F O R M 10 - K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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 Identification
incorporation or organization) Number)
65 Harristown Road
Glen Rock, New Jersey 07452
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 251-8100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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
------ ------
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 amendment to
this Form 10-K. [ X ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 27, 1996: $0.00
Number of shares of the registrant's Common Stock, par value $0.01 per share,
outstanding as of March 27, 1997: 9,000
<PAGE>
PART I
ITEM 1. BUSINESS
J. B. Williams Holdings, Inc. (the "Company" or the "Registrant"), was
incorporated in 1993 to create a holding company for J.B. Williams Company,
Inc. ("J.B. Williams"), and for its other subsidiaries (collectively, the
"Subsidiaries"). The Company, through its Subsidiaries, distributes and sells
personal care products in the United States, Canada and Puerto Rico, and oral
care products 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").
The Company and its Subsidiaries are engaged in only one industry segment,
namely the distribution and sale of personal and oral care products. The
Company's personal care products are Aqua Velva<trademark> after-shave,
Brylcreem<trademark> hair care preparations, Lectric Shave<trademark>
pre-shave and Williams<trademark> Mug Shaving Soap. The Company's oral
care products are Cepacol<trademark> mouthwash, Cepacol<trademark> throat
spray and Cepacol<trademark> throat lozenges. The Company's products are
distributed through a network of independent brokers, consisting of
approximately 30 brokers, covering all fifty states. The Company's
brokers are compensated for their services by the Company on a commission
basis, and either the Company or the independent broker may terminate their
relationship upon 30 days' notice.
The market for the Company's products is the general public throughout the
United States, Canada and Puerto Rico, in the case of the personal care
products, and the United States and Puerto Rico, in the case of the oral care
products. The products are distributed through retail accounts, with the
Company's two largest accounts, Wal-Mart and Kmart, accounting for 22% and 5%,
respectively, of the Company's U.S. net sales in 1996. Wal-Mart and Kmart each
make their purchasing decisions on a centralized basis. Although the Company
believes its relationship with these accounts to be very good, should either of
them significantly reduce their volume of purchases from the Company, cash flow
and net income would be adversely affected and replacing such sales would be
difficult.
The Company does not have formal arrangements for the purchase and sale of
its products with its major customers, except for pricing arrangements pursuant
to which the Company has set predetermined prices for its products. The
Company's net sales fluctuate from month to month due to the timing of
purchases as well as to price discounts offered to certain of the Company's
customers. Historically, the Company's net sales have not demonstrated
significant seasonal variation.
The Company's products are sold in highly competitive markets, with the
Company's principal competitors being Procter & Gamble (personal care products
and oral care products), Colgate-Palmolive Company (personal care products),
SKB (oral care products) and Warner-Lambert Co. (oral care products). Many of
the Company's major competitors are significantly larger than the Company in
terms of sales force, sales volume, product selection and product support
resources. These competitors also have significantly greater access to
capital, marketing and advertising resources than the Company. In addition,
the leverage that some of these competitors derive from the significance of
their other products with key retailers may allow their competing products to
obtain shelf space at the expense of the Company's products.
<PAGE>
Management believes that, although the industry is highly competitive,
competition among brand name products has traditionally been based on factors
other than price, such as brand recognition and loyalty, retail distribution
and product features.
All of the Company's products are manufactured by outside third parties.
Management believes that there are many third party contract manufacturers who
could readily manufacture the Company's products on comparable terms. Raw
materials used in the Company's products are readily available from a number of
sources.
The personal care products business is not subject to governmental
regulation, other than regulations relating to marketing and content (including
alcohol content), labeling and packaging of consumer products. The oral care
products business is subject to regulation by the Federal Food and Drug
Administration and the Bureau of Alcohol, Tobacco and Firearms, as are other
manufacturers of similar products, as well as regulations relating to marketing
and content (including alcohol content), labeling and packaging of consumer
products.
The Company's trademarks "Aqua Velva", "Lectric Shave", "Brylcreem",
"Williams Mug Shaving Soap" and "Cepacol" have been registered with the United
States Patent and Trademark Office and (except for Cepacol), under the Canadian
Trademark Act. The Company considers these trademarks to be the most important
assets of the business.
As of December 31, 1996, the Company had 33 employees, all of which are
non-union. The Company considers its relationship with its employees to be
good.
ITEM 2. PROPERTIES
The Company maintains its executive offices in Glen Rock, New Jersey, in
leased office space of approximately 12,000 square feet. The lease on the
property expires in July, 2001. The Company also uses public warehouse and
distribution facilities in Plainfield, Indiana, Somerset, New Jersey and
Sparks, Nevada.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is party to any material
pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
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<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the equity securities of
the Company or of its Subsidiaries. The Company's equity securities are held
of record by one owner. The Company has not declared any cash dividends on its
common equity for the two most recent fiscal years, and does not currently
intend to declare any such cash dividends for the foreseeable future. In
addition, the Indenture under which the Company's $55,000,000 12% Senior Notes
due 2004 were issued contains restrictions on the payment of dividends which
may limit materially the future payments of dividends on the common equity.
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS)
The financial and operating data set forth on the following page as of
December 31, 1996, 1995, 1994 and 1993 and for the years ended December 31,
1996, December 31, 1995, December 31, 1994 and the period December 3, 1992, the
date of inception, through December 31, 1993, are derived from, and should be
read in conjunction with the consolidated financial statements of the Company
and related notes thereto. The data for the oral care products for the period
January 1, 1994 through February 19, 1994 and the fiscal year ended December
31, 1993 is derived from, and should be read in conjunction with the Statements
of Brand Contribution of the Cepacol Brands of SmithKline Beecham L.P. and
related notes thereto.
During the period of time when negotiations were being held for the
purchase of the Cepacol oral care business, the Company expended considerable
time and effort to obtain financial data for this business for the nine months
ended September, 1992. Numerous discussions were held with the prior owner
with regard to the extent financial data was available pertaining to the
Cepacol oral care products business. Notwithstanding the efforts of the
Company and its outside auditors, it was determined that there was not
sufficient data available to permit the preparation of financial statements
covering this period in accordance with generally accepted accounting
principles (other than a Statement of Net Sales). The lack of financial data
was attributable to the fact that the Cepacol oral care products business did
not comprise a separate business unit of the prior owner, and was not a
material part of its overall business. Accordingly, there is no financial or
operating data, other than net sales, presented for the Cepacol oral care
products business for the nine months ended September, 1992.
Additionally, there is only limited financial and operating data presented
with respect to the Cepacol oral care products for the period from September
15, 1992 through December 31, 1992, the fiscal year ended December 31, 1993,
and the period from January 1, 1994 through February 19, 1994, and with respect
to the personal care products for the fiscal year ended December 31, 1992,
because during such periods the Cepacol oral care products and personal care
products were owned and operated as part of the consumer brand business of SKB,
and not as a separate business unit.
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<PAGE>
Selected Financial Data
(In Thousands)
<TABLE>
<CAPTION>
Personal Care Oral Care Products J. B. Williams Holdings, Inc.
Products
------------- --------------------------- ------------------------------------------------
Fiscal Year Fiscal Years January 1,
Ended Ended Through Fiscal Years Ended
December 31 December 31, February 19 December 31,
------------- -------------------------- ----------- -----------------------------------
1992 1992(1) 1993 1994 1993(2) 1994 1995 1996
---- ---------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jan. 1- Sept. 15-
Sept. 30 Dec. 31
-------- ---------
Income Statement Data:
Net Sales $30,370 $13,949 $5,072 $18,345 $2,454 $28,380 $44,060 $46,899 $48,283
Cost of Goods Sold 8,311 1,288 5,732 879 8,269(3) 13,605(3) 13,111 14,206
------- ------ ------- ------ ------- ------- ------- -------
Gross Profits 22,059 3,784 12,613 1,575 20,111 30,455 33,788 34,077
Advertising 20 730 2,149 629 1,825 2,436 3,241
Promotion 2,828 1,880 3,452 386 2,290 5,994 6,740 7,412
Distribution and
Cash Discounts 1,603 304 1,119 114 1,788 4,202 4,273 3,683
------- ------ ------- ------ ------- ------- ------- -------
Brand Contribution $17,608 $ 870 $5,893 $1,075 $15,404 18,434 20,339 19,741
======= ====== ======= ====== ------- ------- ------- -------
Selling, General and
Administrative Expenses 5,780 6,096 7,060 7,452
Depreciation and
Amortization 3,478 4,250 4,543 4,580
Interest Expense, Net 2,543 5,578 5,685 5,231
------- ------- ------- ------
Income Before Income
Taxes 3,603 2,510 3,051 2,478
Provision for Income
Taxes 1,485 976 1,251 1,015
------- ------- ------- -------
Net Income $2,118 $1,534 $ 1,800 $1,463
======= ======= ======= =======
BALANCE SHEET DATA:
Cash $4,961 $14,072 $19,478 $21,201
Working Capital
(Deficiency) (4,599) 17,202 22,925 23,555
Intangible Assets, Net 37,176 47,128 43,145 39,222
Total Assets 49,343 76,625 78,198 76,795
Total Debt 37,000 55,000 55,000 50,345
Shareholder's Equity 7,718 13,252 15,052 16,515
</TABLE>
(footnotes on following page)
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<PAGE>
Notes to Selected Financial Data
(1) From January 1, 1992 through September 15, 1992 the oral care products
were owned by Marion Merrell Dow Inc. ("MMD") and from September 15, 1992
through December 31, 1992 the oral care products were owned by SKB.
Although MMD recorded sales through September 30, 1992, these sales are
not duplicative and represent sales of the Cepacol products that are in
addition to sales recorded during September, 1992 by SKB.
(2) The fiscal year ended December 31, 1993 includes the period from December
3, 1992, the date of inception. The Company's operations began January 1,
1993 and, as such, no sales activity or operating expenses were incurred
prior to January 1, 1993.
(3) Includes an inventory purchase accounting adjustment associated with the
acquisition of the personal care products business which increased cost of
goods sold by $1.7 million in 1993 and an inventory purchase account
adjustment associated with the acquisition of the oral care products
business which increased cost of goods sold by $1.3 million for 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Selected
Financial Data and the Consolidated Financial Statements included elsewhere in
this report.
GENERAL
J. B. Williams Holdings, Inc. (the "Company"), through its subsidiaries,
distributes and sells personal care products in the United States, Canada and
Puerto Rico, and oral care products 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").
On March 16, 1994, the Company offered and sold $55,000,000 12% Senior
Notes due 2004 pursuant to an indenture of even date (the "Senior Notes"). The
Company applied a portion of such net proceeds to the repayment in full of
approximately $33 million of indebtedness to SKB incurred in connection with
the 1993 acquisition of the personal care products. The Company also used
approximately $16.3 million of such net proceeds, together with a $2 million
cash equity contribution by its sole shareholder, to pay the purchase price for
the 1994 acquisition of the oral care products. The Senior Notes originally
carried a 12 1/2 % interest rate, which was permanently reduced to 12% on
December 1, 1994, as a result of the consummation of an Exchange Offer by the
Company (the "Exchange Offer").
The operations of the Company began on January 1, 1993, following the
acquisition of the personal care products business. During the nine-month
period thereafter, management was retained and an independent broker network
was established. During this period SKB conducted substantially all of the
selling and administrative functions associated with operating the personal
care products business on behalf of the Company pursuant to a Transitional
Services Agreement between the Company and SKB. In a similar arrangement, SKB
continued to provide certain
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<PAGE>
selling and administrative functions for the two-month period following the
February, 1994 acquisition of the oral care products business. As a result,
the financial data presented for these time periods may not reflect the costs
and expenses that would have resulted if the business had been operated without
the benefit of the services provided by SKB under the Transitional Services
Agreement.
RESULTS OF OPERATIONS
Personal Care Products
The following table sets forth certain financial data for the Company's
personal care products for each of the three years ended December 31, 1994,
1995 and 1996.
FISCAL YEARS ENDED DECEMBER 31,
1994 1995 1996
---- ---- ----
(Dollars in thousands)
(Percentages represent percent of net sales)
Net Sales $30,666 100% $30,311 100% $30,996 100%
Cost of Goods Sold 7,622 25 7,614 25 8,155 26
------- ------- -------
Gross Profit 23,044 75 22,697 75 22,841 74
Advertising 1,351 4 1,431 5 2,159 7
Promotion 2,828 9 3,291 11 4,172 13
Distribution and Cash
Discounts 2,677 9 2,527 8 2,020 7
------- ------- -------
Brand Contribution $16,188 53% $15,448 51% $14,490 47%
======= ======= =======
1996 Compared to 1995
Net sales increased 2.3% to $31.0 million in 1996 from $30.3 million in
1995. This increase is primarily attributable to the successful launch of a
line of deodorants and anti-perspirants under the Aqua Velva brand during the
second half of 1996.
Cost of goods sold increased 7.1% to $8.2 million in 1996 from $7.6
million in 1995. This increase reflects a combination of the increased sales
volumes and higher manufacturing costs caused by price increases from the
Company's contract manufacturers and component suppliers.
Distribution and cash discounts decreased 20.1% to $2.0 million in 1996
from $2.5 million in 1995. This decrease is primarily due to a more efficient
use of the Company's distribution network as a result of the addition of a new
distribution facility in the Midwest during the summer of 1996.
Advertising and promotion expenses increased 34.1% to $6.3 million in 1996
from $4.7 million in 1995. This increase is primarily due to the advertising
and promotional campaign supporting the introduction of the new Aqua Velva
products.
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<PAGE>
1995 Compared to 1994
Net sales decreased 1.2% to $30.3 million in 1995 from $30.7 million in
1994. This decrease is primarily attributable to trade inventory reduction
programs designed to reduce customer warehouse inventory that occurred over the
course of the year. The business, however, remains strong as evidenced by the
increased market share experienced across all brands.
DOLLAR MARKET SHARE - 52 WEEKS ENDING DECEMBER 31ST
Brand 1994 1995 % Change
Aqua Velva 6.2% 7.1% +14.5%
Lectric Shave 70.8% 73.3% + 3.5%
Brylcreem 19.4% 19.7% + 1.5%
Cost of goods sold were essentially unchanged versus 1994 in spite of the
overall reduction in factory shipments. Manufacturing costs were slightly
higher in 1995 reflecting price increases on certain packaging material
components, most notably corrugated cartons.
Distribution and cash discounts decreased 5.6% to $2.5 million in 1995
from $2.7 million in 1994. This decrease reflects efficiencies the Company was
able to realize by entering into pooled shipping arrangements on deliveries to
the mid-west as well as the reduction in overall shipments.
Advertising and promotion expenses increased 13.0% to $4.7 million in 1995
from $4.2 million in 1994. This increase is primarily due to a new advertising
and promotional campaign supporting the Company's Aqua Velva Ice Sport product.
Oral Care Products
The Company did not own the oral care products business during the first
two months of 1994.
The following table sets forth certain financial data for the oral care
products for each of the three years ended December 31, 1994, 1995, and 1996.
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<PAGE>
FISCAL YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1995 1996
--------------------------------------- -------------- -----------------
(Dollars in thousands)
(Percentages represent percent of net sales)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jan. 1 - Feb. 19 Feb. 20 - Dec. 31
---------------- -----------------
Net Sales $2,454 100% $13,393 100% $16,588 100% $17,286 100%
Cost of Goods Sold 879 36 5,983(1) 45 5,497 33 6,051 35
------ ------- ------- -------
Gross Profit 1,575 64 7,410 55 11,091 67 11,235 65
Advertising 474 4 1,005 6 1,082 6
Promotion 386 16 3,166 24 3,449 21 3,239 19
Distribution and
Cash Discounts 144 6 1,525 11 1,746 11 1,664 10
------ ------- ------- -------
Brand Contribution $1,045 43% $2,245 17% $4,891 29% $5,250 30%
====== ======= ======= =======
</TABLE>
(1) Includes an inventory purchase accounting adjustment which increased cost
of goods sold by $1.3 million in 1994.
1996 Compared to 1995
Net sales increased 4.2% to $17.3 million from $16.6 million in 1995.
This increase is primarily due to strong fourth quarter shipments of the
cough/cold items and a stabilizing of the mouthwash business during the second
half of 1996.
Cost of goods sold increased 10% to $6.1 million from $5.5 million in
1995. This increase reflects a combination of the increased sales volumes and
higher manufacturing costs caused by price increases from the Company's
contract manufacturers and component suppliers.
Distribution and cash discounts decreased 6.1% to $3.2 million in 1996
from $3.4 million in 1995. This decrease is primarily due to a more efficient
use of the Company's distribution network which added a Midwestern distribution
facility during the summer of 1996.
Advertising and promotion expenses decreased 3.0% to $4.3 million in 1996
from $4.5 million in 1995. This slight decrease reflects the absence of costs
associated with new product introductions as compared to 1995.
1995 Compared to 1994
The following discussion concerning the 1995 financial performance of the
oral care products business compares these results with the results for the
period of time from January 1, 1994 through February 19, 1994, while the
business was owned by SKB, combined with the results for the period of time
from February 20, 1994 through December 31, 1994 when the business was owned by
the Company.
Net sales increased 4.7% to $16.6 million in 1995 from net sales, on a
combined basis, of $15.8 million in 1994.
Cost of goods sold decreased 19.9% to $5.5 million in 1995 from costs of
goods sold, on a combined basis, of $6.9 million in 1994. Cost of goods sold
were adversely affected in 1994 by a
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<PAGE>
$1.3 million charge relating to a purchase accounting adjustment to the value
of the oral care products inventory purchased from SKB. Excluding this charge,
cost of goods sold would have essentially been unchanged at $5.5 million in
1995.
Distribution and cash discounts increased 4.6% to $1.7 million in 1995
from distribution and cash discounts, on a combined basis, of $1.7 million in
1994.
Advertising and promotion expenditures increased 10.6% to $4.5 million in
1995 from advertising and promotions, on a combined basis, of $4.0 million in
1994.
Total Company Expenses
FISCAL YEARS ENDED DECEMBER 31,
1994 1995 1996
---- ---- ----
(Dollars in thousands)
(Percentages represent percent of net sales)
Net Sales $44,060 100% $46,899 100% $48,283 100%
======= ======= =======
Brand Contribution $18,433 42 $20,339 43 19,741 41
Selling, General &
Administrative 6,095 14 7,060 15 7,452 15
Depreciation &
Amortization 4,250 10 4,543 10 4,580 9
Interest Expense, Net 5,578 13 5,685 12 5,231 11
Provision for
Income Taxes 976 2 1,251 3 1,015 2
------- ------- -------
Net Income $1,534 3% $1,800 4% $1,463 3%
======= ======= =======
1996 Compared to 1995
Selling general and administrative expenses increased 5.6% to $7.5 million
in 1996 from $7.1 million in 1995. This increase reflects increased staffing
levels and related expenses associated with the development and introduction of
the new Cepacol and Aqua Velva products.
Depreciation and amortization remained essentially unchanged at $4.6
million in 1996 versus $4.5 million in 1995.
Interest expense, net of interest income, decreased 8.0% to $5.2 million
in 1996 from $5.7 million 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 of its Senior Notes. See "Liquidity
and Capital Resources."
Provision for income taxes was $1.0 million in 1996 versus $1.3 million in
1995. The effective tax rate was 41% for both years.
As a result of the foregoing factors, net income for 1996 was $1.5 million
or 3.0% of net sales.
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<PAGE>
1995 Compared to 1994
Selling, general and administrative expenses increased 15.8% to $7.1
million in 1995 from $6.1 million in 1994. This increase is attributable to a
combination of higher administrative costs related to the absorption of the
Cepacol business into the daily operations of the Company and higher broker
commission payments associated with increased sales in 1995.
Depreciation and amortization increased 6.9% to $4.5 million in 1995 from
$4.3 million in 1994. This increase is primarily associated with the full year
impact of the acquisition of the oral care products business and the related
intangible asset amortization.
Interest expense, net of interest income increased 1.9% to $5.7 million in
1995 from $5.6 million in 1994. The 1995 amount reflects the $55 million in
Senior Notes due 2004 at an interest rate of 12%. The 1994 amount reflects $37
million of SKB indebtedness with interest at 7% for January through March 15,
1994 plus interest on the Senior Notes at an initial rate of 12.5% from March
15, 1994 through November 30, 1994 and at a 12% rate for the month of December
(reflecting the .5% rate reduction resulting form the Company's Exchange
Offer).
Provision for income taxes was $1.3 million in 1995 versus $1.0 million in
1994. The effective tax rate was 41% for 1995 versus 39% for 1994.
As a result of the foregoing factors, net income for 1995 was $1.8
million, or 3.8% of net sales.
Liquidity and Capital Resources
The following chart summarizes the net funds provided and/or used in
operating, financing and investing activities for the years ended December 31,
1996 and 1995 (in thousands).
Fiscal Years Ended
December 31,
-------------------
1996 1995
------- -------
Net cash provided by operating activities $6,881 $5,553
Net cash used in investing activities (503) (147)
Net cash used in financing activities (4,655) --
------- ------
Increase in cash and cash equivalents $1,723 $5,406
======= ======
The principal adjustments to reconcile net income of $1.5 million for 1996
to net cash provided by operating activities of $6.9 million are depreciation
and amortization of $4.6 million combined with a net decrease in working
capital requirements of $1.1 million.
The principal adjustments to reconcile net income of $1.8 million for 1995
to net cash provided by operating activities of $5.6 million are depreciation
and amortization of $4.5 million offset by a net increase in working capital
requirements of $.7 million.
Capital expenditures, which were $.5 million in 1996 and $.1 million in
1995, are generally not significant in the Company's business and the Company
currently has no material commitments for future capital expenditures.
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<PAGE>
Management believes that inflation does not presently have a significant impact
on the Company's results of operations.
As a result of the placement 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 the 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 Senior Notes purchased pursuant to the Free Cash Flow
offer, the Company also purchased an additional $600,000 of 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.
RECENT DEVELOPMENTS
On January 14, 1997, the Company received a one-time payment of $750,000
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and those of the Company's
predecessor, and the related Reports of Independent Auditors appear on pages
F-2 to F-17. See Index to Financial Statements, page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following tables list the directors and executive officers of the
Company and J.B. Williams Company, Inc., the wholly owned subsidiary through
which the Company's operations are conducted ("J.B. Williams").
J. B. WILLIAMS HOLDINGS, INC.
NAME AGE OFFICES(S) HELD
Hendrik J. Hartong, Jr. 57 Director, Chairman
Richard T. Niner 57 Director, Vice President
Dario U. Margve 40 Director, President and CEO
Kevin C. Hartnett 46 Vice President Finance and
Administration and Secretary
C. Alan MacDonald 64 Director
Carl G. Anderson 52 Director
John T. Gray 61 Director
J. B. WILLIAMS COMPANY, INC.
Hendrik J. Hartong, Jr. 57 Director, Chairman
Richard T. Niner 57 Director
Dario U. Margve 40 President and CEO
Kevin C. Hartnett 46 Vice President Finance and
Administration and Secretary
Robert G. Sheasby 45 Vice President Marketing
Jeffrey L. Bower 45 Vice President Operations
D. John Dowers 37 Vice President Sales
All directors and executive officers of the Company and J.B. Williams are
elected annually and serve as such until their successors have been elected and
qualified.
Hendrik J. Hartong, Jr. - Mr. Hartong has been a member of the Board of
Directors of each of the Company and J.B. Williams since the organization of
these companies in December, 1993 and December, 1992, respectively. He has
also served as the Chairman of the Company since March, 1994, and Chairman of
J.B. Williams since its organization. Since 1984, Mr. Hartong has been a
General Partner of Brynwood Partners Limited Partnership and Brynwood Partners
II L.P. and since mid-1995, a General Partner of Brynwood Partners III L.P.,
investment management firms based in Greenwich, Connecticut. Mr. Hartong is
Chairman of the Board of Directors of Air Express International Corporation and
a director of Hurco Companies, Inc. Mr. Hartong graduated from the Harvard
Graduate School of Business Administration in 1964, and the University of
Cincinnati in 1962.
-12-
<PAGE>
Richard T. Niner - Mr. Niner has been a member of the Board of Directors
of each of the Company and J.B. Williams since their organization and has
served as Vice President of the Company since that date. Since 1984, Mr. Niner
has been a General Partner of Brynwood Partners Limited Partnership and
Brynwood Partners II L.P., investment management firms based in Greenwich,
Connecticut. Mr. Niner is also a director of Air Express International
Corporation, Arrow International, Inc. and Hurco Companies, Inc. Mr. Niner
graduated from the Harvard Graduate School of Business Administration in 1964,
and Princeton University in 1961.
C. Alan MacDonald - Mr. MacDonald has been a member of the Company's Board
of Directors since March, 1994. Mr. MacDonald is a General Partner of The
Marketing Partnership Inc., a full service marketing consulting firm. Prior to
assuming this position, Mr. MacDonald was associated with the Noel Group and
Lincoln Snack Co. Mr. MacDonald was formerly President and CEO of Nestle Foods
Corp. in Purchase, New York, a position he held from 1983 to 1991. Prior to
that he had been President of The Stouffer Frozen Food Co. Mr. MacDonald is
also a director of Lord, Abbett & Co., manager of mutual funds, Fountainhead
Water Company, a producer of bottled water, and Den America, the largest
franchisor of Denny's Restaurants. Mr. MacDonald graduated from Cornell
University in 1955 with a B.S. in Hotel Administration.
Carl G. Anderson - Mr. Anderson has been a member of the Company's Board
of Directors since March, 1994. Mr. Anderson is Vice President - General
Manager of Retail Consumer Products for James River Corporation, a paper
products company, and has served in this position since August of 1994. Mr.
Anderson also served as Vice President of Marketing for James River Corporation
from May, 1992 to August, 1994. He was a marketing executive at Procter &
Gamble from 1972 to 1984 and Vice President and General Manager at Nestle Foods
Corporation in Purchase, New York from 1984 to 1992. Mr. Anderson graduated
from Lehigh Graduate School of Business Administration in 1972 and Lafayette
College in 1967 and served as a First Lieutenant in the U.S. Army.
John T. Gray - Mr. Gray is a General Partner of Brynwood Partners III
L.P., an investment management firm based in Greenwich, Connecticut. During
the period 1984 through mid-1995, Mr. Gray served as President and Chief
Executive Officer of The Genie Company, a manufacturer of garage door openers
and wet/dry vacuum cleaners. He first became associated with Genie as
Executive Vice President in 1982. Mr. Gray joined the Norelco Division of
North American Philips Corporation in 1968 where he served in various marketing
positions and rose to become Vice President and General Manager in 1974. Mr.
Gray graduated from the University of Illinois and served as a First Lieutenant
in the U.S. Air Force.
Dario U. Margve - Mr. Margve has been a member of the Board of Directors
of the Company, and the President and CEO of the Company, and the President and
CEO of J.B. Williams since March 9, 1995. Mr. Margve began his employment with
J.B. Williams in May, 1993 as the Vice President Sales and served in this
position until his election as President and CEO. Prior to joining the J. B.
Williams, Mr. Margve was the Vice President Division Manager of the Stouffer
Foods Division of Nestle Company, Inc., which company Mr. Margve joined in
March, 1991. Mr. Margve previously held other positions with Nestle, including
Regional Manager of the Nestle Foods Division, and was Vice President, Regional
Manager of Wine World, Inc. Mr. Margve received a B.S. in Engineering from the
United States Military Academy at West Point, New York, in 1978.
-13-
<PAGE>
Kevin C. Hartnett - Mr. Hartnett began his employment with J.B. Williams
in March, 1993 as Vice President Finance and Administration. He has also
served as Vice President Finance and Administration of the Company and
Secretary of J.B. Williams since March, 1994 and as Secretary of the Company
since December, 1994. He is responsible for financial matters related to J.B.
Williams, including its existing operations and development. Previously, Mr.
Hartnett was the Director of Finance and Accounting for the Bottled Water
Division of The Clorox Company from September, 1989 to March, 1993. Mr.
Hartnett also held various positions with Nestle Foods Corporation from April,
1973 to September, 1989 including the Division Controller of the Coffee/Tea
Division, and the Marketing Controller of the Beverage Division. He graduated
from the University of Dayton with a B.S. in Accounting, and from Iona College
with an M.B.A. in Finance.
Jeffrey L. Bower - Mr. Bower began his employment with J.B. Williams in
August, 1994. Previously, Mr. Bower was employed by Reckitt & Colman Inc., a
consumer products company, from 1987 to August, 1994 where he served as the
Director of External and Special Manufacturing and prior thereto as the
Director of Engineering, Durkee-French Foods Inc. Mr. Bower also served as a
Manager of Engineering for Pepsi-Cola USA from 1984 to 1987 and as Senior
Project Engineer for Mobil Chemical Company from 1978 to 1984. Mr. Bower was
the Company Commander, A Co. of the 9th Engr. Bn. from 1973 to 1978. He
received his B.S. in Aerospace Engineering from the University of Virginia in
1973.
Robert G. Sheasby - Mr. Sheasby began his employment with J.B. Williams in
October, 1994. Mr. Sheasby was a partner of and marketing consultant to
Creative Options, a marketing, new products and communications consultant, from
1993 until he joined J.B. Williams, and Vice President of Marketing for
Tulip/Polymerics, Inc. from 1991 to 1993. Mr. Sheasby was Vice President,
Marketing for Cheesebrough-Pond's USA from 1989-1991. Mr. Sheasby also held
various positions with Bristol-Myers Co. and Lever Brothers Co. He received
his B.S. in Marketing and his B.S. in Advertising from Syracuse University in
1973.
D. John Dowers - Mr. Dowers began his employment with J.B. Williams in
June, 1995. Prior to joining J.B. Williams, Mr. Dowers was Vice President of
Marketing for the Nestle Ice Cream Company from August, 1993. Mr. Dowers also
held other positions within the Nestle U.S.A. organization, including Vice
President of Trade Marketing and Vice President of Sales Administration for
Stouffer Foods. He received his B.A. in Economics from Bucknell University in
1981 and an M.B.A. in Marketing from the University of Chicago in 1987.
-14-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company and
J.B. Williams to their chief executive officer and each of the other most
highly compensated executive officers of such companies whose total cash
compensation exceeded $100,000 for the fiscal years ended December 31, 1996,
1995 and 1994. The dollar value of perquisites and other personal benefits for
each of the named individuals was less than established reporting thresholds.
<TABLE>
<CAPTION>
Shares
Underlying All Other
Annual Compensation Options Compensation(3)
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2)
<S> <C> <C> <C> <C> <C>
Dario U. Margve, President 1996 $200,000 $120,000 ---- $6,000
and CEO of the Company and 1995 176,500 93,000 150 5,295
J.B. Williams Co. 1994 138,000 68,000 200 3,667
Kevin C. Hartnett, Vice 1996 $128,000 $77,000 ---- $3,840
President - Finance and 1995 120,000 60,000 25 3,600
Administration of the 1994 110,000 60,000 150 4,400
Company and J.B. Williams Co.
Robert G. Sheasby, Vice 1996 $145,000 $87,000 ---- $4,350
President - Marketing of 1995 136,000 70,000 25 2,992
J.B. Williams Co. 1994 133,000 15,000 150 ----
Jeffrey L. Bower, Vice 1996 $110,000 $66,000 ---- $3,300
President - Operations of 1995 104,167 46,000 ---- 3,125
J.B. Williams Co. 1994 100,000 ---- 50 ----
D. John Dowers, Vice 1996 $148,000 $89,000 ---- $4,440
President - Sales of 1995 143,000 36,000 150 715
J.B. Williams Co. 1994 ---- ---- ---- ----
</TABLE>
________________________________
(1) Salary for 1995 for Mr. Dower represents his annualized salary; actual
amount paid for 1995 was $83,417. Salary for 1994 represents the
annualized salary of Messrs. Sheasby and Bower. Actual amounts paid for
1994 were Mr. Sheasby, $25,189 and Mr. Bower, $34,375.
(2) Bonuses reflected for 1996 and 1995 were paid in the following year.
Bonuses reflected for 1994 were paid in 1995, except that Mr. Margve was
paid $3,000 of the amount reflected in 1994, and Mr. Hartnett was paid
$10,000 of the amount reflected in 1994.
(3) Represents contributions made by J.B. Williams pursuant to a 401(k) plan.
STOCK OPTION GRANTS FOR YEAR ENDED DECEMBER 31, 1996
No stock options were granted during the fiscal year ended December 31,
1996 under the Company's 1994 Stock Option Plan (the "STOCK OPTION PLAN") or
otherwise.
-15-
<PAGE>
OPTION TABLE FOR YEAR ENDED DECEMBER 31, 1996
The following table contains information concerning options outstanding at
the end of the last fiscal year for the executive officers of J.B. Williams who
are named in the summary compensation table. All options were issued pursuant
to the Stock Option Plan which provides in general that each grant is
exercisable immediately as to 20% of the grant, with an additional 20% becoming
exercisable on each subsequent anniversary of the date of grant. No options
were exercised by these executives in 1996.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End at Fiscal Year End
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
Dario U. Margve 220 130 $181,544 $87,356
Kevin C. Hartnett 130 45 116,572 36,138
D. John Dowers 60 90 33,576 50,364
Robert G. Sheasby 100 75 61,747 45,828
Jeffrey L. Bower 30 20 18,717 12,478
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Each of the named executive officers of J.B. Williams has an employment
letter setting forth the general terms of his respective employment. Each such
employment letter provides for employment for an initial period of one year,
with automatic renewals for additional one-year periods, and entitles each
executive officer to participation in benefit plans and perquisites available
generally to executive employees. Each employment letter specifies a base
salary, and provides for annual reviews for possible merit increases. Each
employment letter specifies that the executive may be eligible for a
discretionary bonus based partially upon attaining planned performance
objectives and partially upon subjective performance factors. Mr. Margve's
employment letter also has a change in control provision under which his
options under the Stock Option Plan will fully vest if there is a change in
control prior to the fourth year following the grant of such options and the
executive officer continues to be employed by J.B. Williams. Change in control
is not defined in the employment letter.
BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Neither the Company nor J.B. Williams has a compensation committee. No
compensation is paid to any executive officer of the Company. Decisions with
respect to executive compensation for officers of J.B. Williams are made by the
Board of Directors of J.B. Williams. None of the members of the Board of
Directors of J.B. Williams received any compensation in 1996 or previously as
an officer or employee of J.B. Williams.
REPORT OF BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Board of Directors of J.B. Williams reviews and approves the annual
compensation of J.B. Williams' executive officers, as well as the Company's
policies and practices with respect to compensation of other management
personnel.
-16-
<PAGE>
Compensation of executive officers consists primarily of base salary and
discretionary bonus awards. The base salary of executive officers is specified
in their employment letters, summarized above. The base salary is subject to a
merit review for possible increase at the end of each fiscal year during the
executive's employment. The bonus awards are made at the sole discretion of
the Board of Directors based partially upon attaining planned performance
objectives and partially upon subjective performance factors.
In reviewing the compensation of J.B. Williams' executive officers for
possible increases in base salary and for bonus awards, the Board of Directors
considers (i) the levels of executive compensation paid in the industry, (ii)
the company's earnings and profit margin (operating income as a percentage of
revenues), both in absolute terms as well as in relation to budget forecasts,
and compared to results for prior years, and (iii) the extent to which the
company has achieved or exceeded its goals for the year. No specific weight is
accorded to any single factor and the different factors may be accorded greater
or lesser weight in particular years or for particular officers.
The base compensation of J.B. Williams' chief executive officer for 1996
was determined at the beginning of that year in light of all of the foregoing
factors as applied to the CEO's performance in 1995. His bonus for 1996 was
determined in 1997 in light of these same factors as applied to his performance
in 1996.
By the Board of Directors of J.B. Williams
Hendrik J. Hartong, Jr.
Richard T. Niner
-17-
<PAGE>
COMPENSATION OF DIRECTORS
A director who is not an employee or officer of the Company or any of its
subsidiaries is paid an annual fee of $2,000 per calendar quarter for serving
as a director of the Company, and $1,000 for attendance per meeting. Directors
of the Company and any of its subsidiaries are reimbursed for their
out-of-pocket expenses incurred in connection with their service as directors,
including travel expenses.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 25, 1997, the beneficial
security ownership, if any, of (a) any person who is known to the registrant to
be the beneficial owner of more than five percent of the Company's voting
securities, together with any such person's address, (b) the directors of the
Company, (c) each of the executive officers named in the Summary Compensation
Table, and (d) the directors and executive officers of the Company as a group.
Amount and
Nature of
Beneficial Percent of
Title of Class Beneficial Owner Ownership Class(1)
Common Stock Brynwood Partners II L.P.
Two Soundview Drive
Greenwich, CT 06830 (2) 9,000 shares 100%
Common Stock Hendrik J. Hartong, Jr. 9,000 shares(3) 100%
Common Stock Richard T. Niner 9,000 shares(4) 100%
Common Stock Dario U. Margve 290 shares(5) 3.1%
Common Stock Kevin C. Hartnett 165 shares(5) 1.8%
Common Stock Robert G. Sheasby 105 shares(5) 1.2%
Common Stock D. John Dowers 60 shares(5) 0.7%
Common Stock Jeffrey L. Bower 30 shares(5) 0.3%
Common Stock All directors and executive
officers as a group
(10 persons) 645 shares(6) 6.7%
-------------------
(1) Securities as to which the named executive has the right to acquire
beneficial ownership as of the date hereof or within sixty days of the
date hereof are included for purposes of calculating the relative
percentage of the class owned by such executive, and for purposes of
calculating the relative percentage of the class owned by all directors
and executive officers as a group, but are excluded for purposes of
calculating the percentage of the class owned by any other person.
(2) All of the Company's issued and outstanding common stock is owned
beneficially and of record by Brynwood Partners II L.P. ("Brynwood").
Pursuant to the terms of its Amended and Restated Agreement of Limited
Partnership, Brynwood must be dissolved by December 31, 1998 and all
assets of the partnership (including the capital stock of the Company)
must be distributed to the partners by such time.
-18-
<PAGE>
(3) Consists of 9,000 shares owned by Brynwood Partners II L.P. Mr. Hartong
is a general partner of Brynwood Management II L.P., which serves as
general partner of Brynwood Partners II L.P. Together with Mr. Niner,
Mr. Hartong has voting and investment power over these shares. Mr.
Hartong's address is c/o Brynwood Partners, Two Soundview Drive,
Greenwich, CT 06830.
(4) Consists of 9,000 shares owned by Brynwood Partners II L.P. Mr. Niner is
a general partner of Brynwood Management II L.P., which serves as general
partner of Brynwood Partners II L.P. Together with Mr. Hartong, Mr.
Niner has voting and investment power over these shares. Mr. Niner's
address is c/o Brynwood Partners, Two Soundview Drive, Greenwich, CT
06830.
(5) The shares reflected are shares covered by option as to which such person
has the present right to acquire beneficial ownership.
(6) Consists of 645 shares covered by option as to which such persons have
the present right to acquire beneficial ownership or will have the right
to acquire beneficial ownership within sixty days. Does not include for
Mr. Hartong or Mr. Niner the 9,000 shares owned by Brynwood Partners II
L.P. which is reflected as being beneficially owned by such directors in
the chart.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company pays a monthly fee of $25,000 to Brynwood Management II L.P.
for management and consulting services. Such payments aggregated $300,000 in
1996. Messrs. Hartong and Niner, who are directors of the Company, are the
General Partners of Brynwood Management II L.P.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report on Form 10-K
1. Financial Statements
The financial statements and notes thereto listed on page F-1 are
filed herewith as part of this report.
2. Financial Statement Schedules
All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required, are inapplicable or have been disclosed in the Notes
to Consolidated Financial Statements and therefore have been
omitted.
3. Exhibits
EXHIBIT
NUMBER DESCRIPTION
(2)(i) Agreement dated as of February 24, 1994, between SmithKline
Beecham Consumer Healthcare, L.P. and CEP Holdings, Inc.
("CEP") (incorporated by reference to Exhibit (2)(i) to the
Registration Statement on Form S-4 (No. 33-83734) of J.B.
Williams Holdings, Inc. (the "Company"), J.B. Williams
-19-
<PAGE>
Company, Inc. ("J. B. Williams"), After Shave Products, Inc.
("ASP"), Pre-Shave Products, Inc. ("PSP"), Hair Care Products,
Inc. ("HCP") and CEP (the "Registration Statement")).
(2)(ii) Intellectual Property Agreement dated as of February 24, 1994,
between Merrell Dow Pharmaceuticals Inc. and CEP (incorporated
by reference to Exhibit (2)(ii) to the Registration Statement).
(2)(iii) Agreement dated as of December 16, 1992, between SmithKline
Beecham Corporation, SmithKline Beecham Consumer Brands Inc.,
and Beecham (NJ) Inc. and J.B. Williams (incorporated by
reference to Exhibit (2)(iii) to the Registration Statement).
(3)(i) Certificate of Incorporation of the Company, as amended to
March 11, 1994 (incorporated by reference to Exhibit
(3)(i)(1) to the Registration Statement).
(3)(ii) By-Laws of the Company (incorporated by reference to Exhibit
3(ii) to the Registration Statement).
(4)(i) Specimen of the Company's 12% Senior Notes due 2004
(incorporated by reference to Exhibit (4)(i)(1) to the
Registration Statement).
(4)(ii) Indenture dated as of March 16, 1994 among the Company, J.B.
Williams, ASP, PSP, HCP, CEP and The Bank of New York, as
Trustee (incorporated by reference to Exhibit (4)(iv) to the
Registration Statement).
(10)(i)(1) Manufacturing Agreement dated as of February 24, 1994, between
J.B. Williams and Marion Merrell Dow Inc. (incorporated by
reference to Exhibit (10)(i)(3) to the Registration Statement).
(10)(i)(2) License Agreements between J.B. Williams and CEP dated as of
February 20, 1994 and between J.B. Williams and each of PSP,
HCP and ASP dated as of January 1, 1993 (incorporated by
reference to Exhibit (10)(i)(4) to the Registration Statement).
(10)(ii)(D) Sublease, dated August 11, 1993, between E. I. Du Pont De
Nemours and Company and J.B. Williams (incorporated by
reference to Exhibit (10)(ii)(D) to the Registration
Statement).
(10)(iii)(A)(1) The Company's 1994 Stock Option Plan dated March 4, 1994
(incorporated by reference to Exhibit (10)(iii)(A)(1) to the
Registration Statement).
(10)(iii)(A)(2) Employment Agreement dated as of May 3, 1993 between J.B.
Williams and Dario U. Margve (incorporated by reference to
Exhibit (10)(iii)(A)(2) to the Registration Statement).
(10)(iii)(A)(3) Employment Agreement dated as of February 11, 1993 between J.B.
Williams and Kevin C. Hartnett (incorporated by reference to
Exhibit (10)(iii)(A)(2) to the Registration Statement).
-20-
<PAGE>
(10)(iii)(A)(4) Employment Agreement dated as of August 4, 1994 between J.B.
Williams and Jeffrey L. Bower (incorporated by reference to
Exhibit (10)(iii)(A)(2) to the Registration Statement).
(10)(iii)(A)(5) Employment Agreement dated as of October 19, 1994 between J.B.
Williams and Robert G. Sheasby (incorporated by reference to
Exhibit (10)(iii)(A)(6) to the Registrant's 1994 Annual Report
on Form 10-K).
(21) Subsidiaries of the Company (incorporated by reference to
Exhibit (21) to the Registration Statement).
(24) Powers of Attorney for directors and certain officers of the
Company
(27) Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed with the Securities and Exchange
Commission during the last quarter of the period covered by this Form 10-K.
-21-
<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.
J.B. WILLIAMS HOLDINGS, INC.
(Registrant)
/s/ Dario U. Margve
By:-----------------------------------
Dario U. Margve, President and CEO
Date: March 27, 1997
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 and on the dates
indicated.
SIGNATURE TITLE
/s/ Dario U. Margve
- ------------------------- President, CEO and March 27, 1997
Dario U. Margve Director
(principal executive
officer)
/s/ Kevin C. Hartnett
- ------------------------- Vice President, March 27, 1997
Kevin C. Hartnett Finance and Administration
(principal financial and
accounting officer)
NAME TITLE
/s/ Kevin C. Hartnett
Hendrik J. Hartong, Jr. Director : By--------------------------------
: Kevin C. Hartnett
Richard T. Niner Director : As Attorney-in-Fact
: Date: March 27, 1997
:
C. Alan MacDonald Director : and
:
: /s/ Dario U. Margve
Carl Anderson Director : By--------------------------------
: Dario U. Margve
John T. Gray Director : As Attorney-in-Fact
: Date: March 27, 1997
-22-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
J.B. Williams Holdings, Inc.
Independent Auditors' Report ................................. F-2
Consolidated Balance Sheets, December 31, 1996 and 1995 ...... F-3
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 ........................... F-4
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994 ..................... F-5
Notes to Consolidated Financial Statements ................... F-6
Oral Care Brand Business
Independent Auditor's Report ................................. F-14
Statement of Brand Contribution for the period
January 1, 1994 through February 19, 1994 .................. F-15
Notes to the Statement of Brand Contribution ................. F-16
F-1
<PAGE>
J.B. Williams
Holdings, Inc.
Consolidated Financial Statements as of
December 31, 1996 and 1995, and
for each of the Three Years in the Period
Ended December 31, 1996, and
Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholder
J. B. Williams Holdings, Inc.
We have audited the accompanying consolidated balance sheets of J. B. Williams
Holdings, Inc. and subsidiaries (the "Company") as of December 31, 1996 and
1995, and the related consolidated statements of income and retained earnings
and cash flows for each of the three years in the period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements 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, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of J. B. Williams
Holdings, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
February 26, 1997
Stamford, CT
F-2
<PAGE>
J. B. WILLIAMS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
ASSETS 1996 1995
CURRENT ASSETS:
Cash And Cash Equivalents $ 21,201 $ 19,478
Accounts Receivable, Net Of Allowance
for Doubtful Accounts Of $320 and
$322 at December 31, 1996 and 1995,
respectively (Note 12) 7,819 7,209
Inventories 3,235 3,267
Other current assets (Note 3) 1,235 1,117
-------- --------
Total 33,490 31,071
-------- --------
PROPERTY AND EQUIPMENT:
Machinery and equipment 1,769 1,269
Furniture and fixtures 126 123
Leasehold improvements 30 30
-------- --------
Total 1,925 1,422
Less accumulated depreciation and amortization 996 626
-------- --------
Net 929 796
-------- --------
OTHER ASSETS:
Intangible assets, net of accumulated
amortization of $15,078 and $11,155 at
December 31, 1996 and 1995, respectively 39,222 43,145
Deferred charges and other assets 3,154 3,186
-------- --------
TOTAL ASSETS $ 76,795 $ 78,198
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,362 $ 1,094
Accrued expenses (Note 4) 6,356 6,546
Income taxes payable 217 506
-------- --------
Total 9,935 8,146
-------- --------
SENIOR NOTES (Note 5) 50,345 55,000
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 9)
SHAREHOLDER'S EQUITY (Note 6):
Common stock and paid-in capital 9,600 9,600
Retained earnings 6,915 5,452
-------- --------
Total 16,515 15,052
-------- --------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 76,795 $ 78,198
======== ========
See notes to consolidated financial statements.
F-3
<PAGE>
J. B. WILLIAMS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS EXCEPT SHARE DATA)
1996 1995 1994
NET SALES $ 48,283 $ 46,899 $ 44,060
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Cost of goods sold 14,206 13,111 13,605
Advertising 3,241 2,436 1,825
Promotion 7,412 6,740 5,994
Cash discounts 929 896 844
Distribution 2,754 3,377 3,358
Selling 1,844 2,059 1,912
General and administrative 5,608 5,001 4,184
Depreciation and amortization 4,580 4,543 4,250
--------- --------- ---------
Total operating expenses 40,574 38,163 35,972
--------- --------- ---------
OPERATING PROFIT 7,709 8,736 8,088
INTEREST EXPENSE - Net of interest
income of $984, $915 and $321 for
1996, 1995 and 1994, respectively 5,231 5,685 5,578
--------- --------- ---------
INCOME BEFORE INCOME TAXES 2,478 3,051 2,510
PROVISION FOR INCOME TAXES (Note 7) 1,015 1,251 976
--------- --------- ---------
NET INCOME 1,463 1,800 1,534
RETAINED EARNINGS, BEGINNING OF YEAR 5,452 3,652 2,118
--------- --------- ---------
RETAINED EARNINGS, END OF YEAR $ 6,915 $ 5,452 $ 3,652
========= ========= =========
INCOME PER COMMON SHARE (PRIMARY AND
FULLY DILUTED) $ 157.01 $ 193.55 $ 165.52
========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 9,343 9,305 9,268
========= ========= =========
See notes to consolidated financial statements.
F-4
<PAGE>
J. B. WILLIAMS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
1996 1995 1994
OPERATING ACTIVITIES:
Net Income $ 1,463 $ 1,800 $ 1,534
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization of intangibles 4,210 4,270 4,025
Depreciation and amortization
of property and equipment 370 273 225
Deferred income tax benefit - net (259) (270) (644)
changes in operating assets and
liabilities:
Accounts receivable (610) (763) (2,996)
Inventories 32 923 1,445
Other current assets (114) (453) 813
Accounts payable 2,268 360 190
Accrued expenses (190) (448) 3,468
Income taxes payable (289) (139) 90
--------- --------- ---------
Net cash provided by operating
activities 6,881 5,553 8,150
--------- --------- ---------
INVESTING ACTIVITIES:
Acquisition of Oral Care Products and
related assets - - (18,024)
Equipment purchases and leasehold
improvements (503) (147) (168)
--------- --------- ---------
Net cash used in investing
activities (503) (147) (18,192)
--------- --------- ---------
FINANCING ACTIVITIES:
Paid-in capital - - 4,000
Net proceeds from issuance of
senior notes - - 52,153
Payment of long-term debt issued - - (37,000)
Repayment of senior notes (4,655) - -
--------- --------- ---------
Net cash provided by (used in)
financing activities (4,655) - 19,153
--------- --------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 1,723 5,406 9,111
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 19,478 14,072 4,961
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 21,201 $ 19,478 $ 14,072
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 1,678 $ 1,593 $ 1,060
========= ========= =========
Interest paid $ 6,401 $ 6,668 $ 4,836
========= ========= =========
See notes to consolidated financial statements.
F-5
<PAGE>
J. B. WILLIAMS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1. BASIS OF ACCOUNTING AND ORGANIZATION
The consolidated financial statements include J. B. Williams Holdings,
Inc. and its subsidiaries: J.B. Williams Company, Inc. (formerly U.S.
Personal Care Inc.), After Shave Products Co., Pre-Shave Products Co.,
Hair Care Products Co. and CEP Holdings (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. Brynwood partnerships, including affiliates of Brynwood
Partners II L.P., have invested in and managed several companies since
1984 and their investors include major insurance companies, financial
institutions, corporations and pension funds.
The Company, which was organized on December 3, 1992, made an initial
acquisition of certain assets ("Personal Care Products Acquisition") from
SmithKline Beecham Corporation, Beecham (NJ) Inc. and SmithKline Beecham
Consumer Products, Inc. (collectively, "SKB") for $45,000,000 on December
16, 1992. The Personal Care Products Acquisition was financed through the
issuance of a promissory note for $40 million to SKB and an equity
contribution of $5.6 million from Brynwood Partners II L.P. Operating
activity commenced on January 1, 1993. Additionally, the Company acquired
certain assets ("Oral Care Products Acquisition") in February 1994 from
SKB for $18,323,000. The Oral Care Products Acquisition and repayment of
the note payable to SKB relating to the Personal Care Products Acquisition
were financed through the private placement issuance of $55,000,000 of
senior notes and an equity contribution of $4 million from the Company's
shareholder.
The Company's products are marketed under the trademarks "Aqua Velva"
aftershave, "Lectric Shave" preshave, "Brylcreem" hair care preparations,
"Williams Mug Shave Soap" and "Cepacol" dry throat lozenges, sore throat
spray and mouthwash. Each of the trademarks is owned by a subsidiary of
the Company, and is licensed to J. B. Williams Company, Inc. The Company
purchases finished goods from contract manufacturers and sells products
under the above brand names in the United States, Canada (except Cepacol)
and Puerto Rico.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition - Revenue is recognized upon the shipment of products
to customers.
Net Sales - Net sales include the sales price less an estimate of returns
and other allowances.
Advertising Costs - Such costs are comprised of various television, radio
and newspaper advertisements and are charged to expense as incurred.
Promotion Costs - Such costs are comprised of coupons, trade promotion
incentives, market research expenditures and package design costs and are
charged to expense as incurred.
Cash Discounts - Such discounts are estimated at 2% of sales and are
charged to expense as sales are recorded.
Distribution Costs - Such costs are comprised of freight, handling and
warehousing charges and are charged to expense as incurred.
F-6
<PAGE>
Selling Costs - Such costs are comprised principally of incentives and
commissions to selling brokers and are charged to expense as incurred.
Cash and Cash Equivalents - Cash and cash equivalents include
investments with a one-day availability.
Inventories - Inventories consist principally of finished goods and are
stated at the lower of cost (using the first-in, first-out method) or
market value. Inventory acquired in the Oral Care Products Acquisition
included a purchase accounting adjustment of approximately $1.3 million
relating to the acquired gross profit assigned to the value of inventory.
The assigned value of $1.3 million was charged to cost of goods sold
during the year ended December 31, 1994.
Property and Equipment - Leasehold improvements furniture and fixtures
and machinery and equipment are recorded at cost. Depreciation of
machinery and equipment and furniture and fixtures is computed by the
straight-line method over their estimated useful lives which range from
3 to 7 years and 5 years, respectively. Leasehold improvements are
amortized over the lives of the related leases or the estimated useful
lives of the assets, whichever is shorter, using the straight-line method.
The cost of improvements are capitalized; expenditures for maintenance
and repairs are charged to expense.
Intangible Assets - Intangible assets arose from the SKB acquisitions in
1993 and 1994. The costs of the noncompete agreements are being amortized
on the straight-line method over the 5-year terms of the agreements.
Trademarks and formulas and other identified intangibles are being
amortized on the straight-line method over their estimated remaining
useful lives of 25 years and 5 years, respectively. Goodwill represents
the excess of the purchase price over the fair value of the assets
acquired and is being amortized using the straight-line method over 25
years. The Company evaluates the recoverability of goodwill and other
intangible assets on an annual basis by assessing whether the unamortized
intangible assets can be recovered over their remaining lives through
operating results and cash flows.
Deferred Charges and Other Assets - Deferred charges and other assets
consist primarily of costs associated with the issuance of the senior
notes which are being amortized over the term of the debt.
Income Taxes - Deferred income taxes are recognized for the tax
consequences of temporary differences by applying enacted statutory
tax rates applicable to future years to differences between the financial
statement carrying amounts and the tax basis of existing assets and
liabilities.
Principles of Consolidation - The consolidated financial statements
include all subsidiaries. All significant intercompany items have been
eliminated. Certain prior year amounts have been reclassified to conform
with the presentation for the current year.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
F-7
<PAGE>
Stock Options - Financial Accounting Statement No. 123, "Accounting For
Stock Based Compensation," (SFAS 123) requires expanded disclosures of
employee stock based compensation arrangements and encourages, but does
not require, employers to adopt a fair value based method of accounting
for employee stock based compensation. Under the fair value based method,
compensation cost is measured at the grant date based on the value of the
option and is recognized over the service period, which is usually the
vesting period. As provided by SFAS 123, the Company follows Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issues to
Employees," for employee stock compensation measurement, which does not
require compensation expense recognition when the exercise price of stock
options is greater than or equal to current market value at the date of
the stock option grant.
Income Per Common Share - Income per share is based on the weighted
average number of common shares outstanding and the assumed exercise of
dilutive stock options less the number of treasury shares assumed to be
purchased from the option proceeds. Weighted average number of common
shares assumes that all common stock options had been converted to common
stock as of the original issuance dates. Common equivalent shares are
not included in the per share calculations where the effect of their
inclusion would be antidilutive.
Financial Instruments - The estimated fair value of financial
instruments, which includes cash and cash equivalents, senior notes
and accounts receivable, approximates their carrying value.
3. OTHER CURRENT ASSETS
Other current assets consist of the following:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Due from SKB $ 19 $ 211
Deferred Tax Asset 429 425
Other 787 481
-------- --------
Total $ 1,235 $ 1,117
======== ========
The amount due from SKB relates principally to net operating proceeds in
Canada collected by SKB on behalf of the Company.
F-8
<PAGE>
4. ACCRUED EXPENSES
Accrued expenses consist of the following:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Marketing $ 1,728 $ 2,045
Interest 2,014 2,200
Compensation 1,097 839
Manufacturing Costs 442 442
Other 1,075 1,020
------- -------
Total $ 6,356 $ 6,546
======= =======
5. SENIOR NOTES
During February 1994, the Company financed the Oral Care Products
Acquisition and the payment of the note payable to SKB from the proceeds
of the private placement of $55,000,000 of senior notes (the "Notes")
and an equity contribution from its shareholder. The Notes were
registered under the Securities Act of 1933 effective December 1, 1994.
Commencing with the year ended December 31, 1995, provided certain
conditions are met, the Company must, not later than April 15
immediately following such year, offer to purchase from the holders of
the Notes, on a pro rata basis, an aggregate principal amount of Notes,
equal to a specified calculation at a purchase price equal to 100% of
the principal amount of the Notes plus accrued interest. During 1996
the Company repurchased $4.1 million of the Notes pursuant to the terms
of the note agreement and $.6 million from the bond market. Notes
outstanding at December 31, 1996 was $50,345,000. The Company will be
required to make a similar tender offer in 1997.
Interest on the Notes is payable semiannually in cash on March 1 and
September 1 of each year commencing September 1, 1994. The initial
interest rate of 12 1/2% per annum was decreased to 12% per annum
effective December 1, 1994. The Notes are redeemable at the option of
the Company, in whole or in part, at any time on or after March 1, 1999,
at 106% of their principal amount, plus accrued interest, declining to
100% of their principal amount on and after March 1, 2001, plus accrued
interest. In addition, at the option of the Company at any time prior to
March 1, 1997, up to 35% of the aggregate principal amount of the Notes
may be redeemed from the proceeds of one or more public equity offerings
at 110% of their principal amount, plus accrued interest.
The Notes are guaranteed by each of the Company's wholly-owned
subsidiaries, as indicated in Note 1, which constitute all of the
Company's direct or indirect subsidiaries (the "Subsidiary Guarantors").
The Subsidiary Guarantors have fully and unconditionally guaranteed the
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. Accordingly, separate financial statements and other
disclosures concerning the Subsidiary Guarantors are not included
herein.
The Notes contain certain restrictive covenants. The Company is in
compliance with all covenants at December 31, 1996.
F-9
<PAGE>
6. SHAREHOLDER'S EQUITY
Common stock consists of 20,000 authorized shares at $.01 par value of
which 9,000 shares were issued and outstanding at December 31, 1996 and
1995, respectively.
The Company has a stock option plan (the "Plan") which provides for the
granting of options on shares of the Company's common stock to its
directors and certain key employees. The Plan permits a maximum of 1,000
shares of common stock to be issued at the fair value per share at the
date the option is granted. If the option is granted to a person, who at
the time of the grant owns more than 10% of the combined voting power of
all classes of stock, the purchase price shall not be less than 110% of
the fair value per share at the date the option is granted. Stock option
transactions during 1996, 1995 and 1994 were as follows:
1996 1995 1994
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
Outstanding,
beginning
of year 950 $1,172 980 $1,028 750 $ 960
Repurchased,
during the year - - (400) - - -
Granted, during
the year - - 370 $1,325 230 $1,249
----- ----- -----
Outstanding, end
of year 950 $1,172 950 $1,172 980 $1,028
==== ===== =====
Exercisable, end
of year 576 $1,049 391 $ 985 346 $ 960
==== ===== =====
Stock options become exercisable in equal amounts over a four-year period
from the date the option is granted. Stock options expire five years
from the grantee's initial date of employment. No stock options were
granted or exercised during 1996.
The Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for the stock
option plan. Accordingly, no compensation cost has been recognized for
the plan. Had compensation cost for the stock option plan been determined
based on the fair value of the option at date of grant consistent with the
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company's 1996 and 1995 net income and income per share would have
been reduced to the pro forma amounts indicated below.
1996 1995
NET INCOME AS REPORTED $ 1,463 $ 1,800
PRO FORMA 1,429 1,774
NET INCOME PER SHARE AS REPORTED $ 157.01 $ 193.55
PRO FORMA 152.95 190.65
F-10
<PAGE>
The fair value of stock options granted during 1995 have been estimated
at the date of grant using the Black-Scholes option pricing model with
the following weighted-average assumptions:
1995
Risk free interest rate 6.1%
Expected life 4
Expected dividend yield 0
Expected volatility 0
7. INCOME TAXES
The components of the income tax provision (benefit) are
as follows:
1996 1995 1994
(IN THOUSANDS)
CURRENT:
FEDERAL $ 858 $ 1,150 $ 1,211
STATE 330 371 409
-------- ------- --------
1,188 1,521 1,620
-------- ------- --------
Deferred:
Federal (75) (168) (542)
State (98) (102) (102)
-------- ------- --------
(173) (270) (644)
-------- ------- --------
Total $ 1,015 $ 1,251 $ 976
======== ======= ========
A reconciliation of the provision for income taxes based on
the applicable statutory Federal income tax rate to the
income tax provision as set forth in the consolidated
statements of income is as follows:
1996 1995 1994
AMOUNT RATE AMOUNT RATE AMOUNT RATE
(DOLLAR AMOUNTS IN THOUSANDS)
Provision for
taxes at statutory
Federal rate $ 842 34.0% $1,037 34.0% $ 853 34.0%
State taxes - net
of Federal income
tax benefit 75 3.0 118 3.9 207 8.3
Other - net 98 4.0 96 3.1 (84) (3.4)
------ ---- ------ ---- ------ ----
Total $1,015 41.0 % $1,251 41.0% $ 976 38.9%
====== ==== ====== ==== ====== ====
Deferred taxes result from temporary differences in the recognition of
revenue and expense for tax and financial statement purposes. The
principal sources of the differences are the use for income tax purposes
of a 15-year amortization period for intangible assets, the use of
accelerated methods of computing depreciation and the capitalization of
certain inventory related costs.
F-11
<PAGE>
The tax effects of the significant temporary differences which comprise
the deferred tax assets and liabilities are as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
ASSETS:
Inventories $ 429 $ 425
Intangible assets 2,579 1,956
Other 340 194
-------- --------
Gross deferred tax assets 3,348 2,575
-------- --------
Liabilities:
Intangible assets 1,707 1,175
Other 12 49
-------- --------
Gross deferred tax liabilities 1,719 1,224
-------- --------
Net deferred tax asset $ 1,629 $ 1,351
======== ========
8. EMPLOYEE BENEFIT PLAN
The Company maintains a 401(k) plan covering substantially all employees
and permitting employees to defer up to 20% of their salary. Matching
contributions are at the discretion of the Company; additional
contributions of 2% of compensation are made for each employee at the
end of each pay period. Annual discretionary contributions may also be
made by the Company. The Company matches 25% of employee contributions
up to the maximum of 4% of each employee's salary. Company contributions
for the years ended December 31, 1996, 1995 and 1994 were approximately
$56,000, $47,000, and $36,000, respectively.
9. COMMITMENTS AND CONTINGENCIES
The Company leases equipment and its facilities under operating lease
agreements which require payment of property taxes, insurance and normal
maintenance costs. Certain leases contain renewal options. Rental
expense was approximately $145,000, $126,000 and $79,000 for the years
ended December 31, 1996, 1995 and 1994, respectively.
Future minimum annual rentals under the above leases are as follows:
(IN THOUSANDS)
1997 $ 166
1998 176
1999 179
2000 187
2001 117
-----
$ 825
=====
F-12
<PAGE>
The Company is not a party to any material pending legal proceedings.
Concurrently with the Oral Care Products Acquisition, the Company entered
into a Purchasing and Manufacturing Agreement (the "Agreement") with
Hoechst Marion Roussel ("HMR") (formerly Marion Merrell Dow, Inc. ("MMD")),
whereby the Company agreed to purchase existing oral care products
exclusively from HMR and in connection therewith pay fixed overhead costs
of $1,766,000 each year until August 31, 1997.
During 1996 the Agreement was extended until December 31, 1998 under the
terms of which the Company will pay fixed overhead costs of $1,412,000
plus a variable amount based on volume.
The Company has entered into employment contracts with each of its
executive officers. Each contract provides for employment for an
initial period of one year, with automatic renewals for additional
one-year periods. Terms of the contract include details regarding
participation in benefit plans, base salary, merit increases and
discretionary bonuses.
10. SIGNIFICANT CUSTOMER
One of the Company's customers accounted for approximately 22%, 19% and
18% of net sales in the United States for the years ended December 31,
1996, 1995 and 1994, respectively.
11. SEGMENT DATA
The Company operates in one industry segment, the distribution and sale
of personal and oral care products. Data by geographic area is as
follows:
1996 1995 1994
(IN THOUSANDS)
Net sales to unaffiliated
customers:
United States
(including Puerto Rico) $ 44,536 $ 43,186 $ 40,363
Canada 3,747 3,713 3,697
-------- -------- --------
Total $ 48,283 $ 46,899 $ 44,060
======== ======== ========
Operating profit:
United States
(including Puerto Rico) $ 7,316 $ 8,119 $ 7,241
Canada 393 617 847
-------- -------- --------
Total $ 7,709 $ 8,736 $ 8,088
======== ======== ========
Assets are primarily located in the United States.
12. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ADDITIONS
BALANCE, CHARGED TO BALANCE,
BEGINNING PROFIT END
OF YEAR AND LOSS DEDUCTIONS OF YEAR
(IN THOUSANDS)
Allowance for
doubtful
accounts:
1996 $ 322 $ 65 $ (67) $ 320
1995 253 110 (41) 322
1994 100 265 (112) 253
******
F-13
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
The J.B. Williams Company, Inc. and
SmithKline Beecham L.P.:
We have audited the accompanying Statement of Brand Contribution
of the Cepacol Brands of SmithKline Beecham L.P. (the Company), for the
period January 1, 1994 through February 19, 1994. The Statement of Brand
Contribution is the responsibility of Company management. Our
responsibility is to express an opinion on the special purpose statement
based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the Statement of Brand
Contribution is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the Statement of Brand Contribution. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the Statement
of Brand Contribution. We believe that our audit provides a reasonable
basis for our opinion.
The operations covered by the Statement of Brand Contribution
referred to above have no separate legal status or existence. The
accompanying statement was prepared as described in Note 1 to present the
Cepacol Brand Contribution in assisting the Company in the divestiture of
these brands and is not intended to be a complete presentation of the
Cepacol Brand Business. Various costs incurred by the Company were
allocated to the Cepacol Brand Business based on estimates as described in
the notes to the statement. Accordingly, the resulting statement is not
necessarily indicative of the costs and expenses that would have resulted
if the Cepacol Brand Business had been operated as a separate entity.
In our opinion, the statement referred to above presents fairly,
in all material respects, the brand contribution of the Cepacol Brand
Business for the period January 1, 1994 through February 19, 1994, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Pittsburgh, Pennsylvania
May 19, 1994
F-14
<PAGE>
CEPACOL BRAND BUSINESS
STATEMENT OF BRAND CONTRIBUTION
for the period January 1, 1994 through February 19, 1994
(in thousands)
----------------------------
Net Sales $2,454
Cost of Goods Sold 879
-----
Gross Profit 1,575
Promotion 386
Cash Discounts 48
Distribution 96
-----
Brand Contribution $1,045
=====
The accompanying notes are an integral part of
the Statement of Brand Contribution
F-15
<PAGE>
CEPACOL BRAND BUSINESS
NOTES TO THE STATEMENT OF BRAND CONTRIBUTION
1. OWNERSHIP/BASIS OF PRESENTATION:
Effective September 15, 1992, SmithKline Beecham Consumer Brands and
Marion Merrell Dow Inc. (MMD) formed a joint venture, SmithKline
Beecham L.P. (the Company), to which each venturer contributed the
right to various brands. One of the brands contributed by MMD was
the Cepacol Brand Business (the Business). The Business includes
distribution and marketing rights of brands sold under the trade
names of Cepacol Mouthwash and Cepacol Lozenges within the United
States and Puerto Rico. MMD manufactures these Cepacol products and
charges the Company an agreed upon contractual amount. Effective
February 19, 1994, the Company sold the distribution and marketing
rights of its Cepacol Brand Business to the J.B. Williams Company,
Inc.
Historically, financial statement were not prepared for the
Business. These statement have been carved out from the historical
accounting records of the Company. All of the allocations and
estimates in the financial statement, as described in Note 2, are
based on the assumptions that Company management believes are
reasonable. However, these allocations and estimates are not
necessarily indicative of the costs and expenses that would have
resulted if the Business had been operated as a separate entity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INCOME RECOGNITION:
Sales and related cost of goods sold are included in income when
goods are shipped to the customer.
NET SALES:
Net sales include the sales price net of allowances specifically
identified by brand, less an allocation of the Company's returns and
other miscellaneous sales adjustments based on sales of the Business
to total sales of the Company.
continued
F-16
<PAGE>
NOTES TO THE STATEMENT OF BRAND CONTRIBUTION, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING, continued:
COST OF GOODS SOLD:
Cost of goods sold include the agreed upon contractual amount paid
to MMD for products sold.
PROMOTION:
Promotion costs are comprised of coupons, trade promotion
incentives, market research expenditures and package design costs
and are charged to expense as incurred.
CASH DISCOUNTS:
Cash discounts are estimated based on 2% of net sales.
DISTRIBUTION COSTS:
Distribution costs principally include freight and warehousing
charges and are allocated based on a percentage of net sales. Such
percentage is determined by dividing total Company distribution
costs by total Company sales.
F-17
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
(2)(i) Agreement dated as of February 24, 1994, between SmithKline
Beecham Consumer Healthcare, L.P. and CEP Holdings, Inc.
("CEP") (incorporated by reference to Exhibit (2)(i) to the
Registration Statement on Form S-4 (No. 33-83734) of J.B.
Williams Holdings, Inc. (the "Company"), J.B. Williams
Company, Inc. ("J. B. Williams"), After Shave Products, Inc.
("ASP"), Pre-Shave Products, Inc. ("PSP"), Hair Care Products,
Inc. ("HCP") and CEP (the "Registration Statement")).
(2)(ii) Intellectual Property Agreement dated as of February 24, 1994,
between Merrell Dow Pharmaceuticals Inc. and CEP (incorporated
by reference to Exhibit (2)(ii) to the Registration Statement).
(2)(iii) Agreement dated as of December 16, 1992, between SmithKline
Beecham Corporation, SmithKline Beecham Consumer Brands Inc.,
and Beecham (NJ) Inc. and J.B. Williams (incorporated by
reference to Exhibit (2)(iii) to the Registration Statement).
(3)(i) Certificate of Incorporation of the Company, as amended to
March 11, 1994 (incorporated by reference to Exhibit
(3)(i)(1) to the Registration Statement).
(3)(ii) By-Laws of the Company (incorporated by reference to Exhibit
3(ii) to the Registration Statement).
(4)(i) Specimen of the Company's 12% Senior Notes due 2004
(incorporated by reference to Exhibit (4)(i)(1) to the
Registration Statement).
(4)(ii) Indenture dated as of March 16, 1994 among the Company, J.B.
Williams, ASP, PSP, HCP, CEP and The Bank of New York, as
Trustee (incorporated by reference to Exhibit (4)(iv) to the
Registration Statement).
(10)(i)(1) Manufacturing Agreement dated as of February 24, 1994, between
J.B. Williams and Marion Merrell Dow Inc. (incorporated by
reference to Exhibit (10)(i)(3) to the Registration Statement).
(10)(i)(2) License Agreements between J.B. Williams and CEP dated as of
February 20, 1994 and between J.B. Williams and each of PSP,
HCP and ASP dated as of January 1, 1993 (incorporated by
reference to Exhibit (10)(i)(4) to the Registration Statement).
<PAGE>
(10)(ii)(D) Sublease, dated August 11, 1993, between E. I. Du Pont De
Nemours and Company and J.B. Williams (incorporated by
reference to Exhibit (10)(ii)(D) to the Registration
Statement).
(10)(iii)(A)(1) The Company's 1994 Stock Option Plan dated March 4, 1994
(incorporated by reference to Exhibit (10)(iii)(A)(1) to the
Registration Statement).
(10)(iii)(A)(2) Employment Agreement dated as of May 3, 1993 between J.B.
Williams and Dario U. Margve (incorporated by reference to
Exhibit (10)(iii)(A)(2) to the Registration Statement).
(10)(iii)(A)(3) Employment Agreement dated as of February 11, 1993 between J.B.
Williams and Kevin C. Hartnett (incorporated by reference to
Exhibit (10)(iii)(A)(2) to the Registration Statement).
(10)(iii)(A)(4) Employment Agreement dated as of August 4, 1994 between J.B.
Williams and Jeffrey L. Bower (incorporated by reference to
Exhibit (10)(iii)(A)(2) to the Registration Statement).
(10)(iii)(A)(5) Employment Agreement dated as of October 19, 1994 between J.B.
Williams and Robert G. Sheasby (incorporated by reference to
Exhibit (10)(iii)(A)(6) to the Registrant's 1994 Annual Report
on Form 10-K).
(21) Subsidiaries of the Company (incorporated by reference to
Exhibit (21) to the Registration Statement).
(24) Powers of Attorney for directors and certain officers of the
Company
(27) Financial Data Schedule
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of J.B. WILLIAMS HOLDINGS, INC., a Delaware corporation, which
is filing with the Securities and Exchange Commission an annual report on
Form 10-K for the year ended December 31, 1996, hereby constitutes and
appoints Kevin C. Hartnett and Dario U. Margve, and each of them, as the
true and lawful attorneys-in-fact and agents, for the undersigned, with
the power to act either jointly or severally for him in his name, place
and stead, in any and all capacities to sign such annual report on Form
10-K and any and all amendments thereto, and to file such annual report
on Form 10-K and each such amendment or amendments thereto, with all
exhibits thereto, and any and all documents in connection therewith, with
the Securities and Exchange Commission hereby granting unto said
attorneys-in-fact and agents, and each of them, the full power and
authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises, as fully to all intents
and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
as of the 21 day of March, 1997.
/s/ Hendrik J. Hartong, Jr.
-------------------------------
Hendrik J. Hartong, Jr.
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of J.B. WILLIAMS HOLDINGS, INC., a Delaware corporation, which
is filing with the Securities and Exchange Commission an annual report on
Form 10-K for the year ended December 31, 1996, hereby constitutes and
appoints Kevin C. Hartnett and Dario U. Margve, and each of them, as the
true and lawful attorneys-in-fact and agents, for the undersigned, with
the power to act either jointly or severally for him in his name, place
and stead, in any and all capacities to sign such annual report on Form
10-K and any and all amendments thereto, and to file such annual report
on Form 10-K and each such amendment or amendments thereto, with all
exhibits thereto, and any and all documents in connection therewith, with
the Securities and Exchange Commission hereby granting unto said
attorneys-in-fact and agents, and each of them, the full power and
authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises, as fully to all intents
and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
as of the 21st day of March, 1997.
/s/ Richard T. Niner
-------------------------------
Richard T. Niner
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of J.B. WILLIAMS HOLDINGS, INC., a Delaware corporation, which
is filing with the Securities and Exchange Commission an annual report on
Form 10-K for the year ended December 31, 1996, hereby constitutes and
appoints Kevin C. Hartnett and Dario U. Margve, and each of them, as the
true and lawful attorneys-in-fact and agents, for the undersigned, with
the power to act either jointly or severally for him in his name, place
and stead, in any and all capacities to sign such annual report on Form
10-K and any and all amendments thereto, and to file such annual report
on Form 10-K and each such amendment or amendments thereto, with all
exhibits thereto, and any and all documents in connection therewith, with
the Securities and Exchange Commission hereby granting unto said
attorneys-in-fact and agents, and each of them, the full power and
authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises, as fully to all intents
and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
as of the 26th day of March, 1997.
/s/ C. Alan MacDonald
-------------------------------
C. Alan MacDonald
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of J.B. WILLIAMS HOLDINGS, INC., a Delaware corporation, which
is filing with the Securities and Exchange Commission an annual report on
Form 10-K for the year ended December 31, 1996, hereby constitutes and
appoints Kevin C. Hartnett and Dario U. Margve, and each of them, as the
true and lawful attorneys-in-fact and agents, for the undersigned, with
the power to act either jointly or severally for him in his name, place
and stead, in any and all capacities to sign such annual report on Form
10-K and any and all amendments thereto, and to file such annual report
on Form 10-K and each such amendment or amendments thereto, with all
exhibits thereto, and any and all documents in connection therewith, with
the Securities and Exchange Commission hereby granting unto said
attorneys-in-fact and agents, and each of them, the full power and
authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises, as fully to all intents
and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
as of the 20 day of March, 1997.
/s/ Carl Anderson
-------------------------------
Carl Anderson
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
or officer of J.B. WILLIAMS HOLDINGS, INC., a Delaware corporation, which
is filing with the Securities and Exchange Commission an annual report on
Form 10-K for the year ended December 31, 1996, hereby constitutes and
appoints Kevin C. Hartnett and Dario U. Margve, and each of them, as the
true and lawful attorneys-in-fact and agents, for the undersigned, with
the power to act either jointly or severally for him in his name, place
and stead, in any and all capacities to sign such annual report on Form
10-K and any and all amendments thereto, and to file such annual report
on Form 10-K and each such amendment or amendments thereto, with all
exhibits thereto, and any and all documents in connection therewith, with
the Securities and Exchange Commission hereby granting unto said
attorneys-in-fact and agents, and each of them, the full power and
authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises, as fully to all intents
and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
as of the 26th day of March, 1997.
/s/ John T. Gray
-------------------------------
John T. Gray
<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 YEAR ENDED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 21,201
<SECURITIES> 0
<RECEIVABLES> 8,139
<ALLOWANCES> 320
<INVENTORY> 3,235
<CURRENT-ASSETS> 33,490
<PP&E> 1,925
<DEPRECIATION> 996
<TOTAL-ASSETS> 76,795
<CURRENT-LIABILITIES> 9,935
<BONDS> 50,345
0
0
<COMMON> 9,600
<OTHER-SE> 6,915
<TOTAL-LIABILITY-AND-EQUITY> 76,795
<SALES> 48,283
<TOTAL-REVENUES> 48,283
<CGS> 14,206
<TOTAL-COSTS> 14,206
<OTHER-EXPENSES> 26,368
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,231
<INCOME-PRETAX> 2,478
<INCOME-TAX> 1,015
<INCOME-CONTINUING> 1,463
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,463
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
