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 September 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number: 33-83734
--------
J. B. WILLIAMS HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 06-1387159
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification number)
65 Harristown Road
Glen Rock, New Jersey 07452
(Address of Principal Executive Offices, including Zip Code)
(201) 251-8100
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No x
----- -----
Number of shares of the issuer's Common Stock, par value $0.01, outstanding as
of October 31, 2000: 10,000
<PAGE>
J.B. Williams Holdings, Inc.
I N D E X
Page
Part I - Financial Information
---------------------
Item 1: Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations
for the Thirteen Weeks and Thirty Nine Weeks
Ended September 30, 2000 and October 2, 1999 ............ 3
Condensed Consolidated Balance Sheets at
September 30, 2000 and January 1, 2000 .................. 4
Condensed Consolidated Statements of Cash Flows
for the Thirty Nine Weeks Ended September 30, 2000
and October 2, 1999 ..................................... 5
Notes to Condensed Consolidated Financial Statements .... 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................... 8
Part II - Other Information
-----------------
Item 6: Exhibits and Reports on Form 8-K ........................ 13
Signature ......................................................... 14
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<PAGE>
J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands)
<TABLE>
<CAPTION>
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
Sept 30, Oct 2, Sept 30, Oct 2,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales ..................................... $ 18,022 $ 20,059 $ 45,120 $ 49,756
Cost of sales ................................. 6,934 7,823 16,477 19,088
-------- -------- -------- --------
Gross margin .................................. 11,088 12,236 28,643 30,668
Distribution and cash discounts ............... 1,089 1,467 2,925 4,076
Advertising and promotion ..................... 2,735 4,074 9,310 11,203
Selling, general and administrative expenses .. 2,825 2,723 8,644 8,282
Depreciation and amortization ................. 1,035 1,041 3,155 3,122
-------- -------- -------- --------
Operating income .............................. 3,404 2,931 4,609 3,985
Interest expense-net .......................... 1,258 1,435 3,873 4,390
-------- -------- -------- --------
Income (loss) before income taxes ............. 2,146 1,496 736 (405)
Income tax provision (benefit) ................ 880 613 302 (166)
-------- -------- -------- --------
Net income (loss) ............................. $ 1,266 $ 883 $ 434 $ (239)
======== ======== ======== ========
Income (loss) per share - basic and diluted ... $ 126.60 $ 88.30 $ 43.40 $ (23.90)
Weighted average shares outstanding ........... 10,000 10,000 10,000 10,000
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE>
J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In Thousands)
<TABLE>
<CAPTION>
At Sept 30, 2000 At January 1, 2000
---------------- ------------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents ................. $ 3,745 $ 11,113
Accounts receivable, net .................. 12,430 14,144
Inventories ............................... 12,114 6,404
Other current assets ...................... 498 831
-------- --------
Total Current Assets .................. 28,787 32,492
Property and Equipment, Net ...................... 2,078 2,005
Intangible Assets, Net ........................... 37,522 39,744
Other Assets ..................................... 4,677 4,956
-------- --------
TOTAL ASSETS ..................................... $ 73,064 $ 79,197
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable .......................... $ 3,327 $ 3,195
Accrued expenses .......................... 6,304 7,290
-------- --------
Total Current Liabilities ............. 9,631 10,485
-------- --------
Due To Sellers Of Acquired Businesses ............ 239 463
-------- --------
Long Term Debt ................................... 44,856 50,345
-------- --------
Shareholders' Equity:
Common stock and paid-in capital .......... 10,804 10,804
Notes receivable from sales of common stock (1,204) (1,204)
Retained earnings ......................... 8,738 8,304
-------- --------
Total Shareholders' Equity ....................... 18,338 17,904
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....... $ 73,064 $ 79,197
======== ========
</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>
Thirty Nine Thirty Nine
Weeks Weeks
Ended Ended
Sept 30, Oct 2,
2000 1999
---- ----
OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) ........................................... $ 434 $ (239)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Amortization of intangibles and debt issuance costs ...... 2,654 2,685
Depreciation and amortization of property and equipment .. 502 437
Changes in operating assets and liabilities:
Accounts receivable .................................. 1,714 2,228
Inventories .......................................... (5,710) 1,196
Other current assets ................................. 333 150
Accounts payable ..................................... 132 (1,156)
Accrued expenses and other liabilities ............... (986) (3,582)
Other assets ......................................... 90 (2,458)
-------- --------
Net Cash Used In Operating Activities ........................... (837) (739)
-------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment ......................... (575) (984)
Acquisition of trademark and contingent payments ............ (467) --
-------- --------
Net Cash Used in Investing Activities .................... (1,042) (984)
-------- --------
FINANCING ACTIVITIES:
Repayment of Senior Notes ................................... (5,489) --
-------- --------
Net Cash Used in Financing Activities .................... (5,489) --
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................ (7,368) (1,723)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .................. 11,113 6,263
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........................ $ 3,745 $ 4,540
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid ........................................... $ 55 $ 251
Interest paid ............................................... $ 5,847 $ 6,041
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE>
J.B. Williams Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BASIS OF ACCOUNTING AND ORGANIZATION
The consolidated financial statements include J.B. Williams Holdings,
Inc. and its wholly-owned subsidiaries: J.B. Williams Company, Inc.,
After Shave Products Inc., Pre-Shave Products Inc., Hair Care Products
Inc., and CEP Holdings Inc. (collectively the "Company"). Brynwood
Partners II L.P., a private partnership formed under Delaware law, is the
majority owner of the capital stock of the Company.
The accompanying unaudited condensed consolidated financial statements as
of September 30, 2000 and for the thirteen week and thirty nine week
periods ended September 30, 2000 and the thirteen week and thirty nine
week periods ended October 2, 1999 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 week and
thirty nine week periods ended September 30, 2000 and for the thirteen
week and thirty nine week periods ended October 2, 1999, have been
reflected. All such adjustments are of a normal recurring nature. The
September 30, 2000 condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto for the year ended January 1, 2000 included in the Company's
Annual Report on Form 10-K.
The results of operations for the period ended September 30, 2000 are not
necessarily indicative of the operating results for the full year.
2. LONG TERM DEBT
Long term debt consists of $44.9 million 12% Senior Notes, due 2004 (the
"Senior Notes").
3. FINANCIAL INFORMATION CONCERNING GUARANTORS
The Senior Notes are guaranteed by each of the Company's wholly-owned
subsidiaries, which constitute all of the Company's direct or indirect
subsidiaries (the "Subsidiary Guarantors"). The Subsidiary Guarantors
have fully and unconditionally guaranteed the Senior Notes on a joint and
several basis; and the aggregate assets, liabilities, earnings and equity
of the Subsidiary Guarantors are substantially equivalent to the assets,
liabilities, earnings and equity of the Company on a consolidated basis.
There are no restrictions on the ability of the Subsidiary Guarantors to
make distributions to the Company. In management's opinion separate
financial statements and other disclosures concerning the Subsidiary
Guarantors would not be material to investors. Accordingly, separate
financial statements and other disclosures concerning the Subsidiary
Guarantors are not included herein.
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<PAGE>
4. RECLASSIFICATIONS
Certain reclassifications have been made to the 1999 financial statements
to conform to the current year's presentation.
-7-
<PAGE>
J. B. Williams Holdings, Inc.
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations
GENERAL
J. B. Williams Holdings, Inc. (the "Company"), through its subsidiaries,
distributes and sells personal 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, Total Hair Fitness
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 formulas and cold sore medications.
RESULTS OF OPERATIONS FOR THE THIRTEEN WEEK PERIOD ENDED SEPTEMBER 30, 2000
The following table sets forth certain operating data for the thirteen weeks
ended September 30, 2000 and October 2, 1999.
<TABLE>
<CAPTION>
Periods Ended September 30, 2000 and October 2, 1999
-----------------------------------------------------------------------
(In Thousands)
Personal Care Products Health Care Products Total Company
---------------------- -------------------- -------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Sales $12,047 $14,047 $ 5,975 $6,012 $18,022 $20,059
Cost of Goods Sold 4,715 5,512 2,219 2,311 6,934 7,823
------- ------- ------ ------ ------- -------
Gross Margin 7,332 8,535 3,756 3,701 11,088 12,236
Distribution and Cash Discounts 670 959 419 508 1,089 1,467
Advertising and Promotion 1,582 2,694 1,153 1,380 2,735 4,074
------- ------- ------- ------ ------- -------
Brand Contribution $ 5,080 $ 4,882 $ 2,184 $1,813 7,264 6,695
======= ======= ======= ======
Selling, General and Admin. Exp. 2,825 2,723
Depreciation and Amortization 1,035 1,041
------- -------
Operating Income 3,404 2,931
Interest Expense, Net 1,258 1,435
------- -------
Income Before Income Taxes 2,146 1,496
Income Tax Provision 880 613
------- -------
Net Income $1,266 $ 883
======= =======
</TABLE>
For the thirteen week period ended September 30, 2000, net sales decreased 10.2%
to $18,022,000 from $20,059,000 for the same period in 1999. This decrease is
primarily related to lower sales on the San Francisco Soap product line
resulting from the absence of any large distribution gains, as realized during
this same period in 1999 when the entire line was being re-launched. It also
reflects lower sales on the Brylcreem and Lectric Shave brands as a result of
distribution losses on non-core items.
For the thirteen week period ended September 30, 2000, cost of goods sold
decreased 11.4% to $6,934,000 from $7,823,000 for the same period in 1999. This
decrease is primarily related to the lower sales volumes.
-8-
<PAGE>
For the thirteen week period ended September 30, 2000, distribution expenses and
cash discounts decreased 25.8% to $1,089,000 from $1,467,000 for the same period
in 1999. This decrease is due to a combination of lower sales volumes and the
absence of certain additional expenses incurred during 1999 that were primarily
related to order fulfillment and shipping issues on the San Francisco Soap
business.
For the thirteen week period ended September 30, 2000, advertising and promotion
expenses decreased 32.9% to $2,735,000 from $4,074,000 for the same period in
1999. This decrease reflects the absence of any significant advertising
expenditures during this period on both the Aqua Velva and Cepacol businesses.
Since media rates were driven up significantly by the demand for media time
associated with the 2000 Summer Olympics and the 2000 national elections, the
Company chose not to advertise in this period.
For the thirteen week period ended September 30, 2000, selling, general, and
administrative expenses increased 3.7% to $2,825,000 from $2,723,000 for the
same period in 1999. Most of this increase is related to generally higher levels
of salaries and management consulting expenses partially offset by lower broker
commission payments associated with the decline in net sales.
For the thirteen week period ended September 30, 2000, depreciation and
amortization of $1,035,000 is slightly lower versus the $1,041,000 expensed for
the same period in 1999.
For the thirteen week period ended September 30, 2000, interest expense, net of
interest income, decreased 12.3% to $1,258,000 from $1,435,000 for the same
period in 1999. A repurchase by the Company, in May 2000, of $5,489,000 in
outstanding principal amount of its Senior Notes, resulted in an overall net
decrease in interest expense.
For the thirteen week period ended September 30, 2000, the Company recorded
income tax expense of $880,000 versus $613,000 for the same period in 1999. The
effective tax rate was 41% for both interim periods.
Results of Operations for the Thirty Nine Week Period Ended September 30, 2000
The following table sets forth certain operating data for the thirty nine weeks
ended September 30, 2000 and October 2, 1999.
<TABLE>
<CAPTION>
Periods Ended September 30, 2000 and October 2, 1999
-------------------------------------------------------------------------
(In Thousands)
Personal Care Products Health Care Products Total Company
---------------------- -------------------- -------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Sales $30,415 $33,931 $14,705 $15,825 $45,120 $49,756
Cost of Goods Sold 10,908 12,969 5,569 6,119 16,477 19,088
------- ------- ------- ------- ------- -------
Gross Margin 19,507 20,962 9,136 9,706 28,643 30,668
Distribution and Cash Discounts 1,793 2,581 1,132 1,495 2,925 4,076
Advertising and Promotion 5,656 7,751 3,654 3,452 9,310 11,203
------- ------- ------- ------- ------- -------
Brand Contribution $12,058 $10,630 $ 4,350 $ 4,759 16,408 15,389
======= ======= ======= =======
Selling, General and Admin. Exp. 8,644 8,282
Depreciation and Amortization 3,155 3,122
------- -------
Operating Income 4,609 3,985
Interest Expense, Net 3,873 4,390
------- -------
Income (Loss) Before Income Taxes 736 (405)
Income Tax Provision (Benefit) 302 (166)
------- -------
Net Income (Loss) $ 434 $(239)
======= =======
</TABLE>
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<PAGE>
For the thirty-nine week period ended September 30, 2000, net sales decreased
9.3% to $45,120,000 from $49,756,000 for the same period in 1999. This decrease
is primarily due to lower sales of the Cepacol cough/cold products caused by an
abrupt end to the cough/cold season as compared to 1999, lower sales on the San
Francisco Soap product line resulting from the absence of any large distribution
gains, as realized during this same period in 1999 when the entire line was
being re-launched and the Company's decision to not offer a gift set program for
the 2000 Mothers Day season.
For the thirty-nine week period ended September 30, 2000, cost of goods sold
decreased 13.7% to $16,477,000 from $19,088,000 for the same period in 1999.
This decrease is directly linked to the Company's lower sales volumes combined
with generally lower manufacturing costs on the San Francisco Soap products.
During 1999, the San Francisco Soap business incurred certain one-time expenses
associated with the shutdown of the gift set and 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 thirty-nine week period ended September 30, 2000, distribution expenses
and cash discounts decreased 28.2% to $2,925,000 from $4,076,000 for the same
period in 1999. This decrease is due to lower sales volumes and the absence of
certain additional expenses incurred during 1999 that were primarily related to
order fulfillment and shipping issues on the San Francisco Soap business.
For the thirty-nine week period ended September 30, 2000, advertising and
promotion expenses decreased 16.9% to $9,310,000 from $11,203,000 for the same
period in 1999. This overall reduction in marketing support reflects program
savings associated with the San Francisco Soap business, which incurred
significant expenses during this period of time in 1999 associated with the
re-launch of the brand and with the 1999 Mothers Day gift set program.
For the thirty-nine week period ended September 30, 2000, selling, general, and
administrative expenses increased by 4.4% to $8,644,000 from $8,282,000 for the
same period in 1999. This increase reflects somewhat higher staffing levels and
consulting expenses during this period of 2000 versus the same period in 1999.
For the thirty-nine week period ended September 30, 2000, depreciation and
amortization of $3,155,000 increased slightly from $3,122,000 for the same
period in 1999.
For the thirty-nine week period ended September 30, 2000, interest expense, net
of interest income, decreased 11.8% to $3,873,000 from $4,390,000 for the same
period in 1999. Generally higher levels of cash yielded a corresponding increase
in interest income and combined with lower interest expense, as a result of the
repurchase by the Company of $5,489,000 in outstanding principal amount of its
Senior Notes, resulted in an overall net decrease in interest expense.
For the thirty-nine week period ended September 30, 2000, an income tax
provision of $302,000 was recorded compared with an income tax benefit of
$166,000 recorded during the same period in 1999. The effective tax rate was 41%
for both interim periods.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The following chart summarizes the net funds provided by and/or used in
operating, financing and investing activities for the periods ended September
30, 2000 and October 2, 1999 (in thousands).
Period Ended
Sept 30,2000 Oct 2,1999
Net cash used in operating activities $ (837) $ (739)
Net cash used in investing activities (1,042) (984)
Net cash used in financing activities (5,489) -
-------- --------
Decrease in cash and cash equivalents $(7,368) $(1,723)
The principal adjustments to reconcile net income of $434,000 for the period
ended September 30, 2000 to net cash used in operating activities of $837,000
are depreciation and amortization of $3,156,000, offset by a net increase in
working capital requirements of $4,427,000. The working capital increase is
primarily linked to higher levels of inventory and lower levels of accruals
partially offset by lower accounts receivable balances.
Capital expenditures, which were $575,000 for the nine months ended September
30, 2000, are generally not significant in the Company's business. Except for
funds previously identified for certain packaging improvements and computer
system upgrades, 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 January 1, 2000. Pursuant to the terms of the Senior Notes, on
April 12, 2000, 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 May 16, 2000, the Company purchased Senior Notes from
certain holders thereof for an aggregate of $5,489,000.
As a result of this repurchase, 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. Since
there can be no guarantee that the Company will generate internal funds
sufficient to finance its operations and debt requirements, the Company is
planning to extend its secured line of credit with the Bank of New York through
August 31, 2001 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.
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<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In 1998, the Financial Accounting Standards Board (FASB) issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133),
which establishes accounting and reporting standards for derivative instruments
and hedging activities. FAS 133 requires an entity to recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. In June 2000, the FASB issued Statement
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities" (FAS 138), an amendment of FAS 133. J.B. Williams Holdings, Inc.
historically has made limited, if any, use of derivative instruments and
financial hedges to reduce its exposure to exchange rate risk on foreign source
income and purchases. FAS 133 as amended under FAS 138 is effective for fiscal
years beginning after December 15, 2000. The Company does not expect this
statement to have a significant impact on the results of operations or financial
position and related disclosure requirements.
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," (SAB
101) which provides guidance on the recognition, presentation and disclosure of
revenue in financial statements. SAB 101B issued in June 2000 delayed the
effective date of SAB 101 to the fourth quarter of 2000. J.B. Williams Holdings,
Inc. is required to adopt SAB 101 in the fourth quarter of 2000 (retroactive to
January 1, 2000). Management does not expect SAB 101 to have a material effect
on J.B. Williams Holdings, Inc.'s financial position or results of operations
and related disclosure requirements.
-12-
<PAGE>
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
- Exhibit 27 - Financial Data Schedule
-13-
<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: November 13, 2000 /s/ Kevin C. Hartnett
----------------- --------------------------------
Name: Kevin C. Hartnett
Title: Vice President and
Chief Financial Officer
Qtr900
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