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 March 30, 1996
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 Road
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
registrants were required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
At May 8, 1996, 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 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits 13
(b) Reports on Form 8-K 13
Signatures 14
-2-
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 30, December 30,
ASSETS 1996 1995
---------- ------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 4,435 $ 5,940
Receivables, less allowance for
doubtful accounts 86,631 58,019
Inventories 39,934 49,190
Current deferred taxes 12,812 13,154
Other current assets 1,867 4,545
-------- --------
Total current assets 145,679 130,848
Net property, plant and equipment 52,375 52,462
Intangible assets, net:
Goodwill 356,804 359,629
Patents, trademarks and other 37,701 38,076
Deferred financing costs 16,921 17,426
Due from related party 80,017 80,017
Other noncurrent assets 4,407 4,403
-------- --------
Total assets $693,904 $682,861
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,543 $ 20,057
Accrued expenses 71,688 60,257
Income taxes payable 6,933 1,897
Current maturities of long-term debt 22,500 20,000
-------- --------
Total current liabilities 120,664 102,211
Long-term debt 755,800 770,050
Due to related party 78,386 78,386
Other noncurrent liabilities 15,607 16,784
Deferred income taxes 18,423 16,406
-------- --------
Total liabilities 988,880 983,837
Stockholders' equity:
Common stock, $.01 par value, authorized
100,000,000 shares, issued
50,879,701 shares at March 30, 1996
and December 30, 1995 509 509
Additional paid-in capital 424,217 424,217
Retained earnings (deficit) (717,936) (723,917)
Foreign currency translation adjustment (1,766) (1,785)
-------- --------
Total stockholders' equity (294,976) (300,976)
-------- --------
Total liabilities and
stockholders' equity $693,904 $682,861
======== ========
See condensed notes to consolidated financial statements.
-3-
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share data)
Three Months Three Months
Ended Ended
March 30, April 1,
1996 1995 (a)
----------- ------------
Net sales $143,067 $132,767
Cost of sales 55,650 53,215
-------- --------
Gross profit 87,417 79,552
Operating expenses:
Advertising and sales promotion 38,306 32,706
Selling, distribution and research 13,842 12,938
Administrative 4,228 3,991
Amortization of intangibles 3,200 2,658
-------- --------
Total operating expenses 59,576 52,293
-------- --------
Operating earnings 27,841 27,259
Interest expense, including related party
interest expense of $3,037 for both periods
presented, net of related party interest
income of $3,001 for both periods
presented 16,662 20,673
-------- --------
Earnings before income taxes 11,179 6,586
Income taxes 5,198 2,833
-------- --------
Net earnings $ 5,981 $ 3,753
======== ========
Weighted average shares outstanding 50,880 30,880
======== ========
Earnings per share (primary and fully
diluted) $ .12 $ .12
======== ========
(a) Certain prior year accounts have been reclassified for consistency with
the 1996 presentation.
See condensed notes to consolidated financial statements.
-4-
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited, in thousands)
Foreign
Additional Retained Currency
Common Paid-In Earnings Translation
Stock Capital (Deficit) Adjustment
------- ---------- --------- ----------
Balance, December 30, 1995 $ 509 $ 424,217 $(723,917) $ (1,785)
Net earnings -- -- 5,981 --
Foreign currency translation
adjustment -- -- -- 19
------ --------- --------- ---------
Balance, March 30, 1996 $ 509 $ 424,217 $(717,936) $ (1,766)
====== ========= ========= ========
See condensed notes to consolidated financial statements.
-5-
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Three Months
Ended Ended
March 30, April 1,
1996 1995
------------- ------------
Cash flows from operations:
Net earnings $ 5,981 $ 3,753
Non-cash items included in earnings:
Amortization of intangibles 3,200 2,658
Amortization of debt discount and
deferred financing costs 505 659
Depreciation 2,154 2,054
Deferred taxes 2,359 (1,118)
Other, net (4) 36
Net increase in working capital accounts
(1,902) (4,426)
-------- --------
Net cash flows from operations 12,293 3,616
-------- --------
Cash flows used for investing activities:
Purchases of property, plant and equipment (2,097) (1,651)
Business acquired -- (20,100)
-------- --------
Net cash flows used for investing activities
(2,097) (21,751)
-------- --------
Cash flows (used for) from financing activities:
(Repayments) borrowings under working
capital facilities, net (1,750) 18,950
Repayment of term loan facility (10,000) --
Other, net 49 (595)
-------- --------
Net cash flows (used for) from
financing activities (11,701) 18,355
-------- --------
Change in cash and cash equivalents
Cash and cash equivalents at beginning of period 5,940 10,373
-------- --------
Cash and cash equivalents at end of period $ 4,435 $ 10,593
======== ========
Supplemental disclosures of cash flow information
Net cash paid (refunded) during the periods for:
Interest $ 8,157 $ 11,956
======== ========
Income taxes, net of refunds $ (2,176) $ 3,951
======== ========
See condensed notes to consolidated financial statements.
-6-
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Consolidated Financial Statements
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 the Company. The results of the interim period ended March 30, 1996 are
not necessarily indicative of the results that may be expected for the full
year.
The Company presumes the 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 30, 1995.
Accordingly, all footnote disclosures which would substantially duplicate the
disclosures contained therein have been omitted.
2. Balance Sheet Components
The components of certain balance sheet accounts are as follows (in
thousands):
March 30, December 30,
1996 1995
------------ -----------
(Unaudited)
Receivables $ 88,646 $ 60,061
Less allowance for doubtful accounts (2,015) (2,042)
--------- ---------
Net $ 86,631 $ 58,019
========= =========
Inventories:
Raw materials $ 13,911 $ 18,187
Work in process 1,049 1,267
Finished goods 24,974 29,736
--------- ---------
Total $ 39,934 $ 49,190
========= =========
Net property, plant and equipment:
Land $ 1,190 $ 1,190
Buildings 24,182 24,055
Machinery and equipment 89,463 86,955
--------- ---------
114,835 112,200
Less accumulated depreciation (62,460) (59,738)
--------- ---------
Net $ 52,375 $ 52,462
========= =========
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<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Balance Sheet Components (continued)
March 30, December 30,
1996 1995
---------- ------------
(Unaudited)
Goodwill $ 446,482 $ 446,482
Less accumulated amortization (89,678) (86,853)
--------- ---------
Net $ 356,804 $ 359,629
========= =========
Patents, trademarks and other $ 49,769 $ 49,769
Less accumulated amortization (12,068) (11,693)
--------- ---------
Net $ 37,701 $ 38,076
========= =========
Deferred financing costs $ 19,463 $ 19,463
Less accumulated amortization (2,542) (2,037)
--------- ---------
Net $ 16,921 $ 17,426
========= =========
Accrued expenses:
Advertising and sales promotion $ 27,987 $ 29,401
Interest 14,243 6,320
Employee compensation and benefits 6,516 10,162
Insurance 5,014 4,858
Accrued returns reserve 7,362 500
Other 10,566 9,016
--------- ---------
Total $ 71,688 $ 60,257
========= =========
3. Long-Term Debt
Long-term debt consists of the following (in thousands):
March 30, December 30,
1995 1995
---------- ----------
(Unaudited)
1995 Credit Agreement:
1995 Term Loan Facility $377,500 $ 387,500
1995 Acquisition Credit Facility 37,500 37,500
1995 Working Capital Facility 3,300 5,050
9% Senior Subordinated Notes due
2003 360,000 360,000
-------- ---------
778,300 790,050
Less current maturities (22,500) (20,000)
-------- ---------
Total long-term debt $755,800 $ 770,050
======== =========
-8-
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Long-Term Debt (continued)
The 1995 Term Loan Facility provides for semi-annual repayment of
principal, including payments of $10.0 million due on September 15, 1996 and
$12.5 million on March 15, 1997. The rate of interest on borrowings under
the 1995 Credit Agreement is, at the Company's option, a function of various
alternative short-term borrowing rates, as defined in the 1995 Credit
Agreement. At March 30, 1996, the weighted average variable interest rate
was 7.34%. The weighted average variable interest rate for the quarter ended
March 30, 1996 was 7.39%. The weighted average variable interest rate, under
the previous credit agreement, for the quarter ended April 1, 1995 was 9.12%.
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 March 30, 1996, aggregate unused lines of credit (giving effect
to outstanding letters of credit) under the 1995 Credit Agreement amounted to
$69.8 million.
The provisions of the 1995 Credit Agreement require the Company 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% Senior Subordinated Notes (the "9% Notes") contain
certain similar restrictions and requirements. Under the terms of the 1995
Credit Agreement and the 9% Notes, payment of cash dividends on the common
stock of the Company is restricted.
4. Earnings Per Share
Earnings per share is calculated using net earnings divided by the
weighted average number of common shares issued and outstanding for the
periods presented. At March 30, 1996 and at December 30, 1995, no shares of
common stock were held in treasury.
5. Contingent Liabilities
In the opinion of management, there are no claims, commitments,
guarantees or litigation pending to which the Company 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 the
Company.
-9-
<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 30, 1995 filed with the Securities and Exchange Commission (No. 33-
25485).
Certain statements in this Quarterly Report or others made hereafter
(including orally) may constitute "forward looking statements" within the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause actual results, performance or achievements of the Company to
be materially different from any future results, performance or achievements
expressed or implied by such forward looking statements. Such factors
include but are not limited to: intensified competition, higher spending for
advertising and promotion, new product initiatives and continued activity in
the private label sector, the loss of significant customers, product
liability litigation and changes in governmental regulations.
Results of Operations
---------------------
Three Months Ended March 30, 1996 Versus
Three Months Ended April 1, 1995:
Net Sales - Net sales of $143.1 million for the quarter ended March 30,
1996 were $10.3 million, or 7.8%, higher than for the same quarter in fiscal
1995. On a worldwide basis, net sales of the Company's Feminine Care
products were equal to the first quarter of 1995, while U.S. net sales
increased 2.4%. Sun Care net sales increased 30.3%. Excluding the impact of
the acquisition of the remaining equity of Banana Boat not previously owned
-----------
by the Company (the "BBH Acquisition"), which occurred in the fourth quarter
of 1995, Sun Care net sales would have increased 13.5%. Infant Care net
sales continued to show growth, with a 23.3% increase in the current
quarter. The Playtex Spill-Proof cup continued to be the leading contributor
------- -----------
to Infant Care's growth in net sales. Additionally, versus the same period
in 1995, Household Product net sales increased 20.1%, which was impacted in
part by a full quarter of net sales in 1996 of the Woolite rug and upholstery
-------
cleaning products business ("Woolite"),which was acquired in February 1995.
-------
Hair Care net sales, which represents 5.3% of the Company's total net sales,
decreased 38.8% versus the first quarter of 1995. When compared with the
fourth quarter of 1995, Hair Care net sales increased 9.5%.
Gross Profit - Gross profit of $87.4 million for the first quarter of
fiscal 1996 increased by $7.9 million, or 9.9%, from the corresponding fiscal
1995 quarter. Period to period, gross margin increased 1.2% to 61.1%. This
increase was primarily attributable to favorable product mix and increased
margin on Sun Care products as a result of the BBH Acquisition . This
increase in Sun Care margin was partially tempered due to the impact of a
non-cash acquisition
-10-
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
accounting adjustment as required by Accounting Principles Board Opinion No.
16 - "Business Combinations".
Operating Earnings - Operating earnings of $27.8 million for the first
quarter of 1996 were $0.6 million, or 2.1%, higher than for the comparable
period in fiscal 1995. The increase in operating earnings was attributable
to the increase in gross profit offset in part by the impact of a 17.1%
increase in advertising and promotional spending. It was further impacted by
increases of 7.0% and 20.4% in selling, distribution and research and
amortization of intangibles, respectively, for the first quarter of 1996
versus the same period in 1995. These increases were attributable primarily
to the Woolite and BBH acquisitions.
-------
Interest Expense - Interest expense decreased $4.0 million or 19.4%.
This decrease resulted from lower interest rates in the first quarter of
fiscal 1996 versus fiscal 1995 and the reduction in long-term debt (including
current portion) which is down $116.4 million versus the balance outstanding
at the end of the first quarter of 1995. The decrease in the long-term debt
was primarily the result of an equity infusion and a new credit agreement
with Chase Manhattan Bank (formerly Chemical Bank) in June 1995 in connection
with the 1995 Investment, partly offset by the financing of the BBH
Acquisition.
Net Earnings - Net earnings of $6.0 million for the first quarter of
fiscal 1996 were $2.2 million, or 59.4%, higher than for the same quarter in
fiscal 1995. The favorable variance resulted from the combined effect of all
factors described above.
Financial Condition
-------------------
At March 30, 1996, the Company's working capital decreased by $3.6
million to $25.0 million from $28.6 million at December 30, 1995. On a
significant component basis: a) inventory decreased $9.3 million, primarily
due to the first quarter sell off of the seasonal Sun Care inventory and
inventory built in the fourth quarter for promotions, b) an $11.4 million
increase in accrued expenses resulting mostly from the timing of interest
payments and from increased accrued returns reserves in the first quarter of
1996 versus the fourth quarter of 1995, c) a $5.0 million increase in income
taxes payable, primarily the result of the difference in the earnings in the
first quarter of 1996 and the fourth quarter of 1995, and d) a $2.5 million
increase in the current portion of long term debt. These working capital
decreases were partly offset by receivables which increased by $28.6 million,
principally due to an increase in sales in the first quarter of 1996 when
compared with the fourth quarter of 1995 and the seasonal nature of Sun Care
product sales with extended credit terms. All other working capital
components decreased by a net $4.0 million.
Long-term debt (including current portion) of $778.3 million at March
30, 1996 was $11.8 million lower than at December 30, 1995. The net decrease
in long-term borrowings reflect the impact of the $10.0 million principal
payment on the 1995 Term Loan Facility and $1.8 million reduction in 1995
Working Capital Facility.
-11-
<PAGE>
PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
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.
Capital Expenditures for equipment and facility improvements were $2.1
million and $1.7 million for the three month periods ended March 30, 1996 and
April 1, 1995, respectively.
Inflation in the United States and Canada has not been a significant
concern of the Company during recent periods.
The Company's business, with the exception of Banana Boat, have
-----------
generally not been seasonal. Banana Boat sales are highly seasonal with 85
-----------
to 90 percent of sales occurring in the first six months of the year. In
addition, the seasonality requires increased working capital needs to support
inventory builds prior to the selling season and higher receivable levels
resulting from extended credit terms which are typical in the sun care
industry.
-12-
<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 30, 1995.
As of the end of March 1996, there were approximately 12 pending Toxic
Shock Syndrome ("TSS") claims relating to Playtex tampons, although
additional claims may be made in the future.
In the previously reported action, "Harding, Hayes et. al. v. Tambrands,
Inc. and Playtex Family Products Corp.", in which plaintiffs purported to
represent and sought to certify a nationwide class of tampon users who
allegedly contracted TSS from the use of rayon fiber tampons manufactured by
Playtex, the Court denied class certification in March, 1996. The
plaintiff's time to appeal this ruling has not expired.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
(27) Financial Data Schedule
b. Reports on Form 8-K - None
-13-
<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: May 8, 1996 By: /s/Michael R. Gallagher
------------------ ----------------------------
Michael R. Gallagher
Chief Executive Officer
Date: May 8, 1996 By: /s/Michael F. Goss
------------------ ----------------------------
Michael F. Goss
Executive Vice President
and
Chief Financial Officer
-14-
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 4,435
<SECURITIES> 0
<RECEIVABLES> 88,646
<ALLOWANCES> 2,015
<INVENTORY> 39,934
<CURRENT-ASSETS> 145,679
<PP&E> 114,836
<DEPRECIATION> 62,461
<TOTAL-ASSETS> 693,904
<CURRENT-LIABILITIES> 120,664
<BONDS> 755,800
0
0
<COMMON> 509
<OTHER-SE> (295,485)
<TOTAL-LIABILITY-AND-EQUITY> 693,904
<SALES> 143,067
<TOTAL-REVENUES> 143,067
<CGS> 55,650
<TOTAL-COSTS> 55,650
<OTHER-EXPENSES> 59,576
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,662
<INCOME-PRETAX> 11,179
<INCOME-TAX> 5,198
<INCOME-CONTINUING> 5,981
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