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UNITED STATES
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 March 28, 2003
Commission file Number 333-73160
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ARMKEL, LLC
(Exact name of registrant as specified in its certificate of formation)
Organized in Delaware
469 North Harrison Street
Princeton, New Jersey 08543-5297 13-4181336
(Address of principal executive offices) (Zip Code) I.R.S Employer Identification No.
(609) 683-5900
Registrant's telephone Number, including area code
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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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 |X| No |_|
As of May 9, 2003, all of the 10,000 outstanding membership interests in Armkel,
LLC were held by affiliates.
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PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
ARMKEL, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
CHANGES IN MEMBERS' EQUITY
(Unaudited)
Three Months Ended
(Dollars in thousands) March 28, March 31,
2003 2002
---- ----
Net Sales............................................................ $ 99,654 $ 87,372
Cost of goods sold................................................... 41,169 45,234
---------- -----------
Gross Profit......................................................... 58,485 42,138
Marketing expenses................................................... 12,009 11,449
Selling, general and administrative expenses......................... 21,376 20,421
---------- -----------
Income from Operations............................................... 25,100 10,268
Interest expense..................................................... (8,890) (9,379)
Interest income...................................................... 281 285
Other income (expense)............................................... (284) (72)
----------- ------------
Income before taxes.................................................. 16,207 1,102
Income taxes......................................................... 3,104 1,364
---------- -----------
Income from continuing operations ................................... 13,103 (262)
Income from discontinued operations.................................. 254 570
Gain on disposition of discontinued operations....................... 1,862 --
---------- -----------
Net Income........................................................... 15,219 308
Other comprehensive income (loss) ................................... 648 (1,131)
---------- ------------
Total comprehensive income (loss).................................... 15,867 (823)
Members' Equity at Beginning of Period............................... 229,680 203,586
---------- -----------
Members' Equity at End of Period..................................... $ 245,547 $ 202,763
========== ===========
See Notes to Condensed Consolidated Financial Statements.
ARMKEL, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) March 28, 2003 Dec. 31, 2002
-------------- -------------
(Unaudited)
Assets
Current Assets
Cash and cash equivalents....................................................... $ 48,606 $ 54,780
Accounts receivable, less allowances of $2,349 and $2,177....................... 91,160 75,864
Inventories..................................................................... 56,720 53,427
Prepaid expenses................................................................ 5,291 5,557
Assets of discontinued operations............................................... -- 42,079
Net assets held for sale........................................................ 14,600 14,600
----------- -----------
Total Current Assets............................................................ 216,377 246,307
Property, Plant and Equipment (Net)............................................. 73,655 72,867
Tradenames and Patents.......................................................... 260,150 261,275
Goodwill........................................................................ 205,844 205,467
Deferred Financing Costs........................................................ 16,480 17,380
Other Assets.................................................................... 5,405 5,218
----------- -----------
Total Assets.................................................................... $ 777,911 $ 808,514
=========== ===========
Liabilities and Members' Equity
Current Liabilities
Short-term borrowings........................................................... $ -- $ 55
Accounts payable and accrued expenses........................................... 83,899 85,036
Liabilities of discontinued operations.......................................... -- 23,582
Current portion of long-term debt............................................... 7,657 28,501
Taxes payable................................................................... 3,845 1,606
----------- -----------
Total Current Liabilities....................................................... 95,401 138,780
Long-term Debt.................................................................. 407,597 411,634
Deferred Income Taxes........................................................... 8,480 8,500
Deferred and Other Long-term Liabilities........................................ 20,886 19,920
Commitments and Contingencies
Members' Equity
Net contributed capital......................................................... 220,500 220,500
Retained earnings............................................................... 30,785 15,566
Accumulated other comprehensive loss............................................ (5,738) (6,386)
----------- -----------
Total Members' Equity........................................................... 245,547 229,680
----------- -----------
Total Liabilities and Members' Equity........................................... $ 777,911 $ 808,514
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
ARMKEL, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
------------------
March 28, March 31,
(Dollars in thousands) 2003 2002
---- ----
Cash Flow From Operating Activities:
Net Income........................................................................ $ 15,219 $ 308
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................................................ 3,933 4,157
Unrealized gain on foreign exchange transactions............................. 81 202
Net (income) loss from discontinued operations............................... (254) (570)
Net gain on sale of discontinued operations.................................. (1,862) --
Change in assets and liabilities:
(Increase) in accounts receivable............................................ (12,337) (818)
(Increase) Decrease in inventories........................................... (1,995) 5,634
(Increase) Decrease in prepaid expenses and other current assets............. 326 (47)
(Decrease) in accounts payable and other accrued expenses.................... (2,549) (17,448)
(Increase)in other........................................................... (1,927) (2,092)
------------ ------------
Net Cash Used in Operating Activities............................................. (1,365) (10,674)
------------ ------------
Cash Flow From Investing Activities:
Additions to property, plant and equipment........................................ (2,054) (2,196)
Proceeds from divestiture......................................................... 22,573 --
----------- -----------
Net Cash Provided by (Used in) Investing Activities............................... 20,519 (2,196)
----------- ------------
Cash Flow From Financing Activities:
Repayment of syndicated bank credit facility...................................... (26,253) --
Payment of deferred financing costs............................................... -- (167)
----------- -----------
Net Cash Used in Financing Activities............................................. (26,253) (167)
------------ -----------
Effect of exchange rate changes on cash and cash equivalents...................... 925 (200)
----------- -----------
Net Change in Cash and Cash Equivalents........................................... (6,174) (13,237)
Cash and Cash Equivalents at Beginning of Period.................................. 54,780 55,617
----------- -----------
Cash and Cash Equivalents at End of Period........................................ $ 48,606 $ 42,380
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
ARMKEL, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statement Presentation
The condensed consolidated balance sheet as of March 28, 2003, the condensed
consolidated statements of income and changes in members' equity for the three
months ended March 28, 2003 and March 31, 2002, and the consolidated statement
of cash flows for the three months ended March 28, 2003 and March 31, 2002 have
been prepared by Armkel, LLC and subsidiaries (the "Company") and are unaudited.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flow at March 28, 2003 and for all periods
presented have been made.
Fifty-percent (50%) of the membership interests in the Company is owned by each
of Church & Dwight Co., Inc. ("C&D") and certain affiliates of Kelso & Company,
L.P. ("Kelso").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 2002
required Form 10-K filing. Certain items previously reported in specific
captions in the accompanying financial statements have been reclassed to conform
with current period classification. The financial statement effect of the
recently divested Italian operations is recognized as discontinued operations in
all periods. The results of operations for the period ended March 28, 2003 are
not necessarily indicative of the operating results for the full year.
2. Inventories consist of the following:
March 28, 2003 Dec. 31, 2002
-------------- -------------
(In thousands)
Raw materials and supplies............................................. $ 14,118 $ 10,561
Work in process........................................................ 6,261 5,983
Finished goods......................................................... 36,341 36,883
---------- ---------
$ 56,720 $ 53,427
========== =========
3. Property, Plant and Equipment consist of the following:
March 28, 2003 Dec. 31, 2002
-------------- -------------
(In thousands)
Land................................................................... $ 7,160 $ 7,067
Buildings and improvements............................................. 21,849 21,620
Machinery and equipment................................................ 45,372 44,946
Office equipment and other assets...................................... 4,294 3,800
Construction in progress............................................... 6,219 4,716
---------- ---------
84,894 82,149
Less accumulated depreciation and amortization......................... 11,239 9,282
---------- ---------
Net Property, Plant and Equipment...................................... $ 73,655 $ 72,867
========== =========
4. Goodwill and Intangible Assets
The following tables discloses the carrying value of all intangible assets:
March 28, 2003 December 31, 2002
--------------- -----------------
Gross Carrying Accum. Gross Carrying Accum.
(In thousands) Amount Amortization Net Amount Amortization Net
------ ------------ --- ------ ------------ ---
Amortized intangible assets:
- ---------------------------
Patents $ 27,500 $ 6,750 $ 20,750 $ 27,500 $ 5,625 $ 21,875
========= ======== ========== ========== ======= =========
Unamortized intangible assets - Carrying value
- -----------------------------
Tradenames $ 239,400 $ 239,400
========= ==========
ARMKEL, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Intangible amortization expense amounted to $1.1 million for the three months
ended March 28, 2003 and March 31, 2002. The estimated intangible amortization
is approximately $4.5 million per year over the remaining amortization period.
The weighted average amortization period for patents is 6.4 years.
The changes in the carrying amount of goodwill for the three months ended March
28, 2003 is as follows:
(In thousands) Domestic International Total
-------- ------------- -------
Balance December 31, 2002..................................... $173,006 $ 32,461 $ 205,467
Foreign exchange/other........................................ -- 377 377
-------- ---------- -----------
Balance March 28, 2003........................................ $173,006 $ 32,838 $ 205,844
======== ========== ===========
5. Related Party Transactions
Arrangements with Church & Dwight
- ---------------------------------
The Company owed C&D $6.4 million and $3.5 million for primarily administrative
and management oversight services for the three months ended March 28, 2003 and
March 31, 2002, respectively. The Company sold $0.7 and $5.4 million of
deodorant/antiperspirant inventory to C&D at its cost during the three months
ended March 28, 2003 and March 31, 2002, respectively. The Company purchased
$0.8 million and $0.1 million of Arm & Hammer products to be sold in
international markets during the three months ended March 28, 2003 and March 31,
2002, respectively. During the three months ended March 31, 2002, the Company
charged C&D $1.0 million of transition administrative services. The Company had
a net payable to C&D at March 28, 2003 and March 31, 2002, respectively, of
approximately $3.5 million and $6.0 million that primarily related to
administration fees and invoices paid by C&D on behalf of Armkel, offset by
amounts owed for inventory.
Arrangements with Kelso
- -----------------------
Kelso provides the Company with financial advisory services for which the
Company pays an annual fee of $1.0 million. The Company indemnifies Kelso
against certain liabilities and reimburses expenses in connection with its
engagement. The Company prepaid Kelso's 2003 annual fee at the end of December
2002. For the three months ended March 31, 2002, the Company paid Kelso $0.3
million.
6. Contingencies
On January 17, 2002, a petition for appraisal, Cede & Co., Inc. and GAMCO
Investors, Inc. v. Medpointe Healthcare Inc., Civil Action No. 19354, was filed
in the Court of Chancery of the State of Delaware demanding a determination of
the fair value of shares of Medpointe. The action was brought by purported
former shareholders of Carter-Wallace in connection with the merger on September
28, 2001 of MCC Acquisition Sub Corporation with and into Carter-Wallace. The
merged entity subsequently changed its name to Medpointe. The petitioners seek
an appraisal of the fair value of their shares in accordance with Section 262 of
the Delaware General Corporation Law. The matter was heard on March 10 and 11,
2003, at which time the petitioners purportedly held approximately 2.3 million
shares of Medpointe. No decision has yet been rendered by the court.
Medpointe and certain former Carter-Wallace shareholders are party to an
indemnification agreement pursuant to which such shareholders will be required
to indemnify Medpointe from a portion of the damages, if any, suffered by
Medpointe in relation to the exercise of appraisal rights by other former
Carter-Wallace shareholders in the merger. Pursuant to the agreement, the
shareholders have agreed to indemnify Medpointe for 40% of any Appraisal Damages
(defined as the recovery greater than the per share merger price times the
number of shares in the appraisal class) suffered by Medpointe in relation to
the merger; provided that if the total amount of Appraisal Damages exceeds $33.3
million, then the indemnifying stockholders will indemnify Medpointe for 100% of
any damages suffered in excess of that amount. The Company, in turn, is party to
an agreement with Medpointe pursuant to which it has agreed to indemnify
Medpointe and certain related parties against 60% of any Appraisal Damages for
which Medpointe remains liable. The maximum liability to the Company pursuant to
the indemnification agreement and prior to any indemnification from C&D, as
described in the following sentence is $12 million. C&D is party to an agreement
with the Company pursuant to which it has agreed to indemnify the Company for
17.4% of any Appraisal Damages, or up to a maximum of $2.1 million for which the
Company becomes liable.
ARMKEL, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company, Medpointe and the indemnifying shareholders believe that the
consideration offered in the merger was fair to the former Carter-Wallace
shareholders and have vigorously defended the petitioner's claim. However, the
Company cannot predict the outcome of the proceedings.
On August 26, 2002, the Company filed suit against Pfizer in the District Court
of New Jersey to redress infringement of two (2) of the Company's patents
directed to pregnancy diagnostic devices. The suit claims that Pfizer's "ept"
product infringes these patents. The Company is seeking a reasonable royalty and
associated damages as compensation for Pfizer's infringement. The Court has
ordered a Settlement Conference for June 10, 2003, and has set dates throughout
2003 for various stages of discovery.
In 2002, a purported class action suit, Sandra J. Wagner v. Church & Dwight Co.,
Inc., et al, was filed against the Company and C&D in the Superior Court of New
Jersey. The lawsuit alleged that the Company's ovulation test kits ("OTK") are
being marketed in a misleading manner because they do not advise women with
certain ovarian conditions that test results may be inaccurate. The plaintiffs
seek monetary damages as well as injunctive relief against the OTK's - marketing
materials. The products in question have been cleared for marketing as medical
devices under applicable FDA regulations. The Company is vigorously defending
the action but cannot predict the outcome of the proceedings. If the Company is
not successful in defending against a claim, the Company could be liable for
substantial damages or may be prevented from offering some of the Company's
products. These events could harm the Company's financial condition and results
of operations.
The Company's distribution of condoms under the Trojan and other trademarks is
regulated by the U.S. Food and Drug Administration (FDA). Certain of Armkel's
condoms and similar condoms sold by Armkel's major competitors, contain the
spermicide nonoxynol-9 (N-9). The World Health Organization and other interested
groups have issued reports suggesting that N-9 should not be used rectally or
for multiple daily acts of vaginal intercourse, given the ingredient's potential
to cause irritation to human membranes. The Company expects the FDA to issue
non-binding draft guidance concerning the labeling of condoms with N-9, although
the timing of such draft guidance is uncertain. The Company believes that
condoms with N-9 provide an acceptable added means of contraceptive protection
and is cooperating with the FDA concerning the appropriate labeling revisions,
if any. However, the Company cannot predict the outcome of the FDA review. If
the FDA or state governments promulgate rules which prohibit or restrict the use
of N-9 in condoms (such as new labeling requirements), the financial condition
and operating results of the Company could suffer.
Relating to this issue, on February 28, 2003 a class action suit, Lisette Velez
v. Church & Dwight Co., Inc., et als including Armkel, LLC, was filed against
the Company and C&D, and two other condom manufacturers, in the Superior Court
of New Jersey. The lawsuit alleges that condoms lubricated with N-9 are being
marketed in a misleading manner because the makers of such condoms claim they
aid in the prevention of sexually transmitted diseases whereas, according to the
plaintiffs, public health organizations have found that N-9 usage can under some
circumstances increase the risk of transmission of disease. Condoms with N-9
have been marketed for many years as a cleared medical device under applicable
FDA regulations. The Company together with the other two defendants, have filed
a motion to dismiss the action on the ground that the subject matter is
preempted by federal regulation, however, the Company cannot predict the outcome
of this litigation.
The Company, in the ordinary course of its business, is the subject of, or party
to, various pending or threatened legal actions. The Company believes that any
ultimate liability arising from these actions will not have a material adverse
effect on its financial position or results of operation.
7. Reorganization Reserve
As of September 28, 2001, the date of the acquisition of the Carter-Wallace
Consumer Business, (the "Predecessor"), the Company started to implement a plan
to reorganize the operation of the acquired consumer business. The main
components of the plan included rationalizing facilities for which the Company
had incurred lease termination costs, environmental remediation costs and work
force rationalization costs. The plan was finalized in 2002 and the Company
expects to complete the plan in 2003 except for certain long-term contractual
obligations related to benefits for certain former executives of Carter-Wallace,
Inc.
ARMKEL, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company established an accrual for severance to reflect the purchase of
various services from C&D in lieu of obtaining such services through continued
employment of certain personnel at the Predecessor company. The accrued
severance is for identified employees from various areas including executives,
administrative support and corporate functions (finance, human resources, legal,
MIS, R&D, logistics, marketing, sales and purchasing).
The following table summarizes the activity in the Company's reorganization
accruals:
Reserves at Payments and Reserves at
(In thousands) Dec. 31, 2002 Adjustments March 28, 2003
------------- ----------- --------------
Severance and other charges....................................... $ 6,005 $ (1,668) $ 4,337
Environmental remediation costs................................... 1,828 (83) 1,745
Lease termination costs........................................... 110 (12) 98
--------- ----------- ---------
$ 7,943 $ (1,763) $ 6,180
========= =========== =========
8. Assets Held for Sale
In the third quarter of 2002, the Company made a commitment to sell its land and
buildings, excluding the research and development building, at its Cranbury, New
Jersey location and, as such, has classified these assets as held for sale. This
property, with a fair market value of $14.6 million, will likely be sold to land
developers who would use it for purposes other than manufacturing.
9. Discontinued Operations
At the end of December 2002, the Company signed a definitive agreement to sell
its Italian operations. On February 20, 2003, the sale was completed with
proceeds of $22.6 million. The Company recorded an after-tax gain on the sale of
these operations of approximately $1.9 million. As part of this transaction, the
Company recorded a $.5 million guarantee reserve which is the estimated fair
value of the contractual indemnification obligation of the Company to the buyer
of the Italian operations. Exposure under such indemnification obligation is
capped at 1.5 million Euros. For the three months ended March 28, 2003, net
sales from the Italian operations was $10.0 million as compared to $9.1 million
for the same period in 2002 and income from discontinued operations was $0.3
million (net of taxes of $0.3 million) as compared to $0.6 million (net of taxes
of $0.5 million) for the same period in 2002. The proceeds were used to pay down
the term loan debt and costs associated with the divestiture. The financial
statements of the comparable periods of a year ago in this report have been
reclassified for discontinued operations.
10. Recent Accounting Pronouncements
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The Company has assessed SFAS No. 143 and has
determined there is no material impact on the Company's consolidated financial
statements.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("Interpretation"). This Interpretation elaborates on
the existing disclosure requirements for most guarantees, including loan
guarantees such as standby letters of credit. It also clarifies that at the time
a company issues a guarantee, the company must recognize an initial liability
for the fair market value of the obligations it assumes under that guarantee and
must disclose that information in its interim and annual financial statements.
The initial recognition and measurement provisions of the Interpretation apply
on a prospective basis to guarantees issued or modified after December 31, 2002.
The disclosure provisions were effective for financial statements of interim or
annual periods ending after December 15, 2002.
In April 2003, the FASB issued SFAS No. 149,"Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This Statement amends Statement
133 for decisions made (1) as part of the Derivatives Implementation Group
process that effectively required amendments to Statement 133, (2) in connection
with other Board projects dealing with financial instruments, and (3) in
connection with implementation issues raised in
ARMKEL, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
relation to the application of the definition of a derivative, in particular,
the meaning of an initial net investment that is smaller than would be required
for other types of contracts that would be expected to have a similar response
to changes in market factors, the meaning of underlying, and the characteristics
of a derivative that contains financing components. This Statement is effective
for contracts entered into or modified after June 30, 2003, except as stated
below and for hedging relationships designated after June 30, 2003. In addition,
except as stated below, all provisions of this Statement should be applied
prospectively. The provisions of this Statement that relate to Statement 133
Implementation Issues that have been effective for fiscal quarters that began
prior to June 15, 2003, should continue to be applied in accordance with their
respective effective dates. In addition, certain provisions, which relate to
forward purchases or sales of when-issued securities or other securities that do
not yet exist, should be applied to both existing contracts and new contracts
entered into after June 30, 2003. The Company will adopt the provisions of the
statement on its effective date.
11. Segments and Supplemental Information
Segment Information
- -------------------
The Company has two operating segments: Domestic Consumer Products Division and
International Consumer Products Division.
Measurement of Segment Results and Assets
- -----------------------------------------
The accounting policies of the segments are generally the same as those
described in Note 1.
Supplemental Financial Information of Domestic and International Operations
- ---------------------------------------------------------------------------
The senior subordinated notes registered by the Company are fully and
unconditionally guaranteed by the domestic subsidiaries of the Company on a
joint and several basis. The following information is being presented to comply
with SEC Regulation SX, Item 3-10 and to provide required segment disclosures.
Supplemental information for condensed consolidated balance sheets at March 28,
2003, condensed consolidated income statements and consolidated cash flows for
the period from December 31, 2002 to March 28, 2003 is summarized as follows
(amounts in thousands):
ARMKEL, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Statements of Income
For The Three Months Ended March 28, 2003
------------------------------------------------------------------
Total
Domestic International Eliminations Consolidated
-------- ------------- ------------ ------------
Net sales................................... $ 53,706 $ 47,525 $ (1,577) $ 99,654
Cost of goods sold.......................... 20,238 22,508 (1,577) 41,169
----------- ------------ ------------ -----------
Gross profit................................ 33,468 25,017 -- 58,485
Operating expenses.......................... 18,380 15,005 -- 33,385
----------- ------------ ----------- -----------
Income from operations...................... 15,088 10,012 -- 25,100
Interest expense............................ (8,593) (297) -- (8,890)
Interest income............................. 98 183 -- 281
Intercompany accounts....................... 1,384 (1,384) -- --
Other income (expense)...................... (29) (255) -- (284)
------------ ------------- ----------- ------------
Income before taxes......................... 7,948 8,259 -- 16,207
Income taxes................................ -- 3,104 -- 3,104
----------- ------------ ----------- -----------
Income from continuing operations........... 7,948 5,155 -- 13,103
Income from discontinued operations......... -- 254 -- 254
Gain on disposition of discontinued operations -- 1,862 -- 1,862
----------- ------------ ----------- -----------
Net Income............................... $ 7,948 $ 7,271 $ -- $ 15,219
============ ============ =========== ==========
For the Three Months Ended March 31, 2002
-----------------------------------------------------------------
Total
Domestic International Eliminations Consolidated
-------- ------------- ------------ ------------
Net sales................................... $ 51,432 $ 38,712 $ (2,772) $ 87,372
Cost of goods sold.......................... 28,697 19,309 (2,772) 45,234
---------- ----------- ------------ -----------
Gross profit................................ 22,735 19,403 -- 42,138
Operating expenses.......................... 17,005 14,865 -- 31,870
--------- ----------- ----------- -----------
Income from operations...................... 5,730 4,538 -- 10,268
Interest expense............................ (9,115) (264) -- (9,379)
Interest income............................. 157 128 -- 285
Intercompany accounts....................... 1,476 (1,476) -- --
Other income (expense)...................... (694) 622 -- (72)
----------- ----------- ----------- ------------
Income before taxes......................... (2,446) 3,548 -- 1,102
Income taxes................................ -- 1,364 -- 1,364
---------- ----------- ----------- -----------
Income from continuing operations........... (2,446) 2,184 -- (262)
Income from discontinued operations......... -- 570 -- 570
Gain on disposition of discontinued operations -- -- -- --
---------- ---------- ----------- -----------
Net Income............................... $ (2,446) $ 2,754 $ -- $ 308
=========== ========== =========== ===========
ARMKEL, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Consolidated Balance Sheet March 28, 2003
---------------------------------------------------------------
Total
Domestic International Eliminations Consolidated
-------- ------------- ------------ ------------
Cash and cash equivalents.................. $ 22,946 $ 25,660 $ -- $ 48,606
Accounts receivable, less allowances....... 29,537 61,623 -- 91,160
Inventories................................ 25,605 31,115 -- 56,720
Prepaid expenses........................... 1,276 4,015 -- 5,291
Net assets held for sale ................. 14,600 -- -- 14,600
----------- ----------- ----------- ----------
Total current assets.................... 93,964 122,413 -- 216,377
Property, plant and equipment (net)........ 49,275 24,380 -- 73,655
Notes receivable........................... 65,490 -- (65,490) --
Investment in subsidiaries................. 53,760 -- (53,760) --
Tradenames and patents..................... 221,950 38,200 -- 260,150
Goodwill................................... 173,006 32,838 -- 205,844
Deferred financing costs................... 16,480 -- -- 16,480
Other assets............................... 2,621 2,784 -- 5,405
----------- ----------- ----------- ----------
Total assets............................ $ 676,546 $ 220,615 $ (119,250) $ 777,911
=========== =========== =========== ==========
Accounts payable and accrued expenses...... $ 38,292 $ 45,607 $ -- $ 83,899
Intercompany accounts...................... (1,839) 1,839 -- --
Current portion of long-term debt.......... 4,973 2,684 -- 7,657
Taxes payable.............................. -- 3,845 -- 3,845
----------- ----------- ----------- ----------
Total current liabilities............... 41,426 53,975 -- 95,401
Long-term debt............................. 392,564 15,033 -- 407,597
Deferred income taxes...................... -- 8,480 -- 8,480
Notes payable.............................. -- 76,978 (76,978) --
Deferred and other long-term liabilities... 10,762 10,124 -- 20,886
---------- ----------- ----------- ----------
Total liabilities....................... 444,752 164,590 (76,978) 532,364
Members' Equity and Subsidiary Capital
Net contributed capital.................... 220,500 42,264 (42,264) 220,500
Retained earnings.......................... 16,382 14,403 -- 30,785
Accumulated other comprehensive loss....... (5,088) (642) (8) (5,738)
----------- ----------- ----------- ----------
Total members' equity and subsidiary capital 231,794 56,025 (42,272) 245,547
----------- ----------- ----------- ----------
Total liabilities and members' equity... $ 676,546 $ 220,615 $ (119,250) $ 777,911
=========== =========== =========== ==========
ARMKEL, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Consolidated Balance Sheet December 31, 2002
----------------------------------------------------------------
Total
Domestic International Eliminations Consolidated
-------- ------------- ------------ ------------
Cash and cash equivalents................... $ 35,093 $ 19,687 $ -- $ 54,780
Accounts receivable, less allowances........ 21,885 53,979 -- 75,864
Inventories................................. 22,948 30,479 -- 53,427
Prepaid expenses............................ 1,428 4,129 -- 5,557
Net assets of discontinued operations....... -- 42,079 -- 42,079
Net assets held for sale ................... 14,600 -- -- 14,600
----------- --------- ---------- -----------
Total current assets..................... 95,954 150,353 -- 246,307
Property, plant and equipment (net)......... 48,646 24,221 -- 72,867
Investment in subsidiaries.................. 58,591 -- (58,591) --
Notes receivable............................ 63,357 -- (63,557) --
Tradenames and patents...................... 223,075 38,200 -- 261,275
Goodwill.................................... 173,006 32,461 -- 205,467
Deferred financing costs.................... 17,380 -- -- 17,380
Other assets................................ 2,665 2,553 -- 5,218
------------- ---------- ---------- -----------
Total assets............................. $ 682,874 $ 247,788 $ (122,148) $ 808,514
========== ========== =========== ===========
Short-term borrowings....................... $ -- $ 55 $ -- $ 55
Accounts payable and accrued expenses....... 44,762 40,274 -- 85,036
Intercompany accounts....................... (3,633) 3,633 -- --
Net liabilities of discontinued operations . -- 23,582 -- 23,582
Current portion of long-term debt........... 9,541 18,960 -- 28,501
Taxes payable............................... -- 1,606 -- 1,606
---------- ---------- ---------- ----------
Total current liabilities................ 50,670 88,110 -- 138,780
Long-term debt.............................. 397,838 13,796 -- 411,634
Deferred income taxes....................... -- 8,500 -- 8,500
Notes payable............................... -- 69,138 (69,138) --
Deferred and other long-term liabilities.... 10,705 9,215 -- 19,920
---------- ---------- ---------- -----------
Total liabilities........................ 459,213 188,759 (69,138) 578,834
Members' Equity and Subsidiary Capital
Net contributed capital..................... 220,500 52,061 (52,061) 220,500
Retained earnings........................... 8,434 7,132 -- 15,566
Accumulated other comprehensive loss........ (5,273) (164) (949) (6,386)
----------- ---------- ---------- -----------
Total members' equity and subsidiary capital 223,661 59,029 (53,010) 229,680
----------- ---------- ---------- -----------
Total liabilities and members' equity.... $ 682,874 $ 247,788 $ (122,148) $ 808,514
=========== ========== ========== ===========
ARMKEL, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Statement of Cash Flows For The Three Months Ended March 28, 2003
-----------------------------------------
Total
Domestic International Consolidated
Cash Flow From Operating Activities: -------- ------------- ------------
Net Income............................................................. $ 7,948 $ 7,271 $ 15,219
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................................... 2,956 977 3,933
Unrealized (gain) loss on foreign exchange transactions............. (42) 123 81
Net income from discontinued operations............................. -- (254) (254)
Net gain on sale of discontinued operations......................... -- (1,862) (1,862)
Change in assets and liabilities:
(Increase) in accounts receivable................................... (7,833) (4,504) (12,337)
Decrease (Increase) in inventories.................................. (2,657) 662 (1,995)
Decrease in prepaid expenses and other current assets............... 161 165 326
(Decrease) Increase in accounts payable and other accrued expenses.. (7,186) 4,637 (2,549)
(Decrease) Increase in other........................................ 2,208 (4,135) (1,927)
----------- ----------- -----------
Net Cash (Used in) Provided by Operating Activities.................... (4,445) 3,080 (1,365)
----------- ----------- -----------
Cash Flow From Investing Activities:
Additions to property, plant & equipment............................ (1,503) (551) (2,054)
Proceeds from divestiture........................................... -- 22,573 22,573
----------- ----------- -----------
Net Cash (Used in) Provided by Investing Activities.................... (1,503) 22,022 20,519
----------- ----------- -----------
Cash Flow from Financing Activities:
Repayment of syndicated bank credit facility........................ (9,881) (16,372) (26,253)
Intercompany capital contribution................................... 9,797 (9,797) --
Intercompany debt transactions...................................... (6,115) 6,115 --
---------- ----------- ----------
Net Cash Used in Financing Activities.................................. (6,199) (20,054) (26,253)
---------- ----------- ----------
Effect of exchange rate changes on cash and cash equivalents........... -- 925 925
---------- ----------- ----------
NET CHANGE IN CASH & CASH EQUIVALENTS.................................. (12,147) 5,973 (6,174)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD......................... 35,093 19,687 54,780
---------- ----------- ----------
CASH & CASH EQUIVALENTS AT END OF PERIOD............................... $ 22,946 $ 25,660 $ 48,606
========== =========== ==========
ARMKEL, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Statement of Cash Flows For The Three Months Ended March 31, 2002
-----------------------------------------
Total
Domestic International Consolidated
Cash Flow From Operating Activities: -------- ------------- ------------
Net Income (Loss)...................................................... $ (2,446) $ 2,754 $ 308
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................................... 3,517 640 4,157
Unrealized (gain) loss on foreign exchange transactions............. 627 (425) 202
Net (income) loss from discontinued operations...................... -- (570) (570)
Change in assets and liabilities:
Decrease (Increase) in accounts receivable.......................... 190 (1,008) (818)
Decrease (Increase) in inventories.................................. 6,812 (1,178) 5,634
Decrease (Increase) in prepaid expenses and other current assets.... 246 (293) (47)
(Decrease) Increase in accounts payable and other accrued expenses.. (21,330) 3,882 (17,448)
(Decrease) Increase in other........................................ (223) (1,869) (2,092)
---------- ---------- ----------
Net Cash (Used in) Provided by Operating Activities.................... (12,607) 1,933 (10,674)
---------- ---------- ----------
Net Cash Used in Investing Activities (for additions to property,
plant & equipment).................................................. (1,844) (352) (2,196)
---------- ---------- ----------
Net Cash Used in Financing Activities (for payment of financing costs) (167) -- (167)
---------- ---------- ----------
Effect of exchange rate changes on cash and cash equivalents........... -- (200) (200)
---------- ---------- ----------
NET CHANGE IN CASH & CASH EQUIVALENTS.................................. (14,618) 1,381 (13,237)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD......................... 40,444 15,173 55,617
---------- ---------- ----------
CASH & CASH EQUIVALENTS AT END OF PERIOD.......................... $ 25,826 $ 16,554 $ 42,380
========== ========== ==========
The following table sets forth the Company's principal product lines and related
data for the three month period ended March 28, 2003 and March 31, 2002.
Three Months Ended
Net Sales (In thousands) March 28, 2003 March 31, 2002
-------------- --------------
Products
Family Planning(1)..................................................... $ 44,712 $ 42,363
Depilatories and waxes; face and skincare.............................. 23,408 18,359
Oral care.............................................................. 8,553 6,165
OTC Products........................................................... 12,532 12,633
Other consumer products................................................ 10,449 7,852
------------- -------------
Total net sales........................................................ $ 99,654 $ 87,372
============= =============
- ----------------
(1) Family Planning includes condom product sales and pregnancy and ovulation
kits.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Armkel, LLC (the Company) is an equally owned joint venture formed by Church
& Dwight Co., Inc. (C&D) and affiliates of Kelso & Company, L.P. (Kelso). On
September 28, 2001, the Company acquired certain of the domestic consumer
product assets of Carter-Wallace (the "Acquisition"), primarily Trojan condoms,
Nair depilatories, and First Response and Answer test kits, and the
international subsidiaries of Carter-Wallace. Initial financing was obtained on
August 28, 2001, however operations did not commence until the Acquisition was
consummated on September 28, 2001. The remainder of Carter-Wallace, comprised of
its healthcare and pharmaceuticals businesses, was merged with MedPointe, Inc.
("MedPointe") after the completion of the Acquisition. Simultaneously with the
consummation of the Acquisition, the Company sold the remainder of the consumer
products businesses, Arrid antiperspirant in the U.S and Canada and the
Lambert-Kay line of pet care products, to C&D - (the "Disposed Businesses").
In December 2002, the Company entered into an agreement to sell its Italian
subsidiary to a group, comprising local management and private equity investors.
The sale closed in February 2003 for a price of $22.6 million including the
repayment of $12.8 million of intercompany debt. The Company retained ownership
of certain Italian pregnancy kit and oral care product lines with sales of
approximately $3 million. The remainder of the Italian subsidiary's business
included a high percentage of distributor sales as well as hospital diagnostic
and other products not related to the Company's core business. The Company
reported a $1.9 million gain on the sale and $0.3 million income (net of tax)
from discontinued operations in the current period. The financial statements
have been reclassified to reflect the Italian business as a discontinued
operation in 2003 and prior financial statements.
The following section discusses comparisons to the three-month period ended
March 28, 2003 compared to the same period in the prior year. This section does
not include the income from discontinued operations.
Results of Continuing Operations
Three Month Comparison
Three Months Ended
-------------------
March 28, March 31,
2003 2002
---- ----
(in millions)
Net sales....................................................... $ 99.7 $ 87.4
Cost of goods sold.............................................. 41.2 45.3
-------- ---------
Gross Profit.................................................... 58.5 42.1
Marketing expenses............................................. 12.0 11.5
Selling, general & administrative expenses...................... 21.4 20.4
Interest expense & other income................................. 8.9 9.1
-------- ---------
Income before taxes from continuing operations.................. $ 16.2 $ 1.1
======== =========
The results of operations for the period from January 1, 2003 to March 28,
2003 are affected by moderate acquisition related expenses amounting to $0.8
million primarily for the cost to carry the Cranbury facility. The prior year
results are affected by $1.0 million in transition expenses and an $8.1 million
inventory step-up charge.
Net Sales
---------
Net sales increased $12.3 million, or 14.1%, to $99.7 million in the period
ended March 28, 2003 from $87.4 million in the three months ended March 31,
2002. Domestic Net Sales (net of intercompany eliminations) increased $3.5
million, or 7.2%, to $52.2 million from $48.7 million. This increase in Domestic
Net Sales is due to sales behind the launch of Lineance, and increases for
Trojan and pregnancy kits. International Net Sales increased $8.8 million, or
22.7%, to $47.5 million from $38.7 million. The increase in International Net
Sales is due to higher sales in the UK and France, condom sales in Mexico, as
well as foreign exchange which accounted for $3.4 million of the increase.
Cost of Goods Sold
------------------
Cost of goods sold decreased $4.1 million, or 9.0%, to $41.2 million for the
quarter from $45.3 million in the same period last year. As a percentage of net
sales, cost of goods sold reduced to 41.3% from 51.8% in 2002. This decrease in
cost of goods sold is due to the first quarter 2002 $8.1 million of expense
relating to inventory step-up
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
adjustments incurred at the Acquisition. Excluding these adjustments in 2002,
cost of goods sold, as a percentage of net sales, would be reduced to 42.5% of
net sales for 2002. The 1.2 point improvement over the adjusted 2002 results are
primarily due to the movement of Nair products from the Cranbury facility to the
C&D Lakewood facility and due to production of domestic Nair products at our
facility in Spain.
Operating Costs excluding Interest Expense and Other Income
-----------------------------------------------------------
Total operating expenses excluding interest expense and other income
increased $1.5 million, or 4.8%, to $33.4 million from $31.9 million in the
same period last year. The operating expense increases are addressed below.
Marketing expenses for the quarter increased by $0.5 million, or 4.3%, to
$12.0 million from $11.5 million in 2002. The increase is primarily related to
introductory marketing spending behind the launch of Lineance as a depilatory in
the United States.
Selling, general and administrative expenses increased $1.0 million, or
4.9%, to $21.4 million in the quarter from $20.4 million in 2002. This increase
in SG&A expenses is primarily related to higher R&D expenses by both the
Domestic and International divisions.
Interest Expense and Other Income
---------------------------------
Interest expense was $8.9 million in the quarter compared to $9.1 million
for the prior year. This reduction in interest expense is related to the lower
debt position from prior year.
Interest income of $0.3 million for the quarter remains unchanged from last
year.
Other expense was $0.3 million for the quarter compared to $0.1 million last
year, and primarily relates to foreign exchange remeasurement on intercompany
loans with certain of its subsidiaries.
Liquidity and Capital Resources
===============================
The Company had outstanding total debt of $415.3 million, and cash of $48.6
million, for a net debt position of $366.7 million at March 28, 2003. This
compares to $385.4 at December 31, 2002. The decrease in debt is attributable to
the proceeds related to the divestiture of the Italian operation.
Interest payments on the notes and on borrowings under the senior credit
facilities significantly increase the Company's liquidity requirements.
Borrowings under the term loans and the revolving credit facility bear interest
at variable rates plus any applicable margin. The interest rates on the term
loans are dependent on the attainment of certain covenants depending on the
ratio of total debt to EBITDA. EBITDA is a required component of the financial
covenants contained in the Company's primary credit facility and management
believes that the presentation of EBITDA is useful to investors as a financial
indicator of the Company's ability to service its indebtedness. Financial
covenants include a leverage ratio and an interest coverage ratio, which if not
met, could result in an event of default and trigger the early termination of
the credit facility, if not remedied within a certain period of time. EBITDA, as
defined by the Company's loan agreement was approximately $27.9 million for the
three months ended March 28, 2003. The leverage ratio as defined in the term
loan agreement was 3.54 versus the agreement's maximum 5.25, and the interest
coverage ratio was 3.31 versus the agreement's minimum of 2.25. The
reconciliation of Net Cash Provided by Operating Activities to the Company's key
liquidity measure, "EBITDA", per the term loan agreement, is as follows (in
millions):
Net Cash Provided by Operating Activities................. $ (1.4)
Interest Expense (1)................................. 8.0
Interest Income...................................... (0.3)
Current Income Tax Provision......................... 3.1
Increase in Working Capital.......................... 16.6
Other................................................ 1.9
---------
EBITDA.................................................... $ 27.9
=========
(1) Interest expense excludes the amortization of deferred financing costs.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Cash flows used in operating activities was $1.4 million for the three
months ended March 28, 2003 which includes $10.7 million in interest payments,
$1.6 million in severance payments, and an increase in working capital partially
offset by net income.
Cash flows from investing activities was $20.5 million for the three months
ended March 28, 2003. The net cash flows provided by investing activities
includes the proceeds from the Italian divestiture of $22.6 million partially
offset by $2.1 million in capital expenditures.
Cash flows used in financing activities was $26.3 million which includes a
$21.3 million payment of debt from proceeds of the Italian sale and a $5.0
million voluntary debt reduction.
The Company incurred severance and other change in control related
liabilities to certain employees. Since acquisition the Company paid $43.6
million in severance payments, including $1.6 million paid in the three months
ended March 28, 2003. The Company estimates that the total severance payments
will be approximately $48.0 million. The Company anticipates the remaining $4.4
million in severance and related costs to be principally paid out in 2003 with a
small balance being carried into future years for medical and life insurance
payments for three former Carter-Wallace executives.
The Company expects that the total capital expenditures will be
approximately $16 million in 2003.
The Company expects that funds provided from operations and available
borrowing of $85 million under its six-year revolving credit facility, none of
which was drawn on March 28, 2003, will provide sufficient funds to operate its
businesses, to make expected capital expenditures, to make expected severance
payments, and to meet foreseeable liquidity requirements.
Recent Accounting Pronouncements
================================
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The Company has assessed SFAS
No. 143 and has determined there is no material impact on the Company's
consolidated financial statements.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("Interpretation"). This Interpretation
elaborates on the existing disclosure requirements for most guarantees,
including loan guarantees such as standby letters of credit. It also clarifies
that at the time a company issues a guarantee, the company must recognize an
initial liability for the fair market value of the obligations it assumes under
that guarantee and must disclose that information in its interim and annual
financial statements. The initial recognition and measurement provisions of the
Interpretation apply on a prospective basis to guarantees issued or modified
after December 31, 2002. The disclosure provisions were effective for financial
statements of interim or annual periods ending after December 15, 2002.
In April 2003, the FASB issued SFAS No. 149,"Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This Statement amends Statement
133 for decisions made (1) as part of the Derivatives Implementation Group
process that effectively required amendments to Statement 133, (2) in connection
with other Board projects dealing with financial instruments, and (3) in
connection with implementation issues raised in relation to the application of
the definition of a derivative, in particular, the meaning of an initial net
investment that is smaller than would be required for other types of contracts
that would be expected to have a similar response to changes in market factors,
the meaning of underlying, and the characteristics of a derivative that contains
financing components. This Statement is effective for contracts entered into or
modified after June 30, 2003, except as stated below and for hedging
relationships designated after June 30, 2003. In addition, except as stated
below, all provisions of this Statement should be applied prospectively. The
provisions of this Statement that relate to Statement 133 Implementation Issues
that have been effective for fiscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their respective effective
dates. In addition, certain provisions, which relate to forward purchases or
sales of when-issued securities or other securities that do not yet exist,
should be applied to both existing contracts and new contracts entered into
after June 30, 2003. The Company will adopt the provisions of the statement on
its effective date.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have not been any material changes during the three month period ended
March 28, 2003. For further information, please refer to the Company's December
31, 2002 Annual Report on Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, we have concluded that the Company's disclosure controls
and procedures are effective in recording, processing, summarizing and reporting
within the time periods specified in the SEC's rules and forms material
information relating to the Company (including its consolidated subsidiaries)
required to be included in the Company's periodic SEC filings.
Since the Chief Executive Officer and Chief Financial Officer's most recent
review of the Company's internal controls systems, there have been no
significant changes in internal controls or in other factors that could
significantly affect these controls.
Cautionary Note on Forward-Looking Statements
=============================================
This report contains forward-looking statements relating to, among other
things, short- and long-term financial objectives, sales growth, cash flow and
cost improvement programs. These statements represent the intentions, plans,
expectations and beliefs of the Company, and are subject to risk, uncertainties
and other factors, many of which are outside the Company's control and could
cause actual results to differ materially from such forward-looking statements.
The uncertainties include assumptions as to market growth and consumer demand
(including the effect of political and economic events on consumer demand), raw
material and energy prices and the financial condition of major customers. With
regard to the new product introductions referred to in this report, there is
particular uncertainty relating to trade, competitive and consumer reactions.
Other factors, which could materially affect the results, include the outcome of
contingencies, including litigation, pending regulatory proceedings,
environmental remediation and the acquisition or divestiture of assets.
The Company undertakes no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any further disclosures we make on related
subjects in our filings with the U.S. Securities and Exchange Commission. This
discussion is provided as permitted by the Private Securities Litigation Reform
Act of 1995.
PART II - Other Information
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
(99.1) Certification of the CEO of Armkel, LLC Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to 906 of the
Sarbanes-Oxley Act of 2002
(99.2) Certification of the CFO of Armkel, LLC Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to 906 of the
Sarbanes-Oxley Act of 2002
b. No reports on Form 8-K were filed for the three months ended
March 28, 2003.
EXHIBIT 99.1
CERTIFICATION OF PERIODIC FINANCIAL REPORTS
PURSUANT TO 18 U.S.C. SECTION 1350
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of Armkel, LLC (the
"Company") certifies to his knowledge that:
(1) The Quarterly Report on Form 10-Q of the Company for the quarterly period
ended March 28, 2003 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in that Form 10-Q fairly presents, in all material
respects, the financial conditions and results of operation of the Company.
May, 9, 2003 /s/ Robert A. Davies, III
- --------------------------- --------------------------------------
Date Robert A. Davies, III
Chairman and Chief Executive Officer
EXHIBIT 99.2
CERTIFICATION OF PERIODIC FINANCIAL REPORTS
PURSUANT TO 18 U.S.C. SECTION 1350
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of Armkel, LLC (the
"Company") certifies to her knowledge that:
(1) The Quarterly Report on Form 10-Q of the Company for the quarterly period
ended March 28, 2003 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in that Form 10-Q fairly presents, in all material
respects, the financial conditions and results of operation of the Company.
May 9, 2003 /s/ Maureen Usifer
- --------------------------- --------------------------------------
Date Maureen Usifer
Chief Financial Officer
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.
ARMKEL, LLC.
------------------------------------
(REGISTRANT)
DATE: May 9, 2003 /s/ Maureen K. Usifer
----------------------- ------------------------------------
MAUREEN K. USIFER
CHIEF FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER
DATE: May 9, 2003 /s/ Zvi Eiref
----------------------- ------------------------------------
ZVI EIREF
DIRECTOR
CERTIFICATION
I, Robert A. Davies, III, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Armkel, LLC;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of any material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls: and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls: and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 9, 2003
/s/ Robert A. Davies, III
--------------------------------------------
Robert A. Davies, III
Chief Executive Officer
CERTIFICATION
I, Maureen K. Usifer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Armkel, LLC;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of any material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls: and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls: and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 9, 2003
/s/ Maureen K. Usifer
--------------------------------------------
Maureen K. Usifer
Chief Financial Officer