SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 28, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _______ to _______.
Commission File No. 33-25485-01
PLAYTEX PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0312772
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Nyala Farms Road 06880
Westport, Connecticut (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (203) 341-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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FORM 10-K
(Facing Sheet Continuation)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 18, 1997 was $331,520,345 (based on the closing
sale price of $11.00 on March 18, 1997 as reported by the New York Stock
Exchange - Composite Transactions). For this computation, the registrant has
excluded the market value of all shares of its Common Stock reported as
beneficially owned by named executive officers and directors of the registrant;
such exclusion shall not be deemed to constitute an admission that any such
person is an "affiliate" of the registrant.
At March 18, 1997, 50,913,804 shares of Playtex Products, Inc. common
stock, par value $.01 per share, were outstanding.
Documents incorporated by reference:
Document Part of Form 10-K
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Portions of the registrant's Annual Report to Stockholders II
for the twelve months ended December 28, 1996 (the "Annual
Report")(pages 3 through 36).
Portions of the registrant's definitive Proxy Statement (the "Proxy III
Statement") for the 1997 Annual Meeting of Stockholders to be held on
May 20, 1997, which will be filed with the Securities and Exchange
Commission within 120 days after the end of the registrant's fiscal
year ended December 28, 1996 pursuant to Regulation 14A.
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TABLE OF CONTENTS
Page
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PART I
Item 1. Business 4
Item 2. Properties 14
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 15
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters 16
Item 6. Selected Financial Data 16
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 16
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 17
PART III
Item 10. Directors and Executive Officers of the Registrant 18
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners and Management 18
Item 13. Certain Relationships and Related Transactions 18
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K 19
Signatures 22
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PART I
Item 1. Business
A. History
The Playtex businesses were founded in 1932 under the name
International Latex Company and operated for many years prior to 1986 under the
name International Playtex, Inc. ("IPI"). In the mid-1950's, using the latex
technology developed for the manufacture of girdles, Playtex began to market
household gloves, the first of many products to constitute its Family Products
division. Through the marketing of gloves, the addition of disposable nursers in
the mid-1960's, and the acquisition in 1967 and subsequent expansion of its
tampon manufacturing business, Playtex established a major presence in the drug
store, supermarket and mass merchandise classes of trade.
In late 1986, Playtex Holdings, Inc. ("Holdings") and certain of its
subsidiaries were organized by an investor group to effect a management
leveraged buy out of the businesses of IPI. Playtex Products, Inc. (including,
as the context requires, its subsidiaries, the "Company") was organized in 1988
by an investor group consisting of certain senior executives of Holdings, the
ML-Lee Acquisition Fund, L.P., a Delaware limited partnership, the Thomas H. Lee
Company and certain senior executives of the Thomas H. Lee Company and certain
other investors, to effect the acquisition of the Playtex Family Products
businesses from Holdings (the "1988 Acquisition").
On December 28, 1988, the Company consummated the 1988 Acquisition.
Concurrently, Playtex Apparel, Inc. ("Apparel"), an indirect wholly owned
subsidiary of Holdings, after the repayment of $340 million of intercompany
indebtedness, was divested to Playtex Apparel Partners, L.P. (the "Apparel
Partnership"), a limited partnership owned by the operating management of
Apparel, for a $40 million subordinated debenture.
On November 19, 1991, Apparel was sold by the Apparel Partnership to
and became a wholly owned subsidiary of Sara Lee Corporation ("Sara Lee"). On
December 20, 1991, the Company and its stockholders (the "Playtex Stockholders")
completed a transaction with Sara Lee (the "Sara Lee Transaction") which
included, among other things, (i) the acquisition by Sara Lee of convertible
preferred stock of the Company (the "Series C Preferred Stock"), that together
with shares of the Company's common stock (the "Common Stock") purchased from
the Playtex Stockholders, gave Sara Lee 25% of the voting and dividend rights in
the Company; and (ii) the sale of an option in favor of Sara Lee to acquire all
of the remaining outstanding shares of Common Stock (the "Sara Lee Option"). In
connection with the 1994 Recapitalization (as defined and discussed below), the
Sara Lee Option was terminated and the Series C Preferred Stock was redeemed.
In December 1992, the Company acquired, for $5 million, a 22% common
equity interest (17.5% on a fully diluted basis) in Banana Boat Holding
Corporation ("BBH") in conjunction with the acquisition by BBH's wholly-owned
subsidiary, Sun Pharmaceuticals Corp. ("Sun"), of the assets and certain
liabilities of Sun Pharmaceuticals, Ltd. BBH was controlled by Thomas H. Lee
Equity Partners, L.P. and other employees and affiliates of Thomas H. Lee
Company. Sun manufactured and marketed a line of sun and skin care products in
the United States and abroad under the Banana Boat(R) and other trademarks.
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Concurrent with its acquisition of the equity interest in BBH, the Company
entered into a distribution agreement with Sun under which it began to
distribute Banana
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Boat sun and skin care products for Sun from November 1993 to October 1995 (see
- ----
"the BBH Acquisition").
The 1994 Recapitalization
During the first quarter of fiscal 1994, the Company issued 20 million
shares of Common Stock, par value $.01 per share (the "Common Stock"), at a
price of $13.00 per share as part of a recapitalization plan (the "1994
Recapitalization"). The 1994 Recapitalization included transactions effected by
the Company and its subsidiary Playtex Family Products Corporation ("Family
Products"), which was merged into the Company on March 8, 1994. Therefore, all
references to the Company include the activities of the merged companies. In
addition to the issuance of shares of Common Stock, the principal elements of
the Recapitalization included: (a) borrowings from banks of $500.0 million under
a new term loan facility (the "1994 Term Loan") and of approximately $40.0
million under a $75.0 million new working capital facility (the "1994 Revolving
Credit Facility" and, together with the 1994 Term Loan, the "1994 Credit
Agreement") and (b) the issuance of $360.0 million aggregate principal amount of
9% Senior Subordinated Notes due 2003 (the "Senior Subordinated Notes").
The net proceeds from the 1994 Recapitalization were used to retire
substantially all of the Company's outstanding indebtedness (including premiums
and accrued interest) and preferred stocks (including accrued dividends). In
addition, the Company paid a consent fee to Sara Lee in consideration for the
early termination of the Sara Lee Option.
The 1995 Transaction
On June 6, 1995, the Company consummated the sale, for an aggregate
purchase price of $180.0 million, of 20 million shares of Common Stock at a
price of $9.00 per share (the "Investment") 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, pursuant to a Stock Purchase Agreement,
dated as of March 17, 1995, between the Company and the Investors (the "Stock
Purchase Agreement"). The Investors' shares constitute approximately 40% of the
Company's outstanding Common Stock. The Investment and related matters were
approved by the stockholders of the Company at the Annual Meeting of
Stockholders on June 6, 1995 (the "Annual Meeting"). At the Annual Meeting,
designees of the Investors were elected by the Company's stockholders as a
simple majority of the Board of Directors.
Contemporaneously with the Investment, the Company entered into a new
bank credit agreement with Chase Manhattan Bank N.A. (formerly Chemical Bank),
as agent (the "1995 Credit Agreement" and, together with the Investment, the
"1995 Transaction"). Borrowings under the 1995 Credit Agreement, together with
the net proceeds of the Investment, were used by the Company to refinance all
outstanding borrowings under the Company's 1994 Credit Agreement. The 1995
Credit Agreement 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"), all of which was borrowed at closing and of which $37.5 million
was cash collateralized in order to reduce interest rates on the 1995 Term Loan
Facility, (ii) a $75.0 million revolving credit facility for general corporate
purposes and (iii) a $37.5 million acquisition revolving credit facility which
is available to make permitted business acquisitions and investments and for
general corporate purposes.
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The BBH Acquisition
On October 31, 1995, the Company and BBA Acquisition, Inc., a Delaware
corporation and wholly owned subsidiary of the Company, acquired all issued and
outstanding common shares, not previously owned by the Company, of BBH (the "BBH
Acquisition"). The BBH Acquisition was completed pursuant to an agreement and
plan of merger dated October 17, 1995.
Since November 1993, the Company had recognized 42.5% of the operating
profits from the sale of Banana Boat products, in accordance with the terms of a
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distribution agreement between BBH and the Company. Following the BBH
Acquisition, the Company's equity ownership of BBH increased from 22% to 100%
and the Company's interest in the operating profits from the sale of Banana Boat
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products increased to 100%. Concurrent with the BBH Acquisition, the
distribution agreement between the Company and BBH was terminated.
The net consideration expended in connection with the BBH Acquisition
included cash of approximately $40.4 million, 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 $4.3 million.
The BBH Acquisition was financed with approximately $34.3 million of existing
cash balances and advances under the Company's acquisition revolving credit
facility of $37.5 million.
On March 22, 1996, BBH was merged with and into Sun, with Sun being the
surviving corporation.
B. Executive Officers of Registrant
Listed below are the executive officers of the Company as of March 18,
1997. There are no family relationships between any of the executive officers,
and there is no arrangement or understanding between any executive officer and
any other person pursuant to which the executive officer was selected. At the
annual meeting of the Board of Directors which follows the Annual Meeting of
Stockholders, executive officers are elected by the Board to hold office for one
year and until their respective successors are elected and qualified, or until
earlier resignation or removal.
Name Age Position
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Michael R. Gallagher 51 Chief Executive Officer and Director
Michael F. Goss 37 Executive Vice President, Chief Financial Officer
and Director
Richard G. Powers 51 President, Personal Products Division
Max R. Recone 41 President, Consumer Products Division
James S. Cook 45 Senior Vice President, Operations
Paul E. Yestrumskas 45 Vice President, General Counsel and Secretary
Michael R. Gallagher has been the Chief Executive Officer and a
Director of the Company since June 1995. Prior to joining the Company, Mr.
Gallagher was Chief Executive Officer of North America for Reckitt & Colman PLC
(1994-1995). Mr. Gallagher was President and Executive Officer of Eastman
Kodak's L&F Products subsidiary from 1988 until the subsidiary was sold to
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Reckitt & Colman PLC in 1994. Mr. Gallagher was President of the Lehn & Fink
Consumer Products Division at Sterling Drug from 1984 until the Division was
sold to Eastman Kodak in 1988.
Michael F. Goss has been Executive Vice President and Chief Financial
Officer of the Company since December 1994. He has served as a Director of the
Company since September 1995. From 1992 to 1994, Mr. Goss was Treasurer and Vice
President - Corporate Development of Oak Industries, Inc. ("Oak"). From 1990 to
1992, he was Director of Financial Planning for Oak.
Richard G. Powers has been the President of the Personal Products
Division of the Company since August 1996. Prior to joining the Company, Mr.
Powers was President of Reckitt & Colman, PLC's North American ("R&C") Personal
Products Division. From 1992 to 1995, he was Vice President of Sales for R&C,
and from 1990 to 1992 he was Vice President of Marketing for R&C's Durkee-French
Foods Division. From 1973 to 1990, Mr. Powers held various positions in
marketing and general management at General Foods Corp.
Max R. Recone has been the President of the Consumer Products Division
of the Company since March 1996. From June 1995 to March 1996, he was Vice
President and Business Manager for Sun Care, Hair Care and Household Products.
From August 1993 to June 1995, he served as Vice President - Banana Boat. From
February 1992 to July 1993, he was Vice President - Sales of the Company. From
January 1990 to February 1992, Mr. Recone served as Vice President/General
Manager of Playtex Limited, the Company's Canadian subsidiary.
James S. Cook has been Senior Vice President, Operations of the Company
since August 1991. From August 1990 to August 1991, he was Vice President, Dover
Operations of the Company. From December 1988 to August 1990, he was Vice
President of Distribution, Logistics & MIS of the Company.
Paul E. Yestrumskas has been the Vice President, General Counsel and
Secretary of the Company since December 1995. Prior to joining the Company, Mr.
Yestrumskas was Senior Counsel of Rhone-Poulenc, Inc. from 1991 to 1995. Mr.
Yestrumskas was Assistant General Counsel of Hubbell, Inc. from 1988 to 1991 and
Senior Counsel and Director of Government Relations at Timex Corporation from
1981 to 1988.
C. General
The Company is a leading manufacturer and distributor of an extensive
line of personal care products marketed under such brand names as Playtex Gentle
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Glide(R), Soft Comfort(TM), Slimfits(TM) and Silk Glide (R) feminine care
- ----- ------------ -------- ----------
products, Playtex nurser disposable feeding systems for infants, Playtex
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Spill-Proof(TM) cups, Cherubs(R) baby products, Banana Boat and BioSun(TM) sun
- ----------- ------- ----------- ------
and skin care products, Playtex Living(R), Handsaver(R) and Wearshield(R)
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household and industrial gloves, Woolite(R) rug and upholstery cleaning
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products, Jhirmack(R) hair care products, and Tek(R) toothbrushes. Playtex
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feminine care products have the second largest market share in the United States
tampon market and the leading position in the plastic applicator segment of the
market. Playtex Infant Care is the brand leader in the United States in
disposable feeding systems for infants and the infant cups market. Banana Boat
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has the number two market position in the United States sun care market. Playtex
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gloves are the market leader in the branded domestic household rubber gloves
market. Woolite rug and upholstery cleaning products are the number two brand in
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their domestic market.
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Net sales by classes of similar products to unaffiliated customers for
the five most recent fiscal years are as follows (in millions):
Twelve Months Ended December
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1996 1995 1994 1993 1992
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Feminine Care $225.5 $243.6 $257.1 $244.5 $214.0
Infant Care 109.5 87.6 77.9 74.7 74.1
Sun Care 73.3 50.3 48.9 1.9 --
Household Products 60.5 57.3 32.5 28.8 27.6
Hair Care 25.2 39.7 51.4 54.5 61.9
Toothbrushes 4.7 5.1 5.5 5.5 6.9
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Total $498.7 $483.6 $473.3 $409.9 $384.5
====== ====== ====== ====== ======
U.S. $459.1 $445.9 $436.1 $369.2 $343.8
Canada 39.6 37.7 37.2 40.7 40.7
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Total $498.7 $483.6 $473.3 $409.9 $384.5
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D. Products
Feminine Care Products. The Company's largest brand is Playtex tampons.
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In 1996, the brand accounted for 45% of the Company's total net sales. Playtex
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is the second largest selling tampon brand in the United States. The Company's
market share of tampon sales (by dollar volume) for the five most recent fiscal
years, as reported by Nielsen Marketing Research, was as follows:
Twelve Months Ended December
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1996 1995 1994 1993 1992
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26% 27% 29% 30% 30%
Playtex has two major product lines in the Feminine Care business--
plastic and cardboard applicators. The plastic applicator business represented
90% of the Playtex branded domestic tampon business and is comprised of three
product offerings: Gentle Glide, Playtex's original plastic tampon; Soft
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Comfort, with an applicator made of a soft, plastic material designed to improve
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comfort; and Slimfits, a new line of tampons introduced in late 1996, developed
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for the first-time tampon user. The Silk Glide brand is Playtex's line of
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cardboard applicator tampons. This product line features a rounded tip cardboard
applicator that provides the consumer with a quality product in the cardboard
segment of the tampon market.
Infant Care. The Company's second largest product category is Infant
Care, which is comprised of the Playtex disposable nurser system, cups and
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mealtime products, reusable hard bottles, and pacifiers. In 1996, Infant Care
products accounted for approximately 22% of the Company's total net sales.
The Playtex disposable nurser system includes disposable bottles (the
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largest segment of the business), nurser kits, rubber nipples and component
parts. The Company is the market leader in disposable feeding systems for
infants with a 73% dollar share of the market in 1996.
The cups and mealtime segment is the fastest growing portion of the
Playtex Infant Care business. The cup segment of the market has almost doubled
since Playtex's introduction of the
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Spill-Proof cup in 1994. The Company's market share in the cup segment has
- -----------
increased from 29% in 1994 to 70% in 1996. In addition, the Company offers other
baby-related products such as reusable bottles, spoons, bowls and pacifiers.
Sun Care. The Company has two brands within its Sun Care business,
Banana Boat and BioSun. In 1996, these products accounted for approximately 15%
- ----------- ------
of the Company's total net sales.
Since their introduction in the 1980's, sales of Banana Boat products
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have grown steadily. Banana Boat has achieved the second largest share of the
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sun care market (by unit volume). For 1996, Banana Boat had a 19% share of the
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market, compared to a 18% share in 1995 and a 16% share in 1994. The sun care
market grew 2% (in unit volume) in 1996 versus the same period in 1995.
BioSun is a premium priced line of sun care products introduced in late
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1996. This line of higher SPF products carries The Skin Cancer Foundation
recommendation.
Household Products. Household products consist of Playtex gloves and
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the Woolite rug and upholstery cleaning products.
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Since the Company introduced the first household latex glove in 1954,
Playtex gloves have continued to be the leader in this category. In 1996, this
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product line accounted for approximately 7% of the Company's total net sales.
The Company competes primarily with manufacturers of various lower priced, latex
gloves which are generally manufactured overseas and marketed as private label
gloves. Private label gloves, in the aggregate, have the second largest market
share behind Playtex. For 1996, Playtex gloves had a unit market share of 38%,
compared to 35% in 1995. -------
As noted previously, the Company acquired certain assets of the Woolite
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rug and upholstery cleaning business ("Woolite") in February 1995. Woolite is
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the second leading brand in this domestic business and accounted for 5% of the
Company's net sales in 1996.
Hair Care Products. In 1996, hair care products contributed
approximately 5% of the Company's total net sales.
As a result of management's evaluation of the erosion of Jhirmack's
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market share and net sales, the Company effected a write-off of all of the
goodwill associated with the Jhirmack business in the third quarter of 1993. The
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decline in net sales continued in 1996 and the Company is evaluating strategic
alternatives for this business. Hair Care is not considered one of the Company's
core businesses.
Toothbrushes. The Company manufactures and distributes regular, angled
and childrens toothbrushes under the Tek brand name. In 1996, this line
---
contributed approximately $4.7 million in total net sales.
E. Marketing
The Company allocates a significant portion of its revenues to the
advertising and promotion of its products. Expenditures for these purposes were
24%, 24%, and 21%, respectively, as a percentage of net sales during the last
three fiscal years. These expenditures are an integral
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component of the overall marketing effort for the Company's direct customers and
the ultimate consumer.
As part of the Company's consumer oriented marketing strategy,
initiated in 1995, the Company is investing more heavily in advertising and
other consumer based spending and less on trade spending.
F. Competition
The markets for the Company's products are highly competitive. They are
characterized by the frequent introduction of new products, often accompanied by
major advertising and promotional programs. The Company competes primarily on
the basis of product quality, product differentiation and brand name recognition
supported by advertising and promotion. Tambrands, Inc. has the leading market
share and is the Company's principal competitor in the tampon market. In its
remaining businesses, the Company's competitors consist of a large number of
domestic and foreign companies, a number of which have significantly greater
financial resources and less leverage than the Company.
The Company believes that the market for consumer products will
continue to be highly competitive. In fact, the level of competitiveness may
intensify in the future, including higher spending for advertising and
promotion, new product initiatives and continued activity in the private label
sector.
G. Regulation
Government regulation has not materially restricted or impeded the
Company's operations. Certain of the Company's products are subject to
regulation under the Federal Food, Drug and Cosmetic Act and the Fair Packaging
and Labeling Act. The Company is also subject to regulation by the Federal Trade
Commission with respect to the content of its advertising, its trade practices
and other matters. The Company is subject to regulation by the United States
Food and Drug Administration in connection with its manufacture and sale of
tampons.
H. Distribution
The Company's sales are generated by its sales organization of
approximately 195 people and by exclusive distributors. In 1996, products were
sold through supermarkets (40%), drug stores (19%) and mass merchandising and
other outlets (41%). In recent years, sales through mass merchandisers and price
clubs, as a percentage of total sales, have experienced gains at the expense of
drug stores, while sales through supermarkets have remained generally constant.
The field sales force makes sales presentations at the headquarters or
home offices of its customers, where applicable, as well as to individual retail
outlets. The sales representatives focus their efforts on selling the Company's
products, providing services to its direct customers and executing programs to
ensure sales to the ultimate consumer. Consumer-directed programs include
arranging for on-shelf and separate displays, obtaining feature price
reductions, and coordinating cooperative advertising participation.
During 1996, Playtex restructured its sales force into two separate
organizations: the Consumer Products Division for Sun Care and Household
Products, and the Personal Products
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Division for Feminine Care and Infant Care Products. This new structure will
allow the Company's sales forces to focus more effectively on individual product
lines.
I. Research and Development
The Company maintains ongoing research and development programs in
Paramus, New Jersey. Approximately 55 employees are engaged in these programs,
for which expenditures were $7.3 million, $6.5 million, and $5.8 million,
respectively, during each of the last three fiscal years.
J. Trademarks and Patents
The Company has proprietary rights to a number of trademarks important
to its businesses, such as Playtex, Gentle Glide, Portables(R), Silk Glide, Soft
------- ------------ --------- ---------- ----
Comfort, Living, HandSaver, Comfortflow(R), Drop-Ins, Spill-Proof, Most Like
- ------- ------ --------- ----------- -------- ----------- ---------
Mother(R), Natural Action(R), Cherubs, Jhirmack, HeatCare(TM), Banana Boat, Get
- ------ -------------- ------- -------- -------- ----------- ---
On The Boat(R), BioSun and Tek. The Playtex and Living trademarks in the United
- ----------- ------ --- ------- ------
States and Canada are owned by Playtex Marketing Corporation ("Marketing
Corporation"), a corporation owned equally by the Company and Apparel. Marketing
Corporation is responsible for protecting, exercising quality control over and
enforcing the trademarks. The Company and Apparel each have licenses from
Marketing Corporation for the use of such trademarks in the United States and
Canada on a perpetual, royalty-free basis; Apparel's license is for apparel and
apparel-related products, and the Company's license is for all other products.
In all other countries, Apparel retains title to the Playtex and Living
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trademarks, subject to a perpetual, royalty-free license to the Company to use
such trademarks for all products other than apparel products.
The Company also owns various patents related to certain products and
their method of manufacture, including patents for the tampon wrap material, the
assembly of the compact tampon, the tampon inserter, the baby nurser holder, the
configuration of certain baby pacifiers, nipples, caps, and formulations for
certain sun care and hair care products. The patents expire at varying times,
ranging from 1997 to 2014. The Company also has pending patent applications for
various products and methods of manufacture relating to its tampon, nurser and
toothbrush businesses. While the Company considers its patents to be important
to its business, it believes that the success of its products is more dependent
upon the quality of these products and the effectiveness of its marketing
programs. No single patent is material to the business of the Company.
K. Raw Materials and Suppliers
The principal raw materials used by the Company in the manufacture of
its products are synthetic fibers, resin-based plastics and other chemicals and
certain natural materials, all of which are normally readily available. While
all raw materials are purchased from outside sources, the Company is not
dependent upon a single supplier in any of its operations for any material
essential to its business or not otherwise commercially available to the
Company. The Company has been able to obtain an adequate supply of raw
materials, and no shortage of such materials is currently anticipated.
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L. Customers and Backlog
No single customer or affiliated group of customers represents 10% or
more of the Company's sales, except for Wal-Mart Stores, Inc. ("Wal-Mart")
(approximately 18% in 1996, 17% in 1995, and 15% in 1994). For each of such
periods, net sales to the Company's next three largest customers represented in
the aggregate approximately 12% in 1996, 12% in 1995, and 11% in 1994 of the
total net sales of the Company. The loss of sales to Wal-Mart could have a
material adverse effect on the business and operations of the Company. In
accordance with industry practice, the Company grants credit to its customers at
the time of purchase. In addition, the Company grants extended payment terms to
new customers and for the initial sales of introductory products and product
line extensions, and it grants extended terms on its Banana Boat products due to
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the seasonal nature of this business. While the extension of credit carries
risk, the bad debt experience of the Company has not been material in recent
years.
The Company's policy is not to accept returned goods, except for
certain Sun Care products, which are seasonal in nature. Exceptions to this
policy are authorized by management of the sales organization. Returns result
primarily from Sun Care seasonal products, damage and shipping discrepancies and
generally are not material to the total net sales of the Company.
Because of the short period between order and shipment dates (generally
less than one month) for most of the Company's sales (more than 80% in 1996),
the dollar amount of current backlog is not considered to be a reliable
indication of future sales volume.
M. Employees and Labor Relations
The Company's worldwide workforce consisted of approximately 1,600
employees as of December 28, 1996, of whom 180 were located outside the United
States, primarily in Canada. Of the United States facilities, only the Tek
operation at Watervliet, New York, has union representation; it is organized by
The Brush Workers Union Local No. 20466 I.U.E. A.F.L.-C.I.O. The collective
bargaining agreement covered 190 workers at December 28, 1996 and expires on
June 28, 1997. The Company believes that its labor relations are satisfactory
and no material labor cost increases, other than those in the ordinary course of
business, are anticipated.
N. Environmental
The Company believes that it is in substantial compliance with federal,
state and local provisions enacted or adopted regulating the discharge of
materials hazardous to the environment. There are no significant capital
expenditures for environmental control in the current year or expected in the
near future. See "Legal Proceedings."
O. Board of Directors Sets Record Date and Date, Time and Place of Annual
Meeting of Stockholders
At its meeting on March 5, 1997, the Board of Directors set the close
of business on April 1, 1997 as the record date for determining stockholders
entitled to notice of and to vote at the 1996 Annual Meeting of Stockholders.
This meeting will be held at Chase Manhattan Bank, 270 Park Avenue, New York,
New York on Tuesday, May 20, 1997 at 11:00 a.m. local time.
12
<PAGE>
P. Special Factors Regarding Forward-Looking Statements
Certain statements in this Annual Report on Form 10-K or others made
hereafter (including orally) may constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the 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 (See "Business-Competition"); the loss of a
significant customer (See "Business-Customers and Backlog"); and product
liability litigation and changes in governmental regulation (See "Legal
Proceedings").
13
<PAGE>
Item 2. Properties
The principal executive offices of the Company are located at 300 Nyala
Farms Road, Westport, Connecticut 06880 and are occupied pursuant to a lease
which expires in 2004. The Company operates manufacturing and distribution
facilities in Dover, Delaware; Watervliet, New York; and Arnprior and Malton,
Canada. The Company maintains a research and development facility in Paramus,
New Jersey, which is leased from Apparel on a month-to-month basis. The Company
operates two facilities in Canada. The Arnprior facility, primarily a warehouse
and assembly operation, is owned by the Company. The Malton facility, a
warehouse and office site, is leased from Apparel. This lease extends to 2004.
For 1996, the Company's average utilization rate of manufacturing capacity was
an estimated 75%. The Company does not anticipate any material acquisition of
plant or any significant increase in the capacity thereof in the near future.
The following table sets forth the principal properties of the Company,
which are located in four states and Canada:
# of Estimated
Facilities Square Footage
---------- --------------
Facilities Owned
Manufacturing/Office/Distribution/
Warehouse
Dover, DE 3 710,000
Watervliet, NY 1 159,600
Arnprior, Canada 1 91,800
Facilities Leased
Office/Distribution/Warehouse
Dover, DE 5 317,500
Malton, Canada 1 72,800
Westport, CT 1 41,700
Paramus, NJ 1 33,000
Guaynabo, PR 1 15,700
Item 3. Legal Proceedings
Beginning in 1980, studies were published leading to the hypothesis
that tampons are associated with Toxic Shock Syndrome ("TSS"). Since 1980,
numerous claims have been filed against manufacturers of tampons, a small
percentage of which have been litigated to conclusion.
The number of TSS claims relating to Playtex tampons has declined
substantially over the years. During the mid-1980s, there were approximately 200
pending claims at any one time relating to Playtex tampons. As of the end of
February 1997, there were approximately 14 pending claims, although additional
claims may be asserted in the future. For claims filed from October 1, 1985
until November 30, 1995, the Company is self-insured for TSS claims, and bears
the costs of defending those claims, including settlements and trials. Effective
December 1, 1995, the Company obtained insurance coverage with certain limits in
excess of the self-insured retention of $1.0 million per occurrence/$4.0 million
in the aggregate, on claims occurring on or after December 1, 1995.
The incidence rate of menstrually associated TSS among tampon users has
declined significantly over the years. In 1982, the rate was reported to be
between six and seventeen
14
<PAGE>
occurrences per 100,000 menstruating women per year. The most recent reported
information as of 1989 is that the rate is approximately one occurrence per
100,000.
Based on the Company's experience with TSS cases, its evaluation of the
currently pending claims, the reported decline in the incidence of menstrually
associated TSS, the federally-mandated warning about TSS on and in its tampon
packages and the development of case law upholding the adequacy of tampon
warnings which comply with federally-mandated warnings, the Company believes
that there are no claims or litigation pending, including the TSS cases, which
would have a materially adverse effect on the consolidated financial position,
results of operations or cash flows of the Company.
The Company, as successor to the Family Products businesses of IPI, is
presently participating as part of a group of several potentially responsible
corporate parties ("PRP Group") in the remediation of the Wildcat Landfill in
Dover, Delaware, which has been designated as a "Superfund" site by the EPA. In
June 1989, the PRP Group entered into a settlement pursuant to which the Company
(together with Apparel) assumed a share of the remediation costs, which share,
based on reasonable engineering estimates, was $565,000 for both companies
combined. The Company and Apparel have each paid $300,000 (or a total of
$600,000) to an escrow fund under an agreement with other settling parties and
site remediation has been completed. Associated monitoring costs are not
expected to be material.
The Company has joined the PRP Group with respect to the Kent County
Landfill Site in Houston, Delaware, which has been designated a "Superfund" site
by the State of Delaware. A study of the site is being conducted to formulate a
remediation plan. The Company's allocated share of the costs of the remediation
study is not expected to exceed $100,000, which amount will be shared equally
with Apparel. Although the remedial costs associated with the site will be
difficult to assess until the study is completed, based on the information
currently available to the Company, the nature and quantity of material
deposited by the Company and the number of other entities in the PRP group who
are expected to share in the costs and expenses, the Company does not believe
that the costs to the Company will be material. The Company and Apparel will
share equally all expenses and costs associated with IPI's involvement with this
site.
The Company is a defendant in various other suits, claims and
investigations which arise in the normal course of business. In the opinion of
Management, the ultimate disposition of these matters, including those described
above, will not have a material adverse effect on the consolidated financial
position, results of operations or cash flows of the Company.
The Company is subject to regulation by the United States Food and Drug
Administration in connection with its manufacture and sale of tampons.
Item 4. Submissions of Matters to Vote of Security Holders
Not applicable
15
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company has two classes of authorized stock: (a) Common Stock and
(b) up to 50,000,000 shares of preferred stock, par value $.01 per share. Of
100,000,000 shares of Common Stock authorized, 50,913,804 shares were issued and
outstanding as of March 18, 1997. There were 449 holders of record of the
Company's Common Stock on that date. The Common Stock is traded on the New York
Stock Exchange ("NYSE") under the symbol "PYX." As of March 18, 1997, the
Company had not issued any shares of preferred stock. No cash dividends have
ever been paid on the Common Stock, and the Company is restricted from paying
dividends on the Common Stock by the terms of the 1995 Credit Agreement and the
indenture governing the Senior Subordinated Notes.
The following table sets forth the high and low sale price per share of
the Common Stock during the fiscal years ended December 28, 1996 and December
30, 1995 as reported by the New York Stock Exchange - Composite Transactions:
Fiscal 1996 First Quarter Second Quarter Third Quarter Fourth Quarter
- ----------- ------------- -------------- ------------- --------------
High $ 8 5/8 $ 10 3/8 $ 9 1/2 $ 9 1/2
Low 6 5/8 7 1/8 7 1/2 7 1/8
Fiscal 1995
- -----------
High 8 5/8 10 1/4 12 1/2 9
Low 6 3/4 7 1/2 8 3/8 6 1/2
Item 6. Selected Financial Data
The response to this Item is incorporated by reference to the
information in the section entitled "Selected Financial Data" of the Company's
1996 Annual Report to Stockholders (included as Exhibit 13 to this Annual Report
on Form 10-K).
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The response to this Item is incorporated by reference to the
information in the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of the Company's 1996 Annual
Report to Stockholders (included as Exhibit 13 to this Annual Report on Form
10-K).
Item 8. Financial Statements and Supplementary Data
The response to this Item is incorporated by reference to the
information under the captions "Consolidated Statements of Operations",
"Consolidated Balance Sheets", "Consolidated Statements of Redeemable Preferred
Stocks, Common Stock and Other Stockholders' Equity", "Consolidated Statements
of Cash Flows", "Notes to Consolidated
16
<PAGE>
Financial Statements", "Independent Auditors' Report", and "Report of
Management" of the Company's 1996 Annual Report to Stockholders (included as
Exhibit 13 to this Annual Report on Form 10-K).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
17
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The response to this Item is incorporated by reference to the
information in the section entitled "Election of Directors" in the Company's
Proxy Statement for the 1997 Annual Meeting of Stockholders.
Item 11. Executive Compensation
The response to this Item is incorporated by reference to the
information in the section entitled "Executive Compensation" in the Company's
Proxy Statement for the 1997 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The response to this Item is incorporated by reference to the
information in the section entitled "Security Ownership of Certain Beneficial
Owners and Management" in the Company's Proxy Statement for the 1997 Annual
Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions
The response to this Item is incorporated by reference to the
information in the section entitled "Certain Transactions" and "Executive
Compensation - Arrangements with Former Chief Executive Officer" in the
Company's Proxy Statement for the 1997 Annual Meeting of Stockholders.
18
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a) Financial Statements
(a)(1) The following Consolidated Financial Statements and related
Notes of the Company are incorporated herein by reference to the Company's 1996
Annual Report to Stockholders (included as Exhibit 13 to this Annual Report on
Form 10-K):
Independent Auditors' Report
Consolidated Balance Sheets as of December 28, 1996 and December 30,
1995
Consolidated Statements of Operations for the twelve months ended
December 28, 1996, December 30, 1995 and December 31, 1994
Consolidated Statements of Redeemable Preferred Stocks, Common Stock
and Other Stockholders' Equity for the twelve months ended
December 28, 1996, December 30, 1995 and December 31, 1994
Consolidated Statements of Cash Flows for the twelve months ended
December 28, 1996, December 30, 1995 and December 31, 1994
Notes to Consolidated Financial Statements
(a) (2) Financial Statement Schedules
The following financial statement schedule of the Company as set forth
below is filed with this Annual Report on Form 10-K:
Page
----
Independent Auditors' Report on Schedule 20
Schedule VIII - Valuation and Qualifying Accounts 21
All other schedules are omitted as the required information is not
applicable or the information is presented in the consolidated financial
statements or related notes.
(a) (3) Exhibits
See Exhibit Index on Pages X-1 to X-9 for exhibits filed with this
Annual Report on Form 10-K.
(b) Reports on Form 8-K
None
19
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
The Board of Directors and Stockholders
Playtex Products, Inc.
Under date of February 7, 1997, we reported on the consolidated balance
sheets of Playtex Products, Inc. and subsidiaries as of December 28, 1996 and
December 30, 1995, and the related consolidated statements of operations,
redeemable preferred stocks, common stock and other stockholders' equity, and
cash flows for the twelve months ended December 28, 1996, December 30, 1995 and
December 31, 1994, as contained in the 1996 Annual Report to Stockholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the Annual Report on Form 10-K for the fiscal year 1996. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedule for
the twelve months ended December 28, 1996, December 30, 1995, and December 31,
1994, as listed in Item 14(a)(2) of the Annual Report on Form 10-K for the
fiscal year 1996. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
February 7, 1997
20
<PAGE>
PLAYTEX PRODUCTS, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Twelve Months Ended December 28, 1996, December 30, 1995, and December 31, 1994
(In Thousands)
<TABLE>
<CAPTION>
Balance at Additions Balance
Beginning Charged to at End
of Period Income Deductions (1) of Period
--------- ---------- -------------- ---------
Receivables:
Allowance for doubtful accounts
<S> <C> <C> <C> <C>
December 31, 1994 $ (2,149) $ (650) $ 453 $ (2,346)
December 30, 1995 $ (2,346) $ (449) $ 753 $ (2,042)
December 28, 1996 $ (2,042) $ (325) $ 609 $ (1,758)
</TABLE>
- ----------
(1) - Represents accounts written-off.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ Michael R. Gallagher
----------------------------
Michael R. Gallagher
Chief Executive Officer
March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated this 27th day of March 1997.
Signatures Title
---------- -----
/s/ Robert B. Haas Chairman of the Board and
- ------------------------------------ Director
Robert B. Haas
/s/ Michael R. Gallagher Chief Executive Officer and
- ------------------------------------ Director
Michael R. Gallagher
/s/ Michael F. Goss Executive Vice President, Chief
- ------------------------------------
Michael F. Goss Financial Officer and Director
(Principal Financial and Accounting
Officer)
- ------------------------------------
Joel E. Smilow Director
- ------------------------------------
Thomas H. Lee Director
/s/ Douglas D. Wheat
- ------------------------------------
Douglas D. Wheat Director
- ------------------------------------
Michael R. Eisenson Director
/s/ Kenneth F. Yontz
- ------------------------------------
Kenneth F. Yontz Director
- ------------------------------------
Timothy O. Fisher Director
22
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
3(a) Restated Certificate of Incorporation of Playtex Products, Inc.
(hereafter, "Playtex" or the "Company") dated as of May 5, 1994.
(Incorporated herein by reference to Exhibit 4(a) of Playtex's
Registration Statement on Form S-8, No. 33-88806.)
3(a)(1) Restated Certificate of Incorporation, as amended through June 6,
1995. (Incorporated herein by reference to Exhibit 3.2 of
Playtex's Form 8-K, dated June 6, 1995, File No. 33-25485-01.)
3(b) Bylaws of Playtex. (Incorporated herein by reference to Exhibit
3(b) of Playtex's Registration Statement on Form S-1, No.
33-25485.)
3(c) Amendment to Bylaws of Playtex. (Incorporated herein by reference
to Exhibit 3(g) of Playtex's Registration Statement on Form S-1,
No. 33-43771.)
3(d) Amendment to Bylaws of Playtex. (Incorporated herein by reference
to Exhibit 3(g) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 25, 1993, File No. 33-25485-01.)
3(e) Amendment to Bylaws of Playtex. (Incorporated herein by reference
to Exhibit 4(e) of Playtex's Registration Statement on Form S-8,
No. 33- 88806.)
3(f) By-laws of the Company, as amended through June 6, 1995.
(Incorporated herein by reference to Exhibit 3.1 of Playtex's Form
8-K, dated June 6, 1995, File No. 33-25485-01.)
3(g) Merger Certificate dated March 8, 1994 between Playtex Family
Products Corporation ("Family Products") and Playtex.
(Incorporated herein by reference to Exhibit 3(h) of Playtex's
Annual Report on Form 10-K for the fiscal year ended December 25,
1993, File No. 33-25485-01.)
4(a) Specimen Common Stock Certificate. (Incorporated herein by
reference to Exhibit 4(a) of Playtex's Registration Statement on
Form S-1, No. 33-71512.)
4(b) Indenture dated as of February 2, 1994 relating to the 9% Senior
Subordinated Notes due 2003 (the "Senior Subordinated Notes")
among Family Products, Playtex and IBJ Schroder Bank & Trust
Company, as trustee, including form of Note. (Incorporated herein
by reference to Exhibit 4(b) of Playtex's Annual Report on Form
10-K for the fiscal year ended December 25, 1993, File No.
33-25485-01.)
4(b)(1) First Supplemental Indenture dated as of March 8, 1994.
(Incorporated herein by reference to Exhibit 4(b)(1) of Playtex's
Annual Report on Form 10-K for the fiscal year ended December 25,
1993, File No. 33-25485-01.)
X-1
<PAGE>
Exhibit No. Description
- ----------- -----------
4(b)(2) Second Supplemental Indenture, dated as of June 6, 1995 among the
Company, Playtex Sales & Service, Inc. and IBJ Schroder Bank and
Trust Company, as Trustee. (Incorporated herein by reference to
Exhibit 4.1 of Playtex's Form 8-K, dated June 6, 1995, File No.
33-25485-01.)
4(b)(3) Third Supplemental Indenture, dated as of June 6, 1995 among the
Company, Playtex Manufacturing Inc. and IBJ Schroder Bank and
Trust Company, as Trustee. (Incorporated herein by reference to
Exhibit 4.2 of Playtex's Form 8-K, dated June 6, 1995, File No.
33-25485-01.)
4(b)(4) Fourth Supplemental Indenture among Playtex Products, Inc., as
Issuer, BBA Acquisition, Inc., as Guarantor and IBJ Schroder Bank
& Trust Company, as Trustee, dated as of October 31, 1995.
(Incorporated herein by reference to Exhibit 4(b)(4) of Playtex's
Annual Report on Form 10-K for the fiscal year ended December 30,
1995, File No. 33-25485-01.)
4(b)(5) Fifth Supplemental Indenture among Playtex Products, Inc., as
Issuer, BBA Acquisition, Inc., as Guarantor and IBJ Schroder Bank
& Trust Company, as Trustee, dated as of October 31, 1995.
(Incorporated herein by reference to Exhibit 4(b)(5) of Playtex's
Annual Report on Form 10-K for the fiscal year ended December 30,
1995, File No. 33-25485-01.)
4(b)(6) Sixth Supplemental Indenture among Playtex Products, Inc., as
Issuer, BBA Acquisition, Inc., as Guarantor and IBJ Schroder Bank
& Trust Company, as Trustee, dated as of October 31, 1995.
(Incorporated herein by reference to Exhibit 4(b)(6) of Playtex's
Annual Report on Form 10-K for the fiscal year ended December 30,
1995, File No. 33-25485-01.)
4(b)(7) Seventh Supplemental Indenture among Playtex Products, Inc., as
Issuer, BBA Acquisition, Inc., as Guarantor and IBJ Schroder Bank
& Trust Company, as Trustee, dated as of October 31, 1995.
(Incorporated herein by reference to Exhibit 4(b)(7) of Playtex's
Annual Report on Form 10-K for the fiscal year ended December 30,
1995, File No. 33-25485-01.)
4(c)(1) Amended and Restated Stockholders Agreement. (Incorporated herein
by reference to Exhibit 4 to Playtex's Current Report on Form 8-K
dated November 5, 1991.)
4(c)(2) Amendment No. 1, dated as of March 17, 1995, to Amended and
Restated Stockholders Agreement. (Incorporated herein by reference
to Exhibit 4(c)(2) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995, File No. 33-25485-01.)
4(d) Form of Junior Subordinated Note of Playtex. (Incorporated herein
by reference to Exhibit 4(i) of Playtex's Registration Statement
on Form S-1, No. 33-25485.)
X-2
<PAGE>
Exhibit No. Description
- ----------- -----------
4(d)(1) Form of Junior Subordinated Note of Playtex dated December 15,
1989. (Incorporated herein by reference to Exhibit 4(f)(1) to
Playtex's Annual Report on Form 10-K for the year ended December
30, 1989, No. 33-25485.)
4(d)(2) Junior Subordinated Note of Playtex dated December 15, 1990.
(Incorporated herein by reference to Exhibit 4(f) (2) to Playtex's
Annual Report on Form 10-K for the year ended December 29, 1990,
No. 33-25485.)
4(d)(3) Junior Subordinated Note of Playtex dated December 15, 1991.
(Incorporated herein by reference to Exhibit 4(h)(3) of Playtex's
Registration Statement on Form S-1, No. 33-43771.)
4(d)(4) Junior Subordinated Note of Playtex dated December 15, 1992.
(Incorporated herein by reference to Exhibit 4(h)(4) of Playtex's
Annual Report on Form 10-K for the year ended December 26, 1992.)
4(d)(5) Junior Subordinated Note of Playtex dated December 15, 1993.
(Incorporated herein by reference to Exhibit 4(j)(5) of Playtex's
Registration Statement on Form S-1, No. 33-71512.)
4(d)(6) Agreement between Playtex and Playtex Apparel Partners, L.P. dated
November 30, 1994 relating to Junior Subordinated Notes.
(Incorporated herein by reference to Exhibit 4(d)(6) of Playtex's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994, File No. 33-25485-01.)
10(a)(1) Credit Agreement, dated as of June 6, 1995, among the Company,
Chemical Bank, as Agent, and the Lenders thereto and forms of
notes, security documents and guarantees attached as exhibits
thereto. (Incorporated herein by reference to Exhibit 10.1 of
Playtex's Form 8-K, dated June 6, 1995, File No. 33-25485-01.)
10(a)(2) First Amendment, dated October 5, 1995, to the Credit Agreement,
dated as of June 6, 1995, among the Company, Chemical Bank, as
Agent, and the Lenders thereto. (Incorporated herein by reference
to Exhibit 10(a)(3) of Playtex's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995, File No. 33-25485-01.)
10(a)(3) Supplement No. 1, dated as of October 31, 1995, to the
Subsidiaries Guarantee dated June 6, 1995, made by the
Subsidiaries of Playtex signatories thereto in favor of Chemical
Bank as Agent. (Incorporated herein by reference to Exhibit
10(a)(4) of Playtex's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995, File No. 33-25485-01.)
X-3
<PAGE>
Exhibit No. Description
- ----------- -----------
10(a)(4) Supplement No. 1, dated October 31, 1995, to Borrower Pledge
Agreement dated as of June 6, 1995, made by Playtex in favor of
Chemical Bank as Agent. (Incorporated herein by reference to
Exhibit 10(a)(5) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995, File No. 33-25485-01.)
10(a)(5) Supplement No. 2, dated October 31, 1995, to Borrower Pledge
Agreement dated as of June 6, 1995, made by Playtex in favor of
Chemical Bank as Agent. (Incorporated herein by reference to
Exhibit 10(a)(6) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995, File No. 33-25485-01.)
10(b) Agreement between Playtex and Chemical Bank for currency swap and
interest rate hedging. (Incorporated herein by reference to
Exhibit 10(b) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, File No. 33-25485-01.)
10(b)(1) Interest Protection Agreement effective July 6, 1995 between
Playtex and Chemical Bank. (Incorporated herein by reference to
Exhibit 10(b)(1) of Playtex's Form 10-Q for the quarter ended July
1, 1995, No. 33-25485-01.)
10(b)(2) Interest Protection Agreement effective July 25, 1995 between
Playtex and Chemical Bank. (Incorporated herein by reference to
Exhibit 10(b)(2) of Playtex's Form 10-Q for the quarter ended July
1, 1995, No. 33-25485-01.)
* 10(b)(3) Interest Protection Agreement effective July 25, 1996 between
Playtex and Chemical Bank.
10(c) Stock Purchase Agreement, dated as of December 28, 1988, among
Playtex Holdings, Inc., Playtex Investment Corp., Playtex Apparel,
Inc. and Playtex Apparel Partners, L.P. (Incorporated herein by
reference to Exhibit 10(b) of Playtex's Annual Report on Form 10-K
for the year ended December 31, 1988, No. 33-25485.)
10(d) Stock Purchase Agreement, dated as of November 26, 1986, among
Playtex Holdings, Inc., Playtex, Inc., and BCI Consumer Products
Corporation. (Incorporated herein by reference to Exhibit 10(c) of
Playtex's Annual Report on Form 10-K for the year ended December
31, 1988, No. 33-25485.)
10(e) Stock Purchase Agreement, dated November 13, 1986, between Playtex
Holdings, Inc. and Revlon Group Incorporated. (Incorporated herein
by reference to Exhibit 10(d) of Playtex's Annual Report on Form
10-K for the year ended December 31, 1988, No. 33-25485.)
X-4
<PAGE>
Exhibit No. Description
- ----------- -----------
10(f) Playtex Park Profit-Sharing Retirement Plan and Savings Plan dated
December 12, 1986, as amended January 1, 1989. (Incorporated
herein by reference to Exhibit 10(e) of Playtex's Annual Report on
Form 10-K for the year ended December 30, 1989, No. 33-25485.)
10(g) Deferred Benefit Equalization Plan dated August 15, 1977, as
amended April 15, 1987. (Incorporated herein by reference to
Exhibit 10(e) of Playtex Holding's Annual Report on Form 10-K for
the year ended December 28, 1987, File No. 33-15607.)
10(h) Revised Special Severance Plan dated August 27, 1990.
(Incorporated herein by reference to Exhibit 10(g)(2) of Playtex's
Annual Report on Form 10-K for the year ended December 29, 1990,
File No. 33-25485.)
10(i) Termination Policy for Management Compensation Plan Participants.
(Incorporated herein by reference to Exhibit 10(h)(1) of Playtex's
Annual Report on Form 10-K for the year ended December 30, 1989,
File No. 33- 25485.)
10(j) Playtex Pension Plan effective January 1, 1989. (Incorporated
herein by reference to Exhibit 10(j) of Playtex's Registration
Statement on Form S-1, No. 33-71512.)
10(k) Retirement Plan for Hourly Employees of Tek effective January 1,
1989. (Incorporated herein by reference to Exhibit 10(k) of
Playtex's Registration Statement on Form S-1, No. 33-71512.)
10(l)(1) Playtex Management Incentive Plan for 1996. (Incorporated herein
by reference to Exhibit 10(l)(1) of Playtex's Annual Report on
Form 10-K for the fiscal year ended December 30, 1995, File No.
33-25485-01.
*10(l)(2) Playtex Management Incentive Plan for 1997.
10(m) Consulting Agreement between Family Products and Joel E. Smilow
dated January 30, 1993. (Incorporated herein by reference to
Exhibit 10(m) of Playtex's Registration Statement on Form S-1, No.
33-71512.)
10(n) Form of Management Contribution and Subscription Agreement.
(Incorporated herein by reference to Exhibit 4(d) of Playtex's
Registration Statement on Form S-1, No. 33-25485.)
10(n)(1) First Amendment to the Management Contribution and Subscription
Agreement dated February 23, 1989. (Incorporated herein by
reference to Exhibit 10(c)(1) of Playtex's Annual Report on Form
10-K for the year ended December 30, 1989, No. 33-25485.)
X-5
<PAGE>
Exhibit No. Description
- ----------- -----------
10(n)(2) Second Amendment to the Management Contribution and Subscription
Agreement dated November 15, 1989. (Incorporated herein by
reference to Exhibit 10(c)(2) of Playtex's Annual Report on Form
10-K for the year ended December 30, 1989, No. 33-25485.)
10(n)(3) Third Amendment to the Management Contribution and Subscription
Agreement dated August 1, 1990. (Incorporated herein by reference
to Exhibit 10(c)(3) of Playtex's Annual Report on Form 10-K for
the year ended December 29, 1990, No. 33-25485.)
10(n)(4) Fourth Amendment to the Management and Contribution Subscription
Agreement dated January 1, 1992. (Incorporated herein by reference
to Exhibit 10(q)(4) of Playtex's Registration Statement on Form
S-1, No. 33- 71512.)
10(o) Form of Playtex Stock Subscription Agreement. (Incorporated herein
by reference to Exhibit 10(o) of Playtex's Registration Statement
on Form S-1, No. 33-25485.)
10(p) Amended Trademark License Agreement dated November 19, 1991 among
Marketing Corporation, Apparel and Family Products. (Incorporated
herein by reference to Exhibit 10(r) of Playtex's Registration
Statement on Form S- 1, No. 33-43771.)
10(q) Amended Trademark License Agreement dated November 19, 1991 by and
between Apparel and Family Products. (Incorporated herein by
reference to Exhibit 10(s) of Playtex's Registration Statement on
Form S-1, No. 33- 43771.)
10(r) Release Agreement, dated November 5, 1991, between Playtex
Investment Corp. and Playtex Apparel Partners, L.P. (Incorporated
herein by reference to Exhibit 10(gg) of Playtex's Registration
Statement on Form S-1, No. 33- 71512.)
10(s) Playtex 1994 Stock Option Plan for Directors and Executive and Key
Employees. (Incorporated herein by reference to Exhibit 10(hh) of
Playtex's Registration Statement on Form S-1, No. 33-71512.)
10(t)(1) Amendment No. 1 to the 1994 Stock Option Plan. (Incorporated
herein by reference to Exhibit 10.2 of Playtex's Form 8-K, dated
June 6, 1995, File No. 33-25485-01.)
10(u) Agreement with the Personal Products Division of McNeil-PPC, Inc.,
a subsidiary of Johnson & Johnson dated as of October 17, 1994.
(Incorporated herein by reference to Exhibit 10(ii) of Playtex's
Form 10-Q for the quarter ended September 24, 1994, No.
33-25485-01.)
X-6
<PAGE>
Exhibit No. Description
- ----------- -----------
10(u)(1) Agreement between Playtex and the Personal Products Division of
McNeil-PPC, Inc., a subsidiary of Johnson & Johnson dated as of
November 15, 1994. (Incorporated herein by reference to Exhibit
10(v)(1) of Playtex's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, File No. 33-25485-01.)
* 10(u)(2) Agreement between Playtex and McNeil-PPC, Inc., a subsidiary of
Johnson & Johnson dated as of October 31, 1996.
10(v) Agreement between Playtex and Reckitt & Colman, Inc., dated
December 22, 1994. (Incorporated herein by reference to Exhibit
10.1 of Playtex's Form 8- K dated January 4, 1995, No.
33-25485-01.)
10(v)(1) Amendment dated February 16, 1995 to Agreement with Reckitt &
Colman, Inc. (Incorporated herein by reference to Exhibit 10.2 of
Playtex's Form 8- K/A, dated March 6, 1995, No. 33-25485-1.)
10(v)(2) Trademark License Agreements (U.S.) dated as of February 24, 1995
between Playtex and Reckitt & Colman, Inc. (Incorporated herein by
reference to Exhibit 10.3 of Playtex's Form 8-K as amended, dated
January 4, 1995, No. 33-25485-1.)
10(v)(3) Trademark License Agreements (Canada) dated as of February 24,
1995 between Playtex and Reckitt & Colman, Inc. (Incorporated
herein by reference to Exhibit 10.4 of Playtex's Form 8-K as
amended, dated January 4, 1995, No. 33-25485-1.)
10(w) Agreement between Playtex and Richard Green to acquire SmileTote,
Incorporated, dated as of July 15, 1994. (Incorporated herein by
reference to Exhibit 10(x) of Playtex's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, File No.
33-25485-01.)
10(x) Lease Agreement between Playtex and Stauffer Management Company
dated as of June 3, 1994. (Incorporated herein by reference to
Exhibit 10(y) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, File No. 33-25485-01.)
10(y) Stock Purchase Agreement dated as of March 17, 1995 between
Playtex and HWH Capital Partners, L.P., HWH Valentine Partners,
L.P. and HWH Surplus Valentine Partners, L.P. (Incorporated herein
by reference to Exhibit 10.1 of Playtex's Form 8-K dated March 17,
1995.)
10(z) Agreement and Plan of Merger between and among Playtex, BBA
Acquisition, Inc. and Banana Boat Holding Corporation, dated as of
October 17, 1995. (Incorporated herein by reference to Exhibit
10.1 of Playtex's Form 8-K dated October 31, 1995, File No.
33-25485-01.)
X-7
<PAGE>
Exhibit No. Description
- ----------- -----------
10(aa) Memorandum of Understanding, dated June 21, 1995 with Michael R.
Gallagher, Chief Executive Officer. (Incorporated herein by
reference to Exhibit 10(ab) of Playtex's Annual Report on Form
10-K for the fiscal year ended December 30, 1995, File No.
33-25485-01.)
* 12(a) Statement re-computation of ratios.
* 13 Playtex's 1996 Annual Report to Stockholders
* 22(a) Subsidiaries of Playtex
* 23 Consent of KPMG Peat Marwick LLP
* 27 Financial Data Schedule
- ----------
* Filed herewith
X-8
EXHIBIT 10(b)(3)
Confirmation
------------
Swap Transaction
July 1, 1996
Playtex Products, Inc.
Connecticut
Attn.: Mike Goss
Fax: 203-341-4260
Re: Swap Transaction (Our ref. no. MN490)
----------------
Dear Sirs:
The purpose of this Confirmation is to set forth the terms and
conditions of the Swap Transaction entered into between us on the Trade Date
specified below (the "Swap Transaction"). This Confirmation constitutes a
"Confirmation" as referred to in the Interest Rate and Currency Exchange
Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions
(as published by the International Swap Dealers Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
1. This Confirmation supplements, forms part of, and is subject to, the
Master Agreement dated as of March 23, 1994 (the "Agreement") between
Chemical Bank ("Chemical") and Playtex Products, Inc. (the
"Counterparty"). All provisions contained in the Agreement govern this
Confirmation except as expressly modified below.
2. The terms of the particular Swap Transaction to which this Confirmation
relates are as follows:
Notional Amount: USD 150,000,000
Trade Date: July 1, 1996
Effective Date: July 25, 1996
Termination Date: July 25, 1998, subject to adjustment in accordance
with the Modified Following Business Day Convention
and the provisions of Section 3.
<PAGE>
Fixed Amounts:
- --------------
Fixed Rate Payer: Counterparty
Fixed Rate Payer Payment Dates, subject to adjustment in accordance
with the Modified Following Business Day Convention: January 25, April
25, July 25 and October 25 of each year prior to and including the
Termination Date, commencing with October 25, 1996.
Fixed Rate and Fixed Rate Day Count Fraction: 5.59%; Actual /360
Floating Amounts:
- -----------------
Floating Rate Payer: Chemical
Floating Rate Payer Payment Dates, subject to adjustment in accordance
with the Modified Following Business Day convention: January 25, April
25, July 25 and October 25 of each year prior to and including the
Termination Date, commencing with October 25, 1996.
Floating Rate for initial Calculation Period: To be determined two
London Banking Days prior to the Effective Date.
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: Three months
Spread: None
Compounding: Not applicable
Reset Dates: The first day of each Calculation Period for the Floating
Rate Payer.
Floating Rate Day Count Fraction: Actual /360
3. Termination:
------------
The Swap Transaction will terminate on the first day of the respective
Calculation Period with no Settlement Amount due to either party if the
Floating Rate applicable for the Calculation Period scheduled to
commence on July 25, 1996 or any Calculation Period thereafter is equal
to or greater than 6.25%. Notwithstanding the foregoing, any other
payments due on or before such day with respect to any preceding
Calculation Period shall remain due and payable.
<PAGE>
4. Account Details
Payments to Chemical:
---------------------
Account for payments in USD: Chemical Bank
Account No. 544-707266
Attn.: Incoming Swaps
Payments to Counterparty:
-------------------------
Account for payments in USD: Please Advise
5. Office and Address for Notices in Connection With This Swap
Transaction:
(a) Counterparty: its head office in Connecticut
(b) Chemical: its office in New York at 4 Metro Tech
15th Floor Brooklyn, NY 11245
Tel: 718-242-7344 Fax: 718-242-9262/4811
6. Documents to be delivered:
Each party shall deliver to the other, at the time of its execution of
this Confirmation, evidence of the specimen signature and incumbency of
each person who is executing the Confirmation on the party's behalf,
unless such evidence has previously been supplied in connection with
this Agreement and remains true and in effect.
Each party represents to the other party on the date hereof that
(absent a written agreement between the parties that expressly imposes
affirmative obligations to the contrary for this Transaction):
(a) Non-Reliance. It has made its own independent decision to enter
into this Transaction, is acting at arm's length for its own account,
and is not relying on any communication (written or oral) of the other
party as a recommendation or investment advice regarding this
Transaction.
(b) Evaluation and Understanding. It has the capability to evaluate and
understand (on its own behalf or through independent professional
advice), and does understand, the terms, conditions and risks of this
Transaction and is willing to accept those terms and conditions and to
assume (financially and otherwise) those risks.
<PAGE>
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copies of this Confirmation enclosed for that purpose
and returning them to us.
Yours sincerely,
CHEMICAL BANK
By: /s/ Soumya Mahapatra
------------------------
Name: Soumya Mahapatra
Title: Operations Officer
Confirmed as of the date first above written:
PLAYTEX PRODUCTS, INC.
By: /s/ Michael F. Goss
-----------------------
Name: Michael F. Goss
Title: Executive Vice President, CFO
EXHIBIT 10(l)(2)
1997 MANAGEMENT INCENTIVE PLAN
SUMMARY PLAN DESCRIPTION
I. Purpose
The purpose of the Management Incentive Plan ("MIP") is to recognize and reward
exceptional performance that contributes to the overall profitability and growth
of the corporation. It provides financial rewards and recognition based on
company and individual performance.
II. Eligibility
Employees in salary grades 12 and above are eligible to participate in the plan.
An employee who is eligible, however, is not guaranteed bonus status, receipt of
an award or to continue participation. An employee's capacity for their position
to measurably impact the success of the organization is a criterium for
participation, and rates of participation in the lower eligible grade levels can
be reduced or eliminated. Senior management in each business unit can nominate
participants at any point in the year, subject to the provisions of Article XI
(C), based on the overall performance of the operating unit and the individual's
contribution during the Plan Year. Nominations are subject to approval by the
Compensation Committee of the Board of Directors.
III. Definitions
A. "Base Salary" equals the gross earnings for the portion of the
Fiscal Year during which the participant was in the particular
Company salary grade for which the computation is being made.
It does not include MIP awards, non-recurring earnings, such
as moving expenses or any allowances, or salary continuation
or other payments while on an approved Leave of Absence, and
is based on salary earnings before reductions for such items
as insurance and pension plan contributions.
B. Company Profit Target means operating profit goals as
determined in Section VI.
C. Conversion Percentage shall be the figure set forth in Exhibit
B for any particular MIP Component Attainment Percentage. This
could range from 0 - 100% on Individual Performance, 85% -
105+% on the others.
D. Net Sales Targets means net sales as determined in Section VI.
E. Company Cash Flow Performance Targets means Company Profit
plus depreciation less changes in working capital and capital
expenditures, in each case as determined in Section VI.
F. Individual Performance shall be established by objectives
articulated early in the plan year by each employee's
supervisor. Following the completion of the plan year, each
<PAGE>
2
employee's performance against these objectives will be rated
by the supervisor on a 0 - 100% completion scale.
G. Indexed Attainment of Plan means the weighted sum of the
following conversion percentages with the following weights:
(1) For all participants other than the CEO:
Net Sales 25%
Company Profit 25%
Company Cash Flow 25%
Individual Performance 25%
(2) For the CEO:
Net Sales 25%
Company Profit 50%
Company Cash Flow 25%
H. MIP Component Attainment Percentage for each of Net Sales,
Company Profit and Company Cash Flow for any year is the
actual Company performance for such measure divided by the
Target for such measure.
IV. Award Earned
A participant in the Plan shall be eligible for an award based on individual and
company performance which is computed in accordance with the following formula:
Bonus level as Indexed Base Potential
a % of Base Salary X Attainment X Salary = Award
of Plan
(See Exhibit D for specific examples)
Where:
o "Bonus level as a % of Base Salary" is set forth in Exhibit A.
o "Indexed Attainment of Plan" has the meaning set forth in Section III,
(F).
o "Base Salary" has the meaning set forth in Section III, (A).
V. Split Award Component
The award earned is prorated for those executives who have a bonus composition
based on the
<PAGE>
3
performance of more than one business unit or, whose bonus level has been
changed during the MIP year, or who have been hired or promoted into a bonus
level during the MIP year.
The formula for calculating split award earned is:
Percent of Bonus Potential
Fiscal Year Award as Indexed Base Award earned
Associated X a % of Base X Attainment X Salary = Based on
with Business Salary of Plan (during Business Unit
Unit A eligible A (or changed
(or changed period) bonus level/
bonus level/salary) salary)
The calculation is repeated for each business unit or bonus
level the award is based on.
The award earned for each business unit or bonus level are
added together to arrive at total award earned.
VI. Targets and Payout Ranges
The targets used for incentive purposes shall be proposed by the business unit
based on its annual business plan. Targets and payout ranges shall be determined
and approved by the CEO, or in the case of the bonus of the CEO, by the
Compensation Committee of the Board of Directors of the Company.
VII. Participant Bonus Calculation
Each participant's bonus shall be calculated by the Chief Financial Officer of
the Company and in the case of the bonus of the CEO, by the Compensation
Committee of the Board of Directors of the Company.
VIII. Computation and Disbursement of Funds
Promptly after the close of the Fiscal Year, the CEO, and in the case of the
CEO, the Compensation Committee shall review and approve for each participant a
final Bonus Award. Payment of the Awards shall be made promptly thereafter by
check, unless an Irrevocable Deferred Payment Election has been filed with the
Corporate Human Resources Department in accordance with Section IX below.
U.S. Expatriate participants will receive payment in U.S. dollars.
Local Nationals and Third Country Nationals shall receive payment in the
currency of the country in which they are employed.
<PAGE>
4
IX. Deferred Payment Election
Participants in the MIP have the opportunity to defer the current receipt of all
or a portion of their awards and under certain options as the Company allows.
For deferral to be effective, an Irrevocable Deferred Payment Election Form must
be filed with the Corporate Human Resources Department within 30 days of the
receipt of plan deferral documents by a participant in the plan. The deferred
account for 1997 will be credited at the end of each fiscal quarter with
interest, defined as the prime interest rate in effect at the beginning of each
such fiscal quarter at the Chemical Bank (or its successor).
Other terms and conditions are expressly specified in the Irrevocable Deferral
Payment Election Form. (Exhibit C)
All payments of awards shall be reduced by amounts required to be withheld for
taxes.
X. Changes To Awards
The CEO has sole discretion to amend MIP awards based upon an equitable
treatment of plan participants for all participants in the Plan other than the
CEO.
XI. Partial Awards
A. Promptly after the close of the Fiscal Year and at the sole
discretion of the CEO a participant may be entitled to the
payment of a partial financial award if prior to the end of the
Fiscal Year, a participant:
o Dies,
o Retires (i.e., is eligible to immediately begin to receive
retirement benefits under a company sponsored retirement
plan),
o Becomes permanently disabled,
o Transfers to a position not entitled to bonus participation,
o Enters military service,
o Takes an approved leave of absence,
o Is elected to public office,
However, no partial financial award will be paid if the
participant voluntarily or involuntarily leaves prior to the date
of award distribution.
B. Partial financial awards will be computed in accordance with
Section V based on the achievement of applicable targets for the
entire Plan Year and on Base Salary earned in the Plan Year
during employment.
<PAGE>
5
C. Participants hired or promoted into a grade level eligible for
participation during the first, second or third quarter of a Plan
Year and who are employed through the end of the Plan Year shall
be eligible for an award based on their Base Salary earnings
during the eligible portion of the Plan Year and on the
achievement of applicable financial targets. Participants hired
or promoted during the fourth quarter of the Plan Year will not
be eligible for a partial award.
D. All partial awards will be paid following the end of the Plan
Year at such time as payments under the plan are customarily
made.
XII. Administration
This Plan shall be administered by the Corporate Human Resources Department,
subject to the control and supervision of the CEO of the Company. With respect
to the CEO, the Plan shall be administered by the Compensation Committee of the
Board of Directors which shall have the powers described in Section XIII to the
extent applicable.
XIII. Reservations To Management
The Company hereby reserves the absolute authority to select the individuals
eligible to participate in the Plan and to make exceptions, and to determine the
extent of participation of any individual or individuals in the Plan. The
establishment of this Plan, the granting of an incentive payment, or any other
action at any time taken by the Company, its Chief Executive Officer, or other
officer or officers of the Company, or by its or their authority, shall not
constitute any contract with, or confer any legal or equitable right (except as
to the rights accrued with respect to previously earned and deferred awards)
upon any employee or other person whomsoever as against the Company, or any of
its subsidiary or affiliated corporations, or against any officer, director,
stockholder, or employee of any such corporation. Any action taken hereunder
shall not be held or construed to create a contract that any employee shall be
retained in the service of the Company, or any of its subsidiary or affiliated
corporations, and the Company expressly reserves unaffected hereby, its right to
discharge, without liability other than for salary due and unpaid, any employee
whenever its interest, in its judgement, so requires.
The decision of the Chief Executive Officer of the Company as to the facts in
any case arising hereunder, and the meaning and intent of any provision hereof,
or of its application, shall be final and conclusive.
The Company expressly reserves the right and power, acting through its Board of
Directors or its Chief Executive Officer, to (a) alter, amend, or annul any of
the provisions of this Plan at any time, and from time to time, or (b) terminate
this Plan at any time, or (c) at any time (including subsequent to the end of
the fiscal year, but before awards are paid) terminate and rescind the
participation of any individual or individuals in this Plan.
This Plan and any action taken thereunder are subject to all federal and state
laws and regulations now in effect, or which may be enacted or promulgated.
<PAGE>
EXHIBIT A
PLAYTEX PRODUCTS, INC.
FY 1997
COMPUTATION OF MIP AMOUNTS
Composition of Bonus
The bonus will be composed of a financial award, based on the Indexed Attainment
of Plan of one or more business units.
Target
Grade Level Bonus %
----------- -------
12 10%
11 10%
10 15%
9 20%
8 25%
7 30%
6 35%
5 40%
4 50%
3 75%
2 100%
<PAGE>
EXHIBIT B
PLAYTEX PRODUCTS, INC.
MANAGEMENT INCENTIVE PLAN - 1997
ACHIEVEMENTS REQUIRED FOR BONUS PARTICIPATION
(To Be Used With Company Cash Flow Performance,
Net Sales Targets, and Company Profit Target)
MIP COMPONENT
ATTAINMENT PERCENTAGE CONVERSION (%)
---------------------- --------------
105.+ 150.0
104 140.0
103 130.0
102 120.0
101 110.0
100 100.0
99 96.67
98 93.33
97 90.0
96 86.67
95 83.33
94 80.00
93 76.67
92 73.34
91 70.0
90 66.66
89 63.33
88 60.0
87 56.63
86 53.34
85 50.0
================================================================================
ACHIEVEMENTS REQUIRED FOR BONUS PARTICIPATION
(To Be Used With Individual Performance)
MIP Component Conversion
Attainment Percentage Percentage
--------------------- ----------
100% 150
90% 125
80% 100
70% 75
60% 50
<60% 0
<PAGE>
EXHIBIT C
PLAYTEX PRODUCTS, INC.
MANAGEMENT INCENTIVE PLAN
1997
1. PARTICIPANT (PLEASE PRINT)
Name _____________________________ SS# ______/_______/_______
2. PAYMENT ALTERNATIVES
As a participant in the Company's Management Incentive Plan (the
"Plan"), I may be eligible to receive a bonus award during the first
quarter of 1997 for the current plan year, 1997. I wish to receive any
such bonus award as follows: (check one)
A. |_| CURRENT CASH PAYMENT - 100% of such bonus award paid in a lump
sum on a current basis in the first quarter of 1997. (Do not
complete other sections. Sign, date and return this form.)
B. |_| DEFERRED PAYMENT - I hereby irrevocably agree with the Company
that in lieu of receiving such bonus award in a lump sum in
the first quarter of 1997, I elect to defer a portion or all
of such bonus award as follows:
(Must be in increments of 10%)
______% Current Cash Payment (as defined above).
______% Deferred until (specify year: 1998, 1999, 2000, 2001,
2002) and paid * as follows: (check one)
|_| (i) in a lump sum in the year specified above;
or
|_| (ii) over a period of years (specify number of
years 2 to 5) in equal annual payments,
starting in the year specified above.
______% Deferred until retirement (must complete Section 3
below).
100% TOTAL
====
<PAGE>
3. PAYMENT DEFERRED UNTIL RETIREMENT
* (Complete this section only if you elected payment deferred until
retirement in Section 2 above.)
The election in this section will apply only if you retire and at that
time are eligible to start receiving benefits under a Company-sponsored
qualified retirement plan AND you are at least 55 years of age on your
last day of active employment AND you are not terminated by the Company
for cause.
I elect to receive any payment deferred until retirement as follows:
(check one)
A. |_| In a lump sum at the time of retirement (i.e. as soon after
retirement as administratively feasible); or
B. |_| In a lump sum paid* in the year following retirement; or
C. |_| In equal annual installments beginning in the year following
retirement and paid* over a period of __________ years
(specify number of years 2 to 10).
4. TERMINATION (MUST BE COMPLETED BY ALL PARTICIPANTS ELECTING DEFERRED
PAYMENT)
(a) If my employment terminates before I am eligible to receive
any payment deferred pursuant to Section 2 above, excluding a
payment deferred until retirement, I elect such deferred
payment to be made as follows: (check one)
A. |_| As soon after termination as administratively
feasible; or
B. |_| In the year following the year of my termination*; or
* Deferred payments will be made in the first quarter
of the Company's fiscal year, at the time when bonus
awards are customarily paid.
C. |_| On the dates and at the percentages selected in
Section 2 above, irrespective of my termination.
(b) (Complete this subsection only if you elected payment deferred
until retirement in Section 2 above).
If my employment terminates and I have elected payment
deferred until retirement which I am ineligible to receive
pursuant to Section 3 above, I elect such deferred payment to
be made as follows: (check one)
A. |_| As soon after termination as administratively
feasible; or
B. |_| In the year following the year of my termination.*
(c) Any employee terminated for cause will be deemed to have
elected to receive all deferred payments as soon after
termination as administratively feasible.
<PAGE>
I understand that my deferred account will be credited at the end of each fiscal
quarter with interest at a rate equal to the prime interest rate at the
beginning of each such fiscal quarter announced by Chemical Bank.
I also understand that no funds will be segregated for my benefit, that I will
have no interest in such deferred amounts until I am entitled to payment of
such; and that such amounts will be subject to the claims of the Company's other
creditors until paid to me; and that if I die prior to receipt of all deferred
payments, the entire amount of my deferral account will be paid to my designated
beneficiary of my Company life insurance, or if there is no such beneficiary at
the time of my death, to my estate.
I agree that:
A. Once this form is signed and returned, my elections for deferral cannot
be altered and are irrevocable.
B. If I return this form with no choice marked, or if this election form
is not returned, the award will be paid in cash at the time payments
are made for the current plan year.
C. If I elect deferred payments, but my bonus award is less than $10,000,
it will be paid in a single current cash payment.
Income deferred is includable as earnings for the purpose of determining profit
sharing contributions only in the year it is received, provided the individual
is actively employed at the time of receipt. Therefore, such deferred income
will not be includable as earnings for profit sharing benefits in the current
year.
I may request acceleration of payment of my deferral account if I incur a heavy
financial hardship for which funds are not reasonably available from other
sources. Such request must be submitted to the Company's Chief Human Resources
officer, and supported by evidence satisfactory to the Company's Compensation
Committee or other committee designated by the Company's Board of Directors to
make such determinations. Decisions of the Committee will be final. If approved,
hardship distribution will be made only in the amount necessary to eliminate the
hardship.
The rights of the Employee under this agreement are not subject to assignment,
transfer or alienation, except as may be required by law. The payments shall,
however, be subject to any applicable payroll or other taxes required to be
withheld.
EMPLOYEE SIGNATURE: _____________________
DATE: ____________________
ACCEPTED BY:
PLAYTEX PRODUCTS, INC.
BY: _____________________
UPON COMPLETION OF THIS ELECTION FORM RETURN TO CORPORATE HUMAN RESOURCES
<PAGE>
EXHIBIT D
MIP CALCULATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Company Cash Net Company Individual
Flow Performance Sales Target Profit Target Performance
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Example A 100% of Goal Reached 90% of Goal Reached 105% of Goal Reached 100% of Goal Reached
100% x .25 = .25 66.66% x .25 = .1667 150% x .25 = .375 150% x .25 = .375
- ----------------------------------------------------------------------------------------------------------------------------------
Indexed Attainment of Plan = 116.67%
- ----------------------------------------------------------------------------------------------------------------------------------
Example B 90% of Goal Reached 95% of Goal Reached 95% of Goal Reached 100% of Goal Reached
66.66% x .25 = .1667 83.33% x .25 = .2083 83.33% x .25 = .2083 150% x .25 = .375
- ----------------------------------------------------------------------------------------------------------------------------------
Indexed Attainment of Plan = 95.83%
- ----------------------------------------------------------------------------------------------------------------------------------
Example C 80% of Goal Reached 90% of Goal Reached 90% of Goal Reached 100% of Goal Reached
0 x .25 = 0 66.66% x .25 = .1667 66.66% x .25 = .1667 150% x .25 = .375
- ----------------------------------------------------------------------------------------------------------------------------------
Indexed Attainment of Plan = 70.84%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ASSUMING BASE SALARY OF $50,000 and BONUS LEVEL AS % OF BASE SALARY OF 10.00%:
Indexed
Bonus Attainment Base Potential
Level of Plan Salary Award
----- ------- ------ -----
In Ex. A: 10.00% x 116.67% x $50,000 = $5,834
In Ex. B: 10.00% x 95.83% x $50,000 = $4,792
In Ex. C: 10.00% x 70.84% x $50,000 = $3,542
EXHIBIT 10(u)(2)
AGREEMENT dated as of October 31, 1996 between Playtex Products, Inc.
("Playtex") and McNeil-PPC, Inc. ("McNeil").
A. TERMINATION
1. The Agreements dated October 17, 1994 between Playtex and McNeil for the sale
of plastic applicator tampons and November 15, 1994 for the sale of cardboard
applicator tampons (both Agreements called the "Agreements") are hereby
terminated in all respects effective October 31, 1996, except for Sections 9 and
13. There shall be no continuing obligations concerning exclusivity, minimum
commitments, dedicated capacity or competing products, or any other obligations
under the Agreements, except as aforesaid.
2. McNeil will reimburse Playtex no later than December 15, 1996 for all
finished product and packaging materials on hand as of the termination date
(estimated $83,000, see Exhibit 1), except for materials to be maintained by
Playtex as will service the continued sale of product pursuant to Section 3
(estimated $172,000, see Exhibit 2), and for which McNeil will be ultimately
responsible. McNeil shall have the right to audit such amounts. Playtex will at
McNeil's request and expense ship the non-retained product and material to
McNeil's destination.
B. FUTURE SUPPLY
3. Playtex will, subject to its own needs first, and to the terms of this
Agreement
1
<PAGE>
continue to supply McNeil's needs for plastic applicator tampons ("Products")
for sale to McNeil on a non-exclusive basis for resale only in the countries of
Brazil, New Zealand and Spain (the "Territory"). The type of tampon applicator
will be the same as currently supplied by Playtex to McNeil, and McNeil will not
have rights to product changes or improvements unless agreed to by Playtex.
McNeil will provide Playtex with 3-month rolling forecasts for Product.
4. McNeil will pay Playtex for Product purchased under Section 3 in an amount
equal to Playtex's standard and incremental costs in producing the Product, plus
20%, provided all such incremental costs which are capital costs incurred solely
on account of Buyer shall be reimbursed at 100% of such costs. All other
incremental costs shall be charged to and paid by Buyer at 120% of such cost. A
list of current costs are attached on Exhibit 1. The risk of loss with respect
to Products shall remain with Playtex until delivered to the carrier at Dover,
Delaware. Unless otherwise requested by McNeil, Playtex will pack all Products
ordered hereunder in a manner suitable for ocean freight shipment. Payment terms
on all orders shall be net 45 days from delivery to the carrier, payable in U.S.
dollars.
5. McNeil will have the right to use the Gentle Glide(R) trademark (the
"Trademark") owned by Playtex in the country of New Zealand. McNeil shall have
no right to use said trademark anywhere else. However, McNeil shall be entitled
to sell off all existing inventory, including existing packaging, containing the
Gentle Glide name in the ordinary course. McNeil acknowledges that Playtex is
the sole owner of the Trademark, and shall have no
2
<PAGE>
proprietary interest therein, and shall not register it in the Territory.
Playtex makes no representations as to the validity or enforceability of the
Trademark. Nothing herein shall limit Playtex's right to use the Trademark in
the Territory, including New Zealand, during or after the Term.
6. (a) Playtex warrants that the Products purchased under Section 3 will
conform to Playtex specifications (which include Standard Operating
Procedures and quality acceptance procedures), copies of which have
been provided to McNeil, together with the applicable packaging and
labeling specifications heretofore provided to McNeil, and will
comply with applicable U.S. FDA laws and regulations, including Good
Manufacturing Practice regulations.
(b) McNeil will be responsible for compliance with applicable laws and
regulations and patent rights in each country where product is sold
per Section 3.
(c) Neither party shall be liable for delay for failure to perform by
reason of force majeure.
-------------
(d) EXCEPT AS SPECIFICALLY SET FORTH IN SECTION 6(a), PLAYTEX MAKES NO
EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER REPRESENTATION OR
WARRANTY WITH RESPECT TO THE PRODUCTS.
(e) Playtex shall indemnify McNeil for all losses, including reasonable
attorney's fees, arising from claims for personal injury arising out
of or resulting from any
3
<PAGE>
breach by Playtex of any representation or warranty herein, provided
that to the extent such claims are for personal injury of the types
and causes described in a letter dated September 22, 1994 from
Playtex's counsel to McNeil's counsel, and at incidence levels at or
below the historical rates shown in said letter, then such claims
shall not be included in the scope of this indemnity. McNeil shall
indemnify Playtex for all losses, including reasonable attorney
fees, arising from claims of personal injury resulting from use of
the Products, except insofar as such injury results from the breach
by Playtex of any representation or warranty herein. The foregoing
indemnity provisions will survive the termination of this Agreement.
7. The Term of this Supply Agreement (Sections 3-9) shall be two years, or
earlier if McNeil finds an alternate supplier. Either party may terminate for
(a) insolvency of the other party; or (b) breach of a material representation,
warranty or covenant if such breach remains uncured for thirty days after
notice.. Neither party shall be entitled to any consequential damages. Upon
termination for any reason, McNeil shall reimburse Playtex the costs of all
packaging and Product inventory on hand and produced for McNeil at McNeil's
request under this Agreement. No termination of this Supply Agreement for any
reason shall revive or give either party any rights under the terminated
agreements referenced in Section (A)(1).
8. Each party will keep confidential the non-public, proprietary information
received by it from the other. In addition, McNeil will not communicate any such
confidential information of
4
<PAGE>
Playtex to any employee or agent principally engaged in the U.S., Canada or
Mexico tampon business of McNeil or its affiliates. This provision will survive
the termination of this Agreement.
9. The Agreement shall be governed by the laws of the State of New York. Any
controversy or claim arising out of or relating to this Agreement, or the
parties' decision to enter into this Agreement or the breach thereof, shall be
settled by arbitration before a single arbitrator in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The arbitration shall be held in New York, New
York, and the arbitrator shall apply the substantive law of New York except that
the interpretation and enforcement of this arbitration provision shall be
governed by the Federal Arbitration Act. The arbitrator shall not award any of
the parties punitive damages and the parties shall be deemed to have waived any
right to such damages. This provision shall survive any termination of this
Agreement.
PLAYTEX PRODUCTS, INC. MC NEIL-PPC, INC.
By: Personal Products Worldwide Division
By: /s/ John Leahy By: /s/ James Hilton
--------------------------- ---------------------------
5
EXHIBIT 12(a)
PLAYTEX PRODUCTS, INC.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Fixed Charges and Preferred Dividends
(Dollars in Thousands)
<TABLE>
<CAPTION>
Twelve Months Ended
--------------------------------------------------------------------------
December 28, December 30, December 31, December 25, December 26,
1996 1995 1994 1993 1992
-------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings (loss) before
cumulative effect of
accounting changes and $ 18,199 $ 2,774 $ 29,547 $(124,845) $ (15,258)
extraordinary loss
Income taxes 16,141 8,151 23,994 2,049 5,100
-------- ------- -------- --------- ---------
Earnings (loss) before
income taxes, cumulative
effect of accounting changes
and extraordinary loss 34,340 10,925 53,541 (122,796) (10,158)
Fixed charges:
Interest 64,860 71,361 76,153 115,949 114,016
One-third of rental 1,734 1,697 1,413 1,180 1,261
-------- ------- -------- --------- ---------
Total fixed charges 66,594 73,058 77,566 117,129 115,277
-------- ------- -------- --------- ---------
Earnings (loss) before fixed
charges, income taxes,
cumulative effect of
accounting changes and
extraordinary loss $100,934 $83,983 $131,107 $ (5,667) $ 105,119
======== ======= ======== ========= =========
Ratio of earnings to fixed 1.52X 1.15X 1.69X -- --
charges ======== ======= ======== ========= =========
Pre-tax earnings required for
preferred stock dividends (1) N/A N/A $ 2,107 $ -- $ --
======== ======= ======== ========= =========
Ratio of earnings to fixed
charges and preferred dividends 1.52X 1.15X 1.65X -- --
======== ======= ======== ========= =========
Coverage (deficiency) of
earnings to fixed charges $ 34,340 $10,925 $ 53,541 $(122,796) $ (10,158)
======== ======= ======== ========= =========
Coverage (deficiency) of
earnings to fixed charges and
preferred dividends $ 34,340 $10,925 $ 51,434 $ -- $ --
======== ======= ======== ========= =========
</TABLE>
(1) Gross-up of earnings for preferred stock dividends has been computed at
the applicable effective tax rates. For periods where the historical
effective tax rates exceed 100% or are negative, gross-up of earnings
has not been computed because material distortions would have resulted
from the use of the prescribed mathematical formula. Notwithstanding
the foregoing, Playtex's earnings would have been inadequate to cover
fixed charges and preferred dividends for such periods.
Exhibit 13
PLAYTEX PRODUCTS, INC.
1996 Annual Report to Stockholders
<PAGE>
PLAYTEX PRODUCTS, INC.
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Selected Financial Data 3
Management's Discussion and Analysis of
Financial Condition and Results of Operations 4 - 8
Consolidated Financial Statements 9 - 12
Notes to Consolidated Financial Statements 13 - 34
PART II - OTHER INFORMATION
Independent Auditors' Report 35
Report of Management 36
Other Information 37 - 38
2
<PAGE>
PLAYTEX PRODUCTS, INC.
SELECTED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
Twelve Months Ended
----------------------------------------------------------------------
Dec. 28, Dec. 30, Dec. 31, Dec. 25, Dec. 26,
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 498,742 $ 483,581 $ 473,275 $ 409,858 $ 384,486
Gross profit 306,230 295,452 306,674 273,136 257,937
Operating expenses, excluding
amortization of intangibles 194,184 195,457 166,799 143,834 139,098
Amortization of intangibles 12,846 11,268 10,181 14,529 14,981
Write-off of SmileTote and Beauty
Care intangible assets - 1995 and
1993, respectively -- 6,441 -- 121,620 --
Operating earnings (loss) 99,200 82,286 129,694 (6,847) 103,858
Interest expense, net 64,860 71,361 76,153 115,949 114,016
Earnings (loss) before cumulative
effect of accounting changes
and extraordinary loss 18,199 2,774 29,547 (124,845) (15,258)
Net earnings (loss) available to
common stockholders 18,199 2,774(1) 28,384 (137,655)(2) (26,421)
Net earnings (loss) per share
before cumulative effect of
accounting changes and
extraordinary loss available to
common stockholders (primary
and fully diluted) $ 0.36 $ 0.07(3) $ 0.97(4) $ (12.67)(5) $ (2.44)
Weighted average common
shares outstanding 50,883 42,309 29,212 10,867 10,845
Balance Sheet Data (at period end):
Working capital (deficit) $ 6,522 $ 28,637 $ 17,623 $ (24,632) $ 1,372
Total assets 660,331 682,861 599,400 588,457 716,083
Total long-term debt,
including current portion
and excluding due to related party 739,700 790,050 875,700 915,413 930,032
Redeemable preferred stock -- -- -- 139,644 124,834
Common stock and other
stockholders' equity (deficit) (282,727) (300,976) (465,997) (723,408) (544,917)
</TABLE>
(1) Earnings available to common stockholders for the twelve months
ended December 30, 1995 excludes the extraordinary loss of $7.9
million (net of $5.2 million of income tax benefit) related to early
extinguishment of debt in connection with the 1995 Transaction.
(2) Loss from continuing operations available to common stockholders for
the twelve months ended December 25, 1993 excludes the cumulative
effect of accounting changes of $0.9 million (net of $0.7 million of
income tax benefit) and extraordinary loss of $39.4 million (net of
$25.4 million of income tax benefit) related to the early
extinguishment of debt in connection with the 1994 Recapitalization.
(3) Fiscal 1995 earnings per share from continuing operations available
to common stockholders, assuming the 1995 Transaction had been
consummated on January 1, 1995, would have been $0.13 per share.
(4) Fiscal 1994 earnings per share from continuing operations available
to common stockholders, assuming the 1994 Recapitalization had been
consummated on December 26, 1993, would have been $1.01 per share.
(5) Fiscal 1993 loss per share from continuing operations available to
common stockholders of ($12.67) includes the effect of the write-off
of Beauty Care excess cost ($11.19 loss per share).
3
<PAGE>
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the historical
audited consolidated financial statements and notes thereto, presented on pages
9 through 34 hereof.
In accordance with Rule 14a-3(c) under the Securities Exchange Act of 1934
(the "Exchange Act"), information contained herein is provided solely for the
information of stockholders and of the Securities and Exchange Commission. Such
information shall not be deemed to be "soliciting material" or to be "filed"
with the Commission or subject to Regulation 14A under the Exchange Act (except
as provided in Rule 14a-3) or to the liabilities of Section 18 of the Exchange
Act, unless, and only to the extent that, it is expressly incorporated by
reference into the Annual Report on Form 10-K of Playtex Products, Inc. for its
fiscal year ended December 28, 1996.
Cautionary Statement For Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
Certain statements in this commentary or others made hereafter (including
orally) may constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the 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, continued activity in the private label
sector, the loss of a significant customer, product liability litigation, and
changes in governmental regulation.
A. Twelve Months Ended December 28, 1996 Versus
Twelve Months Ended December 30, 1995
Results of Operations
Net Sales - Fiscal 1996 net sales increased $15.2 million, or 3%, versus fiscal
1995 to $498.7 million. For the year, Feminine Care net sales decreased $18.1
million, or 7%, versus fiscal 1995. Infant Care, Sun Care and Household Products
reported growth in net sales versus fiscal 1995 of 25%, 46% and 6%,
respectively.
Net sales for the Feminine Care business were $225.5 million for the twelve
months ended December 28, 1996. These results reflect: 1) the rigorous
competitive environment in the tampon category, particularly in the first half
of the year; 2) a reduction in the level of inventories carried by retailers
during the year; and 3) a stabilization in the Company's unit market share at
4
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
23% for the year. Although shipments to retailers were off 7% during the year,
retail takeaway was only off 1%, roughly in line with the category.
Infant Care net sales were $109.5 million, up $21.9 million, or 25%, versus
fiscal 1995. The increase in net sales was due primarily to the continued growth
of the 6-ounce Playtex Spill-Proof(TM) Cup and the successful introductions in
-------------------
1996 of the 9-ounce Spill-Proof Cup and the QuickStraw(TM) bottle.
----------- ----------
Sun Care net sales for fiscal 1996 were $73.3 million, an increase of 46%
over fiscal 1995. Contributing to the increase in net sales was an increase in
market share for the year from 18% to 19%, category growth of 2% versus 1995,
and $10.3 million of additional revenues as a result of the acquisition on
October 31, 1995 of the remaining portion of Banana Boat Holdings Corporation
(the "BBH Acquisition") not previously owned by Playtex.
The Household Product group includes the Woolite(R) rug and upholstery
-------
cleaning business ("Woolite") and Playtex Gloves. As a group, Household Products
------- --------------
net sales increased $3.2 million, or 5.6% during fiscal 1996. Woolite's net
sales increased $4.1 million versus 1995 to $27.8 million, while Glove net sales
of $32.8 million decreased $0.8 million versus the prior year. The increase in
Woolite net sales is associated with the complete integration of this business
- -------
after its acquisition in early 1995. The change in Gloves net sales was
attributed primarily to a change in pricing strategy which resulted in lower
reported revenue which was more than offset by lower trade spending. The
Playtex's market share grew by three percentage points in 1996.
Net sales in Hair Care declined by $14.5 million versus fiscal 1995, to
$25.2 million. Much of this decline was attributable to the strategic decision
on the part of the Company to significantly reduce ineffective and unprofitable
trade spending associated with the Jhirmack brand. For the year, Jhirmack
-------- --------
represented just 5% of total net sales.
Gross Profit - Gross profit of $306.2 million for the year ended December 28,
1996 increased $10.8 million, or 4%, versus fiscal 1995. For the year, gross
margin was 61.4% of net sales versus 61.1% of net sales in 1995. The increase in
margin was due, in part, to $3.4 million of pre-tax charges included in the 1995
cost of sales related to the BBH Acquisition, partially offset by a shift in
product sales mix to lower margin goods.
Operating Earnings - Operating earnings of $99.2 million for the year ended
December 28, 1996 were $16.9 million, or 21%, higher than for the prior fiscal
year. Contributing to this increase was the margin impact of the increased net
sales described above and the $15.5 million of one time pre-tax charges included
in the 1995 results. These one time charges were comprised of the following:
$3.4 million in the cost of sales as previously described, $5.7 million
(included in administrative expenses) to implement certain organizational
changes arising from management's plan to streamline and strengthen the Company,
and $6.4 million to write-off intangible assets associated with SmileTote(R).
---------
The Company's advertising and promotion expenses increased by $1.8 million,
or 2%, versus fiscal 1995. As part of Playtex's consumer oriented marketing
strategy, the Company is
5
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
investing more heavily in advertising and consumer spending and focusing less on
trade spending. Excluding the impact of the 1995 one time items, the remaining
operating expenses increased $4.2 million versus 1995, mainly as a result of the
BBH Acquisition in the fourth quarter of 1995 and a continued focus on new
product development.
Interest Expense - The decrease in interest expense of $6.5 million for the year
ended December 28, 1996 was attributable to lower debt levels and lower interest
rates. See note 7 of the Notes to the Consolidated Financial Statements.
B. Twelve Months Ended December 30, 1995 Compared to
Twelve Months Ended December 31, 1994
Results of Operations
Net Sales - Fiscal 1995 net sales increased $10.3 million, or 2%, versus fiscal
1994 to $483.6 million. For the year, Feminine Care net sales decreased $13.5
million, or 5%, versus fiscal 1994. Infant Care, Sun Care and Gloves reported
growth in net sales versus fiscal 1994 of 12%, 3% and 3%, respectively. The
acquisition of the Woolite rug and upholstery cleaning business in the first
-------
quarter of 1995 contributed $23.7 million in additional sales.
Net sales for the Feminine Care business were $243.6 million for the twelve
months ended December 30, 1995. This decline in net sales was attributed to a
decline in the Company's market share partially offset by market growth.
Infant Care net sales were $87.5 million, up $9.6 million, or 12%, versus
fiscal 1994. The increase in net sales was due primarily to increased cup volume
associated with the success of the six-ounce Playtex Spill-Proof Cup, which was
------- -----------
introduced in the fourth quarter of 1993, and a full year's impact of the
SmileTote line of cups and bottles that was acquired in July of 1994.
- ---------
Sun Care net sales for fiscal 1995 were $50.3 million, an increase of 3%
over fiscal 1994. Contributing to the increase in net sales was an increase in
market share for the year from 15% to 16%, category growth of 7% versus 1994,
and $1.4 million of additional revenues as a result of the BBH Acquisition.
Partially offsetting these net sales gains were higher than expected product
returns related to the 1994 sun care season of approximately $3.1 million.
Glove net sales increased 3% to $33.6 million versus fiscal 1994. This gain
was attributed primarily to an estimated 3% category growth combined with a
three percentage point increase in market share to 33%. Partially offsetting
these increases was a $1.6 million decrease in net sales associated with the
discontinuation of the Duramitt(R) product line. Excluding Duramitt, net sales
-------- --------
for gloves increased 9% year to year.
Net sales in Hair Care declined by $11.6 million versus fiscal 1994 to
$39.7 million. For the year, Jhirmack represented just 8% of total net sales.
--------
Gross Profit - Gross profit of $295.5 million for the year ended December 30,
1995 decreased $11.2 million, or 4%, versus fiscal 1994. For the year, gross
margin was 61.1% of net sales
6
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
versus 64.8% of net sales in 1994. The decrease in margin was due to $3.4
million of one time charges incurred in the fourth quarter associated with
Banana Boat and the acquisition of BBH, a change in product mix to lower margin
- -----------
products, and higher product costs, including increased costs for key materials
such as latex, resin, rayon, and corrugate.
Operating Earnings - Operating earnings of $82.3 million for the year ended
December 30, 1995 were $47.4 million, or 37%, lower than for the prior fiscal
year. Contributing to this decline were $15.5 million of pre-tax one time
charges previously described.
In line with the Company's strategy to more aggressively focus on the
consumer, advertising and promotion expenses were up $18.6 million, or 19%,
versus fiscal 1994. Selling, distribution and research costs increased $2.6
million versus 1994, mainly as a result of the acquisitions of Woolite in the
-------
first quarter of 1995 and BBH in the fourth quarter of 1995.
Write-off of SmileTote intangible assets - During the fourth quarter of 1995 and
in connection with certain strategic decisions regarding the SmileTote product
---------
line, management determined that the unamortized intangible assets associated
with SmileTote were permanently impaired. See Note 11 of the Notes to the
---------
Consolidated Financial Statements.
Interest Expense - The decrease in interest expense of $4.8 million for the year
ended December 30, 1995 was attributable to lower debt levels as a result of the
$180 million equity infusion from partnerships managed by Haas Wheat & Partners
and lower interest rates associated with a $500 million Credit Agreement with
Chase Manhattan Bank (the "1995 Credit Agreement"). See note 7 of the Notes to
the Consolidated Financial Statements.
Financial Condition and Liquidity
At December 28, 1996, the Company's working capital decreased to $6.5
million from $28.6 million at December 30, 1995. This decrease was in line with
management's intention to reduce the levels of working capital required to
manage the Company. These efforts contributed to the generation of $50.0 million
of free cash flow and a corresponding reduction in long-term debt.
Long-term debt of $739.7 million at December 28, 1996 consisted of: a)
$342.5 million of borrowings under the Term Loan Facility, exclusive of $25.0
million included in current maturities (due within the next twelve months); b)
$2.2 million of borrowings under the Working Capital Facility; c) $10.0 million
of borrowings under the Acquisition Credit Facility; and d) $360.0 million
aggregate principal amount of 9% Senior Subordinated Notes. Of the $112.5
million of authorized credit from the Working Capital Facility and Acquisition
Credit Facility, on December 28, 1996, approximately $98.9 million was available
to be borrowed by the Company.
The Company believes that it will generate sufficient cash flow from
operations to make the scheduled interest and principal payments under the 1995
Credit Agreement and interest payments under the 9% Senior Subordinated Notes.
However, the Company does not expect to generate sufficient cash flow from
operations to make the principal payment due in 2003 on the
7
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
9% Senior Subordinated Notes. Accordingly, the Company will have to either
refinance its obligations with respect to the 9% Senior Subordinated Notes prior
to maturity, sell assets or raise equity capital to repay the principal amount
of the 9% Senior Subordinated 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 subject to prevailing economic
conditions and to certain 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.
The Company's outstanding indebtedness under the 1995 Credit Agreement bears
interest at floating rates. The Company has entered into three interest rate
protection agreements which hedge substantially all of the Company's long-term
bank debt. The first agreement effectively fixes the interest rate on $125
million at 7.71% until July 7, 1997. The second agreement effectively fixes the
interest rate on $100 million at 7.575% until July 25, 1997. At the option of
the counterparty, these agreements may each be extended for one additional year.
The third agreement effectively fixes the rate on $150 million at 7.34% until
July 25, 1998. This agreement will terminate with no penalty to either party if
the 90 day LIBOR rate on specified interest reset dates is equal to or greater
than 6.25%. See note 7 of the Notes to the Consolidated Financial Statements.
Capital expenditures for equipment and facility improvements were $9.7
million, $12.4 million and $8.5 million for the twelve months ended December 28,
1996, December 30, 1995 and December 31, 1994, respectively. These expenditures
were used primarily to upgrade production equipment and maintain facilities in
the ordinary course of business. Capital expenditures for 1997 are anticipated
at $15.0 million, mostly for production related equipment and facility
improvements and for projects consistent with those of the prior years.
Inflation in the United States and Canada has not been a significant
concern to the Company during recent periods.
With the exception of Sun Care, the Company's businesses have generally not
been seasonal in nature. Sun Care sales are highly seasonal with a range of 85%
to 90% of sales occurring in the first six months of the year. In addition, the
seasonality requires increased working capital to support inventory build prior
to the selling season and higher receivables levels resulting from extended
credit terms which are typical in the sun care industry.
8
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Twelve Months Ended
-----------------------------------------
December 28, December 30, December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $498,742 $ 483,581 $ 473,275
Cost of sales 192,512 188,129 166,601
-------- --------- ---------
Gross profit 306,230 295,452 306,674
-------- --------- ---------
Operating expenses:
Advertising and sales promotion 119,380 117,581 98,999
Selling, distribution and research 56,776 54,251 51,628
Administrative 18,028 23,625 16,172
Amortization of intangibles 12,846 11,268 10,181
Write-off of SmileTote intangible assets -- 6,441 --
--------- -------- --------- ---------
Total operating expenses 207,030 213,166 176,980
-------- --------- ---------
Operating earnings 99,200 82,286 129,694
Interest expense including related party interest
expense of $12,150, net of related party interest
income of $12,003 for all periods presented 64,860 71,361 76,153
-------- --------- ---------
Earnings before income taxes 34,340 10,925 53,541
Income taxes 16,141 8,151 23,994
-------- --------- ---------
Earnings before extraordinary loss 18,199 2,774 29,547
Extraordinary loss on early extinguishment
of debt, net of $5,180 tax benefit -- (7,935) --
-------- --------- ---------
Net earnings (loss) 18,199 (5,161) 29,547
Preferred dividend requirements -- -- (1,163)
-------- --------- ---------
Net earnings (loss) available to
common stockholders $ 18,199 $ (5,161) $ 28,384
======== ========= =========
Earnings (loss) per share after preferred dividend requirements (primary and
fully diluted):
Before extraordinary loss $ .36 $ .07 $ .97
Net earnings (loss) $ .36 $ (.12) $ .97
Average shares outstanding 50,883 42,309 29,212
</TABLE>
See the accompanying notes to consolidated financial statements.
9
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
December 28, December 30,
Assets 1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash $ 6,205 $ 5,940
Receivables, less allowance for doubtful accounts 63,982 58,019
Inventories 37,637 49,190
Deferred income taxes 9,702 13,154
Other current assets 4,965 4,545
--------- ---------
Total current assets 122,491 130,848
Net property, plant and equipment 53,408 52,462
Intangible assets, net:
Goodwill 348,449 359,629
Patents, trademarks and other 36,405 38,076
Deferred financing costs 15,337 17,426
Due from related party 80,017 80,017
Other noncurrent assets 4,224 4,403
--------- ---------
Total assets $ 660,331 $ 682,861
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 36,131 $ 20,057
Accrued expenses 49,252 60,257
Income taxes payable 5,586 1,897
Current maturities of long-term debt 25,000 20,000
--------- ---------
Total current liabilities 115,969 102,211
Long-term debt 714,700 770,050
Due to related party 78,386 78,386
Other noncurrent liabilities 14,207 16,784
Deferred income taxes 19,796 16,406
--------- ---------
Total liabilities 943,058 983,837
--------- ---------
Stockholders' equity:
Common stock, $0.01 par value, authorized 100,000,000
shares, issued 50,887,200 shares at December 28,1996
and 50,879,701 shares at December 30,1995 509 509
Additional paid-in capital 424,277 424,217
Retained earnings (deficit) (705,718) (723,917)
Foreign currency translation adjustment (1,795) (1,785)
--------- ---------
Total stockholders' equity (282,727) (300,976)
--------- ---------
Total liabilities and stockholders' equity $ 660,331 $ 682,861
========= =========
</TABLE>
See the accompanying notes to consolidated financial statements.
10
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED
STOCKS, COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Foreign
Redeemable Additional Retained Currency
Preferred Common Paid-In Earning Translation
Stocks Stock Capital (Deficit) Adjustment
---------- ------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Balance,
December 25, 1993 $ 139,644 $109 $ 25,301 $(747,140) $(1,678)
Net earnings -- -- -- 29,547 --
Accrued dividend requirements 1,163 -- -- (1,163) --
Issuance of shares of common
stock, net -- 200 244,116 -- --
Redemption of redeemable
preferred stocks (140,807) -- -- -- --
Consent fee paid to Sara Lee -- -- (15,000) -- --
Foreign currency translation
adjustment -- -- -- -- (289)
--------- ---- --------- --------- -------
Balance,
December 31, 1994 -- 309 254,417 (718,756) (1,967)
Net loss -- -- -- (5,161) --
Issuance of shares of common
stock, net -- 200 169,800 -- --
Foreign currency translation
adjustment -- -- -- -- 182
--------- ---- --------- --------- -------
Balance,
December 30, 1995 -- 509 424,217 (723,917) (1,785)
Net earnings -- -- -- 18,199 --
Issuance of shares of common
stock -- -- 60 -- --
Foreign currency translation
adjustment -- -- -- -- (10)
--------- ---- --------- --------- -------
Balance,
December 28, 1996 $ -- $509 $ 424,277 $(705,718) $(1,795)
========= ==== ========= ========= =======
</TABLE>
See the accompanying notes to consolidated financial statements.
11
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Twelve Months Ended
----------------------------------------
December 28, December 30, December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operations:
Net earnings (loss) $ 18,199 $ (5,161) $ 29,547
Non-cash items included in earnings:
Extraordinary loss -- 7,935 --
Write-off of SmileTote intangible assets -- 6,441 --
---------
Amortization of intangibles 12,846 11,268 10,181
Amortization of deferred financing costs 2,089 2,246 2,358
Depreciation 8,929 8,496 7,412
Deferred income taxes 6,842 (133) 19,849
Other, net 48 (291) --
Increase (decrease) in working capital items,
net of effects of acquisitions:
Increase in receivables (5,963) (4,471) (10,871)
Decrease (increase) in inventories 11,553 4,629 (8,549)
Increase in other current assets (420) (1,802) (560)
Increase (decrease) in accounts payable 16,074 6,967 (10,959)
(Decrease) increase in accrued expenses (12,794) (7,076) 729
Increase (decrease) in income taxes payable 3,689 (4,207) (397)
(Decrease) increase in accrued interest (788) 2,238 (3,987)
--------- --------- ---------
Net cash flow from operations 60,304 27,079 34,753
Cash flows used for investing activities:
Purchases of property, plant and equipment (9,740) (12,395) (8,503)
Businesses or investments acquired -- (94,429) (7,044)
--------- --------- ---------
Net cash used for investing activities (9,740) (106,824) (15,547)
Cash flows (used for) from financing activities:
Net (payments) borrowings under working
capital credit facilities (2,850) (42,650) 47,700
Long-term debt borrowings -- 425,000 860,000
Long-term debt payments (47,500) (468,000) (947,413)
Payment of recapitalization costs -- -- (44,155)
Redemption of preferred stock -- -- (140,807)
Payment of financing costs -- (9,113) (25,750)
Issuance of shares of common stock 60 170,000 244,316
Consent fee paid to Sara Lee Corporation -- -- (15,000)
Other, net (9) 75 (3,111)
--------- --------- ---------
Net cash (used for) from financing
activities (50,299) 75,312 (24,220)
Increase (decrease) in cash 265 (4,433) (5,014)
Cash at beginning of period 5,940 10,373 15,387
--------- --------- ---------
Cash at end of period $ 6,205 $ 5,940 $ 10,373
========= ========= =========
Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest $ 63,559 $ 66,884 $ 89,755
Income taxes, net of refunds $ 5,610 $ 10,748 $ 3,989
</TABLE>
See the accompanying notes to consolidated financial statements.
12
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements include the
accounts of Playtex Products, Inc. and all of its subsidiaries ("Playtex" or the
"Company"). All significant intercompany balances have been eliminated.
Inventories - Inventories are stated at the lower of cost (first-in, first-out
basis) or market. Inventory costs include material, labor and manufacturing
overhead.
Long-lived Assets - Effective January 1, 1996, Playtex adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
Impairment of Long Lived Assets and for Long Lived Assets to Be Disposed of
("SFAS 121")". Such adoption had no impact on the accompanying consolidated
financial statements. In accordance with SFAS 121, the Company systematically
reviews the recoverability of the long-lived assets by comparing their
unamortized carrying value to their related anticipated undiscounted future cash
flows. Any impairment related to long-lived assets is measured by reference to
the assets' fair market value. Impairments are charged to expense when such
determination is made.
Net Property, Plant and Equipment - Depreciation is provided on the
straight-line method over the estimated useful lives of the respective assets
(ranging from 3 to 40 years). Repair and maintenance costs ($5.5 million in
1996, $5.1 million in 1995 and $4.7 million in 1994) are expensed; renewals and
betterments are capitalized.
Intangible Assets - Intangible assets are amortized on a straight-line basis
over a period not exceeding 40 years. The Company systematically reviews the
recoverability of its goodwill by comparing their unamortized value to their
relative anticipated undiscounted future cash flows. Any impairment related to
goodwill is measured against discounted cash flows.
Deferred Financing Costs - Fees and expenses relating to debt issuance costs are
classified as deferred financing costs and are amortized, under the interest
method, over the average life of the related debt (ranging from 8 to 10 years).
Fees and expenses related to bank financing are amortized on a straight line
basis over the term of the facility.
Income Taxes -Deferred tax assets and liabilities are provided using the asset
and liability method for temporary differences between financial and tax
reporting using the enacted tax rates in effect for the period in which the
differences are expected to reverse.
Foreign Currency Translation - The functional currency of Playtex's Canadian
operations is the local currency. Net exchange gains or losses resulting from
the translation of assets and liabilities are accumulated in a separate section
of stockholders' equity titled "Foreign currency translation adjustment."
13
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Earnings Per Share - Earnings (loss) per share are net earnings (loss) less the
dividend requirements on preferred stocks, divided by the weighted average
number of common shares issued and outstanding for the periods. In connection
with the 1994 Recapitalization (as defined below), Playtex effected a one for
4.6296 reverse stock split. All per share information has been adjusted to
reflect the reverse stock split on a retroactive basis. The 1995 earnings per
share before extraordinary loss, assuming the 1995 Transaction (as defined
below) took place on January 1, 1995, would have been $0.13 per share. Earnings
per share in 1994, assuming the 1994 Recapitalization took place on December 26,
1993, would have been $1.01 per share.
Use of Estimates - The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements,
and the reported amounts of revenue and expenses during the reporting period.
Actual results could vary from those estimates.
2. The 1995 Transaction
On June 6, 1995, following the receipt of stockholder approval at the
Annual Meeting of Stockholders, the Company consummated the sale of 20 million
shares of common stock of the Company, par value $.01 per share, at a price of
$9.00 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,
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 $10.0 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 $75.0 million revolving credit
facility (the "1995 Working Capital Facility") and (iii) a $37.5 million
acquisition revolving credit facility (the "1995 Acquisition Credit Facility").
Fees and expenses associated with the new credit agreement of $9.1 million are
being amortized over the term of the associated credit agreement.
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
14
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recapitalization included transactions effected by Playtex and its former
subsidiary Playtex Family Products Corporation, 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 20.0 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 $40.0 million under a $75.0
million working capital facility (the "1994 Revolving Credit 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
indebtedness under the Company's previous term loan and revolving credit
facilities, and its senior and subordinated debt and preferred stocks (including
premiums, accrued interest and accrued preferred dividends). In addition, the
Company paid a $15.0 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. Businesses and Investments Acquired
Banana Boat Holding Corporation ("BBH") - On October 31, 1995, the Company and
BBH Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of
Playtex, acquired all issued and outstanding common shares not previously owned
by Playtex, of BBH, a Delaware corporation and manufacturer of Banana Boat sun
-----------
and skin care products (the "BBH Acquisition"). The BBH Acquisition was
completed pursuant to an agreement and plan of merger dated October 17, 1995.
Prior to the BBH Acquisition, Playtex had recognized 42.5% of the operating
profits from the sale of Banana Boat products, in accordance with the terms of a
-----------
distribution agreement between BBH and Playtex. Following the BBH Acquisition,
Playtex's equity ownership of BBH increased from 22% to 100% and the Company's
interest in the operating profits from the sale of Banana Boat products
-----------
increased to 100%. Concurrent with the BBH acquisition, the distribution
agreement was terminated.
The net funds expended for the BBH Acquisition included cash of $40.4
million, 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 $4.3 million. The BBH Acquisition was financed with $34.3
million of existing cash balances and advances under the 1995 Acquisition Credit
Facility of $37.5 million. The BBH Acquisition was accounted for as a purchase
and the results of operations of BBH have been included in the consolidated
statements of operations from the date of acquisition. Accordingly, the purchase
price was allocated to the assets acquired and the liabilities assumed based on
the fair values at the date of acquisition. The excess purchase price over the
fair value of net assets acquired was $44.1 million and is being amortized on a
straight-line basis over 40 years.
Woolite (R) Rug and Upholstery Cleaning Products ("Woolite") - Playtex entered
into an Asset Purchase and Sale Agreement, dated December 22, 1994, with Reckitt
& Colman, Inc. (R&C), a Delaware corporation, pursuant to which Playtex acquired
certain assets of the Woolite business from R&C (the "Acquired Assets") under an
-------
exclusive, royalty-free trademark license in perpetuity in the
15
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
United States and Canada. The purchase price for the Acquired Assets, exclusive
of $0.1 million for legal and other costs, was $21.7 million, which was paid in
cash with borrowings under the 1994
Revolving Credit Facility.
The Woolite acquisition was accounted for as a purchase and the results of
-------
operations of Woolite have been included in the consolidated statements of
-------
operations from the date of acquisition. Accordingly, the purchase price was
allocated to the assets acquired and the liabilities assumed based on the fair
values at the date of acquisition. The excess purchase price over the fair value
of net assets acquired was $17.3 million and is being amortized on a
straight-line basis over 30 years.
5. Balance Sheet Components
The components of certain balance sheet accounts are as follows (in
thousands):
December 28, December 30,
1996 1995
------------ ------------
Receivables $ 65,740 $ 60,061
Less allowance for doubtful accounts (1,758) (2,042)
--------- ---------
Net $ 63,982 $ 58,019
========= =========
Inventories:
Raw materials $ 13,854 $ 18,187
Work in process 1,004 1,267
Finished goods 22,779 29,736
--------- ---------
Total $ 37,637 $ 49,190
========= =========
Net property, plant and equipment:
Land $ 1,190 $ 1,190
Buildings 24,818 24,055
Machinery and Equipment 95,938 86,955
--------- ---------
121,946 112,200
Less accumulated depreciation (68,538) (59,738)
--------- ---------
Net $ 53,408 $ 52,462
========= =========
Goodwill $ 446,602 $ 446,482
Less accumulated amortization (98,153) (86,853)
--------- ---------
Net $ 348,449 $ 359,629
========= =========
Patents, trademarks and other $ 49,644 $ 49,769
Less accumulated amortization (13,239) (11,693)
--------- ---------
Net $ 36,405 $ 38,076
========= =========
16
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) December 28, December 30,
1996 1995
------------ ------------
Deferred financing costs $19,463 $19,463
Less accumulated amortization (4,126) (2,037)
------- -------
Net $15,337 $17,426
======= =======
Accrued expenses:
Advertising and sales promotion $19,191 $29,401
Employee compensation and benefits 12,349 10,162
Interest 5,532 6,320
Insurance 4,731 4,858
Other 7,449 9,516
------- -------
Total $49,252 $60,257
======= =======
6. Due from Related Party
Playtex Investment Corp., a wholly owned subsidiary of Playtex, is the
holder of 15% debentures in aggregate principal amount of $40 million (the
"Apparel Debenture") issued by Playtex Apparel Partners, L.P. (the "Apparel
Partnership") in connection with its 1988 acquisition of Playtex Apparel, Inc.
Interest on the 15% debentures is payable annually in cash on each December 15.
However, with respect to any such interest amount payable prior to maturity,
Apparel Partnership may elect and elected for periods through December 15, 1993
to make such payments in additional 15% debentures. On December 16, 1996 and
December 15, 1995, the Apparel Partnership paid in cash the accrued interest for
the annual periods then ended. Principal and any unpaid accrued interest are due
in cash on December 15, 2003. The obligations of the Apparel Partnership are
nonrecourse to the partners of the Apparel Partnership. The assets of the
Apparel Partnership are Sara Lee Corporation common stock with a market value at
December 28, 1996 and December 30, 1995 of approximately $7.7 and $7.9 million,
respectively, cash of approximately $0.4 and $0.3 million, respectively, and
Playtex's 15 1/2% Subordinated Notes. See notes 8 and 15 for a discussion of the
relationship between the Apparel Partnership and Playtex. Playtex believes that
the Apparel Debenture represents the only material liability of the Apparel
Partnership.
17
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Long-Term Debt
Long-term debt consists of the following (in thousands):
December 28, December 30,
1996 1995
------------ ------------
1995 Credit Agreement:
Working Capital Facility $ 2,200 $ 5,050
Term Loan Facility 367,500 387,500
Acquisition Credit Facility 10,000 37,500
9% Senior Subordinated
Notes due 2003 360,000 360,000
--------- ---------
739,700 790,050
Less current maturities (25,000) (20,000)
--------- ---------
Total long-term debt $ 714,700 $ 770,050
========= =========
On June 6, 1995, as part of the 1995 Transaction (as described in note 2),
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. The 1995 Term Loan Facility provides for
semi-annual repayments of principal, including payments of $12.5 million due on
March 15, 1997 and September 15, 1997. 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 $0.1 million per annum are also required. At December 28, 1996,
aggregate unused lines of credit (giving effect to outstanding letters of
credit) under the 1995 Credit Agreement amounted to $98.9 million.
The provisions of the 1995 Credit Agreement require Playtex to meet certain
financial covenants and ratios and also include conditions or restrictions on:
new indebtedness and liens; major acquisitions or mergers; capital expenditures
and disposition of assets; certain dividends and other distributions; and
prepayment and modification of 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. Certain wholly-owned
subsidiaries of the Company are guarantors of the 9% Notes (see note 20).
On June 9, 1995, the Company entered into an interest rate protection
agreement such that, for a two year period commencing 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
18
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. This agreement effectively fixes the rate
on $125 million at 7.71%, after giving effect to the 1.75% spread as provided
for in the 1995 Credit Agreement.
Effective July 25, 1995, the Company entered into a second 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). This agreement effectively fixes the rate on
$100 million at 7.575%, after giving effect to the 1.75% spread as provided for
in the 1995 Credit Agreement.
Effective July 25, 1996, the Company entered into a third interest rate
protection agreement to fix interest expense with respect to an additional $150
million of its outstanding indebtedness. This agreement provides for quarterly
payments by Playtex at a rate of 5.59% and receipt of quarterly payments from
the counterparty at a 90-day LIBOR rate until July 25, 1998. The agreement will
terminate with no penalty to either party, if the 90-day LIBOR rate is equal to
or greater than 6.25% at any 90 day interest reset date. This agreement
effectively fixes the rate on $150 million at 7.34%, after giving effect to the
1.75% spread as provided for in the 1995 Credit Agreement.
Net receipts or payments under these agreements are recognized as an
adjustment to interest expense.
Aggregate annual maturities under the 1995 Credit Agreement are (in
millions): $25.0 in fiscal 1997, $30.0 in fiscal 1998, $50.0 in fiscal 1999,
$85.0 in fiscal 2000 and $105.0 in fiscal 2001.
At December 28, 1996, December 30, 1995 and December 31, 1994, the weighted
average interest rates for the 1995 Credit Agreement borrowings were 7.32%,
7.57% and 9.19%, respectively. In addition, the weighted average interest rates
on such borrowings were 7.35%, 8.11% and 7.30% for the twelve month periods
ended December 28, 1996, December 30, 1995 and December 31, 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 16, 1996 and December 15, 1995, Playtex paid in
cash the
19
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
accrued interest for the annual periods then ended. Principal and any unpaid
accrued interest on the 15 1/2% Subordinated Notes are payable in cash on
December 15, 2003.
9. Income Taxes
The provision for income taxes is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities. Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to amounts that are
more likely than not to be realized.
Earnings (loss) before income taxes, cumulative effect of accounting
changes and extraordinary loss are as follows (in thousands):
Twelve Months Ended
------------------------------------------------
December 28, December 30, December 31,
1996 1995 1994
------------ ------------ ------------
U.S. $32,650 $ 8,579 $51,049
Foreign 1,690 2,346 2,492
------- ------- -------
Total $34,340 $10,925 $53,541
======= ======= =======
Playtex's provisions for income taxes for the twelve months ended December
28, 1996, December 30, 1995, and December 31, 1994 are as follows (in
thousands):
Twelve Months Ended
------------------------------------------------
December 28, December 30, December 31,
1996 1995 1994
------------ ------------ ------------
Current:
Federal $ 7,851 $ 9,174 $ 3,750
State and local 553 (2,123) (2,075)
Foreign 895 1,233 2,470
-------- -------- --------
9,299 8,284 4,145
-------- -------- --------
Deferred:
Federal 6,851 (82) 16,593
State and local 311 (26) 4,439
Foreign (320) (25) (1,183)
-------- -------- --------
6,842 (133) 19,849
-------- -------- --------
Total $ 16,141 $ 8,151 $ 23,994
======== ======== ========
20
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Taxable and deductible temporary differences and tax credit carryforwards
which give rise to Playtex's deferred tax assets and liabilities at December 28,
1996 and December 30, 1995 are as follows (in thousands):
December 28, December 30,
1996 1995
------------ ------------
Deferred tax assets:
Allowances and reserves not
currently deductible $12,468 $17,604
Net operating loss carryforwards 6,185 6,745
Postretirement benefits reserve 2,256 2,009
Capitalized book expenses for tax purposes 675 581
State tax credits 58 136
------- -------
Total $21,642 $27,075
======= =======
Deferred tax liabilities:
Deferred gain on sale of business $14,650 $14,650
Property, plant and equipment 8,845 8,052
Trademarks 5,139 4,222
Undistributed earnings of foreign subsidiary 2,622 2,836
Other 480 567
------- -------
Total $31,736 $30,327
======= =======
Undistributed earnings of the Company's Canadian subsidiary for which U.S.
income taxes have not been provided were approximately $3.5 million at December
28, 1996. Such undistributed earnings are expected to be permanently reinvested
in the Canadian subsidiary.
At the time of its acquisition, BBH had net operating loss carryforwards of
$18.4 million that expire in years 2007 through 2010. These net operating loss
carryforwards can be utilized by Playtex, with certain limitations, on its
federal, state and local tax return for tax periods subsequent to October 31,
1995. Playtex expects to fully utilize these net operating loss carryforwards
prior to their expiration.
21
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's tax provision differed from the amount computed using the
federal statutory rate of 35% as follows (in thousands):
<TABLE>
<CAPTION>
Twelve Months Ended
----------------------------------------
December 28, December 30, December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Expected federal income tax at statutory rates $ 12,019 $ 3,824 $ 18,739
Amortization and write-off of intangible assets 3,618 5,647 3,436
Settlement of tax examinations -- (2,385) (1,498)
State and local income taxes 562 786 2,993
Foreign tax rate differential 279 331 362
Effect on deferred taxes due to change in
Canada withholding tax rates (214) -- --
Other, net (123) (52) (38)
-------- ------- --------
Total tax provision $ 16,141 $ 8,151 $ 23,994
======== ======= ========
</TABLE>
During 1995 and 1994, several state jurisdictions concluded their
examinations of tax returns filed by Playtex or its subsidiaries for various
years 1987 through 1992 or the statute of limitations related to other specific
situations lapsed. As a result of these favorable developments, Playtex recorded
a $2.4 million and a $1.5 million tax benefit in the provision for income taxes
for the years ended December 30, 1995 and December 31, 1994, respectively.
10. Common stock
During 1994, the Company established a long-term incentive plan (the "1994
Stock Option Plan") under which awards of incentive stock options, nonqualified
stock options and stock appreciation rights ("SARs") may be granted to directors
and key employees of the Company. Stock options granted under the 1994 Stock
Option Plan may have a term not in excess of ten years. The exercise price for
stock options may not be less than the fair market value of the common stock on
the date of grant. Except with respect to formula grants to certain non-employee
directors, options vest over a period determined by the Compensation and Stock
Option Committee.
SARs may be granted in tandem with a stock option grant or at any time
following the stock option grant. Upon exercise of a SAR, the grantee will
receive cash equal to the excess of the fair market value of a share of common
stock over the exercise price. No SARs have been granted.
On June 6, 1995, the Company's stockholders approved an amendment to the
1994 Stock Option Plan increasing the number of shares of common stock available
for issuance upon exercise of options and SARs from 1,047,785 to 3,047,785 and
increasing the number of shares available for issuance upon exercise of options
and SARs grants to any single executive officer from 300,000 to 1,000,000.
In 1996, the Company adopted SFAS No. 123, Accounting for Stock-based
--------------------------
Compensation ("SFAS 123"). As permitted by SFAS 123, the Company will continue
- ------------
to follow the provisions of APB No. 25, Accounting for Stock Issued to Employees
----------------------------------------
and related interpretations in accounting for compensation
22
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
expense related to the issuance of stock options. Had compensation costs related
to the issuance of stock options under the Company's 1994 Stock Option Plan been
determined based on the estimated fair value at the grant dates for awards under
SFAS 123, the Company's net income and earnings per share for the twelve months
ended December 28, 1996 and December 30, 1995 would have been reduced to the pro
forma amounts listed below:
December 28, December 30,
1996 1995
------------ ------------
Net income (loss) to common shareholders
As reported $ 18,199 $ (5,161)
Pro forma $ 15,649 $ (6,611)
Earning per share (primary & fully diluted)
As reported $ 0.36 $ (0.12)
Pro forma $ 0.31 $ (0.16)
The fair value of each stock option grant was estimated on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions: weighted average risk-free interest rates of 6.63% and 6.26% for
fiscal 1996 and 1995, respectively; no dividend yield; expected lives of 5
years; and volatility of 35%.
A summary of the status of the 1994 Stock Option Plan for fiscal 1996, 1995
and 1994 and the changes during those years is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 2,240,800 $ 9.17 297,500 $12.21 -- $ --
Granted 166,000 8.76 2,080,700 8.82 321,500 12.27
Exercised (7,499) 7.87 -- -- -- --
Forfeited (83,867) 9.47 (137,400) 10.43 (24,000) 13.00
--------- --------- -------
Outstanding at end of year 2,315,434 9.14 2,240,800 9.17 297,500 12.21
========= ========= =======
Options exercisable at
year-end 715,452 9.37 76,348 11.98 None
Weighted-average fair
value of options granted
during the year $ 4.40 $ 4.43
</TABLE>
23
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information about fixed stock options
outstanding at December 28, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------- ----------------------
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at Contractual Exercise at Exercise
Prices 12/28/96 Life Prices 12/28/96 Prices
-------- ----------- ----------- -------- ----------- --------
<C> <C> <C> <C> <C> <C> <C>
$ 6.000 to 7.000 37,500 7.96 $ 6.7500 25,000 $ 6.7500
$ 7.000 to 8.000 971,834 8.61 7.8750 320,228 7.8750
$ 8.000 to 9.000 166,000 9.40 8.6528 3,000 8.2500
$ 9.000 to 10.000 800,000 8.48 9.8750 200,000 9.8750
$10.000 to 13.000 340,100 7.92 11.5134 167,224 12.0250
--------- -------
$ 6.750 to 13.000 2,315,434 8.51 9.1379 715,452 9.3663
========= =======
</TABLE>
11. Write-off of SmileTote Intangible Assets
---------
During the fourth quarter of fiscal 1995 and in connection with certain
strategic decisions regarding the SmileTote product line, the Company prepared
---------
financial projections to evaluate the SmileTote business in terms of projected
---------
net earnings and operating cash flows. Based upon the projections of
undiscounted operating earnings before amortization of intangible assets and
after considering interest on indebtedness, management concluded that the
unamortized value of the intangible assets associated with SmileTote had been
---------
permanently impaired. Consequently, the Company wrote off in the fourth quarter
of fiscal 1995 the remaining $6.4 million of intangible assets associated with
SmileTote.
- ---------
12. 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 write-off of the unamortized portion of
deferred financing costs associated with the 1994 Credit Agreement.
See notes 2 and 7.
13. Leases
Future minimum payments under non-cancelable operating leases for years
after December 28, 1996 are as follows (in thousands): $3,430 in 1997, $3,560 in
1998, $3,010 in 1999, $2,472 in 2000, $2,472 in 2001 and $5,573 in later years.
24
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rent expense for operating leases amounted to (in thousands): $5,201,
$5,092, and $4,240 for the twelve months ended December 28, 1996, December 30,
1995, and December 31, 1994, respectively.
14. Pension and Other Postretirement Benefits
Pension Plans - Substantially all Playtex U.S. hourly and approximately 78% of
all Canadian employees participate in pension plans. At December 28, 1996,
approximately 1,112 employees were covered by these plans, of which
approximately 189 retirees or beneficiaries were receiving benefits.
Changes in pension benefits, which are allocable to previous service of
employees, and gains and losses that occur because actual experience differs
from assumptions will be amortized over the estimated average future service
period of employees. Actuarial assumptions for the plans include: (a) 8% for the
expected long-term rate of return on plans assets, (b) 7.5% for the discount
rate for calculating the projected benefit obligation and (c) 3.25% for the rate
of average future increases in compensation levels.
Net pension expense (income) for the twelve months ended December 28, 1996,
December 30, 1995, and December 31, 1994 includes the following components (in
thousands):
Twelve Months Ended
----------------------------------------
December 28, December 30, December 31,
1996 1995 1994
------------ ------------ ------------
Service cost-benefits
earned during the period $ 721 $ 616 $ 622
Interest cost on projected
benefit obligation 1,688 1,559 1,414
Actual return on plan assets (3,711) (6,000) 872
Amortization of prior
service cost 73 73 59
Amortization of unrecognized
net gain (51) (2) (106)
Amortization of transition
gain over 10 years (193) (193) (192)
Excess (shortfall) of actual return
on plan assets over estimated 1,479 4,190 (2,797)
------- ------- -------
Net pension expense (income) $ 6 $ 243 $ (128)
======= ======= =======
A reconciliation of the projected benefit obligation for the pension plans
to the prepaid pension expense recorded at December 28, 1996 and December 30,
1995 is as follows (in thousands):
25
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 28, December 30,
1996 1995
------------ ------------
Projected benefit obligation for
service rendered to date $(24,347) $(22,740)
Plan assets at fair value, primarily
listed stocks, money market funds
and guaranteed investment contracts 31,171 28,313
-------- --------
Plan assets in excess of projected
benefit obligation 6,824 5,573
Unrecognized net gain from past
experience different from that assumed
and effects of changes in assumptions (4,398) (3,019)
Prior service cost not yet recognized
in net periodic pension cost 365 438
Unrecognized transition gain (395) (589)
-------- --------
Prepaid pension expense $ 2,396 $ 2,403
======== ========
The portion of the projected benefit obligation at December 28, 1996 and
December 30, 1995 representing the accumulated benefit obligation was $22.0
million, of which $21.2 million was vested, and $20.6 million, of which $19.8
million was vested, respectively.
Postretirement Benefits Other than Pensions - Playtex provides Company-sponsored
postretirement health care and life insurance benefits to certain U.S. retirees.
These plans require employees to share in the costs. Approximately 89 % of all
U.S. personnel may become eligible for Company-sponsored post-retirement health
care and life insurance if they were to retire from the Company. The cost of
providing Company-sponsored postretirement health care and life insurance
benefits for U.S. retirees was approximately $0.8 million for each of the twelve
months ended December 28, 1996, December 30, 1995, and December 31, 1994. The
Company accrues the estimated cost of these benefits during the participants'
active service periods up to the dates on which they become eligible for full
benefits.
Playtex also provides two non-contributory defined contribution plans and a
contributory 401(k) plan covering various employee groups. The amounts charged
to earnings for Playtex's defined contribution plans totaled $4.6 million, $4.7
million, and $4.2 million for the twelve months ended December 28, 1996,
December 30, 1995, and December 31, 1994, respectively.
15. Related Party Transactions
Joel E. Smilow, a director and former senior executive officer of Playtex
and Hercules P. Sotos, former director and senior executive officer of Playtex,
are general partners of the Apparel Partnership, holding beneficial interests of
58.5% and 13.5%, respectively, in the Apparel
26
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Partnership. Under a consulting agreement, which commenced in the third quarter
of 1995, the Company has retained Mr. Smilow as a consultant for a five-year
period at an annual fee of $250,000 plus expenses and certain benefits. The
consulting agreement does not require Mr. Smilow to devote any minimum amount of
time to the performance of consulting services.
On October 31, 1995, Playtex and a wholly-owned subsidiary acquired all
issued and outstanding common shares of BBH not previously owned by Playtex.
Prior to the BBH Acquisition, BBH was controlled by Thomas Lee Equity Partners,
L.P. and certain employees and affiliates of the Thomas H. Lee Company. Thomas
H. Lee, President of the Thomas H. Lee Company, is a director and a significant
stockholder of Playtex. Beginning in December 1992, Playtex had a distribution
agreement with Sun Pharmaceuticals Corp. ("Sun"), a wholly-owned subsidiary of
BBH, pursuant to which Playtex was the exclusive distributor of Banana Boat
-----------
products in all of the areas Sun had repurchased distribution rights from its
then current distributors. Concurrent with the acquisition, the distribution
agreement between Sun and Playtex was canceled. For the ten months ended October
31, 1995 and for the twelve months ended December 31, 1994 Playtex purchased
$30.1 million and $30.5 million, respectively, of Banana Boat products from Sun
-----------
and at December 31, 1994 Playtex had accounts payable to Sun of $3.9 million.
Playtex believes that the terms of all the arrangements with the Apparel
Partnership and BBH were fair to Playtex and comparable to those which could be
obtained from unrelated third parties.
16. Business and Credit Concentrations
Most of Playtex's customers are disbursed throughout the United States and
Canada. No single customer accounted for more than 10% of Playtex's net sales in
1996, 1995, or 1994 with the exception of Wal-Mart Stores, Inc. ("Wal Mart")
(approximately 18% in 1996, 17% in 1995, and 15% in 1994 ). At December 28, 1996
and December 30, 1995, no account receivable from any customer was significant,
except for Wal-Mart (approximately $11.9 million in 1996 and $11.1 million in
1995). Aggregate receivables from high risk customers are not considered
significant and Playtex estimates, based upon past experience, that it has
sufficient reserves to cover any losses arising from any such accounts.
17. Disclosure About the Fair Value of Financial Instruments
Cash, Receivables, Accounts Payable, Income Taxes and Accrued Expenses - The
carrying amounts approximate fair value because of the short-term maturity of
these instruments.
1995 Credit Agreement The carrying amounts approximate fair value because 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.
Interest Rate Protection Agreements The fair value of interest rate protection
agreements is the estimated amount that Chase Manhattan Bank would receive or
pay to terminate the interest rate protection agreements at the balance sheet
date, taking into account current interest rates and the current credit
worthiness of the interest rate protection agreement counterparties. Termination
of the
27
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
interest rate protection agreements at December 28, 1996 would require Playtex
to pay the Chase Manhattan Bank $1.6 million.
Long-term Debt and Other Financial Instruments The fair value of the following
financial instruments was estimated at December 28, 1996 and December 30, 1995
as follows (in thousands):
<TABLE>
<CAPTION>
December 28, 1996 December 30, 1995
---------------------- ----------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<C> <C> <C> <C> <C>
9% Senior Subordinated Notes (a) $360,000 $353,400 $360,000 $317,700
15% Notes due from Playtex Apparel
Partners, L.P. (b) 80,017 80,017 80,017 80,017
15 1/2% Subordinated Notes due to Playtex
Apparel Partners, L.P. (b) 78,386 78,386 78,386 78,386
Other noncurrent assets (c) 4,224 4,100 4,403 4,270
Noncurrent liabilities (c) 14,207 12,930 16,784 15,270
</TABLE>
(a) At December 28, 1996 and December 30, 1995, the estimates were based on
the average range of bid/ask quotes provided by independent securities
dealers.
(b) The estimated fair value approximates the carrying amount at December 28,
1996 and December 30, 1995, based on the amount of future cash flows
associated with these instruments, discounted using an appropriate
interest rate.
(c) The fair values are based on a combination of actual cost associated with
recent purchases or the amount of future cash flows discounted using
Playtex's borrowing rate for similar instruments.
18. Information by Major Geographic Segment
Net sales by geographic area represent sales to unaffiliated customers
only. Intergeographic sales and transfers between geographic areas are nominal
and have not been disclosed separately.
Operating earnings is defined as total revenue less operating expenses. In
computing operating earnings, interest and income taxes have not been deducted.
Identifiable assets by geographic area represent those assets that are used
in Playtex's operations in each area.
Twelve Months Ended
----------------------------------------
(In thousands) December 28, December 30, December 31,
1996 1995 1994
-------- -------- --------
Sales:
United States $459,075 $445,880 $436,091
Canada 39,667 37,701 37,184
-------- -------- --------
$498,742 $483,581 $473,275
======== ======== ========
28
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Twelve Months Ended
---------------------------------------
(In thousands) December 28, December 30, December 31,
1996 1995 1994
----------- ----------- -----------
Operating earnings:
United States $ 97,702 $ 80,085 $127,136
Canada 1,498 2,201 2,558
-------- -------- --------
$ 99,200 $ 82,286 $129,694
======== ======== ========
Identifiable assets (at period end):
United States $647,629 $671,722 $589,649
Canada 12,702 11,139 9,751
-------- -------- --------
$660,331 $682,861 $599,400
======== ======== ========
19. Quarterly Data (Unaudited)
The following is a summary of the quarterly results of operations and
market price data for the Company for the twelve months ended December 28, 1996
and December 30, 1995:
<TABLE>
<CAPTION>
(In thousands, except per share data) First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Fiscal 1996
Net sales $143,067 $ 131,872 $117,500 $ 106,303
Operating earnings 27,841 26,735 26,334 18,290
Net earnings 5,981 5,489 5,408 1,321
Earnings per share: (a)
Net earnings $ .12 $ .11 $ .11 $ .03
Market price - high $ 8 5/8 $ 10 3/8 $ 9 1/2 $ 9 1/2
- low $ 6 5/8 $ 7 1/8 $ 7 1/2 $ 7 1/8
Fiscal 1995
Net sales $132,767 $ 135,627 $111,744 $ 103,443
Operating earnings (loss) 27,259 30,199 25,433 (605)
Earnings (loss) before extraordinary items 3,753 6,521 5,488 (12,988)
Net earnings (loss) 3,753 (1,414) 5,488 (12,988)
Earnings (loss) per share: (a)
Before extraordinary items $ .12 $ .18 $ .11 $ (.26)
Net earnings (loss) $ .12 $ (.04) $ .11 $ (.26)
Market price - high $ 8 5/8 $ 10 1/4 $ 12 1/2 $ 9
- low $ 6 3/4 $ 7 1/2 $ 8 3/8 $ 6 1/2
</TABLE>
(a) Per share data is computed independently for each of the periods presented;
therefore, the sum of the earnings per share amounts for the quarters may not
equal the total for the year.
29
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. Condensed Consolidating Financial Information
The 9% Notes are guaranteed by certain wholly-owned subsidiaries of the
Company (the "Guarantors"), namely Playtex Sales & Services, Inc. ("PSSI"),
Playtex Manufacturing, Inc. ("PMI") and Sun Pharmaceuticals Corp. ("Sun"). The
remaining first tier and lower tier subsidiaries of the Company are not
guarantors of the 9% Notes (the "Non-Guarantors"). PSSI provides sales
solicitation, management and administrative services to Playtex and its U.S.
affiliates. PMI is a contract manufacturer and contract research and development
services provider for Playtex and its U.S. affiliates. Sun owns the Banana Boat
-----------
trade name and certain other intangible assets associated with the Banana Boat
-----------
business. Sun distributes its product outside the U.S. and Puerto Rico and to
certain U.S. distributors excluding Playtex. Sun has entered into license
agreements with Playtex and other unrelated licensors for the right to use the
Banana Boat trade name and intangible assets associated with the Banana Boat sun
- ----------- -----------
and skin care business and manufacture and distribute Banana Boat products.
-----------
The Non-Guarantors include Playtex Beauty Care, Inc., a manufacturer and
distributor of Jhirmack hair care products, Playtex Investment Corporation, an
--------
investment holding company which holds the 15% debentures issued by Playtex
Apparel Partners, L.P. due December 15, 2003, Playtex International, Inc., sole
shareholder of Playtex Limited, a manufacturer and distributor of Playtex
products in Canada, SmileTote, Inc., owner of certain Infant Care related
intangible assets, TH Marketing Corp., sole shareholder of Playtex Foreign Sales
Corporation, and Playtex Foreign Sales Corporation, a foreign sales corporation
as defined by Internal Revenue Code Section 922.
The Guarantors are joint and several guarantors of the 9% Notes. Such
guarantees are joint and several obligations of the Guarantors, irrevocable and
full and unconditional, limited to the largest amount that would not render such
Guarantors' obligations under the guarantees subject to avoidance under any
applicable federal or state fraudulent conveyance or similar law. The guarantees
are senior subordinated obligations of the applicable Guarantor, and are
subordinated to all senior obligations of such Guarantor, including guarantees
of the Company's obligations under the 1995 Credit Agreement.
The Notes contain certain restrictions and limitations, which, among other
things, restrict the type and/or amount of additional indebtedness that may be
incurred by Playtex or its subsidiaries, payment of dividends and other
distributions, issuances of preferred stock; loans and advances; certain
transactions with Playtex stockholders and affiliates; certain mergers and
consolidations; certain sales or transfers of assets; the creation of certain
liens; the transfer of assets to certain subsidiaries; and restrictions on
dividends and other distributions by subsidiaries, including the Guarantors.
The information which follows presents condensed financial information as
of December 28, 1996 and December 30, 1995 of (a) the Company on a consolidated
basis, (b) the parent company only ("Parent Company"), (c) the combined
Guarantors, and (d) the combined Non-Guarantors.
30
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Balance Sheet Data
as of December 28, 1996
(In thousands)
<TABLE>
<CAPTION>
Consoli- Elimina- Parent Combined Non-
Assets dated tions Company Guarantors Guarantors
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Current assets $ 122,491 $ -- $ 66,474 $ 39,436 $ 16,581
Investment in subsidiaries -- (70,924) 70,924 -- --
Intercompany receivable -- (126,773) 120,717 5,717 339
Net property, plant and
equipment 53,408 -- 309 51,743 1,356
Intangible assets 384,854 -- 316,057 66,749 2,048
Other noncurrent assets 99,578 (504) 19,556 -- 80,526
--------- --------- --------- -------- ---------
Total assets $ 660,331 $(198,201) $ 594,037 $163,645 $ 100,850
========= ========= ========= ======== =========
Liabilities and
Stockholders' Equity
Current liabilities $ 115,969 $ -- $ 69,584 $ 39,723 $ 6,662
Intercompany payable -- (126,773) -- -- 126,773
Long-term debt 793,086 -- 793,086 -- --
Other noncurrent liabilities 34,003 (504) 14,094 2,966 17,447
--------- --------- --------- -------- ---------
Total liabilities 943,058 (127,277) 876,764 42,689 150,882
Stockholders' equity (282,727) (70,924) (282,727) 120,956 (50,032)
--------- --------- --------- -------- ---------
Total liabilities and
stockholders' equity $ 660,331 $(198,201) $ 594,037 $163,645 $ 100,850
========= ========= ========= ======== =========
</TABLE>
Condensed Consolidating
Balance Sheet Data as of December 30, 1995
(In thousands)
<TABLE>
<CAPTION>
Consoli- Elimina- Parent Combined Non-
Assets dated tions Company Guarantors Guarantors
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Current assets $ 130,848 $ (460) $ 112,969 $ 1,303 $ 17,036
Investment in subsidiaries -- (68,280) 68,280 -- --
Intercompany receivable -- (127,210) 126,955 -- 255
Net property, plant and
equipment 52,462 -- 201 50,757 1,504
Intangible assets 397,705 -- 326,752 68,837 2,116
Other noncurrent assets 101,846 (505) 21,832 -- 80,519
--------- --------- --------- -------- ---------
Total assets $ 682,861 $(196,455) $ 656,989 $120,897 $ 101,430
========= ========= ========= ======== =========
Liabilities and
Stockholders' Equity
Current liabilities $ 102,211 $ (460) $ 94,762 $ -- $ 7,909
Intercompany payable -- (127,210) -- -- 127,210
Long-term debt 848,436 -- 848,436 -- --
Other noncurrent liabilities 33,190 (505) 14,767 2,271 16,657
--------- --------- --------- -------- ---------
Total liabilities 983,837 (128,175) 957,965 2,271 151,776
Stockholders' equity (300,976) (68,280) (300,976) 118,626 (50,346)
--------- --------- --------- -------- ---------
Total liabilities and
stockholders' equity $ 682,861 $(196,455) $ 656,989 $120,897 $ 101,430
========= ========= ========= ======== =========
</TABLE>
31
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Earnings Data
For the Twelve Months Ended December 28, 1996:
(In thousands)
<TABLE>
<CAPTION>
Consoli- Elimina- Parent Combined Non-
dated tions Company Guarantors Guarantors
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues $ 498,742 $(167,269) $ 438,127 $ 168,890 $ 58,994
Cost of sales 192,512 (104,374) 161,849 108,699 26,338
--------- --------- --------- --------- --------
Gross profit 306,230 (62,895) 276,278 60,191 32,656
Operating expenses:
Advertising, selling and
administrative 194,184 (62,895) 171,534 53,666 31,879
Amortization of intangibles 12,846 -- 10,570 2,208 68
--------- --------- --------- --------- --------
Total operating expenses 207,030 (62,895) 182,104 55,874 31,947
--------- --------- --------- --------- --------
Operating earnings 99,200 -- 94,174 4,317 709
Interest expense, net 64,860 -- 76,864 (1) (12,003)
Equity in net earnings
of subsidiaries -- 10,456 (10,456) -- --
--------- --------- --------- --------- --------
Earnings before
income taxes 34,340 (10,456) 27,766 4,318 12,712
Income taxes 16,141 -- 9,567 1,988 4,586
--------- --------- --------- --------- --------
Net income $ 18,199 $ (10,456) $ 18,199 $ 2,330 $ 8,126
========= ========= ========= ========= ========
</TABLE>
Condensed Consolidating Statement of Earnings Data
For the Twelve Months Ended December 30, 1995:
(In thousands)
<TABLE>
<CAPTION>
Consoli- Elimina- Parent Combined Non-
dated tions Company Guarantors Guarantors
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues $ 483,581 $ (7,427) $ 417,894 $ 1,367 $ 71,747
Cost of sales 188,129 (6,365) 163,233 1,227 30,034
--------- --------- --------- --------- --------
Gross profit 295,452 (1,062) 254,661 140 41,713
Operating expenses:
Advertising, selling and
administrative 195,457 (1,062) 152,975 830 42,714
Amortization of intangibles 17,709 -- 10,427 365 6,917
--------- --------- --------- --------- --------
Total operating expenses 213,166 (1,062) 163,402 1,195 49,631
--------- --------- --------- --------- --------
Operating earnings 82,286 -- 91,259 (1,055) (7,918)
Interest expense, net 71,361 -- 83,326 -- (11,965)
Equity in net earnings
of subsidiaries -- (808) 808 -- --
--------- --------- --------- --------- --------
Earnings (loss) before income
taxes and extraordinary loss 10,925 808 7,125 (1,055) 4,047
Income taxes 8,151 -- 4,351 (341) 4,141
--------- --------- --------- --------- --------
Earnings (loss) before
extraordinary loss 2,774 808 2,774 (714) (94)
Extraordinary loss on early
retirement of debt, net of
$5,180 tax benefit (7,935) -- (7,935) -- --
--------- --------- --------- --------- --------
Net loss $ (5,161) $ 808 $ (5,161) $ (714) $ (94)
========= ========= ========= ========= ========
</TABLE>
32
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows Data
For the Twelve Months Ended December 28, 1996:
(In thousands)
<TABLE>
<CAPTION>
Consoli- Elimina- Parent Combined Non-
dated tions Company Guarantors Guarantors
-------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net earnings $ 18,199 $(10,456) $ 18,199 $ 2,330 $ 8,126
Non-cash items included in earnings:
Amortization of intangibles 12,846 -- 10,570 2,208 68
Amortization of deferred
financing costs 2,089 -- 2,089 -- --
Depreciation 8,929 -- 72 8,428 429
Deferred taxes 6,842 -- 7,963 (1,449) 328
Other, net 48 10,456 (10,279) (120) (9)
Decrease (increase) in
net working capital 11,351 -- 13,273 (1,983) 61
-------- -------- -------- ------- -------
Net cash flows from operations 60,304 -- 41,887 9,414 9,003
-------- -------- -------- ------- -------
Cash flows (used for) investing activities:
Purchase of property, plant
and equipment (9,740) -- (45) (9,414) (281)
-------- -------- -------- ------- -------
Net cash flows used for
investing activities (9,740) -- (45) (9,414) (281)
-------- -------- -------- ------- -------
Cash flows from (used for)
financing activities:
Net payments under working
capital facilities and long-
term debt obligations (50,350) -- (50,350) -- --
Issuance of shares of common
stock, net 60 -- 60 -- --
(Payment) receipt of dividends -- -- 7,802 -- (7,802)
Other, net (9) -- (9) -- --
-------- -------- -------- ------- -------
Net cash flows used for
financing activities (50,299) -- (42,497) -- (7,802)
-------- -------- -------- ------- -------
Increase (decrease) in cash 265 -- (655) -- 920
Cash at beginning of period 5,940 -- 1,834 -- 4,106
-------- -------- -------- ------- -------
Cash at end of period $ 6,205 $ -- $ 1,179 $ -- $ 5,026
======== ======== ======== ======= =======
</TABLE>
33
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows Data
For the Twelve Months Ended December 30, 1995:
(In thousands)
<TABLE>
<CAPTION>
Consoli- Elimina- Parent Combined Non-
dated tions Company Guarantors Guarantors
--------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net loss $ (5,161) $ 808 $ (5,161) $(714) $ (94)
Non-cash items included in earnings:
Extraordinary loss 7,935 -- 7,935 -- --
Write-off of SmileTote intangibles 6,441 -- -- -- 6,441
---------
Amortization of intangibles 11,268 -- 10,424 368 476
Amortization of deferred
financing costs 2,246 -- 2,246 -- --
Depreciation 8,496 -- 8,000 -- 496
Deferred taxes (133) -- 1,039 -- (1,172)
Other, net (291) (808) 268 -- 249
Decrease (increase) in
net working capital (3,722) -- (6,443) (391) 3,112
--------- ----- --------- ----- -------
Net cash flows from operations 27,079 -- 18,308 (737) 9,508
--------- ----- --------- ----- -------
Cash flows (used for) investing activities:
Purchase of property, plant
and equipment (12,395) -- (12,296) -- (99)
Business or investments
acquired (94,429) 737 (95,166) -- --
--------- ----- --------- ----- -------
Net cash flows used for
investing activities (106,824) 737 (107,462) -- (99)
--------- ----- --------- ----- -------
Cash flows from (used for)
financing activities:
Net payments under working
capital facilities and long-
term debt obligations (85,650) -- (85,650) -- --
Payment of financing costs (9,113) -- (9,113) -- --
Issuance of shares of common
stock, net 170,000 -- 170,000 -- --
(Payment) receipt of dividends -- -- 7,802 -- (7,802)
Other, net 75 -- 75 -- --
--------- ----- --------- ----- -------
Net cash flows used for
financing activities 75,312 -- 83,114 -- (7,802)
--------- ----- --------- ----- -------
Increase (decrease) in cash (4,433) 737 (6,040) (737) 1,607
Cash at beginning of period 10,373 (737) 7,874 737 2,499
--------- ----- --------- ----- -------
Cash at end of period $ 5,940 $-- $ 1,834 $-- $ 4,106
========= ===== ========= ===== =======
</TABLE>
34
<PAGE>
PLAYTEX PRODUCTS, INC.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Playtex Products, Inc.
We have audited the accompanying consolidated balance sheets of Playtex
Products, Inc. and subsidiaries as of December 28, 1996 and December 30, 1995,
and the related consolidated statements of operations, redeemable preferred
stocks, common stock and other stockholders' equity and cash flows for the
twelve months ended December 28, 1996, December 30, 1995 and December 31, 1994.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Playtex Products,
Inc. and subsidiaries as of December 28, 1996 and December 30, 1995 and the
results of their operations and their cash flows for the twelve months ended
December 28, 1996, December 30, 1995 and December 31, 1994, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick
February 7, 1997
Stamford, Connecticut
35
<PAGE>
PLAYTEX PRODUCTS, INC.
REPORT OF MANAGEMENT
The management of Playtex Products, Inc. is responsible for the financial and
operating information contained in the Annual Report, including the financial
statements covered by the independent auditors' report. These statements were
prepared in conformity with generally accepted accounting principles and
include, where necessary, informed estimates and judgements.
The Company maintains systems of accounting and internal control designed to
provide reasonable assurance that assets are safeguarded against loss, and that
transactions are executed and recorded properly so as to ensure that the
financial records are reliable for preparing financial statements.
Elements of these control systems are the establishment and communication of
accounting and administrative policies and procedures, the selection and
training of qualified personnel, and continuous programs of internal review.
The Company's financial statements are reviewed by its Audit Committee, which is
composed entirely of non-employee Directors. This Committee meets with the
independent auditors and management to review the scope and results of the
annual audit, interim reviews, internal controls, and financial reporting
matters. The independent auditors have direct access to the Audit Committee.
/s/ Michael R. Gallagher
Chief Executive Officer
and Director
/s/ Michael F. Goss
Executive Vice President,
Chief Financial Officer,
and Director
Westport, Connecticut
February 7, 1997
36
<PAGE>
PLAYTEX PRODUCTS, INC.
OTHER INFORMATION
Corporate Information
Shares of Playtex's Common Stock are traded on the New York Stock Exchange under
the symbol PYX.
Playtex has not paid a cash dividend since its inception, and its present policy
is to retain earnings for use in its business. Under its debt agreements,
Playtex is restricted from paying dividends unless it meets certain specified
financial criteria immediately following such payment.
Stock Transfer Agent and Registrar
ChaseMellon Shareholder Services, L.L.C.
80 Challenger Road
Ridgefield Park, New Jersey 07660
(800)851-9677
Auditors
KPMG Peat Marwick LLP
Stamford, CT 06905
Corporate Offices
300 Nyala Farms Road
Westport, CT 06880
10-K Report
A copy of Annual Report on Form 10-K filed with the Securities and Exchange
Commission by Playtex Products, Inc. for the year ended December 28, 1996 is
available upon request from the Secretary of the Corporation at the Company's
corporate offices. Requests may be faxed to (203)341-4260.
37
<PAGE>
PLAYTEX PRODUCTS, INC.
OTHER INFORMATION
Board of Directors
- ------------------
Robert B. Haas Chairman and Director, Chairman of the Board and Chief
Executive Officer of Haas Wheat & Partners Incorporated
Michael R. Gallagher Chief Executive Officer and Director
Michael F. Goss Executive Vice President, Chief Financial Officer, and
Director
Joel E. Smilow Former President and Chief Executive Officer
Thomas H. Lee President of the Thomas H. Lee Company
Kenneth F. Yontz Chairman of the Board, President and Chief Executive
Officer of Sybron International Corporation
Douglas D. Wheat President of Haas Wheat & Partners Incorporated
Michael R. Eisenson President and Chief Executive Officer of Harvard
Private Capital Group, Inc.
Timothy O. Fisher Vice President of The Hillman Group
Principal Officers
- ------------------
Michael R. Gallagher Chief Executive Officer and Director
Michael F. Goss Executive Vice President, Chief Financial Officer,
and Director
Richard G. Powers President, Personal Products Division
Max R. Recone President, Consumer Products Division
James S. Cook Senior Vice President, Operations
Irwin S. Butensky Senior Vice President, Research & Development
John D. Leahy Vice President, Sales
Paul E. Yestrumskas Vice President, General Counsel and Secretary
Frank M. Sanchez Vice President, Human Resources
Glenn A. Forbes Vice President, Finance
38
EXHIBIT 22(a)
Subsidiaries of Playtex Products, Inc.
Percent Jurisdiction of
Corporation Ownership Incorporation
----------- --------- -------------
Playtex Products, Inc. Delaware
Playtex Marketing Corporation 50% Delaware
Playtex Beauty Care, Inc. 100% Delaware
Playtex Sales & Services, Inc. 100% Delaware
Playtex Manufacturing, Inc. 100% Delaware
Sun Pharmaceuticals Corp. 100% Delaware
SmileTote, Inc. 100% California
Playtex Investment Corp. 100% Delaware
Playtex International Corp. 100% Delaware
Playtex Ltd. 100% Canada
TH Marketing Corp. 100% Delaware
Playtex Foreign Sales Corporation 100% Barbados
EXHIBIT 23
The Board of Directors
Playtex Products, Inc.:
We consent to incorporation by reference in the registration statement (No.
33-88806) on Form S-8 of Playtex Products, Inc. of our reports dated February 7,
1997, relating to the consolidated balance sheets of Playtex Products, Inc. and
subsidiaries as of December 28, 1996 and December 30, 1995, and the related
consolidated statements of operations, redeemable preferred stock, common stock,
and other stockholders' equity, and cash flows for the twelve months ended
December 28, 1996, December 30, 1995 and December 31, 1994 and related schedule,
which reports appear or are incorporated by reference in the December 28, 1996
annual report on Form 10-K of Playtex Products, Inc.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-28-1996
<CASH> 6,205
<SECURITIES> 0
<RECEIVABLES> 65,740
<ALLOWANCES> 1,758
<INVENTORY> 37,637
<CURRENT-ASSETS> 122,491
<PP&E> 121,946
<DEPRECIATION> 68,538
<TOTAL-ASSETS> 660,331
<CURRENT-LIABILITIES> 115,969
<BONDS> 714,700
0
0
<COMMON> 509
<OTHER-SE> (283,236)
<TOTAL-LIABILITY-AND-EQUITY> 660,331
<SALES> 498,742
<TOTAL-REVENUES> 498,742
<CGS> 192,512
<TOTAL-COSTS> 192,512
<OTHER-EXPENSES> 207,030
<LOSS-PROVISION> 325
<INTEREST-EXPENSE> 64,860
<INCOME-PRETAX> 34,340
<INCOME-TAX> 16,141
<INCOME-CONTINUING> 18,199
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,199
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
