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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10—Q

For the Quarter Ended June 28, 2003

Commission File No. 1-12620

PLAYTEX PRODUCTS, INC.
(Exact name of registrant as specified in its charter)

        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 ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes ý    No o

        At August 8, 2003 61,215,856 shares of Playtex Products, Inc. common stock, par value $.01 per share, were outstanding.

PLAYTEX PRODUCTS, INC.

INDEX

2

PLAYTEX PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except per share data)

See accompanying notes to unaudited consolidated financial statements.

3

PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands except per share data)

See accompanying notes to unaudited consolidated financial statements.

4

PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands except per share data)

See accompanying notes to unaudited consolidated financial statements.

5

PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AND ACCUMULATED OTHER COMPREHENSIVE EARNINGS
(Unaudited, in thousands)

See accompanying notes to unaudited consolidated financial statements.

6

PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

See accompanying notes to unaudited consolidated financial statements.

7

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.     Consolidated Financial Statements

        The interim consolidated financial statements, which are a part of our Quarterly Report on Form 10-Q, are unaudited. In preparing our consolidated financial statements, we make certain adjustments (consisting of normal recurring adjustments) considered necessary in our opinion for a fair presentation of our financial position and results of operations. The results for the three and six month periods ended June 28, 2003 are not necessarily indicative of the results that you may expect for the full year.

        We presume you have access to the audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 28, 2002. As a result, we have not included footnote disclosures that would substantially duplicate the disclosures contained in the Form 10-K. We file our annual, quarterly, current reports, proxy statements, and other documents with the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1933 and 1934. You may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The SEC also maintains an internet website that contains our filed reports at www.sec.gov. In addition, we make our filings with the SEC available at the Investors Relations section of our website www.playtexproductsinc.com. You can call our Investor Relations Department at (203) 341-4017 or via email at invrel@playtex.com to request a copy of any of our reports filed with the SEC.

2.     Stock-Based Compensation

        We account for stock-based compensation in accordance with Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure". As permitted by SFAS No. 123 and SFAS No. 148, we follow the intrinsic value approach of Accounting Principles Board Opinion No. 25 ("APB No. 25"), and Financial Accounting Standards Board ("FASB") Interpretation No. 44, "Accounting for Certain Transactions Involving Stock-Based Compensation, an Interpretation of APB No. 25" issued for determining compensation expense related to the issuance of stock options. Accordingly, we do not recognize compensation expense related to our stock option program. Had we recognized compensation expense under the fair value approach permitted by SFAS No. 123, which measures and expenses the fair value of each stock option on the date of grant, our earnings and earnings per share would have been reduced to the pro forma amounts listed below (unaudited, in thousands, except per share data):

8

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     Stock-Based Compensation (Continued)

        The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model, which uses a number of assumptions to estimate the value of stock option grants. Assumptions used in the Black-Scholes option-pricing model include: risk-free interest rates, dividend yield if applicable, expected option life and the volatility of the underlying stock price.

3.     Impact of Adopting New Accounting Pronouncements

        Effective December 30, 2001, the beginning of our 2002 fiscal year, we adopted the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets," which changed our accounting for goodwill and other intangible assets with indefinite lives from an amortization method to an impairment only approach. In accordance with the requirements of SFAS No. 142, we tested the goodwill attributable to each of our reporting units for impairment as of December 30, 2001, the first day of fiscal 2002, and determined that none of our goodwill was impaired. Also, in accordance with the requirements of SFAS No. 142, we tested each of our trademarks for impairment by comparing the fair value of each trademark to its carrying value at December 30, 2001. Fair value was estimated using the relief from royalty method (a discounted cash flow methodology). Based on these impairment tests, we recorded a charge, reported as a cumulative effect of change in accounting principle, of $19.6 million ($12.4 million net of tax benefits) for the six months ended June 29, 2002. This charge reduced the trademark carrying value of certain non-core brands, primarily Chubs and Diaparene, to their estimated fair value. We are required to test our goodwill and trademarks for impairment, based on the methodologies as outlined in SFAS No. 142, on an annual basis and more frequently if events or circumstances indicate a likelihood of impairment. We performed additional tests, as part of the required annual goodwill and intangibles impairment testing, during the second quarter of 2003 and no reduction in goodwill or trademark balances were required.

        In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." We adopted this statement effective December 29, 2002, the first day of fiscal 2003. This statement updates, clarifies and simplifies existing accounting pronouncements and requires that gains and losses on extinguishments of debt be classified as income or loss from continuing operations rather than as extraordinary items as previously required under the old accounting rules. Any gain or loss on extinguishment of debt previously classified as an extraordinary item in prior periods that does not meet the criteria of APB No. 30 for such classification has been reclassified to conform to the provisions of SFAS No. 145. We recorded a pre-tax extraordinary loss during the second quarter ended June 29, 2002 of $5.9 million associated with the write-off of unamortized deferred financing costs relating to our Term A Loan and Term B Loan (see Note 8 in our unaudited consolidated financial statements). In accordance with SFAS No. 145, we have reclassified the $5.9 million pre-tax loss from extraordinary loss to earnings from continuing operations. In addition, we reduced income tax expense by $2.2 million to reclassify the tax benefit of this transaction in accordance with the new accounting standard.

        Effective June 29, 2003, we adopted SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This statement amends and clarifies financial accounting and reporting for derivatives and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This standard has no impact on our financial statements.

        In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This standard requires that certain financial instruments embodying an obligation to transfer assets to issue equity securities be classified as liabilities. It is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective July 1, 2003. This standard has no impact on our financial statements.

        In January 2003, the FASB issued Interpretation No. 46, ("FIN 46") "Consolidation of Variable Interest Entities." FIN 46 requires a company to consolidate a variable interest entity (VIE), as defined, when the company will absorb a

9

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     Impact of Adopting New Accounting Pronouncements (Continued)

majority of the VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. FIN 46 also requires consolidation of existing, non-controlled affiliates if the VIE is unable to finance its operations without investor support, or where the other investors do not have exposure to the significant risks and rewards of ownership. FIN 46 applies immediately to a VIE created or acquired after January 31, 2003. For a VIE created before February 1, 2003, FIN 46 applies in the first fiscal year or interim period beginning after June 15, 2003. We have not completed our assessment of the impact of FIN 46 upon adoption.

4.     Restructuring and Impairment Costs

        In the first quarter of 2002, we recorded a pre-tax restructuring and asset impairment charge of $7.6 million as a result of our decision to close our Watervliet, New York plastic molding facility. The write-off of assets associated with the closure of the facility was approximately $4.2 million and severance and other exit costs related to the termination of employees were estimated at $3.4 million. As of June 28, 2003, we spent $2.9 million related to severance and other exit costs since we announced our intent to close the facility in the first quarter of 2002. The Watervliet facility manufactured component parts primarily for our infant feeding category and employed approximately 160 people at the time of the announcement.

5.     Impact of Tax Regulations

        In the first quarter of 2002, the U.S. Treasury issued new regulations that replaced the loss disallowance rules applicable to the sale of stock of a subsidiary member of a consolidated tax group. These regulations permitted us to utilize a previously disallowed $135.1 million tax capital loss that resulted from the sale of Playtex Beauty Care, Inc. during fiscal 1999. We can utilize the tax capital loss associated with the sale of Playtex Beauty Care, Inc. to offset capital gains during the statutory five-year carryforward period. We anticipate utilizing $40.0 million of the capital loss to offset a capital gain, in fiscal 2003, related to the retirement of our related party notes, which come due on December 15, 2003. Accordingly, we recorded a tax benefit of $14.3 million in the first quarter of 2002. The remaining capital loss carryover will expire on December 25, 2004, if not utilized. The remaining tax benefit associated with the capital loss carryforward has been reduced by a valuation allowance, as we do not currently expect to realize it. The tax benefit related to the new regulations, recorded in the first quarter of 2002, does not impact our effective tax rate during fiscal 2003. We expect our effective tax rate during fiscal 2003 to be between 36% and 37% of earnings before income taxes.

6.     Accumulated Other Comprehensive Earnings

        The accumulated balances for each classification of other comprehensive earnings are as follows (unaudited, in thousands):

10

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.     Balance Sheet Components

(a)

Cash held in lock box pending weekly settlement procedure for Receivables Facility (see Note 9 in our unaudited consolidated financial statements).

(b)

During the second quarter of 2003, we reduced our reserves for certain advertising and sales promotion programs that occurred prior to this quarter by approximately $0.4 million based on the actual costs of these programs versus our original estimates. During the second quarter of 2002, we recorded additional expenses of $2.0 million to cover higher than expected Sun Care returns from the 2001 Sun Care season and, we reduced our reserves for certain advertising and sales promotion programs conducted prior to 2002 by $1.7 million based on the actual costs of these programs versus our original estimates.

11

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.    Long-Term Debt 

        Long-term debt consists of the following (in thousands):

        On May 22, 2001, we completed a refinancing of our senior indebtedness (the "Refinancing Transaction"). As part of the Refinancing Transaction we issued:

•

$350.0 million principal amount of 9³/8% Senior Subordinated Notes due June 1, 2011 (the "9³/8% Notes") and



•

a senior secured credit facility (the "Credit Facility" or "Senior Debt"), at that time, consisting of:



•

a six-year $100.0 million Term A Loan, subsequently repaid on May 29, 2002,

•

an eight-year $400.0 million Term B Loan, subsequently repaid on May 29, 2002, and

•

a six-year $125.0 million Revolving Credit Facility.

        In addition, we entered into a receivables purchase agreement (the "Receivables Facility") with a third party through a wholly-owned consolidated special purpose bankruptcy remote subsidiary of ours, Playtex A/R LLC. The net proceeds from the Refinancing Transaction and the Receivables Facility were used to pay-off all of our then outstanding indebtedness, except for the 6% Convertible Subordinated Notes (the "6% Convertible Notes").

        On May 29, 2002, we amended our Credit Facility and issued a new $450.0 million Term C Loan and, together with $21.8 million of cash, we repaid in full our outstanding obligations under our Term A Loan and Term B Loan, which collectively totaled $471.8 million.

        On June 26, 2003, we amended our Credit Facility. This amendment provided for revised and more stringent financial covenants and increased the interest rate margin on our Term C Loan and Revolving Credit Facility. Under the revised terms, pricing for LIBOR-based loans was increased and a Senior Debt Leverage Ratio, as defined in the amended credit agreement, was added. Additionally, pricing for LIBOR-based loans increased by 125 basis points to LIBOR plus 350 basis points for the Term C Loan and 100 basis points to LIBOR plus 400 basis points for the Revolving Credit Facility. Based on our current outstanding indebtedness, the revised pricing would increase our interest expense by approximately $5.5 million on an annualized basis. The amendment requires that we affirm that we are in compliance with our Senior Debt Leverage Ratio prior to initiating any borrowing requests. Compliance is based on the most recent quarterly compliance certificate filed with the banks as adjusted to reflect proposed new Senior Debt balances. Based upon our most recent quarterly compliance certificate, our maximum Senior Debt borrowing may not exceed $489.8 million. At June 28, 2003, our Senior Debt was $445.5 million. Additionally, as a result of the amendment to the senior indebtedness, we paid amendment fees of approximately $1.6 million. These costs were deferred and are being amortized over the remaining term of our Credit Facility.

12

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.    Long-Term Debt (Continued) 

Fixed Rate Indebtedness

        Our fixed rate indebtedness at June 28, 2003 of $360.0 million consists of $350.0 million of our 9³/8% Notes and $10.0 million of our 6% Convertible Notes. We pay interest on the 9³/8% Notes semi-annually on June 1 and December 1 of each year. At any time prior to June 1, 2004, we may redeem up to 35% of the principal amount of the 9³/8% Notes with the proceeds of one or more equity offerings at a redemption price of 109.375% of the principal amount, plus accrued and unpaid interest to the redemption date. We do not have the option to redeem the 9³/8% Notes from June 1, 2004 through May 31, 2006. At our option, we may redeem the notes on or after June 1, 2006 at the redemption prices (expressed as a percentage of principal amount) listed below plus accrued and unpaid interest to the redemption date.

        The 6% Convertible Notes are currently redeemable by us, in whole or in part, at our option at a redemption price equal to 100% of the principal amount, together with accrued and unpaid interest to the redemption date. On April 24, 2003, we redeemed $20.0 million principal amount of our 6% Convertible Notes. The remaining $10.0 million principal amount of 6% Convertible Notes are convertible into approximately 0.5 million shares of our common stock at a conversion price of approximately $19.15 per common share. The 6% Convertible Notes mature on January 31, 2004.

Variable Rate Indebtedness

        Our variable rate indebtedness of $445.5 million at June 28, 2003 is comprised entirely of our Term C Loan. The rates of interest we pay under the Term C Loan and Revolving Credit Facility vary over time depending on short-term interest rates. We also pay fees on our Revolving Credit Facility commitments, which may vary depending on our credit rating. Loans made under the Revolving Credit Facility mature on May 22, 2007 and our final principal payment on the Term C Loan is due May 31, 2009. Scheduled principal payments on the Term C Loan are made semi-annually and amount to: $4.5 million per year in fiscal years 2003 through 2007, $213.8 million in 2008, and $211.5 million in 2009. We repaid approximately $2.3 million of the Term C Loan during the six month period ended June 28, 2003.

        We periodically use financial instruments, such as derivatives, to manage the impact of interest rate changes on our variable rate debt. At June 28, 2003, we were not a party to any derivative or other type of financial instrument that hedged the impact of interest rate changes on our variable rate debt. Based on our interest rate exposure at June 28, 2003, a 1% increase in interest rates would result in an estimated $4.5 million of additional interest expense on an annualized basis.

13

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.    Long-Term Debt (Continued) 

        The rates of interest we pay on our variable rate debt are, at our option, a function of various alternative short term borrowing rates, such as the Prime Rate or LIBOR.

•

Our weighted average variable interest rate was 3.98% for the three months ended June 28, 2003 compared to 4.63% for the three months ended June 29, 2002.



•

At June 28, 2003, our variable interest rate was 4.87% compared to 4.09% at June 29, 2002. This increase was the result of the increase in pricing associated with the amendment, as previously discussed.

        The provisions of the credit agreement for our Credit Facility require us to meet certain financial covenants and ratios and include limitations and restrictions, including:

The 9³/8% Notes also contain certain restrictions and requirements. Under the terms of each of these agreements, payment of cash dividends on our common stock is restricted. Certain of our wholly owned subsidiaries are guarantors of the 9³/8% Notes.

        At June 28, 2003, our required principal repayments (excluding balances outstanding on our Revolving Credit Facility and amounts due to related party) were:

        In the event that we have excess cash flow, as defined in our Credit Facility, we are, within 90 days of each year-end, required to: make either mandatory debt repayments on the Term C Loan equal to the amount of the excess cash flow, as defined, or make deposits into the excess cash flow account equal to the amount of the excess cash flow. At the end of fiscal 2002, we determined that we had excess cash flow as defined in our Credit Facility and we deposited, in March of 2003, $19.1 million into the excess cash flow account. This $19.1 million along with $0.9 million of cash was used to redeem $20.0 million of our 6% Convertible Notes on April 24, 2003, as allowed under our Credit Agreement.

9.     Receivables Facility

        On May 22, 2001, we entered into the Receivables Facility through a wholly-owned, special purpose bankruptcy remote subsidiary of ours, Playtex A/R LLC. Through the Receivables Facility, we sell on a continuous basis to Playtex A/R LLC substantially all of our domestic customers' trade invoices that we generate. Playtex A/R LLC sells to a third-party commercial paper conduit (the "Conduit") an undivided fractional ownership interest in these trade accounts receivable. The Conduit issues short-term commercial paper to finance the purchase of the undivided fractional interest in the receivables. The total funding available to us on a revolving basis under the Receivables Facility is up to $100.0 million, depending primarily on: the amount of receivables generated by us and sold to Playtex A/R LLC, the rate of collection on those receivables, and other characteristics of the receivables pool which affects their eligibility. Our Retained Interest in Receivables represents our subordinated fractional undivided interest in receivables sold to Playtex A/R LLC and the net unamortized deferred financing costs incurred by Playtex A/R LLC.

        Commitments under the Receivables Facility have terms of 180 days, which may be renewed at the option of the Conduit prior to termination. In May 2003, the Receivables Facility was extended through November 2003.

14

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.    Receivables Facility (Continued) 

        We have agreed to continue servicing the sold receivables at market rates; accordingly, no servicing asset or liability has been recorded. Playtex A/R LLC shares credit risk with the Conduit as the undivided fractional interest in the receivables are sold without recourse. We believe, however, that Playtex A/R LLC has most of the credit risk associated with customers that do not pay, as the Conduit has preferential treatment with regard to cash settlement procedures and other conditions that limit their credit exposure. Our retained interest in receivables will be negatively impacted if Playtex A/R LLC writes-off any receivable balances as uncollectible. We believe the Receivables Facility is beneficial to us as: (1) we convert trade receivables to cash faster, and (2) although we sell our invoices to Playtex A/R LLC at a discount and pay fees to the Conduit, these expenses are lower than our borrowing costs under the Credit Facility.

        At June 28, 2003, Playtex A/R LLC had approximately $117.7 million of receivables, of which $61.8 million of undivided fractional interest therein was sold to the Conduit. Since the beginning of fiscal 2003, we sold in aggregate approximately $329.3 million of accounts receivable to Playtex A/R LLC. In return, we've received from Playtex A/R LLC approximately $329.4 million of cash.

        We sell receivables at a discount, which is included in Other Expenses in the Consolidated Statements of Earnings. This discount, which was $0.6 million for the second quarter of 2003 and $1.0 million for the six month period ended June 28, 2003, reflects the estimated fees required by the Conduit to purchase a fractional undivided interest in the receivables. The fees are based on the payment characteristics of the receivables, most notably their average life, interest rates in the commercial paper market and historical credit losses. Also included in Other Expenses is the impact of the amortization of deferred financing costs incurred by Playtex A/R LLC to establish the Receivables Facility.

        We account for the sale of accounts receivable to Playtex A/R LLC and related transactions with the Conduit in accordance with SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." At the time the receivables are sold, the balances are removed from our balance sheet. Playtex A/R LLC pays fees on the value of the undivided interest of the receivables sold to the Conduit equal to the 30 day LIBOR rate, which is reset weekly. In addition, under the terms of the May 2003 renewal of the Receivables Facility, Playtex A/R LLC pays a 0.50% per annum fee on the utilized portion of the Receivables Facility and a 0.75% per annum liquidity fee on the entire committed amount of the Receivables Facility. Because of the short-term nature, generally less than 60 days, of our trade accounts receivable sold to Playtex A/R LLC and the historically low credit risk associated with these receivables, the carrying value of our Retained Interest in Receivables approximates the fair value.

        The Receivables Facility may be terminated prior to its term in the event of:

15

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.   Business Segments

        We are organized in three divisions:

        Our Personal Products Division includes Infant Care and Feminine Care products sold in the United States primarily to mass merchandisers, grocery and drug classes of trade. The Infant Care product category includes the following brands:

        The Feminine Care product category includes a wide range of plastic and cardboard applicator tampons. As well as complementary products, marketed under such brand names as:

        Our Consumer Products Division includes a number of leading and well-recognized brands sold in the United States primarily to mass merchandisers, grocery and drug classes of trade. The Consumer Products Division includes the following brands:

        Our International/Corporate Sales Division includes:

        The International/Corporate Sales Division sells the same products as are available to our U.S. customers.

16

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.   Business Segments (Continued)

        We evaluate division performance based on their 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 us to evaluate division results. We do not segregate assets, amortization, capital expenditures, or interest income and interest expense to divisions.

        The results of our divisions for the three and six months ended June 28, 2003 and June 29, 2002 are as follows (unaudited dollars in thousands):

17

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.   Earnings Per Share

        The following table explains how our basic and diluted Earnings Per Share ("EPS") were calculated for the three and six months ended June 28, 2003 and June 29, 2002 (unaudited, in thousands, except per share amounts):

        Basic EPS excludes all potentially dilutive securities. Basic EPS is computed by dividing net earnings by the weighted average number of common shares outstanding for the period. Diluted EPS includes all potentially dilutive securities. Diluted securities include stock options granted to our employees and shares that may be exchanged for the 6% Convertible Notes, if determined to be dilutive. Diluted EPS is computed by dividing net earnings, adjusted by the if-converted method for convertible securities, by the weighted average number of common shares outstanding for the period plus the number of additional common shares that would have been outstanding if the dilutive securities were issued. In the event the dilutive securities are anti-dilutive on earnings before cumulative effect of change in accounting principle (have the affect of increasing EPS), the impact of the dilutive securities is not included in the computation.

12.   Contingencies

        On May 27, 2003 a federal jury in Manhattan found in favor of our lawsuit against Procter & Gamble for false advertising. We challenged the superiority advertising claims Procter & Gamble utilized in support of the launch of its Tampax Pearl tampons. The jury found Procter & Gamble's superiority claims for comfort, absorbency, and protection to be false and misleading and awarded Playtex $2.96 million in damages. This award is subject to appeal and has not been recognized in our financial statements.

18

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.   Contingencies (Continued)

        In our opinion, there are no claims, commitments, guarantees or litigation pending to which we or any of our subsidiaries is a party which would have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

19

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with:

•

the unaudited consolidated financial statements and notes included in this report, and

•

audited consolidated financial statements and notes to consolidated financial statements included in our report on Form 10-K for the year ended December 28, 2002.

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995

        This document includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future results. When we use words in this document such as "anticipates," "intends," "plans," "believes," "estimates," "expects," and similar expressions we do so to identify forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements. These forward-looking statements are affected by risks, uncertainties, and assumptions that we make, including, among other things, the Risk Factors that are listed in Item I. of our Annual Report on Form 10-K for the year ended December 28, 2002, and:

        You should keep in mind that any forward-looking statement made by us in this document, or elsewhere, speaks only as of the date on which we make it. New risks and uncertainties come up from time to time, and it's impossible for us to predict these events or how they may affect us. In light of these risks and uncertainties, you should keep in mind that any forward-looking statements made in this report or elsewhere might not occur. In addition, the preparation of financial statements in accordance with generally accepted accounting principles requires us to make estimates and assumptions. These estimates and assumptions affect:

•

the reported amounts and timing of revenue and expenses,

•

the reported amounts and classification of assets and liabilities, and

•

the disclosure of contingent liabilities.

Actual results may vary from our estimates and assumptions. These estimates and assumptions are based on historical results, assumptions that we make as well as assumptions by third parties. The level of reserves for Sun Care product returns, bad debts and advertising and promotional costs are three areas of which you should be aware (see Management's Discussion and Analysis—Critical Accounting Policies). As part of our customary review and reconciliation process, we periodically record adjustments to our accounting estimates. During the second quarter of 2003, we reduced our reserves for certain advertising and sales promotion programs that occurred prior to this quarter by approximately $0.4 million based on the actual costs of these programs versus our original estimates. During the second quarter of 2002, we recorded additional expenses of $2.0 million to cover higher than expected Sun Care returns from the 2001 Sun Care season and, we reduced our reserves for certain advertising and sales promotion programs conducted prior to 2002 by $1.7 million based on the actual costs of these programs versus our original estimates.

20

PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)

Trademarks

        We have proprietary rights to a number of trademarks important to our business, such as: Active Sport, Baby Magic, Banana Boat, Binaca, Blasters, Big Sipster, Cool Colorz, CoolStraw, Diaper Genie, Dentax, Drop-Ins, Fast Blast, Gentle Glide, Get On The Boat, Gripster, HandSaver, Heat Therapy, Heavy Traffic, Insulator, LipPops, Most Like Mother, Mr. Bubble, Natural Action, Ogilvie, Oxy Deep, Power Shot, Precisely Right, QuickStraw, Quik Blok, Safe'N Sure, Silk Glide, SipEase, Slimfits, Sooth-A-Caine, Tub Mate, Tek, Tussy, VentAire, VitaSkin, and Wet Ones. We also own a royalty free license in perpetuity to the Playtex and Living trademarks, and to the Woolite trademark for rug and upholstery cleaning products in the United States and Canada.

Items Affecting Comparability

        Our results for the second quarter of 2003 are for the 13-week period ended June 28, 2003 and our results for the second quarter of 2002 are for the 13-week period ended June 29, 2002. All references to market share and market share data are for comparable 13-week periods and represent our percentage of the total U.S. dollar volume of products purchased by consumers in the applicable category (dollar market share or retail consumption). This information is provided to us from the ACNielsen Company and is subject to revisions. This market share data does not include scanner/consumption data from Wal-Mart Stores, Inc. as they ceased providing this information to third parties.

        In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS No. 145"). This statement updated, clarified and simplified existing accounting pronouncements and became effective for us starting in fiscal 2003. In most instances, SFAS No. 145 required gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under the old accounting rules. Starting in 2003, any gain or loss on extinguishment of debt previously classified as an extraordinary item in prior periods presented that does not meet the criteria of APB No. 30 for such classification was reclassified to conform to the provisions of SFAS No. 145. In accordance with SFAS No. 145, we have reclassified the May 2002 $5.9 million pre-tax loss from extraordinary loss to earnings from continuing operations. In addition, we reduced income tax expense by $2.2 million to reclassify the tax benefit of this transaction in accordance with the new accounting standard.

        We also adopted, on December 30, 2001, SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." As a result of the adoption of SFAS No. 142, we ceased the amortization of: (a) all of our remaining goodwill balance and (b) trademarks that are determined to have indefinite lives. This change favorably affected our reported net earnings in the second quarter of 2002 by $4.3 million and for the six month period ended June 29, 2002, this change favorably affected our reported net earnings by $8.6 million. Also in connection with the new requirements set forth in SFAS No. 142, we performed impairment tests on our indefinite-lived intangible assets based on a fair value concept. As a result of this testing, we recorded an after tax impairment in trademarks for certain non-core businesses of $12.4 million as a cumulative effect of change in accounting principles in the first quarter of 2002 (see Note 3 in our unaudited consolidated financial statements). The adoption of SFAS No. 141 had no impact on us.

        On March 7, 2002, the U.S. Treasury issued new regulations that replace the loss disallowance rules applicable to the sale of stock of a subsidiary member of a consolidated tax group. These regulations permit us to utilize a previously disallowed $135.1 million tax capital loss that resulted from the sale of Playtex Beauty Care, Inc., during fiscal 1999. We anticipate utilizing $40.0 million of the capital loss to offset a capital gain, in fiscal 2003, related to the retirement of our related party notes, which come due on December 15, 2003. Accordingly, we recorded a tax benefit of $14.3 million in the first quarter of 2002 (see Note 5 in our unaudited consolidated financial statements).

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PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)

Results of Operations

Three Months Ended June 28, 2003 Compared To
    Three Months Ended June 29, 2002

Consolidated Net Sales—Our consolidated net sales decreased $21.5 million, or 11%, to $180.0 million in the second quarter of 2003.

Personal Products Division—Net sales decreased $15.7 million, or 14%, to $99.4 million in the second quarter of 2003.

        Net sales of Infant Care products decreased $4.2 million, or 7%, to $58.8 million in the second quarter of 2003, mainly due to lower net sales in our non-core baby wipes business and less than expected category growth in a number of our categories. We believe the less than expected category growth is due to softness in the economy. We continue to show favorable market share trends in Infant Feeding and Wet Ones. In Infant Feeding, our market share has improved to 35.1% in the second quarter of 2003, up from 34.8% and 33.8% in the first quarter of 2003 and the fourth quarter of 2002, respectively. In Wet Ones, our market share reached 69.0% in the second quarter of 2003 versus 63.1% for the same quarter in 2002. Our market share in Baby Toiletries decreased by 0.6% to 7.8% in the second quarter of 2003 versus the same period in 2002. While our market share has declined slightly in Diaper Genie, we remain the dominant brand in the diaper pail category with a 91.8 share in the second quarter of 2003.

        Net sales of Feminine Care products decreased $11.5 million, or 22%, to $40.6 million in the second quarter of 2003. Overall, our dollar market share in the second quarter of 2003 was 27.3%, down versus the same quarter last year which was 30.3%, but up versus the first quarter of 2003 market share of 26.8%. The decline in our net sales reflects the impact of the market share decline as noted above as well as a timing difference between shipments and retail consumption. As noted in previous filings, heavy promotional activities occurred as a result of a major competitive launch in the plastic applicator segment. Our second quarter 2003 shipments remain negatively impacted as retailers and consumers continue to work down the inventory build accumulated during these promotional periods. We continue to invest in trade and promotional activities to protect our franchise in the long-term.

Consumer Products Division—Net sales decreased $4.2 million, or 8%, to $46.4 million in the second quarter of 2003.

        Net sales of Sun Care products decreased $2.7 million, or 9%, to $28.9 million in the second quarter of 2003. This decline in net sales was due to the unfavorable weather pattern in the early portion of the sun care season especially in the northeastern United States. It should be noted that the comparable period in 2002 included a reduction in net sales of $3.3 million to adjust for higher than expected 2001 seasonal returns. In Banana Boat, our market share increased 0.4 percentage points to 22.5% for the second quarter of 2003. Retail consumption in the sun care category has trended below the comparable year ago results for the three months ended June 28, 2003.

        Net sales of Household Products/Personal Grooming decreased $1.5 million, or 8%, to $17.5 million in the second quarter of 2003. This decrease is the result of lower shipments in Ogilvie and Binaca, despite market share gains in each product, as the home permanent and breath freshener categories continue to decline. Net Sales for our Woolite rug and upholstery products continued to increase over the prior year comparable quarter due to the success of our Woolite Oxy Deep launch in 2002. Our dollar market share for Woolite increased by 4.3 percentage points to 28.1% for the second quarter of 2003. In Gloves, our dollar market share decreased to 27.1% in the second quarter of 2003 versus 28.8% for the same period in 2002. This decline was due to a continuation of competitive activities including higher private label consumption likely driven by the softer economy.

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PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)

International/Corporate Sales Division—Net sales decreased $1.6 million, or 5%, to $34.3 million in the second quarter of 2003. The decrease was due primarily to lower Feminine Care and Sun Care net sales to the specialty classes of trade, offset, in part, by gains in Infant Care net sales.

Consolidated Gross Profit—Our consolidated gross profit decreased $20.6 million, to $93.2 million in the second quarter of 2003. As a percent of net sales, gross profit decreased 4.7 percentage points, to 51.8% in the second quarter of 2003. The decrease in gross profit and gross profit as a percent of net sales was due to the decrease in net sales, the mix of products sold and the impact of fixed manufacturing costs on lower production volumes.

Consolidated Product Contribution—Product contribution is defined as gross profit less advertising and sales promotion expenses. See Note 10 in our unaudited consolidated financial statements for a reconciliation of product contribution to operating earnings. Our consolidated product contribution decreased $25.7 million, or 29%, to $63.4 million in the second quarter of 2003. As a percent of net sales, product contribution decreased 9.0 percentage points to 35.2% in the second quarter of 2003. The decrease in product contribution and product contribution as a percent of net sales was due primarily to lower gross profit, as discussed, combined with higher overall advertising and sales promotion expenses. We increased our advertising and promotional expenses in defense of our tampon franchise.

Personal Products Division—Product contribution decreased $20.8 million, or 36%, to $37.1 million in the second quarter of 2003. As a percent of net sales, product contribution decreased 13.0 percentage points to 37.3% in the second quarter of 2003. The decrease in product contribution and product contribution as a percent of net sales was due to lower net sales, the mix of products sold, the impact of fixed manufacturing costs on lower production volumes and higher advertising and sales promotion expenses, mainly to defend our tampon franchise.

Consumer Products Division—Product contribution decreased $3.5 million, or 23%, to $11.6 million in the second quarter of 2003. As a percent of net sales, product contribution decreased 4.8 percentage points to 24.9% in the second quarter of 2003. The decrease in product contribution and product contribution as a percent of net sales was due primarily to lower net sales, partially attributable to the impact of the unfavorable weather, and lower gross profit.

International/Corporate Sales Division—Product contribution decreased $1.4 million, or 9%, to $14.8 million in the second quarter of 2003. As a percent of net sales, product contribution decreased 2.0 percentage points to 43.3% in the second quarter of 2003. The decrease in product contribution and product contribution as a percent of net sales was due to lower net sales, lower gross profit and higher advertising and sales promotion expenses as a percent of net sales.

Consolidated Operating Earnings—Our consolidated operating earnings decreased $27.2 million, or 56%, to $21.3 million in the second quarter of 2003. The decrease in operating earnings was the result of our lower net sales, gross profit and product contribution, and increased advertising and sales promotion expenses, as discussed.

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PLAYTEX PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)

Consolidated Interest Expense—Our consolidated interest expense decreased $1.9 million, or 12%, to $13.4 million in the second quarter of 2003. The decrease in interest expense was due to the combined impact of:

•

Lower average debt balances. Our average debt for the second quarter of 2003 was less than the comparable period by $25.9 million, or 3%, as a result of continued strategy to reduce our outstanding indebtedness. Our debt reduction since the beginning of fiscal 2002 is a follows:

•

we redeemed $20.0 million principal amount of 6% Convertible Notes on November 6, 2002 and an additional $20.0 million of principal on April 24, 2003;

•

we paid down $21.8 million of our variable rate indebtedness as part of the May 29, 2002 amendment to our Credit Facility;

•

we made two $2.25 million payments on our Term C Loan; one in September of 2002 and another in May of 2003;

•

we used our Revolving Credit Facility to meet borrowing needs primarily associated with peaks in working capital requirements throughout this period.

•

Lower interest rates when compared to the prior year. Our weighted average variable interest rate in the second quarter of 2003 was 3.98% compared to 4.63% in the second quarter of 2002.

Expenses Related to Retirement of Debt—On May 29, 2002, we amended our Credit Facility and issued a new $450.0 million Term C Loan and, together with $21.8 million of cash, we repaid in full our outstanding obligations under our Term A Loan and Term B Loan, which collectively totaled $471.8 million (see Note 8 in our unaudited consolidated financial statements). We recorded a pre-tax extraordinary loss during the second quarter ended June 29, 2002 of $5.9 million associated with the write-off of unamortized deferred financing costs relating to our Term A Loan and Term B Loan (see Note 8 in our unaudited consolidated financial statements). In accordance with SFAS No. 145, we have reclassified the $5.9 million pre-tax loss from extraordinary loss to earnings from continuing operations. In addition, we reduced income tax expense by $2.2 million to reclassify the tax benefit of this transaction in accordance with the new accounting standard.

Consolidated Other Expenses—Our consolidated other expenses decreased $0.1 million, or 16%, to $0.6 million in the second quarter of 2003. The amount charged to other expenses represents the discount offered to the third party on the sale of receivables and the amortization of deferred financing costs associated with the formation of the Receivables Facility.