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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 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 25, 1999
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. 1-12620
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
Westport, Connecticut 06880
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(Address of principal executive offices)
Telephone number: (203) 341-4000
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(Registrant's telephone number, including area code)
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 |X|.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 15, 2000 was $317,717,063 (based on the closing sale
price of $11 5/8 on March 15, 2000 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 15, 2000, 60,761,329 shares of Playtex Products, Inc. common
stock, par value $.01 per share, were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE:
PART OF FORM 10-K
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Portions of our definitive Proxy Statement (the "Proxy
Statement") for our 2000 Annual Meeting of Stockholders
to be held on May 16, 2000, which will be filed with the
Securities and Exchange Commission within 120 days after
the end of our fiscal year ended December 25, 1999
pursuant to Regulation 14A.................................... III
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TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business...................................................... 5
Item 2. Properties.................................................... 17
Item 3 Legal Proceedings............................................. 17
Item 4. Submission of Matters to a Vote of Security Holders........... 18
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters ........................................ 19
Item 6. Selected Financial Data....................................... 19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 19
Item 7A Quantitative and Qualitative Disclosure about Market Risk..... 19
Item 8. Financial Statements and Supplementary Data................... 20
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ................................... 20
PART III
Item 10. Directors and Executive Officers of the Registrant............ 20
Item 11. Executive Compensation........................................ 20
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 20
Item 13. Certain Relationships and Related Transactions................ 20
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K ................................................ 20
Signatures.................................................... 23
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PART I
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This document includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future results. When we use words in this document such as "anticipates,"
"intends," "plans," "believes," "estimates," "expects," and similar expressions,
we do so to identify forward-looking statements. Our actual results could differ
materially from those anticipated in these forward-looking statements. These
forward-looking statements are affected by risks, uncertainties, and assumptions
that we make, including, among other things:
o price and product changes,
o promotional activity by competitors,
o the loss of a significant customer,
o capacity limitations,
o the difficulties of integrating acquisitions,
o adverse publicity and product liability claims,
o our level of debt,
o future cash flows, and
o dependence on key employees.
You should keep in mind that any forward-looking statement made by us in
this document, or elsewhere, speaks only as of the date on which we make it. New
risks and uncertainties come up from time to time, and it's impossible for us to
predict these events or how they may affect us. In light of these risks and
uncertainties, you should keep in mind that any forward-looking statement made
in this report or elsewhere might not occur.
TRADEMARKS
We have proprietary rights to a number of trademarks important to our
businesses, such as: BABY MAGIC, BANANA BOAT, BINACA, BINKY, BIOSUN, CHUBS, COOL
COLORZ, COOLSTRAW, DIAPARENE, DIAPER GENIE, DENTAX, DOROTHY GRAY, DROP-INS,
GENTLE GLIDE, HANDSAVER, MOST LIKE MOTHER, MR. BUBBLE, NATURAL ACTION, OGILVIE,
QUICKSTRAW, QUIK BLOK, SAFE'N SURE, SILK GLIDE, SIPEASE, SLIMFITS, TAN EXPRESS,
TEK, TUSSY, and WET ONES. We also own a royalty free license in perpetuity to
the PLAYTEX and LIVING trademarks, and to the WOOLITE trademark for rug and
upholstery cleaning products in the United States and Canada.
All references to market share and market share data are for the years
indicated and represent our percentage of the total dollar volume of products
purchased by consumers in the applicable category (dollar market share). This
information is provided to us from the ACNielsen Company.
ITEM 1. BUSINESS
A. HISTORY
Our business was founded in 1932 under the name International Latex
Company and operated for many years prior to 1986 under the name International
Playtex, Inc. In the mid-1950's, using latex technology developed for the
manufacture of girdles, we began to market household gloves. This was the first
of many products to constitute our consumer products division. Through the
marketing of gloves, the addition of disposable nursers in the mid-1960's and
the acquisition in 1967 and the expansion of our tampon manufacturing business,
we established a major presence in the drug store, supermarket and mass
merchandise channels of distribution.
In 1986, we were taken private in a management led leveraged buyout and,
in 1988, we were reorganized by certain management investors and others. In the
reorganization, Playtex Apparel, Inc. ("Apparel"), which manufactures women's
intimate apparel, was spun-off to the management of that business. Today, we no
longer have any corporate relationship with Apparel, except that we each own 50%
of the stock of Playtex Marketing Corporation ("Playtex Marketing"), which owns
the PLAYTEX and LIVING trademarks. Playtex Marketing licenses the PLAYTEX and
LIVING
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trademarks to us on a royalty-free perpetual basis. In 1994, we completed an
initial public offering of our common stock. Our common stock trades on the New
York Stock Exchange under the symbol "PYX".
In 1995, a group of investors associated with Haas Wheat & Partners
Incorporated ("Haas Wheat") purchased 20 million shares of our common stock at a
price of $9 per share. The Haas Wheat shares represented approximately 40% of
our outstanding common stock at the time of the investment and individuals
associated with Haas Wheat were elected by our stockholders as a simple majority
of our Board of Directors.
Since 1992, we have acquired a number of leading consumer products brands
and companies, including:
o In December 1992, we acquired 22% of the company that made BANANA
BOAT sun and skin care products. Subsequently, in October 1995, we
acquired the remaining 78% of the company, giving us 100% ownership
of this business. This brand has grown to become the number two
brand (based on dollar market share) in the sun care category.
o In February 1995, we acquired the WOOLITE rug and upholstery
cleaning products business, the number two brand in this category.
We purchased the rights for the United States and Canada.
o In January 1998, we acquired Personal Care Holdings, Inc. ("PCH"),
Carewell Industries, Inc. ("Carewell"), and the BINKY pacifier
business ("BINKY").
>> We acquired PCH for approximately $91.0 million in cash and
approximately 9.3 million shares of our common stock. PCH
manufactured and marketed a number of leading consumer product
brands, including:
o WET ONES-pre-moistened towelettes, the number one brand
in the hands/face towlettes category,
o OGILVIE-home permanent products, the number one brand in
the home permanents category,
o BINACA-breath spray and drops, the number two brand in
the spray and drops breath fresheners category,
o MR. BUBBLE-children's bubble bath products, the number
two brand in the bath additives category,
o CHUBS-baby wipes,
o DIAPARENE-infant care products,
o TUSSY-deodorant,
o DOROTHY GRAY-skin care products, and
o BETTER OFF-depilatories.
>> We acquired Carewell for approximately $9.2 million. Carewell
manufactured and marketed certain value-priced oral care
products, including DENTAX toothbrushes, toothpaste, and
dental floss.
>> We acquired BINKY for approximately $1.7 million. BINKY
manufactured and marketed BINKY pacifiers.
o In January 1999, we acquired the DIAPER GENIE business for
approximately $72.0 million in cash and $50.0 million principal
amount of 6% convertible notes. DIAPER GENIE is the market leading
diaper disposal system.
o In June 1999, we acquired the BABY MAGIC brand for approximately
$90.0 million. BABY MAGIC sells infant related bath, lotion,
shampoo, oil and powder products. BABY MAGIC is the number two brand
in the baby care category. We purchased the rights for the United
States and Canada.
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B. EXECUTIVE OFFICERS OF REGISTRANT
Listed below are our executive officers and a short description of their
prior work experiences. There are no family relationships or arrangements
between any of them pursuant to which they were hired or promoted by the
Company. Ages and positions are shown as of March 15, 2000.
NAME AGE POSITION
Michael R. Gallagher 54 Chief Executive Officer and Director
Glenn A. Forbes 49 Executive Vice President and Chief
Financial Officer
Richard G. Powers 54 President, Personal Products Division
Max R. Recone 44 President, Consumer Products Division
James S. Cook 48 Senior Vice President, Operations
Irwin S. Butensky, Ph.D. 64 Senior Vice President, Biomedical and
Administrative Services
Paul A. Siracusa, Ph.D. 43 Senior Vice President, Research and
Development
John D. Leahy 46 Senior Vice President, Corporate Sales
/ International
Paul E. Yestrumskas 48 Vice President, General Counsel and
Secretary
MICHAEL R. GALLAGHER has been Chief Executive Officer and a Director since
1995. Prior to joining the Company, Mr. Gallagher was Chief Executive Officer of
North America for Reckitt & Colman PLC ("R&C") (a consumer products company)
from 1994 to 1995. Mr. Gallagher was President and Chief Executive Officer of
Eastman Kodak's L&F Products subsidiary from 1988 until the subsidiary was sold
to R&C in 1994. From 1984 to 1988, Mr. Gallagher held various executive
positions with the Lehn & Fink Group of Sterling Drug. From 1982 to 1984, he was
Corporate Vice President and General Manager of the Household Products Division
of the Clorox Company ("Clorox"). Prior to that, Mr. Gallagher had various
marketing and general management assignments with Clorox and with the Procter &
Gamble Company ("P&G"). Presently he serves as a director of Allergan, Inc. and
the Grocery Manufacturers Association.
GLENN A. FORBES has been Executive Vice President and Chief Financial
Officer since March 2000. He has served the Company for the past 28 years in
various finance and accounting positions, including Vice President, Finance from
1988 to 2000.
RICHARD G. POWERS has been President, Personal Products Division since
1996. Prior to joining us, Mr. Powers was President of R&C's North American
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 President, Consumer Products Division since 1996.
From 1995 to 1996, he was Vice President and Business Manager for our Sun Care,
Hair Care and Household Products brands. From 1993 to 1995, he served as Vice
President-Banana Boat. From 1992 to 1993, he was our Vice President of Sales.
From 1990 to 1992, Mr. Recone served as Vice President/General Manager of our
Canadian subsidiary.
JAMES S. COOK has been Senior Vice President, Operations since 1991. From
1990 to 1991, he was our Vice President of Dover Operations. From 1988 to 1990,
he was our Vice President of Distribution, Logistics & Management Information
Systems. From 1982 to 1988, Mr. Cook held various senior level positions in
manufacturing and distribution with us. From 1974 to 1982, he held various
manufacturing and engineering positions at P&G.
IRWIN S. BUTENSKY, PH.D. has been Senior Vice President, Biomedical and
Administrative Services since January 1999. From 1990 to 1999, he was our Senior
Vice President Research and Development. From 1979 to 1990, he was our Vice
President of Research & Development. From 1967 to 1979, Dr. Butensky held
several senior technical positions at Richardson-Vicks, Inc., his last being
Director of Dermatology Research.
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PAUL A SIRACUSA, PH.D. has been Senior Vice President, Research and
Development since March 2000. From 1997 to March 2000, he was Senior Vice
President Research and Development for R&C. From 1995 to 1997, he was Divisional
Vice President of Research & Development, North America for R&C. From 1992 to
1995, he was Director of Technology for the Lehn & Fink Group of Sterling Drug.
Prior to that, he held various Research and Development positions with Henkel
Corporation, International Flavors and Fragrances, and Union Carbide
Corporation.
JOHN D. LEAHY has been Senior Vice President, Corporate Sales /
International since 1998. From 1996 until 1998, he was our Vice President of
Corporate Sales / International. From 1993 to 1996, he was our Vice President of
Sales. From 1982 to 1993, Mr. Leahy held various sales positions with us.
PAUL E. YESTRUMSKAS has been Vice President, General Counsel and Secretary
since December 1995. Prior to joining us, 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
We are a leading manufacturer and marketer of a diversified portfolio of
well-recognized branded consumer and personal products, including:
o PLAYTEX Infant Care products,
o PLAYTEX Feminine Care products,
o BANANA BOAT Sun Care products,
o PLAYTEX Gloves, and
o WOOLITE rug and upholstery cleaning products.
As a result of the acquisitions in 1998 and 1999, we added a number of
widely-recognized branded consumer products to further strengthen and diversify
our product line, including:
o CHUBS baby wipes,
o WET ONES pre-moistened towelettes,
o BINKY pacifiers,
o MR. BUBBLE children's bubble bath products,
o BINACA breath spray and drops,
o OGILVIE home permanent products,
o DENTAX oral care products,
o DIAPER GENIE diaper pails, and
o BABY MAGIC lotion, shampoo, oil, and powder products.
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Our net sales for each of the past three fiscal years ended 1999, 1998,
and 1997 are provided based on our divisional structure. The results for 1999
and 1998 include the results of the acquired brands since the date of their
acquisition by us. We acquired the BABY MAGIC business on June 30, 1999, the
DIAPER GENIE business on January 29, 1999, Personal Care Holdings Inc., on
January 28, 1998, the BINKY pacifier business on January 26, 1998, and Carewell
Industries Inc., on January 6, 1998 (dollars in millions):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
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DECEMBER 25, DECEMBER 26, DECEMBER 27,
PRODUCT LINE 1999 PRINCIPAL BRAND NAMES 1999 1998 1997
- ------------ -------------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Personal Products Division:
Infant Care................................. PLAYTEX, CHUBS, WET ONES,
BINKY, MR. BUBBLE,
DIAPER GENIE, BABY MAGIC $ 269.0 $ 197.5 $ 107.1
Feminine Care............................... PLAYTEX 224.1 198.0 170.0
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Total Personal Products Division.......... 493.1 395.5 277.1
Consumer Products Division:
Sun Care.................................... BANANA BOAT, BIOSUN 103.6 88.0 84.5
Household Products.......................... PLAYTEX, WOOLITE 56.5 58.3 51.6
Personal Grooming........................... OGILVIE, TUSSY, BINACA, TEK,
DENTAX 52.0 53.2 19.6
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Total Consumer Products Division.......... 212.1 199.5 155.7
International and Other Division............... 82.5 74.6 67.8
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Total .................................. $ 787.7 $ 669.6 $ 500.6
========= ======== =========
</TABLE>
In 1999, approximately 89% of our sales came from products in which we
held the number one or two market share position.
D. BUSINESS SEGMENTS AND PRODUCT LINES
We are organized in three divisions, which allows us to focus more
effectively on individual product lines, category management initiatives, and
the efficient integration of acquired brands. Our two largest divisions, the
Personal Products Division and the Consumer Products Division, constituted
approximately 90% of our consolidated net sales in 1999.
PERSONAL PRODUCTS DIVISION--The Personal Products Division accounted for
approximately 63%, 59%, and 55% of our consolidated net sales for each of the
past three fiscal years ended 1999, 1998, and 1997. This Division includes
Feminine Care and Infant Care products sold in the United States (excluding
Puerto Rico). The Infant Care product category includes:
o PLAYTEX disposable nurser system, cups and reusable hard bottles,
o WET ONES hand and face towelettes,
o BABY MAGIC bath, oil, lotion and powders,
o BINKY pacifiers,
o MR. BUBBLE children's bubble bath,
o CHUBS baby wipes,
o DIAPARENE infant care products, and
o DIAPER GENIE diaper disposal system.
The Feminine Care product category includes a wide range of plastic and
cardboard applicator tampons marketed under such brand names as PLAYTEX: GENTLE
GLIDE, SILK GLIDE AND SLIMFITS.
INFANT CARE--Infant Care accounted for approximately 55%, 50%, and 39% of
net sales for the Personal Products Division for each of the past three fiscal
years ended 1999, 1998, and 1997. As a result of the recent acquisitions, Infant
Care has surpassed Feminine Care as our largest product category in terms of net
sales.
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Our largest Infant Care business is infant feeding products, in which we
held a market leading 42% dollar market share in 1999. We are particularly
strong in both the disposable feeding and the infant cup categories with 1999
dollar market shares of 84% and 61%, respectively. In the pre-moistened
towelette business, our WET ONES hand and face towelette brand held a 79% dollar
market share of the hand and face segment, while our CHUBS baby wipe brand held
a 4% dollar market share in 1999.
The PLAYTEX disposable feeding system, introduced in 1960, was the first
disposable system on the market. Since that time, we have provided innovative
product improvements as a healthy alternative to breast feeding. In 1996, we
introduced our DROP-INS ready formed disposable bottle. Since its introduction
in 1996, DROP-INS has steadily increased its market share in the disposable
feeding category. In 1999, DROP-INS constituted approximately 31% of total
disposable liners used by consumers based on consumption data from the ACNielsen
Company.
In 1994, we introduced the Spill-Proof cup. Sales of the popular 6-ounce
version and a larger 9-ounce size have increased our dollar market share in the
infant cup category to 61% in 1999 from 29% in 1994. In 1996, we introduced
another innovative cup product, the QUICKSTRAW cup, and in late 1997 introduced
an insulated version of the QUICKSTRAW cup, the COOLSTRAW cup. Prior to our
introduction of the Spill-Proof cup, there was really no distinct market segment
for children's cups. The Spill-Proof cup revolutionized this category. The cup
category increased in dollar terms from approximately $34 million in 1994 to
$103 million in 1999. Our 1999 dollar market share is down approximately 6
percentage points versus 1998. This decline is due to the influx of additional
product offerings, many of which are lower priced than ours, as competitors
looked to profit on this new category. In response to this competitive threat,
we continue to develop new product offerings, introducing in late 1999 a
six-color version of our popular Spill-Proof cup and the BIG SIPSTER, a cup
targeted at older children.
We entered the pre-moistened towelette business in early 1998 with the
acquisition of WET ONES, the market leader in the hand and face segment of the
market. These products are used by parents in applications other than diaper
changing, such as cleaning up after meals or traveling away from home.
Historically, WET ONES has been offered in both canister and travel pack form,
but in 1998, we introduced new individually wrapped towelettes, called WET ONES
SINGLES, and another individually wrapped product targeted for children's lunch
boxes called LUNCHKINS. WET ONES is the leader in the hands and face towelette
segment with a 79% dollar market share in 1999.
We also entered the baby wipe business in early 1998 with the acquisition
of the CHUBS and DIAPARENE brands. Our initial focus has been on improving
product quality and consumer appeal including softer, quilted material and
greater refill count sizes.
Our acquisitions of the MR. BUBBLE children's bubble bath business and the
BINKY pacifier business provide us with new platforms for leveraging strong
Infant Care brands into new avenues for growth. MR. BUBBLE commands an 86% brand
awareness level among consumers and, similarly, we believe the BINKY trademark
is particularly well known among parents and is well suited for further growth
through product line extensions, better retail merchandising and more innovative
forms of consumer marketing.
Through our recent acquisitions of the DIAPER GENIE business and the BABY
MAGIC brand, we have added two premium brands and expanded the growth potential
of our Infant Care category. DIAPER GENIE dominates the diaper disposal market
with a 94% dollar market share in 1999. The DIAPER GENIE business is comprised
of two segments:
o DIAPER GENIE diaper pail unit, and
o DIAPER GENIE liner refills, the largest component of the business.
The diaper pail unit individually seals diapers in an odor-proof, germ-proof
chain. The unit uses our proprietary refill liners. A supply of liners lasts
approximately one month. A large percentage of the diaper pail units are given
to expectant mothers as gifts. This provides a unique opportunity to begin
cross-marketing our entire line of infant care products before the baby arrives.
BABY MAGIC occupies the number two position among the branded products in the
U.S. baby care category (defined as lotions, shampoos, powders, bath products,
oils and gift packs), with an especially strong position in the bath and lotion
segments.
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Our carefully designed message of quality for our infant care business,
health and convenience is delivered in a variety of ways including a
professional sampling and advertising program targeting pediatricians and
pediatric nurses. Programs directed to new mothers include distribution of
millions of samples and coupons prenatally via childbirth instructors and
postnatally in hospitals and at home.
FEMININE CARE--PLAYTEX tampons accounted for approximately 45%, 50%, and
61% of net sales for the Personal Products Division for each of the past three
fiscal years ended 1999, 1998, and 1997. As a result of the recent acquisitions,
Feminine Care represents a smaller portion of the Personal Products Division in
terms of net sales compared to recent years. For over 20 years, our tampons have
been the second largest selling tampon brand in the United States, and the
leader in the plastic applicator and deodorant segments.
Tampons represented approximately 40% of the U.S. feminine sanitary
protection market in 1999 and accounted for approximately $860.0 million in
retail sales. In 1999, the tampon market grew 4% in dollar terms versus 5% in
both 1998 and 1997. Our research indicates that brand loyalty rates in the
tampon category are high relative to other consumer product categories. The
research further suggests that women generally develop brand preferences during
their adolescent years and early twenties and are likely to maintain a high
degree of brand loyalty over time.
We have two major product lines in the Feminine Care category: plastic
applicator tampons and cardboard applicator tampons. The plastic applicator
business represented approximately 85% of our branded domestic tampon business
in 1999 and is comprised of two primary product offerings:
o GENTLE GLIDE, our original plastic tampon, and
o SLIMFITS, developed for the first-time tampon user.
The SILK GLIDE brand is our line of cardboard applicator tampons. This
product line features a rounded-tip cardboard applicator and a unique surface
coating that provides the consumer with a quality product in the cardboard
applicator segment of the tampon market.
Our dollar market share of the U.S. tampon market increased to 30% in 1999
from 27% in 1998 and 26% in 1997. This growth in market share is attributable to
our consumer marketing strategy, our focus on product innovation, and our
category building initiatives which include attracting young first time users
and converting feminine protection pad users to tampon users or dual users (i.e.
women who use pads and tampons).
Since 1996, we have gradually focused more of our resources on brand
building activities, such as television and print advertising, and less on trade
promotional activities. The reduction in special offers to the trade had the
effect of destocking inventory balances at both the household and retail level
as consumers and retailers had less incentive to build inventory in their
pantries or warehouses. This destocking occurred primarily in 1997 and early
1998 and was not an issue for us in 1999. With less focus on special trade
offers, our average retail pricing increased approximately 9% since 1997 and our
product shipments are now more aligned with consumer consumption.
Product improvement and innovation have been key components of our recent
market share growth. Since the end of 1996, we introduced three innovative
feminine care products to the market:
o SLIMFITS, developed for young teens,
o GENTLE GLIDE Odor Absorbing, and
o SILK GLIDE Odor Absorbing.
The introductions of SLIMFITS in late 1996, GENTLE GLIDE Odor Absorbing in
late 1997 and SILK GLIDE Odor Absorbing in late 1998 are examples of our
innovative product development and new advertising and promotional strategies.
SLIMFITS were developed to appeal to a key segment of the tampon market: young
teens. SLIMFITS have a softer and more narrow plastic applicator providing for
greater comfort. We believe that SLIMFITS will build our business by encouraging
young women to use tampons rather than pads at an earlier age, and by developing
brand loyalty for our
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tampons at a time when lifelong preferences are being formed. GENTLE GLIDE Odor
Absorbing tampons and SILK GLIDE Odor Absorbing tampons are plastic and
cardboard applicator tampons with an all natural material in the tampons that
absorbs odors without the use of a fragrance or deodorant. These products are
designed to appeal to a large group of women who are concerned with odor
protection yet reluctant to use a fragranced tampon.
An additional avenue for growth is to convert women who are pad users into
tampon users or dual users. We believe this strategy will benefit the tampon
category and result in higher sales for our Feminine Care business.
Our long-term strategy focuses on: (i) consumer-driven brand-building
activities such as advertising and product sampling, (ii) product innovation,
and (iii) building the tampon category by attracting first time users and
converting pad users to tampon users. We believe these initiatives will preserve
our brand's premium price position and maximize cash flow from the business.
CONSUMER PRODUCTS DIVISION--The Consumer Products Division accounted for
approximately 27%, 30%, and 31% of our consolidated net sales for each of the
past three fiscal years ended 1999, 1998, and 1997. This division includes Sun
Care, Household Products, and Personal Grooming products sold in the United
States (excluding Puerto Rico). The Sun Care business consists of an extensive
line of sun care products marketed under the BANANA BOAT and BIOSUN trade names.
The Household Products category includes PLAYTEX Gloves and WOOLITE rug and
upholstery cleaning products. Our Personal Grooming product lines consist of:
o BINACA breath spray and drops,
o OGILVIE at-home permanents,
o DENTAX oral care products,
o TEK toothbrushes,
o DOROTHY GRAY skin care products,
o TUSSY deodorant,
o BETTER OFF depilatories, and
o JHIRMACK hair care products (through May 12, 1999).
On May 12, 1999 we sold the U.S. JHIRMACK business.
SUN CARE--Our Sun Care product lines accounted for approximately 49%, 44%,
and 54% of net sales in the Consumer Products Division for each of the past
three fiscal years ended 1999, 1998, and 1997. Our offerings consist of an
extensive line of sun care products designed for specific uses, such as sun
protection in sun protection factors ("SPFs") from 4 to 50, waterproof and sweat
proof formulas and infant and children's products. We also sell a variety of
BANANA BOAT skin care products, including sunless tanning lotion, after-sun
products, moisturizers and skin treatment formulas containing additives such as
vitamin E and aloe vera gel. Our Sun Care products had a 21% dollar market share
in 1999, up from 19% in 1998 and 18% in 1997.
In 1999, the Sun Care category grew 13% in dollar terms versus 3% in 1998
and 12% in 1997. We believe that the lower category growth experienced in 1998
was due to weather related issues, including the effects of El Nino. We believe
the growth prospects for the sun care market are favorable as a result of
increasing consumer awareness of the need for sunscreen protection and
consumers' desire for sun care products targeted towards their specific age and
needs.
For the 2000 season, we launched several new items including COOL COLORZ
Foaming Sunblock Lotion, a new product which adds to our existing line of
vanishing colored sunblocks with fragrances, and a Hair and Scalp Protector
which helps prevent burned scalps and sun damaged hair. In the tanning segment,
we added a protective tanning oil SPF 15 with carrot extract, the highest SPF
oil available. Also, we launched Thick and Rich Dark Tanning Oil with no SPF
which has a formula that reduces the messiness experienced with most oils.
We focus on a number of different distribution outlets to deliver our Sun
Care products to the consumer. BANANA BOAT is particularly strong with mass
merchandisers among whom the brand held a 24% dollar market share for 1999.
Another valuable part of the focused sales effort for Sun Care products is the
use of more than 35 vans to call on key outlets in the southern and coastal
areas of the country. This ensures product availability and selection in the key
locations during the prime sun care buying season. The van operators manage
product inventory at the store level, invoice customers and transmit key
marketing data to us through a network of hand-held computers. This technology
and the information it supplies provides us with a competitive advantage
relative to our smaller competitors.
12
<PAGE>
Industry convention and the seasonal nature of the sun care business
require that manufacturers of Sun Care products provide retailers with the
opportunity to return unsold products at the end of the season. To better
reflect the impact of potential returns, we provide for estimated returns in our
reported operating results as sales are made throughout the year. As mentioned
previously, weather patterns also impact the success of the sun care season.
HOUSEHOLD PRODUCTS--We compete in two product lines of the Household
Products category: household gloves and rug and upholstery cleaning products.
These products accounted for approximately 27%, 29%, and 33% of net sales in the
Consumer Products Division for each of the past three fiscal years ended 1999,
1998, and 1997.
Since we introduced the first household latex glove in the U.S. in 1954,
PLAYTEX gloves have held the number one market share. Our leading dollar market
share of this category has been maintained at approximately 34% for the last
three years. Our nationally recognized brand name, based upon our reputation for
superior quality, durability and protection, provides a strong competitive
advantage as our primary competition is from private label and regional brands.
The rubber glove category had retail sales of approximately $113.0 million in
1999. Growth in the category is primarily in the disposable segment. In late
1997, we launched PLAYTEX Home Health Care Disposable Gloves to participate in
the fastest growing part of the category.
WOOLITE is the number two rug and upholstery cleaning product in the
United States with a 20% dollar market share in 1999. Since acquiring the brand
in 1995, we have introduced a number of new products and product enhancements,
including:
o new distinctive packaging,
o an improved Pet Stain spray in 1996,
o a new foam Pet Carpet Cleaner in early 1997, and
o a new liquid carpet cleaning product called STAIN SOLUTIONS in early
1998.
PERSONAL GROOMING--Personal Grooming contributed approximately 24%, 27%,
and 13% of net sales in the Consumer Products Division for each of the past
three fiscal years ended 1999, 1998, and 1997. In January 1998, we added the
following brands to our Personal Grooming portfolio as a result of the
acquisition of PCH and Carewell:
o OGILVIE home hair permanents,
o BINACA breath freshener products,
o DENTAX oral care products,
o TUSSY deodorants,
o DOROTHY GRAY skin care products, and
o BETTER OFF depilatories.
Prior to January 1998, our Personal Grooming business consisted of JHIRMACK hair
care products and TEK toothbrushes. On May 12, 1999, we sold the U.S. JHIRMACK
hair care products business to a third party.
Our OGILVIE brand is the market leader of the $40.0 million market for at
home permanents and straighteners with a 58% dollar market share in 1999.
Because this category has declined at an annual rate of approximately 10% per
year since 1992 (11% in 1999), our strategy is to more aggressively consolidate
the market behind our market leadership position and to prudently extend the
well known OGILVIE brand into closely related hair care categories. In 1999, as
an example, we successfully launched OGILVIE Straightener, which removes the
curl from permed hair, controls the curl from naturally curly hair, and delivers
smooth texture to hair. As a result of the early success of OGILVIE
Straightener, we see indications of a slowdown in the decline in the home
permanents/straightener category.
Our BINACA brand of breath fresheners is also a well known brand. It is a
leader in the drop & spray segment of the market with a 41% dollar market share
in 1999. Our research indicates that BINACA has the highest brand awareness
among breath freshener users, and we believe this brand equity can provide a
platform for future growth initiatives. In 1999, efforts to improve front-end
store distribution were launched. In addition, we introduced a new product, FAST
BLAST. These two initiatives resulted in improved dollar market share for
Binaca, up five percentage points versus 1998.
We also compete in the value-priced end of the toothbrush business with
our TEK and DENTAX brands of toothbrushes.
13
<PAGE>
INTERNATIONAL AND OTHER DIVISION--The International and Other Division
constituted 10% of our consolidated net sales for the year ended December 25,
1999. The International and Other Division includes export sales, sales by our
Canadian subsidiary, sales in Puerto Rico and sales of private label tampons.
The International and Other Division sells the same products as available to our
U.S. customers.
E. MARKETING
We allocate a significant portion of our revenues to the advertising and
promotion of our products. Our advertising and promotion expenditures for the
past three years were (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
------------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Total advertising and promotion........ $ 168,878 $ 145,379 $ 114,279
As a % of net sales................. 21.4% 21.7% 22.8%
</TABLE>
Since 1996, we have gradually shifted a greater percentage of our
advertising and promotion budget to brand-building activities, such as
advertising and sampling programs, and have decreased price-oriented promotional
trade activities. This has had the effect of reducing inventory balances at the
trade level in 1997 and early 1998 and better aligning our shipments to the
trade with consumer's purchases of our products.
It is our opinion that we are accountable for, and will benefit from, the
building and development of the product categories in which we compete. As a
result, we are aggressively developing category management programs-the process
of working with our retailers to increase product category sales and
profitability through analysis of consumer buying habits and improved
merchandising techniques.
F. COMPETITION
The markets for our products are highly competitive and they are
characterized by the frequent introduction of new products, often accompanied by
major advertising and promotional programs. We compete primarily on the basis of
product quality, product differentiation and brand name recognition supported by
advertising and promotional programs.
Our competitors consist of a large number of domestic and foreign
companies, a number of which have significantly greater financial resources and
less debt than we do.
We believe that the market for consumer packaged goods is very competitive
and may intensify in the future. Competitive pressures on our products may
result from:
o new product initiatives,
o higher spending for advertising and promotion, and
o continued activity in the private label sector.
G. REGULATION
Government regulation has not materially restricted or impeded our
operations. Certain of our products are subject to regulation under the Federal
Food, Drug and Cosmetic Act and the Fair Packaging and Labeling Act. We are also
subject to regulation by the Federal Trade Commission with respect to the
content of our advertising, our trade practices and other matters. We are
subject to regulation by the United States Food and Drug Administration in
connection with our manufacture and sale of tampons.
14
<PAGE>
H. DISTRIBUTION
We sell our products using approximately 170 direct sales personnel,
independent food brokers and exclusive distributors. Independent brokers
supplement the direct sales force in the food class of trade, by providing more
effective coverage at the store level. For the twelve months ended December 25,
1999 and December 26, 1998, our net sales were distributed to the following
classes of trade:
DECEMBER 25, DECEMBER 26,
Class of Trade 1999 1998
- -------------- ------------- -------------
Mass merchandisers............................ 47% 48%
Supermarkets.................................. 34% 33%
Drug stores................................... 19% 19%
--- ---
Total..................................... 100% 100%
=== ===
Our field sales force makes sales presentations at the headquarters or
home offices of our customers, where applicable, as well as to individual retail
outlets. The sales representatives focus their efforts on selling our products,
providing services to our customers and executing programs to ensure sales to
the ultimate consumer. Consumer-directed programs include arranging for on-shelf
and separate displays, obtaining temporary retail price reductions from the
retailer, and coordinating cooperative advertising participation.
We use four third-party distribution centers to ship the majority of our
products to customers. These distribution centers are geographically located to
maximize our ability to service our customers.
I. RESEARCH AND DEVELOPMENT
In March 1999, we moved our research and development group into a new
state-of-the-art technical center in Allendale, New Jersey. Prior to March 1999,
we maintained our research and development program in Paramus, New Jersey.
Approximately 70 employees are engaged in these programs, for which expenditures
were $10.1 million, $8.4 million and $8.0 million in 1999, 1998 and 1997,
respectively.
The primary focus of our research and development group is to design and
develop new and improved products that address our customers' wants and needs.
In addition, our research and development group provides technology support to
both in-house and contract manufacturing, as well as, safety and regulatory
support to all of our businesses.
J. TRADEMARKS AND PATENTS
We have proprietary rights to a number of trademarks important to our
businesses, such as: BABY MAGIC, BANANA BOAT, BINACA, BINKY, BIOSUN, CHUBS, COOL
COLORZ, COOLSTRAW, DIAPARENE, DIAPER GENIE, DENTAX, DOROTHY GRAY, DROP-INS,
GENTLE GLIDE, HANDSAVER, MOST LIKE MOTHER, MR. BUBBLE, NATURAL ACTION, OGILVIE,
QUICKSTRAW, QUIK BLOK, SAFE'N SURE, SILK GLIDE, SIPEASE, SLIMFITS, TAN EXPRESS,
TEK, TUSSY, and WET ONES. The PLAYTEX and LIVING trademarks in the United States
and Canada are owned by Playtex Marketing. Playtex Marketing is responsible for
protecting, exercising quality control over and enforcing the trademarks. Along
with Apparel, we have a license from Playtex Marketing 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 our license
is for all other products. In all other countries, Apparel retains title to the
PLAYTEX and LIVING trademarks. We have a perpetual, royalty-free license to use
such trademarks for all products other than apparel products in all other
countries. We also own a royalty-free license in perpetuity to use the WOOLITE
trademark for rug and upholstery cleaning products in the United States and
Canada.
15
<PAGE>
We also own various patents related to certain products and their method
of manufacture, including patents for: cardboard and plastic applicators for
tampons, special over wrap for tampons, baby bottles and nipples, disposable
liners and plastic holders for the nurser systems, children's drinking cups,
pacifiers, sunscreen formulation, carpet cleaning compositions, various
containers for liquid and moist wipes products, including special containers for
children's bubble bath.
The patents expire at varying times, ranging from 2002 to 2019. We also
have pending patent applications for various products and methods of manufacture
relating to our tampons, infant feeding and sun care businesses. While we
consider our patents to be important to our business, we believe that the
success of our products is more dependent upon the quality of these products and
the effectiveness of our marketing programs. No single patent is material to our
business.
K. RAW MATERIALS AND SUPPLIERS
The principal raw materials used in the manufacture of our 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, we are not dependent upon a single supplier
in any of our operations for any material essential to our business or not
otherwise commercially available to us. We have been able to obtain an adequate
supply of raw materials, and no shortage of any materials is currently
anticipated.
L. CUSTOMERS AND BACKLOG
No single customer or affiliated group of customers, except Wal-Mart
Stores, Inc., represented over 10% of our net sales in 1999, 1998, and 1997. Our
next three largest customers represented in total approximately 15% of our total
consolidated net sales in 1999 compared to approximately 14% in both 1998 and
1997 (See Note 16 of Notes to Consolidated Financial Statements). In accordance
with industry practice, we grant credit to our customers at the time of
purchase. In addition, we may grant extended payment terms to new customers and
for the initial sales of introductory products and product line extensions. We
also may grant extended terms on our Sun Care products due to industry
convention and the seasonal nature of this business.
Our practice is not to accept returned goods unless authorized by
management of the sales organization. Returns result primarily from damage and
shipping discrepancies. Exceptions to this policy include our Sun Care seasonal
returns. Sun care retailers have the right to return any product that has not
been sold by the end of the Sun Care season, which is normal practice in the sun
care industry. We generally receive returns of our Sun Care products from
September through March following the summer season. We reduce our Sun Care
sales and increase accrued liabilities for these returns throughout the year
based on management's estimates of these returns as a percent of Sun Care
products sold. Refunds made to our customers for returned Sun Care products
subsequently reduce accrued liabilities.
Because of the short period between order and shipment dates (generally
less than one month) for most of our orders, the dollar amount of current
backlog is not considered to be a reliable indication of future sales volume.
M. EMPLOYEES AND LABOR RELATIONS
Our worldwide workforce consisted of approximately 2,140 employees as of
December 25, 1999, of whom approximately 165 were located outside the United
States, primarily in Canada. Of the United States facilities, only the 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 approximately 200 workers at December 25, 1999 and expires on
June 24, 2000. We believe that our labor relations are satisfactory and no
material labor cost increases are anticipated.
16
<PAGE>
N. ENVIRONMENTAL
We believe that we are 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 environmental
expenditures anticipated for the current year.
ITEM 2. PROPERTIES
Our principal executive office is located at 300 Nyala Farms Road,
Westport, Connecticut 06880 and is occupied pursuant to a lease which expires in
2005. Our principal manufacturing and distribution facilities are located in:
o Dover, Delaware,
o Sidney and Streetsboro, Ohio,
o Watervliet, New York, and
o Arnprior and Malton, Canada.
We maintain a research and development facility in Allendale, New Jersey. This
facility is leased for a term of 15 years with two five-year renewal options. We
operate two facilities in Canada. We own the Arnprior facility, which is
primarily a warehouse and assembly operation, and we lease the Malton facility,
which is a warehouse and office site. This lease expires in 2004. The lease on
the Montvale, NJ facility, expiring in 2002, was acquired by us in the PCH
acquisition and a substantial portion of the facility has been subleased, for
the duration of the lease term, to third parties. For 1999, our average
utilization rate of manufacturing capacity was an estimated 81%.
The following table lists our principal properties as of December 25,
1999, which are located in seven states, Puerto Rico and Canada:
NUMBER ESTIMATED
OF SQUARE
FACILITIES FOOTAGE
FACILITIES OWNED ---------- -------
MANUFACTURING/OFFICE/DISTRIBUTION/WAREHOUSE
Dover, DE....................................... 3 710,000
Streetsboro, OH................................. 1 176,700
Watervliet, NY.................................. 1 159,600
Arnprior, Canada................................ 1 91,800
Sidney, OH...................................... 1 54,400
FACILITIES LEASED
OFFICE/DISTRIBUTION/WAREHOUSE
Dover, DE....................................... 4 351,100
Sidney, OH...................................... 2 216,800
Malton, Canada.................................. 1 72,800
Westport, CT.................................... 1 63,100
Allendale, NJ................................... 1 43,500
Montvale, NJ.................................... 1 19,500
Guaynabo, PR.................................... 1 15,700
Orlando, FL..................................... 1 10,400
Spokane, WA..................................... 1 8,400
ITEM 3. LEGAL PROCEEDINGS
Beginning in 1980, published studies reported a statistical association
between tampons use and Toxic Shock Syndrome ("TSS"), a rare, but potentially
serious illness. Since these studies, numerous claims have been filed against
all tampon manufacturers, a small percentage of which have been litigated to
conclusion. The number of TSS claims relating to our tampons has declined
substantially over the years. During the mid-1980s, there were approximately 200
pending claims at any one time relating to our tampons. As of the end of
February 2000, there were approximately 7 pending claims. Additional claims,
however, may be asserted in the future. For TSS claims filed from October 1,
1985 until
17
<PAGE>
November 30, 1995, we are self-insured and bear the costs of defending those
claims, including settlements and trials. Effective December 1, 1995, we
obtained insurance coverage with certain limits in excess of the self-insured
retention of $1.0 million per occurrence / $4.0 million in total, on claims
occurring on or after December 1, 1995.
The incidence rate of menstrually-associated TSS has declined
significantly over the years. The number of confirmed menstrually-related TSS
cases peaked in 1980 at 814, with 38 deaths. At that time, the United States
Center for Disease Control found that 71% of women who developed the condition
had been using a new brand of tampons. That brand of product was removed from
the market and The Food and Drug Administration proposed regulations, which
required all tampon manufacturers to provide TSS warnings on their labeling. In
1981, the incidence of menstrually-related TSS was reported to be 470, with 13
deaths. It has continued to fall since then. The latest data we have from the
Center for Disease Control and Prevention confirms five menstrually-related TSS
cases and no deaths in 1997.
We believe that there are no claims or litigation pending against us,
including the TSS cases, which would have a materially adverse effect on us.
This assessment is based on:
o our experience with TSS cases,
o our evaluation of the 7 pending claims,
o the reported decline in the incidence of menstrually-associated TSS,
o the federally mandated warnings about TSS on and in our tampon
packages, and
o development of case law upholding the adequacy of tampon warnings
which comply with federally mandated TSS warnings.
We have 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. Based on the information currently available to us, the nature and
quantity of material deposited by us and the number of other entities in the PRP
Group which are expected to share in the costs and expenses, we do not believe
that our costs will be material. We will share equally with Apparel all expenses
and costs associated with our involvement with this site.
On August 13, 1998, we filed an action in the United States District
Court, District of Delaware seeking, among other things, a judgment declaring
that the United States Patent No. 5,747,011 (the " '011 patent"), related to a
"sunscreen with disappearing color indicator," and held by Schering-Plough
HealthCare Products, Inc. ("S-P HealthCare"), as assigned, is invalid. On
September 8, 1998, S-P HealthCare answered our complaint denying its material
allegations, and asserted a counterclaim against us for infringement of the '011
patent, seeking unspecified damages and injunctive relief.
The court decided in our favor in the patent dispute with Schering-Plough
HealthCare Products, Inc. regarding "sunscreen with disappearing color
indicator." The Schering-Plough patent was declared invalid. Schering-Plough
applealed that decision to the Federal Circuit Court in Washington DC, which
upheld the lower court's decision in March 2000. In an unrelated matter, IPA, an
investment partnership which owns patents, recently brought an action against us
in Federal Court in Texas alleging that the BANANA BOAT colored sunscreen
products infringes its patents. We have asked the Texas court to transfer the
case to Delaware in light of the delaware decision in the Schering-Plough case.
We are a defendant in various other legal proceedings, claims and
investigations that arise in the normal course of business. In our opinion, the
ultimate disposition of these matters, including those described above, will not
have a material adverse effect on our consolidated financial position, results
of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
18
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
We have two classes of authorized stock:
o Common Stock, par value $.01 per share, 293 holders of record,
authorized 100,000,000 shares, issued and outstanding 60,761,329
shares at March 15, 2000, and
o Preferred stock, par value $.01 per share, authorized 50,000,000
shares, none issued or outstanding as of March 15, 2000.
Our common stock is traded on the New York Stock Exchange under the symbol
"PYX". No cash dividends have ever been paid on our stock, and we are restricted
from paying dividends by the terms of our debt agreements (See Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations-Financial Condition and Note 7 of Notes to Consolidated Financial
Statements).
The following table lists the high and low sale price per share of our
stock during the fiscal years ended December 25, 1999 and December 26, 1998 as
reported by the New York Stock Exchange-Composite Transactions:
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Fiscal 1999
High........................... $ 17 1/8 $ 17 $ 16 5/8 $ 15 1/8
Low............................ $ 13 1/2 $ 14 $ 13 1/16 $ 11 1/2
Fiscal 1998
High........................... $ 14 15/16 $ 17 $ 17 1/8 $ 16 3/4
Low............................ $ 9 7/16 $ 13 5/16 $ 10 1/8 $ 12 1/4
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears on page F-3 of this Form
10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item appears on pages F-4 to F-13 of this
Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We periodically use financial instruments, such as derivatives, to manage
the impact of interest rate changes on our variable rate debt and its effect on
our earnings and cash flows. Our policies prohibit the use of derivative
instruments for the sole purpose of trading for profit on price fluctuations or
to enter into contracts which intentionally increase our underlying interest
rate exposure. At December 25, 1999, our total indebtedness consisted of $560.0
million in fixed rate debt and $427.9 million in variable rate debt. In July
1998, we entered into an interest rate swap agreement, which effectively fixed
the LIBOR rate on $100.0 million of our variable rate debt at 5.455%. This swap
agreement is for a four-year period and may be cancelled by the other party
after July 23, 2000 upon two days' written notice to us. Based on our interest
rate exposure at December 25, 1999, a 1% increase in interest rates would result
in an estimated $3.3 million of additional interest expense on an annualized
basis. (See Note 7 of Notes to Consolidated Financial Statements and Note 17 of
Notes to Consolidated Financial Statements, which appear on pages F-26 to F-28
and on pages F-37 to F-38, respectively, of this Form 10-K).
19
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and related Notes to Consolidated
Financial Statements are filed as part of this Form 10-K and can be found on
pages F-14 to F-53. The Independent Auditors' Report and the Report of
Management, dated January 27, 2000, are filed as part of this Form 10-K and can
be found on pages F-54 and F-55, respectively, of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by these items (except for the information
regarding our executive officers) is incorporated by reference to our Proxy
Statement for the 2000 Annual Meeting of Stockholders. The information regarding
our executive officers called for by Item 401 of Regulation S-K can be found in
Item I(b) on pages 7 to 8 of this Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS
(A) (1) Our Consolidated Financial Statements and related Notes to
Consolidated Financial Statements are filed as part of this Form 10-K and can be
found on pages F-14 to F-53. The Independent Auditors' Report, dated January 27,
2000, is on page F-54 of this Form 10-K.
(A) (2) FINANCIAL STATEMENT SCHEDULE
The following financial statement schedule-Schedule II-Valuation and
Qualifying Accounts, is filed as part of this Form 10-K and is on page 22.
All other schedules are omitted as the required information is not
applicable to us or the information is already presented in our Consolidated
Financial Statements or related Notes to Consolidated Financial Statements.
20
<PAGE>
(A) (3) EXHIBITS
Exhibit 10(c)(1)-First Amendment to the Consulting Agreement between
Playtex Products, Inc., and Joel E. Smilow.
Exhibit 12(a) -Statement re-computation of ratios.
Exhibit 21(a) -Subsidiaries of Playtex.
Exhibit 23 -Consent of KPMG LLP.
See Exhibit Index on Pages X-1 to X-8.
(B) REPORTS ON FORM 8-K
None
21
<PAGE>
PLAYTEX PRODUCTS, INC.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
TWELVE MONTHS ENDED DECEMBER 25, 1999, DECEMBER 26, 1998, AND DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS NET ADDITIONS BALANCE
BEGINNING CHARGED TO RESULTING FROM AT END
OF PERIOD INCOME ACQUISITIONS DEDUCTIONS(1) OF PERIOD
---------- ---------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Receivables:
Allowance for doubtful accounts
December 27, 1997........................ $ (1,758) $ (64) -- $ 153 $ (1,669)
December 26, 1998........................ $ (1,669) $ (243) $ (568) $ 385 $ (2,095)
December 25, 1999........................ $ (2,095) $ (675) $ (167) $ 645 $ (2,292)
</TABLE>
- ----------
(1) Represent accounts written-off.
22
<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 23, 2000
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 23rd day of March, 2000.
SIGNATURES TITLE
- ----------------------------- -------------------------------------------
/S/ ROBERT B. HAAS
- -----------------------------
Robert B. Haas Chairman of the Board and Director
/S/ MICHAEL R. GALLAGHER
- -----------------------------
Michael R. Gallagher Chief Executive Officer and Director
(Principal Executive Officer)
/S/ GLENN A. FORBES
- ----------------------------- Executive Vice President and Chief
Glenn A. Forbes Financial Officer (Principal Financial and
Accounting Officer)
/S/ RICHARD C. BLUM
- -----------------------------
Richard C. Blum Director
/S/ MICHAEL R. EISENSON
- -----------------------------
Michael R. Eisenson Director
/S/ TIMOTHY O. FISHER
- -----------------------------
Timothy O. Fisher Director
- -----------------------------
C. Ann Merrifield Director
/S/ JEFFREY W. UBBEN
- -----------------------------
Jeffrey W. Ubben Director
/S/ WYCHE H. WALTON
- -----------------------------
Wyche H. Walton Director
- -----------------------------
Douglas D. Wheat Director
- -----------------------------
Kenneth F. Yontz Director
23
<PAGE>
PLAYTEX PRODUCTS, INC.
1999 ANNUAL REPORT TO STOCKHOLDERS
<PAGE>
PLAYTEX PRODUCTS, INC.
1999 ANNUAL REPORT TO STOCKHOLDERS
INDEX
PAGE(S)
------------
PART I--FINANCIAL INFORMATION
Selected Financial Data............................................ F-3
Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ F-4 to F-13
Consolidated Financial Statements.................................. F-14 to F-17
Notes to Consolidated Financial Statements......................... F-18 to F-53
PART II--OTHER INFORMATION
Independent Auditors' Report....................................... F-54
Report of Management............................................... F-55
Other Information.................................................. F-56 to F-57
F-2
<PAGE>
PLAYTEX PRODUCTS, INC.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27, DECEMBER 28, DECEMBER 30,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales ................................. $ 787,711 $ 669,613 $ 500,632 $ 498,742 $ 483,581
Gross profit .............................. 456,469 392,058 304,652 306,230 295,452
Operating expenses, excluding
amortization of intangibles ............ 280,176 243,288 192,056 194,184 195,457
Amortization of intangibles ............... 21,064 17,336 12,894 12,846 11,268
Write-off of intangible assets ............ -- -- -- -- 6,441
Operating earnings ........................ 155,229 131,434 99,702 99,200 82,286
Interest expense, net ..................... 78,961 71,518 64,470 64,860 71,361
Net earnings (loss) ....................... $ 44,071 $ 34,230 $ 14,653(1) $ 18,199 $ (5,161)(2)
Net earnings (loss) per share:
Basic .................................. $ .73 $ .58 $ .29 $ .36 $ (.12)
Diluted ................................ $ .72 $ .57 $ .29 $ .36 $ (.12)
Net earnings before extraordinary loss .... $ 44,071 $ 34,230 $ 18,731 $ 18,199 $ 2,774
Net earnings per share before
extraordinary loss:
Basic .................................. $ .73 $ .58 $ .37 $ .36 $ .07
Diluted ................................ $ .72 $ .57 $ .37 $ .36 $ .07
Weighted average common shares outstanding:
Basic .................................. 60,481 59,486 50,923 50,883 42,309
Diluted ................................ 62,553 60,411 51,006 50,939 42,342
BALANCE SHEET DATA (AT PERIOD END):
Working capital ........................... $ 92,006 $ 78,548 $ 56,402 $ 6,522 $ 28,637
Total assets .............................. 1,148,652 899,221 652,558 660,331 682,861
Total long-term debt, excluding due to
related party .......................... 987,876 811,750 737,800 739,700 790,050
Stockholders' equity (deficit) ............ $ (94,868) $ (140,975) $ (268,063) $ (282,727) $ (300,976)
</TABLE>
- ----------
(1) Includes an extraordinary loss of $4.1 million (net of $2.3 million of
income tax benefit) from the early payoff of debt in connection with our
debt refinancing. (See Note 12 of Notes to Consolidated Financial
Statements).
(2) Includes an extraordinary loss of $7.9 million (net of $5.2 million of
income tax benefit) from the early payoff of our senior debt.
F-3
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and
results of operations should be read together with our audited consolidated
financial statements and notes, presented on pages F-14 through F-53.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This document includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future results. When we use words in this document such as "anticipates,"
"intends," "plans," "believes," "estimates," "expects," and similar expressions
we do so to identify forward-looking statements. Our actual results could differ
materially from those anticipated in these forward-looking statements. These
forward-looking statements are affected by risks, uncertainties, and assumptions
that we make, including, among other things:
o price and product changes,
o promotional activity by competitors,
o the loss of a significant customer,
o capacity limitations,
o the difficulties of integrating acquisitions,
o adverse publicity and product liability claims,
o our level of debt,
o future cash flows, and
o dependence on key employees.
You should keep in mind that any forward-looking statement made by us in
this document, or elsewhere, speaks only as of the date on which we make it. New
risks and uncertainties come up from time to time, and it's impossible for us to
predict these events or how they may affect us. In light of these risks and
uncertainties, you should keep in mind that any forward-looking statement made
in this report or elsewhere might not occur.
F-4
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
BASIS OF MANAGEMENT'S DISCUSSION AND ANALYSIS
We are organized in three divisions, which are categorized as business
segments in accordance with generally accepted accounting principles.
Our PERSONAL PRODUCTS DIVISION accounted for 62.6% of our 1999
consolidated net sales. This division includes Infant Care and Feminine Care
products sold in the United States (excluding Puerto Rico). The Infant Care
product category includes the following brands:
Prior to 1998 Acquisitions
- --------------------------
o disposable nurser system
o cups and mealtime products
o reusable hard bottles and
pacifiers
1998 Acquired Brands
- --------------------
o BINKY pacifiers
o MR. BUBBLE children's bubble bath
o CHUBS baby wipes
o DIAPARENE infant care products, and
o WET ONES hand and face towelettes
1999 Acquired Brands
- --------------------
o DIAPER GENIE diaper disposal
system
o BABY MAGIC lotions, shampoos,
powders, bath products, oils
and gift packs
The Feminine Care product category includes a wide range of plastic and
cardboard applicator tampons marketed under such brand names as PLAYTEX: GENTLE
GLIDE, SILK GLIDE AND SLIMFITS.
Our CONSUMER PRODUCTS DIVISION accounted for 26.9% of our 1999
consolidated net sales. This division includes Sun Care, Household Products, and
Personal Grooming products sold in the United States (excluding Puerto Rico).
Sun Care Household Products
-------- ------------------
o BANANA BOAT o PLAYTEX Gloves
o BIOSUN o WOOLITE rug and upholstery cleaning products
Our Personal Grooming business includes:
Prior to 1998 Acquisitions 1998 Acquired Brands
-------------------------- --------------------
o JHIRMACK hair care products o BETTER OFF depilatories
o TEK toothbrushes o BINACA breath spray and drops
o DENTAX oral care products
o DOROTHY GRAY skin care products
o OGILVIE at-home permanents, and
o TUSSY deodorant
In May 1999, we sold our U.S. JHIRMACK business.
Our INTERNATIONAL AND OTHER DIVISION accounted for 10.5% of our 1999
consolidated net sales and includes:
o export sales,
o sales in Puerto Rico,
o sales by our Canadian and Australian subsidiaries, and
o sales of private label tampons.
F-5
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The International and Other Division sells the same products as available to our
U.S. customers. In May 1999, we sold our International JHIRMACK business,
excluding the Canadian business.
Our net sales for each of the past three fiscal years ended 1999, 1998,
and 1997 are provided based on our divisional structure. The results for 1999
and 1998 include the results of the acquired brands since the date of their
acquisition by us. We acquired the BABY MAGIC business on June 30, 1999, the
DIAPER GENIE business on January 29, 1999, Personal Care Holdings Inc., on
January 28, 1998, the BINKY pacifier business on January 26, 1998, and Carewell
Industries Inc., on January 6, 1998 (dollars in millions):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
PRODUCT LINE 1999 PRINCIPAL BRAND NAMES 1999 1998 1997
- ------------ -------------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Personal Products Division:
Infant Care................................. PLAYTEX, CHUBS, WET ONES,
BINKY, MR. BUBBLE,
DIAPER GENIE, BABY MAGIC $ 269.0 $ 197.5 $ 107.1
Feminine Care............................... PLAYTEX 224.1 198.0 170.0
--------- -------- ---------
Total Personal Products Division.......... 493.1 395.5 277.1
Consumer Products Division:
Sun Care.................................... BANANA BOAT, BIOSUN 103.6 88.0 84.5
Household Products.......................... PLAYTEX, WOOLITE 56.5 58.3 51.6
Personal Grooming........................... OGILVIE, TUSSY, BINACA, TEK,
DENTAX 52.0 53.2 19.6
--------- -------- ---------
Total Consumer Products Division.......... 212.1 199.5 155.7
International and Other Division............... 82.5 74.6 67.8
--------- -------- ---------
Total .................................. $ 787.7 $ 669.6 $ 500.6
========= ======== =========
</TABLE>
We evaluate division performance based on their product contribution
excluding general corporate allocations. Product contribution is defined as
gross profit less advertising and sales promotion expenses. All other operating
expenses are managed at a corporate level and are not used by us to evaluate
division results. We do not segregate assets, amortization, capital
expenditures, or interest income and interest expense to divisions. Although
allocated to the divisions, depreciation is not a measurement used by us to
evaluate their performance.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations presents a consolidated view of our results and, where
appropriate, also provides insight to key indicators of division performance.
TWELVE MONTHS ENDED DECEMBER 25, 1999 COMPARED TO
TWELVE MONTHS ENDED DECEMBER 26, 1998
CONSOLIDATED NET SALES--Our consolidated net sales increased 18% to $787.7
million in 1999. Excluding the impact of the 1999 acquisitions and the divested
portion of our JHIRMACK business, our consolidated net sales grew by $55.3
million in 1999, or 8%, compared to 1998.
PERSONAL PRODUCTS DIVISION--Net sales increased 25% to $493.1 million in
1999. Excluding the impact of the 1999 acquisitions, the net sales of the
division grew by $31.4 million, or 8%, compared to 1998.
F-6
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Net sales of Infant Care products increased 36% to $269.0 million in
1999. Excluding the impact of the 1999 acquisitions, our Infant Care net
sales increased by $5.3 million, or 3%, compared to 1998. Our dollar
market share of the infant feeding category decreased 0.2 percentage
points to 41.9% in 1999. This slight decline comes after a number of years
of market share growth, which was at 30% just four years ago. Our 1999
results were negatively affected by competitive pressures in cups, where
our dollar market share declined 6.4 percentage points to 60.5% in 1999.
Also, to a lesser extent, capacity issues in our DROP-INS disposable
feeding product limited sales in 1999 as growth in product demand exceeded
available capacity. We added additional DROP-INS capacity late in 1999 by
adding an additional manufacturing line. The infant feeding category grew
6.7% in dollars in 1999 versus 1998, and the retail consumption of our
products grew 6.3%, slightly below the category.
Net sales of Feminine Care products increased 13% to $224.1 million
in 1999. We experienced dollar market share gains of 2.6 percentage points
to 29.6% of the tampon category in 1999. The tampon category, in dollars,
grew 4.3% versus 1998, and the retail consumption of our products grew
14.3%. This level of performance is the result of our innovative product
development efforts and strong consumer marketing initiatives. We
introduced three innovative products to the market:
o SLIMFITS developed for young teens in 1996,
o GENTLE GLIDE Odor Absorbing in 1997, and
o SILK GLIDE Odor Absorbing in 1998.
The demand for these new products, combined with strong consumer marketing
initiatives and the general strength of our branded tampon business, has
resulted in the need for additional capacity. We anticipate adding three
new machines during 2000. This will increase capacity by an estimated 23%
on an annual basis. Also, we expect to add two additional machines in
2001.
CONSUMER PRODUCTS DIVISION--Net sales increased 6% to $212.1 million in 1999.
Excluding the impact of the divested portion of our JHIRMACK business, net sales
of the division grew by $19.8 million, or 10%, compared to 1998.
Net sales of Sun Care products increased 18% to $103.6 million in
1999. Our dollar market share increased 1.8 percentage points to 20.6% for
1999. The sun care category, in dollars, grew 12.5% and the retail
consumption of our products increased 23.3% compared to 1998. The category
growth and the growth in our consumption were due largely to high consumer
demand for the BANANA BOAT product, increased consumer awareness of the
need for sunscreen protection, and favorable weather across the country
during the sun care season. We also benefited from the successful
introduction of new BANANA BOAT products in 1999, specifically COOL
COLORZ, a colored sunscreen product with disappearing color indicator.
Net sales of Household Products decreased 3% to $56.5 million in
1999. The shortfall was due to a decrease in WOOLITE net sales during
1999. The shortfall in sales was due to strong WOOLITE shipments in 1998
as a result of the launch of a new WOOLITE product and promotional
activity to defend against a new product introduced by a competitor. In
1999, the retail consumption of WOOLITE increased 0.8% versus 1998,
despite a decrease in the category of 1.9%, and our dollar market share
increased 0.5 percentage points to 19.7%. Our gloves business grew its
dollar market share 1.0 percentage point to 34.4% in 1999, and the retail
consumption of our gloves increased 6.1% versus category growth of 3.1%
during the same period. The growth in the gloves category is largely
centered in the disposable segment.
F-7
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Net sales of Personal Grooming decreased 2% to $52.0 million
in 1999. Personal Grooming net sales excluding the divested U.S.
JHIRMACK line increased $6.0 million, or 14%, compared to 1998.
Contributing to this growth were dollar market share gains in both
BINACA and OGILVIE. The dollar market share for BINACA grew five
percentage points to 41.0% in 1999 as a result of the introduction
of a new product, FAST BLAST, and efforts to secure front-end store
placement. The dollar market share for OGILVIE increased eight
percentage points to 57.7% due primarily to new packaging and the
introduction of a new product, OGILVIE Straightener.
INTERNATIONAL AND OTHER DIVISION--Net sales increased 11% to $82.5 million
in 1999. Excluding the impact of the 1999 acquisitions, net sales of the
division increased 5% compared to 1998. The increase was due primarily to
19% growth in net sales by our Canadian subsidiary, which was attributable
primarily to 40% growth in Infant Care and 13% growth in Feminine Care net
sales. Excluding the impact of the 1999 acquisitions, the Canadian Infant
Care product line increased 9% versus 1998.
CONSOLIDATED GROSS PROFIT--Our consolidated gross profit increased 16% to $456.5
million in 1999. As a percent of net sales, gross profit decreased 0.6
percentage points, to 57.9% in 1999. The lower gross profit as a percent of net
sales was due primarily to lower overall gross margins for acquired brands,
costs associated with new product launches and costs associated with keeping up
with increased demand for our more popular products. The dollar increase in
gross profit was due primarily to our higher net sales. We would expect gross
margin percentages in 2000 to be in line with 1999 results.
CONSOLIDATED PRODUCT CONTRIBUTION--Our consolidated product contribution
increased 17% to $287.6 million in 1999. The increase was due primarily to our
higher net sales. As a percent of net sales, product contribution decreased 0.3
percentage points to 36.5% in 1999. The decrease was primarily the result of
lower gross margins offset, in part, by lower overall advertising and sales
promotion expenses as a percentage of net sales.
PERSONAL PRODUCTS DIVISION--Product contribution increased 20% to $200.6
million in 1999. As a percent of net sales, product contribution decreased
1.5 percentage points to 40.7% in 1999. The increase in product
contribution was due primarily to higher net sales. As a percent of net
sales, product contribution decreased due to:
o a change in sales mix to lower gross margin products primarily
associated with the 1999 acquisitions,
o costs associated with new product launches, and
o costs related to capacity constraints in our Feminine Care and
DROP-INS businesses.
CONSUMER PRODUCTS DIVISION--Product contribution increased 7% to $68.2
million in 1999. As a percent of net sales, product contribution increased
0.2 percentage points to 32.2% in 1999. The increase in product
contribution was due primarily to higher net sales.
INTERNATIONAL AND OTHER DIVISION--Product contribution increased 13% to
$25.9 million in 1999. The increase in product contribution was due
primarily to higher net sales, most notably the increase in our Canadian
subsidiaries net sales. As a percent of net sales, product contribution
increased 0.6 percentage points to 31.4% in 1999. This is due primarily to
higher gross margins offset, in part, by higher advertising and sales
promotion expenses as a percentage of net sales.
CONSOLIDATED OPERATING EARNINGS--Our consolidated operating earnings increased
18% to $155.2 million in 1999. The increase in operating earnings was in line
with the growth in our consolidated product contribution.
F-8
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CONSOLIDATED INTEREST EXPENSE--Our consolidated interest expense increased 10%
to $79.0 million in 1999. Average debt for 1999 exceeded the prior year by
approximately $120.0 million, or 15%, due primarily to our purchases of the
DIAPER GENIE business in January 1999 and the BABY MAGIC business in June of
1999. The impact of the additional debt was offset, in part, by lower interest
rates in 1999 compared to 1998.
CONSOLIDATED INCOME TAXES--Our consolidated income taxes increased 25% to $32.2
million in 1999. As a percent of pretax earnings, our effective tax rate
decreased 0.7 percentage points to 42.2% of pretax earnings in 1999. Our
effective tax rate decreases as non-deductible goodwill amortization becomes a
smaller portion of operating earnings.
TWELVE MONTHS ENDED DECEMBER 26, 1998 COMPARED TO
TWELVE MONTHS ENDED DECEMBER 27, 1997
CONSOLIDATED NET SALES--Our consolidated net sales increased 34% to $669.6
million in 1998. Excluding the impact of the 1998 acquisitions, our consolidated
net sales grew by $46.0 million in 1998, or 9%, compared to 1997.
PERSONAL PRODUCTS DIVISION--Net sales increased 43% to $395.5 million in
1998. Excluding the impact of the 1998 acquisitions, the net sales of the
division grew by $46.1 million, or 17%, compared to 1997.
Net sales of our Infant Care products increased 84% to $197.5
million in 1998. These results reflected the impact of the Infant
Care brands acquired in the 1998 acquisitions and continued growth
in our base Infant Care product lines. Excluding the impact of the
1998 acquisitions, our Infant Care net sales increased by $18.1
million, or 17%, compared to 1997. Our pre-acquisition results
consisting of infant feeding and soothing products reflected:
o dollar market share increase of 1.7 points to 42.1% in
1998,
o category growth of 8.5% in dollars, and
o retail consumption growth of 14.4%.
Net sales of our Feminine Care products increased 16% to
$198.0 million in 1998. In December 1997, we successfully launched
GENTLE GLIDE Odor Absorbing, a plastic applicator tampon with an
all-natural material, which absorbs odors rather than masking it
with the use of fragrance or deodorant. This introduction combined
with general strength in our branded tampon business increased our
dollar market share 1.5 points in 1998 to 27.0% of the tampon
market. The tampon category, in dollars, grew 5.2% in 1998, and the
retail consumption of our products increased 11.6%. Shipments to
retailers in the first half of 1997 were negatively impacted by high
retail inventories created by earlier price-oriented promotional
activity and by our strategic decision to reduce these excess
inventories by curtailing trade discount programs.
CONSUMER PRODUCTS DIVISION--Net sales increased 28% to $199.5 million in
1998. Excluding the impact of the 1998 acquisitions, our net sales grew by
$4.6 million in 1998, or 3%, compared to 1997.
Net sales of our Sun Care products increased 4% to $88.0
million in 1998. This growth was attributable to strong distribution
techniques, improved shelf placement at key retailers and targeted,
highly efficient merchandising and marketing programs. Our Sun Care
line continued to gain market share with a dollar market share
increase of 0.7 percentage points to 18.8% in 1998. The sun care
category, in dollars, grew 3.2% for the year, while the retail
consumption of our products increased 6.6% in 1998. This level of
category growth was lower than in recent years due to the impact of
weather conditions, including El Nino.
F-9
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Net sales of our Household Products increased 13% to $58.3
million in 1998. These results reflected: (i) an increase in WOOLITE
dollar market share of 0.9 points to 19.2% and (ii) category growth
in latex gloves of 6.7%. We are the leader in the latex gloves
category.
Net sales of our Personal Grooming products increased 171% to
$53.2 million in 1998. The Personal Grooming brands acquired in the
1998 acquisitions accounted for all of the sales growth, offsetting
a decrease in net sales of JHIRMACK products.
INTERNATIONAL AND OTHER DIVISION--Net sales increased 10% to $74.6 million
in 1998. The acquired brands accounted for all of the growth. Excluding
the impact of the 1998 acquisitions, net sales of our International and
Other Division decreased by 7% compared to 1997. The reasons for the
decrease, were as follows:
o lower reported net sales due to an unfavorable foreign
currency exchange rate for our Canadian subsidiary,
o lower net sales associated with our private label tampon
business, and
o general uncertainty in international markets, including South
America and Asia.
CONSOLIDATED GROSS PROFIT--Our consolidated gross profit increased 29% to $392.1
million in 1998. As a percent of net sales, gross profit decreased 2.3
percentage points to 58.6% in 1998, due primarily to lower overall gross margins
for brands acquired in 1998. The dollar increase in our gross profit was due
primarily to our higher net sales.
CONSOLIDATED PRODUCT CONTRIBUTION--Our consolidated product contribution
increased 30% to $246.7 million in 1998. As a percent of net sales, product
contribution decreased 1.2 percentage points to 36.8% in 1998. The decrease was
due primarily to lower overall gross margins for the brands acquired in 1998.
The dollar increase in product contribution was due primarily to our higher net
sales.
PERSONAL PRODUCTS DIVISION--Product contribution increased 38% to $166.8
million in 1998. As a percent of net sales, product contribution decreased
1.3 percentage points to 42.2%.
CONSUMER PRODUCTS DIVISION--Product contribution increased 26% to $63.9
million in 1998. As a percent of net sales, product contribution decreased
0.7 percentage points to 32.0%.
INTERNATIONAL AND OTHER DIVISION--Product contribution increased 6% to
$23.0 million in 1998. As a percent of net sales, product contribution
decreased 1.4 percentage points to 30.8%.
In all three divisions, the increase in product contribution was primarily
the result of the higher net sales previously noted, and the decline in
product contribution as a percent of net sales was due primarily to lower
gross margins for the brands acquired in 1998.
CONSOLIDATED OPERATING EARNINGS--Our consolidated operating earnings increased
32% to $131.4 million in 1998. The increase in operating earnings resulted from:
o higher net sales resulting from the 1998 acquisitions,
o higher net sales in our pre-acquisition product lines, and
o lower operating expenses as a percent of net sales.
F-10
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CONSOLIDATED INTEREST EXPENSE--Our consolidated interest expense increased 11%
to $71.5 million in 1998. This resulted from an increase in long-term debt of
$74.0 million (including current obligations). We incurred $110.4 million of
additional debt in conjunction with the 1998 acquisitions. Debt repayments
funded by cash generated from operations partially offset the increase in
long-term debt associated with the 1998 acquisitions.
CONSOLIDATED INCOME TAXES--Our consolidated income taxes increased 56% to $25.7
million in 1998. As a percent of pretax earnings, our effective tax rate
decreased 3.9 percentage points to 42.9% of pretax earnings. Our effective tax
rate decreases as non-deductible goodwill amortization becomes a smaller portion
of operating earnings.
FINANCIAL CONDITION AND LIQUIDITY
At December 25, 1999, our working capital (current assets net of current
liabilities) increased $13.5 million to $92.0 million from $78.5 million at
December 26, 1998. The increase resulted primarily from:
o An increase of $27.1 million in receivables, primarily as a result
of higher net sales compared to the fourth quarter of 1998, and
o An increase of $26.7 million in inventory due primarily to growth
resulting from acquisitions and continued growth of our
pre-acquisition businesses. In addition, certain changes in business
relationships resulted in higher investment in inventory previously
owned by outside contractors and distributors.
These increases in current assets were partially offset by increases in current
debt obligations of $19.9 million (debt payments due within the next twelve
months) and higher accrued expenses of $14.0 million. Accrued expenses were
impacted by (i) higher advertising and sales promotion reserves as a result of
the 1999 acquisitions, (ii) higher returns provision related to the timing of
sun care returns, (iii) higher accrued interest related to our higher debt
balances as a result of the 1999 acquisitions, and (iv) higher accrued employee
compensation and benefits. All other working capital components decreased $6.4
million.
Our product lines, with the exception of Sun Care, generally have not been
seasonal. However, sun care product sales are highly seasonal, with 80 to 90
percent of our sales to retailers occurring from December through June. This
seasonality requires increased inventory from December to June to support the
selling season. We experience higher receivables from February to September due
to extended credit terms on our Sun Care sales.
Capital expenditures for equipment and facility improvements were $20.8
million, $16.4 million and $9.0 million for the twelve months ended December 25,
1999, December 26, 1998, and December 27, 1997, respectively. These expenditures
were used primarily to expand capacity in key product areas, upgrade production
equipment and maintain our facilities. Capital expenditures for 2000 are
expected to be between $23.0 million and $25.0 million.
At December 25, 1999, long-term debt (including current portion but
excluding obligations due to related party) was $987.9 million compared to
$811.8 million at December 26, 1998. The increase resulted from additional
borrowings to buy DIAPER GENIE and BABY MAGIC. We made our first payment on the
principal balance of the Term A Loan on September 15, 1999, and have quarterly
principal repayment obligations through the second quarter of the year 2003. At
December 25, 1999, we had $81.1 million of unused credit borrowings under our
revolving credit facility available to us. The amount of money we are able to
borrow from our Revolving Credit Facility reduces over time, with the first
reduction of $5.0 million occurring on December 15, 2000.
F-11
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Terms of the Revolving Credit Facility, Term A Loan and the Term Loan
require us to meet certain financial tests and also include conditions or
restrictions on:
o new indebtedness and liens,
o major acquisitions or mergers,
o capital expenditures and asset sales, and
o dividends and other distributions.
The 9% Senior Subordinated Notes due December 15, 2003 (the "9% Notes") and the
8 7/8% Senior Notes due July 15, 2004 (the "8 7/8% Senior Notes") also contain
similar restrictions and requirements.
We believe that we will generate sufficient cash flow from operations for:
o working capital,
o capital expenditures,
o interest payments on all of our debt, and
o scheduled principal payments under the Term A Loan and the Revolving
Credit Facility.
However, we do not expect to generate sufficient cash flow from operations to
make the final principal payment due in 2003 on the Term Loan and the 9% Notes,
which collectively total $595.5 million, or the $150 million principal payment
due in 2004 on the 8 7/8% Senior Notes. Accordingly, we will have to either
refinance our obligations or raise equity capital to repay the principal amounts
of these obligations. Historically, our cash flows from operations and
refinancing activities have enabled us to meet all of our obligations. However,
we can't guarantee that our operating results will continue to be sufficient or
that future borrowing facilities will be available for the payment or
refinancing of our debt on economically attractive terms.
During 1999, we acquired two businesses. The DIAPER GENIE business was
acquired on January 29, 1999 for a total purchase price of approximately $122.0
million. We paid cash of $72.0 million, which we borrowed from our Revolving
Credit Facility and issued to the sellers a $50.0 million 6% Convertible Note
due January 31, 2004. The BABY MAGIC business was acquired on June 30, 1999 for
a total purchase price of $90.0 million in cash, which we obtained by increasing
our Term A Loan by $100.0 million.
We intend to use more of our available cash flow to reduce our level of
debt. One of our objectives is to reduce our ratio of debt to earnings before
interest, taxes, depreciation and amortization (EBITDA) to below 4.0X by the end
of 2001. In 1999, this ratio was 5.3X. Our fixed principal debt repayment
obligations are (excluding balances outstanding under the Revolving Credit
Facility and due to related party):
o $23.8 million in 2000,
o $45.1 million in 2001,
o $58.7 million in 2002,
o $627.8 million in 2003, and
o $200.0 million in 2004.
We have no debt obligations due after June 15, 2004. In addition, as a result of
our intention to reduce debt and improve certain key leverage ratios, we may pay
more on our debt balances over the next few years than what is contractually
mandated.
We will continue to consider the acquisition of other companies or
businesses that may require us to seek additional debt or equity financing. As
we cannot assure you that such financing will be available to us, our ability to
expand our operations through acquisitions may be restricted. However, we
believe that capital will be available to achieve our acquisition objectives.
Future acquisitions may have an impact on the timing of the debt reduction
objectives previously discussed.
F-12
<PAGE>
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Inflation in the United States and Canada has not had a significant effect
on our operations during recent periods.
CHANGE IN ESTIMATES
Beginning in 1999, we revised our estimated asset lives used to compute
depreciation on most of our buildings from 30 years to 40 years and on a portion
of our building improvements from 10 and 15 years to 20 years. We also revised
the estimated asset lives of our manufacturing equipment and land improvements.
These revisions were made on a prospective basis to more properly reflect how
long the assets usually last. For the year ended December 25, 1999, the change
had the effect of increasing our net earnings by $1.5 million or $.02 per share
on a diluted basis.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June of 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which is effective beginning in fiscal year
2001. The Statement requires the recognition of certain derivative instruments
on the balance sheet, with resulting transition adjustments reported in other
comprehensive earnings or net earnings as the effect of a change in accounting
principle, as appropriate. We are currently evaluating the effect this Statement
will have on our financial position and results from operations.
YEAR 2000
Historically, certain computer programs were written using two digits
rather than four to define the applicable year. As a result, there was concern
that certain software might recognize a date using "00" as 1900 rather than the
year 2000, which could have resulted in computer system failures or
miscalculations. This potential problem was commonly referred to as the Year
2000 ("Y2K") issue. We have not experienced any significant problems associated
with potential Y2K issues. Our efforts to prepare for Y2K cost us approximately
$3.9 million, including approximately $1.1 million spent in 1999. We made
modifications to our primary network and hardware/software infrastructure, our
core transaction processing and financial systems, and our embedded chip
technology in our manufacturing systems. We believe these modifications as well
as other modifications and replaced systems will provide lasting benefits to the
Company. We will continue to monitor our systems for Y2K issues throughout the
year 2000.
F-13
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
-------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales .................................................................. $ 787,711 $ 669,613 $ 500,632
Cost of sales .............................................................. 331,242 277,555 195,980
--------- --------- ---------
Gross profit ........................................................... 456,469 392,058 304,652
--------- --------- ---------
Operating expenses:
Advertising and sales promotion ........................................ 168,878 145,379 114,279
Selling, distribution and research ..................................... 83,915 73,266 58,657
Administrative ......................................................... 27,383 24,643 19,120
Amortization of intangibles ............................................ 21,064 17,336 12,894
--------- --------- ---------
Total operating expenses ........................................... 301,240 260,624 204,950
--------- --------- ---------
Operating earnings .............................................. 155,229 131,434 99,702
Interest expense including related party interest expense
of $12,150, net of related party interest income
of $12,003 for all periods presented ................................... 78,961 71,518 64,470
--------- --------- ---------
Earnings before income taxes and extraordinary loss ............. 76,268 59,916 35,232
Income taxes ............................................................... 32,197 25,686 16,501
--------- --------- ---------
Earnings before extraordinary loss .............................. 44,071 34,230 18,731
Extraordinary loss on early payoff of debt,
net of $2,344 tax benefit .............................................. -- -- (4,078)
--------- --------- ---------
Net earnings .................................................... $ 44,071 $ 34,230 $ 14,653
========= ========= =========
Earnings per share--Basic:
Before extraordinary loss .............................................. $ .73 $ .58 $ .37
Net earnings ........................................................... $ .73 $ .58 $ .29
Earnings per share--Diluted:
Before extraordinary loss .............................................. $ .72 $ .57 $ .37
Net earnings ........................................................... $ .72 $ .57 $ .29
Weighted average shares outstanding:
Basic .................................................................. 60,481 59,486 50,923
Diluted ................................................................ 62,553 60,411 51,006
</TABLE>
See the accompanying notes to consolidated financial statements.
F-14
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 25, DECEMBER 26,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash ................................................................... $ 7,526 $ 6,871
Receivables, less allowance for doubtful accounts ...................... 130,256 103,185
Inventories ............................................................ 85,496 58,790
Deferred income taxes .................................................. 14,937 14,650
Other current assets ................................................... 5,639 5,650
----------- -----------
Total current assets ............................................. 243,854 189,146
Net property, plant and equipment .......................................... 107,193 78,906
Intangible assets, net:
Goodwill ............................................................... 527,683 430,228
Patents, trademarks and other .......................................... 169,531 101,364
Deferred financing costs ................................................... 15,530 16,448
Due from related party ..................................................... 80,017 80,017
Other noncurrent assets .................................................... 4,844 3,112
----------- -----------
Total assets ..................................................... $ 1,148,652 $ 899,221
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................................... $ 45,107 $ 38,298
Accrued expenses ....................................................... 73,994 59,981
Income taxes payable ................................................... 8,934 8,444
Current maturities of long-term debt ................................... 23,813 3,875
----------- -----------
Total current liabilities ........................................ 151,848 110,598
Long-term debt ............................................................. 964,063 807,875
Due to related party ....................................................... 78,386 78,386
Other noncurrent liabilities ............................................... 12,267 14,049
Deferred income taxes ...................................................... 36,956 29,288
----------- -----------
Total liabilities ................................................ 1,243,520 1,040,196
----------- -----------
Stockholders' equity:
Common stock, $0.01 par value, authorized 100,000,000 shares,
issued and outstanding 60,562,327 shares at December 25,1999
and 60,401,822 shares at December 26,1998 ........................... 605 604
Additional paid-in capital ............................................. 519,811 518,179
Retained earnings (deficit) ............................................ (612,764) (656,835)
Foreign currency translation adjustment ................................ (2,520) (2,923)
----------- -----------
Total stockholders' equity ....................................... (94,868) (140,975)
----------- -----------
Total liabilities and stockholders' equity ....................... $ 1,148,652 $ 899,221
=========== ===========
</TABLE>
See the accompanying notes to consolidated financial statements.
F-15
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
COMMON ADDITIONAL RETAINED CURRENCY
SHARES COMMON PAID-IN EARNINGS TRANSLATION
OUTSTANDING STOCK CAPITAL (DEFICIT) ADJUSTMENT TOTAL
----------- --------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 28, 1996 ......... 50,887 $ 509 $ 424,277 $(705,718) $ (1,795) $(282,727)
Net earnings ....................... -- -- -- 14,653 -- 14,653
Foreign currency translation
adjustment ...................... -- -- -- -- (418) (418)
---------
Comprehensive earnings ....... 14,235
Stock issued to employees exercising
stock options ................... 55 -- 429 -- -- 429
--------- --------- --------- --------- --------- ---------
Balance, December 27, 1997 ... 50,942 509 424,706 (691,065) (2,213) (268,063)
Net earnings ....................... -- -- -- 34,230 -- 34,230
Foreign currency translation
adjustment ...................... -- -- -- -- (710) (710)
---------
Comprehensive earnings ....... 33,520
Stock issued to employees exercising
stock options ................... 203 2 2,149 -- -- 2,151
Stock issued in conjunction with
business acquisition ............ 9,257 93 91,324 -- -- 91,417
--------- --------- --------- --------- --------- ---------
Balance, December 26, 1998 ... 60,402 604 518,179 (656,835) (2,923) (140,975)
Net earnings ....................... -- -- -- 44,071 -- 44,071
Foreign currency translation
adjustment ...................... -- -- -- -- 403 403
---------
Comprehensive earnings ....... 44,474
Stock issued to employees exercising
stock options ................... 160 1 1,632 -- -- 1,633
--------- --------- --------- --------- --------- ---------
Balance, December 25, 1999 ... 60,562 $ 605 $ 519,811 $(612,764) $ (2,520) $ (94,868)
========= ========= ========= ========= ========= =========
</TABLE>
See the accompanying notes to consolidated financial statements.
F-16
<PAGE>
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
--------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operations:
Net earnings ............................................................. $ 44,071 $ 34,230 $ 14,653
Non-cash items included in earnings:
Extraordinary loss, net of tax benefit ................................ -- -- 4,078
Amortization of intangibles ........................................... 21,064 17,336 12,894
Amortization of deferred financing costs .............................. 3,398 2,995 2,163
Depreciation .......................................................... 9,847 9,690 7,520
Deferred income taxes ................................................. 9,070 6,244 5,493
Other, net ............................................................ (113) 36 249
Changes in working capital items, net of effects of business acquisitions
and divestitures:
Increase in receivables ............................................. (20,220) (24,003) (2,894)
(Increase) decrease in inventories .................................. (23,568) 254 (4,863)
Decrease (increase) in other current assets ......................... 207 (696) (948)
Increase (decrease) in accounts payable ............................. 4,365 7,064 (11,619)
Increase (decrease) in accrued expenses ............................. 5,539 (4,687) (14,791)
Increase in income taxes payable .................................... 602 4,323 1,843
Increase in accrued interest ........................................ 2,025 431 3,090
--------- --------- ---------
Net cash flows from operations .................................... 56,287 53,217 16,868
Cash flows used for investing activities:
Purchases of property, plant and equipment ............................... (20,802) (16,405) (9,004)
Businesses acquired, net ................................................. (210,109) (106,581) --
--------- --------- ---------
Net cash flows used for investing activities ...................... (230,911) (122,986) (9,004)
Cash flows provided by (used for) financing activities:
Net borrowings (repayments) under working capital credit facilities ...... 32,500 (23,550) 23,550
Long-term debt borrowings ................................................ 150,000 100,000 355,000
Long-term debt repayments ................................................ (6,374) (2,500) (380,450)
Payment of financing costs ............................................... (2,480) (2,692) (9,367)
Issuance of shares of common stock ....................................... 1,633 2,151 429
--------- --------- ---------
Net cash flows provided by (used for) financing activities ........ 175,279 73,409 (10,838)
Increase (decrease) in cash .................................................. 655 3,640 (2,974)
Cash at beginning of period .................................................. 6,871 3,231 6,205
--------- --------- ---------
Cash at end of period ........................................................ $ 7,526 $ 6,871 $ 3,231
========= ========= =========
Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest ............................................................... $ 73,538 $ 68,092 $ 59,217
Income taxes, net of refunds ........................................... $ 22,316 $ 14,753 $ 9,165
</TABLE>
In connection with the acquisition of Personal Care Holdings, Inc. in
1998, we issued 9,257,345 shares of our common stock with a value of $9.875 per
share, totaling $91,417.
See the accompanying notes to consolidated financial statements.
F-17
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--Our consolidated financial statements include
the accounts of all of our subsidiaries. All significant intercompany balances
have been eliminated.
REVENUE RECOGNITION--Revenues are generally recognized when we deliver our
products to customers. Our products, with the exception of Sun Care products,
generally have not been seasonal. However, Sun Care product sales are highly
seasonal, with 80 to 90 percent of our sales to retailers occurring from
December through June. This seasonality requires increased inventory from
December to June to support the selling season. Additionally, extended credit
terms on Sun Care product sales, which are common in the industry, cause us to
experience higher receivables from February to September.
Also common to the industry, customers have the right to return unused Sun
Care products after the summer season. We generally receive returns of our Sun
Care products from September through March following the summer season. We
reduce our Sun Care sales and increase accrued liabilities for these returns
throughout the year based on management's estimates of these returns as a
percent of Sun Care products sold. Refunds made to our customers for returned
Sun Care products subsequently reduce accrued liabilities.
ADVERTISING AND SALES PROMOTION COSTS--Costs incurred for producing and
communicating advertising, coupon and cooperative advertising programs are
generally expensed when incurred.
INVENTORIES--Inventories are stated at the lower of cost (first-in,
first-out basis) or market. Inventory costs include material, labor and
manufacturing overhead.
NET PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are
stated at cost and depreciated on the straight-line method over the estimated
useful life of the asset. Beginning in 1999, we revised our estimated asset
lives used to compute depreciation on most of our buildings from 30 years to 40
years and on a portion of our building improvements from 10 and 15 years to 20
years. We also revised the estimated asset lives of our manufacturing equipment
and land improvements. These revisions were made on a prospective basis to
better reflect how long the assets usually last. For the year ended December 25,
1999, the change had the effect of increasing our net earnings by $1.5 million
or $.02 per share on a diluted basis. Our estimated useful life for significant
fixed asset classes is as follows:
o land improvements range from 15 to 40 years,
o building and improvements range from 20 to 40 years,
o machinery and equipment range from 4 to 15 years, and
o furniture and fixtures range from 5 to 10 years.
INTANGIBLE AND LONG-LIVED ASSETS--Intangible assets include goodwill,
patents, and trademarks. We amortize intangible assets on the straight-line
method over periods not exceeding 40 years. For each intangible asset, we review
certain financial indicators and projections. We calculate anticipated future
cash flows and compare the undiscounted cash flows to the unamortized carrying
value of the asset. If future cash flows are less than the unamortized carrying
value, we charge the deficit to expense.
DEFERRED FINANCING COST--Expenses incurred to issue long-term debt have
been capitalized and are being amortized over the life of the related debt
agreements. These costs, net of accumulated amortization, amounted to $15.5
million and $16.4 million at December 25, 1999 and December 26, 1998,
respectively.
F-18
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES--Deferred tax assets and liabilities are provided using the
asset and liability method for temporary differences between financial and tax
reporting bases using the enacted tax rates in effect for the period in which
the differences are expected to reverse. Valuation allowances are established,
when necessary, to reduce deferred tax assets to amounts that we expect to use.
FOREIGN CURRENCY TRANSLATION--Assets and liabilities of our foreign
subsidiaries have been translated into U.S. dollars at year-end exchange rates.
Revenues and expenses have been translated at average exchange rates for the
year. Net foreign exchange gains or losses are accumulated in a separate section
of stockholders' equity titled "Foreign currency translation adjustment."
INTEREST RATE PROTECTION AGREEMENTS--We selectively enter into interest
rate protection agreements to reduce our financial risk associated with changing
interest rates. Two types of interest rate protection agreements we have used in
the past include:
o Swaps, which are derivative financial instruments that involve
trading of variable rate for fixed rate interest payments, and
o Caps, which are derivative financial contracts that limit net
interest expense in the event interest rates rise above a
predetermined rate.
We do not utilize derivative financial instruments for trading or other
speculative purposes.
FISCAL YEAR--Our fiscal year end is on the last Saturday nearest to
December 31. Reference to the fiscal years ended 1999, 1998, and 1997 are for
the 52 week periods ended December 25, 1999, December 26, 1998, and December 27,
1997.
USE OF ESTIMATES--The preparation of financial statements in accordance
with generally accepted accounting principles requires us to make estimates and
assumptions. These estimates and assumptions affect:
o the reported amounts of revenue and expenses,
o the reported amounts of assets and liabilities, and
o the disclosure of contingent liabilities.
Actual results could vary from our estimates and assumptions.
2. ACQUISITIONS AND DIVESTITURE
1999 ACQUISITIONS
On January 29, 1999, we acquired the DIAPER GENIE business, the leading
diaper disposal system in the U.S., for $72.0 million in cash and the issuance
of $50.0 million of Convertible Notes (see Note 7). We borrowed the cash portion
of the purchase price from our revolving credit facility. The Convertible Notes
have an interest rate of 6% and are convertible after January 29, 2000, at the
holders' option, into approximately 2.6 million shares of our common stock. The
conversion price is approximately $19.15 per share. The notes will mature in
2004 and are callable by us after January 29, 2002.
F-19
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS AND DIVESTITURE (CONTINUED)
On June 30, 1999, we acquired the BABY MAGIC brand of infant-related bath,
lotion, shampoo, oil and powder products for $90.0 million in cash. We borrowed
$100.0 million in cash from our Term A Loan at variable rates of interest to pay
for the acquisition and related fees.
The acquisitions of BABY MAGIC and DIAPER GENIE were accounted for as
purchases, and our consolidated results of operations included the operating
results of these businesses from the dates of acquisition. In addition, these
acquisitions added $113.7 million to goodwill and $75.1 million to trademarks in
1999.
1998 ACQUISITIONS
On January 28, 1998, we acquired Personal Care Holdings, Inc. ("PCH") for
approximately $91.0 million in cash and 9,257,345 shares of our common stock. We
borrowed money from our revolving credit facility for the cash portion of the
deal (see Note 7). On January 6, 1998, we acquired Carewell Industries, Inc.
("Carewell") for approximately $9.2 million in cash. On January 26, 1998, we
acquired the BINKY pacifier business ("Binky") for approximately $1.2 million in
cash and $0.5 million in notes, which were later repaid in 1998. The
acquisitions of PCH, Carewell, and BINKY were accounted for as purchases.
In connection with the 1999 and 1998 acquisitions, we reserved amounts on
our balance sheet for certain direct costs likely to be incurred as a result of
the acquisitions. These costs include at December 25, 1999 (in thousands):
Reserved Amount Balance
Amount Spent Remaining
-------- ------ ---------
Exit costs ........................ $3,653 $2,386 $1,267
Involuntary terminations .......... 3,116 2,548 568
Relocation costs .................. 135 135 --
------ ------ ------
Total ........................ $6,904 $5,069 $1,835
====== ====== ======
The remaining balance is primarily for building lease commitments and severance
costs. The amount reserved for involuntary terminations include 32 sales and
marketing personnel, 15 accounting and finance personnel, 8 manufacturing and
distribution personnel, 7 information technology personnel, 3 executives, and 1
research and development person.
The following pro forma results of operations assume the 1999 acquisitions
had occurred on December 28, 1997. We did not adjust for any consolidation
savings or other changes in revenues or expenses that we feel could occur as a
result of our acquiring these businesses. As a result, the following pro forma
financial information may not represent our operating results or future
operating results if we had acquired these businesses on December 28, 1997.
F-20
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS AND DIVESTITURE (CONTINUED)
TWELVE MONTHS ENDED
---------------------------
DECEMBER 25, DECEMBER 26,
(unaudited, in thousands, except per share data) 1999 1998
------------ ------------
Net sales .................................... $817,310 $760,418
Net earnings ................................. $ 45,985 $ 36,026
Earnings per share:
Basic ................................... $ .76 $ .61
Diluted ................................. $ .75 $ .60
Weighted average shares outstanding:
Basic ................................... 60,481 59,486
Diluted ................................. 62,553 60,411
1999 DIVESTITURE
On May 12, 1999, we sold, on a break-even basis, for cash and future guaranteed
minimum royalty payments, our U.S. and International JHIRMACK hair care
business. We retained the Canadian JHIRMACK business.
3. COMPREHENSIVE EARNINGS
Foreign currency translation adjustment is the only reconciling item
between net earnings and comprehensive earnings. For all of the periods
presented, there were no material differences between net earnings and
comprehensive earnings. Our comprehensive earnings for the last three fiscal
years were (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net earnings .......................... $ 44,071 $ 34,230 $ 14,653
Foreign currency translation adjustment 403 (710) (418)
-------- -------- --------
Comprehensive earnings ........... $ 44,474 $ 33,520 $ 14,235
======== ======== ========
</TABLE>
4. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
BUSINESS SEGMENTS
We are organized in three divisions, which are categorized as business
segments in accordance with generally accepted accounting principles.
F-21
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
Our PERSONAL PRODUCTS DIVISION includes Infant Care and Feminine Care
products sold in the United States (excluding Puerto Rico). The Infant Care
product category includes the following brands:
Prior to 1998 Acquisitions
- --------------------------
o disposable nurser system
o cups and mealtime products
o reusable hard bottles and
pacifiers
1998 Acquired Brands
- --------------------
o BINKY pacifiers
o MR. BUBBLE children's bubble bath
o CHUBS baby wipes
o DIAPARENE infant care products, and
o WET ONES hand and face towelettes
1999 Acquired Brands
- --------------------
o DIAPER GENIE diaper disposal
system
o BABY MAGIC lotions, shampoos,
powders, bath products, oils
and gift packs
The Feminine Care product category includes a wide range of plastic and
cardboard applicator tampons marketed under such brand names as PLAYTEX: GENTLE
GLIDE, SILK GLIDE AND SLIMFITS.
Our CONSUMER PRODUCTS DIVISION includes Sun Care, Household Products, and
Personal Grooming products sold in the United States (excluding Puerto Rico).
Sun Care Household Products
-------- ------------------
o BANANA BOAT o PLAYTEX Gloves
o BIOSUN o WOOLITE rug and upholstery cleaning products
Our Personal Grooming business includes:
Prior to 1998 Acquisitions 1998 Acquired Brands
-------------------------- --------------------
o JHIRMACK hair care products o BETTER OFF depilatories
o TEK toothbrushes o BINACA breath spray and drops
o DENTAX oral care products
o DOROTHY GRAY skin care products
o OGILVIE at-home permanents, and
o TUSSY deodorant
In May 1999, we sold our U.S. JHIRMACK business.
Our INTERNATIONAL AND OTHER DIVISION includes:
o export sales,
o sales in Puerto Rico,
o sales by our Canadian and Australian subsidiaries, and
o sales of private label tampons.
The International and Other Division sells the same products as available
to our U.S. customers. In May 1999, we sold our International JHIRMACK business,
excluding the Canadian business.
We evaluate division performance based on their product contribution
excluding general corporate allocations. Product contribution is defined as
gross profit less advertising and sales promotion expenses. All other operating
expenses
F-22
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
are managed at a corporate level and are not used by us to evaluate division
results. We do not segregate assets, amortization, capital expenditures, or
interest income and interest expense to divisions. Although allocated to the
divisions, depreciation is not a measurement used by us to evaluate their
performance.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
-----------------------------------------------------------------------------------------------
DECEMBER 25, 1999 DECEMBER 26, 1998 DECEMBER 27, 1997
--------------------------- --------------------------- ---------------------------
NET PRODUCT NET PRODUCT NET PRODUCT
SALES CONTRIBUTION SALES CONTRIBUTION SALES CONTRIBUTION
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Personal Products............... $ 493,099 $ 200,632 $ 395,505 $ 166,811 $ 277,137 $ 120,484
Consumer Products............... 212,111 68,198 199,552 63,927 155,715 50,920
International and Other......... 82,501 25,929 74,556 22,961 67,780 21,828
Unallocated charges (1)......... -- (7,168) -- (7,020) -- (2,859)
----------- ----------- ----------- ----------- ----------- -----------
Total consolidated.......... $ 787,711 287,591 $ 669,613 246,679 $ 500,632 190,373
=========== =========== ===========
RECONCILIATION TO
OPERATING EARNINGS:
Selling, distribution
and research................ 83,915 73,266 58,657
Administrative.................. 27,383 24,643 19,120
Amortization of intangibles..... 21,064 17,336 12,894
----------- ----------- -----------
Operating earnings.......... $ 155,229 $ 131,434 $ 99,702
=========== =========== ===========
</TABLE>
- ----------
(1) Certain unallocated corporate charges such as business license taxes and
product liability insurance are included in consolidated gross margin, but not
included in the evaluation of division performance.
The amount of depreciation allocated to the divisions is as follows
(dollars in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Personal Products....................................... $ 5,459 $ 5,416 $ 3,489
Consumer Products....................................... 1,193 1,466 850
International and Other................................. 732 1,176 1,342
---------- ---------- ----------
Depreciation included in product contribution....... 7,384 8,058 5,681
Depreciation not allocated to divisions................. 2,463 1,632 1,839
---------- ---------- ----------
Consolidated depreciation........................... $ 9,847 $ 9,690 $ 7,520
========== ========== ==========
</TABLE>
GEOGRAPHIC AREA INFORMATION
Net sales and product contribution represents sales to unaffiliated
customers only. Intergeographic sales and transfers between geographic areas are
minimal and are not disclosed separately. Net sales and product contribution
within the United States includes all 50 states and its territories. Corporate
charges that are not allocated to divisions (see preceding table) are included
in product contribution for the United States. International net sales and
product contribution represents business activity outside of the United States
and its territories.
F-23
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------------------------------------------------------------
DECEMBER 25, 1999 DECEMBER 26, 1998 DECEMBER 27, 1997
--------------------------- --------------------------- --------------------------
NET PRODUCT NET PRODUCT NET PRODUCT
SALES CONTRIBUTION SALES CONTRIBUTION SALES CONTRIBUTION
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
United States.................... $ 721,061 $ 265,988 $ 609,866 $ 227,359 $ 448,995 $ 173,054
International.................... 66,650 21,603 59,747 19,320 51,637 17,319
----------- ----------- ----------- ----------- ----------- ---------
Total........................ $ 787,711 $ 287,591 $ 669,613 $ 246,679 $ 500,632 $ 190,373
=========== =========== =========== =========== =========== =========
</TABLE>
Identifiable assets by geographic area represent those assets that are
used in our operations in each area.
DECEMBER 25, DECEMBER 26,
Identifiable Assets 1999 1998
- ------------------- ------------ ------------
United States ........................ $1,130,970 $ 885,538
International ........................ 17,682 13,683
---------- ----------
Total ............................ $1,148,652 $ 899,221
========== ==========
5. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are as follows (in
thousands):
DECEMBER 25, DECEMBER 26,
1999 1998
------------ ------------
Receivables .................................. $ 132,548 $ 105,280
Less allowance for doubtful accounts ......... (2,292) (2,095)
--------- ---------
Net .................................... $ 130,256 $ 103,185
========= =========
Inventories:
Raw materials ............................ $ 27,974 $ 17,722
Work in process .......................... 532 763
Finished goods ........................... 56,990 40,305
--------- ---------
Total .................................. $ 85,496 $ 58,790
========= =========
Net property, plant and equipment:
Land ..................................... $ 2,376 $ 1,435
Buildings ................................ 37,165 30,000
Machinery and equipment .................. 154,848 130,000
--------- ---------
194,389 161,435
Less accumulated depreciation ............ (87,196) (82,529)
--------- ---------
Net .................................... $ 107,193 $ 78,906
========= =========
Goodwill ..................................... $ 666,912 $ 553,443
Less accumulated amortization ................ (139,229) (123,215)
--------- ---------
Net .................................... $ 527,683 $ 430,228
========= =========
F-24
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. BALANCE SHEET COMPONENTS (CONTINUED)
DECEMBER 25, DECEMBER 26,
1999 1998
------------ ------------
Patents, trademarks and other .................. $ 183,934 $ 119,769
Less accumulated amortization .................. (14,403) (18,405)
--------- ---------
Net ...................................... $ 169,531 $ 101,364
========= =========
Deferred financing costs ....................... $ 25,522 $ 23,042
Less accumulated amortization .................. (9,992) (6,594)
--------- ---------
Net ...................................... $ 15,530 $ 16,448
========= =========
Accrued expenses:
Advertising and sales promotion ............ $ 29,011 $ 22,580
Employee compensation and benefits ......... 13,894 11,917
Interest ................................... 11,078 9,053
Insurance .................................. 3,189 3,038
Other ...................................... 16,822 13,393
--------- ---------
Total .................................... $ 73,994 $ 59,981
========= =========
6. DUE FROM RELATED PARTY
Our business is unrelated to the business of Playtex Apparel, Inc.
("Apparel"), which was spun-off from us in 1988 in a reorganization of the
Company. Two of our former directors and senior executive officers are general
partners of the investor group (the "Apparel Partnership") which controlled
Apparel until they were later sold. Playtex Investment Corp., one of our
wholly-owned subsidiaries, is the holder of 15% debentures issued by the Apparel
Partnership due December 15, 2003. Interest on the debentures is payable
annually in cash or additional debentures. The Apparel Partnership decided to
make their debenture payments in additional debentures through their December
15, 1993 payment and have paid in cash since then. 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 25, 1999 and December 26, 1998 of approximately $5.9
million and $7.9 million, cash of approximately $0.5 million and $0.2 million
and our 15 1/2% subordinated notes held by them (see Note 8). We believe our
debentures represent their only material liability.
F-25
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
DECEMBER 25, DECEMBER 26,
1999 1998
------------ ------------
1997 Credit Agreement:
Term A Loan .............................. $ 151,126 $ 55,000
Revolving Credit Facility ................ 32,500 --
Term Loan ................................ 244,250 246,750
6% Convertible Subordinated Notes due 2004 ... 50,000 --
8 7/8% Senior Notes due 2004 ................. 150,000 150,000
9% Senior Subordinated Notes due 2003 ........ 360,000 360,000
--------- ---------
987,876 811,750
Less current maturities .................. (23,813) (3,875)
--------- ---------
Total long-term debt .................. $ 964,063 $ 807,875
========= =========
On July 21, 1997, we completed a refinancing of our senior indebtedness,
which included:
o the issuance of $150.0 million principal amount of 8 7/8% senior
notes due July 15, 2004 (the "8 7/8% Senior Notes"),
o a $150.0 million senior secured term loan due September 15, 2003
(the "Term Loan"), and
o senior secured credit facilities of $170.0 million comprised of:
>> $115.0 million revolving credit facility (the "Revolving
Credit Facility") and
>> $55.0 million term loan facility (the "Term A Loan").
In connection with the 1998 acquisitions (see Note 2), we increased our
indebtedness by:
o $100.0 million under the Term Loan for the PCH acquisition,
o $10.4 million under the Revolving Credit Facility for the
acquisitions of Carewell and BINKY, and
o $0.5 million by issuing a note for the acquisition of BINKY. This
was repaid in 1998.
In connection with the 1999 acquisitions (see Note 2), we increased our
indebtedness by:
o $100.0 million under the Term A Loan for the BABY MAGIC acquisition,
o $72.0 million under the Revolving Credit Facility, and
o $50.0 million by issuing the Convertible Notes for the DIAPER GENIE
acquisition.
On February 2, 1994, we issued $360.0 million aggregate principal of 9%
senior subordinated notes due December 15, 2003 (the "9% Notes"). The interest
on the 9% Notes is payable in cash semi-annually on each June 15 and December 15
with the final principal payment due on December 15, 2003.
The Term Loan provides for quarterly repayment of principal of $625,000
from March 15, 1998 through June 15, 2003. The final payment of $235.5 million
is due on September 15, 2003.
Principal repayments on the Term A Loan, are:
o $21.3 million in fiscal 2000,
o $42.6 million in fiscal 2001,
o $56.2 million in fiscal 2002, and
o $31.0 million in fiscal 2003.
F-26
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT (CONTINUED)
The Revolving Credit Facility matures on June 15, 2003. The amounts we are
able to borrow under this facility decrease by:
o $5.0 million on December 15, 2000 and June 15, 2001,
o $7.0 million on December 15, 2001 and June 15, 2002, and
o $8.0 million on December 15, 2002 and June 15, 2003.
Fees and expenses we have incurred to issue long-term debt have been
capitalized and are being amortized over the life of the related debt
agreements. These deferred financing costs, net of accumulated amortization, at
December 25, 1999 include $6.8 million for the 1997 Credit Agreement, $5.4
million for the 9% Notes, and $3.3 million for the 8 7/8% Senior Notes.
We periodically use financial instruments, such as derivatives, to manage
the impact of interest rate changes on our variable rate debt. We do not enter
into financial instruments for trading or speculative purposes. In July 1998, we
entered into an interest rate swap agreement, which effectively fixed the LIBOR
rate on $100.0 million of our variable rate debt at 5.455%. This swap agreement
is for a four-year period and may be cancelled by the other party after July 23,
2000 upon two days' written notice to us. Based on our interest rate exposure at
December 25, 1999, a 1% increase in interest rates would result in an estimated
$3.3 million of additional interest expense on an annualized basis.
At December 25, 1999, our total indebtedness consisted of $560.0 million
in fixed rate debt and $427.9 million in variable rate debt. The rates of
interest we pay on our variable rate debt are, at our option, a function of
various alternative short term borrowing rates.
o Our weighted average variable interest rate for our last three
fiscal years ended 1999, 1998, and 1997 was: 6.75%, 7.09% and 7.35%.
o At December 25, 1999, our variable interest rate was 7.18% compared
to 6.66% at December 26, 1998.
We also pay a quarterly commitment fee of three-eighths of one percent on the
portion of our Revolving Credit Facility that we are not using and an
administrative fee of $0.1 million per year.
The provisions of the 1997 Credit Agreement require us to meet certain
financial covenants and ratios and include limitations and restrictions,
including:
o indebtedness and liens,
o major acquisitions or mergers,
o capital expenditures,
o disposition of assets,
o certain dividends and other distributions, and
o prepayment and modification of all indebtedness or equity
capitalization.
The 9% Notes and the 8 7/8% Senior Notes also contain certain restrictions and
requirements. Under the terms of each of these agreements, payment of cash
dividends on our common stock is restricted. Certain of our wholly owned
subsidiaries are guarantors of the 9% Notes and the 8 7/8% Senior Notes (see
Note 19).
F-27
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT (CONTINUED)
Our required principal repayments are (excluding balances outstanding
under the Revolving Credit Facility and due to related party):
o $23.8 million in fiscal 2000,
o $45.1 million in fiscal 2001,
o $58.7 million in fiscal 2002,
o $627.8 million in fiscal 2003, and
o $200.0 million in fiscal 2004.
We have no debt obligations due after June 15, 2004.
8. DUE TO RELATED PARTY
Due to related party consists of 15 1/2% subordinated notes issued by us
and held by the Apparel Partnership. The subordinated notes are due on December
15, 2003 and interest on them is payable annually in cash or additional 15 1/2%
subordinated notes. We decided to make our interest payments on the subordinated
notes in additional subordinated notes through our December 15, 1993 payment and
have paid in cash since then.
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 calculated for
differences between the financial statement and tax bases of assets and
liabilities. These differences will result in taxable or deductible amounts in
the future. Valuation allowances are established, when necessary, to reduce
deferred tax assets to amounts we expect to use.
Earnings before income taxes and extraordinary loss are as follows (in
thousands):
TWELVE MONTHS ENDED
--------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
------------ ------------ ------------
U.S. ...................... $74,135 $58,682 $35,129
Foreign ................... 2,133 1,234 103
------- ------- -------
Total ............... $76,268 $59,916 $35,232
======= ======= =======
F-28
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
Our provision for income taxes for the twelve months ended December 25,
1999, December 26, 1998, and December 27, 1997 is as follows (in thousands):
TWELVE MONTHS ENDED
-----------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
------------ ------------ ------------
Current:
Federal................. $ 20,647 $ 17,568 $ 10,197
State and local......... 1,415 1,242 600
Foreign................. 1,065 632 211
---------- ---------- ----------
23,127 19,442 11,008
Deferred:
Federal................. 8,595 6,177 4,939
State and local......... 544 34 516
Foreign................. (69) 33 38
---------- ---------- ----------
9,070 6,244 5,493
---------- ---------- ----------
Total................. $ 32,197 $ 25,686 $ 16,501
========== ========== ==========
Taxable and deductible temporary differences and tax credit carryforwards
which give rise to our deferred tax assets and liabilities at December 25, 1999
and December 26, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 25, DECEMBER 26,
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Allowances and reserves not currently deductible .. $14,925 $13,838
Net operating loss carryforwards .................. 4,377 7,404
Postretirement benefits reserve ................... 3,878 3,495
Other ............................................. 1,131 1,006
------- -------
Total ........................................... $24,311 $25,743
======= =======
<CAPTION>
DECEMBER 25, DECEMBER 26,
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Deferred gain on sale of business ................. $14,298 $14,298
Property, plant and equipment ..................... 15,523 12,574
Trademarks ........................................ 13,654 10,458
Undistributed earnings of foreign subsidiary ...... 2,515 2,515
Other ............................................. 340 536
------- -------
Total ........................................... $46,330 $40,381
======= =======
</TABLE>
Undistributed earnings of our Canadian subsidiary for which U.S. income
taxes have not been provided were approximately $5.3 million at December 25,
1999. Such undistributed earnings are expected to be permanently reinvested in
the Canadian subsidiary.
We have available net operating loss carryforwards ("NOLs") of $12.2
million at December 25, 1999 that expire in years 2009 through 2012. These NOLs
relate primarily to operations of Banana Boat Holdings and Carewell prior to our
acquisition of them. We can utilize these NOLs, with certain limitations, on our
federal, state and local tax returns. We
F-29
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
expect to utilize these NOLs prior to their expiration. The current benefit
realized from these NOLs was $3.0 million, $3.0 million, and $0.9 million for
the fiscal years ended December 25, 1999, December 26, 1998, and December 27,
1997, respectively.
Our tax provision differed from the amount computed using the federal
statutory rate of 35% as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
--------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Expected federal income tax at statutory rates $ 26,694 $ 20,971 $ 12,331
Amortization of intangible assets ............ 4,487 4,414 3,618
State and local income taxes ................. 1,273 829 725
Other, net ................................... (257) (528) (173)
-------- -------- --------
Total tax provision ...................... $ 32,197 $ 25,686 $ 16,501
======== ======== ========
</TABLE>
10. STOCK-BASED COMPENSATION
During 1994, we established a long-term incentive plan under which awards
of stock options are granted. Options granted under the plan must:
o have an exercise price equal to or greater than the price of the
stock on the date of grant and
o have an expiration date no more than ten years from the grant date.
Except for formula grants to certain non-employee directors, options vest over a
period determined by the Compensation and Stock Option Committee.
In May 1999, our stockholders approved an amendment to the plan increasing
the number of shares available for the exercise of stock options to 7,047,785
shares.
F-30
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK-BASED COMPENSATION (CONTINUED)
We account for stock-based compensation in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation". As permitted by SFAS No. 123, we follow alternate accounting
rules for determining compensation expense related to the issuance of stock
options. If we determined compensation expense under the fair value approach of
SFAS No. 123, our earnings and earnings per share would have been reduced to the
pro forma amounts listed below (in thousands, except per share data):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
------------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net earnings:
As reported:
Before extraordinary loss............. $ 44,071 $ 34,230 $ 18,731
Net earnings.......................... $ 44,071 $ 34,230 $ 14,653
Pro forma:
Before extraordinary loss............. $ 39,414 $ 31,168 $ 17,071
Net earnings.......................... $ 39,414 $ 31,168 $ 12,993
Earnings per share:
As reported--Basic:
Before extraordinary loss............. $ .73 $ .58 $ .37
Net earnings.......................... $ .73 $ .58 $ .29
As reported--Diluted:
Before extraordinary loss............. $ .72 $ .57 $ .37
Net earnings.......................... $ .72 $ .57 $ .29
Pro forma--Basic:
Before extraordinary loss............. $ .65 $ .52 $ .34
Net earnings.......................... $ .65 $ .52 $ .25
Pro forma--Diluted:
Before extraordinary loss............. $ .63 $ .52 $ .34
Net earnings.......................... $ .63 $ .52 $ .25
Weighted average shares outstanding:
Basic.................................... 60,481 59,486 50,923
Diluted.................................. 62,553 60,411 51,006
</TABLE>
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:
o weighted average risk-free interest rates of 5.68%, 5.28%, and 6.10%
for fiscal 1999, 1998, and 1997;
o no dividend yield;
o expected option life of 7 years before exercise or cancellation; and
o volatility of 35%.
F-31
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK-BASED COMPENSATION (CONTINUED)
The following table summarizes our stock option activity over the past three
fiscal years:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- --------------------- ---------------------
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.......... 4,093,260 $ 11.11 2,816,598 $ 9.27 2,315,434 $ 9.14
Granted................................... 788,000 15.50 1,568,000 14.09 636,000 9.59
Exercised................................. (160,505) 8.83 (202,673) 8.78 (54,612) 7.88
Forfeited................................. (139,429) 13.70 (88,665) 10.96 (80,224) 9.13
--------- --------- ---------
Outstanding at end of year................ 4,581,326 11.86 4,093,260 11.11 2,816,598 9.27
========= ========= =========
Options exercisable at year-end........... 2,669,878 10.18 1,912,834 9.21 1,334,087 9.26
Weighted-average fair value
of options granted during the year..... $ 7.48 $ 6.67 $ 4.72
</TABLE>
This table summarizes information about our stock options outstanding at
December 25, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- ----------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED
AT REMAINING AVERAGE AT AVERAGE
DECEMBER 25, CONTRACTUAL EXERCISE DECEMBER 25, EXERCISE
RANGE OF EXERCISE PRICES 1999 LIFE PRICES 1999 PRICES
- ------------------------ ------------ ----------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
$6.75 to 7.00.................... 37,500 4.97 $ 6.7500 37,500 $ 6.7500
$7.00 to 8.00.................... 598,366 5.63 7.8750 598,366 7.8750
$8.00 to 9.00.................... 167,500 6.44 8.6586 160,700 8.6525
$9.00 to 10.00................... 1,430,328 6.24 9.7904 1,260,966 9.8191
$10.00 to 13.00.................. 183,632 7.89 10.1113 70,305 10.1723
$13.00 to 14.00.................. 251,000 6.34 13.4741 161,671 13.2412
$14.00 to 15.00.................. 1,913,000 8.97 15.0000 380,370 14.6637
--------- ---------
$6.75 to 15.00................... 4,581,326 7.37 11.8640 2,669,878 10.1768
========= =========
</TABLE>
F-32
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EARNINGS PER SHARE
The following table explains how our basic and diluted Earnings Per Share
("EPS") were calculated for the last three years (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
--------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Numerator:
Net earnings--Basic .................................... $44,071 $34,230 $14,653
Adjustment for interest on Convertible Notes ........... 788 -- --
------- ------- -------
Net earnings--Diluted .................................. $44,859 $34,230 $14,653
======= ======= =======
Denominator:
Weighted average shares outstanding--Basic ............. 60,481 59,486 50,923
Adjustment for dilutive effect of employee stock options 1,003 925 83
Adjustment for dilutive effect of Convertible Notes .... 1,069 -- --
------- ------- -------
Weighted average shares outstanding--Diluted ........... 62,553 60,411 51,006
======= ======= =======
Basic Earnings Per Share ....................................... $ 0.73 $ 0.58 $ 0.29
Diluted Earnings Per Share ..................................... $ 0.72 $ 0.57 $ 0.29
</TABLE>
Basic EPS excludes all potentially dilutive securities. Basic EPS is
computed by dividing net earnings by the weighted average number of common
shares outstanding for the period. Diluted EPS includes all potentially dilutive
securities. Diluted EPS is computed by dividing net earnings, adjusted by the
if-converted method for convertible securities, by the weighted average number
of common shares outstanding for the period plus the number of additional common
shares that would have been outstanding if the dilutive securities were issued.
In the event the dilutive securities are anti-dilutive (has the affect of
increasing EPS), the impact of the dilutive securities are not included in the
computation.
12. EXTRAORDINARY LOSS
In July 1997, when we refinanced our debt, we recorded an extraordinary
loss of $4.1 million (net of income tax benefit of $2.3 million). The loss was
due to the write-off of the unamortized portion of deferred financing costs
associated with our previous credit agreement (see Note 7).
13. LEASES
Our leases are primarily for buildings, manufacturing equipment, company
cars and information technology equipment. Future minimum payments under
non-cancelable operating leases for fiscal years ending after December 25, 1999
are as follows: $8.7 million in 2000, $7.8 million in 2001, $6.0 million in
2002, $4.9 million in 2003, $4.5 million in 2004 and $6.8 million in later
years.
Rent expense for operating leases amounted to $9.5 million, $8.0 million,
and $5.3 million for our last three fiscal years ended 1999, 1998 and 1997.
F-33
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. PENSION AND OTHER POSTRETIREMENT BENEFITS
Defined Benefit Pension Plans--Substantially all of our U.S. hourly and
most of our Canadian employees participate in pension plans. At December 25,
1999, approximately 1,215 participants were covered by these plans and
approximately 270 of them were receiving benefits.
Changes in pension benefits, which are retroactive to previous service of
employees, and gains and losses on pension assets, 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:
o expected long-term rate of return on plan assets of 9.75% at
December 25, 1999 and 9.0% at December 26, 1998,
o discount rate of 7.75% at December 25, 1999 and 7.0% at December 26,
1998 used in calculating the projected benefit obligation, and
o the rate of average future increases in compensation levels was
3.25% at December 25, 1999 and December 26, 1998.
The pension plans assets are invested primarily in equity and fixed income
mutual funds, marketable equity securities, insurance contracts, and cash and
cash equivalents.
Net pension expense for our last three fiscal years ended 1999, 1998 and
1997 includes the following components (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
--------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
NET PENSION EXPENSE 1999 1998 1997
- ------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Service cost--benefits earned during the period $ 1,094 $ 928 $ 875
Interest cost on projected benefit obligation . 2,334 2,166 2,003
Expected return on plan assets ................ (3,958) (3,052) (2,722)
Amortization of prior service cost ............ 84 88 84
Amortization of unrecognized net gain ......... (234) (79) (29)
Amortization of transition gain ............... (41) (39) (42)
------- ------- -------
Net pension (benefit) expense ............. $ (721) $ 12 $ 169
======= ======= =======
</TABLE>
F-34
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
Reconciliations of the change in benefit obligation, change in plan
assets, and the funded status of the plans for the twelve months ended December
25, 1999 and December 26, 1998 are as follows (in thousands):
DECEMBER 25, DECEMBER 26,
1999 1998
------------ ------------
CHANGE IN BENEFIT OBLIGATION
- ----------------------------
Benefit obligation at beginning of year ...... $ 33,155 $ 29,116
Service cost ................................. 1,094 928
Interest cost ................................ 2,334 2,166
Employee contributions ....................... -- 80
Actuarial (gain) loss ........................ (2,741) 2,252
Expected benefits paid ....................... (1,348) (1,175)
Foreign currency exchange rate changes ....... 151 (212)
-------- --------
Benefit obligation at end of year ........ $ 32,645 $ 33,155
======== ========
DECEMBER 25, DECEMBER 26,
1999 1998
------------ ------------
CHANGE IN PLAN ASSETS
- ---------------------
Fair value of plan assets at beginning of year $ 41,317 $ 34,862
Actual return on plan assets ................. 22,577 7,890
Employee contributions ....................... 4 80
Employer contributions ....................... 8 --
Expected benefits paid ....................... (1,348) (1,175)
Foreign currency exchange rate changes ....... 227 (340)
-------- --------
Fair value of plan assets at end of year . $ 62,785 $ 41,317
======== ========
DECEMBER 25, DECEMBER 26,
1999 1998
------------ ------------
RECONCILIATION OF THE FUNDED STATUS
- -----------------------------------
Funded status ................................ $ 30,140 $ 8,162
Unrecognized transition asset ................ (245) (271)
Unrecognized prior service cost .............. 355 439
Unrecognized actuarial gain .................. (27,346) (6,202)
-------- --------
Prepaid benefit cost ..................... $ 2,904 $ 2,128
======== ========
Postretirement Benefits Other than Pensions--We provide postretirement
health care and life insurance benefits to certain U.S. retirees. These plans
require employees to share in the costs. Approximately 86% of all U.S. personnel
would become eligible for these postretirement health care and life insurance
benefits if they were to retire from the Company.
F-35
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The components of the postretirement net periodic benefit expense for
the twelve months ended December 25, 1999, December 26, 1998, and December 27,
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
--------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
NET PERIODIC POSTRETIREMENT EXPENSE
- -----------------------------------
Service cost--benefits earned during the period $ 424 $ 347 $ 240
Interest cost on accumulated benefit obligation 858 813 621
Amortization of prior service cost ............ 217 217 217
Recognized actuarial loss ..................... 69 54 --
------ ------ ------
Net periodic postretirement expense ....... $1,568 $1,431 $1,078
====== ====== ======
</TABLE>
Reconciliations of the change in benefit obligation, change in plan
assets, and the funded status of the plan for the twelve months ended December
25, 1999 and December 26, 1998 are as follows (in thousands):
DECEMBER 25, DECEMBER 26,
CHANGE IN BENEFIT OBLIGATION 1999 1998
- ---------------------------- ------------ ------------
Benefit obligation at beginning of year ...... $ 12,599 $ 8,938
Service cost ................................. 424 347
Interest cost ................................ 858 813
Employee contributions ....................... 184 131
Plan amendments .............................. 21 327
Actuarial (gain) loss ........................ (1,197) 2,309
Benefits paid ................................ (897) (266)
-------- --------
Benefit obligation at end of year ........ $ 11,992 $ 12,599
======== ========
CHANGE IN PLAN ASSETS
- ---------------------
Fair value of plan assets at beginning of year $ -- $ --
Employer contributions ....................... 713 135
Employee contributions ....................... 184 131
Expected benefits paid ....................... (897) (266)
-------- --------
Fair value of plan assets at end of year . $ -- $ --
======== ========
RECONCILIATION OF THE FUNDED STATUS
- -----------------------------------
Funded status ................................ $(11,992) $(12,599)
Unrecognized prior service cost .............. 1,252 1,469
Unrecognized actuarial loss .................. 1,038 2,306
-------- --------
Net amount accrued at year-end ........... $ (9,702) $ (8,824)
======== ========
F-36
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The assumed health care cost trend rate and discount rate was 8.0% and
7.0% in 1999 compared to 8.5% and 7.5% in 1998. The assumed health care cost
trend rate is anticipated to trend down until the final trend rate of 5.25% is
reached in 2005. A one percentage point increase in the assumed health care
costs trend rate increases the sum of the service and interest costs components
of the fiscal 1999 net periodic postretirement benefit expense by 17%, and the
accumulated postretirement benefit obligation as of December 25, 1999 by 13%. A
one percentage point decrease in the assumed health care costs trend rate
decreases the sum of the service and interest costs components of the fiscal
1999 net periodic postretirement benefit expense by 14% and the accumulated
postretirement benefit obligation by 11%.
Defined Contribution Benefit Plans--We also provide two non-contributory
defined contribution plans and a contributory 401(k) plan covering various
employee groups. The amounts charged to earnings for the defined contribution
plans totaled $4.9 million, $4.8 million and $4.1 million for our last three
fiscal years ended 1999, 1998, and 1997.
15. RELATED PARTY TRANSACTIONS
Under a consulting agreement which began in the third quarter of 1995, we
retained our prior chief executive officer, who owns 58.5% of the Apparel
Partnership, as a consultant for a five-year period at an annual fee of $250,000
plus expenses and certain benefits. In August 1999, we amended the consulting
agreement to extend it an additional five-years at no additional cost to the
Company. Rather, we agreed to pay office and secretarial support costs during
the five year extension period in place of the final one and one quarter years
of consulting fees. The consulting agreement does not require the individual to
devote any minimum amount of time to the performance of consulting services.
16. BUSINESS AND CREDIT CONCENTRATIONS
Most of our customers are dispersed throughout the United States and
Canada. No single customer accounted for more than 10% of our consolidated net
sales in 1999, 1998, or 1997 with the exception of our largest customer
(approximately 21% in 1999, 23% in 1998, and 20% in 1997). Sales to this
customer were made primarily from our two largest business segments. At December
25, 1999 and December 26, 1998, no account receivable from any customer was
significant, except for our largest customer (approximately $32.7 million in
1999 and $24.8 million in 1998). Aggregate receivables from high risk customers
are not considered significant and we estimate, based upon past experience, that
we have sufficient reserves to cover any losses arising from those 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.
VARIABLE RATE DEBT--The carrying amounts approximate fair value because
the rate of interest on borrowings under the credit agreement is, at our option,
a function of various alternative short-term borrowing rates.
F-37
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
LONG-TERM DEBT, INTEREST RATE DERIVATIVES, and OTHER FINANCIAL
INSTRUMENTS--The fair value of the following financial instruments was estimated
at December 25, 1999 and December 26, 1998 as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 25, 1999 DECEMBER 26, 1998
------------------------ ------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
9% Senior Subordinated Notes (a)........................... $ 360,000 $ 358,200 $ 360,000 $ 373,500
8 7/8% Senior Notes (a).................................... 150,000 150,563 150,000 157,875
6% Convertible Subordinated Notes due 2004(b).............. 50,000 48,542 -- --
15% Notes due from Playtex Apparel Partners, L.P. (c)...... 80,017 80,017 80,017 80,017
15 1/2% Subordinated Notes due to Playtex Apparel
Partners, L.P. (c)...................................... 78,386 78,386 78,386 78,386
Other noncurrent assets (d)................................ 4,844 4,786 3,112 3,082
Noncurrent liabilities (d)................................. 12,267 12,190 14,049 13,887
Interest Rate Swap (e)..................................... -- 402 -- (2,090)
</TABLE>
- ----------
(a) The estimated fair values were based on the average range of bid/ask
quotes provided by independent securities dealers.
(b) The estimated fair value was based on the net present value of the
interest and principal payments.
(c) The estimated fair values were based on the amount of future cash flows
associated with these instruments, discounted using an appropriate
interest rate.
(d) The estimated fair values were based on a combination of actual cost
associated with recent purchases or the amount of future cash flows
discounted using our borrowing rate for similar instruments.
(e) The estimated fair value was based upon quoted market price (Mark to
Market).
F-38
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. QUARTERLY DATA (UNAUDITED)
The following is a summary of our quarterly results of operations and
market price data for our common stock for our last two fiscal years ended 1999
and 1998 (in thousands, except per share data):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1999 QUARTER QUARTER QUARTER QUARTER
- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales............................... $ 190,452 $ 209,195 $ 187,926 $ 200,138
Operating earnings...................... 42,379 39,079 34,406 39,365
Net earnings............................ 13,571 11,665 8,029 10,806
Earnings per share (a):
Net earnings--basic and diluted..... $ .22 $ .19 $ .13 $ .18
Market price--high...................... $ 17 1/8 $ 17 $ 16 5/8 $ 15 1/8
--low....................... $ 13 1/2 $ 14 $ 13 1/16 $ 11 1/2
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1998 QUARTER QUARTER QUARTER QUARTER
- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales............................... $ 172,689 $ 177,560 $ 162,597 $ 156,767
Operating earnings...................... 37,719 34,398 31,771 27,546
Net earnings............................ 11,310 9,104 7,923 5,893
Earnings per share (a):
Net earnings--basic and diluted..... $ .20 $ .15 $ .13 $ .10
Market price--high...................... $ 14 15/16 $ 17 $ 17 1/8 $ 16 3/4
--low....................... $ 9 7/16 $ 13 5/16 $ 10 1/8 $ 12 1/4
</TABLE>
- ----------
(a) Earnings per share data are 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.
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
8 7/8% SENIOR NOTES DUE 2004
The 8 7/8% Senior Notes are guaranteed by the following wholly-owned
subsidiaries:
o Playtex Sales & Services, Inc. ("PSSI"). PSSI provides sales
solicitation, management and administrative services to us and our
U.S. affiliates.
o Playtex Manufacturing, Inc. ("PMI"). PMI is a contract manufacturer
and contract research and development services provider for us and
our U.S. affiliates.
o Playtex Beauty Care, Inc. ("PBCI"). PBCI is a manufacturer and
distributor of JHIRMACK hair care products (through May 12, 1999).
F-39
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
o Playtex Investment Corp. ("PIC"). PIC is an investment holding
company which holds the Apparel Debentures (see Note 6).
o Playtex International Corp. ("PINTL"). PINTL is the sole shareholder
of Playtex Limited, a manufacturer and distributor of Playtex
products in Canada.
o TH Marketing Corp. ("THMC"). THMC is the sole shareholder of Playtex
Foreign Sales Corporation.
o SmileTote, Inc. ("STI"). STI owns certain intangible assets
associated with our infant feeding business.
o Sun Pharmaceuticals Corp. ("Sun"). Sun owns the BANANA BOAT trade
name and certain other intangible assets associated with the BANANA
BOAT business. Sun distributes its products outside the U.S. and
Puerto Rico and to certain U.S. distributors excluding the Company.
o Personal Care Group, Inc. ("PCG"). PCG is the owner of various
personal care related intangible assets.
o Personal Care Holdings, Inc. ("PCH"). PCH is the sole shareholder of
PCG.
o Carewell Industries, Inc. ("Carewell"). Carewell is the owner of
certain dental care related intangible assets.
The guarantors are joint and several guarantors of the 8 7/8% Senior
Notes. Such guarantees are irrevocable, full and unconditional. The guarantees
are senior subordinated obligations and are subordinated to all senior
obligations including guarantees of our obligations under the credit agreement.
The following wholly-owned subsidiaries are non guarantors of the 8 7/8% Senior
Notes:
o Playtex Limited. Playtex Limited is our Canadian subsidiary.
o Playtex Foreign Sales Corporation ("PFSC"). PFSC is a foreign sales
corporation as defined by Internal Revenue Code Section 922, and
o Personal Care Group Australia PTY LTD ("PCG Aust"). PCG Aust is a
distributor of personal care products in Australia and New Zealand.
The information which follows presents our condensed financial position as
of December 25, 1999 and December 26, 1998 and our condensed statements of
earnings and cash flows for each of our last three fiscal years ended 1999,
1998, and 1997. The presentation is made based on:
o the Company on a consolidated basis,
o the parent company only,
o the combined guarantors, and
o the combined non-guarantors.
F-40
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 25, 1999
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
ASSETS CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Current assets.................................. $ 243,854 $ 8 $ 141,526 $ 86,737 $ 15,583
Investment in subsidiaries...................... -- (442,503) 431,493 11,010 --
Intercompany receivable......................... -- (111,397) 42,387 67,974 1,036
Net property, plant and equipment............... 107,193 -- 135 106,091 967
Intangible assets............................... 712,744 -- 486,725 226,019 --
Other noncurrent assets......................... 84,861 (500) 4,844 80,517 --
------------ ------------- ------------ ----------- ----------
Total assets................................ $ 1,148,652 $ (554,392) $ 1,107,110 $ 578,348 $ 17,586
============ ============= ============ =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities............................. $ 151,848 $ (252) $ 142,621 $ 5,112 $ 4,367
Intercompany payable........................... -- (111,397) -- 108,781 2,616
Long-term debt.................................. 1,042,449 (506) 1,042,955 -- --
Other noncurrent liabilities.................... 49,223 -- 16,402 33,227 (406)
------------ ------------- ------------ ----------- ----------
Total liabilities........................... 1,243,520 (112,155) 1,201,978 147,120 6,577
Stockholders' equity............................ (94,868) (442,237) (94,868) 431,228 11,009
------------ ------------- ------------ ----------- ----------
Total liabilities and stockholders' equity.. $ 1,148,652 $ (554,392) $ 1,107,110 $ 578,348 $ 17,586
============ ============= ============ =========== ==========
</TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 26, 1998
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
ASSETS CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Current assets.................................. $ 189,146 $ 8 $ 116,377 $ 61,001 $ 11,760
Investment in subsidiaries...................... -- (297,273) 288,177 9,095 1
Intercompany receivable......................... -- (88,942) 33,343 54,076 1,523
Net property, plant and equipment............... 78,906 -- 1,368 76,705 833
Intangible assets............................... 548,040 -- 312,890 235,145 5
Other noncurrent assets......................... 83,129 (500) 3,112 80,517 --
------------ ------------- ------------ ----------- ----------
Total assets................................ $ 899,221 $ (386,707) $ 755,267 $ 516,539 $ 14,122
============ ============= ============ =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities............................. $ 110,598 $ 26 $ 99,582 $ 7,297 $ 3,693
Intercompany payable........................... -- (88,942) (106,170) 193,477 1,635
Long-term debt.................................. 886,261 (500) 886,761 -- --
Other noncurrent liabilities.................... 43,337 -- 16,069 27,588 (320)
------------ ------------- ------------ ----------- ----------
Total liabilities........................... 1,040,196 (89,416) 896,242 228,362 5,008
Stockholders' equity............................ (140,975) (297,291) (140,975) 288,177 9,114
------------ ------------- ------------ ----------- ----------
Total liabilities and stockholders' equity.. $ 899,221 $ (386,707) $ 755,267 $ 516,539 $ 14,122
============ ============= ============ =========== ==========
</TABLE>
F-41
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 25, 1999
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues................................... $ 787,711 $ (399,075) $ 741,983 $ 398,280 $ 46,523
Cost of sales.................................. 331,242 (294,977) 321,882 280,166 24,171
----------- ----------- ----------- ----------- ----------
Gross profit............................... 456,469 (104,098) 420,101 118,114 22,352
----------- ----------- ----------- ----------- ----------
Operating expenses:
Advertising, selling and administrative........ 280,176 (104,098) 281,579 84,135 18,560
Amortization of intangibles.................... 21,064 -- 14,060 7,004 --
----------- ----------- ----------- ----------- ----------
Total operating expenses................... 301,240 (104,098) 295,639 91,139 18,560
----------- ----------- ----------- ----------- ----------
Operating earnings......................... 155,229 -- 124,462 26,975 3,792
Interest expense, net.......................... 78,961 -- 91,070 (12,003) (106)
Equity in net earnings of subsidiaries......... -- 28,724 (25,935) (2,789) --
----------- ----------- ----------- ----------- ----------
Earnings before income taxes............... 76,268 (28,724) 59,327 41,767 3,898
Income taxes................................... 32,197 -- 15,256 15,832 1,109
----------- ----------- ----------- ----------- ----------
Net earnings............................... $ 44,071 $ (28,724) $ 44,071 $ 25,935 $ 2,789
=========== =========== =========== =========== ==========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues................................... $ 669,613 $ (307,484) $ 595,947 $ 341,183 $ 39,967
Cost of sales.................................. 277,555 (218,942) 244,496 233,988 18,013
----------- ----------- ----------- ----------- ----------
Gross profit............................... 392,058 (88,542) 351,451 107,195 21,954
----------- ----------- ----------- ----------- ----------
Operating expenses:
Advertising, selling and administrative........ 243,288 (88,542) 235,355 77,159 19,316
Amortization of intangibles.................... 17,336 -- 10,656 6,680 --
----------- ----------- ----------- ----------- ----------
Total operating expenses................... 260,624 (88,542) 246,011 83,839 19,316
----------- ----------- ----------- ----------- ----------
Operating earnings......................... 131,434 -- 105,440 23,356 2,638
Interest expense, net.......................... 71,518 -- 83,621 (12,004) (99)
Equity in net earnings of subsidiaries......... -- 25,234 (23,269) (1,965) --
----------- ----------- ----------- ----------- ----------
Earnings before income taxes............... 59,916 (25,234) 45,088 37,325 2,737
Income taxes................................... 25,686 -- 10,858 14,055 773
----------- ----------- ----------- ----------- ----------
Net earnings............................... $ 34,230 $ (25,234) $ 34,230 $ 23,270 $ 1,964
=========== =========== =========== =========== ==========
</TABLE>
F-42
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues................................... $ 500,632 $ (226,874) $ 443,673 $ 245,797 $ 38,036
Cost of sales.................................. 195,980 (177,208) 186,482 168,411 18,295
----------- ----------- ----------- ----------- ----------
Gross profit............................... 304,652 (49,666) 257,191 77,386 19,741
----------- ----------- ----------- ----------- ----------
Operating expenses:
Advertising, selling and administrative........ 192,056 (49,666) 160,671 62,606 18,445
Amortization of intangibles.................... 12,894 -- 10,618 2,276 --
----------- ----------- ----------- ----------- ----------
Total operating expenses................... 204,950 (49,666) 171,289 64,882 18,445
----------- ----------- ----------- ----------- ----------
Operating earnings......................... 99,702 -- 85,902 12,504 1,296
Interest expense, net.......................... 64,470 -- 76,594 (12,003) (121)
Equity in net earnings of subsidiaries......... -- 17,216 (16,110) (1,106) --
----------- ----------- ----------- ----------- ----------
Earnings before income taxes............... 35,232 (17,216) 25,418 25,613 1,417
Income taxes................................... 16,501 -- 6,687 9,503 311
----------- ----------- ----------- ----------- ----------
Earnings before extraordinary loss......... 18,731 (17,216) 18,731 16,110 1,106
Extraordinary loss on early payoff
of debt, net............................... (4,078) -- (4,078) -- --
----------- ----------- ----------- ----------- ----------
Net earnings............................... $ 14,653 $ (17,216) $ 14,653 $ 16,110 $ 1,106
=========== =========== =========== =========== ==========
</TABLE>
F-43
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 25, 1999
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Net earnings..................................... $ 44,071 $ (28,724) $ 44,071 $ 25,935 $ 2,789
Non-cash items included in earnings:
Amortization of intangibles............... 21,064 -- 14,060 7,004 --
Amortization of deferred financing
costs................................ 3,398 -- 3,398 -- --
Depreciation.............................. 9,847 -- 59 9,504 284
Deferred taxes............................ 9,070 -- 2,244 6,895 (69)
Other, net................................ (113) 28,724 (31,385) 1,797 751
Increase in net working capital.............. (31,050) -- (2,229) (27,647) (1,174)
Increase in amounts due to Parent............ -- -- (24,139) 22,658 1,481
---------- ----------- ---------- ----------- ----------
Net cash flows from operations....... 56,287 -- 6,079 46,146 4,062
Cash flows used for investing activities:
Purchase of property, plant and
equipment................................. (20,802) -- 18,186 (38,968) (20)
Businesses acquired.......................... (210,109) -- (210,109) -- --
---------- ----------- ---------- ----------- ----------
Net cash flows used for investing
activities........................ (230,911) -- (191,923) (38,968) (20)
Cash flows used for financing activities:
Net borrowings under working capital
facilities and long-term debt
obligations............................... 176,126 -- 176,126 -- --
Payment of financing costs................... (2,480) -- (2,480) -- --
Issuance of shares of common stock, net...... 1,633 -- 1,633 -- --
Receipt (payment) of dividends............... -- -- 8,955 (7,645) (1,310)
---------- ----------- ---------- ----------- ----------
Net cash flows provided by
(used for) financing activities... 175,279 -- 184,234 (7,645) (1,310)
Increase in cash................................. 655 -- (1,610) (467) 2,732
Cash at beginning of period...................... 6,871 8 3,462 468 2,933
---------- ----------- ---------- ----------- ----------
Cash at end of period............................ $ 7,526 $ 8 $ 1,852 $ 1 $ 5,665
========== =========== ========== =========== ==========
</TABLE>
F-44
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Net earnings..................................... $ 34,230 $ (25,234) $ 34,230 $ 23,270 $ 1,964
Non-cash items included in earnings:
Amortization of intangibles............... 17,336 -- 10,656 6,680 --
Amortization of deferred financing
costs................................ 2,995 -- 2,995 -- --
Depreciation.............................. 9,690 -- 72 9,376 242
Deferred taxes............................ 6,244 -- 8,318 (2,107) 33
Other, net................................ 36 25,242 (50,682) 26,117 (641)
Increase in net working capital.............. (17,314) -- 4,330 (21,027) (617)
Increase in amounts due to Parent............ -- -- 18,938 (19,775) 837
---------- ----------- ---------- ----------- ----------
Net cash flows from operations....... 53,217 8 28,857 22,534 1,818
Cash flows used for investing activities:
Purchase of property, plant and
equipment................................. (16,405) -- (1,701) (14,421) (283)
Businesses acquired.......................... (106,581) -- (106,581) -- --
---------- ----------- ---------- ----------- ----------
Net cash flows used for investing
activities........................ (122,986) -- (108,282) (14,421) (283)
Cash flows used for financing activities:
Net borrowings under working capital
facilities and long-term debt
obligations............................... 73,950 -- 73,950 -- --
Payment of financing costs................... (2,692) -- (2,692) -- --
Issuance of shares of common stock, net...... 2,151 -- 2,151 -- --
Receipt (payment) of dividends............... -- -- 8,810 (7,645) (1,165)
---------- ----------- ---------- ----------- ----------
Net cash flows provided by
(used for) financing activities... 73,409 -- 82,219 (7,645) (1,165)
Increase in cash................................. 3,640 8 2,794 468 370
Cash at beginning of period...................... 3,231 -- 668 -- 2,563
---------- ----------- ---------- ----------- ----------
Cash at end of period............................ $ 6,871 $ 8 $ 3,462 $ 468 $ 2,933
========== =========== ========== =========== ==========
</TABLE>
F-45
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Net earnings..................................... $ 14,653 $ (17,216) $ 14,653 $ 16,110 $ 1,106
Non-cash items included in earnings:
Extraordinary loss........................ 4,078 -- 4,078 -- --
Amortization of intangibles............... 12,894 -- 10,618 2,276 --
Amortization of deferred financing
costs................................ 2,163 -- 2,163 -- --
Depreciation.............................. 7,520 -- 94 7,191 235
Deferred taxes............................ 5,493 -- 3,752 1,798 (57)
Other, net................................ 249 17,216 (16,742) 42 (267)
Increase in net working capital.............. (30,182) -- (15,852) (11,173) (3,157)
---------- ---------- ---------- ---------- ---------
Net cash flows from operations....... 16,868 -- 2,764 16,244 (2,140)
Cash flows used for investing activities:
Purchase of property, plant and
equipment................................. (9,004) -- (82) (8,599) (323)
---------- ---------- ---------- ---------- ---------
Net cash flows used for investing
activities........................ (9,004) -- (82) (8,599) (323)
Cash flows used for financing activities:
Net repayments under working capital
facilities and long-term debt
obligations............................... (1,900) -- (1,900) -- --
Payment of financing costs................... (9,367) -- (9,367) -- --
Issuance of shares of common stock, net...... 429 -- 429 -- --
Receipt (payment) of dividends............... -- -- 7,645 (7,645) --
---------- ---------- ---------- ---------- ---------
Net cash flows used for financing
activities........................ (10,838) -- (3,193) (7,645) --
Decrease in cash................................. (2,974) -- (511) -- (2,463)
Cash at beginning of period...................... 6,205 -- 1,179 -- 5,026
---------- ---------- ---------- ---------- ---------
Cash at end of period............................ $ 3,231 $ -- $ 668 $ -- $ 2,563
========== ========== ========== ========== =========
</TABLE>
F-46
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
9% SENIOR SUBORDINATED NOTES DUE 2003
The 9% Notes are guaranteed by the following wholly-owned subsidiaries:
o PSSI,
o PMI,
o THMC,
o STI,
o Sun,
o PCG,
o PCH, and
o Carewell.
The guarantors are joint and several guarantors of the 9% Notes. Such
guarantees are irrevocable, full and unconditional. The guarantees are senior
subordinated obligations and are subordinated to all senior obligations
including guarantees of our obligations under the credit agreement.
The following wholly-owned subsidiaries are non-guarantors of the 9% Notes:
o PBCI,
o PIC,
o PINTL,
o Playtex Limited,
o PFSC, and
o PCG Aust.
The information which follows presents our condensed financial position as
of December 25, 1999 and December 26, 1998 and our condensed statements of
earnings and cash flows for each of our last three fiscal years ended 1999,
1998, and 1997. The presentation is made based on:
o the Company on a consolidated basis,
o the parent company only,
o the combined guarantors, and
o the combined non-guarantors.
F-47
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 25, 1999
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets................................... $ 243,854 $ 8 $ 141,526 $ 86,736 $ 15,584
Investment in subsidiaries....................... -- (434,044) 431,493 1,411 1,140
Intercompany receivable.......................... -- (111,397) 42,387 67,409 1,601
Net property, plant and equipment................ 107,193 -- 135 106,091 967
Intangible assets................................ 712,744 -- 486,725 226,019 --
Other noncurrent assets.......................... 84,861 (500) 4,844 -- 80,517
------------ ------------- ------------ ----------- -----------
Total assets................................. $ 1,148,652 $ (545,933) $ 1,107,110 $ 487,666 $ 99,809
============ ============= ============ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities.............................. $ 151,848 $ (252) $ 142,621 $ 5,112 $ 4,367
Intercompany payable............................. -- (111,397) -- 107,396 4,001
Long-term debt................................... 1,042,449 (506) 1,042,955 -- --
Other noncurrent liabilities..................... 49,223 -- 16,402 16,414 16,407
------------ ------------- ------------ ----------- -----------
Total liabilities............................ 1,243,520 (112,155) 1,201,978 128,922 24,775
Stockholders' equity............................. (94,868) (433,778) (94,868) 358,744 75,034
------------ ------------- ------------ ----------- -----------
Total liabilities and stockholders' equity... $ 1,148,652 $ (545,933) $ 1,107,110 $ 487,666 $ 99,809
============ ============= ============ =========== ===========
</TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 26, 1998
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets................................... $ 189,146 $ 8 $ 116,377 $ 59,014 $ 13,747
Investment in subsidiaries....................... -- (290,631) 288,177 1,146 1,308
Intercompany receivable.......................... -- (88,942) 33,343 53,631 1,968
Net property, plant and equipment................ 78,906 -- 1,368 76,312 1,226
Intangible assets................................ 548,040 -- 312,890 233,233 1,917
Other noncurrent assets.......................... 83,129 (500) 3,112 -- 80,517
------------ ------------- ------------ ----------- -----------
Total assets................................. $ 899,221 $ (380,065) $ 755,267 $ 423,336 $ 100,683
============ ============= ============ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities.............................. $ 110,598 $ 26 $ 99,582 $ 6,419 $ 4,571
Intercompany payable............................. -- (88,942) (106,170) 64,861 130,251
Long-term debt................................... 886,261 (500) 886,761 -- --
Other noncurrent liabilities..................... 43,337 -- 16,069 9,350 17,918
------------ ------------- ------------ ----------- -----------
Total liabilities............................ 1,040,196 (89,416) 896,242 80,630 152,740
Stockholders' equity............................. (140,975) (290,649) (140,975) 342,706 (52,057)
------------ ------------- ------------ ----------- -----------
Total liabilities and stockholders' equity... $ 899,221 $ (380,065) $ 755,267 $ 423,336 $ 100,683
============ ============= ============ =========== ===========
</TABLE>
F-48
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 25, 1999
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues.................................... $ 787,711 $ (399,103) $ 741,983 $ 395,950 $ 48,881
Cost of sales................................... 331,242 (294,977) 321,882 278,428 25,909
----------- ------------- ----------- ----------- ----------
Gross profit................................ 456,469 (104,126) 420,101 117,522 22,972
----------- ------------- ----------- ----------- ----------
Operating expenses:
Advertising, selling and administrative......... 280,176 (104,126) 281,579 83,118 19,605
Amortization of intangibles..................... 21,064 -- 14,060 6,976 28
----------- ------------- ----------- ----------- ----------
Total operating expenses.................... 301,240 (104,126) 295,639 90,094 19,633
----------- ------------- ----------- ----------- ----------
Operating earnings.......................... 155,229 -- 124,462 27,428 3,339
Interest expense, net........................... 78,961 -- 91,070 -- (12,109)
Equity in net earnings of subsidiaries.......... -- 31,060 (25,935) (1,586) (3,539)
----------- ------------- ----------- ----------- ----------
Earnings before income taxes................ 76,268 (31,060) 59,327 29,014 18,987
Income taxes.................................... 32,197 -- 15,256 11,581 5,360
----------- ------------- ----------- ----------- ----------
Net earnings................................ $ 44,071 $ (31,060) $ 44,071 $ 17,433 $ 13,627
=========== ============= =========== =========== ==========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues.................................... $ 669,613 $ (309,131) $ 595,947 $ 333,196 $ 49,601
Cost of sales................................... 277,555 (219,148) 244,496 228,690 23,517
----------- ------------- ----------- ----------- ----------
Gross profit................................ 392,058 (89,983) 351,451 104,506 26,084
----------- ------------- ----------- ----------- ----------
Operating expenses:
Advertising, selling and administrative......... 243,288 (89,983) 235,355 72,767 25,149
Amortization of intangibles..................... 17,336 -- 10,656 6,612 68
----------- ------------- ----------- ----------- ----------
Total operating expenses.................... 260,624 (89,983) 246,011 79,379 25,217
----------- ------------- ----------- ----------- ----------
Operating earnings.......................... 131,434 -- 105,440 25,127 867
Interest expense, net........................... 71,518 -- 83,621 (1) (12,102)
Equity in net earnings of subsidiaries.......... -- 27,186 (23,269) (1,317) (2,600)
----------- ------------- ----------- ----------- ----------
Earnings before income taxes................ 59,916 (27,186) 45,088 26,445 15,569
Income taxes.................................... 25,686 -- 10,858 10,311 4,517
----------- ------------- ----------- ----------- ----------
Net earnings................................ $ 34,230 $ (27,186) $ 34,230 $ 16,134 $ 11,052
=========== ============= =========== =========== ==========
</TABLE>
F-49
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues................................... $ 500,632 $ (226,538) $ 443,673 $ 230,102 $ 53,395
Cost of sales.................................. 195,980 (176,872) 186,482 160,609 25,761
----------- ------------- ----------- ----------- ----------
Gross profit............................... 304,652 (49,666) 257,191 69,493 27,634
----------- ------------- ----------- ----------- ----------
Operating expenses:
Advertising, selling and administrative........ 192,056 (49,666) 160,671 51,826 29,225
Amortization of intangibles.................... 12,894 -- 10,618 2,208 68
----------- ------------- ----------- ----------- ----------
Total operating expenses................... 204,950 (49,666) 171,289 54,034 29,293
----------- ------------- ----------- ----------- ----------
Operating earnings (loss).................. 99,702 -- 85,902 15,459 (1,659)
Interest expense, net.......................... 64,470 -- 76,594 -- (12,124)
Equity in net earnings of subsidiaries......... -- 18,418 (16,110) (1,154) (1,154)
----------- ------------- ----------- ----------- ----------
Earnings before income taxes............... 35,232 (18,418) 25,418 16,613 11,619
Income taxes................................... 16,501 -- 6,687 6,229 3,585
----------- ------------- ----------- ----------- ----------
Earnings before extraordinary loss......... 18,731 (18,418) 18,731 10,384 8,034
Extraordinary loss on early payoff
of debt, net............................... (4,078) -- (4,078) -- --
----------- ------------- ----------- ----------- ----------
Net earnings............................... $ 14,653 $ (18,418) $ 14,653 $ 10,384 $ 8,034
=========== ============= =========== =========== ==========
</TABLE>
F-50
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 25, 1999
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net earnings.................................... $ 44,071 $ (31,060) $ 44,071 $ 17,433 $ 13,627
Non-cash items included in earnings:
Amortization of intangibles............. 21,064 -- 14,060 6,976 28
Amortization of deferred financing
costs.............................. 3,398 -- 3,398 -- --
Depreciation............................ 9,847 -- 59 9,469 319
Deferred taxes.......................... 9,070 -- 2,244 6,995 (169)
Other, net.............................. (113) 31,060 (31,385) 1,088 (876)
(Increase) decrease in net
working capital......................... (31,050) -- (2,229) (29,633) 812
Increase in amounts due to Parent........... -- -- (24,139) 26,531 (2,392)
----------- ----------- ----------- ----------- ----------
Net cash flows from operations..... 56,287 -- 6,079 38,859 11,349
Cash flows used for investing activities:
Purchase of property, plant and
equipment............................... (20,802) -- 18,186 (39,326) 338
Businesses acquired......................... (210,109) -- (210,109) -- --
------------ ----------- ----------- ----------- ----------
Net cash flows used for
investing activities........... (230,911) -- (191,923) (39,326) 338
Cash flows used for financing activities:
Net borrowings under working capital
facilities and long-term debt
obligations............................. 176,126 -- 176,126 -- --
Payment of financing costs.................. (2,480) -- (2,480) -- --
Issuance of shares of common stock.......... 1,633 -- 1,633 -- --
Receipt (payment) of dividends.............. -- -- 8,955 -- (8,955)
----------- ----------- ----------- ----------- ----------
Net cash flows used for
financing activities........... 175,279 -- 184,234 -- (8,955)
Increase in cash............................... 655 -- (1,610) (467) 2,732
Cash at beginning of period..................... 6,871 8 3,462 467 2,934
----------- ----------- ----------- ----------- ----------
Cash at end of period........................... $ 7,526 $ 8 $ 1,852 $ -- $ 5,666
=========== =========== =========== =========== ==========
</TABLE>
F-51
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net earnings.................................... $ 34,230 $ (27,186) $ 34,230 $ 16,134 $ 11,052
Non-cash items included in earnings:
Amortization of intangibles............. 17,336 -- 10,656 6,612 68
Amortization of deferred financing
costs.............................. 2,995 -- 2,995 -- --
Depreciation............................ 9,690 -- 72 9,261 357
Deferred taxes.......................... 6,244 -- 8,318 (1,558) (516)
Other, net.............................. 36 27,194 (50,682) 25,860 (2,336)
(Increase) decrease in net
working capital......................... (17,314) -- 4,330 (21,935) 291
Increase in amounts due to Parent........... -- -- 18,938 (19,486) 548
----------- ----------- ----------- ----------- ----------
Net cash flows from operations..... 53,217 8 28,857 14,888 9,464
Cash flows used for investing activities:
Purchase of property, plant and
equipment............................... (16,405) -- (1,701) (14,421) (283)
Businesses acquired......................... (106,581) -- (106,581) -- --
----------- ----------- ----------- ----------- ----------
Net cash flows used for
investing activities........... (122,986) -- (108,282) (14,421) (283)
Cash flows used for financing activities:
Net borrowings under working capital
facilities and long-term debt
obligations............................. 73,950 -- 73,950 -- --
Payment of financing costs.................. (2,692) -- (2,692) -- --
Issuance of shares of common stock.......... 2,151 -- 2,151 -- --
Receipt (payment) of dividends.............. -- -- 8,810 -- (8,810)
----------- ----------- ----------- ----------- ----------
Net cash flows used for
financing activities........... 73,409 -- 82,219 -- (8,810)
Increase in cash............................... 3,640 8 2,794 467 371
Cash at beginning of period..................... 3,231 -- 668 -- 2,563
----------- ----------- ----------- ----------- ----------
Cash at end of period........................... $ 6,871 $ 8 $ 3,462 $ 467 $ 2,934
=========== =========== =========== =========== ==========
</TABLE>
F-52
<PAGE>
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net earnings..................................... $ 14,653 $ (18,418) $ 14,653 $ 10,384 $ 8,034
Non-cash items included in earnings:
Extraordinary loss....................... 4,078 -- 4,078 -- --
Amortization of intangibles.............. 12,894 -- 10,618 2,208 68
Amortization of deferred financing
costs............................... 2,163 -- 2,163 -- --
Depreciation............................. 7,520 -- 94 7,074 352
Deferred taxes........................... 5,493 -- 3,752 1,823 (82)
Other, net............................... 249 18,418 (16,742) (5) (1,422)
Increase in net working capital.............. (30,182) -- (15,852) (12,943) (1,387)
----------- ------------- ----------- ----------- ----------
Net cash flows from operations...... 16,868 -- 2,764 8,541 5,563
Cash flows used for investing activities:
Purchase of property, plant and
equipment................................ (9,004) -- (82) (8,541) (381)
----------- ------------- ----------- ----------- ----------
Net cash flows used for investing
activities...................... (9,004) -- (82) (8,541) (381)
Cash flows used for financing activities:
Net payments under working capital
facilities and long-term debt
obligations.............................. (1,900) -- (1,900) -- --
Payment of financing costs................... (9,367) -- (9,367) -- --
Issuance of shares of common stock........... 429 -- 429 -- --
Receipt (payment) of dividends............... -- -- 7,645 -- (7,645)
----------- ------------- ----------- ----------- ----------
Net cash flows used for financing
activities...................... (10,838) -- (3,193) -- (7,645)
Decrease in cash................................. (2,974) -- (511) -- (2,463)
Cash at beginning of period...................... 6,205 -- 1,179 -- 5,026
----------- ------------- ----------- ----------- ----------
Cash at end of period............................ $ 3,231 $ -- $ 668 $ -- $ 2,563
=========== ============= =========== =========== ==========
</TABLE>
F-53
<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 25, 1999 and December 26, 1998,
and the related consolidated statements of earnings, changes in stockholders'
equity and cash flows for the twelve months ended December 25, 1999, December
26, 1998 and December 27, 1997 included on pages F-14 through F-53 in the
Company's Annual Report on Form 10-K. In connection with our audits of the
consolidated financial statements, we also have audited the related consolidated
financial statement schedule, on page 22 in the Company's Annual Report on Form
10-K. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule 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 consolidated financial position of
Playtex Products, Inc. and subsidiaries as of December 25, 1999 and December 26,
1998 and the results of their earnings and their cash flows for the twelve
months ended December 25, 1999, December 26, 1998 and December 27, 1997, in
conformity with generally accepted accounting principles. Also in our opinion,
the related 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 herein.
/s/ KPMG LLP
January 27, 2000
Stamford, Connecticut
F-54
<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 judgments.
The Company maintains systems of accounting and internal control designed
to provide reasonable assurance that assets are safeguarded against loss, and
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/ GLENN A. FORBES
Executive Vice President and
Chief Financial Officer
January 27, 2000
Westport, Connecticut
F-55
<PAGE>
PLAYTEX PRODUCTS, INC.
OTHER INFORMATION
CORPORATE INFORMATION
Our common stock is traded on the New York Stock Exchange under the symbol
PYX. We do not pay dividends on our common stock and it is our policy to retain
earnings for use in our business. Under our debt agreements, we are restricted
from paying dividends unless we meet certain specified financial criteria
immediately following such payment.
STOCK TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C.
P.O. Box 3315
South Hackensack, New Jersey 07606-1915
(800)851-9677
www.chasemellon.com
INDEPENDENT AUDITORS
KPMG LLP
3001 Summer Street
Stamford, CT 06905
CORPORATE OFFICES
Playtex Products, Inc.
300 Nyala Farms Road
Westport, CT 06880
F-56
<PAGE>
PLAYTEX PRODUCTS, INC.
OTHER INFORMATION
BOARD OF DIRECTORS
Robert B. Haas Chairman of the Board Playtex Products, Inc. and
Chairman of the Board and Chief Executive
Officer of Haas Wheat & Partners Incorporated
Michael R. Gallagher Chief Executive Officer
Richard C. Blum Chairman of the Board and President of BLUM
Capital Partners, L.P.
Michael R. Eisenson President and Chief Executive Officer of
Charlesbank Capital Partners, LLC
Timothy O. Fisher Vice President of The Hillman Group
C. Ann Merrifield President of Genzyme Genetics
Jeffrey W. Ubben Managing Partner of BLUM Capital Partners, L.P.
Wyche H. Walton Senior Vice President of Haas Wheat & Partners
Incorporated
Douglas D. Wheat President of Haas Wheat & Partners Incorporated
Kenneth F. Yontz Chairman of the Board, President and Chief
Executive Officer of Sybron International
Corporation
PRINCIPAL OFFICERS
Michael R. Gallagher Chief Executive Officer
Glenn A. Forbes Executive Vice President and Chief Financial
Officer
Richard G. Powers President, Personal Products Division
Max R. Recone President, Consumer Products Division
Irwin S. Butensky Senior Vice President, Biomedical and
Administrative Services
James S. Cook Senior Vice President, Operations
John D. Leahy Senior Vice President, Corporate
Sales/International
Paul A. Siracusa Senior Vice President, Research and Development
Frank M. Sanchez Vice President, Human Resources
Vincent S. Viviani Vice President, Quality Systems
Paul E. Yestrumskas Vice President, General Counsel and Secretary
- --------------------
F-57
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3(a) 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) By-laws of the Company, as amended through May 18, 1999.
(Incorporated herein by reference to Exhibit 3(b) of Playtex's Form
10-Q for the period ended June 26, 1999, dated August 4, 1999, File
No. 33-25485-01.)
4(a) 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(a)(1) First Supplemental Indenture dated as of March 8, 1994 to the 9%
Senior Subordinated Notes among Family Products, Playtex and IBJ
Schroder Bank & Trust Company, as trustee. (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.)
4(a)(2) Second Supplemental Indenture, dated as of June 6, 1995 to the 9%
Senior Subordinated Notes 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(a)(3) Third Supplemental Indenture, dated as of June 6, 1995 to the 9%
Senior Subordinated Notes 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(a)(4) Fourth Supplemental Indenture to the 9% Senior Subordinated Notes
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(a)(5) Fifth Supplemental Indenture to the 9% Senior Subordinated Notes
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(a)(6) Sixth Supplemental Indenture to the 9% Senior Subordinated Notes
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.)
X-1
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4(a)(7) Seventh Supplemental Indenture to the 9% Senior Subordinated Notes
among Playtex Products, Inc., as Issuer, TH Marketing Corp., and
Smile-Tote 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(a)(8) Eighth Supplemental Indenture to the 9% Senior Subordinated Notes
among Playtex Products, Inc., as Issuer, TH Marketing Corp., and
Smile-Tote Inc., as Guarantor and IBJ Schroder Bank & Trust Company,
as trustee, dated as of July 21, 1997. (Incorporated herein by
reference to Exhibit 4(b)(8) of Playtex's Annual Report on Form 10-K
for the fiscal year ended December 27, 1997, File No. 33-25485-01.)
4(a)(9) Ninth Supplemental Indenture to the 9% Senior Subordinated Notes
among Playtex Products, Inc., as Issuer, TH Marketing Corp., and
Smile-Tote Inc., as Guarantor and IBJ Schroder Bank & Trust Company,
as trustee, dated as of August 27, 1997. (Incorporated herein by
reference to Exhibit 4(b)(9) of Playtex's Annual Report on Form 10-K
for the fiscal year ended December 27, 1997, File No. 33-25485-01.)
4(a)(10) Tenth Supplemental Indenture to the 9% Senior Subordinated Notes
among Playtex Products, Inc., as Issuer, TH Marketing Corp., and
Smile-Tote Inc., as Guarantor and IBJ Schroder Bank & Trust Company,
as Trustee, dated as of January 28, 1998. (Incorporated herein by
reference to Exhibit 4(b)(10) of Playtex's Annual Report on Form
10-K for the fiscal year ended December 27, 1997, File No.
33-25485-01.)
4(b) 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.)
4(b)(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(b)(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(b)(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(b)(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(b)(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(b)(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.)
X-2
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4(c) Indenture dated as of July 21, 1997 relating to the 8 7/8% Senior
Notes due 2004 (the "Senior Notes") among Playtex Products, Inc., as
Issuer, Playtex Beauty Care, Inc., Playtex Investment Corp., Playtex
International Corp., Playtex Sales & Services, Inc., Playtex
Manufacturing, Inc., Smile-Tote, Inc., Sun Pharmaceuticals Corp., TH
Marketing Corp. (Collectively, the "Guarantors") and Marine Midland
Bank, as trustee. (Incorporated herein by reference to Exhibit 4.2
to the Company's Current Report on Form 8-K dated July 21, 1997.)
4(c)(1) Form of Exchange Notes relating to the Senior Notes (incorporated by
reference to Exhibit 4.1 of the Company's Current Report on Form 8-K
dated July 21, 1997.)
4(c)(2) Registration Rights Agreement relating to the Senior Notes, among
the Company, the Guarantors and Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchaser") (incorporated by
reference to Exhibit 4.3 of the Company's Current Report on Form 8-K
dated July 21, 1997.)
4(c)(3) Purchase Agreement, dated as of July 14, 1997 relating to the 8 7/8
Senior Notes due 2004 (the "Senior Notes") among Playtex Products,
Inc., as Issuer, Playtex Beauty Care, Inc., Playtex Investment
Corp., Playtex International Corp., Playtex Sales & Services, Inc.,
Playtex Manufacturing, Inc., Smile-Tote, Inc., Sun Pharmaceuticals
Corp., TH Marketing Corp. (Collectively, the "Guarantors") and
Donaldson, Lufkin & Jenrette Securities Corporation. (Incorporated
herein by reference to Exhibit 10.1 of the Company's Current Report
on Form 8-K dated July 21, 1997.)
4(c)(4) First Supplemental Indenture relating to the 8 7/8 Senior Notes,
dated as of January 28, 1998 among the Company, Personal Care
Holdings, Inc. ("PCH"), Personal Care Group, Inc. ("PCG") and
Carewell Industries, Inc. ("Carewell"), (each of PCH, PCG and
Carewell being referred to as a Guarantor), and Marine Midland Bank
as trustee. (Incorporated herein by reference to Exhibit 4(e)(4) of
Playtex's Annual Report on Form 10-K for the fiscal year ended
December 27, 1997, File No. 33-25485-01.)
4(d) Indenture relating to the 6% Convertible Notes, dated as of January
29, 1999, between Playtex Products, Inc. and Marine Midland Bank.
(Incorporated herein by reference to Exhibit 2.2 of Playtex's Form
8-K, dated February 12, 1999, File No. 33-25485-01.)
10(a) Credit Agreement, dated as of July 21, 1997, among Playtex Products,
Inc., DLJ Funding, as the syndication agent, Wells Fargo Bank, N.A.
("Wells Fargo"), as the administrative agent, and the lenders named
therein. (Incorporated herein by reference to Exhibit 10.2 of the
Company's Current Report on Form 8-K dated July 21, 1997.)
10(a)(1) First Amendment to the Credit Agreement, dated as of January 28,
1998, among the Company, DLJ Capital Funding, Inc., as the
syndication agent, Wells Fargo, as the administrative agent, and the
lenders named therein. (Incorporated herein by reference to Exhibit
10(a)(1) of Playtex's Annual Report on Form 10-K for the fiscal year
ended December 27, 1997, File No. 33-25485-01.)
10(a)(2) Second Amendment to the Credit Agreement, dated as of June 30, 1999,
among the Company, DLJ Capital Funding, Inc., as the syndication
agent, Wells Fargo, as the administrative agent, and the lenders
named therein. (Incorporated herein by reference to Exhibit 10(1) of
Playtex's Current Report on Form 8-K dated July 15, 1999.)
10(b) Term Loan Agreement, dated as of July 21 1997, among Playtex
Products, Inc., DLJ Funding, as the syndication agent, Wells Fargo,
as the facility manager, and the lenders therein. (Incorporated
herein by reference to Exhibit 10.2 of the Company's Current Report
on Form 8-K dated July 21, 1997.)
X-3
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10(b)(1) First Amendment to the Term Loan Agreement, dated as of January 28,
1998, among the Company, DLJ Capital Funding, Inc., as the
syndication agent, Wells Fargo, as the facility manager, and the
Lenders therein. (Incorporated herein by reference to Exhibit
10(b)(1) of Playtex's Annual Report on Form 10-K for the fiscal year
ended December 27, 1997, File No. 33-25485-01.)
10(c) 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(c)(1) First Amendment to the Consulting Agreement, dated as of August 17,
1999, between Playtex Products Inc., and Joel E. Smilow.
10(d) 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(e) Playtex Management Incentive Plan for 1997. (Incorporated herein by
reference to Exhibit 10(1)(2) of Playtex's Annual Report on Form
10-K for the fiscal year ended December 28, 1996, File No.
33-25485-01.)
10(f) 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(f)(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(f)(2) Amendment No. 2 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(f)(3) Amendment No. 3 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(f)(4) Amendment No. 4 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(f)(5) Amendment No. 5 to the 1994 Stock Option Plan. (Incorporated herein
by reference to Exhibit 10(l)(5) of Playtex's Annual Report on Form
10-K for the fiscal year ended December 25, 1999, File No. 1-12620.)
10(f)(6) Amendment No. 6 to the 1994 Stock Option Plan. (Incorporated herein
by reference to Exhibit 10(1)(6) of Playtex's Annual Report on Form
10-K for the fiscal year ended December 25, 1999, File No. 1-12620.)
10(f)(7) Playtex 1994 Stock Option Plan for Directors and Executive and Key
Employees as amended through April 6, 1999. (Incorporated herein by
reference to Exhibit 10(l) of Playtex's Form 10-Q for the period
ended June 26, 1999, dated August 4, 1999, File No. 33-25485-01.)
10(g) 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.)
X-4
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10(g)(1) Memorandum of Understanding, dated May 18, 1999 with Michael R.
Gallagher, Chief Executive Officer. (Incorporated herein by
reference to Exhibit 10(m) of Playtex's Form 10-Q for the period
ended June 26, 1999, dated August 4, 1999, File No. 33-25485-01.)
10(h) Form of Retention Agreement dated as of July 22, 1997 between
Michael R. Gallagher and the Company. (Incorporated herein by
reference to Exhibit 10.1 of Playtex's Registration Statement on
Form S-4 dated August 29, 1997, File No. 333-33915.)
10(i) Form of Retention Agreement dated as of July 22, 1997 between each
of Irwin S. Butensky, James S. Cook, John D. Leahy, Richard G.
Powers, Max R. Recone, Frank M. Sanchez, and Paul E. Yestrumskas and
the Company. (Incorporated herein by reference to Exhibit 10.3 of
Playtex's Registration Statement on Form S-4 dated August 29, 1997,
File No. 333-33915.)
10(j) 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(k) 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(l) 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(m) 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(m)(1) Amendment No.1 to Stock Purchase Agreement, dated as of June 1,
1998, by and among the Company, HWH Capital Partners, L.P., HWH
Valentine Partners, L.P., HWH Surplus Valentine Partners, L.P. to
the Stock Purchase Agreement, dated as of March 17, 1995.
(Incorporated herein by reference to Exhibit 10(3) of Playtex's Post
Effective Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
10(m)(2) First Amended and Restated Registration Rights Agreement, dated as
of June 1, 1998, by and among the Company, HWH Capital Partners,
L.P., HWH Valentine Partners, L.P., HWH Surplus Valentine Partners,
L.P. to the Stock Purchase Agreement, dated as of March 17, 1995.
(Incorporated herein by reference to Exhibit 10(5) of Playtex's Post
Effective Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
10(m)(3) Amendment No. 1, dated as of January 29, 1999 to the First Amended
and Restated Registration Rights Agreement, dated as of March 17,
1995, as amended and restated as of June 1, 1998 by and among the
Company, HWH Capital Partners, L.P., HWH Valentine Partners, L.P.,
HWH Surplus Valentine Partners, L.P. to the Stock Purchase
Agreement. (Incorporated herein by reference to Exhibit 10(t)(3) of
Playtex's Annual Report on Form 10-K for the fiscal year ended
December 25, 1999, File No. 1-12620.)
10(n) Stock Purchase Agreement, dated as of December 19, 1997, among
Playtex Products, Inc., and the Shareholders of Carewell Industries,
Inc. (Incorporated herein by reference to Exhibit 10(af) of
Playtex's Annual Report on Form 10-K for the year ended December 27,
1997, File No. 33-25485.)
X-5
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10(o) Asset Purchase Agreement, dated as of January 26, 1998, among
Playtex Products, Inc., Binky-Griptight, Inc., Lewis Woolf Griptight
Limited and L.W.G. Holdings Limited. (Incorporated herein by
reference to Exhibit 10(ag) of Playtex's Annual Report on Form 10-K
for the year ended December 27, 1997, File No. 33-25485.)
10(p) Merger Agreement, dated as of December 22, 1997, among Playtex
Products, Inc., PCG Acquisition Corp., J.W. Childs Equity Partners
L.P. and Personal Care Holdings, Inc. (Incorporated herein by
reference to Exhibit 2.1 of Playtex's Form 8-K dated February 12,
1998.)
10(q) Asset Sale Agreement, dated as of May 13, 1999, by and between
Playtex Products, Inc. and Colgate Palmolive Company. (Incorporated
herein by reference to Exhibit 2.1 of Playtex's Current Report on
Form 8-K dated July 15, 1999.)
10(q)(1) Amendment No. 1 to the Asset Sale Agreement, dated as of June 25,
1999, by and between Playtex Products, Inc. and Colgate Palmolive
Company. (Incorporated herein by reference to Exhibit 2.2 of
Playtex's Current Report on Form 8-K dated July 15, 1999.)
10(r) Registration Rights Agreement, dated as of January 28, 1998 among
Playtex Products, Inc. and J.W. Childs Equity Partners, L.P.
(Incorporated herein by reference to Exhibit 2.2 of Playtex's Form
8-K dated February 12, 1998.)
10(r)(1) First Amended and Restated Registration Rights Agreement, dated as
of June 1, 1998, by and among the Company, J.W. Childs Equity
Partners, L.P and certain other Stockholders named in the
Stockholders Agreement dated as of January 28, 1998. (Incorporated
herein by reference to Exhibit 10(6) of Playtex's Post Effective
Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
10(s) Stockholders Agreement, dated as of January 28, 1998, between
Playtex Products, Inc. and J.W. Childs Equity Partners, L.P. and
certain other Stockholders named therein. (Incorporated herein by
reference to Exhibit 2.3 of Playtex's Form 8-K dated February 12,
1998.)
10(t) Letter Agreement, dated as of June 1, 1998, by and among the
Company, J.W. Childs Equity Partners, L.P and certain other
Stockholders named in the Stockholders Agreement dated as of January
28, 1998. (Incorporated herein by reference to Exhibit 10(7) of
Playtex's Post Effective Amendment No. 1 to Form S-3 dated as of
June 12, 1998, No. 333-50099.)
10(u) Letter of Waiver, dated as of June 1, 1998, by and among the
Company, Donaldson, Lufkin & Jenrette International, J.W. Childs
Equity Partners, L.P and certain other Stockholders named in the
Stockholders Agreement dated as of January 28, 1998. (Incorporated
herein by reference to Exhibit 10(8) of Playtex's Post Effective
Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
10(v) Stock Purchase Agreement, dated June 1, 1998 between J.W. Childs
Equity Partners, L.P. (the "seller"), RCBA Playtex, L.P. (the
"Buyer"), and Richard C. Blum & Associates, Inc. (the "Guarantor").
(Incorporated herein by reference to Exhibit 10(1) of Playtex's Post
Effective Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
10(w) Stockholders Agreement, dated June 1, 1998 between RCBA Playtex,
L.P. and the Company. (Incorporated herein by reference to Exhibit
10(2) of Playtex's Post Effective Amendment No. 1 to Form S-3 dated
as of June 12, 1998, No. 333-50099.)
X-6
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10(w)(1) Amended and Restated Stockholders Agreement, dated September 3, 1998
between the Company, RCBA Playtex, L.P. and RCBA Strategic Partners.
(Incorporated herein by reference to Exhibit 10(ac)(1) of Playtex's
Annual Report on Form 10-K for the fiscal year ended December 25,
1999, File No. 1-12620.)
10(x) Registration Rights Agreement, dated June 1, 1998 between RCBA
Playtex, L.P. and the Company. (Incorporated herein by reference to
Exhibit 10(4) of Playtex's Post Effective Amendment No. 1 to Form
S-3 dated as of June 12, 1998, No. 333-50099.)
10(x)(1) Amendment No. 1, dated as of January 29, 1999, to the Registration
Rights Agreement, dated as of June 1, 1998 between RCBA Playtex,
L.P. and the Company. (Incorporated herein by reference to Exhibit
10(ad)(1) of Playtex's Annual Report on Form 10-K for the fiscal
year ended December 25, 1999, File No. 1-12620.)
10(y) Registration Rights Agreement, dated as of January 29, 1999, between
Playtex Products, Inc. and Mondial Industries Limited Partnership.
(Incorporated herein by reference to Exhibit 2.3 of Playtex's Form
8-K, dated February 12, 1999, File No. 33-25485-01.)
10(z) 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(aa) Sublease Agreement between Playtex and AMBAC Capital Management,
Inc. dated as of February 20, 1998. (Incorporated herein by
reference to Exhibit 10(ah) of Playtex's Annual Report on Form 10-K
for the fiscal year ended December 25, 1999, File No. 1-12620.)
10(ab) Agreement of Lease between Playtex Manufacturing, Inc. and Trammell
Crow NE, Inc. (Incorporated herein by reference to Exhibit 10(ai) of
Playtex's Annual Report on Form 10-K for the fiscal year ended
December 25, 1999, File No. 1-12620.)
10(ac) Lease Agreement between Playtex Manufacturing, Inc. and Tetra Pak
Plastic Packaging R&D GmbH, Hitek FSP, S.A., Tetra Laval Holdings &
Finance S.A., and Tetra Laval Credit Inc., dated as of April 26,
1996. (Incorporated herein by reference to Exhibit 10(ai) of
Playtex's Annual Report on Form 10-K for the year ended December 27,
1997, File No. 33-25485.)
10(ad) Lease Agreement between Playtex Manufacturing, Inc. and BTM Capital
Corporation, dated as of June 20, 1996. (Incorporated herein by
reference to Exhibit 10(aj) of Playtex's Annual Report on Form 10-K
for the year ended December 27, 1997, File No. 33-25485.)
10(ae) Interest Rate Swap Agreement effective July 23, 1998 between Playtex
Products, Inc., and Toronto Dominion (New York), Inc. (Incorporated
herein by reference to Exhibit 10(am) of Playtex's Annual Report on
Form 10-K for the fiscal year ended December 25, 1999, File No.
1-12620.)
*12(a) Statement re-computation of ratios.
*21(a) Subsidiaries of Playtex.
*23 Consent of KPMG LLP.
*27 Financial Data Schedule.
- ----------
X-7
<PAGE>
Exhibits marked with an " * " are filed as a part of this Annual Report on Form
10-K, all other exhibits are incorporated by reference as individually noted.
Exhibits listed as 10(d) through and including 10(i) could be considered
compensatory plans or in some manner benefit certain employees.
X-8
EXHIBIT 10(C)(1)
Playtex Products, Inc.
300 Nyala Farms Road
Westport, Connecticut 06880
---------------------------
Michael F. Goss
Executive Vice President
Chief Financial Officer
203 341-4264
Fax: 203 341-4260
August 17, 1999
Mr. Joel E. Smilow
315 Post Road West
Westport, CT 06880
Dear Joel:
This letter serves to amend the Consulting Agreement dated January 30, 1993
between you and Playtex Products, Inc. in accordance with your request that we
waive the final five quarterly Consulting Fees of $62,500 in return for an
extension of the period for which Playtex pays for your office, secretary, and
secretarial support until August 31, 2004.
Our agreement assumes the following: 1) Your office rent will not exceed $16,500
per year, 2) annual increases in the cost of your secretarial support will not
exceed 3% per year from the 1999 level of $48,700, and 3) your secretary will
not participate in the Playtex medical plan after August 1, 1999. All other
terms of the Consulting Agreement will remain in place.
If you concur with these revisions, please sign where indicated below and return
one of the signed copies to me.
Sincerely,
/S/MICHAEL F. GOSS
- ------------------
Micheal F. Goss
Executive Vice President and
Chief Financial Officer
Agreed and Accepted:
/S/ JOEL E. SMILOW
------------------
Joel E. Smilow
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 25, DECEMBER 26, DECEMBER 27, DECEMBER 28, DECEMBER 30,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Earnings before extraordinary
loss and preferred stock dividends............. $ 44,071 $ 34,230 $ 18,731 $ 18,199 $ 2,774
Income taxes...................................... 32,197 25,686 16,501 16,141 8,151
---------- ---------- ---------- --------- ---------
Earnings before income
taxes and extraordinary loss................... 76,268 59,916 35,232 34,340 10,925
Fixed charges:
Interest....................................... 78,961 71,518 64,470 64,860 71,361
One-third of rental............................ 3,171 2,650 1,750 1,734 1,697
---------- --------- ---------- --------- ---------
Total fixed charges......................... 82,132 74,168 66,220 66,594 73,058
---------- --------- ---------- --------- ---------
Earnings before fixed
charges, income taxes and
extraordinary loss.......................... $ 158,400 $ 134,084 $ 101,452 $ 100,934 $ 83,983
========== ========== ========== ========= =========
Ratio of earnings to fixed
charges........................................ 1.93X 1.81X 1.53X 1.52X 1.15X
========== ========== ========== ========= =========
Coverage of earnings to
fixed charges.................................. $ 76,268 $ 59,916 $ 35,232 $ 34,340 $ 10,925
========== ========== ========== ========= =========
</TABLE>
EXHIBIT 21(A)
SUBSIDIARIES OF PLAYTEX PRODUCTS, INC.
PERCENT JURISDICTION OF
CORPORATION OWNERSHIP INCORPORATION
----------- --------- -------------
Playtex Products, Inc. Delaware
Playtex Marketing Corp. 50% Delaware
Playtex Manufacturing, Inc. 100% Delaware
Playtex Sales & Services, Inc. 100% Delaware
Playtex Beauty Care, Inc. 100% Delaware
Playtex Investment Corp. 100% Delaware
TH Marketing Corp. 100% Delaware
Playtex International Corp. 100% Delaware
Sun Pharmaceuticals Corp. 100% Delaware
Smile-Tote, Inc. 100% California
Playtex Limited 100% Canada
Playtex Foreign Sales Corporation 100% Barbados
Carewell Industries, Inc. 100% New York
Personal Care Holdings, Inc. 100% Delaware
Personal Care Group, Inc. 100% Delaware
Personal Care Group Australia PTY Ltd. 100% Australia
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Playtex Products, Inc.:
We consent to the incorporation by reference in the registration statements
(Nos. 33-88806, 333-31703 and 333-32114) on Form S-8 of Playtex Products, Inc.
of our report dated January 27, 2000, relating to the consolidated balance
sheets of Playtex Products, Inc. and subsidiaries as of December 25, 1999 and
December 26, 1998, and the related consolidated statements of earnings, changes
in stockholders' equity, and cash flows for the twelve months ended December 25,
1999, December 26, 1998 and December 27, 1997 and related schedule, which report
appears in the December 25, 1999 Annual Report on Form 10-K of Playtex Products,
Inc.
KPMG LLP
Stamford, Connecticut
March 17, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-END> DEC-25-1999
<CASH> 7,526
<SECURITIES> 0
<RECEIVABLES> 132,548
<ALLOWANCES> 2,292
<INVENTORY> 85,496
<CURRENT-ASSETS> 243,854
<PP&E> 194,389
<DEPRECIATION> 87,196
<TOTAL-ASSETS> 1,148,652
<CURRENT-LIABILITIES> 151,848
<BONDS> 987,876
0
0
<COMMON> 605
<OTHER-SE> (95,473)
<TOTAL-LIABILITY-AND-EQUITY> 1,148,652
<SALES> 787,711
<TOTAL-REVENUES> 787,711
<CGS> 331,242
<TOTAL-COSTS> 331,242
<OTHER-EXPENSES> 301,240
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78,961
<INCOME-PRETAX> 76,268
<INCOME-TAX> 32,197
<INCOME-CONTINUING> 44,071
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,071
<EPS-BASIC> .73
<EPS-DILUTED> .72
</TABLE>
