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 March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 33-83734
--------
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 May 1, 1997: 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 3
Three Months Ended March 31, 1997 and March 31, 1996
Condensed Consolidated Balance Sheets at March 31, 1997 4
and December 31, 1996
Condensed Consolidated Statements of Cash Flows for 5
the Three Months Ended March 31, 1997 and March 31, 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
Part II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 11
Signature 12
-2-
<PAGE>
J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands)
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
NET SALES $11,774 $9,352
Cost of sales 3,569 2,523
------- -------
GROSS MARGIN 8,205 6,829
Distribution and cash discounts 1,033 763
Advertising and promotion 3,054 2,312
Selling, general and administrative expenses 2,108 1,585
Depreciation and amortization 1,120 1,133
------ -------
OPERATING INCOME 890 1,036
Other income 750 -------
Interest expense\net (1,219) (1,364)
------ -------
INCOME (LOSS) BEFORE INCOME TAXES 421 (328)
Income tax provision (benefit) 164 (134)
------ -------
NET INCOME (LOSS) $ 257 $ (194)
====== =======
See Notes to Condensed Consolidated Financial Statements
- 3-
<PAGE>
J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In Thousands)
At March 31, 1997 At December 31, 1996
----------------- --------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $20,206 $21,201
Accounts receivable, net 5,801 8,054
Inventories 3,821 3,235
Other current assets 457 570
------- -------
Total Current Assets 30,285 33,060
PROPERTY AND EQUIPMENT, NET 978 929
Intangible Assets, Net 38,272 39,222
OTHER ASSETS 3,603 3,584
------- -------
TOTAL ASSETS $73,138 $76,795
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $1,516 $3,579
Accrued expenses 4,505 6,356
------- -------
Total Current Liabilities 6,021 9,935
------- -------
LONG TERM DEBT 50,345 50,345
------- -------
SHAREHOLDER'S EQUITY:
Common stock and paid-in capital 9,600 9,600
Retained earnings 7,172 6,915
------- -------
Total Shareholder's Equity 16,772 16,515
------- -------
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $73,138 $76,795
======= =======
See Notes to Condensed Consolidated Financial Statements
-4-
<PAGE>
J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In Thousands)
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
OPERATING ACTIVITIES:
Net income (loss) $ 257 $(194)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Amortization of intangibles and debt
issuance costs 1,022 1,052
Depreciation and amortization of
property and equipment 98 81
Changes in operating assets and liabilities:
Accounts receivable 2,253 2,831
Inventories (586) (659)
Other current assets 113 (208)
Accounts payable (2,063) (274)
Accrued expenses (1,851) (2,987)
Other assets (91) 63
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (848) (295)
-------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment (147) (201)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (147) (201)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (995) (496)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 21,201 19,478
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $20,206 $18,982
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid ---- $469
Interest paid $3,021 $3,300
See Notes to Condensed Consolidated Financial Statements
-5-
<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 March 31, 1997 and for the three month periods ended March 31, 1997 and
1996 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 periods ended March 31, 1997 and 1996 have
been reflected. All such adjustments are of a normal recurring nature.
The March 31, 1997 condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto for the year ended December 31, 1996 included in the Company's
Annual Report on Form 10-K.
The results of operations for the period ended March 31, 1997 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.
-6-
<PAGE>
4. OTHER INCOME
The Company received a one-time payment of $750,000, in January 1997,
representing a break-up fee payable to the Company pursuant to the terms of
a letter of intent entered into by the Company in connection with a
potential transaction.
5. RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 financial statements
to conform with the current year's presentation.
-7-
<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 MARCH 31, 1997
The following table sets forth certain operating data for the three months
ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
(In Thousands)
Personal Care Products Oral Care Products Total Company
---------------------- ------------------ -------------
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1997 1996 1997 1996
------ ------ ------ ------ ------- ------
NET SALES $6,972 $5,756 $4,802 $3,596 $11,774 $9,352
Cost of Goods Sold 1,884 1,351 1,685 1,172 3,569 2,523
------ ------ ------ ------ ------- ------
GROSS MARGIN 5,088 4,405 3,117 2,424 8,205 6,829
Distribution and Cash Discounts 522 392 511 371 1,033 763
Advertising and Promotion 1,887 1, 216 1,167 1,096 3,054 2,312
------ ------ ------ ------ ------- ------
BRAND CONTRIBUTION $2,679 $2,797 $1,439 $ 957 4,118 3,754
====== ====== ====== ======
Selling, General and Admin. Exp. 2,108 1,585
Depreciation and Amortization 1,120 1,133
------- ------
OPERATING INCOME 890 1,036
Other Income 750 ---
Interest Expense, Net (1,219) (1,364)
------- ------
INCOME (LOSS) BEFORE INCOME TAXES 421 (328)
Income Tax Provision (Benefit) 164 (134)
------- ------
NET INCOME (LOSS) $ 257 (194)
======= ======
</TABLE>
For the three month period ended March 31, 1997, net sales increased 25.9% to
$11,774,000 from $9,352,000 for the same period in 1996. This increase is
primarily due to increased sales of the new Aqua Velva items, consisting of a
line of deodorants and anti-perspirants introduced during 1996, combined with
generally higher sales on all of the Cepacol products.
For the three month period ended March 31, 1997, cost of goods sold increased
41.5% to $3,569,000 from $2,523,000 for the same period in 1996. This increase
is directly linked to the Company's higher sales volumes combined with higher
manufacturing costs, particularly costs related to the new Aqua Velva products.
-8-
<PAGE>
For the three month period ended March 31, 1997, distribution expenses and
cash discounts increased 35.4% to $1,033,000 from $763,000 for the same period
in 1996. This increase is primarily associated with the increased sales
volumes.
For the three month period ended March 31, 1997, advertising and promotion
expenses increased 32.1% to $3,054,000 from $2,312,000 for the same period in
1996. This increase is primarily due to higher levels of marketing support
behind the continued introduction of the new Aqua Velva items.
For the three month period ended March 31, 1997, selling, general and
administrative expenses increased 33.0% to $2,108,000 from $1,585,000 for the
same period in 1996. This increase is related to a combination of increased
staffing and higher broker commission payments, related to the increased sales
levels.
For the three month period ended March 31, 1997, depreciation and amortization
of $1,120,000 was essentially unchanged versus the same period in 1996.
For the three month period ended March 31, 1997, other income of $750,000 was
received as a result of a one-time payment that represented a break-up fee
payable to the Company pursuant to the terms of a Letter of Intent entered
into by the Company in connection with a potential transaction.
For the three month period ended March 31, 1997, interest expense, net of
interest income, decreased 10.6% to $1,219,000 from $1,364,000 for the same
period in 1996. This reduction is primarily due to lower interest expense
related to a reduction in the outstanding principal amount of the Senior Notes
to $50.3 million in 1997 versus $55.0 million during the same period in 1996.
For the three month period ended March 31, 1997, income taxes were $164,000
versus an income tax benefit of $(194,000) for the same period in 1996. The
effective tax rate was 39% for the 1997 interim period versus 41% for the same
period in 1996.
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 March 31,
1997 and 1996 (in thousands).
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
------ ------
Net cash used in operating activities $(848) $(295)
Net cash used in investing activities (147) (201)
Decrease in cash and cash equivalents $(995) $(496)
-9-
<PAGE>
The principal adjustments to reconcile net income of $257,000 for the period
ended March 31, 1997 to net cash used in operating activities of $848,000 are
depreciation and amortization of $1,120,000, offset by a net increase in
working capital requirements of $2,225,000. The working capital increase is
primarily linked to a decrease in accounts payable and accrued expenses.
Capital expenditures, which were $147,000 for the three months ended March 31,
1997, 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 $50.3 million of total debt
outstanding as of March 31, 1997. 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.
-10-
<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.
-11-
<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: MAY 12, 1997 /s/ KEVIN C. HARTNETT
--------------------------------------------
Name: Kevin C. Hartnett
Title: Vice President and Chief Financial
Officer
- 12-
<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
MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 20,206
<SECURITIES> 0
<RECEIVABLES> 6,121
<ALLOWANCES> 320
<INVENTORY> 3,821
<CURRENT-ASSETS> 30,285
<PP&E> 2,072
<DEPRECIATION> 1,094
<TOTAL-ASSETS> 73,138
<CURRENT-LIABILITIES> 6,021
<BONDS> 50,345
0
0
<COMMON> 9,600
<OTHER-SE> 7,172
<TOTAL-LIABILITY-AND-EQUITY> 73,138
<SALES> 11,774
<TOTAL-REVENUES> 11,774
<CGS> 3,569
<TOTAL-COSTS> 3,569
<OTHER-EXPENSES> 7,315
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,219
<INCOME-PRETAX> 421
<INCOME-TAX> 164
<INCOME-CONTINUING> 421
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 257
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
