<PAGE>
<PAGE>
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 MARCH 31, 1997 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
(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 May 1, 1997
Common Stock, $.01 par value 40,353,136 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 March 31, 1997 and 1996......................................................... 3
Consolidated Condensed Statements of Income -
For the Nine Month Periods
Ended March 31, 1997 and 1996......................................................... 4
Consolidated Condensed Balance Sheets -
March 31, 1997 and June 30, 1996...................................................... 5
Consolidated Condensed Statement of Stockholders'
Equity - For the Nine Month Period
Ended March 31, 1997.................................................................. 6
Consolidated Condensed Statements of Cash
Flows - For the Nine Month Periods
Ended March 31, 1997 and 1996......................................................... 7
Notes to Consolidated Condensed Financial
Statements............................................................................ 8-11
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition...................................... 12-14
Independent Auditors' Review Report.................................................... 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................................. 16
Items 2 - 6............................................................................ 16
SIGNATURE.............................................................................. 17
</TABLE>
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<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1996
----------- ------------
<S> <C> <C>
(in thousands - except per share amounts)
Net sales ....................................................... $ 264,886 $ 262,207
Cost of goods sold .............................................. 168,764 165,092
Selling, general and
administrative expenses ....................................... 61,985 60,263
Amortization and other depreciation ............................. 3,266 4,048
Interest expense and amortization of debt
discount and expense .......................................... 3,974 4,298
Discount on sale of receivables ................................. 1,212 960
Other income (expense), net ..................................... (135) 268
--------- ---------
Income before provision for income taxes
and extraordinary loss ...................................... 25,550 27,814
Provision for income taxes ...................................... 9,496 11,125
--------- ---------
Income before extraordinary loss ................................ 16,054 16,689
Extraordinary loss relating to repurchase
of subordinated notes, net of taxes .......................... (633) --
--------- ---------
Net income ...................................................... $ 15,421 $ 16,689
========= =========
Per common share and common equivalent share (Note 6)
Income before extraordinary loss ............................ $ 0.39 $ 0.39
Extraordinary loss .......................................... (0.02) --
--------- ---------
Net income ................................................. $ 0.37 $ 0.39
========= =========
Weighted average common and common
equivalent shares outstanding (Note 6) ........................ 41,528 42,647
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
(in thousands - except per share amounts)
Net sales................................................... $ 800,435 $ 776,080
Cost of goods sold.......................................... 514,405 504,275
Selling, general and
administrative expenses................................... 180,106 166,001
Amortization and other depreciation......................... 9,537 11,838
Interest expense and amortization of debt
discount and expense...................................... 12,849 13,184
Discount on sale of receivables............................. 3,363 3,015
Other income (expense), net................................. 823 1,954
----------- ---------
Income before provision for income taxes
and extraordinary loss................................... 80,998 79,721
Provision for income taxes.................................. 31,586 32,862
--------- ---------
Income before extraordinary loss............................ 49,412 46,859
Extraordinary loss relating to the repurchase
of subordinated notes, net of taxes...................... (633) -
-------- --------
Net income.................................................. $ 48,779 $ 46,859
======== ========
Per common share and common equivalent share (Note 6)
Income before extraordinary loss...................... $ 1.19 $ 1.10
Extraordinary loss.................................... (0.02) -
------ ------
Net income............................................ $ 1.17 $ 1.10
====== ======
Weighted average common and common
equivalent shares outstanding (Note 6) 41,865 42,588
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
(dollars in thousands, except share amounts) 1997 1996
------------------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash and cash equivalents....................................... $ 11,634 $ 8,326
Accounts and notes receivable - net............................. 97,334 125,126
Inventories..................................................... 166,587 146,002
Deferred tax assets............................................. 20,758 20,155
Prepaid expenses................................................ 4,396 4,662
-------------- -----------
Total current assets.......................................... 300,709 304,271
Property, plant and equipment (net of accumulated
depreciation of $133,984 and $111,401)........................ 374,975 319,677
Patents, trademarks, proprietary technology
and other intangibles (net of accumulated
amortization of $187,943 and $181,929)........................ 310,583 204,422
Deferred charges and other assets (net of
accumulated amortization of $52,803 and $50,965).............. 53,579 32,510
----------- ----------
Total assets.......................................... $ 1,039,846 $ 860,880
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities
Notes payable................................................... $ 13,688 $ 4,013
Current maturities of long-term debt............................ 4,243 116
Accrued income and other taxes.................................. 11,197 3,474
Accounts payable................................................ 50,341 61,168
Accrued liabilities............................................. 72,588 110,522
------------- ----------
Total current liabilities.................................. 152,057 179,293
Long-term debt.................................................. 392,902 199,355
Deferred taxes payable.......................................... 71,362 66,300
Deferred gain on sale of assets................................. 375 1,057
Other long-term obligations..................................... 15,979 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 March 31, 1997 and 50,000,000
shared authorized at June 30,1996; issued 43,356,336
shares at March 31, 1997 and 43,140,586 shares at
June 30, 1996 (Note 6)........................................ 433 431
Capital in excess of par value.................................. 129,278 126,432
Cumulative foreign currency translation adjustment.............. (9,881) (9,321)
Common stock in treasury, at cost; 2,895,900 shares at
March 31, 1997 and 1,490,000 at June 30, 1996................. (86,216) (52,563)
Retained earnings............................................... 373,557 333,846
----------- ---------
Total stockholders' equity................................. 407,171 398,825
----------- ---------
Total liabilities and stockholders' equity $ 1,039,846 $ 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 NINE MONTH PERIOD ENDED MARCH 31, 1997
(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 2,846 - - - 2,848
Cash Dividends............... - - - - (9,068) (9,068)
Purchase of
Treasury Stock.............. - - - (33,653) - (33,653)
Net Income................... - - - - 48,779 48,779
Foreign Currency
Translation Adjustment...... - - (560) - - (560)
------ --------- -------- --------- --------- ----------
Balance as of
March 31, 1997.............. $ 433 $ 129,278 $ (9,881) $ (86,216) $ 373,557 $ 407,171
===== ========= ========= ========== ========= =========
</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>
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
(in thousands) 1997 1996
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................... $ 48,779 $ 46,859
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.............................. 30,409 28,079
Deferred income taxes...................................... 4,958 16,856
Loss on call of subordinated notes......................... 633 -
Change in certain non-cash current a ssets and liabilities,
net of effect of businesses sold and acquired:
Decrease in accounts receivable......................... 20,934 21,872
(Increase) decrease in inventories...................... (9,088) 8,142
Decrease (increase) in prepaid expenses................. 266 (437)
Increase (decrease) in accrued income
and other taxes..................................... 7,723 (2,803)
(Decrease) in accounts payable.......................... (17,112) (34,114)
(Decrease) in accrued liabilities....................... (42,752) (57,755)
Other changes................................................ (4,852) (5,378)
--------- ----------
Total adjustments........................................ (8,881) (25,538)
--------- ----------
Net cash provided by operating activities...................... 39,898 21,321
-------- --------
Cash flows from investing activities:
Capital expenditures........................................ (24,110) (26,309)
Acquisition of leased assets................................ (22,320) (9,797)
Acquisition of businesses, net of cash acquired............. (159,004) (32,257)
Purchase and installation of software....................... (7,924) (4,905)
---------- ----------
Net cash (used for) investing activities....................... (213,358) (73,268)
---------- ----------
Cash flows from financing activities:
Increase in credit facility borrowings, net ...................... 46,485 70,000
Increase (decrease) in other borrowings, net ..................... 10,864 (494)
Increase in securitization of accounts receivable................. 10,000 -
Proceeds from exercise of stock options .......................... 2,848 4,263
Issuance of senior notes, net of underwriting discount............ 149,292 -
Purchase of common stock for treasury ............................ (33,653) (11,871)
Dividends paid.................................................... (9,068) (7,299)
-------- --------
Net cash provided by financing activities............................ 176,768 54,599
-------- --------
Net increase in cash and cash equivalents............................. 3,308 2,652
Cash and cash equivalents at beginning of period...................... 8,326 5,225
-------- --------
Cash and cash equivalents at end of period ........................... $ 11,634 $ 7,877
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
-7-
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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 nine
month periods ended March 31, 1997 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); SCOOP AWAY, EVER CLEAN and JONNY CAT (cat litters) and
STARTERLOGG (fire starters) and HEARTHLOGG (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.
ACQUISITION
On March 14, 1997, the Company purchased, for approximately $160,000,000, 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 operating results of NationalPak have been included in the
Company's consolidated condensed financial statements from the date of
acquisition. The acquisition was funded by long-term borrowings in the United
States, Canada, Australia and New Zealand.
INVENTORIES
Inventories were comprised of:
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Raw materials............................................. $ 29,789 $ 28,549
Work-in-process........................................... 6,331 4,809
Finished goods............................................ 130,467 112,644
--------- ---------
Total................................................. $ 166,587 $ 146,002
========= =========
</TABLE>
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2. LONG-TERM DEBT
First Brands had long-term debt outstanding as of March 31, 1997 and June 30,
1996 as follows:
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Senior Debt:
$300,000,000 Revolving Credit Facility, 5 year term
expiring February 2002, interest at prime rate, LIBOR plus
.275% or CD rate plus .4%; facility
fee of .15%............................................. $ 75,000 $ 95,000
$78,600,000 Australian and New Zealand Credit
Facility, 7 year term expiring March 2004,
interest at local Bill Rate plus .7% .................. 55,020 -
$11,465,000 Canadian Credit Facility, 5 year
term expiring March 2002, interest at Canadian
prime rate, LIBOR plus .425% or Canadian
Bankers Acceptance plus .425% ......................... 11,465 -
Other..................................................... 5,660 4,471
---------- ----------
147,145 99,471
Less: current maturities.................................. (4,243) (116)
---------- ----------
Senior Debt........................................... 142,902 99,355
---------- ----------
Subordinated Debt:
9 1/8% Senior Subordinated Notes Due 1999 ................ 100,000 100,000
7 1/4% Senior Notes Due 2007.............................. 150,000 -
--------- ---------
Total Long-term debt.............................. $ 392,902 $ 199,355
========= =========
</TABLE>
The Company has amended and restated its domestic revolving credit facility
effective February 28, 1997. The amendments to the facility provide the Company
with more favorable borrowing rates, reduces certain restrictive covenants
pertaining to the ratio of debt to equity and extend the facility to February
28, 2002 from December 31, 1999. Additionally, the facility permits a greater
amount of restricted payments, such as dividends and stock repurchases, grants
more flexibility to foreign subsidiaries for borrowing money and in some
circumstances, excludes certain foreign subsidiaries from financial covenant
calculations.
On March 5, 1997 the Company issued $150,000,000 of 7 1/4% Senior Notes (the "7
1/4% Notes") which will become due in 2007. Proceeds from the sale of the 7 1/4%
Notes will be used to redeem all of the Company's 9 1/8% Senior Subordinated
Notes and to reduce outstanding bank debt. During March 1997, the 9 1/8% Senior
Subordinated Notes were called, and on April 10, 1997 all were tendered and
repurchased. The Company recorded an extraordinary charge, net of taxes, of
$633,000 for the costs associated with this repurchase, for the quarter ended
March 31, 1997.
The seven-year $78,600,000 Australian and New Zealand credit facility is
effectively comprised of two parts, one of which was used to acquire the
NationalPak business and a second part which can be used for working capital
needs. There are fixed periodic payments associated with the acquisition
borrowing and the working capital borrowing can be drawn on and repaid at
NationalPak's discretion. The facility is secured by the accounts receivable,
inventory and fixed assets of NationalPak.
The five-year $11,465,000 Canadian credit facility requires fixed periodic
payments. The facility is secured by the accounts receivable, inventory and
fixed assets of the Canadian business.
First Brands was in compliance with the covenants of all debt agreements at
March 31, 1997.
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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 March 31, 1997 totaled $80,000,000. The amounts sold are reflected as
a reduction in accounts receivable on the accompanying Consolidated Condensed
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 March 31, 1997 of $13,688,000 consisted of $9,200,000 of a
$15,000,000 unsecured domestic line of credit and $4,488,000 of the Company's
international subsidiaries' working capital borrowings with local lenders. The
Company's international working capital credit facilities aggregated
$17,364,000, of which $12,876,000 was available at March 31, 1997. The
international facilities are generally secured by the assets of the respective
subsidiaries, with approximately $1,471,000 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 nine months ended March
31, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
March 31, March 31,
------------------------ ---------------
1997 1996 1997 1996
---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
(in thousands)
Current:
Federal............................. $ 7,196 $ 3,576 $ 21,421 $ 10,822
State............................... (91) 862 3,163 2,372
Foreign............................. 713 1,217 2,044 2,812
------- -------- -------- --------
Total current................... 7,818 5,655 26,628 16,006
Deferred:
Federal............................. 1,398 4,791 4,194 13,723
State............................... 310 1,062 930 3,681
Foreign............................. (30) (383) (166) (548)
------- ------- -------- --------
Total deferred.................. 1,678 5,470 4,958 16,856
------- -------- -------- --------
Total provision ............ $ 9,496 $ 11,125 $ 31,586 $ 32,862
======= ======== ======== ========
</TABLE>
6. EARNINGS PER SHARE AND DIVIDENDS
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 per
share for the first quarter of fiscal 1997 and $0.08 per share for the second
and third quarters of fiscal 1997, and $0.05 per share for the first quarter of
fiscal 1996 and $0.0625 per share for the second and third quarters of fiscal
1996.
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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.
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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 nine month periods ended March 31, 1997 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", "SCOOP AWAY", "EVER CLEAN", "JONNY
CAT", "STARTERLOGG" and "HEARTHLOGG" 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 nine month
periods ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
March 31, March 31,
----------------- ----------------
1997 1996 1997 1996
---- ---- ---- -----
<S> <C> <C> <C> <C>
Net sales........................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.................................. 63.7 63.0 64.3 65.0
------ ------ ------ ------
Gross profit........................................ 36.3 37.0 35.7 35.0
Selling, general, and
administrative expenses........................... 23.4 23.0 22.5 21.4
Amortization and other depreciation ................ 1.2 1.5 1.2 1.5
Interest expense and amortization of debt
discount and expense.............................. 1.5 1.6 1.6 1.7
Discount on sale of receivables..................... 0.4 0.4 0.4 0.4
Other income (expense), net......................... 0.0 0.1 0.1 0.2
----- ---- ----- ----
Income before provision for income taxes
and extraordinary loss............................ 9.6 10.6 10.1 10.2
Provision for income taxes........................... 3.6 4.2 3.9 4.2
----- ----- ----- ----
Income before extraordinary loss .................... 6.0 6.4 6.2 6.0
Extraordinary loss relating to repurchase
of subordinated notes, net of taxes .............. (0.2) -- (0.1) --
----- ----- ----- -----
Net income........................................... 5.8% 6.4% 6.1% 6.0%
===== ===== ===== =====
</TABLE>
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<PAGE>
QUARTER AND NINE MONTHS ENDED MARCH, 31 1997 COMPARED TO THE QUARTER AND
NINE MONTHS ENDED MARCH 31, 1996
Sales for the three month period ended March 31, 1997 were $264,886,000, 1%
ahead of last year's $262,207,000. For the nine month period, sales were
$800,435,000, 3% above the prior year's $776,080,000. Domestic plastic wrap and
bag sales for the quarter were even with the prior year, however, sales growth
of 3% was generated by the recent acquisition. Year-to-date, plastic wrap and
bag sales are slightly ahead of the prior year reflecting increased domestic
sales and sales from the above-noted acquisition. These increases were partially
offset by shortfalls in international sales and unfavorable exchange rates. A
sluggish retail environment led to a shortfall in third quarter automotive
sales. While market shares improved in most categories, many orders were
delayed, allowing customers to work off their seasonal inventories. Excluding
sales from the Company's phased out contract packaging operation, automotive
sales have increased 2% year-to-date. Pet product sales were off 3% compared to
a year ago. This was largely due to the delay of a major promotion until the
fourth quarter and to mild weather in the northeast where clay cat litter also
has weather related uses. Year-to-date sales of pet product grew 3% over the
prior year due to continued market share growth and new product introductions.
Year-to-date, the Company's new firelog and wood fire starter business
contributed $22,415,000 in sales.
Cost of goods sold for the quarter was $168,764,000, 102% of last year's
$165,092,000. Year-to-date, cost of goods sold was $514,405,000, 102% of the
prior year's $504,275,000. Increased costs for the quarter reflects both higher
polyethylene resin costs, while increased costs for the nine months primarily
reflects higher volumes.
Gross profit for the quarter of $96,122,000 (36.3% of sales) was 99% of last
year's $97,115,000 (37.0% of sales). Year-to-date, gross profit was $286,030,000
(35.7% of sales), 105% of last year's $271,805,000 (35.0% of sales).
Selling, general and administrative expenses during the quarter of $61,985,000
(23.4% of sales), were 103% of last year's $60,263,000 (23.0% of sales).
Year-to-date, expenses were $180,106,000 (22.5% of sales), 108% of last year's
$166,001,000 (21.4% of sales). To support market share growth and new product
introductions, the automotive and pet products business increased spending for
both the quarter and year-to-date. For the quarter, expenditures relating to the
plastic wrap and bags business were reduced to offset the above mentioned raw
material increases. Year-to-date, plastic wrap and bag expenditures are even
with the prior year. Marketing costs associated with the Company's Australian
business and costs associated with new firelog and wood fire starter business
contributed to the quarterly and year-to-date increases.
Amortization and other depreciation expense for the quarter was $3,266,000, 81%
of the prior year's $4,048,000 and for nine months was $9,537,000, 81% of the
prior year's $11,838,000. 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 $3,974,000, 92% of the prior year. Year-to-date, interest
expense was $12,849,000, 97% 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 was 37% and for nine months was
39%, compared to the prior year's quarterly rate of 40% and nine month rate of
41%. Lower rates in the current year reflects higher favorable permanent tax
differences during fiscal 1997 and a change in the composition of global income,
with a larger share of income coming from foreign operations with lower
effective tax rates.
-13-
<PAGE>
<PAGE>
FINANCIAL CONDITION
Worldwide credit facilities in place at March 31, 1997 aggregated $423,450,000
of which $266,227,000 was available, but unused. The unused portion reflects the
temporary pay down of the Company's domestic credit facility with proceeds from
the March 5, 1997 sale of its 7 1/4% Notes. On April 10, 1997, all of the
Company's previously outstanding 9 1/8% Senior Subordinated Notes were tendered
and repurchased. During the fourth quarter of fiscal 1997, proceeds from the
sale of the 7 1/4% Notes will be used to redeem the 9 1/8% Notes and to reduce
outstanding bank debt. 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 third quarter and nine months
of fiscal 1997, the Company repurchased common shares valued at $10,564,000 and
$33,653,000, respectively.
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 15 of this report.
-14-
<PAGE>
<PAGE>
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 March 31, 1997, and the related consolidated
condensed statements of income for the three and nine-month periods ended March
31, 1997 and 1996, the consolidated condensed statements of cash flows for the
nine-month periods ended March 31, 1997 and 1996, and the consolidated condensed
statement of stockholders' equity for the nine-month period ended March 31,
1997. 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
May 1, 1997
-15-
<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
None.
Item 5. Other Information
None.
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
A Form 8-K items 5 and 7, dated February 28, 1997, reporting the Company's
intention to redeem its $100 million 9 1/8% Senior Subordinated Notes Due 1999,
subject to the completion of a private placement of $150 million 7 1/4% Senior
Notes.
A Form 8-K items 2 and 7, dated March 14, 1997, reporting the acquisition of the
NationalPak business in Australia and New Zealand from National Foods Ltd.
-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: May 12, 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 Nine months
ended March 31, ended March 31,
------------------------ ---------------------
1997 1996 1997 1996
---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
COMPONENTS OF PRIMARY NET INCOME
PER COMMON SHARE:
Income before extraordinary loss .......... $ 16,054 $ 16,689 $ 49,412 $ 46,859
Extraordinary loss......................... (633) - (633) -
-------- -------- -------- --------
Net income................................. $ 15,421 $ 16,689 $ 48,779 $ 46,859
======== ======== ======== ========
Average common shares outstanding
during the period........................ 43,324 44,547 43,238 44,419
Average treasury shares held
during the period........................ (2,732) (2,947) (2,313) (2,749)
Common shares issuable with
respect to common equivalents
for stock options........................ 936 1,047 940 918
-------- -------- ------- -------
Average common and common
equivalent shares outstanding ........... 41,528 42,647 41,865 42,588
======== ======== ======= =======
Primary earnings per share:
Income before extraordinary loss .......... $ 0.39 $ 0.39 $ 1.19 $ 1.10
Extraordinary loss......................... (0.02) - (0.02) -
------ ------ ------ ------
Net income................................ $ 0.37 $ 0.39 $ 1.17 $ 1.10
====== ====== ====== ======
</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 Nine months
ended March 31, ended March 31,
------------------------ ---------------------
1997 1996 1997 1996
---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
COMPONENTS OF FULLY DILUTED NET INCOME
PER COMMON SHARE:
Income before extraordinary loss .......... $ 16,054 $ 16,689 $ 49,412 $ 46,859
Extraordinary loss......................... (633) - (633) -
-------- -------- -------- -------
Net income................................. $ 15,421 $ 16,689 $ 48,779 $ 46,859
======== ======== ======== ========
Average common shares outstanding
during the period........................ 43,324 44,547 43,238 44,419
Average treasury shares held
during the period........................ (2,732) (2,947) (2,313) (2,749)
Common shares issuable with
respect to common equivalents
for stock options........................ 872 1,157 872 1,158
-------- ------ ------- ------
Average common and common
equivalent shares outstanding ........... 41,464 42,757 41,797 42,828
======== ======= ======= =======
Fully diluted earnings per share:
Income before extraordinary loss .......... $ 0.39 $ 0.39 $ 1.19 $ 1.09
Extraordinary loss......................... (0.02) - (0.02) -
------ ------ ------ ------
Net income................................ $ 0.37 $ 0.39 $ 1.17 $ 1.09
====== ====== ====== ======
</TABLE>
<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, February 4,
1997 and May 1, 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
May 14, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,634
<SECURITIES> 0
<RECEIVABLES> 98,846
<ALLOWANCES> 1,512
<INVENTORY> 166,587
<CURRENT-ASSETS> 300,709
<PP&E> 508,959
<DEPRECIATION> 133,984
<TOTAL-ASSETS> 1,039,846
<CURRENT-LIABILITIES> 152,057
<BONDS> 392,902
<COMMON> 433
0
0
<OTHER-SE> 407,171
<TOTAL-LIABILITY-AND-EQUITY> 1,039,846
<SALES> 264,886
<TOTAL-REVENUES> 264,886
<CGS> 168,764
<TOTAL-COSTS> 168,764
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,186
<INCOME-PRETAX> 25,550
<INCOME-TAX> 9,496
<INCOME-CONTINUING> 16,054
<DISCONTINUED> 0
<EXTRAORDINARY> (633)
<CHANGES> 0
<NET-INCOME> 15,541
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
