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 September 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 October 30, 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 Nine Months Ended September 30, 1996
and September 30, 1995
Condensed Consolidated Balance Sheets at September 30, 2
1996 and December 31, 1995
Condensed Consolidated Statements of Cash Flows for 3
the Nine Months Ended September 30, 1996 and
September 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>
<TABLE>
J.B. WILLIAMS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(IN THOUSANDS)
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $12,756 $11,783 $31,951 $33,389
Cost of sales 3,933 3,444 9,504 9,421
------- ------- ------- -------
GROSS MARGIN 8,823 8,339 22,447 23,968
Distribution and cash discounts 926 1,028 2,476 3,084
Advertising and promotion 2,218 3,497 5,637 6,729
Selling, general and administrative expenses 1,936 1,715 5,280 5,186
Depreciation and amortization 1,155 1,138 3,430 3,404
------- ------- ------- -------
OPERATING INCOME 2,588 961 5,624 5,565
Interest expense-net 1,276 1,405 3,967 4,284
------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES 1,312 (444) 1,657 1,281
Income tax provision (benefit) 539 (207) 680 500
------- -------- ------- -------
NET INCOME (LOSS) $ 773 $ (237) $ 977 $ 781
======= ======== ======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
- 1 -
<PAGE>
<TABLE>
J.B. WILLIAMS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
(IN THOUSANDS)
<CAPTION>
AT SEPTEMBER 30, 1996 AT DECEMBER 31, 1995
-------------------- --------------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $16,953 $19,478
Accounts receivable, net 6,028 7,712
Inventories 3,424 3,267
Other current assets 660 188
------- -------
Total Current Assets 27,065 30,645
PROPERTY AND EQUIPMENT, NET 1,021 796
INTANGIBLE ASSETS, NET 40,203 43,145
OTHER ASSETS 3,330 3,612
------- -------
TOTAL ASSETS $71,619 $78,198
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,660 $ 1,600
Accrued expenses 3,584 6,546
------- -------
Total Current Liabilities 5,244 8,146
------- -------
LONG TERM DEBT 50,345 55,000
------ -------
SHAREHOLDER'S EQUITY:
Common stock and paid-in capital 9,600 9,600
Retained earnings 6,430 5,452
------- -------
Total Shareholder's Equity 16,030 15,052
------- -------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $71,619 $78,198
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
- 2 -
<PAGE>
<TABLE>
J.B. WILLIAMS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 977 $ 781
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of intangibles and debt issuance costs 3,157 3,203
Depreciation and amortization of property and equipment 272 201
Changes in operating assets and liabilities:
Accounts receivable 1,684 177
Inventories (157) (347)
Other current asset (472) 63
Accounts payable 60 (1,080)
Accrued expenses (2,962) (2,704)
Other assets 68 --
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,627 294
------- -------
INVESTING ACTIVITIES - Purchases of property and equipment (497) (97)
------- -------
FINANCING ACTIVITIES - Repurchase of Senior Notes (4,655) --
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,525) 197
Cash and cash equivalents, beginning of year 19,478 14,072
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $16,953 $14,269
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 855 $ 1,531
Interest paid $ 6,401 $ 6,668
</TABLE>
See Notes to Condensed Consolidated Financial Statements
- 3 -
<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 September 30, 1996 and for the three month and nine month periods
ended September 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
nine month periods ended September 30, 1996 and 1995 have been
reflected. All such adjustments are of a normal recurring nature. The
September 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 September 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 SEPTEMBER 30, 1996
The following table sets forth certain operating data for the three months
ended September 30, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------
(In Thousands)
PERSONAL CARE PRODUCTS ORAL CARE PRODUCTS TOTAL COMPANY
---------------------- ------------------ -------------
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET SALES $8,561 $7,572 $4,195 $4,211 $12,756 $11,783
Cost of Goods Sold 2,348 2,073 1,585 1,371 3,933 3,444
------ ------ ------ ------ ------- -------
GROSS MARGIN 6,213 5,499 2,610 2,840 8,823 8,339
Distribution and Cash Discounts 528 588 398 440 926 1,028
Advertising and Promotion 1,308 1,871 910 1,626 2,218 3,497
------ ------ ------ ------ ------- -------
Brand Contribution $4,377 $3,040 $1,302 $ 774 5,679 3,814
====== ====== ====== ======
Selling, General and Admin. Exp. 1,936 1,715
Depreciation and Amortization 1,155 1,138
------- -------
OPERATING INCOME 2,588 961
Interest Expense, Net 1,276 1,405
------- -------
INCOME (LOSS) BEFORE INCOME TAXES 1,312 (444)
Income Tax Provision (Benefit) 539 (207)
------- -------
NET INCOME (LOSS) $ 773 $ (237)
======= =======
</TABLE>
For the three month period ended September 30, 1996, net sales increased
8.3% to $12,756,000 from $11,783,000 for the same period in 1995. All of
this increase is related to sales of the new Aqua Velva deodorants, anti-
perspirants and skin conditioners that were introduced and began shipping in
July 1996.
For the three month period ended September 30, 1996, cost of goods sold
increased 14.2% to $3,933,000 from $3,444,000 for the same period in 1995.
This increase is related to a combination of the increased sales volumes and
higher manufacturing costs caused by price increases from the Company's
contract manufacturers and component suppliers.
- 6 -
<PAGE>
For the three month period ended September 30, 1996, distribution expenses
and cash discounts decreased 10.0% to $926,000 from $1,028,000 for the same
period in 1995. This decrease is primarily due to a more efficient use of
the Company's distribution network which was recently expanded to add a new
distribution facility in the Midwest.
For the three month period ended September 30, 1996, advertising and
promotion expenses decreased 36.6% to $2,218,000 from $3,497,000 for the
same period in 1995. Most of the change versus 1995 is related to lower
levels of support on Aqua Velva and Cepacol as plans were being finalized
for the 1996 second half roll-out of the new Aqua Velva line extensions. It
is anticipated that spending will increase during the fourth quarter in
support of this roll-out.
For the three month period ended September 30, 1996, selling, general, and
administrative expenses increased 12.9% to $1,936,000 from $1,715,000 for
the same period in 1995. Most of this increase is due to expenses
associated with increased staffing and outside professional services related
to the development and introduction of the new Cepacol and Aqua Velva
products.
For the three month period ended September 30, 1996, depreciation and
amortization increased slightly to $1,155,000 from $1,138,000 for the same
period in 1995.
For the three month period ended September 30, 1996, interest expense, net
of interest income, decreased 9.2% to $1,276,000 from $1,405,000 for the
same period in 1995. This reduction is primarily due to lower interest
expense related 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 September 30, 1996, income taxes were
$539,000 versus a credit of $(207,000) for the same period in 1995. The
effective tax rate was 41% for the 1996 interim period and 47% for the same
period in 1995.
RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996
The following table sets forth certain operating data for the nine months
ended September 30, 1996 and 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------
(In Thousands)
PERSONAL CARE PRODUCTS ORAL CARE PRODUCTS TOTAL COMPANY
---------------------- ------------------ -------------
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET SALES $20,821 $22,018 $11,130 $11,371 $31,951 $33,389
Cost of Goods Sold 5,394 5,522 4,110 3,899 9,504 9,421
------- ------- ------- ------- ------- -------
GROSS MARGIN 15,427 16,496 7,020 7,472 22,447 23,968
Distribution and Cash Discounts 1,344 1,895 1,132 1,189 2,476 3,084
Advertising and Promotion 3,202 3,656 2,435 3,073 5,637 6,729
------- ------- ------- ------- ------- -------
BRAND CONTRIBUTION $10,881 $10,945 $ 3,453 $ 3,210 14,334 14,155
======= ======= ======= =======
Selling, General and Admin. Exp. 5,280 5,186
Depreciation and Amortization 3,430 3,404
------- -------
OPERATING INCOME 5,624 5,565
Interest Expense, Net 3,967 4,284
------- -------
INCOME BEFORE INCOME TAXES 1,657 1,281
Income Tax Provision 680 500
------- -------
NET INCOME $ 977 $ 781
======= =======
</TABLE>
- 7 -
<PAGE>
For the nine month period ended September 30, 1996, net sales decreased 4.3%
to $31,951,000 from $33,389,000 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. These negative
factors were partially offset in the third quarter by shipments of the new
Aqua Velva products.
For the nine month period ended September 30, 1996, cost of goods sold
increased .9% to $9,504,000 from $9,421,000 for the same period in 1995.
This increase is primarily related to higher manufacturing costs caused by
price increases from the Company's contract manufacturers and component
suppliers, partially offset by the lower sales volumes.
For the nine month period ended September 30, 1996, distribution expenses and
cash discounts decreased 19.7% to $2,476,000 from $3,084,000 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 expanded distribution network.
For the nine month period ended September 30, 1996, advertising and
promotion expenses decreased 16.2% to $5,637,000 from $6,729,000 for the
same period in 1995. This reflects slightly lower levels of marketing
support on both the personal care and oral care businesses, as marketing
programs generally have been scheduled for later in the year.
For the nine month period ended September 30, 1996, selling, general, and
administrative expenses increased by 1.8% to $5,280,000 from $5,186,000 for
the same period in 1995. This increase is primarily related to increased
levels of staffing and associated expenses associated with the development
and introduction of the new Cepacol and Aqua Velva products, partially
offset by lower broker commission payments.
For the nine month period ended September 30, 1996, depreciation and
amortization increased slightly by .8% to $3,430,000 from $3,404,000 for the
same period in 1995.
For the nine month period ended September 30, 1996, interest expense, net of
interest income, decreased 7.4% to $3,967,000 from $4,284,000 for the same
period in 1995. This reduction is primarily due to 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 nine month period ended September 30, 1996, income taxes were
$680,000 versus $500,000 for the same period in 1995. The effective tax
rate was 41% for 1996 and 39% for the 1995 interim period.
- 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
September 30, 1996 and 1995 (in thousands).
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
---- ----
Net cash provided by operating activities $ 2,627 $294
Net cash used in investing activities (497) (97)
Net cash used in financing activities (4,655) ---
-------- ----
Increase (Decrease) in cash and cash equivalents $(2,525) $197
======== ====
The principal adjustments to reconcile net income of $977,000 for the nine
month period ended September 30, 1996 to net cash provided by operating
activities of $2,627,000 are depreciation and amortization of $3,429,000,
partially offset by a net increase in working capital requirements of
$1,779,000. The working capital increase is primarily due to lower levels
of accrued expenses.
Capital expenditures, which were $.5 million for the nine months ended
September 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 cash position and total debt outstanding
have both been reduced accordingly. 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: OCTOBER 30, 1996 /S/ KEVIN C. HARTNETT
---------------- -------------------------------
Name: Kevin C. Hartnett
Title: Vice President and Chief
Financial Officer
- 11 -
<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 NINE-MONTH
PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 16,953
<SECURITIES> 0
<RECEIVABLES> 6,348
<ALLOWANCES> 320
<INVENTORY> 3,424
<CURRENT-ASSETS> 27,065
<PP&E> 1,919
<DEPRECIATION> 898
<TOTAL-ASSETS> 71,619
<CURRENT-LIABILITIES> 5,244
<BONDS> 50,345
0
0
<COMMON> 9,600
<OTHER-SE> 6,430
<TOTAL-LIABILITY-AND-EQUITY> 71,619
<SALES> 31,951
<TOTAL-REVENUES> 31,951
<CGS> 9,504
<TOTAL-COSTS> 9,504
<OTHER-EXPENSES> 16,823
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,967
<INCOME-PRETAX> 1,657
<INCOME-TAX> 680
<INCOME-CONTINUING> 977
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 977
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
