SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
- ----
For the quarterly period ended April 3, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
Commission file number: 33-83734
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J. B. WILLIAMS HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 06-1387159
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification number)
65 Harristown Road
Glen Rock, New Jersey 07452
(Address of Principal Executive Offices, including Zip Code)
(201) 251-8100
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No x
---- ----
Number of shares of the issuer's Common Stock, par value $0.01, outstanding as
of May 1, 1999: 10,000
<PAGE>
J.B. Williams Holdings, Inc.
I N D E X
Page
Part I - Financial Information
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Item 1: Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations for the 1
Thirteen Weeks Ended April 3, 1999 and the Three Months
Ended March 31, 1998
Condensed Consolidated Balance Sheets at April 3, 1999 2
and December 31, 1998
Condensed Consolidated Statements of Cash Flows for the 3
Thirteen Weeks Ended April 3, 1999 and the Three Months
Ended March 31, 1998
Notes to Condensed Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
Part II - Other Information
-----------------
Item 2: Changes in Securities 10
Item 6: Exhibits and Reports on Form 8-K 10
Signature 11
<PAGE>
J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands)
Thirteen Weeks Ended
------------------------------
April 3, March 31,
1999 1998
-------- ---------
Net sales $14,209 $15,777
Cost of sales 5,651 5,727
----- -----
Gross margin 8,558 10,050
Distribution and cash discounts 1,243 1,355
Advertising and promotion 3,904 3,905
Selling, general and administrative expenses 2,790 2,859
Depreciation and amortization 1,049 1,027
------ -----
Operating income (loss) (428) 904
Interest expense-net 1,503 1,438
------ -----
Loss before income tax benefit (1,931) (534)
Income tax benefit (791) (208)
------- -------
Net loss $(1,140) $(326)
======== ======
Loss per share - basic and diluted $114.00 $34.93
Weighted average shares outstanding 10,000 9,333
See Notes to Condensed Consolidated Financial Statements
-1-
<PAGE>
J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In Thousands)
<TABLE>
<CAPTION>
At April 3, 1999 At December 31, 1998
---------------- --------------------
ASSETS
- ------
Current Assets:
<S> <C> <C>
Cash and cash equivalents $5,199 $6,263
Accounts receivable, net 11,295 15,187
Inventories 10,411 10,809
Other current assets 621 662
------- --------
Total Current Assets 27,526 32,921
Property and Equipment, Net 1,681 1,350
Intangible Assets, Net 41,861 42,638
Other Assets 4,390 3,252
------ ------
TOTAL ASSETS $75,458 $80,161
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $3,056 $3,510
Accrued expenses
4,854 7,963
----- -----
Total Current Liabilities 7,910 11,473
----- ------
Due To Sellers Of Acquired Businesses 674 674
--- ---
Long Term Debt 50,345 50,345
------ ------
Shareholder's Equity:
Common stock and paid-in capital 10,800 10,800
Notes receivable from sales of common stock (1,200) (1,200)
Retained earnings 6,929 8,069
----- -----
Total Shareholder's Equity 16,529 17,669
------ ------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $75,458 $80,161
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE>
J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In Thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
------------------------
April 3, March 31,
1999 1998
--------- --------
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(1,140) $(326)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of intangibles and debt issuance costs 906 910
Depreciation and amortization of property and equipment 143 117
Changes in operating assets and liabilities:
Accounts receivable 3,892 5,110
Inventories 398 (2,777)
Other current assets 41 (236)
Accounts payable (454) 969
Accrued expenses (3,109) (4,750)
Other assets (1,267) (65)
------- --------
Net Cash Used In Operating Activities (590) (1,048)
-------- --------
INVESTING ACTIVITIES - Purchases of property and equipment (474) (167)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (1,064) (1,215)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,263 7,375
------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $5,199 $6,160
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $242 $583
Interest paid $3,021 $3,021
SUPPLEMENTAL NON-CASH INVESTING ACTIVITIES:
Notes receivable from sales of common stock ---- $1,196
</TABLE>
See Notes to Condensed Consolidated Financial Statements
-3-
<PAGE>
J.B. Williams Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BASIS OF ACCOUNTING AND ORGANIZATION
The consolidated financial statements include J.B. Williams Holdings, Inc.
and its wholly-owned subsidiaries: J.B. Williams Company, Inc., After
Shave Products Inc., Pre-Shave Products Inc., Hair Care Products Inc., and
CEP Holdings Inc. (collectively the "Company"). Brynwood Partners II L.P.,
a private partnership formed under Delaware law, is the owner of all of
the issued and outstanding capital stock of the Company.
Commencing January 1, 1999, the Company changed its annual fiscal period
to a fifty two week period consisting of four thirteen weeks interim
periods with the fsical year ending January 1, 2000. The change did not
materially impact reported results of operations for the first interim
period of fiscal 1999.
The accompanying unaudited condensed consolidated financial statements as
of April 3, 1999 and for the thirteen weeks ended April 3, 1999 and the
three months ended March 31, 1998 have been prepared in accordance with
the instructions to Form 10-Q. All adjustments which, in the opinion of
the management of the Company, are necessary for a fair presentation of
the condensed consolidated financial statements for the thirteen weeks
ended April 3, 1999 and the three months ended March 31, 1998 have been
reflected. All such adjustments are of a normal recurring nature. The
April 3, 1999 condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes
thereto for the year ended December 31, 1998 included in the Company's
Annual Report on Form 10-K.
The results of operations for the period ended April 3, 1999 are not
necessarily indicative of the operating results for the full year.
2. LONG TERM DEBT
Long term debt consists of $50.3 million 12% Senior Notes, due 2004 (the
"Senior Notes").
3. FINANCIAL INFORMATION CONCERNING GUARANTORS
The Senior Notes are guaranteed by each of the Company's wholly-owned
subsidiaries, which constitute all of the Company's direct or indirect
subsidiaries (the "Subsidiary Guarantors"). The Subsidiary Guarantors have
fully and unconditionally guaranteed the Senior Notes on a joint and
several basis; and the aggregate assets, liabilities, earnings and equity
of the Subsidiary Guarantors are substantially equivalent to the assets,
liabilities, earnings and equity of the Company on a consolidated basis.
There are no restrictions on the ability of the Subsidiary Guarantors to
make distributions to the Company. In management's opinion separate
financial statements and other disclosures concerning the Subsidiary
Guarantors would
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<PAGE>
not be material to investors. Accordingly, separate financial statements
and other disclosures concerning the Subsidiary Guarantors are not
included herein.
4. CHANGES IN SECURITIES
As of March 1, 1998, the Company issued 1,000 shares of common stock for
an aggregate purchase price of $1,196,233. These shares were issued to
certain employees of the Company as a result of the exercise of options
issued to the employees under the Company's 1994 Stock Option Plan. The
shares were in each case paid for by a recourse promissory note in favor
of the Company.
5. RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 financial statements
to conform with the current year's presentation.
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<PAGE>
J. B. Williams Holdings, Inc.
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations
GENERAL
J. B. Williams Holdings, Inc. (the "Company"), through its subsidiaries,
distributes and sells personal and health care products in the United States,
Canada and Puerto Rico. The personal care products business includes the Aqua
Velva, Brylcreem, Williams Lectric Shave, Williams Mug Soap and the San
Francisco Soap Company brands. The health care products business is comprised of
the Cepacol and Viractin brands, a broad line of oral health care products that
includes mouthwash, sore throat lozenges and sprays, children's sore throat
elixirs and cold sore medications.
CHANGE IN ANNUAL FISCAL YEAR
Commencing January 1, 1999, the Company changed its annual fiscal period to a
fifty two week period consisting of four thirteen weeks interim periods with the
fiscal year ending January 1, 2000. The change did not materially impact
reported results of operations for the first interim period of fiscal 1999.
RESULTS OF OPERATIONS FOR THE PERIOD ENDED APRIL 3, 1999
The following table sets forth certain operating data for the thirteen weeks
ended April 3, 1999 and the three months ended March 31, 1998.
<TABLE>
<CAPTION>
Periods Ended April 3, 1999 and March 31, 1998
---------------------------------------------------------------------
(In Thousands)
Personal Care Products Health Care Products Total Company
---------------------- -------------------- -------------
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 8,739 $ 10,529 $ 5,470 $ 5,248 $ 14,209 $ 15,777
Cost of Goods Sold 3,651 3,971 2,000 1,756 5,651 5,727
-------- -------- -------- -------- -------- --------
Gross Margin 5,088 6,558 3,470 3,492 8,558 10,050
Distribution and Cash Discounts 745 886 498 469 1,243 1,355
Advertising and Promotion 2,740 2,196 1,164 1,709 3,904 3,905
-------- -------- -------- -------- -------- --------
Brand Contribution $ 1,603 $ 3,476 $ 1,808 $ 1,314 3,411 4,790
======== ======== ======== ========
Selling, General and Admin. Exp. 2,790 2,859
Depreciation and Amortization 1,049 1,027
-------- --------
Operating Income (Loss) (428) 904
Interest Expense, Net 1,503 1,438
-------- --------
Loss Before Income Tax Benefit (1,931) (534
Income Tax Benefit (791) (208
-------- --------
Net Loss $ (1,140) $ (326
======== ========
</TABLE>
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<PAGE>
For the period ended April 3, 1999, net sales decreased 9.9% to $14,209,000 from
$15,777,000 for the comparable period in 1998. This decrease is due to lower
sales associated with the personal care business, particularly on the Total Hair
Fitness line of shampoo's and conditioners. Of the $1,568,000 decrease in total
company sales versus 1998, approximately $1,200,000 reflects the impact of the
retail inventory build associated with the launch of the Total Hair Fitness
business in 1998 with the balance reflecting lower sales results for the Aqua
Velva, Brylcreem and Lectric Shave businesses.
For the period ended April 3, 1999, cost of goods sold decreased 1.3% to
$5,651,000 from $5,727,000 for the comparable period in 1998. This decrease is
directly linked to the Company=s lower sales volumes offset by higher
manufacturing costs. Most of the increase in manufacturing costs are related to
one time expenses associated with the shutdown of the gift set/special pack
assembly operation that the Company operated during 1998 and with the March 1999
re-launch of the entire San Francisco Soap product line.
For the period ended April 3, 1999, distribution expenses and cash discounts
decreased 8.3% to $1,243,000 from $1,355,000 for the comparable period in 1998.
This decrease is primarily associated with the overall decrease in sales
volumes.
For the period ended April 3, 1999, advertising and promotion expenses of
$3,904,000 remained virtually unchanged versus the $3,905,000 spent during the
comparable period in 1998. Marketing spending in 1999 has been focussed
primarily on the re-launch of the San Francisco Soap business and continued
support behind the Total Hair Fitness line of shampoos and conditioners for men
that was introduced during 1998.
For the period ended April 3, 1999, selling, general and administrative expenses
decreased slightly by 2.4% to $2,790,000 from $2,859,000 for the comparable
period in 1998. Most of the decrease is caused by lower broker commission
payments associated with the decline in net sales.
For the period ended April 3, 1999, depreciation and amortization increased 2.1%
to $1,049,000 from $1,027,000 for the comparable period in 1998. This increase
is related to slightly higher levels of depreciation that reflects the capital
spending in 1998 and 1999 associated with the replacement of the Company's
business and financial systems.
For the period ended April 3, 1999, interest expense, net of interest income,
increased 4.5% to $1,503,000 from $1,438,000 for the comparable period in 1998.
Slightly lower levels of cash have resulted in a corresponding decrease in
interest income, thereby resulting in an overall net increase in interest
expense.
For the period ended April 3, 1999, the Company recorded an income tax benefit
of $791,000 versus an income tax benefit of $208,000 for the comparable period
in 1998. The effective tax rate was 41% for the 1999 interim period and 39% for
the comparable interim period in 1998.
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<PAGE>
As a result of the foregoing, the Company realized a net loss of $(1,139,000)
for the period ended April 3, 1999. This compares unfavorably with a net loss of
$(326,000) for the comparable period in 1998. Most of this variance can be
attributed to the profit effect of the lower sales volumes and increased
manufacturing costs, primarily associated with the San Francisco Soap business,
that are not expected to be of a recurring nature.
LIQUIDITY AND CAPITAL RESOURCES
The following chart summarizes the net funds provided and/or used in operating,
financing and investing activities for the thirteen weeks ended April 3, 1999
and the three months ended March 31, 1998 (in thousands).
Period Ended
------------
April 3, 1999 March 31, 1998
------------- --------------
Net cash used in operating activities $ (590) $(1,048)
Net cash used in investing activities (474) (167)
Decrease in cash and cash equivalents $(1,064) $(1,215)
The principal adjustments to reconcile net loss of $(1,139,000) for the period
ended April 3, 1999 to net cash used in operating activities of $(590,000) are
depreciation and amortization of $1,049,000, offset by a net increase in working
capital requirements of $500,000. The working capital increase is primarily
linked to generally lower levels of accrued expenses.
Capital expenditures, which were $474,000 for the period ended April 3, 1999,
are generally not significant in the Company's business. Aside from
approximately $.6 million that the Company has budgeted in 1999 for the
replacement of its financial operating system, the Company currently has no
material commitments for future capital expenditures.
As a result of the Senior Notes, the Company had $50.3 million of total debt
outstanding as of December 31, 1998 and April 3, 1999. 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. Since there can be no guarantee that the Company will generate internal
funds sufficient to finance its operations and debt requirements, the Company
has arranged for a secured line of credit with the Bank of New York through
August 31, 1999 to provide funds, should they be required, in order for the
Company to meet its liquidity requirements. The line of credit is in the maximum
amount of $5,000,000, with the amount available being subject to reduction based
on certain criteria relative to the Company's accounts receivable and inventory.
-8-
<PAGE>
YEAR 2000 READINESS DISCLOSURE
As part of a plan to improve its overall system capabilities, the Company
initiated a Year 2000 program in 1997 to upgrade its internal use software and
hardware to address possible issues that may arise from using two digits rather
than four to define the applicable year for dates. As part of this effort the
Company is reviewing the compliance of material third parties (significant
vendors and customers) on the operations of the business in order to determine
the risks to the Company for a third party's failure to remediate its own Year
2000 issues. While this information will be used to mitigate these risks, due to
the complexity of the problem, there can be no assurance that any third party
systems will be Year 2000 compliant on a timely basis or that non-compliance
will not have an adverse material impact on the company.
The Company believes that the planned modifications and conversions of internal
systems and hardware will allow it to meet its Year 2000 compliance schedule and
prevent any material adverse impact on its results of operations, liquidity and
financial condition. However, due to the inherent uncertainty of the Year 2000
problem, the Company cannot determine whether its overall program, including
third party compliance, or any future contingency plans will, in fact, prevent a
material adverse impact on its results of operations, liquidity and financial
condition. It is believed that the most likely worst case scenario would involve
the temporary disruption of fulfilling and billing customer orders, which would
require manual resolution. No material adverse impact on the Company's financial
condition is expected from this specific scenario.
Estimated costs for the complete system upgrade, including any specific Year
2000 requirements, are projected to be approximately $900,000 of which $600,000
have been incurred through March 31, 1999 and $300,000 are estimated for the
remainder of 1999. The funds for these costs have and will continue to come from
normal operating cash flows of the business. It is expected that all internal
systems will be implemented, tested and validated by July 1999.
The contingency planning process is ongoing and, as additional information
becomes available, the Company will consider the results of the systems
conversion and the status of third party Year 2000 readiness.
-9-
<PAGE>
Part II - Other Information
-----------------
Item 2 - Changes in Securities
As of March 1, 1998, the Company issued 1,000 shares of common stock for an
aggregate purchase price of $1,196,233. These shares were issued to certain
employees of the Company as a result of the exercise of options issued to
the employees under the Company=s 1994 Stock Option Plan, and pursuant to
the exemption from registration under the Securities Act of 1933 provided
for by Rule 701 of Regulation S-K. The shares were in each case paid for by
a recourse promissory note in favor of the Company.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
- Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
- No reports on Form 8-K were filed by the registrant during
the period covered by this report.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
J.B. WILLIAMS HOLDINGS, INC.
Date: May 14, 1999 /s/ KEVIN C. HARTNETT
------------- -------------------------------------------------
Name: Kevin C. Hartnett
Title: Vice President and Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE J. B.
WILLIAMS HOLDINGS, INC. FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED
APRIL 3, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000929651
<NAME> J.B. Williams Holdings, Inc.
<MULTIPLIER> 1,000
<CURRENCY> US $
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-01-1999
<PERIOD-END> APR-03-1999
<EXCHANGE-RATE> 1
<CASH> 5,199
<SECURITIES> 0
<RECEIVABLES> 11,561
<ALLOWANCES> 266
<INVENTORY> 10,411
<CURRENT-ASSETS> 27,526
<PP&E> 3,728
<DEPRECIATION> 2,047
<TOTAL-ASSETS> 75,458
<CURRENT-LIABILITIES> 7,910
<BONDS> 0
0
0
<COMMON> 10,800
<OTHER-SE> 5,729
<TOTAL-LIABILITY-AND-EQUITY> 75,458
<SALES> 14,209
<TOTAL-REVENUES> 14,209
<CGS> 5,651
<TOTAL-COSTS> 5,651
<OTHER-EXPENSES> 8,986
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,503
<INCOME-PRETAX> (1,931)
<INCOME-TAX> (791)
<INCOME-CONTINUING> (1,931)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,140)
<EPS-PRIMARY> (114.00)
<EPS-DILUTED> (114.00)
</TABLE>
