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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JULY 23, 1998
DRYPERS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-23422 76-0344044
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
5300 MEMORIAL, SUITE 900
HOUSTON, TEXAS 77007
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 869-8693
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ITEM 5. OTHER EVENTS
On July 23, 1998, the Company reported second quarter 1998 results,
announced that it had received a test market opportunity with Wal-Mart and also
provided a revised outlook for the remainder of 1998 and 1999. A copy of the
Company's press release dated July 23, 1998, which describes the foregoing, is
filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated
herein by reference.
On August 10, 1998, the Company announced that a fire had occurred in its
manufacturing facility in Argentina. There were no injuries that resulted from
the fire, which occurred on Saturday, August 8, 1998. Due to business
interruption, property and casualty insurance, management does not believe this
event will have a material adverse impact on the Company's 1998 operating
results. As a result of damage caused by the fire, the facility will be shut
down temporarily and all efforts will be made to resume operating at full
capacity within a short period of time. The Company expects that excess
manufacturing capacity in its United States and Mexico facilities will meet
customer demand for its products in Argentina and the surrounding area. The
cause of the fire has not yet been determined. In addition to physical damage
to the facility, the fire resulted in the loss of a portion of the finished
goods inventory and the entire inventory of raw materials. A copy of the
Company's press release dated August 10, 1998, which describes the foregoing, is
filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated
herein by reference.
On August 13, 1998, the Company announced a restructuring of its top
management. Walter V. Klemp, 39, formerly Co-Chief Executive Officer, has
been named Chief Executive Officer, in addition to continuing as Chairman of the
Board of Directors. Raymond M. Chambers, 42, formerly Co-Chief Executive
Officer and President of Drypers International, will assume the title of
President and Chief Operating Officer. Terry A. Tognietti, 41, formerly Co-
Chief Executive Officer and President of Drypers North America, will step away
from the day-to-day business, but will continue as a Director of the Company in
the newly created role of Vice-Chairman, under which he will spearhead special
projects and serve as an advisor. A copy of the Company's press release dated
August 10, 1998, which describes the foregoing, is filed as Exhibit 99.3 to this
Current Report on Form 8-K and is incorporated herein by reference.
<PAGE>
Item 7. Financial Statements and Exhibits
(c) Exhibits.
The following documents are filed as exhibits to this report in accordance
with Item 601 of Regulation S-K.
99.1 Press release of Drypers Corporation dated July 23, 1998.
99.2 Press release of Drypers Corporation dated August 10, 1998.
99.3 Press release of Drypers Corporation dated August 13, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DRYPERS CORPORATION
Dated: August 18, 1998 By: /s/ Walter V. Klemp
---------------------------------
Walter V. Klemp
Chairman of the Board and
Chief Executive Officer
<PAGE>
EXHIBIT 99.1
FOR: Drypers Corporation
APPROVED BY: Walter V. Klemp
Chairman & Co-Chief
Executive Officer
(713) 869-8693
FOR IMMEDIATE RELEASE
- ---------------------
CONTACT: Cheryl Schneider/Tessa Lavender
Press: Michael McMullan
Morgen-Walke Associates
(212) 850-5600
DRYPERS CORPORATION REPORTS SECOND QUARTER AND SIX MONTH RESULTS
- Announces Test Market with Wal-Mart -
- ALSO PROVIDES OUTLOOK FOR REMAINDER OF 1998 AND 1999 -
HOUSTON, TEXAS, July 23, 1998--Drypers Corporation (Nasdaq: DYPR) today
reported results for the second quarter and six months ended June 30, 1998.
For the quarter, net sales increased 11.4% to $80.8 million, compared with
$72.6 million for the same period in 1997. Net income was $1.1 million, or
$0.06 per diluted share, compared to income (before an extraordinary charge) of
$2.2 million, or $0.12 per diluted share, in the second quarter of 1997. Second
quarter 1998 results were in line with analysts' estimates and reflect the
Company's previously announced increase in costs related to brand development
and capacity expansion.
For the six months, net sales increased 20.1% to $159.4 million, compared
with $132.7 million for the same period in 1997. A net loss of $4.6 million, or
$0.32 per diluted share, compared to income (before an extraordinary charge) of
$4.2 million, or $0.23 per diluted share, in the year-ago period. Six-month
results also reflect the Company's previously announced increase in costs, as
discussed above.
INTERNATIONAL - GROWTH IN BRAZIL AND ARGENTINA
Walter V. Klemp, Chairman and Co-Chief Executive Officer, said, "We had
solid revenue growth in the second quarter with sales up 11.4% over last year.
This was due in large part to a 19.5% increase in international sales, primarily
reflecting notable strength in Brazil and Argentina. In Brazil, our launch of
`Xuxa by Drypers' has been an overwhelming success since its introduction in
June. Initial demand for this new diaper line has exceeded our capacity and we
are taking immediate steps to supplement supply from Argentina. We have also
signed a deal to launch the Xuxa diaper line in Argentina sometime during the
third quarter. First-half strength in Brazil and Argentina offset lower sales
in Mexico, which were negatively impacted by a now concluded price war initiated
in the first quarter."
<PAGE>
DOMESTIC - DISTRIBUTION IN MASS MERCHANDISERS
Mr. Klemp continued, "Our sales from domestic operations increased 7.0% in
the second quarter, despite a sharp reduction in export sales to Asia due to the
continued currency crisis there. Excluding this reduction, sales within the
United States were up approximately 10%, reflecting positive trade and consumer
reaction to our national media campaign. Considering that the grocery channel
for diapers decreased in overall size by almost 4% during the same period, that
means our effective growth in the grocery channel was close to 14%. Current
grocery store penetration increased to 70% versus 62% in the second quarter of
1997 and 66% at the end of 1997. Also, our grocery market share increased 10%
during the second quarter to 7.1%."
Mr. Klemp added, "We are very excited to announce that our first-half
investment in brand building has paid off in a most important way by being a
catalyst for a major breakthrough with Wal-Mart. Beginning this quarter, Wal-
Mart will test Drypers(R) branded products in up to 300 of its stores in two
major regions of the United States. Wal-Mart has indicated that success in this
test could lead to a roll-out of Drypers products later this year or early 1999.
This is truly an exciting opportunity and one that we have been striving toward
for some time. It is clear to us that our national media campaign was critical
to Wal-Mart's decision."
Mr. Klemp continued, "We are also encouraged by a recent decision by K-Mart
to feature Drypers in a national promotion during the third quarter of this
year. This effort will result in Drypers(R) branded product displays in all K-
Mart stores nationwide for the period of the promotion. While this does not
necessarily equate to or ensure ongoing full distribution, it presents a great
opportunity to demonstrate Drypers' capability."
EXPECTATIONS FOR SECOND HALF 1998 AND 1999
Mr. Klemp added, "The progress with Wal-Mart and K-Mart constitutes major
achievements, however, we now believe that the bulk of the opportunity for
significantly increased volume won't begin until the first quarter of 1999.
Although we made good progress in grocery during the first half of 1998, we
believe the combination of our own reduction in promotional spending and product
improvements by competitors worked to dampen growth resulting from the media
campaign as compared to our original expectations."
Mr. Klemp continued, "Accordingly, we have revised our outlook for the
second half of 1998 based on an improving trend in United States grocery sales
and continued strong growth in international. As a result, we currently
anticipate 1998 and 1999 total sales to increase approximately 20% and 30% year-
over-year, respectively. Given these revised volume expectations, we expect an
excess of manufacturing capacity in the United States through the end of 1998.
This excess capacity, combined with increased promotional spending during the
second half of the year, suggests that our anticipated results will be below
analysts' current expectations for 1998 and 1999."
<PAGE>
Mr. Klemp concluded, "Although we are having to temper our expectations for
United States grocery growth in 1998, there is now little question as to whether
the media campaign can provide a significant pay back, as evidenced by the Wal-
Mart and K-Mart decisions. We continue to work on developing new, innovative
features for our diapers and look forward to future announcements in this area."
Drypers Corporation manufactures and markets disposable baby diapers and
other consumer products under the Drypers and other brand names. The Company
also produces private label diapers and related products. The Company's
products are sold through grocery stores and mass merchants throughout the
United States, Latin America and other international markets.
This press release contains, and any oral statements made by the Company
concerning this release may contain, forward-looking statements that involve
assumptions and uncertainties. The Company's actual results could differ
materially. Some of the more significant factors that could cause or contribute
to such differences are noted in the Company's Reports on Forms 10-K and 10-Q,
and include, but are not limited to, acceptance of Drypers products by mass
merchandisers, effectiveness of advertising and promotional activities, lack of
acceptance by consumers of new products, competitive and economic factors, price
changes by competitors, changes in costs of raw materials, timing of
technological advances by the Company and its competitors, and fluctuations in
currency values and economic conditions in international markets.
(Financial Table to Follow)
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DRYPERS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except Share and Per-Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
NET SALES $ 80,805 $ 72,551 $ 159,397 $ 132,712
COST OF GOODS SOLD 47,667 44,983 94,916 81,739
----------- ----------- ----------- -----------
Gross profit 33,138 27,568 64,481 50,973
SELLING, GENERAL
& ADMINISTRATIVE EXPENSES 27,399 22,972 59,876 41,933
----------- ----------- ----------- -----------
Operating income 5,739 4,596 4,605 9,040
INTEREST EXPENSE, net 4,453 2,012 7,903 4,210
OTHER INCOME 219 165 275 42
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME
TAX PROVISION AND
EXTRAORDINARY ITEM 1,505 2,749 (3,023) 4,872
INCOME TAX PROVISION 406 566 1,547 716
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 1,099 2,183 (4,570) 4,156
EXTRAORDINARY ITEM, costs of
early extinguishment of debt -- (7,769) -- (7,769)
----------- ----------- ----------- -----------
NET INCOME (LOSS) 1,099 (5,586) (4,570) (3,613)
PREFERRED STOCK DIVIDEND -- 168 80 336
----------- ----------- ----------- -----------
NET INCOME (LOSS) ATTRIBUTABLE
TO COMMON STOCKHOLDERS $ 1,099 $ (5,754) $ (4,650)$ (3,949)
=========== =========== =========== ===========
INCOME (LOSS) PER COMMON SHARE:
Before extraordinary item:
Basic $ 0.07 $ 0.26 $ (0.32)$ 0.49
=========== =========== =========== ===========
Diluted $ 0.06 $ 0.12 $ (0.32)$ 0.23
=========== =========== =========== ===========
Extraordinary item:
Basic $ -- $ (0.99) -- $ (0.99)
=========== =========== =========== ===========
Diluted $ -- $ (0.42) -- $ (0.43)
=========== =========== =========== ===========
Net income (loss):
Basic $ 0.07 $ (0.73) $ (.32)$ (0.50)
=========== =========== =========== ===========
Diluted $ 0.06 $ (0.30) $ (0.32)$ (0.20)
=========== =========== =========== ===========
COMMON SHARES OUTSTANDING 16,868,179 7,875,910 14,704,116 7,856,844
=========== =========== =========== ===========
COMMON AND POTENTIAL COMMON
SHARES OUTSTANDING 18,793,958 18,482,412 14,704,116 18,242,149
=========== =========== =========== ===========
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<PAGE>
EXHIBIT 99.2
FOR: Drypers Corporation
APPROVED BY: Walter V. Klemp
Chairman & Co-Chief
Executive Officer
(713) 869-8693
FOR IMMEDIATE RELEASE
- ---------------------
CONTACT: Cheryl Schneider/Tessa Lavender
Press: Michael McMullan
Morgen-Walke Associates
(212) 850-5600
DRYPERS CORPORATION ADDRESSES FIRE IN ARGENTINA MANUFACTURING FACILITY
- NOT EXPECTED TO MATERIALLY IMPACT 1998 OPERATING RESULTS -
HOUSTON, TEXAS, August 10, 1998--Drypers Corporation (Nasdaq: DYPR) today
announced that a fire in its manufacturing facility in Argentina occurred over
the weekend. There were no injuries that resulted from the fire, which occurred
on Saturday, August 8, 1998.
Due to business interruption, property and casualty insurance, management
does not believe this event will have a material adverse impact on the Company's
1998 operating results. As a result of damage caused by the fire, the facility
will be shut down temporarily and all efforts will be made to resume operating
at full capacity within a short period of time. The Company expects that excess
manufacturing capacity in its United States and Mexico facilities will meet
customer demand for its products in Argentina and the surrounding area. The
cause of the fire has not yet been determined. In addition to physical damage to
the facility, the fire resulted in the loss of a portion of the finished goods
inventory and the entire inventory of raw materials.
Walter V. Klemp, Chairman and Co-Chief Executive Officer, said, "We are
very thankful that nobody was injured, and that the impact of this fire on our
business will be negligible. We look forward to no interruption in meeting
consumer demand for Drypers(R) products in Argentina."
Drypers Corporation manufactures and markets disposable baby diapers and
other consumer products under the Drypers and other brand names. The Company
also produces private label diapers and related products. The Company's
products are sold through grocery stores and mass merchants throughout the
United States, Latin America and other international markets.
This press release contains, and any oral statements made by the Company
concerning this release may contain, forward-looking statements that involve
assumptions and uncertainties. The Company's actual results could differ
materially. Some of the more significant factors that could cause or contribute
to such differences are noted in the Company's Reports on Forms 10-K and 10-Q,
and include, but are not limited to, acceptance of Drypers products by mass
merchandisers, effectiveness of advertising and promotional activities, lack of
acceptance by consumers of new products, competitive and economic factors, price
changes by competitors, changes in costs of raw materials, timing of
technological advances by the Company and its competitors, scope of insurance
coverage, and fluctuations in currency values and economic conditions in
international markets.
# # #
<PAGE>
EXHIBIT 99.3
FOR: Drypers Corporation
APPROVED BY: Walter V. Klemp
Chairman & CEO
(713) 869-8693
FOR IMMEDIATE RELEASE
- ---------------------
CONTACT: Cheryl Schneider/Tessa Lavender
Press: Michael McMullan
Morgen-Walke Associates
(212) 850-5600
DRYPERS CORPORATION ANNOUNCES TOP-MANAGEMENT RESTRUCTURING
-WALTER V. KLEMP CONTINUES AS CHAIRMAN AND ASSUMES TITLE OF CHIEF
EXECUTIVE OFFICER -
HOUSTON, TEXAS, August 13, 1998--Drypers Corporation (Nasdaq: DYPR) today
announced a restructuring of its top management.
Walter V. Klemp, 39, formerly Co-Chief Executive Officer, has been named
Chief Executive Officer, in addition to continuing as Chairman of the Board of
Directors. Raymond M. Chambers, 42, formerly Co-Chief Executive Officer and
President of Drypers International, will assume the title of President and Chief
Operating Officer. Terry A. Tognietti, 41, formerly Co-Chief Executive Officer
and President of Drypers North America, will step away from the day-to-day
business, but will continue as a Director of the Company in the newly created
role of Vice-Chairman, under which he will spearhead special projects and serve
as an advisor.
Mr. Klemp said, "We believe this strategic decision to restructure our top
management is an important and positive event for Drypers. Discontinuing our
three-person `Co-Chief Executive Officer' structure is a bittersweet but natural
evolution for the Company. This move to centralize leadership at the top
positions us to move forward swiftly with a focus on our core business."
Mr. Klemp continued, "Our major customers are becoming more `globalized'
and as a result an increasing number of decisions made in North America affect
our international operations and vice-versa. The streamlining of top management
not only keeps pace with this changing landscape, but also creates a single
point of continuity and decision making for all operations. We look forward to
Ray, as President and Chief Operating Officer, using his considerable talents as
his role expands and providing common leadership for both domestic and
international operations."
- more -
<PAGE>
DYPR: ANNOUNCES TOP-MANAGEMENT RESTRUCTURING PAGE 2
Mr. Klemp added, "While Terry will be stepping back from day-to-day
activities at Drypers, he will continue to have a very valuable place in our
operation after the initial transition. We owe Terry an incalculable thanks for
his commitment to Drypers, starting with his role as founder, and we look
forward to his ongoing contribution."
Drypers Corporation manufactures and markets disposable diapers and other
consumer products under the Drypers(R) and other brand names. The Company also
produces private label diapers and related products. The Company's products are
sold through grocery stores and mass merchants throughout the United States,
Latin America and other international markets.
# # #
