment . (7,048) (4,542)
Common stock in treasury, at cost; 1,052,000 shares (34,793) --
Retained earnings .................................. 266,561 247,967
----------- -----------
Total stockholders' equity .................... 342,512 360,730
----------- -----------
Total liabilities and stockholders' equity . $ 807,647 $ 813,985
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
Capital Foreign
Common in Excess Currency
Stock of Par Translation Treasury Retained
(in thousands) Par Value Value Adjustment Stock Earnings Total
--------- --------- ----------- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance as of
June 30, 1994 ........ $ 220 $ 117,085 $ (4,542) -- $ 247,967 $ 360,730
Exercise of
Stock Options ........ -- 487 -- -- -- 487
Common Stock
Dividends ............ -- -- -- -- (3,829) (3,829)
Purchase of
Treasury Stock ....... -- -- -- (34,793) -- (34,793)
Net Income ............ -- -- -- -- 22,423 22,423
Foreign Currency
Translation Adjustment -- -- (2,506) -- -- (2,506)
--------- --------- --------- --------- --------- ---------
Balance as of
December 31, 1994 .... $ 220 $ 117,572 $ (7,048) $ (34,793) $ 266,561 $ 342,512
========= ========= ========= ========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
(in thousands) 1994 1993
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income ..................................... $ 22,423 $ 32,764
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................ 22,143 21,027
Deferred income taxes ........................ 4,215 9,240
Loss on repurchase of subordinated note ...... 7,463 --
Gain on sale of antifreeze and car care business (4,202) --
Change in certain non-cash current assets and liabilities, net of effect of
businesses sold and acquired:
(Increase) in accounts receivable ............ (23,177) (10,590)
(Increase) Decrease in inventories ........... (26,086) 10,705
Decrease in prepaid expenses ................. 1,095 2,354
(Decrease) Increase in accrued income
and other taxes ............................ (6,448) 3,063
(Decrease) in accounts payable ............... (7,887) (56,683)
Increase (Decrease) in accrued liabilities ... 9,859 (10,297)
Other changes .................................. (2,163) (513)
---------- ----------
Total adjustments .......................... (25,188) (31,694)
---------- ----------
Net cash provided (used) for operating activities (2,765) 1,070
---------- ----------
Cash flows from investing activities:
Capital expenditures .......................... (14,805) (12,298)
Acquisition of leased assets .................. (13,240) --
Proceeds from sale of antifreeze/coolant and car
care business, net of note received ......... 142,000 --
Acquisition of assets ......................... (45,195) --
Other ......................................... (4,900) --
---------- ----------
Net cash provided (used) for investing activities 63,860 (12,298)
---------- ----------
Cash flows from financing activities:
Increase in revolving credit borrowings, net . 29,300 5,500
Increase in other borrowings, net ............ 305 9,222
(Decrease) in accounts receivable securitization (45,000) --
Purchase of common stock for treasury ........ (34,793) --
Repayment of term loan ....................... -- (2,379)
Dividends paid ............................... (3,829) (3,069)
---------- ----------
Net cash (used) provided by financing activities . (54,017) 9,274
---------- ----------
Net Increase (Decrease) in cash and cash equivalents 7,078 (1,954)
Cash and cash equivalents at beginning of period . 13,384 11,672
---------- ----------
Cash and cash equivalents at end of period ....... $ 20,462 $ 9,718
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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<PAGE>
FIRST BRANDS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements include all adjustments (all of which were of a normal
recurring nature) necessary to fairly present the results of operations for the
interim periods. Certain prior year amounts have been reclassified to conform
with the current year's presentation. All material intercompany transactions and
balances have been eliminated. Due to the seasonal nature of some of its former
product lines, primarily the PRESTONE antifreeze/coolant and car care business
which was sold on August 26, 1994, the results of operations for the six month
period ended December 31, 1994 are not indicative of the results for a full
year.
First Brands Corporation ("First Brands" or the "Company") is engaged in the
development, manufacture, marketing and sales of consumer products under branded
and private labels. Principal branded products include: GLAD and GLAD-LOCK
(plastic wrap and bags); STP (oil and fuel additives and other specialty
automotive products); SIMONIZ (car waxes and polishes) and SCOOP AWAY, EVER
CLEAN and JONNY CAT (cat litters).
On July 13, 1994, the Company purchased substantially all of the assets of
Excel-Mineral Inc. and Excel International Inc., the manufacturer and marketer
of the JONNY CAT brand of pet care products, for $45,000,000.
On August 26, 1994, the Company sold the PRESTONE antifreeze/coolant and car
care business for $155,000,000 and received $142,000,000 in cash and a
$13,000,000 7 1/2% subordinated debenture maturing in 2003, which for financial
statement purposes has been valued at $9,000,000. The net assets of that
business have been removed from the balance sheet, and a payable representing
the fractional interest of PRESTONE receivables previously sold under the
securitization program (see note 3) was added, resulting in a pre-tax gain of
$4,202,000 which was included in other income (expense), net, in the
Consolidated Condensed Statement of Income. Sales from the PRESTONE business
were $31,684,000 for the period ended August 25, 1994, and $66,294,000 and
$127,245,000 for the quarter and six months ended December 31, 1993,
respectively.
INVENTORIES
Inventories were comprised of:
<TABLE>
<CAPTION>
December 31, June 30,
1994 1994
------------ --------
(in thousands)
<S> <C> <C>
Raw materials .......................... $ 28,088 $ 24,666
Work-in-process ........................ 6,435 5,844
Finished goods ......................... 110,874 125,227
--------- ---------
Total .............................. $ 145,397 $ 155,737
========= =========
</TABLE>
During the six months ended December 31, 1994, the Company purchased with the
Excel acquisition inventories valued at $2,804,000, and sold inventories
totaling $36,490,000 with the divestiture of the PRESTONE business.
-8-
<PAGE>
2. LONG-TERM DEBT
First Brands had long-term debt outstanding as of December 31, 1994 and June 30,
1994 as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1994 1994
------------- ------
(in thousands)
<S> <C> <C>
Senior Debt:
$165,000,000 Revolving Credit Facility,
4 year term expiring December, 1995,
interest at prime rate, LIBOR plus 3/4%
or CD rate plus 7/8%; commitment fee
of .35% on unused portion ............ $ 33,000 $ 3,700
Other .................................. 4,721 4,778
-------- --------
37,721 8,478
Less: current maturities ............... (48) (48)
-------- --------
Senior Debt ........................ 37,673 8,430
-------- --------
Subordinated Debt:
9 1/8% Senior Subordinated Notes Due 1999 100,000 100,000
13 1/4% Subordinated Notes Due 2001 .... 45,000 45,000
-------- --------
Subordinated Debt .................. 145,000 145,000
-------- --------
Total Long Term Debt ........... $182,673 $153,430
======== ========
</TABLE>
The Revolving Credit Facility has no compensating balance requirements, however
it does have restrictive covenants, the most significant of which include the
maintenance of certain minimum levels for the ratio of current assets to current
liabilities, interest coverage and the ratio of total liabilities to equity. On
December 22, 1994, the Company received commitments to finance a new five year
$300,000,000 unsecured revolving credit facility. This new credit facility
contains a .20% commitment fee, and charges interest at LIBOR plus .30%. It also
contains certain covenants which are no more restrictive than the credit
facility it will replace.
The 9 1/8% Notes Indenture has restrictive covenants or limitations on the
payment of dividends, the distribution of capital stock or the redeeming of
capital stock, as well as limitations on Company and subsidiary debt and
limitations on the sale of assets.
On December 29, 1994, the Company signed an agreement to repurchase, at a 15.8%
premium, the $45,000,000 13 1/4% Subordinated Notes on January 4, 1995. The
costs associated with this transaction were accrued as of December 31, 1994, and
accordingly the premium and unamortized issuance costs, net of taxes, are
reflected as an extraordinary loss in the Company's Consolidated Condensed
Statement of Income.
The 13 1/4% Subordinated Note and the outstanding portion of the current
revolving credit facility are classified as long-term debt as of December 31,
1994, reflecting the Company's intent and ability to refinance these borrowings
on a long term basis through the new five year credit facility.
First Brands was in compliance with all the covenants of all debt agreements at
December 31, 1994.
3. ACCOUNTS RECEIVABLE
In May 1992, the Company entered into a $100,000,000 extendable three year
agreement to sell fractional ownership interest, without recourse, in a defined
pool of eligible trade accounts receivable. During the first quarter of fiscal
1995, the Company reduced the amount sold to $40,000,000. Subsequently, the
Company increased the amount sold by $15,000,000 during the second quarter,
bringing the fractional interest sold as of December 31, 1994 to $55,000,000.
The amounts sold are reflected as a reduction in accounts receivable on the
accompanying balance sheet and costs associated with this program are recorded
on the Consolidated Condensed Statement of Income as discount on sale of
receivables.
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<PAGE>
4. NOTES PAYABLE
Notes payable at December 31, 1994 of $518,000 consisted of international
subsidiaries' working capital borrowings with local lenders. The Company's
international working capital credit facilities aggregated $19,468,000 at
December 31, 1994 and are generally secured by the assets of the respective
international subsidiary, with approximately $1,473,000 of the availability at
one subsidiary being guaranteed by First Brands Corporation (U.S.).
5. TAXES
The provision for income tax expense attributable to income before extraordinary
loss for the three and six months ended December 31, 1994 and 1993 consists of
the following:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31, December 31,
--------------- -----------------
1994 1993 1994 1993
---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
Current:
Federal .............. $ 3,076 $ 4,632 $ 11,029 $ 10,937
State ................ 623 1,067 2,548 2,477
Foreign .............. 732 718 1,685 1,862
--------- --------- --------- ---------
Total current ...... 4,431 6,417 15,262 15,276
Deferred:
Federal .............. 3,354 4,196 3,546 7,778
State ................ 733 963 763 1,632
Foreign .............. (53) (85) (94) (170)
--------- --------- --------- ---------
Total deferred ..... 4,034 5,074 4,215 9,240
--------- --------- --------- ---------
Total Provision .. 8,465 $ 11,491 $ 19,477 $ 24,516
========= ========= ========= =========
</TABLE>
6. EARNINGS PER SHARE
Net income per share has been computed using the weighted average number of
common shares and common share equivalents outstanding for the periods.
During the first and second quarters of fiscal 1995, the Company paid to it's
shareholders cash dividends of $ 0.08 and $ 0.10 cents per share, respectively.
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<PAGE>
FIRST BRANDS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis of the consolidated results of operations
for the three and six month periods ended December 31, 1994 should be read in
conjunction with the accompanying unaudited Consolidated Condensed Financial
Statements and related Notes. The Company is primarily engaged in the
development, manufacture, marketing and sale of branded and private label
consumer products for the home and automotive markets. The Company's products
which include "GLAD", "GLAD-LOCK" "STP", "SIMONIZ", "SCOOP AWAY", "EVER CLEAN"
and "JONNY CAT" can be found in large mass merchandise stores, chain
supermarkets and other retail outlets. The Company believes that the significant
market positions occupied by its products are attributable to brand name
recognition, comprehensive product offerings, continued product innovation,
strong emphasis on vendor support and aggressive advertising and promotion.
The PRESTONE antifreeze/coolant and car care business was sold on August 26,
1994. Financial data below includes the operating information related to this
business while it was still a part of the Company. Therefore, comparison of
results of operations between the two time periods should take the effect of the
divested business into consideration.
RESULTS OF OPERATIONS
The following table sets forth the percentages of net sales of the Company
represented by the components of income and expense for the three and six month
periods ended December 31, 1994 and 1993.
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31, December 31,
--------------- ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales ......................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ................ 61.7 61.7 61.3 61.8
----- ----- ---- ----
Gross profit ...................... 38.3 38.3 38.7 38.2
Selling, general, and
administrative expenses ......... 25.4 23.4 25.4 23.3
Amortization and other depreciation 1.6 1.9 1.6 1.9
Interest expense and amortization
of debt discount and expense ..... 2.0 2.2 1.9 2.1
Discount on sale of receivables ... 0.3 0.4 0.4 0.4
Other income (expense), net ....... (0.3) (0.1) (0.1) (0.1)
----- ----- ---- ----
Income before provision for income
taxes and extraordinary loss ..... 8.7 10.3 9.3 10.4
Provision for income taxes ........ 3.6 4.2 3.9 4.4
----- ----- ---- ----
Income before extraordinary loss .. 5.1 6.1 5.4 6.0
Extraordinary loss relating to the
repurchase of subordinated notes,
net of taxes ..................... 1.9 . 0.9 .
----- ----- ---- ----
Net income ........................ 3.2% 6.1% 4.5% 6.0%
===== ===== ==== ====
</TABLE>
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<PAGE>
Quarter and Six Months ended December 31, 1994 Compared to the Quarter and
Six Months ended December 31, 1993
First Brands' consolidated sales for the three month period ended December 31,
1994 were $233,008,000, 86% of last year's $270,393,000, bringing six month
revenues to $497,175,000 versus last year's $550,206,000. The shortfall reflects
only eight weeks of sales during the first quarter of fiscal 1995 for the
PRESTONE antifreeze/coolant and car care business ("the divested business")
which was sold on August 26, 1994, compared to sales from the divested business
for the entire three and six month periods of fiscal 1994. On a proforma basis
(excluding sales from the divested business) fiscal 1995 second quarter sales
were $233,008,000 or 14% above the prior year's comparable sales of
$204,099,000. Sales dollars, quantities and overall market share were up for
each of the major product groups during the quarter. Plastic wrap and bag
product sales increased 5%, automotive specialty and appearance products
increased 12% and the pet product business sales were up 94%. Cat litter sales
for the quarter were significantly ahead of the prior years level due to the new
JONNY CAT business, which was acquired on July 13, 1994. However, even without
the JONNY CAT sales, pet product revenues for the quarter increased 29%.
Proforma sales for the six months were $465,491,000 versus $422,961,000 last
year, an increase of 10%.
Cost of goods sold for the quarter was $143,781,000, 86% of last year's
$166,722,000. Excluding the divested business, cost of goods sold for the
quarter was 19% above the prior year's $121,019,000. Year to date, cost of goods
sold was $304,607,000, 90% of last year's $339,780,000. On a proforma basis
(excluding the divested business) cost of goods sold for the six months was
$283,439,000, 13% above the prior year's $250,452,000. Higher proforma costs for
the three and six month periods were primarily due to increased volumes and
higher resin costs.
Gross profit for the quarter of $89,227,000 (38.3% of sales) was 86% of last
year's $103,671,000 (38.3% of sales). Year to date, gross profit of $192,568,000
(38.7% of sales) was 92% of last year's $210,426,000 (38.2% of sales). Excluding
the divested business, the gross profit for the quarter was 107% of the prior
year's $83,080,000 (40.7% of sales); and the gross profit for six months was
$182,052,000 (39.1% of sales), 106% of the prior year's $172,509,000 (40.8% of
sales). The higher gross profit for the quarter and six months was due to
increased sales volumes, while the lower gross margin resulted from increased
resin costs and sales mix.
Selling, general and administrative expenses were $59,178,000 (25.4% of sales)
for the second quarter, 94% of last year's second quarter. Year to date,
overhead expenses were $126,339,000 (25.4% of sales), 98% of the comparable
period last year. Excluding the divested business, which includes allocations of
corporate overhead to such business, these expenses for the quarter were, 107%
of the prior year's $55,431,000 (27.2% of sales); and year to date expenses were
$118,499,000 (25.5% of sales), 105% of the prior year's $113,311,000 (26.8% of
sales). The major reason for the increase is higher selling expense for the cat
litter business (for both the quarter and six months) because of the recently
acquired JONNY CAT business, and increased marketing expenditures to support the
continued growth of the SCOOP AWAY and EVER CLEAN business. This was partially
offset by lower spending in the plastic wrap and bag business to counter the
lower gross margin caused by resin price increases.
Amortization and other depreciation expense of $3,836,000, was 70% of last
year's three month period, and $8,118,000, 77% of last year's six month period.
This reduction reflects lower amortization expense for fiscal 1995, as certain
intangible assets were either sold to the divested business or were fully
amortized during fiscal 1994, partially offset by slightly higher depreciation
expense during fiscal 1994 due to the write-down of certain fixed assets.
Interest expense of $4,573,000 and $9,540,000 for the three and six month
periods, respectively, was 78% and 81% of prior year levels due to lower debt
levels. Discount on sale of receivables reflects the costs associated with the
sale of a fractional ownership interest, without recourse, in a defined pool of
the Company's eligible trade accounts receivable.
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<PAGE>
The extraordinary loss of $4,493,000 or $0.21 per share for the quarter and six
month period resulted from the premium paid and the write-off of unamortized
debt issuance costs related to the December 29, 1994 agreement to repurchase
$45,000,000 of the Company's Subordinated Notes.
The Company's provision for income taxes for the three and six months was
$8,465,000, 74% of last year, and $19,477,000, 79% of last year, respectively.
The lower tax expense reflects the reduced pre-tax income, and a marginally
higher effective tax rate during the first quarter of fiscal 1994, which
reflected the inclusion of the retroactive U.S. Federal tax increase and its
effect on deferred taxes.
FINANCIAL CONDITION
Worldwide credit facilities in place at December 31, 1994 aggregated
$195,522,000 of which $160,950,000 was available, but unused. The Company
expects to borrow and repay up to $10,000,000 from these credit facilities over
the next twelve months, primarily for working capital purposes. On December 22,
1994, the Company received commitments to finance a new five year $300,000,000
unsecured revolving credit facility. This new credit facility contains lower
costs and certain covenants which are no more restrictive than the current
credit facility which it will replace. During the second quarter the Company
also increased the amount of accounts receivable sold under its securitization
program from $40,000,000 to $55,000,000 (see Note 3).
The Company's current forecast for the 1995 fiscal year reflects capital
expenditures of approximately $35,000,000 and fixed payments (interest,
principal, discount on sale of receivables and lease payments) of approximately
$45,000,000.
Based on the Company's ability to generate funds from operations and the
availability of credit under its financing facilities, management believes it
will have the funds necessary to meet all of its described financing
requirements and all other financial obligations.
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
First Brands' independent certified public accountants have made a limited
review of the financial information furnished herein in accordance with
standards established by the American Institute of Certified Public Accountants.
The Independent Accountants' Report is presented on Page 14 of this report.
-13-
<PAGE>
Independent Accountants' Report
The Board of Directors
First Brands Corporation:
We have reviewed the consolidated condensed balance sheet of First Brands
Corporation and subsidiaries as of December 31, 1994, and the related
consolidated condensed statements of income for the three and six month periods
ended December 31, 1994 and 1993 and the consolidated condensed statements of
cash flows for the six month periods ended December 31, 1994 and 1993, and the
consolidated condensed statement of stockholders' equity for the six month
period ended December 31, 1994. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated condensed financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of First Brands Corporation and
subsidiaries as of June 30, 1994, and the related consolidated statement of
income, stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated August 9, 1994 (except as to Note 19,
which is as of August 26, 1994), we express an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated condensed balance sheet as of June 30, 1994, is
fairly presented, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
February 2, 1995
-14-
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Federal Trade Commission (FTC) staff is conducting an investigation that
alleges that certain advertising claims for STP Engine Treatment violate a 1976
cease and desist order regarding STP advertising. The Company does not believe
that it is subject to that order or that it made the alleged claims. However,
the FTC staff has proposed a settlement which would involve a penalty payment,
an injunction against further allegedly false claims and corrective advertising.
The Company does not believe that any such settlement would have a material
effect upon the Corporation.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
Submitted at the Annual Meeting of Stockholders, October 28, 1994:
1. Election of four Directors, each to serve for a three-year term
expiring on the date of the Annual Meeting of Stockholders in 1997 and
until his successor is elected and qualified:
<TABLE>
<CAPTION>
Abstentions and
Name For Withheld Broker Non-Votes
---- --- -------- ----------------
<S> <C> <C> <C>
James R. Maher ............. 18,114,378 100,063 0
Dwight C. Minton ........... 18,114,747 99,694 0
William V. Stephenson ...... 18,114,736 99,705 0
Robert G. Tobin ............ 18,114,747 99,694 0
</TABLE>
2. Ratification of selection by the Board of Directors of KPMG Peat
Marwick LLP as independent auditors:
<TABLE>
<CAPTION>
Abstentions and
For Withheld Broker Non-Votes
--- -------- ----------------
<S> <C> <C> <C>
18,113,758 17,942 82,741
</TABLE>
Item 5. Other Information
None.
-15-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit Index:
Exhibit
Number Description of Exhibit
- ------ ----------------------
10.1 (a) --Amended and Restated Credit Agreement, dated as of September 20,
1991, among the Company, Manufacturers Hanover Trust Company, as
Agent, and Several Lenders parties thereto. Incorporated by
reference to Exhibit 10.1 to Form S-1 filed by the Registrant on
February 7, 1992.
(b) --Commitment Transfer Supplement thereto, dated as of October 28,
1991. Incorporated by reference to Exhibit 10.1(b) to Form 10-K
filed by the Registrant on September 25, 1992.
(c) --Amendment and Consent thereto, dated as of February 25, 1992.
Incorporated by reference to Exhibit 10.1(c) to Form 10-K filed by
the Registrant on September 25, 1992.
(d) --Second Amendment and Consent thereto, dated as of May 18, 1992.
Incorporated by reference to Exhibit 10.1(d) to Form 10-K filed by
the Registrant on September 25, 1992.
(e) --Third Amendment thereto, dated as of November 5, 1992. Incorporated
by reference to Exhibit 10.1(e) to Form 10-K filed by the Registrant
on September 28, 1993.
(f) --Commitment Transfer Supplement thereto, dated as of May 26, 1993.
Incorporated by reference to Exhibit 10.1(f) to Form 10-K filed by
the Registrant on September 28, 1993.
(g) --Fourth Amendment thereto, dated as of June 2, 1994.
10.2 (a) --Leasing Agreement between the Company and Citicorp North America,
Inc., relating to its Glad Plastic Bag and Wrap facility in
Cartersville, Georgia, dated as of November 16, 1993. Incorporated
by reference to Exhibit 10.2 to Form 10-Q for Quarter ended December
31, 1993, filed by the Registrant on February 14, 1994.
(b) --Rider No. 1 thereto, dated as of December 1, 1993.
(c) --Rider No. 2 thereto, dated as of May 11, 1994.
10.3 --Equipment Lease Agreement between the Company and PNC Leasing Corp,
relating to its Glad Plastic Bag and Wrap facility in Rogers,
Arkansas, dated as of October 15, 1993. Incorporated by reference to
Exhibit 10.6 to Form 10-Q for Quarter ended December 31, 1993, filed
by the Registrant on February 14, 1994.
10.4 --Purchase Agreement, dated as of December 23, 1991, between the
Company and Pitney Bowes Credit Corporation, relating to the sale
and leaseback of equipment at the Company's GLAD Plastic Wrap and
Bag facility in Rogers, Arkansas. Incorporated by reference to
Exhibit 10.8 to Form S-1 filed by the Registrant on February 7,
1992.
10.5 (a)*--Agreement dated December 23, 1994 between the Company and Pitney
Bowes Credit Corporation ("Pitney Bowes") to the exercise by the
Company of an Early Purchase Option with regard to certain equipment
at the Company's GLAD Plastic Wrap and Bag facility at Rogers,
Arkansas. This equipment was subject to the Equipment Lease
Agreement (the "Lease") dated as of December 23, 1991 between Pitney
Bowes and the Company; the Lease was previously filed as and
incorporated by reference to Exhibit 10.9 to Form S-1 filed by
Registrant on February 7, 1992.
(b)*--Bill of Sale by Pitney Bowes dated December 23, 1994 for certain
equipment repurchased by the Company pursuant to the Company's
exercise of the Early Purchase Option provided for in the Lease.
-16-
<PAGE>
10.6 --Purchase Agreement, dated as of June 25, 1992, between the Company
and Nationsbanc Leasing Corporation of Georgia, relating to the sale
and leaseback of certain equipment at the Company's GLAD plastic
wrap and bag facility in Amherst, Virginia. Incorporated by
reference to Exhibit 10.13 to form 10-K filed by the Registrant on
September 25, 1992.
10.7 (a) --Equipment Lease Agreement, dated as of June 25, 1992, between the
Company and Nationsbanc Leasing Corporation of Georgia, relating to
the sale and leaseback of certain equipment at the Company's GLAD
plastic wrap and bag facility in Amherst, Virginia. Incorporated by
reference to Exhibit 10.14 to form 10-K filed by the Registrant on
September 25, 1992.
(b) --First Amendment thereto, dated as of March 30, 1993. Incorporated by
reference to Exhibit 10.15(b) to Form 10-K filed by the Registrant
on September 28, 1993.
10.8 --Purchase Agreement, dated as of June 25, 1993, between the Company
and Nationsbanc Leasing Corporation, relating to the sale and
leaseback of certain equipment at the Company's GLAD plastic wrap
and bag facility in Amherst, Virginia. Incorporated by reference to
Exhibit 10.16 to Form 10-K filed by the Registrant on September 28,
1993.
10.9 --Equipment Lease Agreement, dated as of June 25, 1993, between the
Company and Nationsbanc Leasing Corporation, relating to the sale
and leaseback of certain equipment at the Company's GLAD plastic
wrap and bag facility in Amherst, Virginia. Incorporated by
reference to Exhibit 10.17 to Form 10-K filed by the Registrant on
September 29, 1993.
10.10 (a) --Sales Agreement, dated as of January 1, 1989 between Union Carbide
Chemicals & Plastics Company, Inc. (formerly Union Carbide
Corporation) and the Company, (confidential treatment has been
granted with respect to certain portions of the Sales Agreement;
such portions were omitted and filed separately with the Securities
and Exchange Commission). Incorporated by reference to Exhibit
10.22(b) to Form 10-K filed by the Registrant on September 19, 1989.
(b) --Sales Agreement, dated March 1, 1991, between Union Carbide
Chemicals and Plastics Company Inc. and the Company, (confidential
treatment has been granted with respect to certain portions of the
Sales Agreement, such portions were omitted and filed separately
with the Securities and Exchange Commission). Incorporated by
reference to Post-Effective Amendment No. 1 to Form S-1 filed by the
Registrant on June 12, 1991.
10.11 (a) --Subordinated Notes Registration Rights Agreement, dated as of July
1, 1986, between the Company and Metropolitan Life Insurance
Company, the current Note holder ("Metropolitan"), relating to the
13.25% Subordinated Note due 2001 (the "Note"). Incorporated by
reference to Exhibit 10(xii) to form S-1 filed by the Registrant on
July 15, 1986.
(b)*--Agreement between the Company and Metropolitan dated December 29,
1994, for the purchase of the Note, outstanding in the principle
amount of $45,000,000, by the Company on January 4, 1995.
10.12 --Underwriting Agreement among the Company, certain stockholders and
The First Boston Corporation and Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner and Smith Incorporated as representatives of the
Several Underwriters, relating to 8,400,000 shares of Common Stock
of the Company. Incorporated by reference to Exhibit 1.1 to Form S-
1 filed by the Registrant on March 5, 1991.
10.13 --Subscription Agreement among the Company, certain stockholders and
Credit Suisse First Boston Limited and Merrill Lynch International
Limited as Managers, relating to 2,110,000 shares of Common Stock of
the Company. Incorporated by reference to Exhibit 1.2 to Form S-1
filed by the Registrant on March 5, 1991.
10.14 --Underwriting Agreement, dated as of February 26, 1992, between the
Company and The First Boston Corporation, relating to $100,000,000
in 9 1/8% Senior Subordinated Notes due 1999. Incorporated by
reference to Exhibit 10.19 to form 10-K filed by the Registrant on
September 25, 1992.
-17-
<PAGE>
10.15 (a) --Pooling and Servicing Agreement, dated as of May 21, 1992, between
the Company, First Brands Funding Inc and Chemical Bank, as Trustee,
relating to First Brands Funding Master Trust trade
receivables-backed financing. Incorporated by reference to Exhibit
10.20(a) to form 10-K filed by the Registrant on September 25, 1992.
(b) --Variable Funding Supplement thereto, dated as of May 21, 1992.
Incorporated by reference to Exhibit 10.20(b) to form 10-K filed by
the Registrant on September 25, 1992.
(c) --Amendment No. 1 thereto, dated as of December 22, 1993. Incorporated
by reference to Exhibit 10.18(c) to Form 10-Q for Quarter ended
December 31, 1993, filed by the Registrant on February 14, 1994.
10.16 --Asset Purchase and Sale Agreement, dated as of May 21, 1992, between
the Company and First Brands Funding Inc, relating to First Brands
Funding Master Trust trade receivables-backed financing.
Incorporated by reference to Exhibit 10.21 to form 10-K filed by the
Registrant on September 25, 1992.
10.17 --Asset Purchase and Sale Agreement, dated as of May 21, 1992, between
the Company and Himolene Incorporated, relating to First Brands
Funding Master Trust trade receivables-backed financing.
Incorporated by reference to Exhibit 10.22 to form 10-K filed by the
Registrant on September 25, 1992.
10.18 --Amended and Restated Letter of Credit Reimbursement Agreement, dated
as of December 2, 1993, between the Company, First Brands Funding
Inc, Westdeutsche Landesbank Girozentrale, The Long-Term Credit Bank
of Japan, Limited, and First Brands Funding Master Trust, amending
and restating the Letter of Credit Reimbrusement Agreement, dated as
of May 21, 1992, relating to First Brands Funding Master Trust trade
receivables-backed financing. Incorporated by reference to Exhibit
10.21 to Form 10-Q for Quarter ended December 31, 1993, filed by the
Registrant on February 14, 1994.
10.19 --Amended Long-Term Incentive Plan. Incorporated by reference to
Exhibit 10.34 to Form 10-K filed by the Registrant on September 12,
1990.
10.20 --First Brands Corporation 1994 Performance Stock Option and Incentive
Plan. Incorporated by reference to Exhibit A to the Definitive Proxy
Statement for Annual Meeting of Stockholders, filed by the
Registrant on September 28, 1993.
10.21 (a) --Purchase and Sale Agreement, dated as of June 30, 1994, between the
Registrant and Vestar/Freeze Holdings Corporation and Vestar Equity
Partners, L.P., relating to the sale by the Registrant of its
businesses of developing, manufacturing, marketing, selling and/or
distributing automotive antifreeze, cooling system tools, cooling
system chemicals for cleaning and sealing leaks in automotive
cooling systems, ice fighting products, PRESTONE brake fluid
products, PRESTONE power steering fluid products, and PRESTONE
transmission stop-leak fluid products, and antifreeze recycling
business. Incorporated by reference to Exhibit 2.1 to Form 8-K filed
by the Registrant on September 12, 1994.
(b) --Amendment No. 1 thereto, dated as of August 25, 1994. Incorporated
by reference to Exhibit 2.2 to Form 8-K filed by the Registrant on
September 12, 1994.
11* --Computation of Net Income Per Comman Share
15* --Accountants' Acknowledgment
27* --Financial Data Schedule
- ------------
* Filed herewith
B. Reports on Form 8-K
None.
-18-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST BRANDS CORPORATION
(Registrant)
Date: February 9th, 1995 By: /s/ DONALD A. DESANTIS
------------------
Donald A. DeSantis
Senior Vice President,
Chief Financial Officer
and Treasurer
(Principal Accounting
and Duly Authorized
Officer)
-19-
EXHIBIT 10.5(a)
December 15, 1994
First Brands Corporation
83 Wooster Heights Road
Buildings 301
Danbury, CT 06813-1911
ATTN: R. J. Mosback
RE: Equipment Lease Agreement dated December 23, 1991 between
Pitney Bowes Credit Corporation as Lessor and First Brands
Corporation as Lessee (the "Lease"). Lessor Reference
Number: 0056671-801
Dear Mr. Mosback:
Pursuant to your request, Pitney Bowes Credit Corporation has calculated an
early purchase option according to Article 4.1 of the Lease Agreement effective
December 23, 1994. THIS EARLY PURCHASE OPTION IS SUBJECT TO YOUR COMPLETION OF
ALL OBLIGATIONS SET FORTH IN THE LEASE INCLUDING BUT NOT LIMITED TO ALL RENTAL
PAYMENTS DUE THEREUNDER THROUGH AND INCLUDING THE EARLY PURCHASE EFFECTIVE DATE
SET FORTH BELOW.
EFFECTIVE DATE: December 23, 1994
TERMINATION AMOUNT: $12,946,068.48
INTEREST 10-1-94 TO 12-23-94: $ 294,001.62
--------------
TOTAL AMOUNT DUE: $13,240,070.10
Should you elect to exercise the Early Purchase Option, please sign this letter
in the space provided below, and return this letter to me at the address listed
below no later than December 20, 1994.
Please contact me at (203) 845-5519 should you have any questions.
Sincerely,
/s/ Kim Ehlers
Kim Ehlers
C&I Accounts Specialist
I agree and accept the following option:
12/23/94 effective date
- -------------
By: /s/ Donald A. DeSantis
-----------------------------------
Title: Senior V.P. and Chief Financial Officer
Date: 12/19/94
--------------
EXHIBIT 10.5(b)
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, that Pitney Bowes Credit Corporation, a Delaware
Corporation with a place of business at 201 Merritt Seven, Norwalk, Connecticut
06856-5151 (hereinafter called the Seller), in consideration of the sum of
$13,240,070.10 paid by First Brands Corporation, 83 Wooster Heights Road,
Danbury, CT 06813 (hereinafter called the Buyer), the receipt whereof is hereby
acknowledged, does hereby grant, sell, transfer and deliver unto said Buyer the
equipment described immediately below, upon the terms and conditions set forth
below:
See Schedule "A" attached hereto and made a part hereof
Equipment located at: North 13th Street
Rogers, AR
Buyer is purchasing the equipment herein described in reliance upon his personal
inspection and knowledge of the above equipment on an "AS IS WHERE IS" basis.
SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND
OR NATURE EXCEPT THAT (1) BUYER WILL ACQUIRE BY THE TERMS OF THIS BILL OF SALE
GOOD TITLE TO THE EQUIPMENT, EXCEPT AS TO ANY SOFTWARE LICENSE LISTED ABOVE TO
WHICH SELLER MAKES NO WARRANTY, FREE FROM ALL ENCUMBRANCES (EXCLUDING ANY
CREATED BY BUYER) AND THAT (2) SELLER HAS THE RIGHT TO SELL THE EQUIPMENT,
EXCEPT TO ANY SOFTWARE OR SOFTWARE LICENSE. WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, SELLER MAKES NO WARRANTIES WITH RESPECT TO THE QUANTITY, QUALITY,
CONTENTS, CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE
EQUIPMENT AND NO WARRANTIES OF ANY KIND WHATSOEVER INCLUDING PATENT. Buyer is
liable for any taxes payable as a result of this sale. To have and to hold all
and singular the said goods and chattels to the said Buyer, his successors, and
assigns to their own use and behoof forever.
IN WITNESS WHEREOF, SELLER, THE SAID PITNEY BOWES CREDIT CORPORATION has caused
these presents to be signed, executed, and delivered in its name and behalf by
its duly authorized representative as of the 23rd day of December, 1994.
PITNEY BOWES CREDIT CORPORATION
By: /s/ Kim Ehlers
---------------------------
Kim Ehlers
C&I Accountants Specialist
<PAGE>
SCHEDULE A
TO EQUIPMENT
LEASE AGREEMENT
Equipment Listing PBCC's Cost
-----------------------------
The following is an "Item":
FMC Rotary Bag Machines w/32" dual Unwind
Stands RBM #11, S/N #0340-02- RA100L/000-688
$ 750,000
The following is an "Item":
FMC Rotary Bag Machines w/32" Dual Unwind
Stands RBM #12, S/N #0339-02- RA100R/000-688
750,000
The following is an "Item":
FMC Rotary Bag Machines w/32" Dual Unwind
Stands RBM #13, S/N #0339-01- RA100L/000-688
750,000
The following is an "Item":
FMC Rotary Bag Machines w/32" Dual Unwind
Stands RBM #14, S/N #0339-05- RA100R/000-688
750,000
The following is an "Item":
FMC Rotary Bag Machines w/32" Dual Unwind
Stands RBM #15, S/N #0339-06- RA100L/000-688
750,000
The following is an "Item":
FMC Rotary Bag Machines w/32" Dual Unwind
Stands RBM #16, S/N #0339-07- RA100R/000-688
750,000
The following is an "Item":
FMC Rotary Bag Machines w/32" Dual Unwind
Stands RBM #17, S/N #0339-04- RA100L/000-688
750,000
The following is an "Item":
FMC Rotary Bag Machines w/32" Dual Unwind
Stands RBM #18, S/N #0339-03- RA100R/000-688
750,000
Equipment Listing PBCC's Cost
-----------------------------
The following is an "Item":
One (1) Packaging System 4,000,000
<PAGE>
Such Item is comprised of the
following material items of
equipment:
Autoloaders Tag #01171
Autoloaders Tag #01172
Autoloaders Tag #01173
Autoloaders Tag #01174
Autoloaders Tag #01175
Autoloaders Tag #01176
Autoloaders Tag #01177
Autoloaders Tag #01178
Delcor Model 752 Dual Head
Carton Formers S/N #1132
Delcor Model 752 Dual Head
Carton Formers S/N #1133
Delcor Model 752 Dual Head
Carton Formers S/N #1134
Frontier Wraparound Carton
Loader, TAG #01179
Jetstream Empty Conveyor, Tag #01180
Arrowhead Full Conveyer, Tag #01181
Delcor Model 825S Carton Sealers S/N #1135
Delcor Model 825S Carton Sealers S/N #1136
Peters Model CYG Sealer, Tag #01182
ABC Model SP26 Pumpup Carton
Loaders S/N #21423
Equipment Listing PBCC's Cost
-----------------------------
ABC Model SP26 Pumpup Carton
Loaders S/N #21421
ABC Model SP26 Pumpup Carton
Loaders S/N #21420
Random Model GG350 Case
Sealer, S/N #26-047
<PAGE>
The following is an "Item":
FMC Rotary Bag Machines w/26" Unwind Stands
RBM #21, S/N #0340-03- RA100R/000-
688 370,000
The following is an "Item":
FMC Rotary Bag Machines w/26" Unwind Stands
RBM #22, S/N #0340-04- RA100L/000-
688 370,000
The following is an "Item":
FMC Rotary Bag Machines w/26" Unwind Stands
RBM #23, S/N #0340-05- RA100R/000-
688 370,000
The following is an Item:
One (1) Packaging System $2,000,000
Such Item is comprised of the following
material items of equipment:
Autoload Corrugator/Collators Tag #01182
Autoload Corrugator/Collators Tag #01183
Autoload Corrugator/Collators Tag #01184
Autoload Corrugator/Collators Tag #01185
Autoload Corrugator/Collators Tag #01186
Frontier Wraparound Carton Loaders S/N #8099
<PAGE>
Equipment Listing PBCC's Cost
-----------------------------
Frontier Wraparound Carton Loaders S/N #8093
Frontier Wraparound Carton Loaders S/N #8098
Frontier Wraparound Carton Loaders S/N #9112
Frontier Wraparound Carton Loaders S/N #9113
Arrowhead Full Conveyor System, TAG #01187
ABC Semi-Auto Case Packer MDL
SP-26 S/N #21422
ABC Semi-Auto Case Packer MDL
SP-26 S/N #21424
Random Model GG350 Case
Sealer, S/N #26048
The following is an "Item":
Caterpillar Electric Fork Trucks MDL M400 w/4
Batteries & 2 Battery Chargers S/N #6GC00884
20,000
The following is an "Item":
Caterpillar Electric Fork Trucks MDL M400 w/4
Batteries & 2 Battery Chargers S/N #6GC00535
20,000
The following is an "Item":
Caterpillar Electric Fork Trucks MDL M400 w/4
Batteries & 2 Battery Chargers S/N #4WC00850
20,000
The following is an "Item":
Caterpillar Electric Fork Trucks MDL M400 w/4
Batteries & 2 Battery Chargers S/N #4WC00849
20,000
The following is an "Item":
Air Compressors Ingersol Rand MDL XLE w/2 Air
Dryers, Air Receiver Tank S/N
#JH8168 0315A-6-8911-8 400,000
<PAGE>
Equipment Listing PBCC's Cost
-----------------------------
The following is an "Item":
Air Compressors Ingersol Rand MDL XLE w/2 Air
Dryers, Air Receiver Tank S/N
#JH8292 0315A-6-8809-3 400,000
The following is an "Item":
HVAC Units w/Rapid Makeup Air Units
S/N #21578-02-01 165,000
The following is an "Item":
HVAC Units w/Rapid Makeup Air Units
S/N #21578-01-01 165,000
The following is an "Item":
HVAC Units w/Rapid Makeup Air Units
S/N #21578-01-02 165,000
The following is an "Item":
HVAC Units w/Rapid Makeup Air Units
S/N #21578-02-02 165,000
The following it an "Item":
Tape Slitters & Reclaim Unit:
250,000
Such Item is comprised of the
following material items of equipment:
Independent Machine MDL 18
Slitter Systems (12 Pos.) S/N
#6323-1288
Independent Machine MDL 18
Slitter Systems (12 Pos.) S/N
#6157-1087
Independent Machine MDL 391
Traverse Winders (4 Pos.) S/N
#6323-1288-1
Independent Machine MDL 391
Traverse Winders (4 Pos.) S/N
#6323-1288-2
Independent Machine MDL 391
Traverse Winders (4 Pos.) S/N
#6323-1288-3
<PAGE>
Equipment Listing PBCC's Cost
-----------------------------
Independent Machine MDL 391
Traverse Winders (4 Pos.) S/N
#6157-1087-1
Independent Machine MDL 391
Traverse Winders (4 Pos.) S/N
#6157-1087-2
Independent Machine MDL 391
Traverse Winders(4 Pos.) S/N
#6157-1087-3
The following is an "Item":
Reclaim Recycling System
Alpine MDL RE150/80 Reclaim
Unit, S/N #079682 100,000
The following is an "Item":
Automatic Guided Vehicle (AGV)
System 360,000
Such Item is comprised of the following
material items of equipment:
Prontow Tugger Tractors MDL
1001 S/N #6728-251
Prontow Tugger Tractors MDL
1001 S/N #6728-252
6 Model ZSS-022 Trailers
4 Batteries
2 Battery Chargers
-------------------
Total $15,360,000
------------
EXHIBIT 10.11(b)
December 29, 1994
First Brands Corporation
39 Old Ridgebury Road
Danbury, CT 06817
Attention: Mr. Donald A. DeSantis, Senior Vice
President, Chief Financial Officer &
Treasurer
Dear Gentlemen:
We are the holder of your 13.25% Subordinated Note due 2001 (the "Note"),
presently outstanding in the principal amount of $45,000,000.
This letter will confirm our agreement to sell, and your agreement to purchase,
the Note on January 4, 1995 (the "Closing Date"). The purchase price for the
Note shall be $52,114,834, plus accrued but unpaid interest (in the amount of
$49,688 if paid on 1/04/95).
On the Closing Date, we shall deliver the Note to you against payment of the
purchase price therefore, together with accrued interest thereon, by wire
transfer of immediately available funds to our account, no. 002-2-410591, at The
Chase Manhattan Bank, N.A., ABA no. 021000021.
By your execution at the foot hereof, you shall be deemed to represent and
warrant that the purchase of the Note will not violate the terms of any of your
indebtedness or of any agreement or instrument related thereto.
Very truly yours,
METROPOLITAN LIFE INSURANCE COMPANY
By /s/ Paul R. Crotty
---------------------------
The foregoing is hereby accepted and agreed to.
FIRST BRANDS CORPORATION
By /s/ Donald A. DeSantis
-------------------------
Exhibit 11
(Page 1 of 2)
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands - except per share amounts)
<TABLE>
<CAPTION>
Three months Six months
ended December 31, ended December 31,
----------------- ------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
COMPONENTS OF PRIMARY NET INCOME
PER COMMON SHARE:
Income before extraordinary loss $ 11,842 $ 16,392 $ 26,916 $ 32,764
Extraordinary loss ............. (4,493) -- (4,493) --
--------- --------- --------- ---------
Net income ..................... $ 7,349 $ 16,392 $ 22,423 $ 32,764
========= ========= ========= =========
Average common shares outstanding
during the period ............ 22,021 21,905 22,016 21,872
Average treasury shares held
during the period ............ (801) -- (500) --
Common shares issuable with
respect to common equivalents
for stock options ............ 229 257 235 225
--------- --------- --------- ---------
Average common and common
equivalent shares outstanding 21,449 22,162 21,751 22,097
========= ========= ========= =========
Primary earnings per share:
Income before extraordinary loss $ 0.55 $ 0.74 $ 1.24 $ 1.48
Extraordinary loss ............ (0.21) -- (0.21) --
------ ----- ------ -----
Net income .................... $ 0.34 $ 0.74 $ 1.03 $ 1.48
====== ===== ====== =====
</TABLE>
<PAGE>
Exhibit 11
(Page 2 of 2)
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands - except per share amounts)
<TABLE>
<CAPTION>
Three months Six months
ended December 31, ended December 31,
----------------- ------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
COMPONENTS OF FULLY DILUTED NET
INCOME PER COMMON SHARE:
Income before extraordinary loss . $ 11,842 $ 16,392 $ 26,916 $ 32,764
Extraordinary loss ............... (4,493) -- (4,493) --
--------- --------- ---------
Net income ....................... $ 7,349 $ 16,392 $ 22,423 $ 32,764
========= ========= ========= =========
Average common shares outstanding
during the period .............. 22,021 21,905 22,016 21,872
Average treasury shares held
during the period .............. (801) -- (500) --
Common shares issuable with
respect to common equivalents
for stock options .............. 268 289 267 290
--------- --------- --------- ---------
Average common and common
equivalent shares outstanding .. 21,488 22,194 21,783 22,162
========= ========= ========= =========
Fully diluted earnings per share:
Income before extraordinary loss $ 0.55 $ 0.74 $ 1.24 $ 1.48
Extraordinary loss ............. (0.21) -- (0.21) --
--------- --------- --------- ---------
Net income ..................... $ 0.34 $ 0.74 $ 1.03 $ 1.48
========= ========= ========= =========
</TABLE>
Exhibit 15
Accountants' Acknowledgement
First Brands Corporation
83 Wooster Heights Road
Danbury, CT 06813-1911
Gentlemen:
RE: FORM S-8 REGISTRATION STATEMENTS NO. 33-35770 AND NO. 33-56992
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our reports dated November 1, 1994 and February
2, 1995 related to our review of interim financial information.
Pursuant to Rule 436 (c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
Very truly yours,
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
February 2, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 20,462
<SECURITIES> 0
<RECEIVABLES> 106,601
<ALLOWANCES> 1,449
<INVENTORY> 145,397
<CURRENT-ASSETS> 307,357
<PP&E> 348,649
<DEPRECIATION> 81,966
<TOTAL-ASSETS> 807,647
<CURRENT-LIABILITIES> 210,155
<BONDS> 182,673
<COMMON> 220
0
0
<OTHER-SE> 342,512
<TOTAL-LIABILITY-AND-EQUITY> 807,647
<SALES> 233,008
<TOTAL-REVENUES> 233,008
<CGS> 143,781
<TOTAL-COSTS> 143,781
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 420
<INTEREST-EXPENSE> 5,315
<INCOME-PRETAX> 20,307
<INCOME-TAX> 8,465
<INCOME-CONTINUING> 11,842
<DISCONTINUED> 0
<EXTRAORDINARY> 4,493
<CHANGES> 0
<NET-INCOME> 7,349
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
</TABLE>
