<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
<TABLE>
<S> <C>
FOR QUARTER ENDED SEPTEMBER 30, 1998 COMMISSION FILE NUMBER
------------------- 1-10395
-------
</TABLE>
FIRST BRANDS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
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.
<TABLE>
<S> <C>
YES X NO
--- ---
</TABLE>
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
CLASS Outstanding at November 1, 1998
---------------------------- -------------------------------
Common Stock, $.01 par value 39,024,514 shares
</TABLE>
<PAGE>
<PAGE>
FIRST BRANDS CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
PART I - FINANCIAL INFORMATION
- ------------------------------
<S> <C>
Item 1. Financial Statements
Consolidated Condensed Statements of Income -
For the Three Month Periods
Ended September 30, 1998 and 1997...................................... 3
Consolidated Condensed Balance Sheets -
September 30, 1998 and June 30, 1998................................... 4
Consolidated Condensed Statement of Stockholders'
Equity - For the Three Month Period
Ended September 30, 1998............................................... 5
Consolidated Condensed Statements of Cash
Flows - For the Three Month Periods
Ended September 30, 1998 and 1997...................................... 6
Notes to Consolidated Condensed Financial
Statements............................................................. 7-9
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition....................... 10-12
Independent Auditors' Review Report..................................... 13
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings............................................... 14
Items 2 - 6............................................................. 14
SIGNATURE............................................................... 15
- ---------
</TABLE>
-2-
<PAGE>
<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
-------------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
<S> <C> <C>
(in thousands - except per share amounts)
Net sales........................................ $ 291,509 $ 269,480
Cost of goods sold............................... 188,859 183,195
Selling, general and
administrative expenses........................ 65,720 53,911
Amortization and other depreciation.............. 4,004 3,860
Interest expense and amortization of debt
discount and expense........................... 7,199 7,114
Discount on sale of receivables.................. 1,487 1,147
Other income (expense), net...................... (670) (288)
--------- ----------
Income before provision for income taxes......... 23,570 19,965
Provision for income taxes....................... 9,250 7,792
--------- -------
Net income....................................... $ 14,320 $ 12,173
======== ========
Basic earnings per common share (Note 6):
Net income.................................... $ 0.37 $ 0.30
======= =======
Based on the following number of shares.......... 39,039 39,942
====== ======
Diluted earnings per common share (Note 6):
Net income....................................... $ 0.36 $ 0.30
======= =======
Based on the following number of shares.......... 39,677 40,775
====== ======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
-3-
<PAGE>
<PAGE>
FIRST BRANDS CORPORATION
------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
(dollars in thousands - except share amounts) 1998 1998
--------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash and cash equivalents........................... $ 19,115 $ 12,029
Accounts and notes receivable - net................. 95,103 130,874
Inventories......................................... 154,106 155,480
Deferred tax assets................................. 12,209 11,827
Prepaid expenses.................................... 4,564 10,170
------------ -----------
Total current assets.............................. 285,097 320,380
Property, plant and equipment (net of accumulated
depreciation of $169,126 and $160,529)............ 418,199 419,755
Patents, trademarks, proprietary technology
and other intangibles (net of accumulated
amortization of $207,857 and $204,916)............ 332,505 284,849
Deferred charges and other assets (net of
accumulated amortization of $53,166 and $52,687).. 35,404 35,217
------------ -----------
Total assets.............................. $ 1,071,205 $ 1,060,201
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities
Notes payable....................................... $ 4,280 $ 4,562
Current maturities of long-term debt................ 3,184 3,384
Accrued income and other taxes...................... 15,871 8,253
Accounts payable.................................... 40,294 71,692
Accrued liabilities................................. 67,837 92,919
------------ -----------
Total current liabilities...................... 131,466 180,810
Long-term debt...................................... 443,785 388,054
Deferred taxes payable.............................. 79,023 78,788
Other long-term obligations......................... 26,955 26,401
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 and 43,553,846 shares issued at September 30,
1998 and June 30, 1998............................ 435 435
Capital in excess of par value...................... 134,166 134,166
Cumulative foreign currency translation adjustment.. (31,310) (27,556)
Common stock in treasury, at cost; 4,534,000 shares at
September 30, 1998 and 4,407,000 shares at June 30, 1998 (125,872) (123,039)
Retained earnings................................... 412,557 402,142
------------ -----------
Total stockholders' equity..................... 389,976 386,148
------------ -----------
Total liabilities and stockholders' equity $ 1,071,205 $ 1,060,201
============ ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
-4-
<PAGE>
<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1998
---------------------------------------------------
(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, 1998 ......... $ 435 $ 134,166 $ (27,556) $ (123,039) $ 402,142 $ 386,148
Cash Dividends ......... -- -- -- -- (3,905) (3,905)
Purchase of
Treasury Stock ........ -- -- -- (2,833) -- (2,833)
Net Income ............. -- -- -- -- 14,320 14,320
Foreign Currency
Translation Adjustment -- -- (3,754) -- -- (3,754)
--------- --------- ---------- ----------- ---------- ---------
Balance as of
September 30, 1998 .... $ 435 $ 134,166 $ (31,310) $ (125,872) $ 412,557 $ 389,976
========= ========= ========== =========== ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
-5-
<PAGE>
<PAGE>
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
-------------- -------------
<S> <C> <C>
(in thousands)
Cash flows from operating activities:
Net income ............................................. $ 14,320 $ 12,173
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ........................ 13,214 11,625
Deferred income taxes ................................ 214 2,997
Change in certain non-cash current assets and liabilities:
Decrease in accounts receivable ................... 34,841 32,897
(Increase) in inventories ......................... (39) (12,642)
Decrease in prepaid expenses ...................... 5,558 252
Increase in accrued income and other taxes ........ 7,697 3,557
(Decrease) in accounts payable .................... (31,076) (15,212)
(Decrease) in accrued liabilities ................. (24,686) (32,552)
Other changes .......................................... 546 1,984
-------- --------
Total adjustments .................................. 6,269 (7,094)
-------- --------
Net cash provided by operating activities ................ 20,589 5,079
-------- --------
Cash flows from investing activities:
Capital expenditures .................................. (9,667) (8,234)
Acquisition of leased assets .......................... -- (10,208)
Acquisition of business ............................... (53,000) --
Purchase and installation of information system ....... (1,237) (2,727)
-------- --------
Net cash (used for) investing activities ................. (63,904) (21,169)
-------- --------
Cash flows from financing activities:
Increase in credit facility borrowings, net .......... 57,331 26,345
(Decrease) increase in other borrowings, net ......... (181) 14,522
(Decrease) in securitization of accounts receivable .. --
(15,000)
Proceeds from exercise of stock options .............. -- 787
Purchase of common stock for treasury ................ (2,833) (5,627)
Dividends paid ....................................... (3,916) (3,207)
-------- --------
Net cash provided by financing activities ............... 50,401 17,820
-------- --------
Net increase in cash and cash equivalents ................ 7,086 1,730
Cash and cash equivalents at beginning of period ......... 12,029 7,465
-------- --------
Cash and cash equivalents at end of period ............... $ 19,115 $ 9,195
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
-6-
<PAGE>
<PAGE>
FIRST BRANDS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements include all adjustments (all of which were of a normal
recurring nature) necessary to fairly present the results of operations for the
interim periods. All material intercompany transactions and balances have been
eliminated. The results of operations for the three month period ended September
30, 1998 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 sale of consumer products under branded
and private labels. Principal branded products include: GLAD and GLAD-LOCK
(plastic wrap and bags); GLADWARE (plastic containers); HANDI WIPES and WASH `N
DRI (cleaning cloths); STP (oil and fuel additives and other specialty
automotive products); SCOOP AWAY, EVER CLEAN, EVERFRESH and JONNY CAT (cat
litters) and STARTERLOGG (fire starters) and HEARTHLOGG (fire logs).
INVENTORIES
Inventories were comprised of:
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
----------- --------
(in thousands)
<S> <C> <C>
Raw materials................................... $ 33,261 $ 34,160
Work-in-process................................. 5,416 5,485
Finished goods.................................. 115,429 115,835
--------- ---------
Total....................................... $ 154,106 $ 155,480
========= =========
</TABLE>
2. LONG-TERM DEBT
First Brands had long-term debt outstanding as of September 30, 1998 and June
30, 1998 as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
------------- --------
(in thousands)
<S> <C> <C>
$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% ............................................................. $ 247,000 $ 190,000
$150,000,000 7 1/4% Senior Notes Due 2007 ................................. 150,000 150,000
$54,717,000 Australian and New Zealand Credit
Facility, 7 year term expiring September 2004,
interest at local Bill Rate plus .7% ................................... 38,996 42,745
$9,139,000 Canadian Credit Facility, 5 year term expiring September 2002,
interest at Canadian prime rate, LIBOR plus .425% or Canadian
Bankers Acceptance plus .425% .......................................... 5,493 3,424
Other ..................................................................... 5,480 5,269
--------- ---------
446,969 391,438
Less: current maturities .................................................. (3,184) (3,384)
--------- ---------
Total long-term debt .......................................................... $ 443,785 $ 388,054
========= =========
</TABLE>
-7-
<PAGE>
<PAGE>
The Company's revolving credit facility is unsecured, however, it does contain
certain restrictive covenants pertaining to the ratio of debt to equity,
dividend payments and stock repurchases.
The Australian and New Zealand credit facility is composed 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. 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 Canadian credit facility requires fixed periodic payments. The facility is
secured by the accounts receivable, inventory and fixed assets of the Canadian
business.
The 7 1/4% Note Indenture contains certain restrictive covenants and limitations
principally relating to the Company's right to incur debt and to engage in
certain sale and leaseback transactions.
First Brands was in compliance with the covenants of all debt agreements at
September 30, 1998.
3. ACCOUNTS RECEIVABLE
The Company is engaged in a program to sell up to $100,000,000 in fractional
ownership interest in a defined pool of eligible trade accounts receivable. As
of September 30, 1998 the entire $100,000,000 had been sold. 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 September 30, 1998 of $4,280,000 consisted of the Company's
international subsidiaries' working capital borrowings with local lenders. The
Company's international working capital credit facilities aggregate $16,978,000
and are generally secured by the assets of the respective subsidiaries, with
approximately $2,000,000 of the availability at one subsidiary being guaranteed
by First Brands Corporation (U.S.). The Company also borrows against an
unsecured domestic line of credit and at September 30, 1998, the entire
$15,000,000 available under this facility was unused.
5. TAXES
The provision for income tax expense for the three months ended September 30,
1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
Three Months
Ended
September 30,
---------------
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Current:
Federal...................... $ 6,683 $ 3,200
State........................ 1,454 754
Foreign...................... 899 841
------ ------
Total current............ 9,036 4,795
Deferred:
Federal...................... 87 2,397
State........................ 19 531
Foreign...................... 108 69
------- -------
Total deferred........... 214 2,997
------ -----
Total provision...... $ 9,250 $ 7,792
===== =====
</TABLE>
-8-
<PAGE>
<PAGE>
6. EARNINGS PER SHARE AND DIVIDENDS
Basic earnings per share ("EPS") represents the earnings available to each
common share outstanding during the reporting period. Diluted EPS reflects the
earnings available to each common share after the effect of dilutive stock
options. For the Company, the numerator is constant for both the basic and
diluted calculation. The denominator used in the diluted EPS calculation was
increased by 638,000 and 833,000 common share equivalents pertaining to stock
options for the three months ended September 30, 1998 and 1997, respectively.
The Company has paid its shareholders quarterly cash dividends of $0.10 and
$0.08 per share for the first quarter of fiscal 1999 and 1998, respectively.
7. ACQUISITION
On August 31, 1998, the Company acquired, for approximately $53,000,000, the
HANDI WIPES and WASH `N DRI business from the Colgate-Palmolive Company. This
business is the leader in sales of reusable cleaning cloths and individually
wrapped pre-moistened towelettes in the U.S. and Puerto Rico. The
acquisition was accounted for as a purchase and was financed through borrowings
from the Company's revolving credit facility.
8. COMPREHENSIVE INCOME
As of July 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", which establishes standards
for reporting and displaying comprehensive income and its components. The only
component of comprehensive income which affects the Company is foreign currency
translation adjustments. Since the Company does not provide for U.S. taxes on
undistributed foreign earnings, the impact of foreign currency translation
adjustments is not tax effected. Comprehensive income for the three months ended
September 30, 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
Three Months
Ended
September 30,
---------------
1998 1997
---- ----
(thousands)
<S> <C> <C>
Net income................................. $ 14,320 $ 12,173
Foreign currency translation adjustments... (3,754) (2,699)
------- -------
Comprehensive income....................... $ 10,566 $ 9,474
======== =========
</TABLE>
Accumulated other comprehensive income as of September 30, 1998 and June 30,
1998 consisted solely of foreign currency translation adjustments with debit
balances of $31,310,000 and $27,556,000, respectively.
9. SUBSEQUENT EVENTS
On October 18, 1998, the Company's Board of Directors approved an Agreement and
Plan of Merger, providing for the acquisition of First Brands by The Clorox
Company. In the merger, each outstanding share of First Brands stock will be
converted into a fraction of a Clorox share with a value equal to $39, provided
the average closing price of Clorox stock stays between $80 and $115 in the 10
day period ending 5 days before the date of the merger. If the average closing
price of Clorox stock is higher than $115 during such period, each outstanding
share of First Brands stock will be converted into 0.3391 of a Clorox share. If
the average closing price of Clorox stock is less than $80 during such period,
each share of First Brands stock will be converted into 0.4875 of a Clorox
share. The transaction, which is expected to be completed in the first quarter
of calendar 1999, will be treated as a pooling of interests for accounting
purposes and is structured to be non-taxable to stockholders (except for cash
received in lieu of fractional shares).
-9-
<PAGE>
<PAGE>
FIRST BRANDS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis of the consolidated results of operations
for the three month periods ended September 30, 1998 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 leading consumer products. The
Company's products which include "GLAD", "GLAD-LOCK", "GLADWARE", "HANDI WIPES",
"WASH `N DRI", "STP", "SCOOP AWAY", "EVERFRESH", "EVER CLEAN", "JONNY CAT",
"STARTERLOGG" and "HEARTHLOGG" can be found in 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 month periods
ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months
Ended
September 30,
----------------
1998 1997
------ ------
<S> <C> <C>
Net sales.................................. 100.0% 100.0%
Cost of goods sold......................... 64.8 68.0
------ -----
Gross profit............................... 35.2 32.0
Selling, general, and
administrative expenses.................. 22.5 20.0
Amortization and other depreciation........ 1.4 1.4
Interest expense and amortization of debt
discount and expense..................... 2.5 2.7
Discount on sale of receivables............ 0.5 0.4
Other income (expense), net................ (0.2) (0.1)
------ ------
Income before provision for income taxes.... 8.1 7.4
Provision for income taxes.................. 3.2 2.9
----- -----
Net income.................................. 4.9% 4.5%
==== ====
</TABLE>
-10-
<PAGE>
<PAGE>
QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO THE
------------------------------------------------
QUARTER ENDED SEPTEMBER 30, 1997
--------------------------------
Sales for the quarter ended September 30, 1998 increased $22,029,000 or 8%, to
$291,509,000, from the prior year's sales of $269,480,000. Household product
sales increased 14%, reflecting strong domestic sales within the GLAD and
GLADLOCK product lines, along with higher sales from new GLADWARE products.
International sales of household products, on a U.S. dollar basis, were lower
than the previous year due to unfavorable foreign exchange rates. Excluding the
negative effect of currency exchange rates, on a local currency basis, foreign
sales of household products increased 3%. Automotive product sales were down 13%
for the quarter, primarily due to a reduction of sales to Asian customers
resulting from economic problems in that geographic region. Pet product sales
grew 7% over the prior year due to continued market growth.
Cost of goods sold for the quarter was $188,859,000, 103% of last year's
$183,195,000. Gross profit of $102,650,000 (35.2% of sales) was 119% of last
year's $86,285,000 (32.0% of sales). Increased costs reflect higher sales
volumes, while the higher gross margin percentage primarily reflects a favorable
sales mix along with lower raw material costs.
Selling, general and administrative expenses of $65,720,000 (22.5% of sales),
were 122% of last year's $53,911,000 (20.0% of sales). The increase over last
year reflects additional costs relating to new products, a shift in the timing
of certain household product promotions, reduced trade promotions and the costs
associated with the re-staging of various litter products.
Amortization and other depreciation expense for the quarter was $4,004,000, 104%
of the prior year's $3,860,000. The higher cost reflects amortization expense
associated with the Company's new information system and additional goodwill
amortization relating to the HANDI WIPES acquisition. Debt financing, as
reflected in interest expense and discount on sale of receivables, increased
during the current quarter primarily due to the higher debt levels associated
with the acquisition of HANDI WIPES. 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 39.2%, compared to the
prior year's rate of 39.0%.
FINANCIAL CONDITION
-------------------
Worldwide credit facilities in place at September 30, 1998 aggregated
$398,374,000 of which $100,031,000 was available, but unused. For the three
months ending September 30, 1998, the Company repurchased common shares valued
at $2,833,000.
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.
As more fully discussed in Note 9 to the Consolidated Condensed Financial
Statements, the Company has entered into an agreement for the proposed
acquisition of First Brands by The Clorox Company. The transaction, is expected
to be completed in the first quarter of calendar 1999 and will be treated as a
pooling of interests for accounting purposes.
-11-
<PAGE>
<PAGE>
CAUTIONARY STATEMENT AND "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 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 proposed
merger with The Clorox Company and the Company's expected operating performance.
Forward-looking statements contain a number of risks and uncertainties including
changes in consumer demand, changes in prices of raw materials, changes in
distribution channels and competitive conditions, consumer acceptance of new
product lines, the Company's ability to control internal costs, the successful
development of new technologies, the implementation of strategic initiatives and
general economic conditions. Accordingly, such forward-looking statements should
not be relied upon as a prediction of actual results.
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 13 of this report.
-12-
<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 September 30, 1998, and the related
consolidated condensed statements of income for the three month periods ended
September 30, 1998 and 1997, the consolidated condensed statements of cash flows
for the three month periods ended September 30, 1998 and 1997, and the
consolidated condensed statement of stockholders' equity for the three month
period ended September 30, 1998. 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, 1998, 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 6, 1998, 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, 1998, 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
October 23, 1998
-13-
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
---------------------------
<TABLE>
<S> <C>
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
--------------------------------
</TABLE>
A. Exhibit Index:
-----------------
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- ----------------------
<S> <C>
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.
-14-
<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)
<TABLE>
<S> <C>
Date: November 4, 1998 By: /s/ Donald A. DeSantis
---------------- --------------------------
Donald A. DeSantis
Senior Vice President and
Chief Financial Officer
(Principal Accounting
and Duly Authorized
Officer)
</TABLE>
-15-
<PAGE>
<PAGE>
Exhibit 11
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands - except per share amounts)
<TABLE>
<CAPTION>
BASIC DILUTED
Year ended September 30, Year ended September 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income........................ $ 14,320 $ 12,173 $ 14,320 $ 12,173
======== ======== ======== ========
Average common shares outstanding
during the period............... 43,554 43,406 43,554 43,406
Average treasury shares held
during the period............... (4,515) (3,464) (4,515) (3,464)
Common shares issuable with
respect to common equivalents
for stock options............... 0 0 638 833
------ ------ ------ ------
Average common shares outstanding. 39,039 39,942 39,677 40,775
====== ====== ====== ======
Earnings per share:
Net income........................ $ 0.37 $ 0.30 $ 0.36 $ 0.30
======== ======== ======== ========
</TABLE>
<PAGE>
<PAGE>
Exhibit 15
Accountants' Acknowledgment
---------------------------
First Brands Corporation
83 Wooster Heights Road
Danbury, CT 06813-1911
Gentlemen:
RE: FORM S-8 REGISTRATION STATEMENTS NO. 33-35770, NO. 33-56992,
NO. 33-56503, NO. 333-56503 AND NO. 333-45379
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated October 23, 1998 to our reviews
of interim financial information.
Pursuant to Rule 436 ( C ) under the Securities Act of 1933, such report is 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
November 9, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 19,115
<SECURITIES> 0
<RECEIVABLES> 95,103
<ALLOWANCES> 1,962
<INVENTORY> 154,106
<CURRENT-ASSETS> 285,097
<PP&E> 418,199
<DEPRECIATION> 169,126
<TOTAL-ASSETS> 1,071,205
<CURRENT-LIABILITIES> 131,466
<BONDS> 443,785
<COMMON> 435
0
0
<OTHER-SE> 389,976
<TOTAL-LIABILITY-AND-EQUITY> 1,071,205
<SALES> 291,509
<TOTAL-REVENUES> 291,509
<CGS> 188,859
<TOTAL-COSTS> 188,859
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,199
<INCOME-PRETAX> 23,570
<INCOME-TAX> 9,250
<INCOME-CONTINUING> 14,320
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,320
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.36
</TABLE>
