<PAGE>
UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20509
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-26568
USA DETERGENTS, INC.
--------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 11-2935430
-------- ----------
<S> <C>
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
</TABLE>
1735 JERSEY AVENUE, NORTH BRUNSWICK, NEW JERSEY 08902
-----------------------------------------------------
(Address of principal executive offices -- Zip code)
(732) 828-1800
--------------
(Registrant's telephone number, including area code)
------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was
required to file reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OF STOCK NO. OF SHARES OUTSTANDING DATE
- -------------- ------------------------- ----
Common 13,825,602 November 5, 1999
<PAGE>
USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash ............................................................... $ 2,360 $ --
Restricted funds ................................................... 2,002 --
Accounts receivable, net of customer allowances and doubtful
accounts of $1,015 and $1,111 at September 30, 1999, and
December 31, 1998, respectively .................................. 22,315 19,683
Inventories ........................................................ 17,985 14,668
Refundable income taxes ............................................ 3,192 3,221
Prepaid expenses and other current assets .......................... 4,616 4,591
-------- --------
Total current assets ........................................... 52,470 42,163
Property and equipment -- net ...................................... 44,043 45,245
Deferred financing costs ........................................... 1,596 1,376
Other non-current assets ........................................... 1,638 2,145
-------- --------
Total assets ................................................... $ 99,747 $ 90,929
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .................................. $ 5,534 $ 3,334
Cash overdraft ..................................................... -- 476
Accounts payable ................................................... 22,543 22,670
Accrued expenses ................................................... 15,225 12,457
Other current liabilities .......................................... 288 730
-------- --------
Total current liabilities ...................................... 43,590 39,667
Long-term debt -- net of current portion ........................... 36,674 32,969
Other non-current liabilities ...................................... 81 90
Deferred rent payable .............................................. 725 889
-------- --------
Total liabilities .............................................. 81,070 73,615
-------- --------
Commitments and Contingencies
Stockholders' equity:
Preferred stock-no par value; authorized 1,000,000 shares, none
issued ........................................................... -- --
Common stock -- $.01 par value; authorized 30,000,000 shares, issued
and outstanding 13,825,602 shares at September 30, 1999 and
December 31, 1998 ................................................ 138 138
Additional paid-in capital ......................................... 29,200 29,200
Deficit ............................................................ (10,486) (11,849)
Note receivable from shareholder ................................... (175) (175)
-------- --------
Total stockholders' equity ..................................... 18,677 17,314
-------- --------
Total liabilities and stockholders' equity ..................... $ 99,747 $ 90,929
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT NET INCOME/(LOSS) PER SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------- ----------------------
1999 1998 1999 1998
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales ............................................... $60,683 $ 52,709 $178,849 $163,459
Cost of goods sold ...................................... 42,103 34,794 119,946 111,597
------- -------- -------- --------
Gross profit ............................................ 18,580 17,915 58,903 51,862
Selling, general and administrative ..................... 18,226 15,455 54,206 44,382
Restructuring costs ..................................... -- -- (113) 400
Litigation settlement ................................... -- -- -- 3,266
------- -------- -------- --------
18,226 15,455 54,093 48,048
Income from operations .................................. 354 2,460 4,810 3,814
Interest and amortization of deferred financing costs
-- net ................................................ 1,123 1,502 3,273 3,742
------- -------- -------- --------
Income/(loss) before provision for income taxes ......... (769) 958 1,537 72
Provision for income taxes .............................. 75 25 110 71
------- -------- -------- --------
Income/(loss) before extraordinary charge ............... (844) 933 1,427 1
Extraordinary charge .................................... -- 282 64 282
------- -------- -------- --------
Net income/(loss) ....................................... $ (844) $ 651 $ 1,363 $ (281)
======= ======== ======== ========
Basic income/(loss) per share before extraordinary
charge ................................................ $ (.06) $ .07 $ .10 $ --
Extraordinary charge .................................... -- .02 -- .02
------- -------- -------- --------
Basic net income/(loss) per share ....................... $ (.06) $ .05 $ .10 $ (.02)
======= ======== ======== ========
Weighted average shares outstanding ..................... 13,826 13,826 13,826 13,822
======= ======== ======== ========
Diluted income/(loss) per share before extraordinary
charge ................................................ $ (.06) $ .07 $ .10 $ --
Extraordinary charge .................................... -- .02 -- .02
------- -------- -------- --------
Diluted net income/(loss) per share ..................... $ (.06) $ .05 $ .10 $ (.02)
======= ======== ======== ========
Weighted average shares outstanding and common
share equivalents ..................................... 13,826 14,074 13,862 13,822
======= ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
USA DETERGENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999, AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) ...................................................... $ 1,363 $ (281)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation ........................................................... 4,570 3,900
Loss on disposal of fixed assets ....................................... 235 --
Amortization of deferred financing costs ............................... 519 1,405
Amortization of slotting ............................................... 2,629 3,258
Other amortization ..................................................... 586 691
Change in the provision for customer allowances and doubtful accounts .. (96) 390
Change in deferred rent ................................................ (148) (118)
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable ............................. (2,536) 4,055
(Increase)/decrease in inventories ..................................... (3,317) 1,202
Increase in prepaid expenses and other current assets .................. (2,654) (3,345)
Increase in other non-current assets ................................... (130) (90)
Decrease in cash overdraft ............................................. (476) --
Increase/(decrease) in accounts payable and accrued expenses ........... 2,640 (6,444)
Decrease in refundable income taxes .................................... 29 3,235
------- -------
Net cash provided by operating activities ............................ 3,214 7,858
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ..................................... (3,603) (3,985)
------- -------
Net cash used in investing activities ................................ (3,603) (3,985)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of current portion of long-term debt .................... -- (1,226)
Net proceeds from/(repayments to) credit facilities .................... 7,905 (7,036)
Increase in restricted funds ........................................... (2,002) --
(Decrease)/increase in note payable .................................... (2,000) 4,000
(Decrease)/increase in other current liabilities ....................... (457) 87
Repayments of Oracle purchase obligation ............................... -- (1,367)
Increase in deferred financing costs ................................... (688) (1,878)
(Decrease)/increase in other non-current liabilities ................... (9) 3,295
Net proceeds from exercise of options .................................. -- 114
------- -------
Net cash provided by/(used in) financing activities .................. 2,749 (4,011)
------- -------
Net increase/(decrease) in cash .......................................... 2,360 (138)
Cash at beginning of period .............................................. -- 1,848
------- -------
Cash at September 30, .................................................... $ 2,360 $ 1,710
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS FOR OPERATING ACTIVITIES:
Interest paid .......................................................... $ 2,662 $ 2,496
======= =======
Income taxes paid ...................................................... $ 208 $ 70
======= =======
Income tax refunds received ............................................ $ 107 $ 3,235
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS FOR FINANCING ACTIVITIES:
Value of warrants issued in connection with bank and related party
financings ........................................................... $ -- $ 750
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
USA DETERGENTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules of the Securities and Exchange
Commission (the "SEC") and in the opinion of management, include all
adjustments, (consisting of normal recurring accruals) necessary for the fair
presentation of the Company's financial position, results of operations and cash
flows. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules. The Company
believes the disclosures included herein are adequate to make these financial
statements not misleading. The results for the interim periods presented are not
necessarily indicative of the results to be expected for the full year. These
financial statements should be read in conjunction with the Company's Annual
Report on Form 10-K, for the year ended December 31, 1998
Reclassification -- Certain reclassifications have been made to prior
period amounts to conform with the presentation for the current period.
NOTE 2 -- LEGAL PROCEEDINGS
In connection with the quarterly and annual results of operations
originally reported by the Company for certain fiscal quarters in 1996 and 1997
and the fiscal year ended December 31, 1996, the Company has received a formal
request from the SEC for the production of various documents and the testimony
of certain current and former employees. The Company has been providing
documentation and other materials to the SEC in response to the request, and the
testimony of certain persons has been taken. The Company will continue to
cooperate with the SEC.
The Company is also involved in various routine legal proceedings of a
nature it deems to be customary to a company its size. The Company believes the
ultimate disposition of these actions will not have a material adverse effect on
its business, financial condition or results of operations.
NOTE 3 -- NET INCOME PER SHARE
Basic net income/(loss) per share is based on the weighted average number
of shares outstanding during the periods presented. Diluted net income per share
also includes potential Common Stock that is dilutive.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company's quarterly and annual operating results are affected by a wide
variety of factors that could materially and adversely affect revenues and
profitability, including competition from other suppliers of laundry and
household cleaning products; changes in consumer preferences and spending
habits; the inability to successfully manage growth; seasonality; the ability to
introduce and the timing of the introduction of new products; the inability to
obtain adequate supplies or materials at acceptable prices; and the inability to
reduce expenses to a level commensurate with revenues. As a result of these and
other factors, the Company may experience material fluctuations in future
operating results on a quarterly or annual basis, which could materially and
adversely affect its business, financial condition, operating results, and stock
price. Furthermore, this document and other documents filed by the Company with
the Securities and Exchange Commission (the "SEC") contain certain
forward-looking statements with respect to the business of the Company. These
forward-looking statements are subject to certain risks and uncertainties,
including the factors mentioned above, which may cause actual results to differ
significantly from these forward-looking statements. The Company undertakes no
obligation to publicly release any revisions to these forward-looking statements
which may be necessary to reflect events or
5
<PAGE>
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. An investment in the Company involves various risks,
including the factors mentioned above and those which are detailed from time to
time in the Company's SEC filings.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
Net sales for the three months ended September 30, 1999 increased 15.1% to
$60.7 million from $52.7 million for the three months ended September 30, 1998.
The increase was primarily the result of an increase in unit sales of liquid and
powder laundry products as well as household cleaners. Gross profit for the
three months ended September 30, 1999 increased 3.7% to $18.6 million from $17.9
million for the three months ended September 30, 1998. Gross profit as a
percentage of net sales decreased to 30.6% for the three months ended September
30, 1999 from 34.0% for the same period in 1998. The decrease in gross profit as
a percentage of net sales for the quarter ended September 30, 1999, was mainly
attributable to a 2.0% increase in costs due to the inefficiencies associated
with the start up of four new manufacturing capital projects combined with an
extremely high level of employee turnover and a 1.4% increase in raw material
cost due to commodity price increases.
Selling, general and administrative expenses increased 17.9% to $18.2
million in the three months ended September 30, 1999 from $15.5 million for the
three months ended September 30, 1998. As a percentage of net sales, these
expenses increased to 30.0% for the three months ended September 30, 1999 from
29.3% for the same period in 1998. The increase as a percentage of net sales was
primarily due to an increase in shipping expenses of 0.8% and an increase of
0.7% in marketing funds (co-op advertising, promotional allowances and slotting
amortization). These increases were offset in part by a decrease as a percentage
of net sales of 0.5% in allowance for doubtful accounts.
Interest and amortization of deferred financing costs-net decreased to $1.1
million for the three months ended September 30, 1999 from $1.5 million for the
three months ended September 30, 1998, primarily as a result of lower
amortization of warrant and bank closing costs related to the Company's credit
facilities.
Provision for income taxes for the three month periods ended September 30,
1999 and September 30, 1998 are based on actual tax computations for each of the
periods. The difference between the effective rates and the statutory rate
relates primarily to the Company's net operating loss carry forward, for which
the Company has not provided a tax benefit, and the Alternative Minimum Tax.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
Net sales for the nine months ended September 30, 1999 increased 9.4% to
$178.8 million from $163.5 million for the nine months ended September 30, 1998.
The increase was principally the result of an increase in unit sales of liquid
laundry and powder products, as well as household cleaners.
Gross profit for the nine months ended September 30, 1999 increased 13.6%
to $58.9 million from $51.9 million for the nine months ended September 30,
1998. Gross profit increased as a percentage of net sales to 32.9% for the nine
months ended September 30, 1999 from 31.7% for the same period in 1998. The
increase in gross profit as a percentage of net sales was attributable to a
decrease of 1.0% in material costs, and, to a lesser extent, by a decrease as a
percentage of net sales of 0.4% in distribution overhead costs. These decreases
were offset in part by a 0.5% increase in direct labor costs due to the
inefficiencies associated with the start up of new manufacturing capital
projects combined with an extremely high level of employee turnover in the third
Quarter of 1999.
Selling, general and administrative expenses increased 22.1% to $54.2
million for the nine months ended September 30, 1999 from $44.4 million for the
nine months ended September 30, 1998. As a percentage of net sales, these
expenses increased to 30.3% for the nine months ended September 30, 1999 from
27.2% for the same period in 1998. The increase as a percentage of net sales was
primarily due to an increase of 2.6% in marketing funds (co-op advertising,
promotional allowances and slotting amortization), and 0.4% in sales
commissions.
The restructuring credit of approximately $113,000 relates to a sublease of
a previously closed facility which occurred earlier than expected.
6
<PAGE>
The extraordinary charge of approximately $64,000 relates to the write-off
of deferred financing costs related to the early extinguishment of the Company's
prior credit facility with PNC Bank, N.A., now replaced by the Company's
existing credit facility with a group of banks led by FINOVA Capital
Corporation.
Interest and amortization of deferred financing costs-net decreased to $3.3
million for the nine months ended September 30, 1999 from $3.7 million for the
nine months ended September 30, 1998. The $400,000 decrease was primarily as a
result of lower amortization of warrant and bank closing costs related to the
Company's credit facilities.
Provision for income taxes for the nine month periods ended September 30,
1999 and September 30, 1998 are based on actual tax computations for each of the
periods. The difference between the effective rates and the statutory rate
relates primarily to the Company's net operating loss carry forward, for which
the Company has not provided a tax benefit.
In the second quarter of 1998, the Company settled for $10.0 million a
stockholder class action lawsuit. The Company recorded a charge during that
quarter of approximately $3.3 million which included legal fees, after insurance
and other participations. In addition, the Company recorded a $400,000 charge
related to its future lease commitment, net of sublease income, and associated
lease expenses for its Edison, New Jersey facility which was closed during the
second quarter of 1997.
The extraordinary charge of $282,000 in the second quarter of 1998 relates
to the write-off of deferred financing costs related to the early extinguishment
of the PNC debt.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company's working capital was $8.9 million
compared to working capital of $2.5 million at December 31, 1998.
Net cash provided by operating activities for the nine months ended
September 30, 1999 was $3.2 million, compared to $7.9 million for the nine
months ended September 30, 1998. The cash provided by operating activities in
the nine months ended September 30, 1999 resulted primarily from depreciation
and amortization of $8.3 million, net income of $1.4 million, and an increase in
accounts payable and accrued expenses of $2.6 million, offset in part by an
increase in prepaid expenses and other current assets of $2.7 million, an
increase in inventories of $3.3 million, an increase in accounts receivable of
$2.5 million, and a decrease in cash overdraft of $476,000.
Net cash used in investing activities for the nine months ended September
30, 1999 was $3.6 million relating to the acquisition and upgrades of production
equipment and information systems. The Company anticipates that capital
expenditures for the remaining three months of fiscal 1999 will be approximately
$1.2 million, which includes expenditures for continued enhancements to the
Company's manufacturing, distribution and information systems.
Net cash provided by financing activities for the nine months ended
September 30, 1999 was $2.7 million, which resulted primarily from proceeds from
bank lenders of $7.9 million, offset by an increase in restricted funds of $2.0
million, a decrease in note payable of $2.0 million, an increase in deferred
financing costs of $688,000, and a decrease in other current liabilities of
$457,000.
On February 26, 1999, the Company refinanced its existing indebtedness with
a group of banks lead by FINOVA Capital Corporation to provide for an additional
$14.5 million of financing resulting in a total facility of $60.0 million. The
$14.5 million of additional financing is to be repaid in monthly installments
based upon a ten-year amortization schedule at prime plus 1.0%. The increased
amount is due, along with all amounts outstanding under the previously existing
FINOVA credit facility, in September 2003. The Company used $10.1 million of the
additional proceeds to pay off its remaining indebtedness to PNC Bank under a
previously existing facility. An additional $4.0 million of the proceeds was set
aside for the repayment of the Company's indebtedness to 101 Realty Associates,
LLC ("101 Realty") over the following year, conditioned on the Company meeting
certain working capital criteria and achieving specified profitability levels
for fiscal 1998 and 1999. As a result of meeting the requirements for fiscal
1998, $2.0 million of the 101 Realty debt was repaid in May 1999 from the $4.0
million set aside for that
7
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purpose. The Company's agreement with FINOVA provides for the remaining $2.0
million of reserved funds to be applied to the repayment of amounts owed to
FINOVA if the fiscal 1999 criteria for the repayment of the 101 Realty debt are
not met. The increase in availability under the refinanced FINOVA credit
facility required the granting of a first mortgage security interest to FINOVA
and the other participating lenders on the Company's real property located in
New Jersey and Missouri.
As of September 30, 1999, the Company did not meet certain of the required
financial covenants under the Amended and Restated Loan and Security Agreement
with Finova Capital Corporation dated February 25, 1999. On November 5, 1999,
the Company received a waiver and amendment with respect to these covenants.
The Company requires the availability of sufficient cash flow and borrowing
capacity to finance its operations, meet its debt service obligations and fund
future capital expenditure requirements. Management believes the Company's
present credit facility will adequately support its ongoing operations, debt
service and capital expenditure requirements. The Company's operating plan for
the remainder of 1999 into 2000 includes improving its cost control programs.
CURRENT DEVELOPMENTS
Recently, the cost of resin and paperboard increased approximately $.14 per
pound and $57.50 per ton, respectively. These increases have impacted and will
continue to impact the cost of plastic bottles and corrugated boxes that the
Company uses. There can be no assurance that future price increases from the
Company's suppliers will not have a material adverse effect on the Company or
that the Company will be able to react with price or product changes or other
manufacturing efficiencies of its own to offset these price increases.
IMPACT OF INFLATION
The Company believes that the relatively moderate rate of inflation
recently experienced in the United States has not had a significant effect on
net sales or profitability, other than the increases in resin and paperboard
prices.
YEAR 2000 COMPLIANCE
The inability of computers, software and other equipment using
microprocessors to recognize and properly process data fields containing a two
digit year is commonly referred to as the Year 2000 problem. As the Year 2000
approaches, such systems may be unable to accurately process certain date-based
information. This section discusses the processes currently being implemented by
the Company with respect to issues relating to the Year 2000.
Readiness
The Company initiated its Year 2000 project in late 1996 with a complete
review of all products, manufacturing facilities, information systems and the
impact on the Company from customers and suppliers who may fail to deal with the
issue. The Year 2000 issues that needed to be addressed within the organization
pertain to the Company's internal information systems that date stamp
transactions. The conversion of all current applications, operating systems,
databases, and EDI transactions with Year 2000 issues was completed by the end
of the first quarter of 1999.
Products
The Year 2000 issue with respect to the Company's product line is minimal
since its products are not date sensitive and require no internal or external
date tracking.
Manufacturing Facilities
All existing pieces of machinery and equipment have been reviewed and
examined and management believes that any Year 2000 issues with respect to this
machinery and equipment will not affect production or delivery of the Company's
products since the equipment is not date reliant and the movement of products is
a manual process.
8
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Information Systems
Year 2000 issues with respect to information systems, have been addressed
in six major areas:
I. Operating Systems
II. Databases
III. Business Systems
IV. Support Systems
V. Backup Systems
VI. Hardware Platforms
The following discusses the status of each area:
Operating System
The Company has been advised by its software vendors that all existing
operating systems it uses, Novell 3.12, Windows NT, Unix 4.0D, and Windows 95,
currently are Year 2000 compliant.
Databases
The Company has been advised by its software vendors that all databases
used by the Company's current systems and anticipated new systems are Year 2000
compliant.
Business Systems
The Company believes that all existing business systems are Year 2000
compliant.
Support Systems
Support systems include all desktop applications. These applications have
been upgraded to be Year 2000 compliant.
Backup Systems
The Company has been advised by its software vendors that all applications
currently used by the Company to backup business applications and databases are
Year 2000 compliant.
Hardware Platforms
The Company has been advised by its hardware vendors that all platforms
running the systems and databases mentioned above are Year 2000 compliant.
Customers
The Company has responded to all customers who have requested Year 2000
compliance information, plans, and due dates.
Suppliers
The Company has contacted its major suppliers and has asked them to respond
to questions concerning their ability to be Year 2000 compliant on a timely
basis. The Company plans to monitor the information received in response to
these inquiries on a continuous basis into the Year 2000.
Cost of Year 2000 Readiness
Based on management's assessment of the Company's systems, the cost of
addressing Year 2000 issues is not expected to have a material adverse impact on
the Company's financial condition. To date, the Year 2000 conversion costs
incurred are approximately $80,000, and are not expected to exceed $100,000. The
amounts will be financed through working capital. (Conversion costs do not
include funds spent by the Company on the purchase of its Oracle system, which
would have been acquired irrespective of any Year 2000 issues).
9
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Risk of the Company's Year 2000 Issues
Achieving Year 2000 compliance is dependent on many factors, some of which
are not completely within the Company's control. There can be no assurance that
the Company has, or will be able to identify, all aspects of its business that
are subject to Year 2000 problems of its customers or suppliers. There also can
be no assurance that the Company's software vendors are correct in their
assertions that the software is Year 2000 compliant, or that the Company's
estimate of the costs of systems preparation for the Year 2000 will prove to be
accurate. Should either the Company's internal systems or internal systems of
one or more significant suppliers or customers fail to achieve Year 2000
compliance, or the Company's estimate of the costs of becoming Year 2000
compliant prove to be materially inaccurate, the Company's business and results
of operations could be adversely affected.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's carrying value of cash, restricted funds, trade accounts
receivable, accounts payable, accrued expenses, taxes payable, and existing
revolving line of credit facility, and term loans are a reasonable approximation
of their fair value.
The Company has not entered into, and does not expect to enter into,
financial instruments for trading or hedging purposes.
The Company is currently exposed to material future earnings or cash flow
exposures from changes in interest rates on long-term debt obligations since the
majority of the Company's long-term debt obligations are at variable rates. The
Company does not currently anticipate entering into interest rate swaps and/or
other similar instruments.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
In connection with the quarterly and annual results of operations
originally reported by the Company for certain fiscal quarters in 1996 and 1997
and the fiscal year ended December 31, 1996, the Company has received a formal
request from the SEC for the production of various documents and the testimony
of certain current and former employees. The Company has been providing
documentation and other materials to the SEC in response to the request, and the
testimony of certain persons has been taken. The Company will continue to
cooperate with the SEC.
The Company is also involved in various routine legal proceedings of a
nature it deems to be customary to a company its size. The Company believes the
ultimate disposition of these actions will not have a material adverse effect on
its business, financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES:
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None.
ITEM 5. OTHER INFORMATION:
None.
10
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(A) EXHIBITS
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
11
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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.
USA DETERGENTS, INC.
November 12, 1999
By: /s/ Uri Evan
------------------------------------------
Uri Evan
Chairman of the Board and
Chief Executive Officer
November 12, 1999
By: /s/ Richard D. Coslow
------------------------------------------
Richard D. Coslow
Executive Vice President and
Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Company's Form
10-Q for the nine months ended September 30, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,360
<SECURITIES> 0
<RECEIVABLES> 23,330
<ALLOWANCES> 1,015
<INVENTORY> 17,985
<CURRENT-ASSETS> 52,470
<PP&E> 61,052
<DEPRECIATION> 17,009
<TOTAL-ASSETS> 99,747
<CURRENT-LIABILITIES> 43,590
<BONDS> 0
0
0
<COMMON> 138
<OTHER-SE> 18,539
<TOTAL-LIABILITY-AND-EQUITY> 99,747
<SALES> 178,849
<TOTAL-REVENUES> 178,849
<CGS> 119,946
<TOTAL-COSTS> 54,206
<OTHER-EXPENSES> (113)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,273
<INCOME-PRETAX> 1,537
<INCOME-TAX> 110
<INCOME-CONTINUING> 1,427
<DISCONTINUED> 0
<EXTRAORDINARY> 64
<CHANGES> 0
<NET-INCOME> 1,363
<EPS-BASIC> .10
<EPS-DILUTED> .10
</TABLE>
