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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, 1995 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 191
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 January 31, 1996
Common Stock, $.01 par value 20,803,126 shares
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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, 1995 and 1994...................................................... 3
Consolidated Condensed Statements of Income
For the Six Month Periods
Ended December 31, 1995 and 1994...................................................... 4
Consolidated Condensed Balance Sheets -
December 31, 1995 and June 30, 1995................................................... 5
Consolidated Condensed Statement of Stockholders'
Equity - For the Six Month Period
Ended December 31, 1995............................................................... 6
Consolidated Condensed Statements of Cash
Flows - For the Six Month Periods
Ended December 31, 1995 and 1994...................................................... 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............................................................................ 15-19
SIGNATURE.............................................................................. 20
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FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
------------ -------------
(in thousands - except per share amounts)
<S> <C> <C>
Net sales................................................... $ 263,084 $ 233,008
Cost of goods sold........................................ 172,956 143,781
Selling, general and
administrative expenses.................................. 57,283 59,178
Amortization and other depreciation....................... 3,592 3,836
Interest expense and amortization of debt
discount and expense.................................... 4,572 4,573
Discount on sale of receivables........................... 1,018 742
Other income (expense), net............................... 1,508 (591)
--------- ---------
Income before provision for income taxes
and extraordinary loss.................................... 25,171 20,307
Provision for income taxes.................................. 10,534 8,465
---------- --------
Income before extraordinary loss............................ 14,637 11,842
Extraordinary loss relating to the repurchase
of subordinated note, net of taxes........................ - (4,493)
------------ --------
Net income.................................................. $ 14,637 $ 7,349
========= ========
Per common share and common equivalent share (Note 6):
Income before extraordinary loss ........................ $ 0.69 $ 0.55
Extraordinary loss....................................... - (.21)
-------- --------
Net income............................................... $ 0.69 $ 0.34
======= =======
Weighted average common and common
equivalent shares outstanding (Note 6).................... 21,281 21,449
======== =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
------------ -------------
(in thousands - except per share amounts)
<S> <C> <C>
Net sales................................................... $ 513,873 $ 497,175
Cost of goods sold........................................ 339,183 304,607
Selling, general and
administrative expenses.................................. 105,738 126,339
Amortization and other depreciation....................... 7,790 8,118
Interest expense and amortization of debt
discount and expense.................................... 8,886 9,540
Discount on sale of receivables........................... 2,055 1,936
Other income (expense), net............................... 1,686 (242)
--------- ----------
Income before provision for income taxes
and extraordinary loss.................................... 51,907 46,393
Provision for income taxes.................................. 21,737 19,477
---------- ---------
Income before extraordinary loss............................ 30,170 26,916
Extraordinary loss relating to the repurchase
of subordinated note, net of taxes........................ - (4,493)
--------- ---------
Net income.................................................. $ 30,170 $ 22,423
========= =========
Per common share and common equivalent share (Note 6):
Income before extraordinary loss ........................ $ 1.42 $ 1.24
Extraordinary loss....................................... - (.21)
------- -------
Net income............................................... $ 1.42 $ 1.03
======= =======
Weighted average common and common
equivalent shares outstanding (Note 6).................... 21,286 21,751
======== =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
(in thousands, except share amounts) 1995 1995
------------ --------
(UNAUDITED)
ASSETS:
<S> <C> <C>
Cash and cash equivalents....................................... $ 10,744 $ 5,225
Accounts and notes receivable - net............................. 106,471 121,763
Inventories..................................................... 143,565 156,245
Deferred tax assets............................................. 34,670 34,038
Prepaid expenses................................................ 4,041 3,561
--------- --------
Total current assets.......................................... 299,491 320,832
Property, plant and equipment (net of accumulated
depreciation of $101,459 and $88,447)......................... 304,317 290,960
Patents, trademarks, proprietary technology
and other intangibles (net of accumulated
amortization of $176,018 and $170,584)........................ 180,737 202,323
Deferred charges and other assets (net of
accumulated amortization of $50,994 and $50,214).............. 24,897 25,831
--------- ---------
Total assets.......................................... $ 809,442 $ 839,946
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities
Notes payable................................................... $ 12,916 $ 5,128
Current maturities of long-term debt............................ 955 912
Accrued income and other taxes.................................. 7,696 27,279
Accounts payable................................................ 33,918 70,106
Accrued liabilities............................................. 91,588 144,863
---------- ----------
Total current liabilities.................................. 147,073 248,288
Long-term debt.................................................. 207,825 166,279
Deferred taxes payable.......................................... 66,551 54,524
Deferred gain on sale of assets................................. 1,732 2,637
Other long-term obligations..................................... 15,537 16,040
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
22,261,681 shares at December 31, 1995
and 22,146,014 shares at June 30, 1995........................ 223 221
Capital in excess of par value.................................. 124,181 120,914
Cumulative foreign currency translation adjustment.............. (7,473) (7,173)
Common stock in treasury, at cost; 1,446,000 shares at
December 31, 1995 and 1,210,700 at June 30, 1995.............. (50,328) (40,433)
Retained earnings............................................... 304,121 278,649
--------- ---------
Total stockholders' equity................................. 370,724 352,178
--------- ---------
Total liabilities and stockholders' equity............ $ 809,442 $ 839,946
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1995
(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, 1995 .............. $ 221 $ 120,914 $ (7,173) $ (40,433) $ 278,649 $ 352,178
Exercise of
Stock Options............... 2 3,267 - - - 3,269
Cash Dividends............... - - - - (4,698) (4,698)
Purchase of
Treasury Stock.............. - - - (9,895) - (9,895)
Net Income................... - - - - 30,170 30,170
Foreign Currency
Translation Adjustment...... - - (300) - - (300)
------ ------------ ------- ------------- ------------ ------------
Balance as of
December 31, 1995........... $ 223 $ 124,181 $ (7,473) $ (50,328) $ 304,121 $ 370,724
===== ========= ========= ========== ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
(in thousands) 1995 1994
-------------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................... $ 30,170 $ 22,423
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.............................. 18,624 17,593
Deferred income taxes...................................... 11,386 4,215
Loss on repurchase of subordinated note.................... - 7,463
Net loss on disposal of automotive service
centers and sale of the Prestone business................ - 348
Change in certain non-cash current assets and liabilities,
net of effect of businesses sold and acquired:
Decrease (increase) in accounts receivable.............. 16,128 (7,328)
Decrease (increase) in inventories...................... 12,680 (16,448)
(Increase) decrease in prepaid expenses................. (480) 936
(Decrease) in accrued income and other taxes............ (3,041) (6,415)
(Decrease) in accounts payable.......................... (36,188) (8,451)
(Decrease) increase in accrued liabilities.............. (53,275) 6,086
Net change in current assets and current liabilities
of businesses sold........................................ - (21,024)
Other changes................................................ (1,895) (2,650)
--------- ---------
Total adjustments........................................ (36,061) (25,675)
--------- ---------
Net cash (used for) operating activities....................... (5,891) (3,252)
--------- ---------
Cash flows from investing activities:
Capital expenditures........................................ (16,846) (14,805)
Acquisition of leased assets................................ (9,797) (13,240)
Proceeds from sale of antifreeze/coolant and car
care business, net of note received....................... - 142,000
Acquisition of business..................................... - (45,195)
Other....................................................... - (4,900)
--------- ---------
Net cash (used for) provided by investing activities........... (26,643) 63,860
--------- ---------
Cash flows from financing activities:
Increase in revolving credit borrowings, net............... 41,100 29,300
Increase in other borrowings, net.......................... 8,277 305
(Decrease) in accounts receivable securitization, net...... - (45,000)
Proceeds from exercise of stock options.................... 3,269 487
Purchase of common stock for treasury...................... (9,895) (34,793)
Dividends paid............................................. (4,698) (3,829)
--------- ---------
Net cash provided by (used for) financing activities........... 38,053 (53,530)
--------- ---------
Net increase in cash and cash equivalents...................... 5,519 7,078
Cash and cash equivalents at beginning of period............... 5,225 13,384
--------- --------
Cash and cash equivalents at end of period..................... $ 10,744 $ 20,462
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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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. The results of operations for the six month
period ended December 31, 1995 are not necessarily 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 August 26, 1994, the Company sold the Prestone antifreeze/coolant and car
care business. The net assets of that business have been removed from the
balance sheet, resulting in a gain during fiscal 1995 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 together with the operating results of this business, through such
dates, are included in the fiscal 1995 period.
INVENTORIES
<TABLE>
<CAPTION>
Inventories were comprised of:
December 31, June 30,
1995 1995
----------- -------
(in thousands)
<S> <C> <C>
Raw materials............................................. $ 27,740 $ 28,766
Work-in-process........................................... 5,929 5,531
Finished goods............................................ 109,896 121,948
--------- ---------
Total................................................. $ 143,565 $ 156,245
========= =========
</TABLE>
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2. LONG-TERM DEBT
First Brands had long-term debt outstanding as of December 31, 1995 and June 30,
1995 as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
------------ -------
<S> <C> <C>
Senior Debt: (in thousands)
$300,000,000 Revolving Credit Facility, 5 year term
expiring December 1999, interest at prime rate,
LIBOR plus .30% or CD rate plus .425%; facility
fee of .20%............................................. $ 101,100 $ 60,000
Other..................................................... 7,680 7,191
---------- ----------
108,780 67,191
Less: current maturities.................................. (955) (912)
----------- ----------
Senior Debt........................................... 107,825 66,279
---------- ----------
Subordinated Debt:
9 1/8% Senior Subordinated Notes Due 1999................. 100,000 100,000
--------- ---------
Total Long-term debt.............................. $ 207,825 $ 166,279
========= =========
</TABLE>
The Company's revolving credit facility has no compensating balance
requirements, however, it does contain certain restrictive covenants pertaining
to the ratio of subordinated debt to equity, dividend payments and capital stock
repurchases.
The 9 1/8% Senior Subordinated 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.
First Brands was in compliance with all the covenants of all debt agreements at
December 31, 1995.
3. ACCOUNTS RECEIVABLE
During the first quarter of fiscal 1996, the Company renegotiated its agreement
to sell a $100,000,000 fractional ownership interest, without recourse, in a
defined pool of eligible trade accounts receivable. Under the terms of the
renegotiated agreement, this facility will automatically renew each year and the
facility servicing fees have been reduced. The fractional interest sold as of
December 31, 1995 totalled $60,000,000. The amounts sold are reflected as a
reduction in accounts receivable on the accompanying balance sheets and costs
associated with this program are recorded on the Consolidated Condensed
Statements of Income as discount on sale of receivables.
4. NOTES PAYABLE
Notes payable at December 31, 1995 of $12,916,000 consisted of a fully utilized
$10,000,000 unsecured domestic line of credit and $2,916,000 of the Company's
international subsidiaries' working capital borrowings with local lenders. The
Company's international current and long-term working capital credit facilities
aggregated $27,610,000, of which $21,364,000 was available at December 31, 1995.
The international facilities are generally secured by the assets of the
respective subsidiaries, with approximately $1,474,000 of the availability at
one subsidiary being guaranteed by First Brands Corporation (U.S.).
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5. TAXES
The provision for income tax expense for the three and six months ended December
31, 1995 and 1994 consists of the following:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31, December 31,
----------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
Current:
Federal............................. $ 2,494 $ 3,076 $ 7,246 $ 11,029
State............................... 496 623 1,510 2,548
Foreign............................. 903 732 1,595 1,685
------- ------ ------ ------
Total current................... 3,893 4,431 10,351 15,262
Deferred:
Federal............................. 5,017 3,354 8,932 3,546
State............................... 1,751 733 2,619 763
Foreign............................. (127) (53) (165) (94)
------- ------ ------- -------
Total deferred.................. 6,641 4,034 11,386 4,215
------ ----- ------ ------
Total provision............. $ 10,534 $ 8,465 $ 21,737 $ 19,477
====== ===== ====== ======
</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 1996 the Company paid to its
shareholders cash dividends of $ 0.10 and $0.125 cents per share, respectively.
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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, 1995 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 six month 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, 1995 and 1994.
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31, December 31,
----------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales........................................... 100.0% 100.0% 100.0 100.0
Cost of goods sold.................................. 65.7 61.7 66.0 61.3
------ ------ ------ -----
Gross profit........................................ 34.3 38.3 34.0 38.7
Selling, general, and
administrative expenses........................... 21.8 25.4 20.6 25.4
Amortization and other depreciation................. 1.4 1.6 1.5 1.6
Interest expense and amortization of debt
discount and expense.............................. 1.7 2.0 1.7 1.9
Discount on sale of receivables..................... 0.4 0.3 0.4 0.4
Other income (expense), net......................... 0.6 (0.3) 0.3 (0.1)
----- ------ ----- -----
Income before provision for income taxes
and extraordinary loss............................. 9.6 8.7 10.1 9.3
Provision for income taxes........................... 4.0 3.6 4.2 3.9
----- ----- ----- ----
Income before extraordinary loss..................... 5.6 5.1 5.9 5.4
Extraordinary loss relating to the repurchase
of subordinated notes, net of taxes................ -- 1.9 -- 0.9
------ ----- ------ ----
Net income........................................... 5.6% 3.2% 5.9% 4.5%
==== ==== ==== ====
</TABLE>
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QUARTER AND SIX MONTHS ENDED DECEMBER, 31 1995 COMPARED TO THE QUARTER AND
SIX MONTHS ENDED DECEMBER 31, 1994
Sales for the three month period ended December 31, 1995 were $263,084,000, 13%
ahead of last year's $233,008,000. For the six month period, sales were
$513,873,000, 103% of the prior year's $497,175,000. On a proforma basis
(excluding sales of $31,684,000 from the divested Prestone antifreeze/coolant
and car care business which was sold on August 26, 1994) fiscal 1996 six month
sales were 10% above the prior year's comparable sales of $465,491,000. Plastic
wrap and bag sales increased 18% during the quarter due to strong growth in the
GLAD-LOCK line and higher disposer bag and food category sales, along with the
continued growth in the Company's international business. Sales from the
Company's new South African business contributed 5% to the growth in the plastic
wrap and bag business. Strong quarterly sales brought year-to-date sales of
plastic wrap and bag products to 112% of the prior year's level. Automotive
sales for the quarter and year-to-date were flat, reflecting an overall sluggish
domestic retail market. For the three and six month periods, cat litter sales
were above the comparable prior year levels by 15% and 20%, respectively, due to
continued market and share growth of the SCOOP AWAY and EVER CLEAN brands, along
with distribution and market share gains made by the JONNY CAT brand.
Cost of goods sold for the quarter was $172,956,000, 120% of last year's
$143,781,000. For the six month period, cost of goods sold was $339,183,000,
111% of the prior year's $304,607,000. Excluding costs associated with the
divested business, cost of goods sold year-to-date are 120% of last year's
proforma cost of $283,439,000. For the three and six month periods, increased
volumes and higher polyethylene raw material costs were primarily responsible
for the higher costs.
Gross profit for the quarter of $90,128,000 (34.3% of sales) was 101% of last
year's $89,227,000 (38.3% of sales). Year-to-date, gross profit was $174,690,000
(34.0% of sales), 91% of last year's $192,568,000 (38.7% of sales). Excluding
the divested business, the six month gross profit was 96% of the prior year's
proforma gross profit of $182,052,000 (39.1% of sales). For the quarter and the
proforma year-to-date results, the higher gross profit dollars came from
increased sales, while the reduced margin was primarily due to the
aforementioned increased raw material costs and a less favorable sales mix.
Selling, general and administrative expenses during the quarter of $57,283,000
(21.8% of sales), were 97% of last year's $59,178,000 (25.4% of sales).
Year-to-date expenses were $105,738,000 (20.6% of sales), 84% of last year's
$126,339,000 (25.4% of sales) Excluding the divested business, six month
expenses were 89% of the prior year's proforma expense of $118,499,000 (25.5%
of sales). Lower selling expense during the three and six month periods reflect
reductions in selected marketing programs to offset the higher raw material
costs, as well as a shift in the timing of certain automotive promotional
spending to the second half of the fiscal year.
Amortization and other depreciation expense for the quarter was $3,592,000, 94%
of the prior year's $3,836,000 and for the six month period it was $7,790,000,
96% of the prior year's $8,118,000. Interest expense for the quarter was
$4,572,000, 100% of the prior year. Year-to-date, interest expense of $8,886,000
is 93% of last year, reflecting a lower average borrowing rate. 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.
Other income (expense), net reflects approximately $2,000,000 of accrued
interest which was reversed as a result of a tax audit settlement.
The Company's effective tax rate for the first half of both fiscal 1996 and 1995
was approximately 42%. The fiscal 1996 provision for income taxes is above the
prior year's level due to the higher pre-tax income.
The prior year's extraordinary loss of $4,493,000 or $0.21 per share for the
three and six months ended December 31, 1994, resulted from the premium paid and
the write-off of unamortized debt issuance costs related to the repurchase of
$45,000,000 of the Company's Subordinated Notes.
-12-
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<PAGE>
FINANCIAL CONDITION
Worldwide credit facilities in place at December 31, 1995 aggregated
$338,617,000 of which $220,264,000 was available, but unused. The Company
expects to borrow or repay up to $20,000,000 from these credit facilities over
the next twelve months, primarily for working capital purposes.
The Company's current forecast for the 1996 fiscal year reflects capital
expenditures of approximately $38,000,000, and fixed payments (interest,
principal, discount on sale of receivables and lease payments) of approximately
$42,000,000.
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 performed 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.
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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, 1995, and the related
consolidated condensed statements of income for the three and six-month periods
ended December 31, 1995 and 1994, the consolidated condensed statements of cash
flows for the six month periods ended December 31, 1995 and 1994, and the
consolidated condensed statement of stockholders' equity for the six-month
period ended December 31, 1995. These consolidated condensed 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, 1995, 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 September 19, 1995, we expressed 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, 1995, 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
January 30, 1996
-14-
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
1. In 1994, the Federal Trade Commission (FTC)
commenced an investigation that alleged that certain
advertising claims for STP Engine Treatment violated a
1976 cease and desist order regarding STP advertising.
While it does not believe that the challenged
advertising claims violated that order or applicable
advertising law, the Company agreed to settle the
matter to avoid lengthy and costly litigation. In
December 1995, without admitting any violation, the
Company and its subsidiary STP Corporation entered into
a settlement with the FTC which involved a penalty
payment of $888,000, charged against a reserve set
aside in fiscal year 1995, and an injunction against
any future violations of the 1976 cease and desist
order.
2. IQ Products Company and CSA, Limited, Inc. v. First
Brands Corporation, filed on May 4, 1994 in Federal
District Court in Houston, Texas, arises out of IQ
Products' contractual relationship with the Corporation
for the supply of various aerosol automotive products,
including STP Flat Tire Repair. IQ Products is seeking
compensatory damages of $10.3 million (including the
approximately $800,000 withheld by the Corporation)
plus interest for products allegedly supplied and in
connection with the Company's recall of STP Flat Tire
Repair. The Corporation has denied IQ Products' claims
and counterclaimed for compensatory damages of $4.5
million (less the approximately $800,000 withheld by
it), plus interest. Legal counsel believes that IQ
Products' claims are without merit and that the
Corporation will prevail on part or all of its claims
against IQ Products.
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 27, 1995:
1. Election of three Directors, each to serve for a
three-year term expiring on the date of the Annual
Meeting of Stockholders in 1998 and/or until his
successor is elected or appointed and qualified:
<TABLE>
<CAPTION>
Name For Withheld
<S> <C> <C>
Gary E. Gardner 19,421,185 20,570
Denis Newman 19,421,485 20,270
Ervin R. Shames 19,421,485 20,270
</TABLE>
2. Ratification of the selection by the Board of
Directors of KPMG Peat Marwick LLP as independent
auditors:
<TABLE>
<CAPTION>
Abstentions and
For Against Broker Non-Votes
<S> <C> <C> <C>
19,427,534 4,207 10,014
</TABLE>
-15-
<PAGE>
<PAGE>
3. Authorization of a Non-employee Director Stock
Option Plan (the "Director Plan")
<TABLE>
<CAPTION>
Abstentions and
For Against Broker Non-Votes
<S> <C> <C> <C>
19,000,467 417,674 23,614
</TABLE>
The Director Plan authorizes the issuance of up to
60,000 shares of the Company's common stock. Awards of
non-qualified stock options to purchase 2000 shares of
the Company's common stock during the year 1996 and
1,000 shares during the succeeding four years will be
granted to each elected, re-elected or continuing
non-employee Director of the Company on the first
Friday following each annual meeting of stockholders
during the term of the Director Plan. The Director Plan
is non-discretionary and is administered by the Board
of Directors of the Company. It is effective for the
period beginning October 30, 1995 and ending October
30, 2000 and may be terminated or amended, within
certain limitations, as the Board deems advisable.
4. Authorization of an amendment (the "Amendment") to
the Annual Incentive Plan for certain key employees
of the Company:
<TABLE>
<CAPTION>
Abstentions and
For Against Broker Non-Votes
<S> <C> <C> <C>
15,339,198 4,077,175 25,382
</TABLE>
The Amendment authorizes the issuance of up to 100,000
shares of common stock of the Company under the Annual
Incentive Plan ("Incentive Plan") adopted in 1986 by
the Board of Directors for certain key employees
("Participants") of the Company. The Incentive Plan is
administered by the Compensation Committee of the Board
of Directors (the "Committee"), which determines the
employees to whom awards are granted, the amount of
such awards, if any, and the timing and form of each
award. The Amendment permits certain senior manager
Participants to elect to receive all or part of their
annual incentive award in common stock of the Company
having a fair market value equal to 125% of the cash
award which would otherwise be received pursuant to the
Incentive Plan. Common stock issued under the Incentive
Plan will be restricted in transferability for a period
of two years after the date of issuance. The Committee
has discretion to impose other restrictions on shares
of common stock issued under the Incentive Plan.
Item 5. Other Information
None.
-16-
<PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit Index:
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
<S> <C>
3.1 -- Restated Certificate of Incorporation of the Company, as amended by consent of the
stockholders of the Company as of April 11, 1991. Incorporated by reference to Exhibit
3.1 to Form 10-K filed by the registrant on September 25, 1992.
3.2 -- By-Laws of the Company, as amended by consent of the stockholders of the Company as
of April 11, 1991, and as further amended by the Board of Directors on January 20,
1995, pursuant to Article Fifth, Section G of the Restated Certificate of Incorporation.
Incorporated by reference to Form 10-K filed by the Registrant on September 26, 1995.
10.1 -- Credit Agreement, dated as of February 3, 1995, among the Company, Chemical Bank, as
Agent, and The Several Lenders Parties thereto. Incorporated by reference to Exhibit 10.1
to Form 10-Q for Quarter ended March 31, 1995, filed by the Registrant on May 11, 1995.
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. Incorporated by reference to Exhibit
10.2(b) to Form 10-K filed by the Registrant on September 12, 1994.
(c) -- Rider No. 2 thereto, dated as of May 11, 1994. Incorporated by reference to Exhibit 10.2(c)
to Form 10-K filed by the Registrant on September 12, 1994.
10.3 (a) -- 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.
(b)* -- First Amendment thereto, dated as of October 15, 1995.
10.4 (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 dated
as of December 23, 1991 between Pitney Bowes and the Company; the Equipment Lease
Agreement was previously filed as and incorporated by reference to Exhibit 10.9 to Form
S-1 filed by the Registrant on February 7, 1992.) Incorporated by reference to Exhibit
10.5(a) to Form 10-Q for Quarter ended December 31, 1994, filed by the Registrant on
February 14, 1995.
(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 Equipment Lease Agreement. Incorporated by reference to
Exhibit 10.5(b) to Form 10-Q for Quarter ended December 31,
1994, filed by the Registrant on February 14, 1995.
10.5 -- Letters dated May 4, 1995 and June 23, 1995 of the Company and NationsBanc Leasing
Corporation ("NationsBanc" - successor in interest to NationsBanc Leasing Corporation of
Georgia), respectively, relating 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 in
Amherst, Virginia. (This equipment was subject to the Equipment Lease Agreement dated
as of June 25, 1992, between NationsBanc and the Company; the Equipment Lease
Agreement was previously filed as and incorporated by reference to Exhibit 10.14 to Form
10-K filed by the Registrant on September 25, 1992.) Incorporated by reference to Form
10-K filed by the Registrant on September 26, 1995.
10.6 -- 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.
-17-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C>
10.7 -- 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.
10.8 (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.
10.9 -- Agreement between the Company and Metropolitan dated December 29, 1994, for the
purchase of the 13.25% Subordinated Note due 2001 (the "Note"), outstanding in the
principle amount of $45,000,000, by the Company on January 4, 1995. (The Note was
issued pursuant to the Note Purchase Agreement ("Purchase Agreement") dated as of July
1, 1986, between the Company and Metropolitan Life Insurance Company and the
Subordinated Notes Registration Rights Agreement ("Rights Agreement") dated as of July
1, 1986; the Purchase Agreement was previously filed as and incorporated by reference to
Exhibit 4(ii) to Form S-1 filed by the Registrant on July 15, 1986; the Rights Agreement was
previously filed as and incorporated by reference to Exhibit 10(xii) to Form S-1 filed by the
Registrant on July 15, 1986.) Incorporated by reference to Exhibit 10.11(b) to Form 10-Q
for Quarter ended December 31, 1994, filed by the Registrant on February 14, 1995.
10.10 -- 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.
10.11 -- 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.
10.12 -- 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.
10.13 (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.
10.14 -- 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.
10.15 -- 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.
</TABLE>
-18-
<PAGE>
<PAGE>
<TABLE>
<S> <C>
10.16 -- 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.
10.17 -- Amended Long-Term Incentive Plan. Incorporated by reference to Exhibit 10.34 to Form
10-K filed by the Registrant on September 12, 1990.
10.18 -- 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.
10.19 (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 Common Share
15* -- Accountants' Acknowledgment
27* -- EDGAR Financial Data Schedule
</TABLE>
- ------------
* Filed herewith
B. Reports on Form 8-K
None.
-19-
<PAGE>
<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 5th, 1996 By:/s/ Donald A. DeSantis
------------------ ----------------------
Donald A. DeSantis
Senior Vice President,
Chief Financial Officer
and Treasurer
(Principal Accounting
and Duly Authorized
Officer)
-20-
<PAGE>
<PAGE>
<PAGE>
FIRST AMENDMENT TO
EQUIPMENT LEASE AGREEMENT
Dated as of October 15, 1995
By and Between
PNC LEASING CORP
as the Lessor
and
FIRST BRANDS CORPORATION
as the Lessee
<PAGE>
<PAGE>
FIRST AMENDMENT TO
EQUIPMENT LEASE AGREEMENT
THIS FIRST AMENDMENT TO EQUIPMENT LEASE AGREEMENT is made as
of the 15th day of October, 1995 (the "First Amendment") to that certain
Equipment Lease Agreement dated as of October 15, 1993 (the Equipment Lease
Agreement together with all exhibits and schedules thereto, the "Original
Agreement") (the Original Agreement, as amended by this First Amendment,
together with all extensions, substitutions, replacements, restatements and
other amendments or modifications thereof or thereto, the "Agreement") by and
between PNC LEASING CORP, a corporation organized and existing under the laws of
the Commonwealth of Pennsylvania (the "Lessor") and FIRST BRANDS CORPORATION, a
corporation organized and existing under the laws of the State of Delaware
("FBC").
WITNESSETH:
WHEREAS, the Lessor and FBC desire to amend the Original
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the terms and conditions
contained herein, and other good and valuable consideration, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
AMENDMENTS TO ORIGINAL AGREEMENT
FIRST: Subsection 1.4(a) of the Original Agreement is hereby
amended and restated in its entirety to read as follows:
1.4 Rent.
(a) Base Rent. FBC hereby agrees to pay in arrears, on each Payment
Date during the Base Term, Base Rent to Lessor for the Items. "Base
Rent" shall mean, as to any Payment Date during the Base Term, the sum
of (i) the product of (A) Lessor's Cost for each Item then subject to
this Agreement, and (B) the percentage listed in Column 1 of Schedule
1.4(a) hereto with respect to such Payment Date, and (ii) the product
of (A) Lessor's Cost for each Item then subject to this Agreement, (B)
the percentage listed in Column 2 of Schedule 1.4(a) hereto with
respect to such Payment Date, and (C) the fraction, the numerator of
which is the
<PAGE>
<PAGE>
Base Term Percentage Rental Factor plus the LIBO Rate, and the
denominator of which is 4. "Base Term Percentage Rental Factor" shall
mean with respect to any payment of Base Rent a percentage determined
as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
S&P RATING THEN BASE TERM PERCENTAGE
IN EFFECT RENTAL FACTOR
- -------------------------------------------------------------------
<S> <C>
BB+ or less .80%
- -------------------------------------------------------------------
BBB- .75%
- -------------------------------------------------------------------
BBB .65%
- -------------------------------------------------------------------
BBB+ .60%
- -------------------------------------------------------------------
A- or higher .55%
- -------------------------------------------------------------------
</TABLE>
For the purposes of this Subsection 1.4(a), the term "S&P Rating" shall
mean an actual or implied senior debt rating obtained by FBC from
Standard & Poor's, a division of McGraw-Hill, Inc. ("S&P"). In the
event that, for any reason, an S&P rating is unavailable or cannot be
determined for FBC, then, in Lessor's determination and discretion,
either (i) the equivalent actual or implied senior debt rating obtained
by FBC from Moody's Investor Service ("Moody's"), or a similar
nationally-recognized rating service, shall be substituted for the "S&P
Rating" to be used in determining the Base Term Percentage Rental
Factor, or (ii) if no such equivalent rating is available or can be
determined, then the Base Term Percentage Rental Factor shall be equal
to the latest Base Term Percentage Rental Factor then in effect.
FBC shall pay any Taxes which arise in connection with any Rent payment
to the extent it would have an indemnity obligation under Section 2.2
for such Taxes and subject to any contest rights FBC has under Sections
2.2 and 2.6 hereof.
SECOND: Section 4.6 of the Original Agreement is hereby
amended and restated in its entirety to read as follows:
4.6 Option to Renew.
(a) Option and Exercise; Term. Upon the scheduled expiration of any Term
hereunder, so long as no Event of Default has occurred and is
continuing, FBC shall have the option (each, a "Renewal Option") to
extend for a period of one (1) year the term of this Agreement with
respect to all (but not less than all) of the then remaining Items
(each such period, an "Extended Term"); provided, however, that no
more than three (3) Extended Terms may be elected by FBC hereunder.
Each
-2-
<PAGE>
<PAGE>
Extended Term shall commence on October 16 of the year of such
election and continue until October 15 of the following year. In the
event FBC desires to extend the term of this Agreement, FBC shall
provide written notice (the "Extension Notice") to Lessor not less
than 90 days prior to the expiration of the Base Term or Extended Term
then in effect; provided, in the event Lessor or the Participants
existing on the Closing Date and remaining at such time (in their
reasonable opinion) determine that FBC's financial condition has
changed in a materially adverse manner from the date of this
Agreement, Lessor or such Participants may, by written notice within
15 days after its receipt of the Extension Notice, prevent FBC's
exercise of the Renewal Option; provided, FBC may, during the 30 day
period commencing upon its receipt of such notice preventing its
exercise of the Renewal Option, exercise one of the options set forth
in Section 4.1.
(b) Extended Term Rent. If FBC elects to exercise its option to extend the
term of this Agreement pursuant to Section 4.6(a) above, FBC agrees to
pay in arrears, on each Payment Date during the Extended Term,
Extended Term Rent to Lessor for each Item. "Extended Term Rent" shall
mean, as to any Payment Date during the Extended Term, the sum of (i)
the product of (A) Lessor's Cost for each Item then subject to this
Agreement, and (B) the percentage listed in Column 1 of the Extension
Schedule hereto with respect to such Payment Date, and (ii) the
product of (A) Lessor's Cost for each Item then subject to this
Agreement, (B) the percentage listed in Column 2 of the Extension
Schedule hereto with respect to such payment Date, and (C) the
fraction, the numerator of which is the Base Term Percentage Rental
Factor plus the LIBO Rate, and the denominator of which is 4. "Base
Term Percentage Rental Factor" shall have the meaning ascribed to such
term in Subsection 1.4(a) above.
(c) Other Provisions. All other provisions of this Agreement shall be and
remain in effect during the Extended Term.
THIRD: Schedule 1.4a of the Original Agreement is hereby
amended and restated in its entirety to read as shown on Schedule 1.4a attached
hereto and made a part hereof.
FOURTH: Schedule 11.1(o) of the Original Agreement is hereby
amended and restated in its entirety to read as shown on Schedule 11.1(o)
attached hereto and made a part hereof.
-3-
<PAGE>
<PAGE>
ARTICLE II
CONDITIONS PRECEDENT
This First Amendment shall become operative as of the date
hereof when each of the following conditions precedent are satisfied in the
judgment of the Lessor or have been waived in writing by the Lessor:
(a) First Amendment. Receipt by the Lessor of duly executed
counterparts of this First Amendment from FBC.
(b) Closing Certificate. Receipt by the Lessor of a
certificate signed by an authorized officer of FBC dated as of even date
herewith certifying (i) that the representations and warranties set forth in the
Original Agreement are true and correct in all material respects on and as of
the date of this First Amendment as though made on and as of such date, except
to the extent that such representations and warranties relate solely to an
earlier date (in which case, such representations and warranties shall have been
true and correct on and as of such earlier date) and (ii) as to such other
matters as Lessor may reasonably request.
(c) Corporate Documents of FBC. Receipt by the Lessor of (i)
an incumbency certificate of FBC dated as of the First Amendment closing date
and (ii) duly certified copies of the articles of incorporation and bylaws of
FBC.
(d) Proceedings Satisfactory. Receipt by the Lessor of
evidence that all proceedings taken in connection with this First Amendment and
the consummation of the transactions contemplated hereby and all documents and
papers relating hereto have been completed or duly executed, and receipt by the
Lessor of such documents and papers, all in form and substance reasonably
satisfactory to the Lessor and Lessor's special counsel, as the Lessor or its
special counsel may reasonably request in connection therewith.
ARTICLE III
MISCELLANEOUS
FIRST: Except as expressly amended by this First Amendment,
the Original Agreement and each and every representation, warranty, covenant,
term and condition contained therein is specifically ratified and confirmed.
SECOND: FBC hereby specifically waives any prior notice
requirement, whether pursuant to Subsection 5.3(c)(iii) of the Agreement or
otherwise, applicable to the reassignment of the participation interest of IBJS
Commercial Corporation to Lessor.
-4-
<PAGE>
<PAGE>
THIRD: The intended characterization and treatment of the
transactions contemplated by Section 8.1 of the Original Agreement are hereby
confirmed and shall be unaffected by the execution of this First Amendment.
FOURTH: FBC and Lessor agree and acknowledge that each of the
Operative Documents are each hereby ratified and confirmed in all respects and
shall be and remain in full force and effect, and binding upon them. From and
after the date hereof, all references in the Agreement or any Operative Document
to the Agreement, shall be deemed to be references to the Original Agreement as
amended by this First Amendment.
FIFTH: Except for proper nouns and as otherwise defined or
amended herein, capitalized terms used herein which are not defined herein, but
which are defined in the Original Agreement, shall have the meaning given them
in the Original Agreement.
SIXTH: This First Amendment shall be binding upon and inure to
the benefit of FBC, the Lessor and their respective successors and assigns.
SEVENTH: Nothing in this First Amendment shall be deemed or
construed to be a waiver, release or limitation upon the Lessor's exercise of
any of its rights and remedies under the Original Agreement or any Operative
Document, whether arising as a consequence of any Events of Default which may
now exist, hereafter arise or otherwise, and all such rights and remedies are
hereby expressly reserved.
EIGHTH: This First Amendment may be executed in as many
different counterparts as shall be convenient and by the different parties
hereto on separate counterparts, each of which when executed by FBC and the
Lessor shall be regarded as an original. All such counterparts shall constitute
but one and the same instrument. Delivery of an executed signature page hereto
by telecopier shall be effective as delivery of a manually- executed original.
NINTH: This First Amendment shall be a contract made under and
governed by the laws of the State of New York without regard to the principles
thereof regarding conflict of laws.
TENTH: FBC shall pay any costs and expenses of Lessor incurred
in connection with this amendment and any other documents or agreements executed
in connection therewith, including attorney's fees and costs.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-5-
<PAGE>
<PAGE>
This First Amendment to Equipment Lease Agreement is executed as of the day and
year first above written.
FIRST BRANDS CORPORATION
By /s/ Richard J. Mosback
Name: Richard J. Mosback
Title: Assistant Treasurer
PNC LEASING CORP
By /s/ Douglas B. Bickmore
Name: Douglas B. Bickmore
Title: Vice President
Agreed and consented:
UNION TRUST COMPANY
By /s/ Joseph F. Morrissey
Name: Joseph F. Morrissey
Title: Vice President
-6-
<PAGE>
<PAGE>
SCHEDULE 1.4(a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
COLUMN 1 COLUMN 2 COLUMN 3
MONTHLY UNAMORTIZED TERMINATION
PAYMENT DATE AMORTIZATION BALANCE PERCENTAGE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
01/15/94 2.37044674 100.00000000 97.62955326
- -----------------------------------------------------------------------------------------------------------------------------
04/15/94 2.40229962 97.62955326 95.22725364
- -----------------------------------------------------------------------------------------------------------------------------
07/15/94 2.43458052 95.22725364 92.79267313
- -----------------------------------------------------------------------------------------------------------------------------
10/15/94 2.48349661 92.79267313 90.30917631
- -----------------------------------------------------------------------------------------------------------------------------
01/15/94 2.51420439 90.30917631 87.79497192
- -----------------------------------------------------------------------------------------------------------------------------
04/15/95 2.54529166 87.79497192 85.24968027
- -----------------------------------------------------------------------------------------------------------------------------
07/15/95 2.57678330 85.24968027 82.67291696
- -----------------------------------------------------------------------------------------------------------------------------
10/15/95 2.60862410 82.67291696 80.06429287
- -----------------------------------------------------------------------------------------------------------------------------
01/15/96 2.64087882 80.06429287 77.42341406
- -----------------------------------------------------------------------------------------------------------------------------
04/15/96 2.67353237 77.42341406 74.74988169
- -----------------------------------------------------------------------------------------------------------------------------
07/15/96 2.70658967 74.74988169 72.04329202
- -----------------------------------------------------------------------------------------------------------------------------
10/15/96 2.74005571 72.04329202 69.30323631
- -----------------------------------------------------------------------------------------------------------------------------
01/15/97 2.77393555 69.30323631 66.52930076
- -----------------------------------------------------------------------------------------------------------------------------
04/15/97 2.80823430 66.52930076 63.72106646
- -----------------------------------------------------------------------------------------------------------------------------
07/15/97 2.84295714 63.72106646 60.87810932
- -----------------------------------------------------------------------------------------------------------------------------
10/15/97 2.87810932 60.87810932 58.00000000
- -----------------------------------------------------------------------------------------------------------------------------
01/15/98 2.64458291 58.00000000 55.35641709
- -----------------------------------------------------------------------------------------------------------------------------
04/15/98 2.67797078 55.35541709 52.67744833
- -----------------------------------------------------------------------------------------------------------------------------
07/15/98 2.71178015 52.67744833 49.965666156
- -----------------------------------------------------------------------------------------------------------------------------
10/15/98 2.74601637 49.965666156 47.21964981
- -----------------------------------------------------------------------------------------------------------------------------
01/15/99 2.78068483 47.21964981 44.43896498
- -----------------------------------------------------------------------------------------------------------------------------
04/15/99 2.81579097 44.43896498 41.62317401
- -----------------------------------------------------------------------------------------------------------------------------
07/15/99 2.85134033 41.62317401 38.77183368
- -----------------------------------------------------------------------------------------------------------------------------
10/15/99 2.88733851 38.77183368 35.88449517
- -----------------------------------------------------------------------------------------------------------------------------
01/15/00 2.92379115 35.88449517 32.96070402
- -----------------------------------------------------------------------------------------------------------------------------
04/15/00 2.96070402 32.96070402 30.00000000
- -----------------------------------------------------------------------------------------------------------------------------
07/15/00 2.99808290 30.00000000 27.00191710
- -----------------------------------------------------------------------------------------------------------------------------
10/15/00 3.35933700 27.0019171 23.96598340
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
EXTENDED TERM ENDING: ADJUSTMENT PERCENTAGE: PURCHASE PRICE PERCENTAGE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
October 15, 1998 40.969 47.220
- --------------------------------------------------------------------------------------------------------------------------
October 15, 1999 30.795 35.885
- --------------------------------------------------------------------------------------------------------------------------
October 15, 2000 20.099 23.970
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
<PAGE>
SCHEDULE 11.1(o)
PARTICIPANTS
First Fidelity Bank, formerly Union Trust Company
<PAGE>
<PAGE>
<PAGE>
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,
1995 1994 1995 1994
---- ---- ---- ----
COMPONENTS OF PRIMARY NET INCOME
PER COMMON SHARE:
<S> <C> <C> <C> <C>
Income before extraordinary loss........... $ 14,637 $ 11,842 $ 30,170 $ 26,916
Extraordinary loss......................... -- (4,493) -- (4,493)
---------- -------- ----------- ---------
Net income................................. $ 14,637 $ 7,349 $ 30,170 $ 22,423
======== ======= ======== ========
Average common shares outstanding
during the period........................ 22,199 22,021 22,178 22,016
Average treasury shares held
during the period........................ (1,376) (801) (1,325) (500)
Common shares issuable with
respect to common equivalents
for stock options........................ 458 229 433 235
------ ------- ------- -------
Average common and common
equivalent shares outstanding............ 21,281 21,449 21,286 21,751
====== ====== ====== ======
Primary earnings per share:
Income before extraordinary loss......... $ 0.69 $ 0.55 $ 1.42 $ 1.24
Extraordinary loss....................... -- (0.21) -- (0.21)
-------- ------ -------- ------
Net income............................... $ 0.69 $ 0.34 $ 1.42 $ 1.03
====== ====== ====== ======
</TABLE>
<PAGE>
<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,
1995 1994 1995 1994
---- ---- ---- ----
COMPONENTS OF FULLY DILUTED NET INCOME
PER COMMON SHARE:
<S> <C> <C> <C> <C>
Income before extraordinary loss........... $ 14,637 $ 11,842 $ 30,170 $ 26,916
Extraordinary loss......................... -- (4,493) -- (4,493)
---------- -------- ----------- ---------
Net income................................. $ 14,637 $ 7,349 $ 30,170 $ 22,423
======== ======= ======== ========
Average common shares outstanding
during the period........................ 22,199 22,021 22,178 22,016
Average treasury shares held
during the period........................ (1,376) (801) (1,325) (500)
Common shares issuable with
respect to common equivalents
for stock options........................ 491 268 490 267
------ ------- ------- -------
Average common and common
equivalent shares outstanding............ 21,314 21,488 21,343 21,783
====== ====== ====== ======
Fully diluted earnings per share:
Income before extraordinary loss......... $ 0.69 $ 0.55 $ 1.41 $ 1.24
Extraordinary loss....................... -- (0.21) -- (0.21)
-------- ------ -------- ------
Net income............................... $ 0.69 $ 0.34 $ 1.41 $ 1.03
====== ====== ====== ======
</TABLE>
<PAGE>
<PAGE>
<PAGE>
Exhibit 15
Accountants' Acknowledgement
First Brands Corporation
83 Wooster Heights Road
Danbury, CT 06813-1911
Ladies and 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, 1995 and January
30, 1996 related to our reviews of interim financial information.
Pursuant to Rule 436 (c) under the Securities Act of 1933, such reports are not
considered 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
January 30, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> OCT-1-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,744
<SECURITIES> 0
<RECEIVABLES> 108,058
<ALLOWANCES> 1,587
<INVENTORY> 143,565
<CURRENT-ASSETS> 299,491
<PP&E> 405,776
<DEPRECIATION> 101,459
<TOTAL-ASSETS> 809,442
<CURRENT-LIABILITIES> 147,073
<BONDS> 207,825
<COMMON> 223
0
0
<OTHER-SE> 370,724
<TOTAL-LIABILITY-AND-EQUITY> 809,442
<SALES> 263,084
<TOTAL-REVENUES> 263,084
<CGS> 172,956
<TOTAL-COSTS> 172,956
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,590
<INCOME-PRETAX> 25,171
<INCOME-TAX> 10,534
<INCOME-CONTINUING> 14,637
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,637
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.69
</TABLE>
