UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1995
PLAYTEX PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-25485-01 51-0312772
- ------------------------------- -------------------- --------------------
(State or other jurisdiction of (Commission File No.) (I.R.S. Employer
incorporation or organization) Identification No.)
300 Nyala Farms
Westport, Connecticut 06880
(203) 341 - 4000
------------------------
(Address, including zip
code, and
telephone number,
including area
code, of principal
executive offices)
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
--- ---
At November 14, 1995, 50,879,701 shares of Playtex Products, Inc. common
stock, par value of $.01 per share, were outstanding.
<PAGE>
PLAYTEX PRODUCTS, INC.
INDEX
PAGE
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3 - 15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16 - 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits 21
(b) Reports on Form 8-K 21
Signatures 22
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE><CAPTION>
At September 30, At December 31,
1995 1994
---------------- ---------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 55,844 $ 10,373
Receivables, less allowance for doubtful accounts 70,948 49,238
Inventories 40,258 41,583
Current deferred taxes 10,995 10,096
Other current assets 1,437 2,616
-------- ---------
Total current assets 179,482 113,906
Net property, plant and equipment 51,787 47,057
Intangible assets, net:
Excess of cost over net assets of acquired business 324,674 315,276
Patents, trademarks and other 12,359 11,652
Deferred financing costs 17,603 23,392
Due from related party 89,519 80,517
Other noncurrent assets 7,600 7,600
-------- ---------
Total assets $683,024 $ 599,400
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,568 $ 10,618
Accrued expenses 65,935 45,061
Income taxes payable 1,517 6,104
Current maturities of long-term debt 20,000 34,500
-------- ---------
Total current liabilities 109,020 96,283
Long-term debt 727,500 841,200
Due to related party 88,005 78,893
Other noncurrent liabilities 19,041 23,120
Deferred income taxes 28,065 25,901
-------- ---------
Total liabilities 971,631 1,065,397
Stockholder's equity:
Common stock, $.01 par value, authorized 100,000,000 shares, issued
50,879,701 shares at September 30, 1995; and authorized 75,000,000
shares, issued 30,879,701 shares at December 31, 1994, respectively 509 309
Additional paid-in capital 423,517 254,417
Retained earnings (deficit) (710,929) (718,756)
Foreign currency translation adjustment (1,704) (1,967)
-------- ----------
Total stockholders' equity (288,607) (465,997)
-------- ---------
Total liabilities and stockholders' equity $683,024 $ 599,400
======== =========
</TABLE>
See condensed notes to consolidated financial statements.
-3-
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
<TABLE><CAPTION>
Three Months Three Months
Ended Ended
September 30, September 24,
1995 1994
------------ -------------
<S> <C> <C>
Net sales $111,744 $122,329
Cost of sales 40,025 39,257
-------- --------
Gross profit 71,719 83,072
Operating expenses:
Advertising and sales promotion 25,501 24,523
Selling and distribution 13,717 13,871
Administrative 4,306 4,175
Amortization of intangibles 2,762 2,526
-------- --------
Total operating expenses 46,286 45,095
-------- --------
Operating earnings 25,433 37,977
Interest expense, including related party interest
expense of $3,037 and $3,038, respectively, net of
related party interest income of $3,001 and $3,002,
respectively 15,431 18,808
-------- --------
Earnings before income taxes 10,002 19,169
Income taxes 4,514 8,349
-------- --------
Net earnings $ 5,488 $ 10,820
======== ========
Weighted average shares outstanding 50,880 30,880
======== ========
Earnings per share (primary and fully diluted) $ .11 $ .35
======== ========
</TABLE>
See condensed notes to consolidated financial statements.
-4-
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
<TABLE><CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 24,
1995 1994
------------- -------------
<S> <C> <C>
Net sales $ 380,138 $ 382,189
Cost of sales 145,131 133,576
--------- ---------
Gross profit 235,007 248,613
Operating expenses:
Advertising and sales promotion 90,303 82,056
Selling and distribution 41,185 40,909
Administrative 12,448 11,789
Amortization of intangibles 8,180 7,519
--------- ---------
Total operating expenses 152,116 142,273
--------- ---------
Operating earnings 82,891 106,340
Interest expense, including related party interest
expense of $9,112 and $9,113, respectively, net of
related party interest income of $9,002 and $9,003,
respectively 55,067 55,771
--------- ---------
Earnings before income taxes and extraordinary loss 27,824 50,569
Income taxes 12,062 23,630
--------- ---------
Earnings before extraordinary loss 15,762 26,939
Extraordinary loss on early extinguishment of debt,
net of $5,180 tax benefit (7,935) --
--------- ---------
Net earnings 7,827 26,939
Preferred dividend requirements -- (1,163)
--------- ---------
Net earnings available to common stockholders $ 7,827 $ 25,776
========= =========
Weighted average shares outstanding 39,451 28,658
========= =========
Earnings per share after preferred dividend
requirements (primary and fully diluted):
Before extraordinary loss $ .40 $ .90
========= =========
Net earnings $ .20 $ .90
========= =========
</TABLE>
See condensed notes to consolidated financial statements.
-5-
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
<TABLE><CAPTION>
Foreign
Additional Retained Currency
Common Paid-In Earnings Translation
Stock Capital (Deficit) Adjustment
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ 309 $ 254,417 $(718,756) $ (1,967)
Net earnings -- -- 7,827 --
Issuance of shares of common stock 200 169,100 -- --
Foreign currency translation adjustment -- -- -- 263
------ ---------- --------- ---------
Balance, September 30, 1995 $ 509 $ 423,517 $(710,929) $ (1,704)
====== ========== ========= =========
</TABLE>
See condensed notes to consolidated financial statements.
-6-
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE><CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 24,
1995 1994
------------- ------------
<S> <C> <C>
Net cash flow from operations $ 45,499 $ 41,368
--------- ---------
Cash flows used for investing activities:
Purchases of property, plant and equipment (10,862) (5,243)
Businesses acquired (21,660) (7,000)
--------- ---------
Net cash used for investing activities (32,522) (12,243)
--------- ---------
Cash flows from (used for) financing activities:
Borrowings (repayments) under working credit facilities, net (47,700) 34,950
Long-term debt borrowings 387,500 860,000
Long-term debt payments (468,000) (946,413)
Payment of financing costs (8,800) (25,750)
Payment of recapitalization costs -- (42,543)
Redemption of preferred stock -- (140,807)
Issuance of shares of common stock, net 169,300 244,316
Consent fee paid to Sara Lee -- (15,000)
Other, net 194 (1,859)
--------- ---------
Net cash from (used for) financing activities 32,494 (33,106)
---------- ---------
Increase (decrease) in cash 45,471 (3,981)
Cash at beginning of period 10,373 15,387
--------- ----------
Cash at end of period $ 55,844 $ 11,406
========= =========
The following is a reconciliation between net earnings
and net cash flows from operations:
Net earnings $ 7,827 $ 26,939
Non-cash items included in earnings:
Extraordinary loss 7,935 --
Amortization of intangibles 8,180 7,519
Amortization of debt discount and deferred financing costs 1,756 1,713
Depreciation 6,316 5,533
Deferred taxes 6,445 21,567
Other, net 110 112
Net (increase) in receivables, inventories, payables and other (3,099) (31,224)
Increase in interest accrued but not paid 10,029 9,209
--------- ----------
Net cash flow from operations $ 45,499 $ 41,368
========= =========
</TABLE>
See condensed notes to consolidated financial statements.
-7-
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
1. Statement of Information Furnished
The accompanying quarterly consolidated financial statements
of Playtex Products, Inc. ("Playtex" or the "Company") are
unaudited; however, such statements include all adjustments
(consisting of normal recurring adjustments) considered necessary
in the opinion of management for fair presentation of the
financial position, results of operations and cash flows of
Playtex. The results of the interim period ended September 30,
1995 are not necessarily indicative of the results that may be
expected for the full year.
The Company presumes that users of this Quarterly Report on
Form 10-Q have read or have access to the audited financial
statements contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 1994. Accordingly, footnote
disclosures which would substantially duplicate the disclosures
contained therein have been omitted.
2. The 1995 Transaction
On June 6, 1995, following the receipt of stockholder
approval at the Annual Meeting of Stockholders (the "Annual
Meeting"), the Company consummated the sale of 20 million shares
of common stock of the Company, par value $.01 per share (the
"Common Stock"), at a price of $9 per share to HWH Capital
Partners, L.P., HWH Valentine Partners, L.P., and HWH Surplus
Valentine Partners, L.P. (collectively, the "Investors"), each a
Delaware limited partnership managed by Haas Wheat & Partners
Incorporated ("HWP"), pursuant to a Stock Purchase Agreement,
dated as of March 17, 1995, between the Company and the
Investors. The Investors' shares constitute approximately 40% of
the Company's outstanding Common Stock. At the Annual Meeting,
designees of the Investors were elected by the Company's
stockholders as a majority of the Company's Board of Directors.
Costs and expenses associated with the sale (the "Investment"),
including advisory fees, investment banking, legal and certain
other expenses, amounted to approximately $10.7 million. The net
proceeds of the Investment were used by the Company, together
with borrowings under the 1995 Credit Agreement (as defined
below), to refinance all borrowings under the 1994 Credit
Agreement (as defined in note 3).
Contemporaneously with the Investment, the Company entered
into a new bank credit agreement (the "1995 Credit Agreement"
and, together with the Investment, the "1995 Transaction") which
provides for a new credit facility in the aggregate amount of
$500.0 million consisting of: (i) $387.5 million in term loans
(the "1995 Term Loan Facility"), (ii) a $75 million revolving
credit facility (the "1995 Working Capital Facility") and (iii) a
$37.5 million acquisition revolving credit facility (the "1995
Acquisition Credit Facility").
-8-
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
3. The 1994 Recapitalization
During the first quarter of fiscal 1994, Playtex completed a
recapitalization plan (the "1994 Recapitalization") designed to
reduce indebtedness, interest expense and preferred stock
dividend requirements and to improve Playtex's cash flow and
operating and financial flexibility. The 1994 Recapitalization
included transactions effected by Playtex and its former
subsidiary Playtex Family Products Corporation ("Family
Products"), which was subsequently merged into Playtex.
Therefore, all references to Playtex include the activities of
the merged companies.
The principal elements of the 1994 Recapitalization
included: (a) the issuance of 20 million shares of Common Stock,
at a price of $13.00 per share, (b) borrowings from banks of
$500.0 million under a term loan facility (the "1994 Term Loan
Facility") and of approximately $35.0 million under a $75.0
million working capital facility (the "1994 Working Capital
Facility" and, together with the 1994 Term Loan Facility, the
"1994 Credit Agreement") and (c) the issuance of $360.0 million
aggregate principal amount of 9% Senior Subordinated Notes due
2003 (the "9% Notes").
The net proceeds from the 1994 Recapitalization were used to
retire the following outstanding indebtedness (including premiums
and accrued interest) and preferred stocks (including accrued
dividends): (a) indebtedness under the Company's previous term
loan and revolving credit facilities, (b) the 11 1/2% Senior Secured
Notes due 1997, (c) the Senior Subordinated Discount Notes due
1997, (d) the 13 1/2% Senior Subordinated Notes due 1998, (e) the
15% Subordinated Notes due 2000, (f) the Series C Preferred
Stock, (g) the Series B Preferred Stock and (h) the Family
Products Junior Preferred Stock. In addition, the Company paid a
$15 million consent fee to Sara Lee Corporation in consideration
for the early termination of Sara Lee's option to acquire the
remaining common stock of the Company. The 1994 Recapitalization
and related public debt and preferred stock redemptions were
completed on March 4, 1994.
4. Acquired Assets
Playtex entered into an Asset Purchase and Sale Agreement,
dated as of December 22, 1994, with Reckitt & Coleman, Inc., a
Delaware corporation ("R&C"), pursuant to which Playtex acquired
certain assets of the Woolite(R) rug and upholstery cleaning
products business of R&C (the "Acquired Assets") under an
exclusive, royalty-free trademark license in perpetuity in the
United States and Canada. The purchase price for the Acquired
Assets, exclusive of $0.1 million for legal and other costs, was
$27.1 million, which was paid in cash on February 24, 1995 with
borrowings under the 1994 Working Capital Facility. The excess
of the purchase price over the fair value of the assets acquired
(approximately $17.3 million) was allocated to excess of cost
over net assets of acquired businesses ("Excess Cost").
-9-
<PAGE>
PLAYTEX PRODUCTS, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Balance Sheet Components
The components of certain balance sheet accounts are as
follows (in thousands):
September 30, December 31,
1995 1994
------------- ------------
Receivables:
Gross $ 73,680 $ 51,584
Less allowance for doubtful accounts (2,732) (2,346)
--------- ---------
Net $ 70,948 $ 49,238
========= =========
Inventories:
Raw materials $ 15,276 $ 12,602
Work in process 1,120 1,371
Finished goods 23,862 27,610
--------- ---------
Total $ 40,258 $ 41,583
========= =========
Net property, plant and equipment:
Land $ 1,190 $ 1,190
Buildings 24,265 17,352
Machinery and equipment 84,071 79,805
--------- ---------
109,526 98,347
Less accumulated depreciation (57,739) (51,290)
--------- ---------
Net $ 51,787 $ 47,057
========= =========
Excess cost:
Gross $ 409,325 $392,040
Less accumulated amortization (84,651) (76,764)
--------- ---------
Net $ 324,674 $315,276
========= =========
Patents, trademarks and other:
Gross $ 23,769 $ 22,769
Less accumulated amortization (11,410) (11,117)
--------- ---------
Net $ 12,359 $ 11,652
========= =========
Deferred financing costs:
Gross $ 19,150 $ 25,750
Less accumulated amortization (1,547) (2,358)
--------- ---------
Net $ 17,603 $ 23,392
========= =========
-10-
<PAGE>
PLAYTEX PRODUCTS, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Balance Sheet Components (continued)
<TABLE><CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Accrued expenses:
Advertising and sales promotion $ 27,057 $ 20,354
Interest 14,111 4,082
Employee compensation and benefits 10,104 10,185
Insurance 4,573 4,426
Other 10,090 6,014
--------- ---------
Total $ 65,935 $ 45,061
========= =========
6. Due from Related Party
<CAPTION>
<C>
Due from related party consists of a 15% debenture in aggregate principal amount of $40
million issued by Playtex Apparel Partners, L.P. (the "Apparel Partnership"), together with
unpaid accrued interest thereon. The principal of and any unpaid accrued interest on the debenture
are payable in cash by the Apparel
Partnership on December 15, 2003.
7. Long-Term Debt
Long-term debt consists of the following (in thousands):
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
1995 Credit Agreement:
1995 Term Loan Facility $387,500 $ --
1995 Working Capital Facility -- --
1995 Acquisition Credit Facility -- --
1994 Credit Agreement:
1994 Term Loan Facility -- 468,000
1994 Working Capital Facility -- 47,700
9% Senior Subordinated Notes due 2003 360,000 360,000
-------- --------
747,500 875,700
Less current maturities (20,000) (34,500)
-------- --------
Total long-term debt $727,500 $841,200
======== ========
</TABLE>
-11-
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
7. Long-Term Debt (continued)
On June 6, 1995, as part of the 1995 Transaction,
Playtex entered into the 1995 Credit Agreement, which provided for
borrowings of $387.5 million under the 1995 Term Loan Facility, and
up to $75.0 million and $37.5 million under the 1995 Working
Capital Facility and the 1995 Acquisition Credit Facility,
respectively. At September 30, 1995, borrowings under the 1995
Term Loan Facility amounted to $387.5 million. The 1995 Term
Loan Facility provides for semi-annual repayments of principal,
including payments of $10.0 million due on March 15, 1996 and
September 15, 1996. At September 30, 1995, no borrowings were
outstanding under the 1995 Working Capital Facility or the 1995
Acquisition Credit Facility. Commitments under the 1995
Acquisition Credit Facility are automatically and permanently
reduced semi-annually at a rate of $6.25 million beginning March
15, 2000. All borrowings under the 1995 Credit Agreement have a
final maturity of June 30, 2002.
The rate of interest on borrowings under the 1995 Credit
Agreement is, at Playtex's option, a function of various
alternative short-term borrowing rates, as defined in the 1995
Credit Agreement. Quarterly commitment fees of three-eighths of
1% on the unutilized portion of the 1995 Credit Agreement and an
agency fee of $100,000 per annum are also required. At September
30, 1995, aggregate unused lines of credit (giving effect to
outstanding letters of credit) under the 1995 Credit Agreement
amounted to $110.1 million.
The provisions of the 1995 Credit Agreement require Playtex
to meet certain financial covenants and ratios and also include
limitations or restrictions on: new indebtedness and liens;
major acquisitions or mergers; capital expenditures; disposition
of assets; certain dividends and other distributions; and
prepayment and modification of all indebtedness or equity
capitalization. The 9% Notes also contain restrictions and
requirements with regard to similar matters. Under the terms of
the 1995 Credit Agreement and the 9% Notes, payment of cash
dividends on the common stock of Playtex is restricted.
On June 9, 1995, the Company entered into an interest rate
protection agreement such that, for a two year period from July
6, 1995, interest expense with respect to $125 million of its
variable rate outstanding indebtedness is at fixed rates. The
agreement can be extended, at the option of the counterparty, for
an additional one year period. The agreement provides for
quarterly payments by Playtex at a rate of 6.17% up to October 6,
1995 and at a rate of 5.96% until July 7, 1997 (or July 6, 1998
if the counterparty exercises its option to extend the agreement)
and receipt of payments from the counterparty at a 90-day LIBOR
rate. Net receipts or payments under the swap agreement are
recognized as an adjustment to interest expense. On June 13,
1995, the Company terminated a prior
-12-
<PAGE>
7. Long-Term Debt (continued)
interest rate protection agreement which hedged interest expense
on $90 million of indebtedness for a three year period from April
1, 1994 at levels higher than the current agreement.
Effective July 25, 1995, the Company entered into another
similar interest rate protection agreement to fix interest
expense with respect to an additional $100 million of its
outstanding indebtedness. This agreement provides for quarterly
payments by Playtex at a rate of 5.825% and receipt of quarterly
payments from the counterparty at a 90-day LIBOR rate until July
25, 1997 (or July 25, 1998, if extended by the counterparty).
On February 2, 1994, pursuant to the 1994 Recapitalization,
Playtex entered into the 1994 Credit Agreement consisting of a
1994 Term Loan Facility and a 1994 Working Capital Facility which
provided for borrowings of $500 million and of up to $75 million
respectively. The rate of interest on borrowings under the 1994
Credit Agreement was, at Playtex's option, a function of various
alternative short-term borrowing rates, as defined in the 1994
Credit Agreement. In connection with the 1995 Transaction, all
amounts outstanding under the 1994 Credit Agreement were
refinanced on June 6, 1995.
At September 30, 1995 and September 24, 1994, the weighted
average interest rate for the above borrowings was 7.34% and
7.49%, respectively. In addition, the weighted average interest
rate was 8.25% and 6.92%, and 7.41% and 7.52% for the nine month
and three month periods ended September 30, 1995 and September
24, 1994, respectively.
On February 2, 1994, Playtex issued $360.0 million aggregate
principal amount of 9% Notes. Interest on the 9% Notes is
payable in cash semi-annually on each June 15 and December 15.
Principal of the Notes is due on December 15, 2003.
8. Due to Related Party
Due to related party consists of 15 1/2% Subordinated Notes
held by the Apparel Partnership. Interest on the 15 1/2%
Subordinated Notes is payable annually in cash on each December
15. However, with respect to any such interest amount payable
prior to maturity, Playtex may elect and elected for periods
through December 15, 1993 to make such payments in additional
15 1/2% Subordinated Notes. On December 15, 1994, Playtex paid in
cash the accrued interest for the period from December 16, 1993
to December 15, 1994. Principal and any unpaid accrued interest
on the 15 1/2% Subordinated Notes are payable in cash on December
15, 2003.
-13-
<PAGE>
9. Supplemental Cash Flow Information
Cash payments for interest were $42.2 million and $44.8
million during the first nine months of 1995 and 1994,
respectively. Cash payments for income taxes were $10.2 million
and $2.2 million during the first nine months of 1995 and 1994,
respectively.
10. Extraordinary Loss
In June 1995, in connection with the 1995 Transaction,
Playtex recorded an extraordinary loss of $7.9 million (net of
income tax benefit of $5.2 million), for costs and expenses
related to the refinancing of all amounts under its 1994 Credit
Agreement. Such expenses consisted of the write-off of the
unamortized portion of deferred financing costs associated with
the 1994 Credit Agreement. See note 2.
11. Earnings Per Share
Earnings per share is calculated using net earnings less the
dividend requirements on preferred stock, divided by the weighted
average number of common shares issued and outstanding for the
periods presented. In connection with the 1994 Recapitalization,
Playtex effected a 1 for 4.6296 reverse stock split. All per
share information has been adjusted to reflect the reverse stock
split on a retroactive basis. At September 30, 1995 and at
December 31, 1994, no shares of common stock were held in
treasury. Assuming that the Investment took place on January 1,
1995 and the net proceeds from the 1995 Transaction were used to
retire outstanding debt under the 1994 Credit Agreement at that
date, earnings per share would have been $0.38 for the nine
months ended September 30, 1995.
12. Contingent Liabilities
In the opinion of management, there are no claims,
commitments, guarantees or litigation pending to which Playtex or
any of its subsidiaries is a party which would have a materially
adverse effect on the consolidated financial position, results of
operations or cash flows of Playtex.
-14-
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
13. Subsequent Events
On October 5, 1995 Playtex amended the 1995 Credit
Agreement. Included in the changes to this agreement was a
change in certain financial covenants and a 25 basis point
increase in interest rates until such time as certain conditions
are met.
On October 17, 1995 Playtex entered into an agreement with
the shareholders of Banana Boat Holding Corporation ("BBH") to
acquire the 78% of BBH's equity not currently owned by the
Company for a purchase price of approximately $40.4 million plus
the retirement of $27.1 million of BBH's long-term debt, the
assumption of BBH's working capital facility and the payment of
accrued interest and transaction fees of approximately $4.5
million. On October 31, 1995 the transaction was completed.
Following this acquisition, the Company's ownership of BBH, the
manufacturer of Banana Boat sun and skin care products, increased
from 22% to 100%. The Company has historically realized 42.5% of
operating profits from the sale of Banana Boat products, in
accordance with the terms of a distribution agreement between BBH
and the Company. The transaction was financed with approximately
$34.5 million of existing cash balances and advances on its
acquisition credit facility of $37.5 million.
-15-
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion and analysis of the Company's
financial condition and results of operations should be read in
conjunction with the financial data and condensed notes thereto
included elsewhere in this quarterly report and with the Annual
Report on Form 10-K for the year ended December 31, 1994 filed
with the Securities and Exchange Commission (No. 33-25485).
Results of Operations
---------------------
Three Months Ended September 30, 1995 compared to
Three Months Ended September 24, 1994:
Net Sales - Net sales of $111.7 million for the quarter
ended September 30, 1995 were $10.6 million, or 8.7%, lower than
for the same quarter in fiscal 1994. The lower volume was
primarily in tampons ($17.4 million), sun care ($2.3 million),
and hair care ($1.4 million), partially offset by higher sales in
household products ($7.9 million) and infant care ($2.8 million).
The lower tampon sales continue to reflect the impact of
intense competitive pressures. This decrease can partially be
attributed to a slow down in shipments due to heavy trade
inventory following significant promotional activity in the first
half of 1995. In addition, third quarter 1994 tampon sales were
at record levels due to a strong promotional campaign. The third
quarter of 1995 did not have a corresponding tampon promotional
campaign.
In infant care, the higher volume resulted primarily from
the continued success of the Spill-Proof (R) Cup, the fastest
growing cup in the category.
The household products volume increase reflects the
inclusion in the fiscal 1995 quarter of the Woolite (R) rug and
upholstery cleaning products business which was acquired in
February 1995. In addition, net sales of gloves increased 6.8%
versus the same quarter in 1994.
Sun care net sales for the third quarter were down $2.3
million from the same quarter of fiscal 1994. The decrease was
partially due to timing of shipments and steps taken by the
Company to manage the seasonal nature of the sun care business
and reduce returns.
In hair care, Jhirmack's (R) lower volume reflects reduced
product shipment to retailers as a result of significant
competitive pressures.
-16-
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
Gross Profit - Gross profit of $71.7 million for the third
quarter of fiscal 1995 decreased by $11.4 million, or 13.7%, from
the corresponding fiscal 1994 quarter primarily as a result of
lower sales levels, a shift in sales mix to lower margin
products, and increased product costs. As a result, gross profit
as a percentage of net sales was 64.2% for the third quarter
of fiscal 1995 compared to 67.9% for the same quarter in
fiscal 1994.
Operating Earnings - Operating earnings of $25.4 million for
the third quarter of 1995 were $12.5 million, or 33%, lower than
for the comparable period in fiscal 1994. The lower operating
earnings resulted from the lower sales levels, the gross margin
decrease described above and a $1.0 million increase in
advertising and promotional spending. All other operating
expenses increased by $0.2 million.
Interest Expense - Decreased interest expense resulted from
the reduction in long-term debt effected on June 6, 1995 as a
result of the 1995 Transaction, slightly lower interest rates in
the third quarter of fiscal 1995 versus fiscal 1994, and an
increase in interest income generated on cash equivalents.
Net Earnings - Net earnings of $5.5 million for the third
quarter of fiscal 1995 were $5.3 million, or 49.3%, lower than
for the same quarter in fiscal 1994. The unfavorable variance
resulted from the combined effect of all factors described above.
Nine Months Ended September 30, 1995 compared to
Nine Months Ended September 24, 1994:
Net Sales - Net sales of $380.1 million for the nine months
ended September 30, 1995 were $2.1 million, or 0.5%, lower than
for the same period last year. The lower volume was primarily in
tampons ($23.5 million) and hair care ($8.4 million), partly
offset by higher volumes in infant care ($9.1 million), household
products ($17.7 million) and sun care ($2.9 million).
In tampons, the lower net sales resulted from the Company's
lower market share versus the 1994 period and lower net sales of
Silk Glide (R) compared to the fiscal 1994 period. Hair care
continues to operate in a very difficult business environment.
The higher infant care net sales reflect the impact of
SmileTote (R) which was acquired in July of 1994 and the success of
the Spill-Proof (R) cup. Household products net sales include
Woolite (R) rug and upholstery cleaning products, which were
acquired in February 1995 and therefore were not included in the
1994 period. In sun care, the sales increase reflects year-to-
date unit growth over the prior year. Market share (as measured
by A.C. Nielsen through September 2, 1995) has grown to 16.1%
from 14.7% for the same period a year ago.
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<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
Gross Profit - Gross profit of $235.0 million for the first
nine months of fiscal 1995 decreased by $13.6 million, or 5.5%,
from the first nine months of fiscal 1994 primarily as a result
of lower sales, a shift in sales mix to lower margin products,
and increased product costs. As a result, the gross profit as a
percentage of net sales was 61.8% for the current nine month
period compared to 65.0% for the same period in fiscal 1994.
Operating Earnings - Operating earnings of $82.9 million for
the nine months ended September 30, 1995 were $23.4 million, or
22.1%, lower than for the same period in fiscal 1994. The
decrease was due to the lower sales level, the lower gross margin
described above and an increase in advertising and promotional
spending of $8.2 million, primarily in support of tampons and
Woolite (R) rug and upholstery cleaning products. All other
operating expenses were $1.6 million dollars higher than the
comparable period in fiscal 1994.
Interest Expense - Decreased interest expense reflects the
reduction in long-term debt effected on June 6, 1995 as a result
of the 1995 Transaction partly offset by higher average interest
rates in the first nine months of fiscal 1995 compared to the
same period in 1994.
Earnings Before Extraordinary Loss - Earnings before
extraordinary loss of $15.8 million for the nine months ended
September 30, 1995 were $11.1 million, or 41%, lower than for the
same period in fiscal 1994. The unfavorable variance resulted
from the combined effect of all the factors described above.
Financial Condition
-------------------
During the second quarter, Playtex sold 20 million shares of
common stock at a price of $9 per share to an investor group. The
proceeds (net of cost and expenses associated with the
Transaction) of approximately $169.3 million were used by the
Company, together with borrowings under the 1995 Credit Agreement
(as discussed below), to refinance all borrowings under its
previous credit agreement.
Also during the second quarter, the Company entered into a
new credit agreement ("1995 Credit Agreement") totaling $500.0
million consisting of: (i) $387.5 million in term loans, (ii) a
$75 million revolving credit facility, and (iii) a $37.5 million
acquisition revolving credit facility.
The Company has entered into two interest rate projection
agreements to minimize its variable rate interest risks by
effectively converting $225 million of borrowings from variable
rate to fixed rate debt for a specified period of time.
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<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
At September 30, 1995, the Company's working capital
(excluding current portion long-term debt) increased by $38.4
million to $90.5 million from $52.1 million at December 31, 1994.
On a component basis: a) cash increased by $45.5 million, due
primarily to proceeds from the 1995 Transaction, b) receivables
increased by $21.7 million, principally due to an increase in
sales in the third quarter of 1995 when compared with the fourth
quarter of 1994 and the seasonal nature of sun care product sales
and extended credit terms. These working capital increases were
partly offset by a) a $20.9 million increase in accrued expenses
resulting primarily from the timing of interest payments within
the period and from increased advertising payables associated
with increased spending in the third quarter of 1995 versus the
fourth quarter of 1994 and, b) an increase in trade payables of
$11.0 million, due primarily to the timing of payments for sun
care products purchased from a wholly owned subsidiary of Banana
Boat Holding Corporation. All other working capital components
increased by a net $3.1 million.
Long-term debt (including current portion) of $747.5 million
at September 30, 1995 was $128.2 million lower than at December
31, 1994. The net decrease in long-term borrowings reflects
principal repayments made with the $169.3 million net cash
proceeds from the Investment, and a $14.5 million decrease in
current maturities of long-term debt pursuant to the 1995
Transaction, partly offset by a $37.5 million increase in cash
and cash equivalents, and approximately $20.0 million of
borrowings used during the first quarter of fiscal 1995 for the
purchase of the Woolite (R) rug and upholstery cleaning products
business. On September 30, 1995, approximately $110.1 million
was available to be borrowed by the Company under the 1995 Credit
Agreement.
The Company believes that it will generate sufficient cash
flow from operations to be able to make the scheduled interest
and principal payments under the 1995 Credit Agreement and
interest payments on the 9% Notes; however the Company does not
expect to generate sufficient cash flow from operations to make
the principal payment due in 2003 on the 9% Notes. Accordingly,
the Company will have to either refinance its obligations with
respect to the 9% Notes prior to maturity, sell assets or raise
equity capital to repay the principal amount of the 9% Notes.
The Company's ability to make scheduled principal payments, to
refinance its obligations with respect to its indebtedness, sell
assets or raise equity capital depends on its financial and
operating performance, which, in turn, is in part subject to
prevailing economic conditions and to financial, business and
other factors beyond its control. Although the Company's cash
flow from its operations and borrowings have been sufficient to
meet its historical debt service obligations, there can be no
assurance that the Company's operating results will continue to
be sufficient or that future borrowing facilities will be
available for the payment or refinancing of the Company's
indebtedness.
Recent Events - On October 5, 1995 Playtex amended the 1995
Credit Agreement. Included in the changes to this agreement was
a change in certain financial covenants and a 25 basis point
increase in interest rates until such time as certain conditions
are met.
-19-
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
On October 17, 1995 Playtex entered into an agreement with
the shareholders of Banana Boat Holding Corporation ("BBH") to
acquire the 78% of BBH's equity not currently owned by the
Company for a purchase price of approximately $40.4 million plus
the retirement of $27.1 million of BBH's long-term debt, the
assumption of BBH's working capital facility and the payment of
accrued interest and transaction fees of approximately $4.5
million. On October 31, 1995 the transaction was completed.
Following this acquisition, the Company's ownership of BBH, the
manufacturer of Banana Boat sun and skin care products, increased
from 22% to 100%. Playtex has historically realized 42.5% of
operating profits from the sale of Banana Boat products, in
accordance with the terms of a distribution agreement between BBH
and the Company. The transaction was financed with approximately
$34.5 million of existing cash balances and advances on its
acquisition credit facility of $37.5 million.
The Company believes that the acquisition and its resulting
additional debt will not adversely impact its ability (1) to make
the scheduled interest and principal payments under the 1995
Credit Agreement, (2) to permit anticipated capital expenditures
and (3) to fund working capital and other cash requirements.
-20-
<PAGE>
PLAYTEX PRODUCTS, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The following should be read in conjunction with Part 1,
Item 3., "Legal Proceedings" in the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994.
As of the end of October 1995, there were approximately 21
pending TSS claims relating to Playtex tampons,
although additional claims may be made in the future.
In the pending case of "Harding, Hayes v. Tambrands, Inc.
and Playtex Family Products Corp.", the action against
Tambrands has been severed from the action against Playtex.
The plaintiff in the action against Playtex has filed a
motion for class certification and Playtex's brief in
opposition has been filed in response. A court hearing was
held on the motion for class certification in October of
1995 and the decision is pending. Other motions are either
pending or still being briefed.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
On November 14, 1995, the Company filed with the Commission a
Current Report of Form 8-K dated 14, 1995, pursuant to Item 2
and 7 of Form 8-K, with respect to the transaction described
in note 13 of the condensed notes to the unaudited consolidated
financial statements included elsewhere in this quarterly report.
-21-
<PAGE>
SIGNATURES
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.
PLAYTEX PRODUCTS, INC.
Date: November 14, 1995 By: /s/Michael R. Gallagher
-------------------- -------------------------
Michael R. Gallagher
Chief Executive Officer
Date: November 14, 1995 By: /s/Michael F. Goss
-------------------- -------------------------
Michael F. Goss
Executive Vice President and
Chief Financial Officer
-22-
