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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, 1996 COMMISSION FILE NUMBER
------------------ 1-10395
-------
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
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(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 February 1, 1997
---------------------------- -------------------------------
Common Stock, $.01 par value 40,672,686 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, 1996 and 1995 ....................................... 3
Consolidated Condensed Statements of Income -
For the Six Month Periods
Ended December 31, 1996 and 1995 ....................................... 4
Consolidated Condensed Balance Sheets -
December 31, 1996 and June 30, 1996 .................................... 5
Consolidated Condensed Statement of Stockholders'
Equity - For the Six Month Period
Ended December 31, 1996 ................................................ 6
Consolidated Condensed Statements of Cash
Flows - For the Six Month Periods
Ended December 31, 1996 and 1995 ....................................... 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 Auditors' Review Report ..................................... 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ............................................... 15
Items 2 - 6 ............................................................. 15-16
SIGNATURE ............................................................... 17
</TABLE>
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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,
1996 1995
------------ ------------
<S> <C> <C>
(in thousands - except per share amounts)
Net sales .......................................... $279,952 $263,084
Cost of goods sold ................................. 178,233 172,956
Selling, general and
administrative expenses .......................... 67,902 57,283
Amortization and other depreciation ................ 3,017 3,592
Interest expense and amortization of debt
discount and expense ............................. 4,626 4,572
Discount on sale of receivables .................... 1,131 1,018
Other income (expense), net ........................ 373 1,508
-------- --------
Income before provision for income taxes ........... 25,416 25,171
Provision for income taxes ......................... 10,065 10,534
-------- --------
Net income ......................................... $ 15,351 $ 14,637
======== ========
Net income per common share and common
equivalent share (Note 6) ......................... $ 0.37 $ 0.34
======== ========
Weighted average common and common
equivalent shares outstanding (Note 6) ........... 41,898 42,562
======== ========
</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,
1996 1995
----------- ------------
<S> <C> <C>
(in thousands - except per share amounts)
Net sales .......................................... $535,549 $513,873
Cost of goods sold ................................. 345,641 339,183
Selling, general and
administrative expenses .......................... 118,121 105,738
Amortization and other depreciation ................ 6,271 7,790
Interest expense and amortization of debt
discount and expense ............................. 8,875 8,886
Discount on sale of receivables .................... 2,151 2,055
Other income (expense), net ........................ 958 1,686
-------- --------
Income before provision for income taxes ........... 55,448 51,907
Provision for income taxes ......................... 22,090 21,737
-------- --------
Net income ......................................... $ 33,358 $ 30,170
======== ========
Net income per common share and common
equivalent share (Note 6) ......................... $ 0.80 $ 0.71
======== ========
Weighted average common and common
equivalent shares outstanding (Note 6) ........... 42,062 42,572
======== ========
</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,
(dollars in thousands, except share amounts) 1996 1996
------------ --------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash and cash equivalents ............................ $ 7,608 $ 8,326
Accounts and notes receivable - net .................. 108,720 125,126
Inventories .......................................... 136,958 146,002
Deferred tax assets .................................. 20,556 20,155
Prepaid expenses ..................................... 2,119 4,662
--------- ---------
Total current assets ............................... 275,961 304,271
Property, plant and equipment (net of accumulated
depreciation of $126,054 and $111,401) ............. 340,155 319,677
Patents, trademarks, proprietary technology
and other intangibles (net of accumulated
amortization of $185,640 and $181,929) ............. 198,160 204,422
Deferred charges and other assets (net of
accumulated amortization of $51,782 and $50,965) ... 38,793 32,510
--------- ---------
Total assets ............................... $ 853,069 $ 860,880
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities
Notes payable ........................................ $ 9,587 $ 4,013
Current maturities of long-term debt ................. 60 116
Accrued income and other taxes ....................... 12,125 3,474
Accounts payable ..................................... 30,187 61,168
Accrued liabilities .................................. 65,503 110,522
--------- ---------
Total current liabilities ....................... 117,462 179,293
Long-term debt ....................................... 244,726 199,355
Deferred taxes payable ............................... 69,465 66,300
Deferred gain on sale of assets ...................... 603 1,057
Other long-term obligations .......................... 16,152 16,050
Stockholders' Equity
Preferred stock, $1 par value, 10,000,000
shares authorized; none issued ..................... -- --
Common stock, $0.01 par value, 120,000,000 shares
authorized at December 31, 1996 and 50,000,000
shared authorized at June 30, 1996; issued
43,295,086 shares at December 31, 1996
and 43,140,586 shares at June 30, 1996 (Note 6) .... 433 431
Capital in excess of par value ....................... 128,529 126,432
Cumulative foreign currency translation adjustment ... (10,025) (9,321)
Common stock in treasury, at cost; 2,477,300 shares at
December 31, 1996 and 1,490,000 at June 30, 1996 .... (75,652) (52,563)
Retained earnings .................................... 361,376 333,846
--------- ---------
Total stockholders' equity ...................... 404,661 398,825
--------- ---------
Total liabilities and stockholders' equity . $ 853,069 $ 860,880
========= =========
</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, 1996
(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, 1996 ........ $ 431 $ 126,432 $ (9,321) $ (52,563) $ 333,846 $ 398,825
Exercise of
Stock Options ........ 2 2,097 -- -- -- 2,099
Cash Dividends ........ -- -- -- -- (5,828) (5,828)
Purchase of
Treasury Stock ....... -- -- -- (23,089) -- (23,089)
Net Income ............ -- -- -- -- 33,358 33,358
Foreign Currency
Translation Adjustment -- -- (704) -- -- (704)
--------- --------- --------- --------- --------- ---------
Balance as of
December 31, 1996 .... $ 433 $ 128,529 $ (10,025) $ (75,652) $ 361,376 $ 404,661
========= ========= ========= ========= ========= =========
</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) 1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................................... $ 33,358 $ 30,170
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .............................................. 20,277 18,624
Deferred income taxes ...................................................... 3,280 11,386
Change in certain non-cash current assets and liabilities, net of effect of
businesses sold and acquired:
Decrease in accounts receivable ......................................... 5,454 16,128
Decrease in inventories ................................................. 9,044 12,680
Decrease (increase) in prepaid expenses ................................. 2,543 (480)
Increase (decrease) in accrued income
and other taxes ..................................................... 8,651 (3,041)
(Decrease) in accounts payable .......................................... (30,981) (36,188)
(Decrease) in accrued liabilities ....................................... (45,019) (53,275)
Other changes ................................................................ (708) (1,895)
-------- ----------
Total adjustments ........................................................ (27,459) (36,061)
-------- ----------
Net cash provided by (used for) operating activities ........................... 5,899 (5,891)
-------- ----------
Cash flows from investing activities:
Capital expenditures ........................................................ (14,000) (16,846)
Acquisition of leased assets ................................................ (22,320) (9,797)
Purchase and installation of software ....................................... (4,368) --
-------- ----------
Net cash (used for) investing activities ....................................... (40,688) (26,643)
-------- ----------
Cash flows from financing activities:
Increase in revolving credit borrowings, net ............................... 45,000 41,100
Increase in other borrowings, net .......................................... 5,889 8,277
Increase in securitization of accounts receivable .......................... 10,000 --
Proceeds from exercise of stock options .................................... 2,099 3,269
Purchase of common stock for treasury ...................................... (23,089) (9,895)
Dividends paid ............................................................. (5,828) (4,698)
-------- ----------
Net cash provided by financing activities ..................................... 34,071 38,053
-------- ----------
Net (decrease) increase in cash and cash equivalents ........................... (718) 5,519
Cash and cash equivalents at beginning of period ............................... 8,326 5,225
-------- ----------
Cash and cash equivalents at end of period ..................................... $ 7,608 $ 10,744
======== ==========
</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 three and six
month periods ended December 31, 1996 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); SCOOP AWAY, EVER CLEAN
and JONNY CAT (cat litters) and STARTERLOGG (fire starters) and HEARTHSIDE (fire
logs).
On December 26, 1996 the Company sold its SIMONIZ wax and polish business to
Syndet Products Incorporation ("Syndet"). The impact of the divestiture did not
have a material effect on the Company, nor is it expected to in the future.
INVENTORIES
Inventories were comprised of:
December 31, June 30,
1996 1996
------------ --------
(in thousands)
Raw materials .......................... $ 29,268 $ 28,549
Work-in-process ........................ 5,339 4,809
Finished goods ......................... 102,351 112,644
-------- --------
Total .............................. $136,958 $146,002
======== ========
2. LONG-TERM DEBT
First Brands had long-term debt outstanding as of December 31, 1996 and June 30,
1996 as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
----------- --------
(in thousands)
<S> <C> <C>
Senior Debt:
$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% ..................................... $ 140,000 $ 95,000
Other ............................................. 4,786 4,471
--------- ---------
144,786 99,471
Less: current maturities .......................... (60) (116)
--------- ---------
Senior Debt ................................... 144,726 99,355
--------- ---------
Subordinated Debt:
9 1/8% Senior Subordinated Notes Due 1999 ......... 100,000 100,000
--------- ---------
Total Long-term debt ...................... $ 244,726 $ 199,355
========= =========
</TABLE>
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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 31,1996.
3. ACCOUNTS RECEIVABLE
Since May, 1992, the Company has been a party to an agreement to sell up to
$100,000,000 in fractional ownership interest, without recourse, in a defined
pool of eligible trade accounts receivable. Under the current terms of this
agreement, the facility automatically renews each year. The fractional interest
sold as of December 31, 1996 totaled $80,000,000, reflecting an additional sale
of $10,000,000 during the second quarter of fiscal 1997. 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, 1996 of $9,587,000 consisted of $5,100,000 of a
$15,000,000 unsecured domestic line of credit and $4,487,000 of the Company's
international subsidiaries' working capital borrowings with local lenders. The
Company's international working capital credit facilities aggregated
$23,134,000, of which $18,647,000 was available at December 31, 1996. 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.).
5. TAXES
The provision for income tax expense for the three and six months ended December
31, 1996 and 1995 consists of the following:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31, December 31,
------------------- -----------------
1996 1995 1996 1995
------- ------- ------ ------
(in thousands)
<S> <C> <C> <C> <C>
Current:
Federal ...................... $ 6,321 $ 2,494 $ 14,225 $ 7,246
State ........................ 1,477 496 3,254 1,510
Foreign ...................... 624 903 1,331 1,595
-------- -------- -------- --------
Total current ............ 8,422 3,893 18,810 10,351
Deferred:
Federal ...................... 1,398 5,017 2,796 8,932
State ........................ 310 1,751 620 2,619
Foreign ...................... (65) (127) (136) (165)
-------- -------- -------- --------
Total deferred ........... 1,643 6,641 3,280 11,386
-------- -------- -------- --------
Total provision ...... $ 10,065 $ 10,534 $ 22,090 $ 21,737
======== ======== ======== ========
</TABLE>
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6. EARNINGS PER SHARE, STOCK SPLIT AND DIVIDENDS
On February 5, 1996, a two-for-one stock split of the Company's common stock was
effected in the form of a 100 percent stock dividend. Accordingly, all
historical weighted average share and per share amounts have been restated to
reflect the stock split.
Net income per share has been computed using the weighted average number of
common shares and common share equivalents outstanding for the periods.
The Company has paid its shareholders quarterly cash dividends of $0.0625 and
$0.08 per share for the first and second quarters of fiscal 1997, respectively,
and $0.05 and $0.0625 per share for the first and second quarters of fiscal
1996, respectively.
7. ACCOUNTING PRONOUNCEMENT
Effective July 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of". SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company tested for potential impairment on a business unit basis by analyzing
current and forecasted cash flows. Based on this analysis, the Company
determined that no adjustment to long-lived assets is necessary.
8. SUBSEQUENT EVENT - ACQUISITION
On February 4, 1997, the Company entered into an agreement to purchase, for
approximately $159,000,000 the NationalPak business in Australia and New Zealand
from National Foods Limited. NationalPak manufactures and markets consumer
products such as plastic wrap and bags, aluminum foil and wiping cloths under
the GLAD, CHUX, OSO, MONO and ROTA brand names. The acquisition is expected to
be finalized during the month of March and will be financed through borrowings
on existing lines of credit as well as a new credit facilities to be established
within Australia and New Zealand.
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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, 1996 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",
"JONNY CAT", "STARTERLOGG" and "HEARTHSIDE" 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.
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, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31, December 31,
----------------- ---------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales .................................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ......................... 63.7 65.7 64.5 66.0
----- ----- ----- -----
Gross profit ............................... 36.3 34.3 35.5 34.0
Selling, general, and
administrative expenses .................. 24.2 21.8 22.1 20.6
Amortization and other depreciation ........ 1.1 1.4 1.2 1.5
Interest expense and amortization of debt
discount and expense ..................... 1.6 1.7 1.7 1.7
Discount on sale of receivables ............ 0.4 0.4 0.4 0.4
Other income (expense), net ................ 0.1 0.6 0.2 0.3
----- ----- ----- -----
Income before provision for income taxes ... 9.1 9.6 10.3 10.1
Provision for income taxes ................. 3.6 4.0 4.1 4.2
----- ----- ----- -----
Net income ................................. 5.5% 5.6% 6.2% 5.9%
===== ===== ===== =====
</TABLE>
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QUARTER AND SIX MONTHS ENDED DECEMBER, 31 1996 COMPARED TO THE QUARTER AND
SIX MONTHS ENDED DECEMBER 31, 1995
Sales for the three month period ended December 31, 1996 were $279,952,000, 6%
ahead of last year's $263,084,000. For the six month period, sales were
$535,549,000, 4% above the prior year's $513,873,000. Domestic plastic wrap and
bag sales for the quarter were 4% above the prior year, however, this gain was
offset by soft international sales, and unfavorable exchange rates particularly
in South Africa. Year-to-date, plastic wrap and bag sales are even with the
prior year reflecting the above-noted increases in domestic sales which were
offset by shortfalls in international sales and unfavorable exchange. Excluding
sales from the Company's phased out contract packaging operation, automotive
sales increased 7% for the quarter and 4% year-to-date. The increase for the
quarter and year-to-date primarily reflects strong sales within the Company's
fuel additive business, primarily STP Complete Fuel System Cleaner, and gains in
the sale of automotive protectant products. Quarterly and year-to-date sales of
pet product grew 10% and 7%, respectively, over the prior year due to continued
market share growth and new product introductions such as the Company's line of
anti-bacterial cat litter. The Company's new firelog and wood fire starter
business contributed $13,711,000 in sales for the quarter and $19,376,000
year-to-date.
Cost of goods sold for the quarter was $178,233,000, 103% of last year's
$172,956,000. Year-to-date, cost of goods sold was $345,641,000, 102% of the
prior year's $339,183,000. Increased costs for the quarter reflect both higher
raw material costs and volumes, while increased costs for the six months
primarily reflects higher volumes. Although resin prices are expected to decline
over the next six months, raw material costs for the third quarter of fiscal
1997 are expected to be higher than a year ago.
Gross profit for the quarter of $101,719,000 (36.3% of sales) was 113% of last
year's $90,128,000 (34.3% of sales). Year-to-date, gross profit was $189,908,000
(35.5% of sales), 109% of last year's $174,690,000 (34.0% of sales).
Selling, general and administrative expenses during the quarter of $67,902,000
(24.2% of sales), were 119% of last year's $57,283,000 (21.8% of sales).
Year-to-date, expenses were $118,121,000 (22.1% of sales), 112% of last year's
$105,738,000 (20.6% of sales). The increase compared to last year reflects
increased spending in the automotive and pet products business, to support
market share growth and new product introductions, higher spending in the
plastic wrap and bags business, and the marketing costs associated with the
Company's new firelog and wood fire starter business. To maintain growth within
each of its core businesses, the Company intends to continue its current
advertising and promotion programs. Although this may limit third quarter
earnings, the Company is expecting benefits in the fourth quarter and in fiscal
year 1998.
Amortization and other depreciation expense for the quarter was $3,017,000, 84%
of the prior year's $3,592,000 and for six months was $6,271,000, 81% of the
prior year's $7,790,000. The lower expense for the year reflects the impact of
assets which were fully amortized during the prior fiscal year. Interest expense
for the quarter was $4,626,000, 101% of the prior year. Year-to-date, interest
expense was $8,875,000, 100% of the prior year's. 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.
The Company's effective tax rate for the quarter and six months was 40% compared
to the prior year's rate of 42%. The reduced rate reflects higher favorable
permanent tax differences during fiscal 1997.
FINANCIAL CONDITION
Worldwide credit facilities in place at December 31, 1996 aggregated
$339,031,000 of which $188,547,000 was available, but unused. Excluding costs
associated with acquisitions, leased asset or stock repurchases, the Company
expects to repay up to $50,000,000 on these credit facilities over the next
twelve months by utilizing the positive cash flow generated by its businesses.
During the second quarter and first half of fiscal 1997, the Company repurchased
common shares valued at $3,148,000 and $23,089,000, respectively.
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<PAGE>
The Company's current forecast for the 1997 fiscal year reflects capital
expenditures of approximately $41,000,000, and fixed payments (interest,
principal, discount on sale of receivables and lease payments) of approximately
$44,000,000.
Certain forward-looking statements are contained within this report, reflecting
management's current estimate of future events. These forward-looking statements
are based on many assumptions, primarily related to the Company's expected
operating performance, any variance from these assumptions may result in
significantly different results.
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 Auditors' Review Report is presented on Page 14 of this report.
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Independent Auditors' Review 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, 1996, and the related
consolidated condensed statements of income for the three and six-month periods
ended December 31, 1996 and 1995, the consolidated condensed statements of cash
flows for the six-month periods ended December 31, 1996 and 1995, and the
consolidated condensed statement of stockholders' equity for the six-month
period ended December 31, 1996. 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, 1996, 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 8, 1996, 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, 1996, 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
New York, New York
February 4, 1997
-14-
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
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,
November 1, 1996:
1) Election of three Directors, each to serve for a
three-year term expiring on the date of the Annual
Meeting of Stockholders in 1999 and/or until his
successor is duly elected or appointed and qualified:
Name For Withheld
---- ------- -----------
Alfred E. Dudley 37,235,177 223,215
James R. McManus 37,234,082 224,310
Thomas H. Rowland 37,321,453 136,939
2. Ratification of the selection by the Board of
Directors of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year 1997:
Abstentions and
For Against Broker Non-Votes
--- ------- ----------------
37,428,506 13,063 16,823
3. Ratification of the amendment of the fourth Article
of the Company's Certificate of Incorporation to
increase the authorized shares of the Company's common
stock from 50,000,000 to 120,000,000:
Abstentions and
For Against Broker Non-Votes
--- ------- ----------------
28,533,349 8,854,016 71,027
The increase in the Company's authorized Common Stock
was proposed by the Board of Directors of the Company
to provide flexibility for future stock splits, stock
dividends, and other general corporate purposes. The
additional authorized shares of Common Stock are the
same class as and identical to the shares of Common
Stock authorized prior to amendment of the Company's
Certificate of Incorporation to increase the Company's
authorized Common Stock.
Item 5. Other Information
None.
-15-
<PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit Index:
Exhibit
Number Description of Exhibit
- ------- ----------------------
11* -- Computation of Net Income Per Common Share
15* -- Accountants' Acknowledgment
27* -- EDGAR Financial Data Schedule
- ------------
* Filed herewith
B. Reports on Form 8-K
None.
-16-
<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 10, 1997 By: /s/ Donald A. DeSantis
----------------- -----------------------
Donald A. DeSantis
Senior Vice President,
Chief Financial Officer
and Treasurer
(Principal Accounting
and Duly Authorized
Officer)
-17-
<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 3 ended December 31,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
COMPONENTS OF PRIMARY NET INCOME
PER COMMON SHARE:
Net income ...................... $ 15,351 $ 14,637 $ 33,358 $ 30,170
======== ======== ======== ========
Average common shares outstanding
during the period ............. 43,243 44,398 43,196 44,356
Average treasury shares held
during the period ............. (2,395) (2,752) (2,109) (2,650)
Common shares issuable with
respect to common equivalents
for stock options ............. 1,050 916 975 866
-------- -------- -------- --------
Average common and common
equivalent shares outstanding . 41,898 42,562 42,062 42,572
======== ======== ======== ========
Primary earnings per share:
Net income .................... $ 0.37 $ 0.34 $ 0.80 $ 0.71
======== ======== ======== ========
</TABLE>
* - Fiscal 1996 share and per share amounts have been restated to
reflect a two-for-one stock split which was effective February 5,
1996.
<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,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
COMPONENTS OF FULLY DILUTED NET INCOME
PER COMMON SHARE:
Net income ...................... $ 15,351 $ 14,637 $ 33,358 $ 30,170
======== ======== ======== ========
Average common shares outstanding
during the period ............. 43,243 44,398 43,196 44,356
Average treasury shares held
during the period ............. (2,395) (2,752) (2,109) (2,650)
Common shares issuable with
respect to common equivalents
for stock options ............. 1,070 982 1,071 980
-------- -------- -------- --------
Average common and common
equivalent shares outstanding . 41,918 42,628 42,158 42,686
======== ======== ======== ========
Primary earnings per share:
Net income .................... $ 0.37 $ 0.34 $ 0.80 $ 0.71
======== ======== ======== ========
</TABLE>
* - Fiscal 1996 share and per share amounts have been restated to
reflect a two-for-one stock split which was effective February 5,
1996.
<PAGE>
<PAGE>
Exhibit 15
Accountants' Acknowledgment
First Brands Corporation
83 Wooster Heights Road
Danbury, CT 06813-1911
Ladies and Gentlemen:
RE: FORM S-8 REGISTRATION STATEMENTS NO. 33-35770, NO. 33-56992,
NO. 33-56503 AND NO. 333-56503
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our reports dated November 4, 1996 and February
4, 1997 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
New York, New York
February 14, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,608
<SECURITIES> 0
<RECEIVABLES> 110,095
<ALLOWANCES> 1,375
<INVENTORY> 136,958
<CURRENT-ASSETS> 275,961
<PP&E> 466,209
<DEPRECIATION> 126,054
<TOTAL-ASSETS> 853,069
<CURRENT-LIABILITIES> 117,462
<BONDS> 244,726
<COMMON> 0
0
0
<OTHER-SE> 404,661
<TOTAL-LIABILITY-AND-EQUITY> 853,069
<SALES> 279,952
<TOTAL-REVENUES> 279,952
<CGS> 178,233
<TOTAL-COSTS> 178,233
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,757
<INCOME-PRETAX> 25,416
<INCOME-TAX> 10,065
<INCOME-CONTINUING> 15,351
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,351
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
