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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 26, 1998
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 No. 1-12620
PLAYTEX PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0312772
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Nyala Farms Road
Westport, Connecticut 06880
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(Address of principal executive offices)
Telephone number: (203) 341-4000
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- -------------------------------------- -----------------------
Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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FORM 10-K
(Facing Sheet Continuation)
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 |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K |X|.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 17, 1999 was $420,136,357 (based on the closing sale
price of $14 7/8 on March 17, 1999 as reported by the New York Stock
Exchange-Composite Transactions). For this computation, the registrant has
excluded the market value of all shares of its Common Stock reported as
beneficially owned by named executive officers and directors of the registrant;
such exclusion shall not be deemed to constitute an admission that any such
person is an "affiliate" of the registrant.
At March 17, 1999, 60,417,824 shares of Playtex Products, Inc. common
stock, par value $.01 per share, were outstanding.
2
DOCUMENTS INCORPORATED BY REFERENCE:
DOCUMENT PART OF FORM 10-K
- -------- -----------------
Portions of the registrant's definitive Proxy Statement (the
"Proxy Statement") for the 1999 Annual Meeting of
Stockholders to be held on May 18, 1999, which will be filed
with the Securities and Exchange Commission within 120 days
after the end of the registrant's fiscal year ended December
26, 1998 pursuant to Regulation 14A......................... III
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TABLE OF CONTENTS
Page
----
PART I
Item 1. Business.......................................................... 5
Item 2. Properties........................................................ 15
Item 3 Legal Proceedings................................................. 16
Item 4. Submission of Matters to a Vote of Security Holders............... 16
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................ 17
Item 6. Selected Financial Data........................................... 18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 18
Item 7A Quantitative and Qualitative Disclosure about Market Risk......... 18
Item 8. Financial Statements and Supplementary Data....................... 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure....................................... 18
PART III
Item 10. Directors and Executive Officers of the Registrant................ 19
Item 11. Executive Compensation............................................ 19
Item 12. Security Ownership of Certain Beneficial Owners and Management.... 19
Item 13. Certain Relationships and Related Transactions.................... 19
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.... 19
Signatures........................................................ 21
4
PART I
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This document contains statements that constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. When used in this document, the words "anticipates," "intends," "plans,"
"believes," "estimates," "expects" and similar expressions are intended to
identify forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause actual
results, performance or achievements of Playtex Products, Inc. and its
subsidiaries ("Playtex" or the "Company") to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, but are not limited to: the
Company's highly leveraged capital structure, its substantial principal
repayment obligations, price and product changes and promotional activity by
competitors, the loss of a significant customer, the difficulties of integrating
acquisitions, issues related to the year 2000, adverse publicity and product
liability claims and dependence on key employees. The risk factors described
herein could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statements of the Company and investors,
therefore, should not place undue reliance on any such forward-looking
statements. Further, any forward-looking statement speaks only as of the date on
which such statement is made, and the Company undertakes no obligation to update
any forward-looking statement or statements to reflect events or circumstances
after the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not
possible for management to predict all of such factors. Further, management
cannot assess the impact of each such factor on the Company's business or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements.
TRADEMARKS
The Company has proprietary rights to a number of trademarks important to
its businesses, such as: PLAYTEX, BANANA BOAT, GENTLE GLIDE, MR. BUBBLE, WET
ONES, BINACA, MOST LIKE MOTHER, BINKY, CHUBS, QUICKSTRAW, BIOSUN, DIAPARENE,
DIAPER GENIE, DROP-INS, QUIK BLOK, TAN EXPRESS, NATURAL ACTION, COOLSTRAW,
AVANCE, SAFE'N SURE, EAZY-FEED, WET ONES LUNCHKINS, SLIMFITS, SILK GLIDE,
PORTABLES, SOOTH-A-CAINE, ACTION SPORT, COOL COLORZ, GET ON THE BOAT, LIPPOPS,
BETTER OFF, BLASTERS, DENTAX, DOROTHY GRAY, HANDSAVER, STAIN SOLUTIONS,
JHIRMACK, LIVING, OGILVIE, TEK, and TUSSY. The Company also owns a royalty free
license in perpetuity to the WOOLITE trademark for rug an upholstery cleaning
products in the United States and Canada.
ITEM 1. BUSINESS
A. HISTORY
The Playtex businesses were founded in 1932 under the name International
Latex Company and operated for many years prior to 1986 under the name
International Playtex, Inc. ("IPI"). In the mid-1950's, using the latex
technology developed for the manufacture of girdles, IPI began to market
household gloves, the first of many products to constitute its Family Products
division. Through the marketing of gloves, the addition of disposable nursers in
the mid-1960's, and the acquisition in 1967 and subsequent expansion of its
tampon manufacturing business, Playtex established a major presence in the drug
store, supermarket and mass merchandise channels of distribution.
In 1986, IPI was the subject of a management leveraged buyout and, in
1988, the Company, which was formed by certain management investors and The
Thomas H. Lee Company, acquired the Family Products business from Playtex
Holdings, Inc. ("PHI"), the successor to IPI. Concurrently, Playtex Apparel,
Inc. ("Apparel"), which manufactured woman's intimate apparel, was divested to a
partnership owned by operating management of that business. In November 1991,
Apparel was sold to Sara Lee Corporation ("Sara Lee"). There is no longer any
corporate relationship between the Company and Sara Lee or Apparel, except that
the Company and Apparel each own 50% of the stock of
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Playtex Marketing Corporation ("Playtex Marketing"), which owns the PLAYTEX and
LIVING trademarks and licenses them on a royalty-free basis in perpetuity to the
Company.
In December 1992, the Company acquired, for $5 million, a 22% common
equity interest in BANANA BOAT Holding Corporation ("BBH") in conjunction with
the acquisition by BBH's wholly-owned subsidiary, Sun Pharmaceuticals Corp.
("Sun"), of the assets and certain liabilities of Sun Pharmaceuticals, Ltd. BBH
was controlled by Thomas H. Lee Equity Partners, L.P. and other affiliates and
employees of the Thomas H. Lee Company. Sun manufactured and marketed a line of
sun and skin care products in the United States and abroad under the BANANA BOAT
trademark. Concurrently with its acquisition of the equity interest in BBH, the
Company entered into a distribution agreement with Sun under which it began to
distribute BANANA BOAT sun and skin care products for Sun from November 1993 to
October 1995.
On February 28, 1995, the Company acquired the assets of the WOOLITE Rug
and Upholstery Cleaning Products ("Woolite") from Reckitt & Coleman PLC under an
exclusive, royalty free trademark license in perpetuity in the United States and
Canada.
On June 6, 1995, the Company sold 20 million shares of Common Stock at a
price of $9.00 per share for an aggregate purchase price of $180.0 million (the
"Investment") to HWH Capital Partners, L.P., HWH Valentine Partners, L.P., and
HWH Surplus Valentine Partners, L.P. (collectively, the "Investors"), each a
Delaware limited partnership managed by Haas Wheat & Partners Incorporated,
pursuant to a Stock Purchase Agreement, dated as of March 17, 1995, between the
Company and the Investors (the "Stock Purchase Agreement"). The Investors'
shares constituted approximately 40% of the Company's outstanding Common Stock
at the time of the Investment and designees of the Investors were elected by the
Company's stockholders as a simple majority of the Board of Directors.
Concurrent with the Investment, the Company entered into a new bank credit
agreement and, together with the Investment, the net proceeds were used by the
Company to refinance all outstanding borrowings under the Company's prior credit
agreement.
On October 31, 1995, the Company and BBH Acquisition, Inc., a Delaware
corporation and wholly owned subsidiary of the Company, acquired all of the
issued and outstanding common shares of BBH not previously owned by the Company
(the "BBH Acquisition"). Following the BBH Acquisition, the Company's equity
ownership of BBH increased from 22% to 100% and the Company's interest in the
operating profits from the sale of BANANA BOAT products increased to 100%.
Concurrently with the BBH Acquisition, the distribution agreement between the
Company and BBH was terminated. On March 22, 1996, BBH was merged with and into
Sun, with Sun being the surviving corporation. The net funds expended for the
BBH Acquisition included cash of $40.4 million, the retirement of $27.1 million
of BBH's long term debt, the assumption of BBH's working capital facility and
the payment of accrued interest and transaction fees of $4.3 million. The BBH
Acquisition was financed with $34.3 million of existing cash balances and
advances under the Company's previous credit facility of $37.5 million. The BBH
Acquisition was accounted for as a purchase.
On July 21, 1997, the Company completed a refinancing of its senior
indebtedness (the "1997 Refinancing") designed to increase its financial and
operational flexibility. The net proceeds from the 1997 Refinancing were used to
retire the indebtedness outstanding under the Company's previous credit
agreement: concurrently, the former agreement was terminated. The 1997
Refinancing included: (i) the issuance of $150.0 million principal amount of 8
7/8% senior notes due July 15, 2004 (the "Senior Notes"), (ii) a $150.0 million
senior secured term loan due September 15, 2003 (the "1997 Term Loan") and (iii)
senior secured credit facilities (the "1997 Senior Secured Credit Facilities")
in an aggregate amount of $170.0 million comprised of a $115.0 million revolving
credit facility (the "1997 Revolving Credit Facility") and a $55.0 million term
loan facility (the "1997 Term A Loan").
1998 ACQUISITIONS
On January 6, 1998, the Company acquired Carewell Industries, Inc.
("Carewell") for approximately $9.2 million in cash (exclusive of acquisition
costs). Carewell manufactured and marketed the DENTAX line of toothbrushes,
toothpaste, and dental floss for distribution through food stores, drug chains,
and mass merchandisers. The acquisition, which was financed with borrowings
under the Company's 1997 Revolving Credit Facility, was accounted for as a
purchase.
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On January 26, 1998, the Company acquired certain tangible and intangible
assets related to the BINKY pacifier business ("Binky") from Binky-Griptight,
Inc. for approximately $1.2 million in cash (exclusive of acquisition costs) and
the issuance of a $0.5 million note which was due and paid on July 27, 1998. The
acquisition, which was financed with borrowings under the Company's 1997
Revolving Credit Facility, was accounted for as an asset purchase.
On January 28, 1998, the Company acquired Personal Care Holdings, Inc.
("PCH") for approximately $91 million in cash (exclusive of acquisition costs)
and 9,257,345 shares of Common Stock. PCH manufactured and marketed a number of
leading consumer product brands, including WET ONES pre-moistened towelettes,
CHUBS baby wipes, OGILVIE home permanent products, BINACA breath spray and
drops, MR. BUBBLE children's bubble bath products, DIAPARENE infant care
products, TUSSY deodorants, DOROTHY GRAY skin care products and BETTER OFF
depilatories. The cash portion of the consideration paid for PCH was financed
under the 1997 Term Loan, which was amended concurrently with the PCH
Transaction. The acquisition was accounted for as a purchase.
1999 ACQUISITION
On January 29, 1999, the Company completed the acquisition of the DIAPER
GENIE business, the leading diaper disposal system in the U.S., from
privately-held Mondial Industries L.P. ("Mondial") for approximately $122
million. The purchase price consisted of $72 million in cash and the issuance to
Mondial of $50 million principal amount of convertible notes. The cash portion
of the consideration was financed through the Company's 1997 Revolving Credit
facility. The newly issued convertible notes bear interest at a rate of 6.00%
and are convertible after January 29, 2000, at the holders' option, into
approximately 2.6 million shares of the Company's Common Stock. The conversion
price is approximately $19.15 per share. The notes will mature in 2004 and are
callable by the Company after January 29, 2002. The acquisition was accounted
for as an asset purchase.
B. EXECUTIVE OFFICERS OF REGISTRANT
Listed below are the executive officers of the Company as of March 17,
1999. There are no family relationships between any of the executive officers,
and there is no arrangement or understanding between any executive officer and
any other person pursuant to which the executive officer was selected. The
following information is furnished with respect to each of the executive
officers of the Company, each of which is elected by and serves at the pleasure
of the Board of Directors. Ages and positions are shown as of March 17, 1999.
Name Age Position
- ---- --- --------
Michael R. Gallagher 53 Chief Executive Officer and
Director
Michael F. Goss 39 Executive Vice President, Chief
Financial Officer and Director
Richard G. Powers 53 President, U.S. Personal Products
Division
Max R. Recone 43 President, U.S. Consumer Products
Division
James S. Cook 47 Senior Vice President, Operations
Irwin S. Butensky, Ph.D. 63 Senior Vice President, Biomedical
and Administrative Services
John D. Leahy 45 Senior Vice President, Corporate
Sales / International
Paul E. Yestrumskas 47 Vice President, General Counsel and
Secretary
MICHAEL R. GALLAGHER has been the Chief Executive Officer and a Director
of the Company since 1995. Prior to joining the Company, Mr. Gallagher was Chief
Executive Officer of North America for Reckitt & Colman PLC ("R&C") from 1994 to
1995. Mr. Gallagher was President and Chief Executive Officer of Eastman Kodak's
L&F Products subsidiary from 1988 until the subsidiary was sold to R&C in 1994.
From 1984 to 1988, Mr. Gallagher held various executive positions with the Lehn
& Fink Group of Sterling Drug. From 1982 to 1984, he was Corporate Vice
President and General Manager of the Household Products Division of The Clorox
Company ("Clorox"). Prior to that, Mr. Gallagher had various marketing and
general management assignments with Clorox and with The Procter & Gamble Company
("Proctor & Gamble"). He is presently a director of Fleet Bank N.A., the Grocery
Manufacturers Association and Allergan, Inc.
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MICHAEL F. GOSS has been Executive Vice President and Chief Financial
Officer of the Company since 1994. He has served as a Director of the Company
since 1995. From 1992 to 1994, Mr. Goss was Treasurer and Vice
President-Corporate Development of Oak Industries, Inc. ("Oak"), an electronic
components company. Prior to joining Oak in 1990, Mr. Goss held various
positions with The Thompson Company and Bain Capital, two private investment
firms specializing in leveraged acquisitions.
RICHARD G. POWERS has been the President of the U.S. Personal Products
Division of the Company since 1996. Prior to joining the Company, Mr. Powers was
President of R&C's North American Personal Products Division. From 1992 to 1995,
he was Vice President of Sales for R&C, and from 1990 to 1992 he was Vice
President of Marketing for R&C's Durkee-French Foods Division. From 1973 to
1990, Mr. Powers held various positions in marketing and general management at
General Foods Corp.
MAX R. RECONE has been the President of the U.S. Consumer Products
Division of the Company since 1996. From 1995 to 1996, he was Vice President and
Business Manager for Sun Care, Hair Care and Household Products. From 1993 to
1995, he served as Vice President-Banana Boat. From 1992 to 1993, he was Vice
President-Sales of the Company. From 1990 to 1992, Mr. Recone served as Vice
President/General Manager of Playtex Limited, the Company's Canadian subsidiary.
JAMES S. COOK has been Senior Vice President, Operations of the Company
since 1991. From 1990 to 1991, he was Vice President, Dover Operations of the
Company. From 1988 to 1990, he was Vice President of Distribution, Logistics &
Management Information Systems of the Company. From 1982 to 1988, Mr. Cook held
various senior level positions in manufacturing and distribution with the
Company. From 1974 to 1982, he held various manufacturing and engineering
positions at Procter & Gamble.
IRWIN S. BUTENSKY, PH.D. has been Senior Vice President, Biomedical and
Administrative Services since January 1999. From 1990 to 1999, he was Senior
Vice President Research and Development. From 1979 to 1990, he was Vice
President of Research & Development for the Company. From 1967 to 1979, Dr.
Butensky held several senior technical positions at Richardson-Vicks, Inc., his
last being Director of Dermatology Research.
JOHN D. LEAHY has been Senior Vice President, Corporate Sales /
International since 1998. From 1996 until 1998, he was Vice President of
Corporate Sales / International. From 1993 to 1996, he was Vice President-Sales
for the Company. From 1982 to 1993, Mr. Leahy held various sales positions with
the Company.
PAUL E. YESTRUMSKAS has been the Vice President, General Counsel and
Secretary of the Company since December 1995. Prior to joining the Company, Mr.
Yestrumskas was Senior Counsel of Rhone-Poulenc, Inc. from 1991 to 1995. Mr.
Yestrumskas was Assistant General Counsel of Hubbell, Inc. from 1988 to 1991 and
Senior Counsel and Director of Government Relations at Timex Corporation from
1981 to 1988.
C. GENERAL
The Company is a leading manufacturer and marketer of a diversified line
of well-recognized branded consumer products, including PLAYTEX Infant Care
products, PLAYTEX tampons, BANANA BOAT Sun Care products, PLAYTEX household
latex gloves and WOOLITE rug and upholstery cleaning products. Through the
acquisitions of PCH, Carewell and Binky in January 1998 ("1998 Acquisitions"),
the Company acquired a number of widely-recognized branded consumer products to
further strengthen its product lines, including CHUBS baby wipes, WET ONES
pre-moistened towelettes, BINKY pacifiers, MR. BUBBLE children's bubble bath
products, BINACA breath spray and drops, OGILVIE home permanent products and
DENTAX oral care products. In 1998, approximately 89% of the Company's net sales
were derived from the sale of products in which it holds the number one or two
market share position.
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D. BUSINESS SEGMENTS AND PRODUCT LINES
The following discussion of the Company's business segments and product
lines focus on those segments and brands which were a part of the Company's
product portfolio as of December 26, 1998 (See Management's Discussion and
Analysis of Financial Condition and Results of Operations and Note 4 of Notes to
Consolidated Financial Statements which appears at pages F-4 to F-14 and at
pages F-21 to F-23, respectively, of this Form 10-K). All references to market
share and market share data are for the twelve month periods indicated and were
obtained from the ACNielsen Corporation.
The Company is organized in three divisions to allow management to focus
on individual product lines, category management initiatives, and the efficient
integration of acquired brands. The two largest divisions, the U.S. Personal
Products Division and the U.S. Consumer Products Division, accounted for 89% of
the Company's consolidated net sales in 1998. The third division, the
International and Other Division, accounted for 11% of the Company's
consolidated net sales in 1998. The Company's divisions have been designated as
business segments in accordance with Statement of Financial Accounting Standard
No. 131, "Disclosures about Segments of an Enterprise and Related Information".
U.S. PERSONAL PRODUCTS DIVISION-The U.S. Personal Products Division
accounted for 59% of the Company's 1998 consolidated net sales. This Division
includes Feminine Care and Infant Care products sold in the United States
(excluding Puerto Rico). The Infant Care product category includes the Playtex
disposable nurser system, cups and mealtime products, reusable hard bottles and
pacifiers. As a result of the 1998 Acquisitions, the following brands were added
to the Company's Infant Care product category: BINKY pacifiers, MR. BUBBLE
children's bubble bath, CHUBS baby wipes, DIAPARENE infant care products, and
WET ONES hand and face towelettes. The Feminine Care product category includes a
wide range of plastic and cardboard applicator tampons marketed under such brand
names as PLAYTEX GENTLE GLIDE, SOFT COMFORT, SLIMFITS and SILK GLIDE.
Infant Care. Infant Care accounted for approximately 50% of 1998 net sales
of the U.S. Personal Products Division. The Company offers disposable feeding
systems, cups and mealtime products, reusable hard bottles, pacifiers,
pre-moistened towelettes and bubble bath products.
The Company's largest Infant Care business is in infant feeding products,
in which the Company held a market leading 43% dollar market share in 1998, up
from 40% in 1997, 37% in 1996, and 30% in 1995. The Company is particularly
strong in both the disposable feeding and the infant cup categories with 1998
dollar market shares of 82% and 68%, respectively. In the pre-moistened
towelette business, the Company's WET ONES hand and face towelette brand held a
24% dollar share of the hand and face segment, while its CHUBS baby wipe brand
held a 5% dollar market share in 1998.
The Playtex disposable feeding system, introduced in 1960, was the first
disposable system on the market. Since that time, Playtex has provided
innovative product improvements as a healthy alternative to breast feeding. In
1996, Playtex continued to lead innovation in this category with its DROP-INS
ready formed disposable bottle. Since its introduction in 1996, DROP-INS has
steadily increased its market share in the disposable feeding category.
In 1994, Playtex introduced the Spill-Proof cup. Sales of the popular
6-ounce version and a larger 9-ounce size have increased the Company's dollar
market share in the infant cup category to 68% in 1998 from 29% in 1994. In
1996, the Company introduced another innovative cup product, the QUICKSTRAW cup,
and in late 1997 introduced an insulated version of the QUICKSTRAW cup, the
COOLSTRAW cup.
The Company entered the baby wipe business in early 1998 with the
acquisition of the CHUBS and DIAPARENE brands. This $600 million category has
grown at a compound annual rate of 10% since 1992. CHUBS is best known for its
patented stackable plastic boxes which can be used as large building block toys
by children following their use as a baby wipe container. Both CHUBS and
DIAPARENE (a lower priced brand) are known for their canister dispensers.
The Company competes in a second category of the pre-moistened towelette
business with WET ONES, the market leader in the hand and face segment of the
market. These products are used by parents in applications other than diaper
changing, such as cleaning up after meals or traveling away from home.
Historically, WET ONES has been offered in both
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canister and travel pack form, but in 1998, the Company introduced new
individually wrapped towelettes, called WET ONES Singles, and a second
individually wrapped product targeted for children's lunch boxes called
LUNCHKINS.
The Company's acquisitions of the MR. BUBBLE children's bubble bath
business and the BINKY pacifier business provide the Company with new platforms
for leveraging strong Infant Care brands into new avenues for growth. MR. BUBBLE
commands an 86% brand awareness level among consumers and, similarly, the
Company believes the BINKY trademark is particularly well known among parents
and is well suited for further growth through product line extensions, better
retail merchandising and more innovative forms of consumer marketing.
The Company's carefully designed message of quality, health and
convenience is delivered in a variety of ways including a professional sampling
and advertising program targeting pediatricians and pediatric nurses. Programs
directed to new mothers include distribution of millions of samples and coupons
prenatally via childbirth instructors and postnatally in hospitals and at home.
Feminine Care. The Company's largest selling brand is PLAYTEX tampons,
which accounted for approximately 50% of 1998 net sales of the U.S. Personal
Products Division. For over 20 years, PLAYTEX tampons have been the second
largest selling tampon brand in the United States.
Tampons represented approximately 40% of the U.S. feminine sanitary
protection market in 1998 and accounted for approximately $825 million in retail
sales. In 1998, the tampon market grew 5% in dollar terms versus 5% in 1997 and
had no growth in 1996. Company research indicates that brand loyalty rates in
the tampon category are high relative to other consumer product categories. The
research further suggests that women generally develop brand preferences during
their adolescent years and early twenties and are likely to maintain a high
degree of brand loyalty over time.
Playtex has two major product lines in the Feminine Care category: plastic
applicator tampons and cardboard applicator tampons. The plastic applicator
business represented approximately 88% of the Playtex branded domestic tampon
business in 1998 and is comprised of three product offerings: GENTLE GLIDE,
Playtex's original plastic tampon; SLIMFITS, developed for the first-time tampon
user. The SILK GLIDE brand is the Company's line of cardboard applicator
tampons. This product line features a rounded-tip cardboard applicator and a
unique surface coating that provides the consumer with a quality product in the
cardboard applicator segment of the tampon market.
The Company's dollar market share of the domestic tampon market declined
from 29% in 1994 to 26% in 1997 as a result of heavy promotional activity by
Tambrands in 1995 and early 1996 as Tambrands management sought to accelerate
category growth and increase its market share. As competitors (including the
Company) responded with their own promotional activities, average retail selling
prices in the category declined, and retail and consumer inventories grew. In
the second half of 1996, the retail price environment stabilized, and since the
fourth quarter of 1996, average retail selling prices for both the category and
the Company have increased.
In December 1997, the Company successfully launched GENTLE GLIDE Odor
Absorbing, a plastic applicator tampon with an all-natural material which
absorbs odors without the use of fragrance or deodorant. This introduction
combined with general strength in the Company's branded tampon business has
increased the Company's dollar market share in 1998 to 27% from 26% in 1997. In
the fourth quarter of 1998, the Company's dollar market share increased to 28%
from 25% in the fourth quarter of 1997.
Management's long-term strategy with respect to the Feminine Care business
is to continue shifting its marketing resources into more consumer-driven,
brand-building activities such as advertising and product improvement to
preserve the brand's premium price position and maximize cash flow from the
business.
The introductions of SLIMFITS in late 1996, GENTLE GLIDE Odor Absorbing in
late 1997 and SILK GLIDE Odor Absorbing in late 1998 are examples of the
Company's innovative product development and new advertising and promotional
strategies. SLIMFITS were developed to appeal to a key segment of the tampon
market: young teens. SLIMFITS have a softer and more narrow plastic applicator
providing for greater comfort. The Company believes that SLIMFITS will build its
business by encouraging young women to use tampons rather than pads at an
earlier age, and by developing
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brand loyalty for Playtex tampons at a time when lifelong preferences are being
formed. GENTLE GLIDE Odor Absorbing tampons and SILK GLIDE Odor Absorbing
tampons are plastic and cardboard applicator tampons with an all natural
material in the tampons that absorb odors without the use of a fragrance or
deodorant. These products are designed to appeal to a large group of women who
are concerned with odor protection yet reluctant to use a fragranced tampon.
U.S. CONSUMER PRODUCTS DIVISION-The U.S. Consumer Products Division
constituted 30% of the Company's 1998 consolidated net sales. This division
includes Sun Care, Household Products, and Personal Grooming products sold in
the 50 United States. The Sun Care business consists of an extensive line of sun
care products marketed under the BANANA BOAT and BIOSUN trade names. The
Household Products category includes PLAYTEX Gloves and WOOLITE rug and
upholstery cleaning products. The Company's Personal Grooming product lines
consisted of JHIRMACK hair care products and TEK toothbrushes. As a result of
the 1998 Acquisitions, the following brands were added to the Company's Personal
Grooming product category: BETTER OFF depilatories, BINACA breath spray and
drops, DENTAX oral care products, DOROTHY GRAY skin care products, OGILVIE
at-home permanents and TUSSY deodorant.
Sun Care. The Company's Sun Care product lines, which accounted for 44% of
1998 net sales of the U.S. Consumer Products Division, consists of an extensive
line of sun care products designed for specific uses, such as sun protection in
sun protection factors ("SPFs") from 4 to 50, waterproof and sweat proof
formulas and infant and children's products. The Company also sells a variety of
BANANA BOAT skin care products, including sunless tanning lotion, after-sun
products, moisturizers and skin treatment formulas containing additives such as
vitamin E and aloe vera gel. For 1998, the Company's Sun Care products had a 19%
dollar market share versus 18% and 16% in 1997 and 1996, respectively.
In 1998, the Sun Care category grew 3% in dollar terms versus 12% and 3%
in 1997 and 1996, respectively. The Company believes that the lower category
growth experienced in 1998 was due to weather related issues, including the
effects of El Nino. The Company believes the growth prospects for the sun care
market are favorable as a result of increasing consumer awareness of the need
for sunscreen protection and consumers' desire for sun care products targeted
towards their specific age and needs.
For the 1999 season, the Company launched several new items including COOL
COLORZ (see Item 3. Legal Proceedings), a new product with colored sunscreen
protection, and a line of flavored lip products called LIP POPS, each targeted
for the children's market. The Company also introduced a new line of TAN EXPRESS
products with glitter and added a sport product to the highly successful QUIK
BLOK spray line.
The Company focuses on a number of different distribution outlets to
deliver its sun care products to the consumer. BANANA BOAT is particularly
strong with mass merchandisers among whom the brand held a 22% dollar market
share for 1998. Another valuable part of the focused sales effort for Sun Care
products is the use of more than 35 vans to call on key outlets in the southern
and coastal areas of the country. This ensures product availability and
selection in the key locations during the prime sun care buying season. The van
operators manage product inventory at the store level, invoice customers and
transmit key marketing data to the Company through a network of hand-held
computers. This technology and the information it supplies provide the Company
with a competitive advantage relative to its smaller competitors.
Industry convention and the seasonal nature of the sun care business
require that manufacturers of Sun Care products provide retailers with the
opportunity to return unsold products at the end of the season. To better
reflect the impact of potential returns, the Company provides for estimated
returns in its reported operating results as sales are made throughout the year.
Household Products. Playtex competes in two product lines of the Household
Products category: household latex gloves and rug and upholstery cleaning
products. These products accounted for 29% of 1998 net sales for the U.S.
Consumer Products Division.
Since the Company introduced the first household latex glove in the U.S.
in 1954, PLAYTEX Gloves have held the number one market share. The Company's
leadership position continued in 1998 with a 34% dollar market share of this
category, up from 32% in 1994. Playtex's nationally recognized brand name, based
upon its reputation for superior
11
quality, durability and protection, provides a strong competitive advantage as
the Company's primary competition is from private label and regional brands. The
non-disposable household latex glove market had retail sales of approximately
$110 million in 1998.
In February 1995, Playtex acquired the assets of the WOOLITE rug and
upholstery cleaning products business for $20 million. WOOLITE is the number two
rug and upholstery cleaning product in the United States with a 19% dollar
market share in 1998. Playtex acquired this product line because of its: (i)
strong brand name; (ii) number two position in a growing category; (iii)
distribution alongside gloves in food stores, drug chains and mass
merchandisers; and (iv) opportunity for product line extensions and more
effective marketing programs. Since acquiring the brand in 1995, the Company has
introduced new, distinctive packaging to enhance communication of the product
attributes to the consumer, an improved Pet Stain spray in 1996, a new foam Pet
Carpet Cleaner in early 1997, and a new liquid carpet cleaning product called
STAIN SOLUTIONS in early 1998.
Personal Grooming. Prior to January 1998, the Company's Personal Grooming
business consisted of JHIRMACK hair care products and TEK toothbrushes.
Following the acquisitions of PCH and Carewell, this category also includes
OGILVIE home hair permanents, BINACA breath freshener products, DENTAX oral care
products, TUSSY deodorants, DOROTHY GRAY skin care products and BETTER OFF
depilatories. In 1998, Personal Grooming contributed approximately 27% of 1998
net sales of the U.S. Consumer Products Division.
The Company competes in the value priced end of the toothbrush business
with its TEK and DENTAX brands of toothbrushes. Additionally, the Company offers
value priced toothpaste and dental floss under the DENTAX brand.
The Company's OGILVIE brand is the market leader of the $42 million market
for home hair permanents with a 52% dollar market share in 1998. Because this
category has declined at an annual rate of approximately 10% per year since
1992, the Company's strategy is to more aggressively consolidate the market
behind its market leadership position and to prudently extend the well known
OGILVIE brand into closely related hair care categories.
The Company's BINACA brand of breath fresheners is also a well known
brand. A leader in the spray segment of the market with a 34% dollar market
share in 1998, this brand also competes in the more rapidly growing drops
segment of the market. Recent Company research indicates that BINACA has the
highest brand awareness among breath freshener users and the Company believes
this brand equity can provide a platform for future growth initiatives.
INTERNATIONAL AND OTHER DIVISION-The International and Other Division
constituted 11% of the Company's 1998 consolidated net sales. The International
and Other Division includes export sales, sales from the Company's Canadian
subsidiary, sales in Puerto Rico and sales of private label tampons. The
International and Other Division sells the majority of the Company's product
lines sold in both the U.S. Personal and the U.S. Consumer Products Divisions.
E. MARKETING
The Company allocates a significant portion of its revenues to the
advertising and promotion of its products. Expenditures for these purposes were
$145.4 million, $114.3 million, and $119.4 million, in 1998, 1997 and 1996,
respectively. As part of the Company's strategic shift to a more consumer driven
marketing strategy, the Company has shifted a greater percentage of its spending
to brand-building activities, such as advertising and sampling programs, and has
decreased price-oriented trade spending.
The Company believes it is responsible for, and will benefit from, the
building and development of the markets in which it competes. As a result, the
Company is also aggressively developing category management programs-the process
of working with retailers to increase product category sales and profitability
through analysis of consumer buying habits and improved merchandising
techniques.
F. COMPETITION
12
The markets for the Company's principal products are highly competitive
and they are characterized by the frequent introduction of new products, often
accompanied by major advertising and promotional programs. The Company competes
primarily on the basis of product quality, product differentiation and brand
name recognition supported by advertising and promotion.
The Company's competitors consist of a large number of domestic and
foreign companies, a number of which have significantly greater financial
resources and less leverage than the Company.
The Company believes that the market for consumer products will continue
to be highly competitive. The level of competition may intensify in the future,
including higher spending for advertising and promotion, new product initiatives
and continued activity in the private label sector.
G. REGULATION
Government regulation has not materially restricted or impeded the
Company's operations. Certain of the Company's products are subject to
regulation under the Federal Food, Drug and Cosmetic Act and the Fair Packaging
and Labeling Act. The Company is also subject to regulation by the Federal Trade
Commission with respect to the content of its advertising, its trade practices
and other matters. The Company is subject to regulation by the United States
Food and Drug Administration in connection with its manufacture and sale of
tampons.
H. DISTRIBUTION
The Company sells its products through direct sales personnel of
approximately 180 people, independent food brokers and by exclusive
distributors. Independent food brokers supplement the direct sales force in the
food class of trade, primarily by providing more effective coverage at the store
level. In 1998, mass merchandisers and other outlets, supermarkets, and drug
stores accounted for 48%, 33%, and 19%, respectively, of the Company's net sales
compared to 45%, 36%, and 19%, respectively, of the Company's net sales in 1997.
In recent years, sales through mass merchandisers and price clubs, as a
percentage of total sales, have increased at the expense of drug stores, while
sales through supermarkets have remained generally constant.
The field sales force makes sales presentations at the headquarters or
home offices of its customers, where applicable, as well as to individual retail
outlets. The sales representatives focus their efforts on selling the Company's
products, providing services to its direct customers and executing programs to
ensure sales to the ultimate consumer. Consumer-directed programs include
arranging for on-shelf and separate displays, obtaining temporary retail price
reductions from the retailer, and coordinating cooperative advertising
participation.
During 1996, Playtex restructured its domestic sales force into two
separate organizations: the U.S. Personal Products Division for Feminine Care
and Infant Care Products and the U.S. Consumer Products Division for Sun Care,
Household Products and Personal Grooming. This structure allows the Company's
sales forces to focus on individual product lines, category management
initiatives and efficient integration of acquired brands.
I. RESEARCH AND DEVELOPMENT
The Company maintains ongoing research and development programs.
Approximately 80 employees are engaged in these programs, for which expenditures
were $8.4 million, $8.0 million, and $7.3 million in 1998, 1997 and 1996,
respectively.
J. TRADEMARKS AND PATENTS
The Company has proprietary rights to a number of trademarks important to
its businesses, such as PLAYTEX, BANANA BOAT, GENTLE GLIDE, MR. BUBBLE, WET
ONES, BINACA, MOST LIKE MOTHER, BINKY, CHUBS, QUICKSTRAW, BIOSUN, DIAPARENE,
DIAPER GENIE, DROP-INS, QUIK BLOK, TAN EXPRESS, NATURAL ACTION, COOLSTRAW,
AVANCE, SAFE'N SURE, EAZY-FEED, WET ONES LUNCHKINS, SLIMFITS, SILK GLIDE,
PORTABLES, SOOTH-A-CAINE, ACTION SPORT, COOL COLORZ, GET ON THE BOAT,
13
LIPPOPS, BETTER OFF, BLASTERS, DENTAX, DOROTHY GRAY, HANDSAVER, STAIN SOLUTIONS,
JHIRMACK, LIVING, OGILVIE, TEK, and TUSSY. The Playtex and Living trademarks in
the United States and Canada are owned by Playtex Marketing. Playtex Marketing
is responsible for protecting, exercising quality control over and enforcing the
trademarks. The Company and Apparel each have licenses from Playtex Marketing
for the use of such trademarks in the United States and Canada on a perpetual,
royalty free basis; Apparel's license is for apparel and apparel-related
products, and the Company's license is for all other products. In all other
countries, Apparel retains title to the PLAYTEX and LIVING trademarks, subject
to a perpetual, royalty free license to the Company to use such trademarks for
all products other than apparel products. The Company also owns a royalty free
license in perpetuity to the WOOLITE trademark for rug and upholstery cleaning
products in the United States and Canada.
The Company also owns various patents related to certain products and
their method of manufacture, including patents for the tampon wrap material, the
assembly of the compact tampon, the tampon inserter, the baby nurser holder, the
configuration of certain baby pacifiers, nipples, caps, and cups and
formulations for certain sun care and hair care products. The patents expire at
varying times, ranging from 1999 to 2014. The Company also has pending patent
applications for various products and methods of manufacture relating to its
tampon, nurser and toothbrush businesses. While the Company considers its
patents to be important to its business, it believes that the success of its
products is more dependent upon the quality of these products and the
effectiveness of its marketing programs. No single patent is material to the
business of the Company.
K. RAW MATERIALS AND SUPPLIERS
The principal raw materials used by the Company in the manufacture of its
products are synthetic fibers, resin-based plastics and other chemicals and
certain natural materials, all of which are normally readily available. While
all raw materials are purchased from outside sources, the Company is not
dependent upon a single supplier in any of its operations for any material
essential to its business or not otherwise commercially available to the
Company. The Company has been able to obtain an adequate supply of raw
materials, and no shortage of such materials is currently anticipated (See Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations-Year 2000).
L. CUSTOMERS AND BACKLOG
No single customer or affiliated group of customers, except Wal-Mart
Stores, Inc., represented over 10% of the net sales of the Company in 1998,
1997, and 1996. For each of these periods, net sales to the Company's next three
largest customers represented an aggregate of approximately 14% in 1998 and
1997, and 12% in 1996 of the total net sales of the Company. In accordance with
industry practice, the Company grants credit to its customers at the time of
purchase. In addition, the Company grants extended payment terms to new
customers and for the initial sales of introductory products and product line
extensions, and it grants extended terms on its Sun Care products due to
industry convention and the seasonal nature of this business (See Note 15 of
Notes to Consolidated Financial Statements).
The Company's practice is not to accept returned goods, except for Sun
Care products, which are seasonal in nature. Exceptions to this practice are
authorized by management of the sales organization. Returns result primarily
from Sun Care seasonal products, damage and shipping discrepancies and generally
are not material to the total net sales of the Company.
Because of the short period between order and shipment dates (generally
less than one month) for most of the Company's sales, the dollar amount of
current backlog is not considered to be a reliable indication of future sales
volume.
M. EMPLOYEES AND LABOR RELATIONS
The Company's worldwide workforce consisted of approximately 1,945
employees as of December 26, 1998, of whom approximately 160 were located
outside the United States, primarily in Canada. Of the United States facilities,
only the operation at Watervliet, New York, has union representation; it is
organized by The Brush Workers Union Local No. 20468 I.U.E. A.F.L.-C.I.O. The
collective bargaining agreement covered approximately 200 workers at December
26,
14
1998 and expires on June 24, 2000. The Company believes that its labor relations
are satisfactory and no material labor cost increases are anticipated.
N. ENVIRONMENTAL
The Company believes that it is in substantial compliance with federal,
state and local provisions enacted or adopted regulating the discharge of
materials hazardous to the environment. There are no significant environmental
expenditures anticipated for the current year. (See Item 3. Legal Proceedings).
ITEM 2. PROPERTIES
The principal executive offices of the Company are located at 300 Nyala
Farms Road, Westport, Connecticut 06880 and are occupied pursuant to a lease
which expires in 2005. The Company operates manufacturing and distribution
facilities in Dover, Delaware; Sidney, Ohio; Watervliet, New York; and Arnprior
and Malton, Canada. The Company maintained a research and development facility
in Paramus, New Jersey, which was leased on a month-to-month basis. In May 1997,
the Company signed an agreement to lease certain office space located in
Allendale, New Jersey. This facility contains 43,500 square feet and will house
the Company's Research and Development group. This new lease has a term of 15
years with two five-year renewal options. The Paramus facility noted in the
table below was vacated when construction of the Allendale facility was
completed during the first quarter of 1999. The Company operates two facilities
in Canada. The Arnprior facility, primarily a warehouse and assembly operation,
is owned by the Company. The Malton facility, a warehouse and office site, is
leased from Apparel. This lease expires in 2004. The lease on the Montvale, NJ
facility, expiring in 2002, was acquired by the Company in the PCH acquisition
and a substantial portion of the facility has been subleased, for the duration
of the lease term, to a third party. For 1998, the Company's average utilization
rate of manufacturing capacity was an estimated 84%.
The following table sets forth the principal properties of the Company as
of December 26, 1998, which are located in seven states, Puerto Rico and Canada:
Number Estimated
of Square
Facilities Footage
---------- -------
FACILITIES OWNED
- ----------------
MANUFACTURING/OFFICE/DISTRIBUTION/WAREHOUSE
Dover, DE........................................ 3 710,000
Watervliet, NY................................... 1 159,600
Arnprior, Canada................................. 1 91,800
Sidney, OH....................................... 1 54,400
FACILITIES LEASED
- -----------------
OFFICE/DISTRIBUTION/WAREHOUSE
Dover, DE........................................ 6 390,600
Sidney, OH....................................... 3 227,200
Malton, Canada................................... 1 72,800
Westport, CT..................................... 1 63,100
Allendale, NJ.................................... 1 43,500
Paramus, NJ...................................... 1 33,000
Montvale, NJ..................................... 1 19,500
Guaynabo, PR..................................... 1 15,700
Orlando, FL...................................... 1 10,400
Spokane, WA...................................... 1 8,400
As a result of the Mondial acquisition in January 1999, the Company now
owns and operates a 187,000 square foot manufacturing facility located in
Streetsboro, Ohio.
15
ITEM 3. LEGAL PROCEEDINGS
Beginning in 1980, studies were published leading to the hypothesis that
tampons are associated with Toxic Shock Syndrome ("TSS"). Since 1980, numerous
claims have been filed against manufacturers of tampons, a small percentage of
which have been litigated to conclusion. The number of TSS claims relating to
PLAYTEX tampons has declined substantially over the years. During the mid-1980s,
there were approximately 200 pending claims at any one time relating to PLAYTEX
tampons. As of the end of February 1999, there were approximately 12 pending
claims, although additional claims may be asserted in the future. For TSS claims
filed from October 1, 1985 until November 30, 1995, the Company is self-insured
and bears the costs of defending those claims, including settlements and trials.
Effective December 1, 1995, the Company obtained insurance coverage with certain
limits in excess of the self-insured retention of $1.0 million per
occurrence/$4.0 million in the aggregate, on claims occurring on or after
December 1, 1995.
The incidence rate of menstrually associated TSS among tampon users has
declined significantly over the years. In 1982, the rate was reported to be
between six and seventeen occurrences per 100,000 menstruating women per year.
The most recent reported information as of 1989 is that the rate is
approximately one occurrence per 100,000.
Based on the Company's experience with TSS cases, its evaluation of the
currently pending claims, the reported decline in the incidence of menstrually
associated TSS, the federally mandated warning about TSS on and in its tampon
packages and the development of case law upholding the adequacy of tampon
warnings which comply with federally mandated warnings, the Company believes
that there are no claims or litigation pending, including the TSS cases, which
would have a materially adverse effect on the consolidated financial position,
results of operations or cash flows of the Company.
The Company has joined the PRP Group with respect to the Kent County
Landfill Site in Houston, Delaware, which has been designated a "Superfund" site
by the State of Delaware. Based on the information currently available to the
Company, the nature and quantity of material deposited by the Company and the
number of other entities in the PRP Group who are expected to share in the costs
and expenses, the Company does not believe that the costs to the Company will be
material. The Company and Apparel will share equally all expenses and costs
associated with IPI's involvement with this site.
On August 13, 1998, the Company filed an action in the United States
District Court, District of Delaware (the "Court") seeking, among other things,
a judgment declaring that the United States Patent No. 5,747,011 (the " '011
patent"), related to a "sunscreen with disappearing color indicator," and held
by Schering-Plough HealthCare Products, Inc. ("S-P HealthCare"), as assigned, is
invalid. On September 8, 1998, S-P HealthCare answered the Company's complaint
denying its material allegations, and asserted a counterclaim against the
Company for infringement of the '011 patent, seeking unspecified damages and
injunctive relief. On October 19, 1998, S-P HealthCare moved for a preliminary
injunction against the Company which would prohibit the Company from selling its
BANANA BOAT COOL COLORZ Sunscreen, which allegedly infringes the '011 patent. As
of March 17, 1999, the motion for preliminary injunction had not been granted.
The Company intends to vigorously pursue its claims and request for declaratory
relief.
The Company is a defendant in various other legal proceedings, claims and
investigations that arise in the normal course of business. In the opinion of
management, the ultimate disposition of these matters, including those described
above, will not have a material adverse effect on the consolidated financial
position, results of operations or cash flows of the Company.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company has two classes of authorized stock: (a) Common Stock, par
value $.01 per share, of which 100,000,000 shares are authorized, and (b)
preferred stock, par value $.01 per share, of which 50,000,000 shares are
authorized. Of 100,000,000 shares of Common Stock authorized, there were
60,417,824 shares issued and outstanding and 342 holders of record of the Common
Stock, as of March 17, 1999 and there were no shares of preferred stock were
outstanding as of March 17, 1999. The Common Stock is traded on the New York
Stock Exchange ("NYSE") under the symbol "PYX". No cash dividends have ever been
paid on the Common Stock, and the Company is restricted from paying dividends on
the Common Stock by the terms of the 1997 Term Loan, the 1997 Senior Secured
Credit Facilities and the indentures governing the $360 million 9% senior
subordinated notes due 2003, and the Senior Notes (See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Financial Condition and Note 7 of Notes to Consolidated Financial
Statements).
The following table sets forth the high and low sale price per share of
the Common Stock during the fiscal years ended December 26, 1998 and December
27, 1997 as reported by the New York Stock Exchange-Composite Transactions:
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Fiscal 1998
- -----------
High ............... $14 15/16 $17 $17 1/8 $16 3/4
Low ................ $ 9 7/16 $13 5/16 $10 1/8 $12 1/4
Fiscal 1997
- -----------
High ............... $11 3/4 $11 1/2 $10 1/4 $11
Low ................ $ 7 7/8 $ 9 $ 8 13/16 $ 9
On January 29, 1999, the Company completed the acquisition of the Diaper
Genie business, the leading diaper disposal system in the U.S., from
privately-held Mondial for approximately $122 million. In connection with the
asset purchase agreement, dated as of January 6, 1999, by and between Playtex
and Mondial, the Company issued $50 million of unregistered 6% Convertible
Subordinated Notes due 2004 (the "Convertible Notes") to Mondial and $72 million
in cash. The newly issued Convertible Notes bear interest at a rate of 6.00% and
are convertible after January 29, 2000, at the holders' option, into
approximately 2.6 million shares of Common Stock. The conversion price is
approximately $19.15 per share. The notes will mature in 2004 and are callable
by the Company after January 29, 2002. The holders of the Common Stock issuable
upon conversion of the Convertible Notes will have certain registration rights
that require the Company to register those shares under the Securities Act of
1933.
The issuance of the convertible notes was exempt from registration under
the Securities Act of 1933, as amended, under Section 4(2) thereof. Each of
Mondial and its partners was either (i) an accredited investor as defined in
Rule 501(a)(3),(5) or (6) under the Securities Act or (ii) had such knowledge
and experience in financial and business matters that he or she was capable of
evaluating the merits and risks of the investment in the convertible notes;
there were fewer than 35 partners who were not described in clause (i); the
Company and Mondial furnished to each of such partners the information about the
Company prescribed by Rule 502(b)(2)(ii) a reasonable time prior to the sale of
these securities; and the Company complied with the other applicable
requirements of Rules 501 and 502 under the Securities Act.
17
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears at page F-3 of this Form
10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item appears at pages F-4 to F-14 of this
Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company has interest rate risk associated with variable rate
indebtedness. From time to time, the Company utilizes off-balance sheet
financial instruments to manage market risks associated with fluctuations in
interest rates. It is the Company's policy to use derivative financial
instruments to protect against market risks arising in the normal course of
business. Company policies prohibit the use of derivative instruments for the
sole purpose of trading for profit on price fluctuations or to enter into
contracts which intentionally increase the Company's underlying exposure. Based
on the Company's interest rate exposure including all variable rate indebtedness
and interest rate protection agreements, as of December 26, 1998, a 1% increase
in interest rates on an annualized basis would have resulted in $2.0 million of
additional interest expense for the fiscal year then ended (See Note 7 of Notes
to Consolidated Financial Statements and Note 16 of Notes to Consolidated
Financial Statements, which appears at pages F-25 to F-27 and at page F-35,
respectively, of this Form 10-K).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and related Notes to Consolidated
Financial Statements are filed as part of this Form 10-K and are set forth on
pages F-1 to F-51. The Independent Auditors' Report, dated February 4, 1999 and
the Report of Management, dated February 4, 1999, are filed as part of this Form
10-K and are set forth on pages F-52 and F-53, respectfuly, of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
18
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this Item is incorporated by reference to the information
in the section entitled "Election of Directors" in the Company's Proxy Statement
for the 1999 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The response to this Item is incorporated by reference to the information
in the section entitled "Executive Compensation" in the Company's Proxy
Statement for the 1999 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this Item is incorporated by reference to the information
in the section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Company's Proxy Statement for the 1999 Annual Meeting of
Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this Item is incorporated by reference to the information
in the section entitled "Certain Transactions" and "Executive
Compensation-Arrangements with Former Chief Executive Officer" in the Company's
Proxy Statement for the 1999 Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS
(a)(1) The Consolidated Financial Statements and related Notes to
Consolidated Financial Statements are filed as part of this Form 10-K and are
set forth on pages F-15 to F-51. The Independent Auditors' Report, dated
February 4, 1999, is set forth on page F-52 of this Form 10-K.
(A)(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule-Schedule II-Valuation and
Qualifying Accounts, is filed as part of this Annual Report on Form 10-K and is
set forth on page 20.
All other schedules are omitted as the required information is not
applicable or the information is presented in the consolidated financial
statements or related notes to consolidated financial statements.
(A)(3) EXHIBITS
See Exhibit Index on Pages X-1 to X-8 for exhibits filed with this Annual
Report on Form 10-K.
(B) REPORTS ON FORM 8-K
None
19
PLAYTEX PRODUCTS, INC.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
Twelve Months Ended December 26, 1998, December 27, 1997, and December 28, 1996
(In thousands)
BALANCE AT ADDITIONS NET ADDITIONS BALANCE
BEGINNING CHARGED TO RESULTING FROM AT END
OF PERIOD INCOME ACQUISITIONS DEDUCTIONS(1) OF PERIOD
---------- ---------- -------------- ------------- ---------
Receivables:
Allowance for doubtful accounts
December 28, 1996........................ $ (2,042) $ (325) - $ 609 $ (1,758)
December 27, 1997........................ $ (1,758) $ (64) - $ 153 $ (1,669)
December 26, 1998........................ $ (1,669) $ (243) $ (568) $ 385 $ (2,095)
- -----------
(1) Represent accounts written-off.
20
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.
PLAYTEX PRODUCTS, INC.
By: /s/ MICHAEL R. GALLAGHER
--------------------------
Michael R. Gallagher
Chief Executive Officer
March 24, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated this 24th day of March 1999.
Signatures Title
- --------------------------- --------------------------------------------
- ---------------------------
Robert B. Haas Chairman of the Board and Director
/s/ Michael R. Gallagher
- ---------------------------
Michael R. Gallagher Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Michael F. Goss
- ---------------------------
Michael F. Goss Executive Vice President, Chief Financial
Officer and Director (Principal Financial
and Accounting Officer)
- ---------------------------
Richard C. Blum Director
/s/ Michael R. Eisenson
- ---------------------------
Michael R. Eisenson Director
/s/ Timothy O. Fisher
- ---------------------------
Timothy O. Fisher Director
- ---------------------------
C. Ann Merrifield Director
- ---------------------------
Jeffrey W. Ubben Director
/s/ Wyche H. Walton
- ---------------------------
Wyche H. Walton Director
/s/ Douglas D. Wheat
- ---------------------------
Douglas D. Wheat Director
- ---------------------------
Kenneth F. Yontz Director
21
PLAYTEX PRODUCTS, INC.
1998 ANNUAL REPORT TO STOCKHOLDERS
PLAYTEX PRODUCTS, INC.
1998 ANNUAL REPORT TO STOCKHOLDERS
INDEX
PAGE(S)
------------
PART I--FINANCIAL INFORMATION
Selected Financial Data........................................... F-3
Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... F-4 to F-14
Consolidated Financial Statements................................. F-15 to F-18
Notes to Consolidated Financial Statements........................ F-19 to F-51
PART II--OTHER INFORMATION
Independent Auditors' Report...................................... F-52
Report of Management.............................................. F-53
Other Information................................................. F-54 to F-55
F-2
PLAYTEX PRODUCTS, INC.
SELECTED FINANCIAL DATA
(In thousands, except per share data)
TWELVE MONTHS ENDED
---------------------------------------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28, DECEMBER 30, DECEMBER 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
INCOME STATEMENT DATA:
Net sales .................................... $ 669,613 $ 500,632 $ 498,742 $ 483,581 $ 473,275
Gross profit ................................. 392,058 304,652 306,230 295,452 306,674
Operating expenses, excluding
amortization of intangibles ............... 243,288 192,056 194,184 195,457 166,799
Amortization of intangibles .................. 17,336 12,894 12,846 11,268 10,181
Write-off of intangible assets ............... -- -- -- 6,441 --
Operating earnings ........................... 131,434 99,702 99,200 82,286 129,694
Interest expense, net ........................ 71,518 64,470 64,860 71,361 76,153
Earnings (loss) available to common
stockholders .............................. $ 34,230 $ 14,653(1) $ 18,199 $ (5,161)(2) $ 28,384(3)
Earnings (loss) per share available to
common stockholders:
Basic ..................................... $ .58 $ .29 $ .36 $ (.12) $ .97
Diluted ................................... $ .57 $ .29 $ .36 $ (.12) $ .97
Earnings before extraordinary loss and
preferred stock dividends ................. $ 34,230 $ 18,731 $ 18,199 $ 2,774 $ 29,547
Earnings per share before extraordinary
loss and preferred stock dividends:
Basic ..................................... $ .58 $ .37 $ .36 $ .07 $ 1.01
Diluted ................................... $ .57 $ .37 $ .36 $ .07 $ 1.01
Weighted average common shares outstanding:
Basic ..................................... 59,486 50,923 50,883 42,309 29,212
Diluted ................................... 60,411 51,006 50,939 42,342 29,213
BALANCE SHEET DATA (AT PERIOD END):
Working capital .............................. $ 78,548 $ 56,402 $ 6,522 $ 28,637 $ 17,623
Total assets ................................. 899,221 652,558 660,331 682,861 599,400
Total long-term debt, excluding due to
related party ............................. 811,750 737,800 739,700 790,050 875,700
Stockholders' equity (deficit) ............... $(140,975) $(268,063) $(282,727) $(300,976) $(465,997)
- -----------
(1) Includes the effect of extraordinary loss of $4.1 million (net of $2.3
million of income tax benefit) related to the early extinguishment of debt
in connection with the 1997 Refinancing. See Note 11 of Notes to
Consolidated Financial Statements.
(2) Includes the effect of extraordinary loss of $7.9 million (net of $5.2
million of income tax benefit) related to the early extinguishment of the
Company's senior indebtedness.
(3) Includes dividends on preferred stock of $1.2 million.
F-3
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the historical
audited consolidated financial statements and notes thereto, presented on pages
F-15 through F-51 hereof.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This document contains statements that constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. When used in this document, the words "anticipates," "intends," "plans,"
"believes," "estimates," "expects" and similar expressions are intended to
identify forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, but are not
limited to: the Company's highly leveraged capital structure, its substantial
principal repayment obligations, price and product changes and promotional
activity by competitors, the loss of a significant customer, the difficulties of
integrating acquisitions, issues related to the year 2000, adverse publicity and
product liability claims and dependence on key employees. The risk factors
described herein could cause actual results or outcomes to differ materially
from those expressed in any forward-looking statements of the Company and
investors, therefore, should not place undue reliance on any such
forward-looking statements. Further, any forward-looking statement speaks only
as of the date on which such statement is made, and the Company undertakes no
obligation to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events. New factors emerge from time to
time, and it is not possible for management to predict all of such factors.
Further, management cannot assess the impact of each such factor on the
Company's business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any
forward-looking statements.
F-4
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
BASIS OF MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company is organized in three divisions to allow management to focus
more effectively on individual product lines, category management initiatives,
and the efficient integration of acquired brands (see Note 4 of Notes to
Consolidated Financial Statements). The two largest divisions, the U.S. Personal
Products Division and the U.S. Consumer Products Division, constituted 89% of
the Company's consolidated net sales in 1998. The third division, the
International and Other Division, constituted 11% of the Company's consolidated
net sales in 1998. The Company's divisions have been designated as business
segments in accordance with Statement of Financial Accounting Standard No. 131,
"Disclosures about Segments of an Enterprise and Related Information".
The U.S. Personal Products Division constituted 59% of the Company's 1998
consolidated net sales. This Division includes Feminine Care and Infant Care
products sold in the 50 United States. The Infant Care product category includes
the Playtex(R) disposable nurser system, cups and mealtime products, reusable
hard bottles and pacifiers. As a result of the 1998 Acquisitions, the following
brands were added to the Company's Infant Care product category: Binky(R)
pacifiers, Mr. Bubble(R) children's bubble bath, Chubs(R) baby wipes,
DIAPARENE(R) infant care products, and Wet Ones(R) hand and face towelettes. The
Feminine Care product category includes a wide range of plastic and cardboard
applicator tampons marketed under such brand names as Playtex Gentle Glide(R),
Soft Comfort(R), Slimfits(R) and Silk Glide(R).
The U.S. Consumer Products Division constituted 30% of the Company's 1998
consolidated net sales. This Division includes Sun Care, Household Products, and
Personal Grooming products sold in the 50 United States. The Sun Care business
consists of an extensive line of sun care products marketed under the Banana
Boat(R) and BioSun(R) trade names. The Household Products category includes
PLAYTEX Gloves and Woolite(R) rug and upholstery cleaning products. The
Company's Personal Grooming business consisted of Jhirmack(R) hair care products
and Tek(R) toothbrushes. As a result of the 1998 Acquisitions, the following
brands were added to the Company's Personal Grooming product category: Better
Off(R) depilatories, Binaca(R) breath spray and drops, Dentax(R) oral care
products, Dorothy Gray(R) skin care products, Ogilvie(R) at-home permanents and
Tussy(R) deodorant.
The International and Other Division constituted 11% of the Company's 1998
consolidated net sales. The International and Other Division includes export
sales, sales from the Company's Canadian subsidiary, sales in Puerto Rico and
sales of private label tampons. The International and Other Division sells the
majority of the Company's product sold in both the U.S. Personal and U.S.
Consumer Products Divisions.
F-5
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The following table sets forth the principal divisional product lines and
certain related data for 1998 (dollars in millions):
1998 PERCENT OF
PRODUCT LINE 1998 PRINCIPAL BRAND NAMES NET SALES NET SALES
- ------------ -------------------------------------- --------- ---------
U.S. Personal Products Division:
Infant Care.................................. PLAYTEX, CHUBS, WET ONES, BINKY,
MR. BUBBLE $ 197.5 29%
FEMININE CARE................................ PLAYTEX 198.0 30%
-------- ------
TOTAL U.S. PERSONAL PRODUCTS DIVISION...... 395.5 59%
U.S. CONSUMER PRODUCTS DIVISION:
SUN CARE..................................... BANANA BOAT, BIOSUN 88.0 13%
HOUSEHOLD PRODUCTS........................... PLAYTEX, WOOLITE 58.3 9%
PERSONAL GROOMING............................ OGILVIE, BINACA, JHIRMACK, TEK, DENTAX 53.2 8%
-------- ------
Total U.S. Consumer Products Division...... 199.5 30%
International and Other......................... 74.6 11%
-------- ------
Total...................................... $ 669.6 100%
======== ======
The Company evaluates a division's performance based on its product
contribution excluding general corporate expense allocations. Product
contribution is defined as gross profit less advertising and sales promotion
expenses. All other operating expenses are managed at a corporate level and are
not used by management to evaluate the results of the divisions. The Company
does not segregate assets, amortization, capital expenditures, or interest
income and interest expense to divisions. Although allocated to the divisions,
depreciation is not a measurement used by management to evaluate the performance
of the divisions.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations presents a consolidated view of the Company's results
and where appropriate also provides insight to the key indicators of the
division's performance.
TWELVE MONTHS ENDED DECEMBER 26, 1998 COMPARED TO
TWELVE MONTHS ENDED DECEMBER 27, 1997
Consolidated Net Sales--Consolidated net sales in 1998 increased $169.0
million, or 34%, to $669.6 million from $500.6 million in 1997. The 1998
Acquisitions accounted for $123.0 million of the increase in net sales.
Excluding the impact of the 1998 Acquisitions, the Company's net sales grew by
$46.0 million or more than 9% compared to 1997.
U.S. PERSONAL PRODUCTS DIVISION--Net sales in 1998 increased $118.4
million, or 43%, to $395.5 million from $277.1 million in 1997. The 1998
Acquisitions accounted for $72.3 million of the increase in net sales. Excluding
the impact of the 1998 Acquisitions, the net sales of the U.S. Personal Products
Division grew by $46.1 million, or 17%, compared to 1997.
Net sales of Infant Care products increased $90.4 million, or 84%, to
$197.5 million from $107.1 million in 1997. These results reflect the impact of
the Infant Care brands acquired in the 1998 Acquisitions and continued growth in
the Company's base Infant Care product line. Net sales of the acquired Infant
Care brands were $72.3 million. Net sales of the Company's pre-acquisition
Infant Care product line consisting of infant feeding and soothing products
increased by $18.1 million, or 17% over the comparable period in 1997. These
results reflect: (i) an increase in the Company's dollar market share in the
infant feeding category of 2.2 points to 42.6% in 1998 from 40.4% in 1997 and
(ii) an 8.5% dollar increase in the infant feeding category. The Company's
retail takeaway grew 14.4% during the same period.
F-6
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Net sales of Feminine Care products increased $28.0 million, or 16%, to
$198.0 million from $170.0 million in 1997. In December 1997, the Company
successfully launched GENTLE GLIDE Odor Absorbing, a plastic applicator tampon
with an all-natural material, which absorbs odors without the use of fragrance
or deodorant. This introduction combined with general strength in the Company's
branded tampon business increased the Company's dollar market share 1.5 points
in 1998 to 27.0% from 25.5% in 1997. The tampon category, in dollars, grew 5.2%
in 1998 and the Company's retail takeaway grew 11.6%. Shipments to retailers in
the first half of 1997 were negatively impacted by high retail inventories
created by earlier price-oriented promotional activity and by management's
strategic decision to reduce these excess inventories by curtailing its trade
discount programs.
U.S. CONSUMER PRODUCTS DIVISION--Net sales in 1998 increased $43.8
million, or 28%, to $199.5 million from $155.7 million in 1997. The 1998
Acquisitions accounted for $39.2 million of the increase in net sales. Excluding
the impact of the 1998 Acquisitions, net sales of the U.S. Consumer Products
Division grew by $4.6 million, or 3%, compared to 1997.
Net sales of Sun Care products increased $3.5 million, or 4%, to $88.0
million from $84.5 million in 1997. This growth was attributable to strong
distribution techniques, improved shelf placement at key retailers and targeted,
highly efficient merchandising and marketing programs. The Company's Sun Care
line continued to gain market share. The Company's dollar market share grew to
18.7% in 1998 from 18.1% in 1997. The sun care category, in dollars, grew 3.2%
for the year, while the Company's retail takeaway increased 6.6% in 1998.
Net sales of Household Products increased $6.7 million, or 13%, to $58.3
million from $51.6 million in 1997. These results reflect: (i) an increase in
WOOLITE dollar market share of 0.9 points to 19.2% in 1998 from 18.3% in 1997
and (ii) category growth in latex gloves of 6.7%. The Company is the leader in
the latex gloves category.
Net sales of Personal Grooming increased $33.6 million, or 171%, to $53.2
million from $19.6 million in 1997. The Personal Grooming brands acquired in the
1998 Acquisitions increased net sales by $39.2 million offsetting a decrease in
net sales of Jhirmack products.
INTERNATIONAL AND OTHER DIVISION--Net sales in 1998 increased $6.8
million, or 10%, to $74.6 million from $67.8 million in 1997. The 1998
Acquisitions accounted for $11.5 million of the increase in net sales. Excluding
the impact of the 1998 Acquisitions, net sales for International and Other
Division decreased by $4.7 million, or 7%, compared to 1997. The reasons for the
decrease, were as follows: lower reported net sales due to unfavorable foreign
currency translation adjustments for the Company's Canadian subsidiary, lower
net sales associated with the Company's private label tampon business, and
general uncertainty in certain international markets including South America and
Asia.
Consolidated Gross Profit--Consolidated gross profit increased $87.4
million, or 29%, to $392.1 million from $304.7 million in 1997. As a percent of
net sales, gross profit decreased 2.3 points, to 58.6% from 60.9% in 1997 due
primarily to lower overall gross margins for acquired brands. The dollar
increase in gross profit was primarily due to the higher net sales noted
previously.
Consolidated Product Contribution--Consolidated product contribution
increased $56.3 million, or 30%, to $246.7 million from $190.4 million in 1997.
As a percent of net sales, product contribution decreased 1.2%, to 36.8% from
38.0% due primarily to lower overall gross margins for the acquired brands. The
product contribution dollar increase was primarily due to the higher net sales
noted previously.
U.S. PERSONAL PRODUCTS DIVISION--Product contribution in 1998 increased
$46.3 million, or 38%, to $166.8 million from $120.5 million in 1997. As a
percent of net sales, product contribution decreased 1.3 points, to 42.2% from
43.5% in 1997.
F-7
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
U.S. CONSUMER PRODUCTS--Product contribution in 1998 increased $13.0
million, or 26%, to $63.9 million from $50.9 million in 1997. As a percent of
net sales, product contribution decreased 0.7 points, to 32.0% from 32.7% in
1997.
INTERNATIONAL AND OTHER--Product contribution in 1998 increased $1.2
million, or 6%, to $23.0 million from $21.8 million in 1997. As a percent of net
sales, product contribution decreased 1.4 points, to 30.8% from 32.2% in 1997.
In all three divisions, the increase in product contribution was primarily
the result of the higher net sales previously noted and the decline in product
contribution as a percent of net sales was due primarily to lower gross margins
for the acquired brands.
Consolidated Operating Earnings--Consolidated operating earnings increased
$31.7 million, or 32%, to $131.4 million from $99.7 million in 1997. The
increase in operating earnings resulted from (i) higher net sales resulting from
the 1998 Acquisitions, (ii) higher net sales in the Company's pre-acquisition
product lines, and (iii) lower operating expenses as a percent of net sales.
Consolidated Interest Expense--Consolidated interest expense increased
$7.0 million, or 11%, to $71.5 million from $64.5 million in 1997. This resulted
from an increase in long-term debt of $74.0 million (including current
obligations). The Company incurred $110.4 million of additional indebtedness in
conjunction with the 1998 Acquisitions. Repayments funded by cash generated from
operations partially offset the increase in long-term debt associated with the
1998 Acquisitions.
Consolidated Income Taxes--Consolidated income taxes increased $9.2
million, or 56%, to $25.7 million from $16.5 million in 1997. As a percent of
pretax earnings, the Company's effective tax rate decreased 3.9 points to 42.9%
of pretax earnings from 46.8% of pretax earnings in 1997. The decrease in the
Company's effective tax rate is primarily due to the fixed nature of the
Company's non-deductible amortization expenses.
Consolidated Net Earnings--Consolidated net earnings before extraordinary
loss increased approximately 83%, or $15.5 million, to $34.2 million from $18.7
million in 1997. This increase is due to the combined effects of all of the
factors described above.
TWELVE MONTHS ENDED DECEMBER 27, 1997 COMPARED TO
TWELVE MONTHS ENDED DECEMBER 28, 1996
Consolidated Net Sales--Consolidated net sales in 1997 were $500.6
million, an increase of $1.9 million, or less than 1%, from $498.7 million in
1996.
U.S. PERSONAL PRODUCTS DIVISION--Net sales in 1997 decreased $7.6 million,
or 3%, to $277.1 million from $284.7 million in 1996, primarily as the result of
decreased net sales of Feminine Care products as explained below, offset in part
by increased net sales of Infant Care products.
Net sales of Infant Care increased $14.1 million, or 15%, to $107.1
million in 1997 from $93.0 million in 1996. The growth in Infant Care product
lines was due to: (i) successful new product launches, (ii) increased
distribution, (iii) continued market share gains for the Playtex businesses, and
(iv) continued category growth.
Net sales of Feminine Care decreased $21.7 million, or 11%, to $170.0
million from $191.7 million in 1996. The Company's shipments to retailers in the
first half of 1997 were negatively impacted by high retail inventories created
by earlier price-oriented promotional activity and by management's strategic
decision to reduce these excess inventories by curtailing its trade discount
programs. During the first half of 1997, shipments of Feminine Care products
fell 22% compared to the prior year. During the same period in 1997, retail
sales of the Company's products exceeded the Company's shipments
F-8
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
by 90 million tampons, indicating that retailers reduced their inventories of
PLAYTEX tampons by approximately six weeks worth of sales. The Company believes
that trade inventories returned to more normal levels by mid-year 1997 given
that: (i) shipments in the second half of 1997 were even with the same period in
1996 and 30% higher than shipments in the first half of 1997 and (ii) shipments
and retail sales in the second half of 1997 were in greater balance with one
another. Furthermore, retail sales of PLAYTEX tampons in the second half of 1997
increased 12% over the same period in 1996, the result of both higher market
shares and overall category growth.
U.S. CONSUMER PRODUCTS DIVISION--Net sales in 1997 increased $10.9
million, or 8%, to $155.7 million from $144.8 million in 1996. This increase was
attributable to strong sales growth of Sun Care products as explained below,
offset in part by lower Household Products and Personal Grooming net sales.
Net sales of Sun Care increased $20.1 million, or 31%, to $84.5 million
from $64.4 million in 1996. The growth was due to: (i) successful new product
launches, (ii) increased distribution, (iii) continued market share gains for
the Playtex businesses, and (iv) continued category growth.
Net sales of Household Products decreased $5.2 million, or 9%, to $51.6
million from $56.8 million in 1996. The decrease was due, in part, to a change
in pricing strategy for Playtex Gloves which resulted in both lower reported
revenue offset by lower trade spending compared to 1996. In addition, the
introduction of a new competitor in the carpet cleaning business negatively
impacted sales of WOOLITE during the year.
Net sales of Personal Grooming declined by $4.0 million, or 17%, to $19.6
million from $23.6 million in 1996. The decline is attributable to the strategic
decision on the part of the Company to reduce ineffective trade spending
associated with the JHIRMACK brand and to maximize the cash flow generated by
the brand.
INTERNATIONAL AND OTHER DIVISION--Net sales in 1997 decreased $1.5
million, or 2%, to $67.8 million from $69.3 million in 1996. The reasons for
this decrease were as follows: a decrease in Canadian net sales and a decrease
in net sales of the Company's private label tampon business, offset in part by
an increase in export net sales.
Consolidated Gross Profit--Consolidated Gross profit decreased $1.5
million, or 1%, to $304.7 million for 1997 compared to $306.2 million for 1996.
The gross profit margin decreased to 60.9% for the 1997 fiscal year compared to
61.4% for the prior fiscal year. The decrease in gross profit in fiscal 1997 was
attributable primarily to the mix of products sold, offset in part, by
marginally higher sales.
Consolidated Product Contribution--Consolidated product contribution
increased $3.5 million, or 2%, to $190.4 million from $186.9 million in 1996. As
a percent of net sales, product contribution increased 0.5%, to 38.0% from 37.5%
due primarily to the same factors that impacted gross profit and lower
advertising and sales promotion expenses.
U.S. PERSONAL PRODUCTS DIVISION--Product contribution in 1997 decreased
$1.6 million, or 1%, to $120.5 million from $122.1 million in 1996. As a percent
of net sales, product contribution increased 0.6 points, to 43.5% from 42.9% due
primarily to lower advertising and sales promotion expenses and to the mix of
products sold.
U.S. CONSUMER PRODUCTS DIVISION--Product contribution in 1997 increased
$4.9 million, or 11%, to $50.9 million from $46.0 million in 1996. As a percent
of net sales, product contribution increased 1.0 points, to 32.7% from 31.7% due
to lower advertising and sales promotion expenses and to the mix of products
sold.
F-9
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
INTERNATIONAL AND OTHER DIVISION--Product contribution in 1997 decreased
$0.8 million, or 4%, to $21.8 million from $22.6 million in 1996. As a percent
of net sales, product contribution decreased 0.4 points, to 32.2% from 32.6% due
primarily to the mix of products sold.
Consolidated Operating Earnings--Consolidated operating earnings increased
$0.5 million, or 1%, to $99.7 million for 1997 compared to $99.2 million for
1996. Contributing to this increase was lower trade spending in line with the
Company's consumer oriented marketing strategy. For fiscal 1997, trade spending
was $8.0 million, or 12%, lower than in fiscal 1996. The lower trade spending
was offset by higher consumer spending, up $2.9 million compared to fiscal 1996,
lower gross profit of $1.5 million as noted above, and increased selling,
distribution, research, and administrative expenses which were collectively $3.0
million higher than fiscal 1996.
Consolidated Interest Expense--Consolidated interest expense of $64.5
million for fiscal 1997 decreased $0.4 million, or less than 1%, from $64.9
million in 1996.
Consolidated Income Taxes--Consolidated income taxes increased $0.4
million, or 2%, to $16.5 million from $16.1 million in 1996. As a percent of
pretax earnings, the Company's effective tax rate decreased 0.2 points to 46.8%
of pretax earnings from 47.0% of pretax earnings in 1996. The decrease in the
Company's effective tax rate is primarily due to the fixed nature of the
Company's non-deductible amortization expenses.
Consolidated Extraordinary Loss--In July 1997, the Company refinanced its
senior credit agreement. The Company recorded an extraordinary loss of $4.1
million (net of income tax benefit of $2.3 million) for costs and expenses
related to the write-off of the unamortized portion of the deferred financing
costs associated with the previous credit agreement.
Consolidated Net Earnings--As a result of the factors noted above, net
earnings were $14.7 million in 1997 compared to $18.2 million in 1996.
FINANCIAL CONDITION AND LIQUIDITY
At December 26, 1998, the Company's working capital (current assets net of
current liabilities) increased to $78.5 million from $56.4 million at December
27, 1997. The increase resulted primarily from (i) an increase of $36.3 million
in receivables, primarily as a result of higher net sales compared to the fourth
quarter of 1997 and the impact of the 1998 Acquisitions, and (ii) an increase of
$16.3 million in inventories and $6.8 million in current deferred tax assets,
both due principally to the 1998 Acquisitions. These working capital increases
were partially offset by an increase in accrued expenses of $21.2 million
primarily as a result of the 1998 Acquisitions. All other working capital
components decreased $16.1 million.
The Company's product lines, with the exception of Sun Care, generally
have not been seasonal. However, Sun Care product sales are highly seasonal,
with 80 to 90 percent of sales occurring in the first six months of the year.
This seasonality requires increased inventory to support the selling season and
the extended credit terms which are typical in the sun care industry result in
higher receivables for the Company.
Capital expenditures for equipment and facility improvements were $16.4
million, $9.0 million and $9.7 million for the twelve months ended December 26,
1998, December 27, 1997 and December 28, 1996, respectively. These expenditures
were used primarily to upgrade production equipment and maintain facilities in
the ordinary course of business. Capital expenditures for 1999 are expected to
be approximately $20.0 million, mostly for production related equipment and
facility improvements and for projects consistent with those of the prior years.
The 1999 projection includes increased capital expenditures related to the
acquisition of the Diaper Genie(R) business in January 1999.
F-10
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
On July 21, 1997, the Company completed a refinancing of its senior
indebtedness (the "1997 Refinancing") designed to increase its financial and
operational flexibility. The net proceeds from the 1997 Refinancing were used to
retire the indebtedness outstanding under the Company's previous credit
agreement; concurrently, the former agreement was terminated.
The 1997 Refinancing included: (i) the issuance of $150.0 million
principal amount of 8 7/8% senior notes due July 15, 2004 (the "Senior Notes"),
(ii) a $150.0 million senior secured term loan due September 15, 2003 (the "1997
Term Loan") and (iii) senior secured credit facilities of $170.0 million (the
"1997 Senior Secured Credit Facilities") comprised of a $115.0 million revolving
credit facility (the "1997 Revolving Credit Facility") and a $55.0 million term
loan facility (the "1997 Term A Loan").
At December 26, 1998, long-term debt (including current portion but
excluding obligations due to related party) was $811.8 million compared to
$737.8 million at December 27, 1997 an increase of $74.0 million. The increase
was as a result of debt incurred to fund the 1998 Acquisitions. In January 1998,
the Company acquired PCH, Carewell, and Binky. The Company increased its
borrowings under the 1997 Term Loan by $100 million to fund the cash portion of
the acquisition price of PCH (the Company also issued 9,257,345 shares of its
Common Stock as part of the PCH acquisition) and the purchase of Carewell and
Binky was financed from available borrowings under the Company's revolving
credit facility. At December 26, 1998, the Company had paid down in its entirety
its revolving credit facility with cash generated from operations and has unused
lines of credit (giving effect to outstanding letters of credit) under the 1997
Revolving Credit Facility of $114.0 million.
Terms of the 1997 Senior Secured Credit Facilities and the 1997 Term Loan
require the Company to meet certain financial covenants and ratios and also
include conditions or restrictions on new indebtedness and liens, major
acquisitions or mergers, capital expenditures and disposition of assets, certain
dividends and other distributions, and prepayment and modification of
indebtedness or equity capitalization. The 9% Senior Subordinated Notes and the
Senior Notes (collectively, the "Notes") also contain restrictions and
requirements with regard to similar matters. Under the terms of these debt
instruments, payment of cash dividends on the Common Stock of the Company is
restricted.
The Company believes that it will generate sufficient cash flow from
operations for working capital, capital expenditures and to make the scheduled
interest and principal payments under the 1997 Term Loan and the 1997 Senior
Secured Credit Facilities, and interest payments on the Notes. However, the
Company does not expect to generate sufficient cash flow from operations to make
the $360 million principal payment due in 2003 on the 9% Senior Subordinated
Notes or the $150 million principal payment due in 2004 on the 8 7/8% Senior
Notes. Accordingly, the Company will have to either refinance its obligations
with respect to the Notes prior to their maturity, or raise equity capital to
repay the principal amounts of the Notes. The Company's ability to make
scheduled principal payments, to refinance its obligations with respect to its
indebtedness, or raise equity capital depends on its financial and operating
performance, which is, in part, subject to prevailing economic conditions and to
financial, business and other factors beyond its control. Although the Company's
cash flow from operations and borrowings have been sufficient to meet its
historical debt service obligations, there can be no assurance that the
Company's operating results will continue to be sufficient or that future
borrowing facilities will be available for the payment or refinancing of the
Company's indebtedness.
On January 29, 1999, the Company completed the acquisition of the DIAPER
GENIE business, the leading diaper disposal system in the U.S., from
privately-held Mondial Industries L.P. ("Mondial") for approximately $122
million. The purchase price consisted of $72 million in cash and the issuance to
Mondial of $50 million principal amount of convertible notes. The cash portion
of the consideration was financed through the Company's 1997 Revolving Credit
facility. The newly issued convertible notes bear a rate of interest of 6.00%
and are convertible after January 29, 2000, at the holders' option, into
approximately 2.6 million shares of the Company's Common Stock. The conversion
price is approximately $19.15 per share. The convertible notes will mature in
2004 and are callable by the Company after January 29, 2002.
F-11
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company will continue to regularly consider the acquisition of other
companies or businesses engaged in the manufacture and distribution of related
products. Such potential transactions may require substantial capital resources,
which would in certain circumstances require the Company to seek additional debt
or equity financing. As there can be no assurance that such financing will be
available, the Company's ability to expand its operations through acquisition
may be restricted. However, the Company believes that capital will be available
to achieve its acquisition objectives.
Inflation in the United States and Canada has not had a significant effect
on the Company during recent periods.
On August 13, 1998, the Company filed an action in the United States
District Court, District of Delaware (the "Court") seeking, among other things,
a judgment declaring that United States Patent No. 5,747,011 (the " '011
patent"), related to a "sunscreen with disappearing color indicator," and held
by Schering-Plough HealthCare Products, Inc. ("S-P HealthCare"), as assigned, is
invalid. On September 8, 1998, S-P HealthCare answered the Company's complaint
denying its material allegations, and asserted a counterclaim against the
Company for infringement of the '011 patent, seeking unspecified damages and
injunctive relief. On October 19, 1998, S-P HealthCare moved for a preliminary
injunction against the Company which would prohibit the Company from selling its
BANANA BOAT Cool Colorz(TM) sunscreen, which allegedly infringes the '011
patent. As of March 23, 1999 the motion for preliminary injunction had not been
granted. The Company intends to vigorously pursue its claim and request for
declaratory relief.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June of 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" which is
effective for the Company beginning in fiscal year 2000. The Statement requires
the recognition of certain derivative instruments on the balance sheet, with
resulting transition adjustments reported in other comprehensive earnings or net
earnings as the effect of a change in accounting principle, as appropriate. The
Company is currently evaluating the effect this Statement will have on its
financial position and results from operations.
In 1998, the Accounting Standards Executive Committee ("AcSEC") issued
Statement of Position ("SOP") 98-1 "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use," which is effective for fiscal years
beginning after December 15, 1999. The Company will adopt this SOP in 1999 and
does not expect it to have a material impact on its financial position and
results from operations.
Additionally in 1998, AcSEC issued SOP 98-5 "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5"), which is effective for the Company for fiscal
years beginning after December 15, 1998. Start-up activities are broadly defined
as one time activities related to opening a new facility, introducing a new
product or service, conducting business in a new territory, conducting business
with a new class of customer or beneficiary, initiating a new process in an
existing facility, or commencing some new operation. Start-up activities include
activities related to organizing a new entity (commonly referred to as
organization costs). This SOP provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up activities
and organization costs to be expensed as incurred. The effect of the adoption is
required to be accounted for as a cumulative effect of change in accounting
principle. The Company is currently evaluating the effect this SOP will have on
its financial position and results from operations.
YEAR 2000
Historically certain computer programs were written using two digits
rather than four to define the applicable year. Accordingly, the Company's
software may recognize a date using "00" as 1900 rather than the year 2000,
which could result in computer system failures or miscalculations, commonly
referred to as the Year 2000 ("Y2K") issue. The
F-12
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Y2K issue can arise at any point in the Company's supply, manufacturing,
processing, distribution and financial chains. Incomplete or untimely resolution
of the Y2K issue by the Company, key suppliers, customers and other parties
could result in a temporary inability to process transactions or engage in
normal manufacturing or other business activities. Such inabilities could
potentially have a material adverse effect on the Company's results of
operations, financial condition and cash flows.
The Company, with the assistance of outside consultants, is addressing the
Y2K issue. The Company has inventoried and assessed all date-sensitive
information and transaction processing computer systems and determined that a
portion of its information technology must be modified or replaced. The Company
has identified the critical software and hardware installations that need to be
replaced or modified and has developed a four-tiered program to deal with the
Y2K issue. These tiers include: (i) network and hardware/software
infrastructure, (ii) internally developed and purchased application software,
(iii) critical manufacturing and other operating systems including those that
use embedded technology such as micro-controllers and micro-processors, and (iv)
external relationships including customers, suppliers and service providers.
The Company believes the complete Y2K project will be completed prior to
the year 2000. However, unforeseen difficulties may arise which could adversely
affect the Company's ability to complete its systems modifications correctly,
completely, on time and/or within its cost estimate. In addition, there can be
no assurance that customers, suppliers and service providers on whom the Company
relies will resolve their Y2K issues accurately, thoroughly and on time. Failure
to complete the Y2K project by the year 2000 could have a material adverse
affect on the Company's results of operations, financial condition and cash
flows.
The Company anticipates that necessary modifications to (i) the primary
network and hardware/software infrastructure will be completed during the first
quarter of 1999; (ii) integration and validation testing will commence during
the second quarter of 1999; and (iii) embedded chip technology such as
micro-controllers and micro-processors utilized in manufacturing or other
operating systems will be updated, replaced and validated as necessary by the
third quarter of 1999. The Company has initiated formal communications with its
significant suppliers, customers and service providers to determine the extent
to which the Company may be vulnerable to their failure to correct their own Y2K
issues. The Company will seek updates from these parties to attempt to ascertain
the adequacy of their programs as it relates to the Company. The Company
anticipates that it will develop contingency plans with respect to its principal
customers, suppliers and service providers by July 1999. There can be no
assurance, however, that the Company will be able to predict adequately Y2K
problems experienced by its suppliers, customers and service providers or the
Company's ability to address these potential issues on a timely basis or to
develop adequate contingency plans related thereto.
The total cost associated with required modifications of hardware and
software is not expected to be material to the Company's financial position. The
Company anticipates that its total cost associated with the Y2K project will be
approximately $3.9 million, including $0.6 million expended in 1997, $2.2
million expended in 1998 and $1.1 million estimated to be spent in 1999. Costs
related to addressing the Y2K issues are either expensed as incurred or
capitalized as appropriate. All Y2K related costs have been and will be funded
from operating cash flows.
The failure to properly anticipate and correct a material Y2K problem
could result in an interruption in, or a failure of, certain normal business
activities or operations. Such failures could materially and adversely affect
the Company's results of operations, financial condition and cash flows. Due to
the general uncertainty inherent in the Y2K problem, resulting in part from the
uncertainty of the Y2K readiness of third-party suppliers, customers and service
providers, the Company is unable to determine at this time whether the
consequences of Y2K failures will have a material impact on the Company's
results of operations, financial condition or cash flows. The Y2K project is
expected to significantly reduce the Company's level of uncertainty about the
Y2K problem. The Company believes that, with the
F-13
PLAYTEX PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
implementation of new business systems and completion of the Y2K project as
scheduled, the possibility of significant interruptions of normal operations
should be reduced.
While the Company believes its efforts to address the Y2K issue will be
successful in avoiding any material adverse effect on the Company's results of
operations, financial condition and cash flows, investors and other interested
third parties should recognize that the Company's failure to resolve Y2K issues
on a timely basis would, in a "most reasonably likely worst case scenario",
significantly limit its ability to manufacture and distribute its products and
process its daily business transactions for a period of time, especially if such
failure is coupled with third party or infrastructure failures. Similarly, the
failure of significant suppliers, customers and service providers, or one or
more components of the Company's infrastructure, could significantly affect the
Company's operations subsequent to 1999. Adverse affects on the Company could
include, among other things, business disruption, increased costs, loss of
business and other similar risks, and litigation related thereto. The Company
believes that contingency plans will be developed prior to the year 2000, which
address the most likely risks related to the Y2K problem.
The foregoing discussion regarding Y2K project timing, effectiveness,
implementation and costs are based on management's current evaluation using
available information. Factors that might cause material changes include, but
are not limited to, the availability of key Y2K personnel, the readiness of
third parties, and the Company's ability to respond to unforeseen Y2K
complications.
F-14
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
TWELVE MONTHS ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
----------- ----------- -----------
Net sales........................................................................ $ 669,613 $ 500,632 $ 498,742
Cost of sales.................................................................... 277,555 195,980 192,512
----------- ----------- -----------
Gross profit................................................................. 392,058 304,652 306,230
----------- ----------- -----------
Operating expenses:
Advertising and sales promotion.............................................. 145,379 114,279 119,380
Selling, distribution and research........................................... 73,266 58,657 56,776
Administrative............................................................... 24,643 19,120 18,028
Amortization of intangibles.................................................. 17,336 12,894 12,846
----------- ----------- -----------
Total operating expenses................................................. 260,624 204,950 207,030
----------- ----------- -----------
Operating earnings.................................................... 131,434 99,702 99,200
Interest expense including related party interest expense of $12,150, net of
related party interest income
of $12,003 for all periods presented......................................... 71,518 64,470 64,860
----------- ----------- -----------
Earnings before income taxes and extraordinary loss................... 59,916 35,232 34,340
Income taxes..................................................................... 25,686 16,501 16,141
----------- ----------- -----------
Earnings before extraordinary loss.................................... 34,230 18,731 18,199
Extraordinary loss on early extinguishment of debt,
net of $2,344 tax benefit ................................................... -- (4,078) --
----------- ----------- -----------
Net earnings.......................................................... $ 34,230 $ 14,653 $ 18,199
=========== =========== ===========
Earnings per share--Basic:
Before extraordinary loss.................................................... $ .58 $ .37 $ .36
Net earnings................................................................. $ .58 $ .29 $ .36
Earnings per share--Diluted:
Before extraordinary loss.................................................... $ .57 $ .37 $ .36
Net earnings................................................................. $ .57 $ .29 $ .36
Weighted average shares outstanding:
Basic........................................................................ 59,486 50,923 50,883
Diluted...................................................................... 60,411 51,006 50,939
See the accompanying notes to consolidated financial statements.
F-15
PLAYTEX PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
DECEMBER 26, DECEMBER 27,
1998 1997
----------- -----------
ASSETS
Current assets:
Cash.......................................................................... $ 6,871 $ 3,231
Receivables, less allowance for doubtful accounts............................. 103,185 66,876
Inventories................................................................... 58,790 42,500
Deferred income taxes......................................................... 14,650 7,806
Other current assets.......................................................... 5,650 4,949
----------- -----------
Total current assets.................................................... 189,146 125,362
Net property, plant and equipment................................................. 78,906 54,810
Intangible assets, net:
Goodwill...................................................................... 430,228 337,157
Patents, trademarks and other................................................. 101,364 34,835
Deferred financing costs.......................................................... 16,448 16,751
Due from related party............................................................ 80,017 80,017
Other noncurrent assets........................................................... 3,112 3,626
----------- -----------
Total assets............................................................ $ 899,221 $ 652,558
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 38,298 $ 24,512
Accrued expenses.............................................................. 59,981 38,827
Income taxes payable.......................................................... 8,444 4,121
Current maturities of long-term debt.......................................... 3,875 1,500
----------- -----------
Total current liabilities............................................... 110,598 68,960
Long-term debt.................................................................... 807,875 736,300
Due to related party.............................................................. 78,386 78,386
Other noncurrent liabilities...................................................... 14,049 13,563
Deferred income taxes............................................................. 29,288 23,412
----------- -----------
Total liabilities....................................................... 1,040,196 920,621
----------- -----------
Stockholders' equity:
Common stock, $0.01 par value, authorized 100,000,000 shares, issued
60,401,822 shares at December 26,1998 and
50,941,812 shares at December 27,1997...................................... 604 509
Additional paid-in capital.................................................... 518,179 424,706
Retained earnings (deficit)................................................... (656,835) (691,065)
Foreign currency translation adjustment....................................... (2,923) (2,213)
----------- -----------
Total stockholders' equity.............................................. (140,975) (268,063)
----------- -----------
Total liabilities and stockholders' equity.............................. $ 899,221 $ 652,558
=========== ===========
See the accompanying notes to consolidated financial statements.
F-16
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
FOREIGN
ADDITIONAL RETAINED CURRENCY
COMMON PAID-IN EARNINGS TRANSLATION
STOCK CAPITAL (DEFICIT) ADJUSTMENT TOTAL
------ ----------- ----------- ----------- -----------
Balance, December 30, 1995................................. $ 509 $ 424,217 $ (723,917) $ (1,785) $ (300,976)
Net earnings............................................... -- -- 18,199 -- 18,199
Foreign currency translation adjustment.................... -- -- -- (10) (10)
-----------
Comprehensive earnings.................................. 18,189
Stock issued to employees exercising stock options......... -- 60 -- -- 60
------ ----------- ----------- --------- -----------
Balance, December 28, 1996........................... 509 424,277 (705,718) (1,795) (282,727)
Net earnings............................................... -- -- 14,653 -- 14,653
Foreign currency translation adjustment.................... -- -- -- (418) (418)
------------
Comprehensive earnings.................................. 14,235
Stock issued to employees exercising stock options......... -- 429 -- -- 429
------ ----------- ----------- --------- -----------
Balance, December 27, 1997........................... 509 424,706 (691,065) (2,213) (268,063)
Net earnings............................................... -- -- 34,230 -- 34,230
Foreign currency translation adjustment.................... -- -- -- (710) (710)
-----------
Comprehensive earnings.................................. 33,520
Stock issued to employees exercising stock options......... 2 2,149 -- -- 2,151
Stock issued in conjunction with business acquisition...... 93 91,324 -- -- 91,417
------ ----------- ----------- --------- -----------
Balance, December 26, 1998........................... $ 604 $ 518,179 $ (656,835) $ (2,923) $ (140,975)
====== =========== =========== ========= ===========
See the accompanying notes to consolidated financial statements.
F-17
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share data)
TWELVE MONTHS ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
----------- ----------- -----------
Cash flows from operations:
Net earnings ......................................................... $ 34,230 $ 14,653 $ 18,199
Non-cash items included in earnings:
Extraordinary loss, net of tax benefit............................. -- 4,078 --
Amortization of intangibles........................................ 17,336 12,894 12,846
Amortization of deferred financing costs........................... 2,995 2,163 2,089
Depreciation....................................................... 9,690 7,520 8,929
Deferred income taxes.............................................. 6,244 5,493 6,842
Other, net......................................................... 36 249 48
Changes in working capital items, net of effects of acquisitions:
Increase in receivables.......................................... (24,003) (2,894) (5,963)
Decrease (increase) in inventories............................... 254 (4,863) 11,553
Increase in other current assets................................. (696) (948) (420)
Increase (decrease) in accounts payable.......................... 7,064 (11,619) 16,074
Decrease in accrued expenses..................................... (4,687) (14,791) (12,794)
Increase in income taxes payable................................. 4,323 1,843 3,689
Increase (decrease) in accrued interest.......................... 431 3,090 (788)
----------- ----------- -----------
Net cash flows from operations................................. 53,217 16,868 60,304
Cash flows used for investing activities:
Purchases of property, plant and equipment............................ (16,405) (9,004) (9,740)
Businesses acquired................................................... (106,581) -- --
----------- ----------- -----------
Net cash flows used for investing activities................... (122,986) (9,004) (9,740)
Cash flows provided by (used for) financing activities:
Net (repayments) borrowings under working capital credit facilities... (23,550) 23,550 (2,850)
Long-term debt borrowings............................................. 100,000 355,000 --
Long-term debt repayments............................................. (2,500) (380,450) (47,500)
Payment of financing costs............................................ (2,692) (9,367) --
Issuance of shares of common stock.................................... 2,151 429 60
Other, net............................................................ -- -- (9)
----------- ----------- -----------
Net cash flows provided by (used for) financing activities..... 73,409 (10,838) (50,299)
Increase (decrease) in cash............................................... 3,640 (2,974) 265
Cash at beginning of period............................................... 3,231 6,205 5,940
----------- ----------- -----------
Cash at end of period..................................................... $ 6,871 $ 3,231 $ 6,205
=========== =========== ===========
Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest............................................................ $ 68,092 $ 59,217 $ 63,559
Income taxes, net of refunds........................................ $ 14,753 $ 9,165 $ 5,610
In connection with the acquisition of Personal Care Holdings, Inc., the
Company issued 9,257,345 shares of Common Stock with a value of $9.875 per
share, aggregating $91,417.
See the accompanying notes to consolidated financial statements.
F-18
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of Playtex Products, Inc. and all of its subsidiaries ("Playtex" or
the "Company"). All significant intercompany balances have been eliminated.
INVENTORIES--Inventories are stated at the lower of cost (first-in,
first-out basis) or market. Inventory costs include material, labor and
manufacturing overhead.
NET PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are
stated at cost and depreciation is provided on the straight-line method over the
estimated useful lives of the respective asset. The estimated useful lives for
significant fixed asset classes is as follows: land improvements range from 4 to
20 years, building and improvements range from 4 to 30 years, machinery and
equipment range from 3 to 12 years, and furniture and fixtures range from 5 to 8
years. Repair and maintenance costs ($6.4 million in 1998, $5.2 million in 1997
and $5.5 million in 1996) are expensed as incurred; renewals and betterments are
capitalized.
INTANGIBLE AND LONG-LIVED ASSETS--Intangible assets include goodwill,
which represents costs in excess of net assets of businesses acquired, patents,
and trademarks. Intangible assets are amortized on a straight-line basis over
periods not exceeding 40 years. The Company systematically reviews the
recoverability of its goodwill using certain financial indicators, such as
historical and future ability to generate income from operations. The Company
systematically reviews the recoverability of the other long-lived assets by
comparing their unamortized carrying value to their related anticipated
undiscounted future cash flows. Any impairment related to goodwill or other
long-lived assets is measured by reference to the assets' fair market value.
Impairments are charged to expense when such determination is made.
DEFERRED FINANCING COST--Costs incurred in connection with the issuance of
long-term debt have been capitalized and are being amortized over the life of
the related debt agreements. Such costs, net of accumulated amortization,
amounted to $16.4 million and $16.8 million at December 26, 1998 and December
27, 1997, respectively.
INCOME TAXES--Deferred tax assets and liabilities are provided using the
asset and liability method for temporary differences between financial and tax
reporting basis using the enacted tax rates in effect for the period in which
the differences are expected to reverse. Valuation allowances are established,
when necessary, to reduce deferred tax assets to amounts that are more likely
than not to be realized.
FOREIGN CURRENCY TRANSLATION--Assets and liabilities of foreign
subsidiaries, where the local currency is the functional currency, have been
translated at year-end exchange rates and revenues and expenses have been
translated using weighted average-for-the-year exchange rates. Net exchange
gains or losses resulting from the translation of assets and liabilities are
accumulated in a separate section of stockholders' equity titled "Foreign
currency translation adjustment".
INTEREST RATE PROTECTION AGREEMENTS--The Company selectively enters into
interest rate protection agreements to reduce the impact of interest rate
changes on its variable rate indebtedness. The interest rate protection
agreements involve exchanges of floating for fixed rate interest payments
without the exchange of the underlying notional amount. The Company may also use
interest rate caps, which limit net interest expense if interest rates rise
above a defined level. The differential, which was not material in any of the
years presented, was paid or received as interest rates change and was accounted
for on the accrual basis as an adjustment to interest expense. The notional
amounts of such agreements are used to measure the interest to be paid or
received and do not represent the amount of exposure to loss.
The Company does not enter into interest rate protection agreements for
trading or speculative purposes. Further, the Company has a policy of only
entering into contracts with parties that have at least a "A" (or equivalent)
credit rating. The counterparties to these instruments are major financial
institutions.
F-19
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE--The Company calculates basic and diluted earnings per
share ("EPS") in accordance with Statement of Financial Accounting Standards
("SFAS") No. 128. Basic EPS excludes dilution and is computed by dividing net
earnings by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that would occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that would then
share in the earnings of the Company. For the periods presented, stock options
outstanding under the Company's 1994 Stock Option Plan are the only potentially
dilutive instrument that caused the diluted weighted average shares outstanding
to increase over the basic weighted average shares outstanding. The Company
utilizes the treasury stock method to determine the dilutive impact of
potentially exercised stock options.
USE OF ESTIMATES--The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results could vary from those estimates.
RECLASSIFICATIONS--For comparative purposes, certain amounts have been
reclassified to conform to the current year presentation.
2. 1998 ACQUISITIONS
On January 6, 1998, the Company acquired Carewell Industries, Inc.
("Carewell") for approximately $9.2 million in cash (exclusive of acquisition
costs). Carewell manufactured and marketed the Dentax(R) line of toothbrushes,
toothpaste, and dental floss for distribution through food stores, drug chains,
and mass merchandisers. The acquisition, which was financed with borrowings
under the Company's 1997 Revolving Credit Facility, was accounted for as a
purchase.
On January 26, 1998, the Company acquired certain tangible and intangible
assets related to the Binky(R) pacifier business ("Binky") from Binky-Griptight,
Inc. for approximately $1.2 million in cash (exclusive of acquisition costs) and
the issuance of a $0.5 million note, which was due and paid on July 27, 1998.
The acquisition, which was financed with borrowings under the Company's 1997
Revolving Credit Facility, was accounted for as a purchase.
On January 28, 1998, the Company acquired Personal Care Holdings, Inc.
("PCH") for approximately $91 million in cash (exclusive of acquisition costs)
and 9,257,345 shares of Common Stock. PCH manufactured and marketed a number of
leading consumer product brands, including Wet Ones(R) pre-moistened towelettes,
CHUBS(R) baby wipes, Ogilvie(R) home permanent products, Binaca(R) breath spray
and drops, Mr. Bubble(R) children's bubble bath products, Diaparene(R) infant
care products, Tussy(R) deodorants, Dorothy Gray(R) skin care products and
Better Off(R) depilatories. The cash portion of the consideration paid for PCH
was financed under the 1997 Term Loan, which was amended concurrently with the
PCH transaction. The acquisition was accounted for as a purchase.
The following consolidated unaudited pro forma results of operations for
the Company's 1997 fiscal year assume the acquisitions of PCH, BINKY, and
Carewell (the "1998 Acquisitions") occurred as of December 29, 1996. The pro
forma financial information is not necessarily indicative of operating results
that would have occurred had the 1998 Acquisitions been consummated as of
December 29, 1996, nor of future operating results (in thousands, except per
share data).
F-20
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. 1998 ACQUISITIONS (CONTINUED)
TWELVE MONTHS
ENDED
DECEMBER 27,
1997
-------------
Net sales..................................................... $ 635,544
Earnings before extraordinary items........................... 17,940
Net earnings.................................................. 13,862
Earnings per share--(Basic and Diluted):
Before extraordinary items................................ $ .30
Net earnings.............................................. $ .23
Weighted average shares outstanding:
Basic..................................................... 60,180
Diluted................................................... 60,263
In connection with the 1998 Acquisitions, the Company accrued for certain
direct costs as part of the purchase price allocations. These costs include $3.6
million for costs to exit activities of the acquired companies, $2.1 million of
costs to involuntarily terminate employees of the acquired companies, and $0.2
million to relocate employees of the acquired companies. As of December 26,
1998, the Company has incurred $1.9 million of costs associated with involuntary
terminations, $1.4 million of costs associated with exit activities and $0.1
million associated with relocating employees of the acquired companies. As of
December 26, 1998, the Company's remaining acquisition liability of $2.5 million
relates primarily to lease obligations.
3. COMPREHENSIVE EARNINGS
The Company adopted SFAS No. 130 "Reporting Comprehensive Income" at the
beginning of fiscal year 1998. The only component of comprehensive earnings that
impacts the Company is foreign currency translation adjustments. Such amount is
presented net of income taxes of $533 thousand, $367 thousand, and $9 thousand
for the years ended December 26, 1998, December 27, 1997, and December 28, 1996,
respectively.
4. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
BUSINESS SEGMENTS
The Company is organized in three divisions: the U.S. Personal Products
Division, the U.S. Consumer Products Division, and the International and Other
Division. The Company's divisions have been designated as business segments in
accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information". This divisional structure allows management to focus on
individual product lines, category management initiatives and efficient
integration of acquired brands. The two largest divisions, the U.S. Personal
Products Division and the U.S. Consumer Products Division constituted 89% of the
Company's 1998 consolidated net sales. All of the sales in these two divisions
are within the 50 United States. The third division, International and Other
Division constituted 11% of the Company's 1998 consolidated net sales. Net sales
from the International and Other Division are derived from: export sales, sales
of the Company's Canadian subsidiary, sales in Puerto Rico and sales of private
label tampons. The International and Other Division sell the majority of the
Company's products sold in both the U.S. Personal and U.S. Consumer Products
Divisions.
The U.S. Personal Products Division constituted 59% of the Company's 1998
consolidated total net sales. This Division includes Infant Care and Feminine
Care products sold in the 50 United States. The Infant Care product category
F-21
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
includes the Playtex(R) disposable nurser system, cups and mealtime products,
reusable hard bottles and pacifiers. As a result of the 1998 Acquisitions, the
following brands were added to the Company's Infant Care product category: BINKY
pacifiers, MR. BUBBLE children's bubble bath, CHUBS baby wipes, DIAPARENE infant
care products, and WET ONES hand and face towelettes. The Feminine Care product
category includes a wide range of plastic and cardboard applicator tampons
marketed under such brand names as Playtex(R) Gentle Glide(R), Soft Comfort(R),
Slimfits(R) and Silk Glide(R).
The U.S. Consumer Products Division constituted 30% of the Company's 1998
consolidated net sales. This Division includes Sun Care, Household Products, and
Personal Grooming brands sold in the 50 United States. The Sun Care category
consists of an extensive line of sun care products marketed under the Banana
Boat(R) and BioSun(R) trade names. The Household Products category includes
Playtex Gloves and Woolite(R) rug and upholstery cleaning products. The
Company's Personal Grooming category consisted of Jhirmack(R) hair care products
and Tek(R) toothbrushes. As a result of the 1998 Acquisitions, the following
brands were added to the Company's Personal Grooming product category: BETTER
OFF depilatories, BINACA breath spray and drops, DENTAX oral care products,
DOROTHY GRAY skin care products, OGILVIE at-home permanents and TUSSY deodorant.
The Company evaluates division performance based on the division's product
contribution excluding general corporate allocations. Product contribution is
defined as gross profit less advertising and sales promotion expenses. All other
operating expenses are managed at a corporate level and are not used by
management to evaluate the results of the divisions. The Company does not
segregate assets, amortization, capital expenditures, or interest income and
interest expense to its divisions. (dollars in thousands):
TWELVE MONTHS ENDED
-------------------------------------------------------------------------------------------
DECEMBER 26, 1998 DECEMBER 27, 1997 DECEMBER 28, 1996
----------------------------- ----------------------------- ---------------------------
NET PRODUCT NET PRODUCT NET PRODUCT
SALES CONTRIBUTION SALES CONTRIBUTION SALES CONTRIBUTION
----------- ------------ ----------- ------------ ----------- ------------
U.S. Personal Products.......... $ 395,505 $ 166,811 $ 277,137 $ 120,484 $ 284,710 $ 122,075
U.S. Consumer Products.......... 199,552 63,927 155,715 50,920 144,767 45,964
International and Other......... 74,556 22,961 67,780 21,828 69,265 22,605
Unallocated Charges (1)......... -- (7,020) -- (2,859) -- (3,794)
----------- ----------- ----------- ---------- ----------- ----------
Total Consolidated.......... $ 669,613 246,679 $ 500,632 190,373 $ 498,742 186,850
=========== =========== ===========
Reconciliation to
operating earnings:
Selling, distribution
and research.................... 73,266 58,657 56,776
Administrative.................. 24,643 19,120 18,028
Amortization of intangibles..... 17,336 12,894 12,846
----------- ---------- ----------
Operating earnings.......... $ 131,434 $ 99,702 $ 99,200
=========== ========== ==========
- -----------
(1) Certain unallocated corporate charges such as business license taxes and
product liability insurance that are included in consolidated gross
margin, but not included in the evaluation of the division's performance.
F-22
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
Although allocated to the divisions, depreciation is not a measurement
used by management to evaluate the performance of the divisions (dollars in
thousands):
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
U.S. Personal Products.................................. $ 5,416 $ 3,489 $ 4,405
U.S. Consumer Products.................................. 1,466 850 1,250
International and Other................................. 1,176 1,342 1,225
---------- ----------- ----------
Depreciation included in product contribution....... 8,058 5,681 6,880
Depreciation not allocated to divisions................. 1,632 1,839 2,049
---------- ----------- ----------
Consolidated depreciation........................... $ 9,690 $ 7,520 $ 8,929
========== =========== ==========
GEOGRAPHIC AREA INFORMATION
Net sales and associated product contribution represents sales to
unaffiliated customers only. Intergeographic sales and transfers between
geographic areas are nominal and have not been disclosed separately. Net sales
and associated product contribution within the United States includes all 50
states and territories under its control. Corporate charges that are not
allocated to divisions (see preceding table) are included in product
contribution for the United States. International net sales and associated
product contribution represents business activity outside of the United States
and territories under its control.
TWELVE MONTHS ENDED
----------------------------------------------------------------------------------------------
DECEMBER 26, 1998 DECEMBER 27, 1997 DECEMBER 28, 1996
---------------------------- ---------------------------- ----------------------------
NET PRODUCT NET PRODUCT NET PRODUCT
SALES CONTRIBUTION SALES CONTRIBUTION SALES CONTRIBUTION
----------- ------------ ----------- ------------ ----------- ------------
United States................. $ 609,866 $ 227,359 $ 448,995 $ 173,054 $ 445,869 $ 167,078
International................. 59,747 19,320 51,637 17,319 52,873 19,772
----------- ----------- ----------- ----------- ----------- -----------
Total..................... $ 669,613 $ 246,679 $ 500,632 $ 190,373 $ 498,742 $ 186,850
=========== =========== =========== =========== =========== ===========
Identifiable assets by geographic area represent those assets that are
used in the Company's operations in each area.
DECEMBER 26, DECEMBER 27,
Identifiable Assets 1998 1997
- ------------------- ----------- -----------
United States................................................................................. $ 885,538 $ 642,085
International................................................................................. 13,683 10,473
----------- -----------
Total..................................................................................... $ 899,221 $ 652,558
=========== ===========
F-23
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are as follows (in
thousands):
DECEMBER 26, DECEMBER 27,
1998 1997
--------- ---------
Receivables .................................... $ 105,280 $ 68,545
Less allowance for doubtful accounts ........... (2,095) (1,669)
--------- ---------
Net ...................................... $ 103,185 $ 66,876
========= =========
Inventories:
Raw materials .............................. $ 17,722 $ 14,866
Work in process ............................ 763 845
Finished goods ............................. 40,305 26,789
--------- ---------
Total .................................... $ 58,790 $ 42,500
========= =========
Net property, plant and equipment:
Land ....................................... $ 1,435 $ 1,190
Buildings .................................. 30,000 24,650
Machinery and equipment .................... 130,000 103,767
--------- ---------
161,435 129,607
Less accumulated depreciation .............. (82,529) (74,797)
--------- ---------
Net ...................................... $ 78,906 $ 54,810
========= =========
Goodwill ....................................... $ 553,443 $ 446,607
Less accumulated amortization .................. (123,215) (109,450)
--------- ---------
Net ...................................... $ 430,228 $ 337,157
========= =========
Patents, trademarks and other .................. $ 119,769 $ 49,669
Less accumulated amortization .................. (18,405) (14,834)
--------- ---------
Net ...................................... $ 101,364 $ 34,835
========= =========
Deferred financing costs ....................... $ 23,042 $ 20,350
Less accumulated amortization .................. (6,594) (3,599)
--------- ---------
Net ...................................... $ 16,448 $ 16,751
========= =========
Accrued expenses:
Advertising and sales promotion ............ $ 22,580 $ 13,480
Employee compensation and benefits ......... 11,917 7,808
Interest ................................... 9,053 8,622
Insurance .................................. 3,038 2,945
Other ...................................... 13,393 5,972
--------- ---------
Total .................................... $ 59,981 $ 38,827
========= =========
6. DUE FROM RELATED PARTY
Playtex Investment Corp., a wholly-owned subsidiary of the Company, is the
holder of $40 million aggregate principal amount of 15% debentures (the "Apparel
Debenture") issued by Playtex Apparel Partners, L.P. (the "Apparel Partnership")
in connection with its 1988 acquisition of Playtex Apparel, Inc. Interest on the
Apparel Debenture is payable
F-24
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. DUE FROM RELATED PARTY (CONTINUED)
annually in cash on each December 15. However, with respect to any such interest
amount payable prior to maturity, Apparel Partnership may elect and elected for
periods through December 15, 1993 to make such payments in additional Apparel
Debentures. For the periods ended after December 15, 1993, the Apparel
Partnership paid in cash the accrued interest. Principal and any unpaid accrued
interest are due in cash on December 15, 2003. The obligations of the Apparel
Partnership are nonrecourse to the partners of the Apparel Partnership. The
assets of the Apparel Partnership are Sara Lee Corporation common stock with a
market value at December 26, 1998 and December 27, 1997 of approximately $7.9
and $8.4 million, respectively, cash of approximately $0.2 million and $0.3
million, respectively, and the Company's 15 1/2% Subordinated Notes (see Note
8). The Company believes that the Apparel Debenture represents the only material
liability of the Apparel Partnership.
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
DECEMBER 26, DECEMBER 27,
1998 1997
----------- -----------
1997 Credit Agreement:
Term A Loan............................... $ 55,000 $ 55,000
Revolving Credit Facility................. -- 23,550
Term Loan................................. 246,750 149,250
8 7/8% Senior Notes due 2004.................. 150,000 150,000
9% Senior Subordinated Notes due 2003......... 360,000 360,000
----------- -----------
811,750 737,800
Less current maturities................... (3,875) (1,500)
----------- -----------
Total long-term debt................... $ 807,875 $ 736,300
=========== ===========
On July 21, 1997, the Company completed a refinancing of its senior
indebtedness (the "1997 Refinancing") designed to increase its financial and
operational flexibility. The 1997 Refinancing included: (i) the issuance of
$150.0 million principal amount of 8 7/8% senior notes due July 15, 2004 (the
"Senior Notes"), (ii) a $150.0 million senior secured term loan due September
15, 2003 (the "1997 Term Loan"), and (iii) senior secured credit facilities (the
"1997 Senior Secured Credit Facilities") of $170.0 million comprised of a $115.0
million revolving credit facility (the "1997 Revolving Credit Facility") and a
$55.0 million term loan facility (the "1997 Term A Loan"). The 1997 Term Loan
and the 1997 Senior Secured Credit Facilities are known collectively as the 1997
Credit Agreement ("1997 Credit Agreement"). In connection with the Company's
acquisition of PCH on January 28, 1998 (see Note 2), the Company increased its
borrowings under the 1997 Term Loan by $100.0 million.
The 1997 Revolving Credit Facility matures on June 15, 2003 and
commitments thereunder are automatically and permanently reduced by (i) $5.0
million on December 15, 2000 and June 15, 2001, (ii) $7.0 million on December
15, 2001 and June 15, 2002, and (iii) $8.0 million on December 15, 2002 and June
15, 2003. The 1997 Term A Loan requires a reduction in commitment amounts of
$1.4 million in fiscal 1999, $7.6 million in fiscal 2000, $15.1 million in
fiscal 2001, $19.9 million in fiscal 2002, and $11.0 million in fiscal 2003. The
Term Loan provides for quarterly repayment of principal of $625,000 from March
15, 1998 through June 15, 2003. The remaining principal balance on the Term
Loan, expected to be $235.5 million, is due on September 15, 2003.
The net proceeds from the 1997 Refinancing were used to retire the
indebtedness outstanding under the Company's prior credit agreement originated
in 1995. Concurrently, this credit agreement was terminated. Fees and expenses
associated
F-25
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. LONG-TERM DEBT (CONTINUED)
with the 1997 Refinancing and the incremental borrowings associated with the
1997 Term Loan of $10.0 million and $2.7 million, respectively, are amortized
over the term of the associated financial instruments.
The rates of interest on borrowings under the 1997 Credit Agreement are,
at the Company's option, a function of various alternative short-term borrowing
rates, as defined in the associated credit agreement. Quarterly commitment fees
of three-eighths of one percent on the unutilized portion of the 1997 Revolving
Credit Facility and an agency fee of approximately $0.1 million per annum are
also required. At December 26, 1998 and December 27, 1997, the weighted average
interest rate on the Company's variable rate indebtedness was 6.66% and 7.38%,
respectively. In addition, the weighted average interest rates on the Company's
variable rate indebtedness were 7.09%, 7.35% and 7.35% for the twelve months
ended December 26, 1998, December 27, 1997, and December 28, 1996, respectively.
At December 26, 1998, aggregate unused lines of credit (giving effect to
outstanding letters of credit) under the 1997 Revolving Credit Facility amounted
to $114.0 million.
The provisions of the 1997 Senior Secured Credit Facilities require the
Company to meet certain financial covenants and ratios and also include
limitations or restrictions on: indebtedness and liens; major acquisitions or
mergers; capital expenditures; disposition of assets; certain dividends and
other distributions; and prepayment and modification of all indebtedness or
equity capitalization. The 9% senior subordinated notes due 2003 in an aggregate
principal amount of $360.0 million (the "9% Notes"), the Senior Notes and the
1997 Term Loan also contain certain restrictions and requirements. Under the
terms of each of these agreements, payment of cash dividends on the common stock
of the Company is restricted. Certain wholly owned subsidiaries of the Company
are guarantors of the 9% Notes and the Senior Notes (see Note 18).
On February 2, 1994, the Company issued $360.0 million aggregate principal
of the 9% Notes. The interest on the 9% Notes is payable in cash semi-annually
on each June 15 and December 15. Principal of the 9% Notes is due on December
15, 2003.
The Company periodically uses financial instruments to manage the impact
of interest rate changes on earnings and cash flows. Accordingly, from time to
time, the Company enters into interest rate protection agreements to hedge
portions of its variable rate indebtedness. Based on the Company's interest rate
exposure including all variable-rate indebtedness and interest rate protection
agreements, as of December 26, 1998, a 1% increase in interest rates on an
annualized basis would have resulted in $2.0 million of additional interest
expense for the fiscal year then ended. The Company does not enter into
financial instruments for trading or speculative purposes.
On August 26, 1997, the Company entered into an interest rate cap
agreement, under which, for a one-year period commencing November 28, 1997, the
London Interbank Offered Rate ("LIBOR") with respect to $100.0 million of the
Company's variable rate outstanding indebtedness was capped at 6.5% per annum
(the "Cap Rate"). The agreement provided for quarterly payments by the
counterparty to the extent that LIBOR, as determined on the quarterly reset
dates, exceeded the Cap Rate. This agreement effectively capped the Company's
annual rate of interest on $100.0 million of variable rate indebtedness at
8.00%, after giving effect to the 1.50% spread as provided for in the 1997 Term
Loan. The interest rate cap agreement expired on November 28, 1998.
On July 21, 1998, the Company entered into an interest rate swap agreement
whereby, for a four-year period commencing July 23, 1998, the LIBOR rate with
respect to $100.0 million of the Company's variable rate outstanding
indebtedness has been swapped for a fixed rate of 5.455%. This agreement
effectively fixes the annual rate of interest on $100.0 million of variable rate
indebtedness at 6.955%, after giving effect to the 1.50% spread as provided for
in the 1997 Term Loan. The Company, at its sole discretion, may cancel this
agreement on any monthly reset date occurring on or after July 23, 2000 upon two
days prior written notice to the counterparty.
F-26
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. LONG-TERM DEBT (CONTINUED)
Aggregate annual maturities of the Company's long-term debt for the next
five years and thereafter as of December 26, 1998 are as follows (in millions):
$3.9 in fiscal 1999, $10.1 in fiscal 2000, $17.6 in fiscal 2001, $22.4 in fiscal
2002, $607.8 in fiscal 2003, and $150.0 thereafter.
8. DUE TO RELATED PARTY
Due to related party consists of 15 1/2% Subordinated Notes held by the
Apparel Partnership. Interest on the 15 1/2% Subordinated Notes is payable
annually in cash on each December 15. However, with respect to any such interest
amount payable prior to maturity, the Company may elect and elected for periods
through December 15, 1993 to make such payments in additional 15 1/2%
Subordinated Notes. For the periods ended after December 15, 1993, the Company
paid in cash the accrued interest. Principal and any unpaid accrued interest on
the 15 1/2% Subordinated Notes are payable in cash on December 15, 2003.
9. INCOME TAXES
The provision for income taxes is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities, as adjusted for the impact of the 1998 Acquisitions. Deferred
income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to amounts that are more likely than not to be realized.
Earnings before income taxes and extraordinary loss are as follows (in
thousands):
TWELVE MONTHS ENDED
------------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
U.S. ..................... $58,682 $35,129 $32,650
Foreign .................. 1,234 103 1,690
------- ------- -------
Total ................ $59,916 $35,232 $34,340
======= ======= =======
F-27
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. INCOME TAXES (CONTINUED)
The Company's provisions for income taxes for the twelve months ended
December 26, 1998, December 27, 1997, and December 28, 1996 are as follows (in
thousands):
TWELVE MONTHS ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
Current:
Federal .................... $ 17,568 $ 10,197 $ 7,851
State and local ............ 1,242 600 553
Foreign .................... 632 211 895
-------- -------- --------
19,442 11,008 9,299
Deferred:
Federal .................... 6,177 4,939 6,851
State and local ............ 34 516 311
Foreign .................... 33 38 (320)
-------- -------- --------
6,244 5,493 6,842
-------- -------- --------
Total .................... $ 25,686 $ 16,501 $ 16,141
======== ======== ========
Taxable and deductible temporary differences and tax credit carryforwards
which give rise to the Company's deferred tax assets and liabilities at December
26, 1998 and December 27, 1997 are as follows (in thousands):
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
Deferred tax assets:
Allowances and reserves not currently deductible.. $13,838 $ 9,356
Net operating loss carryforwards ................. 7,404 5,302
Postretirement benefits reserve .................. 3,495 2,915
Other ............................................ 1,006 806
------- -------
Total .......................................... $25,743 $18,379
======= =======
Deferred tax liabilities:
Deferred gain on sale of business ................ $14,298 $14,650
Property, plant and equipment .................... 12,574 10,126
Trademarks ....................................... 10,458 5,980
Undistributed earnings of foreign subsidiary ..... 2,515 2,622
Other ............................................ 536 607
------- -------
Total .......................................... $40,381 $33,985
======= =======
Undistributed earnings of the Company's Canadian subsidiary for which U.S.
income taxes have not been provided were approximately $4.1 million at December
26, 1998. Such undistributed earnings are expected to be permanently reinvested
in the Canadian subsidiary.
The Company has available net operating loss carryforwards ("NOLs") of
$20.8 million at December 26, 1998 that expire in years 2005 through 2012. These
NOLs, primarily related to operations of Banana Boat Holdings, PCH, and Carewell
prior to their acquisition by the Company, can be utilized by the Company, with
certain limitations, on its federal, state and local tax returns. The Company
expects to utilize these NOLs prior to their expiration. The benefit realized
from these NOLs was $3.0 million, $0.9 million, and $0.9 million for the fiscal
years ended December 26, 1998, December 27, 1997, and December 28, 1996,
respectively.
F-28
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. INCOME TAXES (CONTINUED)
The Company's tax provision differed from the amount computed using the
federal statutory rate of 35% as follows (in thousands):
TWELVE MONTHS ENDED
--------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
Expected federal income tax at statutory rates ... $ 20,971 $ 12,331 $ 12,019
Amortization and write-off of intangible assets .. 4,414 3,618 3,618
State and local income taxes ..................... 829 725 562
Other, net ....................................... (528) (173) (58)
-------- -------- --------
Total tax provision .......................... $ 25,686 $ 16,501 $ 16,141
======== ======== ========
10. COMMON STOCK
During 1994, the Company established a long-term incentive plan (the "1994
Stock Option Plan") under which awards of incentive stock options, nonqualified
stock options and stock appreciation rights ("SARs") may be granted to directors
and key employees of the Company. Stock options granted under the 1994 Stock
Option Plan may have a term not in excess of ten years. The exercise price for
stock options may not be less than the fair market value of the common stock on
the date of grant. Except with respect to formula grants to certain non-employee
directors, options vest over a period determined by the Compensation and Stock
Option Committee.
SARs may be granted in tandem with a stock option grant or at any time
following the stock option grant. Upon exercise of a SAR, the grantee will
receive cash equal to the excess of the fair market value of a share of common
stock over the exercise price. No SARs have been granted.
In February 1998, the Company's stockholders approved an amendment to the
1994 Stock Option Plan increasing the number of shares of Common Stock available
for issuance upon exercise of options and SARs from 3,047,785 to 5,047,785.
The Company accounts for stock-based compensation in accordance with SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). As permitted by
SFAS 123, the Company continues to follow the provisions of APB No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for compensation expense related to the issuance of stock options.
Had compensation costs related to the issuance of stock options under the
Company's 1994 Stock Option Plan been determined based on the estimated fair
value at the grant dates under SFAS 123, the Company's earnings and earnings per
share for the twelve months ended December 26, 1998, December 27, 1997, and
December 28, 1996 would have been reduced to the pro forma amounts listed below
(in thousands, except per share data):
F-29
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. COMMON STOCK (CONTINUED)
TWELVE MONTHS ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
Net earnings:
As reported:
Before extraordinary loss............. $34,230 $18,731 $18,199
Net earnings.......................... $34,230 $14,653 $18,199
Pro forma:
Before extraordinary loss............. $31,168 $17,071 $15,649
Net earnings.......................... $31,168 $12,993 $15,649
Earnings per share:
As reported--Basic:
Before extraordinary loss............. $ .58 $ .37 $ .36
Net earnings.......................... $ .58 $ .29 $ .36
As reported--Diluted:
Before extraordinary loss............. $ .57 $ .37 $ .36
Net earnings.......................... $ .57 $ .29 $ .36
Pro forma--Basic:
Before extraordinary loss............. $ .52 $ .34 $ .31
Net earnings.......................... $ .52 $ .25 $ .31
Pro forma--Diluted:
Before extraordinary loss............. $ .52 $ .34 $ .31
Net earnings.......................... $ .52 $ .25 $ .31
Weighted average shares outstanding:
Basic.................................... 59,486 50,923 50,883
Diluted.................................. 60,411 51,006 50,939
The fair value of each stock option grant was estimated on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions: weighted average risk-free interest rates 5.28%, 6.10%, and 6.63%
for fiscal 1998, 1997, and 1996, respectively; no dividend yield; expected lives
of 5 years; and volatility of 35%. A summary of the status of the Company's 1994
Stock Option Plan for fiscal 1998, 1997 and 1996 and the changes during those
years is as follows:
1998 1997 1996
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
Outstanding at beginning of year ....... 2,816,598 $ 9.27 2,315,434 $ 9.14 2,240,800 $ 9.17
Granted ................................ 1,568,000 14.09 636,000 9.59 166,000 8.76
Exercised .............................. (202,673) 8.78 (54,612) 7.88 (7,499) 7.87
Forfeited .............................. (88,665) 10.96 (80,224) 9.13 (83,867) 9.47
--------- --------- ---------
Outstanding at end of year ............. 4,093,260 11.11 2,816,598 9.27 2,315,434 9.14
========= ========= =========
Options exercisable at year-end ........ 1,912,834 9.21 1,334,087 9.26 715,452 9.37
Weighted-average fair value
of options granted during the year ... $ 6.67 $ 4.72 $ 4.40
F-30
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. COMMON STOCK (CONTINUED)
The following table summarizes information about fixed stock options
outstanding at December 26, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------- ----------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED
AT REMAINING AVERAGE AT AVERAGE
DECEMBER 26, CONTRACTUAL EXERCISE DECEMBER 26, EXERCISE
RANGE OF EXERCISE PRICES 1998 LIFE PRICES 1998 PRICES
- ------------------------ ------------ ----------- ----------- ------------ ----------
$6.750 to 7.000............. 37,500 5.97 $ 6.7500 37,500 $ 6.7500
$7.000 to 8.000............. 702,664 6.64 7.8750 702,664 7.8750
$8.000 to 9.000............. 176,500 7.47 8.6735 110,568 8.6566
$9.000 to 10.000............ 1,479,330 7.29 9.7828 922,827 9.8435
$10.000 to 13.000........... 186,766 8.87 10.1196 11,775 10.7288
$13.000 to 14.000........... 301,500 7.53 13.5240 127,500 13.0000
$14.000 to 15.000........... 1,209,000 9.67 14.6474 -- --
----------- ----------- ----------- ----------
$6.750 to 15.000............ 4,093,260 7.97 $ 11.1074 1,912,834 $ 9.2070
=========== =========== =========== ==========
11. EXTRAORDINARY LOSS
In July 1997, in connection with the 1997 Refinancing, the Company
recorded an extraordinary loss of $4.1 million (net of income tax benefit of
$2.3 million) for costs and expenses related to the write-off of the unamortized
portion of deferred financing costs associated with the Company's previous
credit agreement (see Note 7).
12. LEASES
Future minimum payments under non-cancelable operating leases for fiscal
years ending after December 26, 1998 are as follows (in thousands): $7,919 in
1999, $6,995 in 2000, $5,938 in 2001, $4,251 in 2002, $3,616 in 2003 and $9,811
in later years.
Rent expense for operating leases amounted to (in thousands): $7,952,
$5,250, and $5,201 for the twelve months ended December 26, 1998, December 27,
1997, and December 28, 1996, respectively.
13. PENSION AND OTHER POSTRETIREMENT BENEFITS
Defined Benefit Pension Plans--Substantially all of the Company's U.S.
hourly and approximately 86% of all Canadian employees participate in pension
plans. At December 26, 1998, approximately 1,203 employees were covered by these
plans, of which approximately 238 retirees or beneficiaries were receiving
benefits.
Changes in pension benefits, which are allocable to previous service of
employees, and gains and losses, that occur because actual experience differs
from assumptions, will be amortized over the estimated average future service
period of employees. Actuarial assumptions for the plans include: (a) 9.0% for
the expected long-term rate of return on plan's assets, (b) 7.0% at December 26,
1998 and 7.5% at December 27, 1997, for the discount rate used in calculating
the projected benefit obligation and (c) 3.25% for the rate of average future
increases in compensation levels.
F-31
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
Net pension expense for the twelve months ended December 26, 1998,
December 27, 1997, and December 28, 1996 includes the following components (in
thousands):
TWELVE MONTHS ENDED
--------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
NET PENSION EXPENSE
- -------------------
Service cost-benefits earned during the period ... $ 928 $ 875 $ 721
Interest cost on projected benefit obligation .... 2,166 2,003 1,688
Expected return on plan assets ................... (3,052) (2,722) (2,232)
Amortization of prior service cost ............... 88 84 73
Amortization of unrecognized net gain ............ (79) (29) (51)
Amortization of transition gain .................. (39) (42) (193)
------- ------- -------
Net pension expense .......................... $ 12 $ 169 $ 6
======= ======= =======
Reconciliations of the change in benefit obligation, change in plan
assets, and the funded status of the plans for the twelve months ended December
26, 1998 and December 27, 1997 are as follows (in thousands):
DECEMBER 26, DECEMBER 27,
1998 1997
----------- -----------
CHANGE IN BENEFIT OBLIGATION
- ----------------------------
Benefit obligation at beginning of year .......... $ 29,116 $ 24,347
Service cost ..................................... 928 875
Interest cost .................................... 2,166 2,003
Employee contributions ........................... 80 80
Plan amendments .................................. -- 246
Actuarial loss ................................... 2,252 2,690
Expected benefits paid ........................... (1,175) (994)
Foreign currency exchange rate changes ........... (212) (131)
-------- --------
Benefit obligation at end of year ............ $ 33,155 $ 29,116
======== ========
CHANGE IN PLAN ASSETS
- ---------------------
Fair value of plan assets at beginning of year ... $ 34,862 $ 31,171
Actual return on plan assets ..................... 7,890 4,632
Employee contributions ........................... 80 80
Expected benefits paid ........................... (1,175) (994)
Asset gain ....................................... -- 170
Foreign currency exchange rate changes ........... (340) (197)
-------- --------
Fair value of plan assets at end of year ..... $ 41,317 $ 34,862
======== ========
F-32
13. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
RECONCILIATION OF THE FUNDED STATUS
- -----------------------------------
Funded status ................................ $ 8,162 $ 5,746
Unrecognized transition asset ................ (271) (335)
Unrecognized prior service cost .............. 439 527
Unrecognized actuarial gain .................. (6,202) (3,743)
------- -------
Prepaid benefit cost ..................... $ 2,128 $ 2,195
======= =======
Postretirement Benefits Other than Pensions--The Company provides
Company-sponsored postretirement health care and life insurance benefits to
certain U.S. retirees. These plans require employees to share in the costs.
Approximately 87% of all U.S. personnel would become eligible for
Company-sponsored postretirement health care and life insurance if they were to
retire from the Company.
The components of the postretirement net periodic benefit expense for the
twelve months ended December 26, 1998, December 27, 1997, and December 28, 1996
are as follows (in thousands):
TWELVE MONTHS ENDED
-------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
----------- ----------- -----------
NET PERIODIC POSTRETIREMENT EXPENSE
- -----------------------------------
Service cost-benefits earned during the period ........ $ 347 $ 240 $218
Interest cost on accumulated benefit obligation ....... 813 621 534
Amortization of prior service cost .................... 217 217 97
Recognized actuarial loss ............................. 54 -- --
------ ------ ----
Net periodic postretirement expense ............... $1,431 $1,078 $849
====== ====== ====
Reconciliations of the change in benefit obligation, change in plan
assets, and the funded status of the plan for the twelve months ended December
26, 1998 and December 27, 1997 are as follows (in thousands):
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
CHANGE IN BENEFIT OBLIGATION
- ----------------------------
Benefit obligation at beginning of year ....... $ 8,938 $ 9,733
Service cost .................................. 347 240
Interest cost ................................. 813 621
Employee contributions ........................ 131 194
Plan amendments ............................... 327 4
Actuarial loss or (gain) ...................... 2,309 (1,546)
Benefits paid ................................. (266) (308)
-------- -------
Benefit obligation at end of year ......... $ 12,599 $ 8,938
======== =======
F-33
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
CHANGE IN PLAN ASSETS
- ---------------------
Fair value of plan assets at beginning of year .... $ -- $ --
Employer contributions ............................ 135 114
Employee contributions ............................ 131 194
Expected benefits paid ............................ (266) (308)
-------- -------
Fair value of plan assets at end of year ...... $ -- $ --
======== =======
RECONCILIATION OF THE FUNDED STATUS
- -----------------------------------
Funded status ..................................... $(12,599) $(8,938)
Unrecognized prior service cost ................... 1,469 1,686
Unrecognized actuarial loss ....................... 2,306 50
-------- -------
Net amount recognized at year-end ............. $ (8,824) $(7,202)
======== =======
The assumed health care cost trend rate for 1998 was 8.5%. This rate
trends down until the final trend rate of 5.25% is reached in 2005. A one
percentage point increase in the assumed health care costs trend rate increases
the sum of the service and interest costs components of the fiscal 1998 net
periodic postretirement benefit expense by 18%, and the accumulated
postretirement benefit obligation as of December 26, 1998 by 16%. A one
percentage point decrease in the assumed health care costs trend rate decreases
the sum of the service and interest costs components of the fiscal 1998 net
periodic postretirement benefit expense by 14%, and the accumulated
postretirement benefit obligation as of December 26, 1998 by 13%. The discount
rate used to estimate the accumulated postretirement benefit obligations was
7.0% and 7.5% at December 26, 1998 and December 27, 1997, respectively.
Defined Contribution Benefit Plans--The Company also provides two
non-contributory defined contribution plans and a contributory 401(k) plan
covering various employee groups. The amounts charged to earnings for the
Company's defined contribution plans totaled $4.8 million, $4.1 million and $4.6
million for the twelve months ended December 26, 1998, December 27, 1997, and
December 28, 1996, respectively.
14. RELATED PARTY TRANSACTIONS
Two former directors and senior executive officers of the Company, are
general partners of the Apparel Partnership, holding beneficial interests of
58.5% and 13.5%, respectively, in the Apparel Partnership. Under a consulting
agreement, which commenced in the third quarter of 1995, the Company has
retained one of these former directors and senior executive officers of the
Company as a consultant for a five-year period at an annual fee of $250,000 plus
expenses and certain benefits. The consulting agreement does not require the
individual to devote any minimum amount of time to the performance of consulting
services.
15. BUSINESS AND CREDIT CONCENTRATIONS
Most of the Company's customers are dispersed throughout the United States
and Canada. No single customer accounted for more than 10% of the Company's
consolidated net sales in 1998, 1997, or 1996 with the exception of its largest
customer (approximately 23% in 1998, 20% in 1997, and 18% in 1996), which were
made primarily from the Company's two largest segments. At December 26, 1998 and
December 27, 1997, no account receivable from any customer was significant,
except for the Company's largest customer (approximately $24.8 million in 1998
and $12.6 million in 1997). Aggregate receivables from high risk customers are
not considered significant and the Company estimates, based upon past
experience, that it has sufficient reserves to cover any losses arising from any
such accounts.
F-34
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, Receivables, Accounts Payable, Income Taxes and Accrued
Expenses--The carrying amounts approximate fair value because of the short-term
maturity of these instruments.
1997 Credit Agreement--The carrying amounts approximate fair value because
the rate of interest on borrowings under the 1997 Credit Agreement is, at the
Company's option, a function of various alternative short-term borrowing rates,
as defined in the associated Credit Agreement.
Long-term Debt, Interest Rate Derivatives, and Other Financial
Instruments--The fair value of the following financial instruments was estimated
at December 26, 1998 and December 27, 1997 as follows (in thousands):
DECEMBER 26, 1998 DECEMBER 27, 1997
-------------------------- --------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ------------ ----------- -----------
9% Senior Subordinated Notes (a)........................ $ 360,000 $ 373,500 $ 360,000 $ 369,000
8 7/8% Senior Notes (a)................................. 150,000 157,875 150,000 153,750
15% Notes due from Playtex Apparel Partners, L.P. (b)... 80,017 80,017 80,017 80,017
15 1/2% Subordinated Notes due to Playtex Apparel
Partners, L.P. (b)................................... 78,386 78,386 78,386 78,386
Other noncurrent assets (c)............................. 3,112 3,082 3,626 3,520
Noncurrent liabilities (c).............................. 14,049 13,887 13,563 12,340
Interest Rate Swap (d).................................. -- (2,090) -- --
- ----------
(a) At December 26, 1998 and December 27, 1997, the estimates were based on
the average range of bid/ask quotes provided by independent securities
dealers.
(b) The estimated fair value approximates the carrying amount at December 26,
1998 and December 27, 1997, based on the amount of future cash flows
associated with these instruments, discounted using an appropriate
interest rate.
(c) The fair values are based on a combination of actual cost associated with
recent purchases or the amount of future cash flows discounted using the
Company's borrowing rate for similar instruments.
(d) The fair value is based upon quoted market price (Mark to Market) at
December 26, 1998. At December 27, 1997, the Company held an interest rate
cap with no carrying value and an immaterial estimated fair value.
F-35
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. QUARTERLY DATA (UNAUDITED)
The following is a summary of the quarterly results of operations and
market price data for the Company for the twelve months ended December 26, 1998
and December 27, 1997 (in thousands, except per share data):
FIRST SECOND THIRD FOURTH
FISCAL 1998 QUARTER QUARTER QUARTER QUARTER
- ----------- ---------- ---------- --------- ---------
Net sales........................................ $172,689 $177,560 $162,597 $156,767
Operating earnings............................... 37,719 34,398 31,771 27,546
Net earnings..................................... 11,310 9,104 7,923 5,893
Earnings per share (a):
Net earnings--basic and diluted.............. $ .20 $ .15 $ .13 $ .10
Market price --high............................. $ 14 15/16 $ 17 $ 17 1/8 $ 16 3/4
--low.............................. $ 9 7/16 $ 13 5/16 $ 10 1/8 $ 12 1/4
FIRST SECOND THIRD FOURTH
FISCAL 1997 QUARTER QUARTER QUARTER QUARTER
- ----------- ---------- ---------- --------- ---------
Net sales........................................ $136,410 $134,872 $117,675 $111,675
Operating earnings............................... 30,679 26,287 24,130 18,606
Earnings before extraordinary loss............... 7,848 5,517 4,034 1,332
Net earnings (loss).............................. 7,848 5,517 (44) 1,332
Earnings per share--basic and diluted (a):
Before extraordinary loss.................... $ .15 $ .11 $ .08 $ .03
Net earnings................................. $ .15 $ .11 $ -- $ .03
Market price -- high............................. $ 11 3/4 $ 11 1/2 $ 10 1/4 $ 11
-- low.............................. $ 7 7/8 $ 9 $ 8 13/16 $ 9
- -----------
(a) Earnings per share data are computed independently for each of the periods
presented; therefore, the sum of the earnings per share amounts for the
quarters may not equal the total for the year.
F-36
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
8 7/8% SENIOR NOTES DUE 2004
The Senior Notes are guaranteed by certain wholly-owned subsidiaries of
the Company (the "8 7/8% Guarantors"), namely Playtex Sales & Services, Inc.
("PSSI"), Playtex Manufacturing, Inc. ("PMI"), Playtex Beauty Care, Inc.
("PBCI"), Playtex Investment Corp. ("PIC"), Playtex International Corp.
("PINTL"), TH Marketing Corp. ("THMC"), SmileTote, Inc. ("STI"), Sun
Pharmaceuticals Corp. ("Sun"), Personal Care Group, Inc. ("PCG"), Personal Care
Holdings, Inc. ("PCH"), and Carewell Industries, Inc. ("Carewell"). The
remaining first tier and lower tier subsidiaries of the Company are not
guarantors of the 8 7/8% Notes (the "8 7/8% Non-Guarantors"). PSSI provides
sales solicitation, management and administrative services to the Company and
its U.S. affiliates. PMI is a contract manufacturer and contract research and
development services provider for the Company and its U.S. affiliates. PBCI is a
manufacturer and distributor of JHIRMACK hair care products. PIC is an
investment holding company which holds the Apparel Debentures (see Note 6).
PINTL is sole shareholder of Playtex Limited, a manufacturer and distributor of
Playtex products in Canada. THMC is the sole shareholder of Playtex Foreign
Sales Corporation. STI is owner of certain infant care related intangible
assets. Sun owns the Banana Boat trade name and certain other intangible assets
associated with the BANANA BOAT business. Sun distributes its products outside
the U.S. and Puerto Rico and to certain U.S. distributors excluding the Company.
Sun has entered into license agreements with the Company and other unrelated
licensors for the right to use the BANANA BOAT trade name and intangible assets
associated with the BANANA BOAT sun and skin care business and manufacture and
distribute BANANA BOAT products. PCG is owner of various personal care related
intangible assets. PCH is sole shareholder of PCG. Carewell is owner of certain
dental care related intangible assets.
The 8 7/8% Non-Guarantors include Playtex Limited, Playtex Foreign Sales
Corporation ("PFSC"), a foreign sales corporation as defined by Internal Revenue
Code Section 922 and Personal Care Group Australia PTY LTD ("PCG Aust"), a
distributor of personal care products in Australia and New Zealand.
The 8 7/8% Guarantors are joint and several guarantors of the 8 7/8%
Notes. Such guarantees are irrevocable, full and unconditional and are limited
to the largest amount that would not render such 8 7/8% Guarantors' obligations
under the guarantees subject to avoidance under any applicable federal or state
fraudulent conveyance or similar law. The guarantees are senior subordinated
obligations of the applicable 8 7/8% Guarantor, and are subordinated to all
senior obligations of such 8 7/8% Guarantor, including guarantees of the
Company's obligations under the 1997 Credit Agreement.
The 8 7/8% Notes contain certain restrictions and limitations, which,
among other things, restrict the type and/or amount of additional indebtedness
that may be incurred by the Company or its subsidiaries; payment of dividends
and other distributions; issuance of preferred stock; loans and advances;
certain transactions with the Company stockholders and affiliates; certain
mergers and consolidations; certain sales or transfers of assets; the creation
of certain liens; the transfer of assets to certain subsidiaries; and
restrictions on dividends and other distributions by subsidiaries, including the
8 7/8% Guarantors.
The information which follows presents the condensed financial position as
of December 26, 1998 and December 27, 1997 and condensed statements of earnings
and cash flows for each of the fiscal years in the three year period ended
December 26, 1998 of (a) the Company on a consolidated basis, (b) the parent
company only ("Parent Company"), (c) the combined 8 7/8% Guarantors, and (d) the
combined 8 7/8% Non-Guarantors.
F-37
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 26, 1998
(IN THOUSANDS)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
ASSETS
Current assets ................................... $ 189,146 $ 8 $ 116,377 $ 61,001 $ 11,760
Investment in subsidiaries ....................... -- (297,273) 288,177 9,095 1
Intercompany receivable .......................... -- (88,942) 33,343 54,076 1,523
Net property, plant and equipment ................ 78,906 -- 1,368 76,705 833
Intangible assets ................................ 548,040 -- 312,890 235,145 5
Other noncurrent assets .......................... 83,129 (500) 3,112 80,517 --
------------ ------------ ------------ ------------ ------------
Total assets .................................. $ 899,221 $ (386,707) $ 755,267 $ 516,539 $ 14,122
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .............................. $ 110,598 $ 26 $ 99,582 $ 7,297 $ 3,693
Intercompany payable ............................. -- (88,942) (106,170) 193,477 1,635
Long-term debt ................................... 886,261 (500) 886,761 -- --
Other noncurrent liabilities ..................... 43,337 -- 16,069 27,588 (320)
------------ ------------ ------------ ------------ ------------
Total liabilities ............................. 1,040,196 (89,416) 896,242 228,362 5,008
Stockholders' equity ............................. (140,975) (297,291) (140,975) 288,177 9,114
------------ ------------ ------------ ------------ ------------
Total liabilities and stockholders' equity .... $ 899,221 $ (386,707) $ 755,267 $ 516,539 $ 14,122
============ ============ ============ ============ ============
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 27, 1997
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
ASSETS
Current assets ................................... $ 125,362 $ -- $ 71,923 $ 43,820 $ 9,619
Investment in subsidiaries ....................... -- (87,940) 77,776 10,164 --
Intercompany receivable .......................... -- (158,030) 143,647 13,286 1,097
Net property, plant and equipment ................ 54,810 -- 235 53,718 857
Intangible assets ................................ 388,743 -- 322,216 66,522 5
Other noncurrent assets .......................... 83,643 (503) 3,629 80,517 --
------------ ------------ ------------ ------------ ------------
Total assets .................................. $ 652,558 $ (246,473) $ 619,426 $ 268,027 $ 11,578
------------ ------------ ------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .............................. $ 68,960 $ 22 $ 57,590 $ 8,807 $ 2,541
Intercompany payable ............................. -- (158,029) -- 157,641 388
Long-term debt ................................... 814,686 -- 814,686 -- --
Other noncurrent liabilities ..................... 36,975 (507) 15,213 22,649 (380)
------------ ------------ ------------ ------------ ------------
Total liabilities ............................. 920,621 (158,514) 887,489 189,097 2,549
Stockholders' equity ............................. (268,063) (87,959) (268,063) 78,930 9,029
------------ ------------ ------------ ------------ ------------
Total liabilities and stockholders' equity .... $ 652,558 $ (246,473) $ 619,426 $ 268,027 $ 11,578
============ ============ ============ ============ ============
F-38
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In Thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
Net revenues .................................... $ 669,613 $ (307,484) $ 595,947 $ 341,183 $ 39,967
Cost of sales ................................... 277,555 (218,942) 244,496 233,988 18,013
------------ ------------ ------------ ------------ ------------
Gross profit ................................ 392,058 (88,542) 351,451 107,195 21,954
------------ ------------ ------------ ------------ ------------
Operating expenses:
Advertising, selling and administrative ......... 243,288 (88,542) 235,355 77,159 19,316
Amortization of intangibles ..................... 17,336 -- 10,656 6,680 --
------------ ------------ ------------ ------------ ------------
Total operating expenses .................... 260,624 (88,542) 246,011 83,839 19,316
------------ ------------ ------------ ------------ ------------
Operating earnings .......................... 131,434 -- 105,440 23,356 2,638
Interest expense, net ........................... 71,518 -- 83,621 (12,004) (99)
Equity in net earnings of subsidiaries .......... -- 25,234 (23,269) (1,965) --
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ................ 59,916 (25,234) 45,088 37,325 2,737
Income taxes .................................... 25,686 -- 10,858 14,055 773
------------ ------------ ------------ ------------ ------------
Net earnings ................................ $ 34,230 $ (25,234) $ 34,230 $ 23,270 $ 1,964
============ ============ ============ ============ ============
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In Thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
Net revenues .................................... $ 500,632 $ (226,874) $ 443,673 $ 245,797 $ 38,036
Cost of sales ................................... 195,980 (177,208) 186,482 168,411 18,295
------------ ------------ ------------ ------------ ------------
Gross profit ................................ 304,652 (49,666) 257,191 77,386 19,741
------------ ------------ ------------ ------------ ------------
Operating expenses:
Advertising, selling and administrative ......... 192,056 (49,666) 160,671 62,606 18,445
Amortization of intangibles ..................... 12,894 -- 10,618 2,276 --
------------ ------------ ------------ ------------ ------------
Total operating expenses .................... 204,950 (49,666) 171,289 64,882 18,445
------------ ------------ ------------ ------------ ------------
Operating earnings .......................... 99,702 -- 85,902 12,504 1,296
Interest expense, net ........................... 64,470 -- 76,594 (12,003) (121)
Equity in net earnings of subsidiaries .......... -- 17,216 (16,110) (1,106) --
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ................ 35,232 (17,216) 25,418 25,613 1,417
Income taxes .................................... 16,501 -- 6,687 9,503 311
------------ ------------ ------------ ------------ ------------
Earnings before extraordinary loss .......... 18,731 (17,216) 18,731 16,110 1,106
Extraordinary loss on early extinguishment
of debt, net ................................ (4,078) -- (4,078) -- --
------------ ------------ ------------ ------------ ------------
Net earnings ................................ $ 14,653 $ (17,216) $ 14,653 $ 16,110 $ 1,106
============ ============ ============ ============ ============
F-39
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
Net revenues ..................................... $ 498,742 $ (167,269) $ 438,127 $ 188,217 $ 39,667
Cost of sales .................................... 192,512 (104,374) 161,849 116,884 18,153
------------ ------------ ------------ ------------ ------------
Gross profit ................................. 306,230 (62,895) 276,278 71,333 21,514
------------ ------------ ------------ ------------ ------------
Operating expenses:
Advertising, selling and administrative .......... 194,184 (62,895) 171,534 65,721 19,824
Amortization of intangibles ...................... 12,846 -- 10,570 2,276 --
------------ ------------ ------------ ------------ ------------
Total operating expenses ..................... 207,030 (62,895) 182,104 67,997 19,824
------------ ------------ ------------ ------------ ------------
Operating earnings ........................... 99,200 -- 94,174 3,336 1,690
Interest expense, net ............................ 64,860 -- 76,864 (12,004) --
Equity in net earnings of subsidiaries ........... -- 11,339 (10,456) (883) --
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ................. 34,340 (11,339) 27,766 16,223 1,690
Income taxes ..................................... 16,141 -- 9,567 5,767 807
------------ ------------ ------------ ------------ ------------
Net earnings ................................. $ 18,199 $ (11,339) $ 18,199 $ 10,456 $ 883
============ ============ ============ ============ ============
F-40
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
Net earnings ..................................... $ 34,230 $ (25,234) $ 34,230 $ 23,270 $ 1,964
Non-cash items included in earnings:
Amortization of intangibles ............... 17,336 -- 10,656 6,680 --
Amortization of deferred financing
costs ................................ 2,995 -- 2,995 -- --
Depreciation .............................. 9,690 -- 72 9,376 242
Deferred taxes ............................ 6,244 -- 8,318 (2,107) 33
Other, net ................................ 36 25,242 (50,682) 26,117 (641)
Increase in net working capital .............. (17,314) -- 4,330 (21,027) (617)
Increase in amounts due to Parent ............ -- -- 18,938 (19,775) 837
------------ ------------ ------------ ------------ ------------
Net cash flows from operations ....... 53,217 8 28,857 22,534 1,818
Cash flows used for investing activities:
Purchase of property, plant and
equipment ................................. (16,405) -- (1,701) (14,421) (283)
Business or investments acquired ............. (106,581) -- (106,581) -- --
------------ ------------ ------------ ------------ ------------
Net cash flows used for investing
activities ........................ (122,986) -- (108,282) (14,421) (283)
Cash flows used for financing activities:
Net borrowings under working capital
facilities and long-term debt
obligations ............................... 73,950 -- 73,950 -- --
Payment of financing costs ................... (2,692) -- (2,692) -- --
Issuance of shares of common stock, net ...... 2,151 -- 2,151 -- --
Receipt (payment) of dividends ............... -- -- 8,810 (7,645) (1,165)
------------ ------------ ------------ ------------ ------------
Net cash flows provided by
(used for) financing activities ... 73,409 -- 82,219 (7,645) (1,165)
Increase in cash ................................. 3,640 8 2,794 468 370
Cash at beginning of period ...................... 3,231 -- 668 -- 2,563
------------ ------------ ------------ ------------ ------------
Cash at end of period ............................ $ 6,871 $ 8 $ 3,462 $ 468 $ 2,933
============ ============ ============ ============ ============
F-41
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
Net earnings ..................................... $ 14,653 $ (17,216) $ 14,653 $ 16,110 $ 1,106
Non-cash items included in earnings:
Extraordinary loss ........................ 4,078 -- 4,078 -- --
Amortization of intangibles ............... 12,894 -- 10,618 2,276 --
Amortization of deferred financing
costs ................................ 2,163 -- 2,163 -- --
Depreciation .............................. 7,520 -- 94 7,191 235
Deferred taxes ............................ 5,493 -- 3,752 1,798 (57)
Other, net ................................ 249 17,216 (16,742) 42 (267)
Increase in net working capital .............. (30,182) -- (15,852) (11,173) (3,157)
------------ ------------ ------------ ------------ ------------
Net cash flows from operations ....... 16,868 -- 2,764 16,244 (2,140)
Cash flows used for investing activities:
Purchase of property, plant and
equipment ................................. (9,004) -- (82) (8,599) (323)
------------ ------------ ------------ ------------ ------------
Net cash flows used for investing
activities ........................ (9,004) -- (82) (8,599) (323)
Cash flows used for financing activities:
Net repayments under working capital
facilities and long-term debt
obligations ............................... (1,900) -- (1,900) -- --
Payment of financing costs ................... (9,367) -- (9,367) -- --
Issuance of shares of common stock, net ...... 429 -- 429 -- --
Receipt (payment) of dividends ............... -- -- 7,645 (7,645) --
------------ ------------ ------------ ------------ ------------
Net cash flows used for financing
activities ........................ (10,838) -- (3,193) (7,645) --
Decrease in cash ................................. (2,974) -- (511) -- (2,463)
Cash at beginning of period ...................... 6,205 -- 1,179 -- 5,026
------------ ------------ ------------ ------------ ------------
Cash at end of period ............................ $ 3,231 $ -- $ 668 $ -- $ 2,563
============ ============ ============ ============ ============
F-42
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
Net earnings ..................................... $ 18,199 $ (11,339) $ 18,199 $ 10,456 $ 883
Non-cash items included in earnings:
Amortization of intangibles .............. 12,846 -- 10,570 2,276 --
Amortization of deferred financing
costs ............................... 2,089 -- 2,089 -- --
Depreciation ............................. 8,929 -- 72 8,605 252
Deferred taxes ........................... 6,842 -- 7,963 (1,130) 9
Other, net ............................... 48 11,339 (10,279) (1,003) (9)
Decrease (increase) in net working
capital .................................. 11,351 -- 13,273 (1,976) 54
------------ ------------ ------------ ------------ ------------
Net cash flows from operations ...... 60,304 -- 41,887 17,228 1,189
Cash flows used for investing activities:
Purchase of property, plant and
equipment ................................ (9,740) -- (45) (9,426) (269)
------------ ------------ ------------ ------------ ------------
Net cash flows used for investing
activities ...................... (9,740) -- (45) (9,426) (269)
Cash flows used for financing activities:
Net repayments under working capital
facilities and long-term debt
obligations .............................. (50,350) -- (50,350) -- --
Issuance of shares of common stock, net ...... 60 -- 60 -- --
Receipt (payment) of dividends ............... -- -- 7,802 (7,802) --
Other, net ................................... (9) -- (9) -- --
------------ ------------ ------------ ------------ ------------
Net cash flows used for financing
activities ...................... (50,299) -- (42,497) (7,802) --
Increase (decrease) in cash ...................... 265 -- (655) -- 920
Cash at beginning of period ...................... 5,940 -- 1,834 -- 4,106
------------ ------------ ------------ ------------ ------------
Cash at end of period ............................ $ 6,205 $ -- $ 1,179 $ -- $ 5,026
============ ============ ============ ============ ============
F-43
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
9% SENIOR SUBORDINATED NOTES DUE 2003
The 9% Notes are guaranteed by certain wholly owned subsidiaries of the
Company (the "9% Guarantors"), PSSI, PMI, THMC, STI, Sun, PCG, PCH and Carewell.
The remaining first tier and lower tier subsidiaries of the Company are not
guarantors of the 9% Notes (the "9% Non-Guarantors"). The 9% Non-Guarantors
include PBCI, PIC, PINTL, Playtex Limited, PFSC and PCG Aust.
The 9% Guarantors are joint and several guarantors of the 9% Notes. Such
guarantees are irrevocable, and full and unconditional and are limited to the
largest amount that would not render such 9% Guarantors' obligations under the
guarantees subject to avoidance under any applicable federal or state fraudulent
conveyance or similar law. The guarantees are senior subordinated obligations of
the applicable 9% Guarantor, and are subordinated to all senior obligations of
such 9% Guarantor, including guarantees of the Company's obligations under the
1997 Refinancing.
The 9% Notes contain certain restrictions and limitations, which, among
other things, restrict the type and/or amount of additional indebtedness that
may be incurred by the Company or its subsidiaries; payment of dividends and
other distributions; issuances of preferred stock; loans and advances; certain
transactions with the Company stockholders and affiliates; certain mergers and
consolidations; certain sales or transfers of assets; the creation of certain
liens; the transfer of assets to certain subsidiaries; and restrictions on
dividends and other distributions by subsidiaries, including the 9% Guarantors.
The information which follows presents the condensed financial position as
of December 26, 1998 and December 27, 1997 and condensed statements of earnings
and cash flows for each of the fiscal years in the three year period ended
December 26, 1998 of (a) the Company on a consolidated basis, (b) the parent
company only ("Parent Company"), (c) the combined 9% Guarantor, and (d) the
combined 9% Non-Guarantors.
F-44
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 26, 1998
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
ASSETS
Current assets ................................... $ 189,146 $ 8 $ 116,377 $ 59,014 $ 13,747
Investment in subsidiaries ....................... -- (290,631) 288,177 1,146 1,308
Intercompany receivable .......................... -- (88,942) 33,343 53,631 1,968
Net property, plant and equipment ................ 78,906 -- 1,368 76,312 1,226
Intangible assets ................................ 548,040 -- 312,890 233,233 1,917
Other noncurrent assets .......................... 83,129 (500) 3,112 -- 80,517
------------ ------------ ------------ ------------ ------------
Total assets ................................. $ 899,221 $ (380,065) $ 755,267 $ 423,336 $ 100,683
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .............................. $ 110,598 $ 26 $ 99,582 $ 6,419 $ 4,571
Intercompany payable ............................. -- (88,942) (106,170) 64,861 130,251
Long-term debt ................................... 886,261 (500) 886,761 -- --
Other noncurrent liabilities ..................... 43,337 -- 16,069 9,350 17,918
------------ ------------ ------------ ------------ ------------
Total liabilities ............................ 1,040,196 (89,416) 896,242 80,630 152,740
Stockholders' equity ............................. (140,975) (290,649) (140,975) 342,706 (52,057)
------------ ------------ ------------ ------------ ------------
Total liabilities and stockholders' equity ... $ 899,221 $ (380,065) $ 755,267 $ 423,336 $ 100,683
============ ============ ============ ============ ============
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 27, 1997
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
ASSETS
Current assets ................................... $ 125,362 $ -- $ 71,923 $ 40,293 $ 13,146
Investment in subsidiaries ....................... -- (80,084) 77,776 1,154 1,154
Intercompany receivable .......................... -- (158,024) 143,647 13,280 1,097
Net property, plant and equipment ................ 54,810 -- 235 53,210 1,365
Intangible assets ................................ 388,743 -- 322,216 64,542 1,985
Other noncurrent assets .......................... 83,643 (503) 3,629 -- 80,517
------------ ------------ ------------ ------------ ------------
Total assets ................................. $ 652,558 $ (238,611) $ 619,426 $ 172,479 $ 99,264
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities .............................. $ 68,960 $ 22 $ 57,590 $ 7,520 $ 3,828
Intercompany payable ............................. -- (158,023) -- 29,179 128,844
Long-term debt ................................... 814,686 -- 814,686 -- --
Other noncurrent liabilities ..................... 36,975 (507) 15,213 4,636 17,633
------------ ------------ ------------ ------------ ------------
Total liabilities ............................ 920,621 (158,508) 887,489 41,335 150,305
Stockholders' equity ............................. (268,063) (80,103) (268,063) 131,144 (51,041)
------------ ------------ ------------ ------------ ------------
Total liabilities and stockholders' equity ... $ 652,558 $ (238,611) $ 619,426 $ 172,479 $ 99,264
============ ============ ============ ============ ============
F-45
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
Net revenues ..................................... $ 669,613 $ (309,131) $ 595,947 $ 333,196 $ 49,601
Cost of sales .................................... 277,555 (219,148) 244,496 228,690 23,517
------------ ------------ ------------ ------------ ------------
Gross profit ................................. 392,058 (89,983) 351,451 104,506 26,084
------------ ------------ ------------ ------------ ------------
Operating expenses:
Advertising, selling and administrative .......... 243,288 (89,983) 235,355 72,767 25,149
Amortization of intangibles ...................... 17,336 -- 10,656 6,612 68
------------ ------------ ------------ ------------ ------------
Total operating expenses ..................... 260,624 (89,983) 246,011 79,379 25,217
------------ ------------ ------------ ------------ ------------
Operating earnings ........................... 131,434 -- 105,440 25,127 867
Interest expense, net ............................ 71,518 -- 83,621 (1) (12,102)
Equity in net earnings of subsidiaries ........... -- 27,186 (23,269) (1,317) (2,600)
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ................. 59,916 (27,186) 45,088 26,445 15,569
Income taxes ..................................... 25,686 -- 10,858 10,311 4,517
------------ ------------ ------------ ------------ ------------
Net earnings ................................. $ 34,230 $ (27,186) $ 34,230 $ 16,134 $ 11,052
============ ============ ============ ============ ============
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
Net revenues ..................................... $ 500,632 $ (226,538) $ 443,673 $ 230,102 $ 53,395
Cost of sales .................................... 195,980 (176,872) 186,482 160,609 25,761
------------ ------------ ------------ ------------ ------------
Gross profit ................................. 304,652 (49,666) 257,191 69,493 27,634
------------ ------------ ------------ ------------ ------------
Operating expenses:
Advertising, selling and administrative .......... 192,056 (49,666) 160,671 51,826 29,225
Amortization of intangibles ...................... 12,894 -- 10,618 2,208 68
------------ ------------ ------------ ------------ ------------
Total operating expenses ..................... 204,950 (49,666) 171,289 54,034 29,293
------------ ------------ ------------ ------------ ------------
Operating earnings (loss) .................... 99,702 -- 85,902 15,459 (1,659)
Interest expense, net ............................ 64,470 -- 76,594 -- (12,124)
Equity in net earnings of subsidiaries ........... -- 18,418 (16,110) (1,154) (1,154)
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ................. 35,232 (18,418) 25,418 16,613 11,619
Income taxes ..................................... 16,501 -- 6,687 6,229 3,585
------------ ------------ ------------ ------------ ------------
Earnings before extraordinary loss ........... 18,731 (18,418) 18,731 10,384 8,034
Extraordinary loss on early extinguishment
of debt, net ................................. (4,078) -- (4,078) -- --
------------ ------------ ------------ ------------ ------------
Net earnings ................................. $ 14,653 $ (18,418) $ 14,653 $ 10,384 $ 8,034
============ ============ ============ ============ ============
F-46
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
Net revenues ..................................... $ 498,742 $ (167,269) $ 438,127 $ 169,020 $ 58,864
Cost of sales .................................... 192,512 (104,374) 161,849 108,699 26,338
------------ ------------ ------------ ------------ ------------
Gross profit ................................. 306,230 (62,895) 276,278 60,321 32,526
------------ ------------ ------------ ------------ ------------
Operating expenses:
Advertising, selling and administrative .......... 194,184 (62,895) 171,534 53,671 31,874
Amortization of intangibles ...................... 12,846 -- 10,570 2,208 68
------------ ------------ ------------ ------------ ------------
Total operating expenses ..................... 207,030 (62,895) 182,104 55,879 31,942
------------ ------------ ------------ ------------ ------------
Operating earnings ........................... 99,200 -- 94,174 4,442 584
Interest expense, net ............................ 64,860 -- 76,864 -- (12,004)
Equity in net earnings of subsidiaries ........... -- 10,456 (10,456) -- --
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ................. 34,340 (10,456) 27,766 4,442 12,588
Income taxes ..................................... 16,141 -- 9,567 2,034 4,540
------------ ------------ ------------ ------------ ------------
Net earnings ................................. $ 18,199 $ (10,456) $ 18,199 $ 2,408 $ 8,048
============ ============ ============ ============ ============
F-47
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
Net earnings ..................................... $ 34,230 $ (27,186) $ 34,230 $ 16,134 $ 11,052
Non-cash items included in earnings:
Amortization of intangibles .............. 17,336 -- 10,656 6,612 68
Amortization of deferred financing
costs ............................... 2,995 -- 2,995 -- --
Depreciation ............................. 9,690 -- 72 9,261 357
Deferred taxes ........................... 6,244 -- 8,318 (1,558) (516)
Other, net ............................... 36 27,194 (50,682) 25,860 (2,336)
(Increase) decrease in net
working capital .......................... (17,314) -- 4,330 (21,935) 291
Increase in amounts due to Parent ............ -- -- 18,938 (19,486) 548
------------ ------------ ------------ ------------ ------------
Net cash flows from operations ...... 53,217 8 28,857 14,888 9,464
Cash flows used for investing activities:
Purchase of property, plant and
equipment ................................ (16,405) -- (1,701) (14,421) (283)
Business or investments acquired ............. (106,581) -- (106,581) -- --
------------ ------------ ------------ ------------ ------------
Net cash flows used for investing
activities ...................... (122,986) -- (108,282) (14,421) (283)
Cash flows used for financing activities:
Net borrowings under working capital
facilities and long-term debt
obligations .............................. 73,950 -- 73,950 -- --
Payment of financing costs ................... (2,692) -- (2,692) -- --
Issuance of shares of common stock ........... 2,151 -- 2,151 -- --
Receipt (payment) of dividends ............... -- -- 8,810 -- (8,810)
------------ ------------ ------------ ------------ ------------
Net cash flows used for financing
activities ...................... 73,409 -- 82,219 -- (8,810)
Increase in cash ................................. 3,640 8 2,794 467 371
Cash at beginning of period ...................... 3,231 -- 668 -- 2,563
------------ ------------ ------------ ------------ ------------
Cash at end of period ............................ $ 6,871 $ 8 $ 3,462 $ 467 $ 2,934
============ ============ ============ ============ ============
F-48
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
Net earnings ..................................... $ 14,653 $ (18,418) $ 14,653 $ 10,384 $ 8,034
Non-cash items included in earnings:
Extraordinary loss ....................... 4,078 -- 4,078 -- --
Amortization of intangibles .............. 12,894 -- 10,618 2,208 68
Amortization of deferred financing
costs ............................... 2,163 -- 2,163 -- --
Depreciation ............................. 7,520 -- 94 7,074 352
Deferred taxes ........................... 5,493 -- 3,752 1,823 (82)
Other, net ............................... 249 18,418 (16,742) (5) (1,422)
Increase in net working capital .............. (30,182) -- (15,852) (12,943) (1,387)
------------ ------------ ------------ ------------ ------------
Net cash flows from operations ...... 16,868 -- 2,764 8,541 5,563
Cash flows used for investing activities:
Purchase of property, plant and
equipment ................................ (9,004) -- (82) (8,541) (381)
------------ ------------ ------------ ------------ ------------
Net cash flows used for investing
activities ...................... (9,004) -- (82) (8,541) (381)
Cash flows used for financing activities:
Net payments under working capital
facilities and long-term debt
obligations .............................. (1,900) -- (1,900) -- --
Payment of financing costs ................... (9,367) -- (9,367) -- --
Issuance of shares of common stock ........... 429 -- 429 -- --
Receipt (payment) of dividends ............... -- -- 7,645 -- (7,645)
------------ ------------ ------------ ------------ ------------
Net cash flows used for financing
activities ...................... (10,838) -- (3,193) -- (7,645)
Decrease in cash ................................. (2,974) -- (511) -- (2,463)
Cash at beginning of period ...................... 6,205 -- 1,179 -- 5,026
------------ ------------ ------------ ------------ ------------
Cash at end of period ............................ $ 3,231 $ -- $ 668 $ -- $ 2,563
============ ============ ============ ============ ============
F-49
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996:
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ------------ ------------ ------------
Net earnings ..................................... $ 18,199 $ (10,456) $ 18,199 $ 2,409 $ 8,047
Non-cash items included in earnings:
Amortization of intangibles .............. 12,846 -- 10,570 2,208 68
Amortization of deferred financing
costs ............................... 2,089 -- 2,089 -- --
Depreciation ............................. 8,929 -- 72 8,428 429
Deferred taxes ........................... 6,842 -- 7,963 (1,437) 316
Other, net ............................... 48 10,456 (10,279) (120) (9)
Decrease (increase) in net working
capital .................................. 11,351 -- 13,273 (2,074) 152
------------ ------------ ------------ ------------ ------------
Net cash flows from operations ...... 60,304 -- 41,887 9,414 9,003
Cash flows used for investing activities:
Purchase of property, plant and
equipment ................................ (9,740) -- (45) (9,414) (281)
------------ ------------ ------------ ------------ ------------
Net cash flows used for investing
activities ...................... (9,740) -- (45) (9,414) (281)
Cash flows used for financing activities:
Net payments under working capital
facilities and long-term debt
obligations .............................. (50,350) -- (50,350) -- --
Issuance of shares of common stock ........... 60 -- 60 -- --
Receipt (payment) of dividends ............... -- -- 7,802 -- (7,802)
Other, net ................................... (9) -- (9) -- --
------------ ------------ ------------ ------------ ------------
Net cash flows used for financing
activities ...................... (50,299) -- (42,497) -- (7,802)
Increase (decrease) in cash ...................... 265 -- (655) -- 920
Cash at beginning of period ...................... 5,940 -- 1,834 -- 4,106
------------ ------------ ------------ ------------ ------------
Cash at end of period ............................ $ 6,205 $ -- $ 1,179 $ -- $ 5,026
============ ============ ============ ============ ============
F-50
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. SUBSEQUENT EVENTS
On January 29, 1999, the Company completed the acquisition of the Diaper
Genie(R) business, the leading diaper disposal system in the U.S., from
privately-held Mondial Industries L.P. ("Mondial") for approximately $122
million. The purchase price consisted of $72 million in cash and the issuance to
Mondial of $50 million principal amount of convertible notes. The cash portion
of the consideration was financed through the Company's 1997 Revolving Credit
Facility. The newly issued convertible notes bear a rate of interest of 6.00%
and are convertible after January 29, 2000, at the holders' option, into
approximately 2.6 million shares of the Company's Common Stock. The conversion
price is approximately $19.15 per share. The notes will mature in 2004 and are
callable by the Company after January 29, 2002. The acquisition was accounted
for as an asset purchase.
F-51
PLAYTEX PRODUCTS, INC.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Playtex Products, Inc.:
We have audited the accompanying consolidated balance sheets of Playtex
Products, Inc. and subsidiaries as of December 26, 1998 and December 27, 1997,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the twelve months ended December 26, 1998, December
27, 1997 and December 28, 1996 included on pages F-15 through F-51 in the
Company's Annual Report on Form 10-K. In connection with our audits of the
consolidated financial statements, we also have audited the related consolidated
financial statement schedule, on page 20 in the Company's Annual Report on Form
10-K. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Playtex Products, Inc. and subsidiaries as of December 26, 1998 and December 27,
1997 and the results of their operations and their cash flows for the twelve
months ended December 26, 1998, December 27, 1997 and December 28, 1996, in
conformity with generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth herein.
/s/ KPMG LLP
February 4, 1999
Stamford, Connecticut
F-52
PLAYTEX PRODUCTS, INC.
REPORT OF MANAGEMENT
The management of Playtex Products, Inc. is responsible for the financial
and operating information contained in the Annual Report, including the
financial statements covered by the independent auditors' report. These
statements were prepared in conformity with generally accepted accounting
principles and include, where necessary, informed estimates and judgments.
The Company maintains systems of accounting and internal control designed
to provide reasonable assurance that assets are safeguarded against loss, and
that transactions are executed and recorded properly so as to ensure that the
financial records are reliable for preparing financial statements.
Elements of these control systems are the establishment and communication
of accounting and administrative policies and procedures, the selection and
training of qualified personnel, and continuous programs of internal review.
The Company's financial statements are reviewed by its Audit Committee,
which is composed entirely of non-employee Directors. This Committee meets with
the independent auditors and management to review the scope and results of the
annual audit, interim reviews, internal controls, and financial reporting
matters. The independent auditors have direct access to the Audit Committee.
/s/ MICHAEL R. GALLAGHER
Chief Executive Officer
and Director
/s/ MICHAEL F. GOSS
Executive Vice President,
Chief Financial Officer,
and Director
February 4, 1999
Westport, Connecticut
F-53
PLAYTEX PRODUCTS, INC.
OTHER INFORMATION
CORPORATE INFORMATION
Shares of Playtex Products, Inc. Common Stock are traded on the New York
Stock Exchange under the symbol PYX. The Company has not paid a cash dividend
since its inception, and its present policy is to retain earnings for use in its
business. Under its debt agreements, the Company is restricted from paying
dividends unless it meets certain specified financial criteria immediately
following such payment.
STOCK TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C.
80 Challenger Road
Ridgefield Park, New Jersey 07660
(800)851-9677
www.chasemellon.com
INDEPENDENT AUDITORS
KPMG LLP
3001 Summer Street
Stamford, CT 06905
CORPORATE OFFICES
Playtex Products, Inc.
300 Nyala Farms Road
Westport, CT 06880
F-54
PLAYTEX PRODUCTS, INC.
OTHER INFORMATION
BOARD OF DIRECTORS
Richard C. Blum President and Managing Member of Richard C. Blum
and Associates, L.P.
Michael R. Eisenson President and Chief Executive Officer of
Charlesbank Capital Partners, LLC
Timothy O. Fisher Vice President of The Hillman Group
Michael R. Gallagher Chief Executive Officer
Michael F. Goss Executive Vice President and Chief Financial
Officer
Robert B. Haas Chairman, Chairman of the Board and Chief
Executive Officer of Haas Wheat & Partners
Incorporated
C. Ann Merrifield President of Genzyme Genetics
Jeffrey W. Ubben Managing Director of Investments of Richard C.
Blum and Associates, L.P.
Wyche H. Walton Senior Vice President of Haas Wheat & Partners
Incorporated
Douglas D. Wheat President of Haas Wheat & Partners Incorporated
Kenneth F. Yontz Chairman of the Board, President and Chief
Executive Officer of Sybron International
Corporation
PRINCIPAL OFFICERS
Michael R. Gallagher Chief Executive Officer
Michael F. Goss Executive Vice President and Chief Financial
Officer
Richard G. Powers President, U.S. Personal Products Division
Max R. Recone President, U.S. Consumer Products Division
Irwin S. Butensky Senior Vice President, Biomedical and
Administrative Services
James S. Cook Senior Vice President, Operations
John D. Leahy Senior Vice President, Corporate
Sales/International
Jeffrey M. Brown Vice President, Personal Products Research and
Development
Glenn A. Forbes Vice President, Finance
Jeffrey B. Keane Vice President, International
Frank M. Sanchez Vice President, Human Resources
Uma P. Tripathi Vice President, Consumer Products Research and
Development
Vincent S. Viviani Vice President, Quality Systems
Paul E. Yestrumskas Vice President, General Counsel and Secretary
- ----------
F-55
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
3(a) Restated Certificate of Incorporation, as amended through
June 6, 1995. (Incorporated herein by reference to Exhibit
3.2 of Playtex's Form 8-K, dated June 6, 1995, File No.
33-25485-01.)
3(b) By-laws of the Company, as amended through June 4, 1998.
(Incorporated herein by reference to Exhibit 3(b) of
Playtex's Form 10-Q for the period ended June 27, 1998,
dated August 11, 1998, File No. 33-25485-01.)
4(a) Indenture dated as of February 2, 1994 relating to the 9%
Senior Subordinated Notes due 2003 (the "Senior
Subordinated Notes") among Family Products, Playtex and IBJ
Schroder Bank & Trust Company, as trustee, including form
of Note. (Incorporated herein by reference to Exhibit 4(b)
of Playtex's Annual Report on Form 10-K for the fiscal year
ended December 25, 1993, File No. 33-25485-01.)
4(a)(1) First Supplemental Indenture dated as of March 8, 1994.
(Incorporated herein by reference to Exhibit 4(b)(1) of
Playtex's Annual Report on Form 10-K for the fiscal year
ended December 25, 1993, File No. 33-25485-01.)
4(a)(2) Second Supplemental Indenture, dated as of June 6, 1995
among the Company, Playtex Sales & Service, Inc. and IBJ
Schroder Bank and Trust Company, as Trustee. (Incorporated
herein by reference to Exhibit 4.1 of Playtex's Form 8-K,
dated June 6, 1995, File No. 33-25485-01.)
4(a)(3) Third Supplemental Indenture, dated as of June 6, 1995
among the Company, Playtex Manufacturing Inc. and IBJ
Schroder Bank and Trust Company, as Trustee. (Incorporated
herein by reference to Exhibit 4.2 of Playtex's Form 8-K,
dated June 6, 1995, File No. 33-25485-01.)
4(a)(4) Fourth Supplemental Indenture among Playtex Products, Inc.,
as Issuer, BBA Acquisition, Inc., as Guarantor and IBJ
Schroder Bank & Trust Company, as Trustee, dated as of
October 31, 1995. (Incorporated herein by reference to
Exhibit 4(b)(4) of Playtex's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995, File No.
33-25485-01.)
4(a)(5) Fifth Supplemental Indenture among Playtex Products, Inc.,
as Issuer, BBA Acquisition, Inc., as Guarantor and IBJ
Schroder Bank & Trust Company, as Trustee, dated as of
October 31, 1995. (Incorporated herein by reference to
Exhibit 4(b)(5) of Playtex's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995, File No.
33-25485-01.)
4(a)(6) Sixth Supplemental Indenture among Playtex Products, Inc.,
as Issuer, BBA Acquisition, Inc., as Guarantor and IBJ
Schroder Bank & Trust Company, as Trustee, dated as of
October 31, 1995. (Incorporated herein by reference to
Exhibit 4(b)(6) of Playtex's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995, File No.
33-25485-01.)
4(a)(7) Seventh Supplemental Indenture among Playtex Products,
Inc., as Issuer, TH Marketing Corp., and Smile-Tote Inc.,
as Guarantor and IBJ Schroder Bank & Trust Company, as
Trustee, dated as of October 31, 1995. (Incorporated herein
by reference to Exhibit 4(b)(7) of Playtex's Annual Report
on Form 10-K for the fiscal year ended December 30, 1995,
File No. 33-25485-01.)
X-1
Exhibit No. Description
- ----------- -----------
4(a)(8) Eighth Supplemental Indenture among Playtex Products, Inc.,
as Issuer, TH Marketing Corp., and Smile-Tote Inc., as
Guarantor and IBJ Schroder Bank & Trust Company, as
Trustee, dated as of July 21, 1997. (Incorporated herein by
reference to Exhibit 4(b)(8) of Playtex's Annual Report on
Form 10-K for the fiscal year ended December 27, 1997, File
No. 33-25485-01.)
4(a)(9) Ninth Supplemental Indenture among Playtex Products, Inc.,
as Issuer, TH Marketing Corp., and Smile-Tote Inc., as
Guarantor and IBJ Schroder Bank & Trust Company, as
Trustee, dated as of August 27, 1997. (Incorporated herein
by reference to Exhibit 4(b)(9) of Playtex's Annual Report
on Form 10-K for the fiscal year ended December 27, 1997,
File No. 33-25485-01.)
4(a)(10) Tenth Supplemental Indenture among Playtex Products, Inc.,
as Issuer, TH Marketing Corp., and Smile-Tote Inc., as
Guarantor and IBJ Schroder Bank & Trust Company, as
Trustee, dated as of January 28, 1998. (Incorporated herein
by reference to Exhibit 4(b)(10) of Playtex's Annual Report
on Form 10-K for the fiscal year ended December 27, 1997,
File No. 33-25485-01.)
4(b) Form of Junior Subordinated Note of Playtex. (Incorporated
herein by reference to Exhibit 4(i) of Playtex's
Registration Statement on Form S-1, No. 33-25485.)
4(b)(1) Form of Junior Subordinated Note of Playtex dated December
15, 1989. (Incorporated herein by reference to Exhibit
4(f)(1) to Playtex's Annual Report on Form 10-K for the
year ended December 30, 1989, No. 33-25485.)
4(b)(2) Junior Subordinated Note of Playtex dated December 15,
1990. (Incorporated herein by reference to Exhibit 4(f)(2)
to Playtex's Annual Report on Form 10-K for the year ended
December 29, 1990, No. 33-25485.)
4(b)(3) Junior Subordinated Note of Playtex dated December 15,
1991. (Incorporated herein by reference to Exhibit 4(h)(3)
of Playtex's Registration Statement on Form S-1, No.
33-43771.)
4(b)(4) Junior Subordinated Note of Playtex dated December 15,
1992. (Incorporated herein by reference to Exhibit 4(h)(4)
of Playtex's Annual Report on Form 10-K for the year ended
December 26, 1992.)
4(b)(5) Junior Subordinated Note of Playtex dated December 15,
1993. (Incorporated herein by reference to Exhibit 4(j)(5)
of Playtex's Registration Statement on Form S-1, No.
33-71512.)
4(b)(6) Agreement between Playtex and Playtex Apparel Partners,
L.P. dated November 30, 1994 relating to Junior
Subordinated Notes. (Incorporated herein by reference to
Exhibit 4(d)(6) of Playtex's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, File No.
33-25485-01.)
4(c) Indenture dated as of July 21, 1997 relating to the 8 7/8
Senior Notes due 2004 (the "Senior Notes") among Playtex
Products, Inc., as Issuer, Playtex Beauty Care, Inc.,
Playtex Investment Corp., Playtex International Corp.,
Playtex Sales & Services, Inc., Playtex Manufacturing,
Inc., Smile-Tote, Inc., Sun Pharmaceuticals Corp., TH
Marketing Corp. (Collectively, the "Guarantors") and Marine
Midland Bank, as Trustee. (Incorporated herein by reference
to Exhibit 4.2 to the Company's Current Report on Form 8-K
dated July 21, 1997.)
4(c)(1) Form of Exchange Notes (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K
dated July 21, 1997.)
X-2
Exhibit No. Description
- ----------- -----------
4(c)(2) Registration Rights Agreement, among the Company, the
Guarantors and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser") (incorporated by
reference to Exhibit 4.3 to the Company's Current Report on
Form 8-K dated July 21, 1997.)
4(c)(3) Purchase Agreement, dated as of July 14, 1997 relating to
the 8 7/8 Senior Notes due 2004 (the "Senior Notes") among
Playtex Products, Inc., as Issuer, Playtex Beauty Care,
Inc., Playtex Investment Corp., Playtex International
Corp., Playtex Sales & Services, Inc., Playtex
Manufacturing, Inc., Smile-Tote, Inc., Sun Pharmaceuticals
Corp., TH Marketing Corp. (Collectively, the "Guarantors")
and Donaldson, Lufkin & Jenrette Securities Corporation.
(Incorporated herein by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K dated July 21, 1997.)
4(c)(4) First Supplemental Indenture, dated as of January 28, 1998
among the Company, Personal Care Holdings, Inc. ("PCH"),
Personal Care Group, Inc. ("PCG") and Carewell Industries,
Inc. ("Carewell"), (each of PCH, PCG and Carewell being
referred to as a Guarantor), and Marine Midland Bank as
trustee. (Incorporated herein by reference to Exhibit
4(e)(4) of Playtex's Annual Report on Form 10-K for the
fiscal year ended December 27, 1997, File No. 33-25485-01.)
10(a) Credit Agreement, dated as of July 21, 1997, among Playtex
Products, Inc., DLJ Funding, as the syndication agent,
Wells Fargo Bank, N.A. ("Wells Fargo"), as the
administrative agent, and the lenders named therein.
(Incorporated herein by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K dated July 21, 1997.)
10(a)(1) First Amendment, dated as of January 28, 1998, to the
Credit Agreement, dated as of July 21, 1997, among the
Company, DLJ Capital Funding, Inc., as the syndication
agent, Wells Fargo, as the administrative agent, and the
lenders named therein. (Incorporated herein by reference to
Exhibit 10(a)(1) of Playtex's Annual Report on Form 10-K
for the fiscal year ended December 27, 1997, File No.
33-25485-01.)
10(b) Term Loan Agreement, dated as of July 21 1997, among
Playtex Products, Inc., DLJ Funding, as the syndication
agent, Wells Fargo, as the facility manager, and the
lenders therein. (Incorporated herein by reference to
Exhibit 10.2 to the Company's Current Report on Form 8-K
dated July 21, 1997.)
10(b)(1) First Amendment, dated as of January 28, 1998, to the Term
Loan Agreement, dated as of July 21, 1997, among the
Company, DLJ Capital Funding, Inc., as the syndication
agent, Wells Fargo, as the facility manager, and the
Lenders therein. (Incorporated herein by reference to
Exhibit 10(b)(1) of Playtex's Annual Report on Form 10-K
for the fiscal year ended December 27, 1997, File No.
33-25485-01.)
10(c) Playtex Park Profit-Sharing Retirement Plan and Savings
Plan dated December 12, 1986, as amended January 1, 1989.
(Incorporated herein by reference to Exhibit 10(e) of
Playtex's Annual Report on Form 10-K for the year ended
December 30, 1989, No.33-25485.)
10(d) Deferred Benefit Equalization Plan dated August 15, 1977,
as amended April 15, 1987. (Incorporated herein by
reference to Exhibit 10(e) of Playtex Holding's Annual
Report on Form 10-K for the year ended December 28, 1987,
File No. 33-15607.)
10(e) Revised Special Severance Plan dated August 27, 1990.
(Incorporated herein by reference to Exhibit 10(g)(2) of
Playtex's Annual Report on Form 10-K for the year ended
December 29, 1990, File No. 33-25485.)
X-3
Exhibit No. Description
- ----------- -----------
10(f) Termination Policy for Management Compensation Plan
Participants. (Incorporated herein by reference to Exhibit
10(h)(1) of Playtex's Annual Report on Form 10-K for the
year ended December 30, 1989, File No. 33-25485.)
10(g) Playtex Pension Plan effective January 1, 1989.
(Incorporated herein by reference to Exhibit 10(j) of
Playtex's Registration Statement on Form S-1, No.
33-71512.)
10(h) Retirement Plan for Hourly Employees of TEK effective
January 1, 1989. Incorporated herein by reference to
Exhibit 10(k) of Playtex's Registration Statement on Form
S-1, No. 33-71512.)
10(i) Playtex Management Incentive Plan for 1997. (Incorporated
herein by reference to Exhibit 10(1)(2) of Playtex's Annual
Report on Form 10-K for the fiscal year ended December 28,
1996, File No. 33-25485-01.)
10(j) Consulting Agreement between Family Products and Joel E.
Smilow dated January 30, 1993. (Incorporated herein by
reference to Exhibit 10(m) of Playtex's Registration
Statement on Form S-1, No. 33-71512.)
10(k) Form of Management Contribution and Subscription Agreement.
(Incorporated herein by reference to Exhibit 4(d) of
Playtex's Registration Statement on Form S-1, No.
33-25485.)
10(k)(1) First Amendment to the Management Contribution and
Subscription Agreement dated February 23, 1989.
(Incorporated herein by reference to Exhibit 10(c)(1) of
Playtex's Annual Report on Form 10-K for the year ended
December 30, 1989, No. 33-25485.)
10(k)(2) Second Amendment to the Management Contribution and
Subscription Agreement dated November 15, 1989.
(Incorporated herein by reference to Exhibit 10(c)(2) of
Playtex's Annual Report on Form 10-K for the year ended
December 30, 1989, No. 33-25485.)
10(k)(3) Third Amendment to the Management Contribution and
Subscription Agreement dated August 1, 1990. (Incorporated
herein by reference to Exhibit 10(c)(3) of Playtex's Annual
Report on Form 10-K for the year ended December 29, 1990,
No. 33-25485.)
10(k)(4) Fourth Amendment to the Management and Contribution
Subscription Agreement dated January 1, 1992. (Incorporated
herein by reference to Exhibit 10(q)(4) of Playtex's
Registration Statement on Form S-1, No. 33-71512.)
10(l) Playtex 1994 Stock Option Plan for Directors and Executive
and Key Employees. (Incorporated herein by reference to
Exhibit 10(hh) of Playtex's Registration Statement on Form
S-1, No. 33-71512.)
10(l)(1) Amendment No. 1 to the 1994 Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.2 of
Playtex's Form 8-K, dated June 6, 1995, File No.
33-25485-01.)
10(l)(2) Amendment No. 2 to the 1994 Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.2 of
Playtex's Form 8-K, dated June 6, 1995, File No.
33-25485-01.)
10(l)(3) Amendment No. 3 to the 1994 Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.2 of
Playtex's Form 8-K, dated June 6, 1995, File No.
33-25485-01.)
X-4
Exhibit No. Description
- ----------- -----------
10(l)(4) Amendment No. 4 to the 1994 Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.2 of
Playtex's Form 8-K, dated June 6, 1995, File No.
33-25485-01.)
*10(l)(5) Amendment No. 5 to the 1994 Stock Option Plan.
*10(l)(6) Amendment No. 6 to the 1994 Stock Option Plan.
10(m) Memorandum of Understanding, dated June 21, 1995 with
Michael R. Gallagher, Chief Executive Officer.
(Incorporated herein by reference to Exhibit 10(ab) of
Playtex's Annual Report on Form 10-K for the fiscal year
ended December 30, 1995, File No. 33-25485-01.)
10(n) Form of Retention Agreement dated as of July 22, 1997
between Michael R. Gallagher and the Company. (Incorporated
herein by reference to Exhibit 10.1 of Playtex's
Registration Statement on Form S-4 dated August 29, 1997,
File No. 333-33915.)
10(o) Form of Retention Agreement dated as of July 22, 1997
between Michael F. Goss and the Company. (Incorporated
herein by reference to Exhibit 10.2 of Playtex's
Registration Statement on Form S-4 dated August 29, 1997,
File No. 333-33915.)
10(p) Form of Retention Agreement dated as of July 22, 1997
between each of Richard G. Powers, Max R. Recone and James
S. Cook and the Company. (Incorporated herein by reference
to Exhibit 10.3 of Playtex's Registration Statement on Form
S-4 dated August 29, 1997, File No. 333-33915.)
10(q) Amended Trademark License Agreement dated November 19, 1991
among Marketing Corporation, Apparel and Family Products.
(Incorporated herein by reference to Exhibit 10(r) of
Playtex's Registration Statement on Form S-1, No.
33-43771.)
10(r) Amended Trademark License Agreement dated November 19, 1991
by and between Apparel and Family Products. (Incorporated
herein by reference to Exhibit 10(s) of Playtex's
Registration Statement on Form S-1, No. 33-43771.)
10(s) Release Agreement, dated November 5, 1991, between Playtex
Investment Corp. and Playtex Apparel Partners, L.P.
(Incorporated herein by reference to Exhibit 10(gg) of
Playtex's Registration Statement on Form S-1, No.
33-71512.)
10(t) Stock Purchase Agreement dated as of March 17, 1995 between
Playtex and HWH Capital Partners, L.P., HWH Valentine
Partners, L.P. and HWH Surplus Valentine Partners, L.P.
(Incorporated herein by reference to Exhibit 10.1 of
Playtex's Form 8-K dated March 17, 1995.)
10(t)(1) Amendment No.1 to Stock Purchase Agreement, dated as of
June 1, 1998, by and among the Company, HWH Capital
Partners, L.P., HWH Valentine Partners, L.P., HWH Surplus
Valentine Partners, L.P. to the Stock Purchase Agreement,
dated as of March 17, 1995. (Incorporated herein by
reference to Exhibit 10(3) of Playtex's Post Effective
Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
10(t)(2) First Amended And Restated Registration Rights Agreement,
dated as of June 1, 1998, by and among the Company, HWH
Capital Partners, L.P., HWH Valentine Partners, L.P., HWH
Surplus Valentine Partners, L.P. to the Stock Purchase
Agreement, dated as of March 17, 1995. (Incorporated herein
by reference to Exhibit 10(5) of Playtex's Post Effective
Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
X-5
Exhibit No. Description
- ----------- -----------
*10(t)(3) Amendment No. 1, dated as of January 29, 1999 to the First
Amended And Restated Registration Rights Agreement, dated
as of March 17, 1995, as amended and restated as of June 1,
1998 by and among the Company, HWH Capital Partners, L.P.,
HWH Valentine Partners, L.P., HWH Surplus Valentine
Partners, L.P. to the Stock Purchase Agreement.
10(u) Stock Purchase Agreement, dated as of December 19, 1997,
among Playtex Products, Inc., and the Shareholders of
Carewell Industries, Inc. (Incorporated herein by reference
to Exhibit 10(af) of Playtex's Annual Report on Form 10-K
for the year ended December 27, 1997, File No. 33-25485.)
10(v) Asset Purchase Agreement, dated as of January 26, 1998,
among Playtex Products, Inc., BINKY-Griptight, Inc., Lewis
Woolf Griptight Limited and L.W.G. Holdings Limited.
(Incorporated herein by reference to Exhibit 10(ag) of
Playtex's Annual Report on Form 10-K for the year ended
December 27, 1997, File No. 33-25485.)
10(w) Merger Agreement, dated as of December 22, 1997, among
Playtex Products, Inc., PCG Acquisition Corp., J.W. Childs
Equity Partners L.P. and Personal Care Holdings, Inc.
(Incorporated herein by reference to Exhibit 2.1 of
Playtex's Form 8-K dated February 12, 1998.)
10(x) Registration Rights Agreement, dated as of January 28, 1998
among Playtex Products, Inc. and J.W. Childs Equity
Partners, L.P. (Incorporated herein by reference to Exhibit
2.2 of Playtex's Form 8-K dated February 12, 1998.)
10(x)(1) Stockholders Agreement, dated as of January 28, 1998,
between Playtex Products, Inc. and J.W. Childs Equity
Partners, L.P. and certain other Stockholders named
therein. (Incorporated herein by reference to Exhibit 2.3
of Playtex's Form 8-K dated February 12, 1998.)
10(y) First Amended And Restated Registration Rights Agreement,
dated as of June 1, 1998, by and among the Company, J.W.
Childs Equity Partners, L.P and certain other Stockholders
named in the Stockholders Agreement dated as of January 28,
1998. (Incorporated herein by reference to Exhibit 10(6) of
Playtex's Post Effective Amendment No. 1 to Form S-3 dated
as of June 12, 1998, No. 333-50099.)
10(z) Letter Agreement, dated as of June 1, 1998, by and among
the Company, J.W. Childs Equity Partners, L.P and certain
other Stockholders named in the Stockholders Agreement
dated as of January 28, 1998. (Incorporated herein by
reference to Exhibit 10(7) of Playtex's Post Effective
Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
10(aa) Letter of Waiver, dated as of June 1, 1998, by and among
the Company, Donaldson, Lufkin & Jenrette International,
J.W. Childs Equity Partners, L.P and certain other
Stockholders named in the Stockholders Agreement dated as
of January 28, 1998. (Incorporated herein by reference to
Exhibit 10(8) of Playtex's Post Effective Amendment No. 1
to Form S-3 dated as of June 12, 1998, No. 333-50099.)
10(ab) Stock Purchase Agreement, dated June 1, 1998 between J.W.
Childs Equity Partners, L.P. (the "seller"), RCBA Playtex,
L.P. (the "Buyer"), and Richard C. Blum & Associates, Inc.
(the "Guarantor"). (Incorporated herein by reference to
Exhibit 10(1) of Playtex's Post Effective Amendment No. 1
to Form S-3 dated as of June 12, 1998, No. 333-50099.)
X-6
Exhibit No. Description
- ----------- -----------
10(ac) Stockholders Agreement, dated June 1, 1998 between RCBA
Playtex, L.P. and the Company. (Incorporated herein by
reference to Exhibit 10(2) of Playtex's Post Effective
Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
*10(ac)(1) Amended and Restated Stockholders Agreement, dated
September 3, 1998 between the Company, RCBA Playtex, L.P.
and RCBA Strategic Partners.
10(ad) Registration Rights Agreement, dated June 1, 1998 between
RCBA Playtex, L.P. and the Company. (Incorporated herein by
reference to Exhibit 10(4) of Playtex's Post Effective
Amendment No. 1 to Form S-3 dated as of June 12, 1998, No.
333-50099.)
*10(ad)(1) Amendment No. 1, dated as of January 29, 1999, to the
Registration Rights Agreement, dated as of June 1, 1998
between RCBA Playtex, L.P. and the Company.
10(ae) Indenture, dated as of January 29, 1999, between Playtex
Products, Inc. and Marine Midland Bank. (Incorporated
herein by reference to Exhibit 2.2 of Playtex's Form 8-K,
dated February 12, 1999, File No. 33-25485-01.)
10(af) Registration Rights Agreement, dated as of January 29,
1999, between Playtex Products, Inc. and Mondial Industries
Limited Partnership. (Incorporated herein by reference to
Exhibit 2.3 of Playtex's Form 8-K, dated February 12, 1999,
File No. 33-25485-01.)
10(ag) Lease Agreement between Playtex and Stauffer Management
Company dated as of June 3, 1994. (Incorporated herein by
reference to Exhibit 10(y) of Playtex's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, File
No. 33-25485-01.)
*10(ah) Sublease Agreement between Playtex and AMBAC Capital
Management, Inc. dated as of February 20, 1998.
*10(ai) Agreement of Lease between Playtex Manufacturing, Inc. and
Trammell Crow NE, Inc.
10(aj) Lease Agreement between Playtex Manufacturing, Inc. and
Tetra Pak Plastic Packaging R&D GmbH, Hitek FSP, S.A.,
Tetra Laval Holdings & Finance S.A., and Tetra Laval Credit
Inc., dated as of April 26, 1996. (Incorporated herein by
reference to Exhibit 10(ai) of Playtex's Annual Report on
Form 10-K for the year ended December 27, 1997, File No.
33-25485.)
10(ak) Lease Agreement between Playtex Manufacturing, Inc. and BTM
Capital Corporation, dated as of June 20, 1996.
(Incorporated herein by reference to Exhibit 10(aj) of
Playtex's Annual Report on Form 10-K for the year ended
December 27, 1997, File No. 33-25485.)
10(al) Interest Protection Agreement effective November 28, 1997
between Playtex Products, Inc., and Merrill Lynch Capital
Services, Inc. (Incorporated herein by reference to Exhibit
10(ae) of Playtex's Annual Report on Form 10-K for the year
ended December 27, 1997, File No. 33-25485.)
*10(am) Interest Rate Swap Agreement effective July 23, 1998
between Playtex Products, Inc., and Toronto Dominion (New
York), Inc.
*11 Compuation of Earnings Per Share
*12(a) Statement re-computation of ratios.
X-7
Exhibit No. Description
- ----------- -----------
*22(a) Subsidiaries of Playtex.
*23 Consent of KPMG LLP.
*27 Financial Data Schedule.
- -----------
* Filed herewith
X-8