SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 33-83734
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J. B. WILLIAMS HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 06-1387159
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification number)
65 HARRISTOWN ROAD
GLEN ROCK, NEW JERSEY 07452
(Address of Principal Executive Offices, including Zip Code)
(201) 251-8100
(Registrant's Telephone Number, Including Area Code)
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 No X
---- ----
Number of shares of the issuer's Common Stock, par value $0.01, outstanding as
of July 31, 1996: 9,000
<PAGE>
J.B. WILLIAMS HOLDINGS, INC.
I N D E X
PAGE
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations for the 1
Three Months and Six Months Ended June 30, 1996 and
June 30, 1995
Condensed Consolidated Balance Sheets at June 30, 1996 2
and December 31, 1995
Condensed Consolidated Statements of Cash Flows for 3
the Six Months Ended June 30, 1996 and June 30, 1995
Notes to Condensed Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 10
Signature 11
<PAGE>
J.B. WILLIAMS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(IN THOUSANDS)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
Net sales $9,843 $11,332 $19,195 $21,606
Cost of sales 3,048 3,297 5,571 5,977
------ ------ ------ ------
Gross margin 6,795 8,035 13,624 15,629
Distribution and cash discounts 787 1,014 1,550 2,056
Advertising and promotion 1,107 1,713 3,419 3,232
Selling, general and
administrative expenses 1,759 1,782 3,344 3,471
Depreciation and amortization 1,142 1,134 2,275 2,266
------ ------ ------ ------
Operating income 2,000 2,392 3,036 4,604
Interest expense-net 1,327 1,444 2,691 2,879
------ ------ ------ ------
Income before income taxes 673 948 345 1,725
Income tax provision 275 396 141 707
------ ------ ------ ------
Net income $ 398 $ 552 $ 204 $1,018
====== ====== ====== ======
See Notes to Condensed Consolidated Financial Statements
-1-
<PAGE>
J.B. WILLIAMS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
(IN THOUSANDS)
AT JUNE 30, 1996 AT DECEMBER 31, 1995
ASSETS
------
Current Assets:
Cash and cash equivalents $16,117 $19,478
Accounts receivable, net 4,893 7,712
Inventories 3,815 3,267
Other current assets 449 188
------ ------
Total Current Assets 25,274 30,645
Property and Equipment, Net 1,024 796
Intangible Assets, Net 41,184 43,145
Other Assets 3,400 3,612
------ ------
TOTAL ASSETS $70,882 $78,198
====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 670 $1,600
Accrued expenses 4,611 6,546
------ ------
Total Current Liabilities 5,281 8,146
------ ------
Long Term Debt 50,345 55,000
------ ------
Shareholder's Equity:
Common stock and paid-in capital 9,600 9,600
Retained earnings 5,656 5,452
------ ------
Total Shareholder's Equity 15,256 15,052
------ ------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $70,882 $78,198
====== ======
See Notes to Condensed Consolidated Financial Statements
- 2-
<PAGE>
J.B. WILLIAMS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)
SIX MONTHS ENDED JUNE 30,
-------------------------
1996 1995
---- ----
OPERATING ACTIVITIES:
Net income $ 204 $1,018
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of intangibles and debt
issuance costs 2,105 2,135
Depreciation and amortization of
property and equipment 170 131
Provision for doubtful accounts 5 ---
Changes in operating assets and liabilities:
Accounts receivable 2,814 795
Inventories (548) (621)
Other current assets (260) 48
Accounts payable (930) (597)
Accrued expenses (1,935) (381)
Other assets 68 ---
------- -------
Net Cash Provided By Operating Activities 1,693 2,528
------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment (399) (66)
------- -------
Net Cash Used in Investing Activities (399) (66)
------- -------
FINANCING ACTIVITIES:
Repurchase of Senior Notes (4,655) ---
------- -------
Net Cash Used in Financing Activities (4,655) ---
------- -------
Increase (Decrease) in Cash and Cash Equivalents (3,361) 2,462
Cash and cash equivalents, beginning of year 19,478 14,072
------- -------
Cash and Cash Equivalents, End of Period $16,117 $16,534
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 779 $1,232
Interest paid $3,380 $3,368
See Notes to Condensed Consolidated Financial Statements
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<PAGE>
J.B. WILLIAMS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF ACCOUNTING AND ORGANIZATION
The consolidated financial statements include J.B. Williams Holdings, Inc.
and its wholly-owned subsidiaries: J.B. Williams Company, Inc., After
Shave Products Inc., Pre-Shave Products Inc., Hair Care Products Inc., and
CEP Holdings Inc. (collectively the "Company"). Brynwood Partners II L.P.,
a private partnership formed under Delaware law, is the owner of all of the
issued and outstanding capital stock of the Company.
The accompanying unaudited condensed consolidated financial statements as
of June 30, 1996 and for the three month and six month periods ended June
30, 1996 and 1995 have been prepared in accordance with the instructions to
Form 10-Q. All adjustments which, in the opinion of the management of
the Company, are necessary for a fair presentation of the condensed
consolidated financial statements for the three month and six month periods
ended June 30, 1996 and 1995 have been reflected. All such adjustments are
of a normal recurring nature. The June 30, 1996 condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31, 1995
included in the Company's Annual Report on Form 10-K.
The results of operations for the period ended June 30, 1996 are not
necessarily indicative of the operating results for the full year.
2. LONG TERM DEBT
Long term debt consists of $50.3 million 12% Senior Notes, due 2004 (the
"Senior Notes").
3. FINANCIAL INFORMATION CONCERNING GUARANTORS
The Senior Notes are guaranteed by each of the Company's wholly-owned
subsidiaries, which constitute all of the Company's direct or indirect
subsidiaries (the "Subsidiary Guarantors"). The Subsidiary Guarantors have
fully and unconditionally guaranteed the Senior Notes on a joint and
several basis; and the aggregate assets, liabilities, earnings and equity
of the Subsidiary Guarantors are substantially equivalent to the assets,
liabilities, earnings and equity of the Company on a consolidated basis.
There are no restrictions on the ability of the Subsidiary Guarantors to
make distributions to the Company. In management's opinion separate
financial statements and other disclosures concerning the Subsidiary
Guarantors would not be material to investors. Accordingly, separate
financial statements and other disclosures concerning the Subsidiary
Guarantors are not included herein.
-4-
<PAGE>
4. RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 financial statements
to conform with the current year's presentation.
- 5 -
<PAGE>
J. B. WILLIAMS HOLDINGS, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
J. B. Williams Holdings, Inc. (the "Company"), through its subsidiaries,
distributes and sells personal care products (Aqua Velva, Brylcreem, Lectric
Shave, and Williams Mug Soap) in the United States, Canada, and Puerto Rico,
and oral care products (Cepacol) in the United States and Puerto Rico. The
Company acquired its personal care products business in January 1993 and its
oral care products business in February 1994, in each case from certain
affiliates of SmithKline Beecham Corporation (collectively, "SKB").
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED JUNE 30, 1996
The following table sets forth certain operating data for the three months
ended June 30, 1996 and 1995.
THREE MONTHS ENDED JUNE 30,
------------------------------------------------
(In Thousands)
PERSONAL ORAL CARE TOTAL
CARE PRODUCTS PRODUCTS COMPANY
------------- -------------- --------------
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
NET SALES $6,504 $7,833 $3,339 $3,499 $9,843 $11,332
Cost of Goods Sold 1,695 1,960 1,353 1,337 3,048 3,297
----- ----- ----- ----- ----- ------
GROSS MARGIN 4,809 5,873 1,986 2,162 6,795 8,035
Distribution and Cash
Discounts 424 658 363 356 787 1,014
Advertising and Promotion 678 1,196 429 517 1,107 1,713
----- ----- ----- ----- ----- ------
BRAND CONTRIBUTION $3,707 $4,019 $1,194 $1,289 4,901 5,308
===== ===== ===== =====
Selling, General and
Admin. Exp. 1,759 1,782
Depreciation and
Amortization 1,142 1,134
------ ------
OPERATING INCOME 2,000 2,392
Interest Expense, Net 1,327 1,444
------ ------
INCOME BEFORE INCOME TAXES 673 948
Income Tax Provision 275 396
------ ------
NET INCOME $ 398 $ 552
====== ======
For the three month period ended June 30,1996, net sales decreased 13.1% to
$9,843,000 from $11,332,000 for the same period in 1995. While brand shares,
reflecting consumer consumption, are up versus 1995, shipments across all
products have been negatively affected by the continued industry trend towards
reduced inventories and by the depletion of remaining stocks held by specialty
distributors and promotional suppliers.
For the three month period ended June 30, 1996, cost of goods sold decreased
7.6% to $3,048,000 from $3,297,000 for the same period in 1995. This decrease
is primarily related to the lower sales volumes, but is partially offset by
higher manufacturing costs caused by price increases from the Company's
contract manufacturers and component suppliers.
- 6 -
<PAGE>
For the three month period ended June 30, 1996, distribution expenses and cash
discounts decreased 22.4% to $787,000 from $1,014,000 for the same period in
1995. This decrease is associated with a combination of lower sales volumes
and a more efficient use of the Company's distribution network.
For the three month period ended June 30, 1996, advertising and promotion
expenses decreased 35.4% to $1,107,000 from $1,713,000 for the same period in
1995. Most of the change versus 1995 is related to lower levels of support
on Aqua Velva as plans were being finalized for the 1996 second half roll-out
of the new Aqua Velva line extensions.
For the three month period ended June 30, 1996, selling, general, and
administrative expenses decreased slightly by 1.2% to $1,759,000 from
$1,782,000 for the same period in 1995.
For the three month period ended June 30, 1996, depreciation and amortization
of $1,142,000 was essentially unchanged versus $1,134,000 for the same period
in 1995.
For the three month period ended June 30, 1996, interest expense, net of
interest income decreased 8.1% to $1,327,000 from $1,444,000 for the same
period in 1995. This reduction is related to a combination of increased
interest income and lower interest expense due to a reduction in the
outstanding principal amount of the Senior Notes as a result of the
repurchase by the Company of $4,655,000 in outstanding principal amount.
See "Liquidity and Capital Resources."
For the three month period ended June 30, 1996, income taxes were $275,000
versus $396,000 for the same period in 1995. The effective tax rate was 41%
for the 1996 interim period and 42% for the same period in 1995.
RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996
The following table sets forth certain operating data for the six months
ended June 30, 1996 and 1995.
SIX MONTHS ENDED JUNE 30,
-------------------------
(In Thousands)
PERSONAL ORAL CARE TOTAL
CARE PRODUCTS PRODUCTS COMPANY
------------- -------------- ----------------
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
NET SALES $12,260 $14,446 $6,935 $7,160 $19,195 $21,606
Cost of Goods Sold 3,046 3,449 2,525 2,528 5,571 5,977
------ ------ ----- ----- ------ ------
GROSS MARGIN 9,214 10,997 4,410 4,632 13,624 15,629
Distribution and Cash
Discounts 816 1,307 734 749 1,550 2,056
Advertising and Promotion 1,894 1,785 1,525 1,447 3,419 3,232
------ ------ ----- ----- ------ ------
BRAND CONTRIBUTION $ 6,504 $7,905 $2,151 $2,436 8,655 10,341
====== ===== ===== =====
Selling, General and
Admin. Exp. 3,344 3,471
Depreciation and Amortization 2,275 2,266
------ ------
OPERATING INCOME 3,036 4,604
Interest Expense, Net 2,691 2,879
------ ------
INCOME BEFORE INCOME TAXES 345 1,725
Income Tax Provision 141 707
------ ------
NET INCOME $ 204 $ 1,018
====== ======
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<PAGE>
For the six month period ended June 30, 1996, net sales decreased 11.2% to
$19,195,000 from $21,606,000 for the same period in 1995. While brand
shares, reflecting consumer consumption, are up versus 1995, shipments across
all products have been negatively affected by the continued industry trend
towards reduced inventories and by the depletion of remaining stocks held by
specialty distributors and promotional suppliers.
For the six month period ended June 30, 1996, cost of goods sold decreased
6.8% to $5,571,000 from $5,977,000 for the same period in 1995. This decrease
is primarily related to the lower sales volumes, but is partially offset by
higher manufacturing costs caused by price increases from the Company's
contract manufacturers and component suppliers.
For the six month period ended June 30, 1996, distribution expenses and cash
discounts decreased 24.6% to $1,550,000 from $2,056,000 for the same period
in 1995. This decrease is associated with a combination of lower sales
volumes, lower levels of customer returns and a more efficient use of the
Company's distribution network.
For the six month period ended June 30, 1996, advertising and promotion
expenses increased 5.8% to $3,419,000 from $3,232,000 for the same period in
1995. This reflects slightly higher levels of marketing support on both the
personal care and oral care businesses with most of the change versus 1995
being associated with increased spending on the Aqua Velva brand re-stage
program.
For the six month period ended June 30, 1996, selling, general, and
administrative expenses decreased by 3.7% to $3,344,000 from $3,471,000 for
the same period in 1995. This decrease is attributable to a combination of
lower broker commission payments, associated with the lower sales revenue,
and with savings in certain other administrative expenses.
For the six month period ended June 30, 1996, depreciation and amortization
of $2,275,000 was essentially unchanged versus $2,266,000 for the same period
in 1995.
For the six the period ended June 30, 1996, interest expense, net of interest
income decreased 6.5% to $2,691,000 from $2,879,000 for the same period in
1995. This reduction is related to a combination of increased interest
income and lower interest expense as a result of the reduction in the
outstanding principal amount of the Senior Notes as a result of the
repurchase by the Company of $4,655,000 in outstanding principal amount.
See "Liquidity and Capital Resources."
For the six month period ended June 30, 1996, income taxes were $141,000
versus $707,000 for the same period in 1995. The effective tax rate was 41%
for both the 1996 and 1995 interim periods.
-8-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The following chart summarizes the net funds provided and/or used in
operating, financing and investing activities for the periods ended June 30,
1996 and 1995 (in thousands).
Six Months Ended June 30,
-------------------------
1996 1995
---- ----
Net cash provided by operating activities $1,693 $2,528
Net cash used in investing activities (399) (66)
Net cash used in financing activities (4,655) ---
Increase (Decrease) in cash and cash
equivalents $(3,361) $2,462
The principal adjustments to reconcile net income of $204,000 for the period
ended June 30, 1996 to net cash provided by operating activities of $1,693,000
are depreciation and amortization of $2,275,000, partially offset by a net
increase in working capital requirements of $786,000. The working capital
increase is primarily linked to generally lower levels of payables and
accrued expenses.
Capital expenditures, which were $.4 million for the six months ended June
30, 1996, are generally not significant in the Company's business and the
Company currently has no material commitments for future capital
expenditures.
As a result of the Senior Notes, the Company had $55 million of total debt
outstanding as of December 31, 1995. Pursuant to the terms of the Senior
Notes, on March 15, 1996, the Company made an offer to purchase from the
holders thereof on a pro rata basis an aggregate principal amount of Senior
Notes equal to the Company's Free Cash Flow (as defined in the Senior Notes)
at a purchase price equal to 100% of the principal amount of the Senior Notes
plus accrued interest. Pursuant to this offer, on April 15, 1996, the
Company purchased Senior Notes from certain holders thereof for an aggregate
of $4,055,000.
In addition to the Free Cash Flow offer, the Company also purchased an
additional $600,000 of the Senior Notes on June 14, 1996. As a result
of these repurchases, the Company's total debt outstanding was reduced to
$50,345,000. Management expects that cash on hand and internally generated
funds will provide sufficient capital resources to finance the Company's
operations and meet interest requirements on the Senior Notes, both in
respect of the short term as well as during the long term. However, there
can be no guarantee that the Company will generate funds sufficient to meet
these needs or that it will have access to bank financing to meet any
shortfall. Because the Company does not currently have a revolving credit
facility, if such a shortfall occurs, alternative sources of financing would
be necessary in order for the Company to meet its liquidity requirements.
-9-
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
- Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
- No reports on Form 8-K were filed by the registrant during
the period covered by this report.
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
J.B. WILLIAMS HOLDINGS, INC.
Date: AUGUST 13, 1996 /S/ KEVIN C. HARTNETT
--------------- ----------------------------------
Name: Kevin C. Hartnett
Title: Vice President and Chief
Financial Officer
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE J.B.
WILLIAMS HOLDINGS, INC. FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED JUNE
30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 16,117
<SECURITIES> 0
<RECEIVABLES> 5,220
<ALLOWANCES> 327
<INVENTORY> 3,815
<CURRENT-ASSETS> 25,274
<PP&E> 1,821
<DEPRECIATION> 797
<TOTAL-ASSETS> 70,882
<CURRENT-LIABILITIES> 5,281
<BONDS> 50,345
0
0
<COMMON> 9,600
<OTHER-SE> 5,656
<TOTAL-LIABILITY-AND-EQUITY> 70,882
<SALES> 19,195
<TOTAL-REVENUES> 19,195
<CGS> 5,571
<TOTAL-COSTS> 5,571
<OTHER-EXPENSES> 10,588
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,691
<INCOME-PRETAX> 345
<INCOME-TAX> 141
<INCOME-CONTINUING> 204
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 204
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
