approximately 27% of consolidated net sales and
our next four largest customers represented, in total, approximately 22% of consolidated net sales (see Note 15 to our consolidated financial
statements in this Annual Report on Form 10-K).
We reach our North American customers using
approximately 150 direct sales personnel, independent food brokers and specialized distributors. Independent brokers supplement the direct sales force
in the food class of trade by providing more effective coverage at the store level. Our North American sales force makes sales presentations at the
headquarters or home offices of our customers, where applicable, as well as to individual retail outlets. They focus their efforts on selling our
products, providing services to our customers and executing programs to ensure sales to the ultimate consumer. Consumer-directed programs include
arranging for on-shelf and separate displays and coordinating cooperative advertising participation.
For our International customers, we use primarily
in-country distributors who purchase the product from us and resell to the ultimate customer.
We use three third-party distribution centers in the
U.S. to ship the majority of our products to customers. These distribution centers are geographically located to maximize our ability to service our
customers. We operate our own distribution center in Canada, which distributes all of our product in that country. The majority of our other
International business is an export business, which is distributed from our U.S. locations.
Because of the short period between order and
shipment dates (generally less than one month) for most of our orders, the dollar amount of current backlog is not material and is not considered to be
a reliable indication of future sales volume.
| H. |
|
Research and Development |
Our research and development group operates
primarily out of our leased technical center in Allendale, New Jersey as well as our manufacturing facilities in Dover, Delaware. The primary focus of
our research and development group is to design and develop new and improved products that address our consumers’ wants and needs. In addition,
our research and development group provides technology support to both in-house and contract manufacturing and safety and regulatory support to all of
our businesses. As of December 25, 2004, approximately 80 employees were engaged in our research and development programs. In addition, we augment our
research and development workforce by contracting with content experts in various fields of science and engineering. Our research and development
expenses, included in SG&A, were $16.9 million in fiscal 2004, $16.3 million in fiscal 2003 and $15.2 million in fiscal 2002.
Government regulation has not materially restricted
or impeded our operations. Certain of our products are subject to regulation under the Federal Food, Drug and Cosmetic Act and the Fair Packaging and
Labeling Act. We are also subject to regulation by the Federal Trade Commission with respect to the content of our advertising, our trade practices and
other matters. We are subject to regulation by the United States Food and Drug Administration in connection with our manufacture and sale of tampons,
certain sun care products and antibacterial wipes.
| J. |
|
Trademarks and Patents |
We own rights to a number of United States, Canadian
and foreign trademarks that are important to our business, including, but not limited to: BABY MAGIC®, BANANA BOAT®,
BEYOND®, BIG SIPSTER®, DIAPER GENIE®, DROP-INS®, FIRST SIPSTER®, GENTLE GLIDE®, GET ON
THE BOAT®, GRIPSTER®, HANDSAVER®, HEAT THERAPY®, INSULATOR®, INSULATOR SPORT®,
LIPPOPS®, MADE STRONG TO LAST LONG®, MAKES GETTING CLEAN ALMOST AS MUCH FUN AS GETTING DIRTY®, MOST LIKE
MOTHER®, MR. BUBBLE®, NATURAL ACTION®, NATURALATCH™, NATURALSHAPE™, NOBODY
BABIES YOUR BABY BETTER®, OGILVIE®, PORTABLES®, QUICKSTRAW®, QUIK BLOK®, SAFE’N
SURE®, SILK GLIDE®, SIPEASE®, SLIMFITS®, SO COMFORTABLE YOU CAN’T EVEN FEEL THEM®, SOFT
COMFORT®, SUNTANICALS®, TWISTAWAY®, VENTAIRE®, WE GLOVE YOUR HANDS® and WET
ONES®.
6
In addition, we also own royalty-free licenses in
perpetuity to the PLAYTEX® and LIVING® trademarks in the United States, Canada and many foreign jurisdictions related to
certain of our feminine hygiene, baby care and other products, but excluding certain apparel related products.
We also own and license various United States,
Canadian and foreign patents, and have filed numerous patent applications in these jurisdictions, related to certain of our products and their method
of manufacture. Our patent rights expire at varying times and include, but are not limited to: cardboard and plastic applicators for tampons, special
over-wrap for tampons, baby bottles and nipples, disposable liners and plastic holders for the nurser systems, children’s drinking cups,
pacifiers, sunscreen formulation, and various containers for liquid and moist wipes products.
| K. |
|
Raw Materials and Suppliers |
The principal raw materials used in the manufacture
of our products are synthetic fibers, resin-based plastics, certain chemicals and certain natural materials, all of which are normally readily
available. While all raw materials are purchased from outside sources, we are not dependent upon a single supplier in any of our operations for any
material essential to our business or not otherwise commercially available to us. We have been able to obtain an adequate supply of raw materials, and
no shortage of any material is currently anticipated. Increases in raw material prices could have a significant impact on our results.
Approximately 50% of the products we sell are
produced by contract manufacturers. We own and maintain molds and other assets at some of these outside manufacturing locations. We have had strong and
long-term relationships with many of our key suppliers.
Our worldwide workforce consisted of approximately
1,500 employees as of December 25, 2004, of whom approximately 160 were located outside the United States, primarily in Canada. We believe that our
labor relations are satisfactory and no material labor cost increases are anticipated in the near future. None of our United States facilities had
union representation at December 25, 2004.
In February 2005, we announced a realignment of our
business to improve focus on our core categories, reduce organizational complexity and obtain a more competitive cost structure. As a result, we
anticipate there will be a reduction of more than 300 positions by the end of 2005, or approximately 20% of the workforce. The reduction will be
obtained through a combination of attrition, early retirement and layoffs.
We believe that we are 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 fiscal 2005.
| N. |
|
Availability of Reports and Other Information |
Our web site is www.playtexproductsinc.com. On
this web site, the public can access our annual, quarterly, and current reports, changes in the stock ownership of our Directors and Executive
Officers, and other documents filed with the Securities and Exchange Commission (“SEC”) as soon as reasonably practicable after the filing
date. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549.
You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site
that contains our reports, proxy statements and other information at www.sec.gov. Additionally, you can call our Investor Relations Department at
(203) 341-4017 or via email at investorrelations@playtex.com to request a copy of any of our reports filed with the SEC. Our chief executive and
chief financial officers have furnished the Sections 302 and 906 certifications required by the SEC in our Annual Report on Form 10-K. In addition, our
chief executive and chief financial officer has certified to the New York Stock Exchange (“NYSE”) that they are not aware of any violation by
us of NYSE corporate governance listing standards.
In addition, on our web site under the section
entitled, “Investor Relations — Corporate Governance,” we post copies of our (i) Corporate Governance Guidelines, (ii) charters for the
Audit Committee, Compensation Committee,
7
Executive Committee, Corporate Governance
Committee, Purchaser Nominating Committee and Non-Purchaser Nominating Committee, (iii) Code of Business Conduct and Ethics, and (iv) Procedures For
Investigating Employee Complaints Regarding Accounting Matters.
| O. |
|
Forward-Looking Statement |
This document includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information that are based on
forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and
business strategies. The statements contained in this document that are not statements of historical fact may include forward-looking statements that
involve a number of risks and uncertainties.
We have used the words “anticipate,”
“believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,”
“predict,” “project,” “will” and similar terms and phrases, including references to assumptions, in this document to
identify forward-looking statements. These forward-looking statements are made based on our management’s expectations and beliefs concerning
future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult
to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or
implied by these forward-looking statements. The following factors are among those that may cause actual results to differ materially from our
forward-looking statements:
|
|
• consumer demands and preferences,
• new product
introductions, promotional
activity and pricing adjustments by
competitors,
• the
loss or bankruptcy of a significant
customer,
• capacity limitations,
• the difficulties of
integrating acquisitions,
• raw material and manufacturing costs,
• adverse publicity and product liability
claims,
• impact of weather conditions, especially on
Sun Care product sales,
• our level of debt and related restrictions and limitations,
• interest rate and exchange rate fluctuations,
• future cash flows,
• dependence on key employees, and
• impact of unforeseen events, such as war or
terrorist attacks,
on economic conditions
and consumer confidence. |
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. Some of the more significant factors noted
above are described in more detail in the section titled “Risk Factors” included below.
Our business is subject to certain risks, and we
want you to review these risks while you are evaluating our business and our historical results. Please keep in mind, that any of the following risks
discussed below and elsewhere in this Annual Report could materially and adversely affect us, our operating results, our financial condition and our
projections and beliefs as to our future performance. As such, our results could differ materially from those projected in our forward-looking
statements. Additional risks and uncertainties not currently known to us or those we currently deem to be immaterial may also materially and adversely
affect our business.
We face significant competition from other consumer products companies, many of
which have significantly greater financial resources.
The markets for our products are highly competitive
and are characterized by the frequent introduction of new products, often accompanied by major advertising and promotional programs. We believe that
the market for consumer-packaged goods will continue to be highly competitive and that the level of competition may intensify in the future. Our
competitors consist of a large number of domestic and foreign companies, a number of which have significantly greater financial resources than we do
and are not as highly leveraged as we are. If we are unable to continue to introduce new and innovative products that are attractive to consumers, or
are unable to allocate
8
sufficient resources to effectively market and
advertise our products so that they achieve widespread market acceptance, we may not be able to compete effectively and our operating results and
financial condition will be adversely affected, which may also result in the impairment of certain tangible and or intangible assets.
Sales of some of our products may suffer because of unfavorable weather
conditions.
Our businesses, especially Sun Care, may be
negatively impacted by unfavorable weather conditions. In accordance with industry practice, we allow customers to return unsold Sun Care products at
the end of the season and these product returns are usually higher in years when the weather is unseasonably cool or wet. This could adversely affect
our business and operating results. In addition, consumption of our Feminine Care and Wet Ones products may be affected by unfavorable weather,
although to a lesser extent than the Sun Care business, due primarily to reduced levels of outdoor activities.
We may be adversely affected by the trend toward retail trade
consolidation.
With the growing trend toward retail trade
consolidation, we are increasingly dependent upon key retailers whose bargaining strength is growing. We may be negatively affected by changes in the
policies of our retail trade customers, such as inventory destocking, limitations on access to shelf space and other conditions.
We rely on a few large customers for a significant portion of our
sales.
A few of our customers are material to our business
and operations. In fiscal 2004, Wal-Mart, our largest customer, and Target, our second largest customer, represented approximately 28% and 11%,
respectively, of our consolidated net sales. Aggregate consolidated net sales to our next three largest customers represented approximately 11% of our
total consolidated net sales in fiscal 2004. The loss of sales to a large customer could materially and adversely affect us, our operating results, our
financial condition and our projections and beliefs as to our future performance.
Our initiatives to reduce costs may not materialize.
We initiated our operational restructuring program
in late 2003 to increase effectiveness and reduce costs. In February 2005, we announced the second phase of this realignment, which will reduce
headcount and operational complexity. There is no assurance that we will achieve the expected cost savings or that these programs will be completed
within the initially anticipated time frame.
Possible acquisitions are subject to risks and may not be
successful.
We may consider the acquisition of other companies
engaged in the manufacture and sale of consumer products. At any given time, we may be in various stages of looking at these opportunities.
Acquisitions are subject to the negotiation of definitive agreements and to other matters typical in acquisition transactions. There can be no
assurance that we will be able to identify desirable acquisition candidates or will be successful in entering into definitive agreements relating to
them. Even if definitive agreements are entered into, we cannot assure you that any future acquisition will be completed or that anticipated benefits
of the acquisition will be realized. The process of integrating acquired operations into our operations may result in unforeseen operating
difficulties, may absorb significant management attention and may require significant financial resources that would otherwise be available for the
ongoing development or expansion of our existing operations. Future acquisitions by us could result in the incurrence of additional debt and contingent
liabilities, which may have a negative effect on our operating results.
By virtue of its significant stock position and other rights, Haas Wheat will be
able to significantly influence our company and its interests may conflict with yours.
Haas Wheat & Partners, L.P. (“Haas
Wheat”) and its affiliates together hold approximately 28% of the outstanding shares of our common stock. Until June 6, 2005, our by-laws provide
that a committee consisting of directors affiliated with Haas Wheat has the right to nominate a number of persons for election as directors of our
company equal to a simple majority of our board of directors. By virtue of its voting power and these by-law provisions, Haas Wheat will be able to
significantly influence the Company. In particular, circumstances may occur in which the interests of Haas Wheat could be in conflict with your
interests.
9
We may be unable to adequately protect our intellectual property.
While we believe that our patents, trademarks and
other intellectual property have significant value, it is uncertain that this intellectual property, or any intellectual property acquired or developed
by us in the future, will provide meaningful competitive advantages. There can be no assurance that our patents or pending applications will not be
challenged, invalidated or circumvented by competitors or that rights granted thereunder will provide meaningful proprietary protection. Moreover,
competitors may infringe our patents or successfully avoid them through design innovation. To combat infringement or unauthorized use, we may need to
commence litigation, which can be expensive and time-consuming. In addition, in an infringement proceeding a court may decide that a patent, trademark
or other intellectual property right of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology or other
intellectual property right at issue on the grounds that it is non-infringing. Policing unauthorized use of our intellectual property is difficult and
expensive, and we cannot assure you that we will be able to, or have the resources to, prevent misappropriation of our proprietary rights, particularly
in countries where the laws may not protect such rights as fully as do the laws of the United States.
We may face liability associated with the use of products for which patent
ownership or other intellectual property rights are claimed.
We may be subject to claims or inquiries regarding
alleged unauthorized use of a third party’s intellectual property. An adverse outcome in any intellectual property litigation could subject us to
significant liabilities to third parties, require us to license technology or other intellectual property rights from others, require us to comply with
injunctions to cease marketing or using certain products or brands, or require us to redesign, reengineer or rebrand certain products or packaging, any
of which could affect our business, financial condition and results of operations. If we are required to seek licenses under patents, trademarks or
other intellectual property rights of others, we may not be able to acquire these licenses on acceptable terms, if at all. In addition, the cost of
responding to an intellectual property infringement claim, in terms of legal fees and expenses and the diversion of management resources, whether or
not the claim is valid, could have a material adverse effect on our business, financial condition and results of operations.
We have substantial debt, which could impair our financial
condition.
Our indebtedness at December 25, 2004 consisted of
$800.0 million in Notes. As more fully described in Note 6 to our consolidated financial statements in this Annual Report on Form 10-K, we are highly
leveraged. However, other than interest payment obligations, we do not have required debt service obligations for our Notes until
2011.
The degree to which we are leveraged could have
important consequences to us, including:
• |
|
our ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired; |
• |
|
a significant portion of our cash from operations must be
dedicated to the payment of interest on our debt,
which reduces the funds available to us for our operations; |
• |
|
our vulnerability in a period of significant economic downturn;
and |
• |
|
limitation on our ability to withstand significant and sustained
competitive pressures. |
The terms of our credit facility and our indentures may limit certain
activities.
Our credit facility and the indentures governing the
Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on us, including among other things our
ability to:
• |
|
incur additional debt and contingent obligations; |
• |
|
pay dividends and make restricted payments; |
• |
|
make investments, loans and acquisitions; |
• |
|
make payments on certain debt and modifications to certain
debt; |
• |
|
sell assets and subsidiary stock; |
10
• |
|
enter into transactions with affiliates, and; |
• |
|
enter into certain mergers, consolidations and transfers of all
or substantially all of our assets. |
A failure to comply with the restrictions contained
in our credit facility could lead to an event of default, which could result in an acceleration of any indebtedness outstanding under our credit
facility and could cause a cross-default of our indentures. A failure to comply with the restrictions in our indentures could result in an event of
default under our indentures and could cause a cross-default of our credit facility. We cannot assure you that our future operating results will be
sufficient to enable us to remedy any such default. In addition, in the event of an acceleration, we may not have or be able to obtain sufficient funds
to make any accelerated payments.
Our principal executive office is located in
Westport, Connecticut and is occupied pursuant to a lease which expires in 2011 with a five year option to renew. Our principal U.S. manufacturing
facilities are located in Dover, Delaware and Sidney and Streetsboro, Ohio. We maintain a research and development facility in Allendale, New Jersey
under a lease which expires in 2013. We operate two facilities in Canada. We own our Arnprior, Ontario facility, which is primarily a warehouse and
assembly operation, and we lease the Mississauga, Ontario facility, which is a warehouse and office site. This lease expires in 2006. In fiscal 2004,
our average utilization rate of manufacturing capacity was an estimated 60%.
The following table lists our principal owned and
leased properties as of March 1, 2005.
Owned
|
|
Number
of
Facilities
|
|
Estimated
Square
Footage
|
Dover,
DE |
|
|
3 |
|
|
|
710,000 |
|
Streetsboro,
OH |
|
|
1 |
|
|
|
189,700 |
|
Arnprior,
Canada |
|
|
1 |
|
|
|
91,800 |
|
Sidney,
OH |
|
|
1 |
|
|
|
54,400 |
|
|
Leased
|
|
|
|
|
|
|
|
|
Dover,
DE |
|
|
3 |
|
|
|
108,900 |
|
Sidney,
OH |
|
|
2 |
|
|
|
216,800 |
|
Mississauga,
Canada |
|
|
1 |
|
|
|
72,800 |
|
Westport,
CT |
|
|
1 |
|
|
|
59,100 |
|
Allendale,
NJ |
|
|
1 |
|
|
|
43,500 |
|
Guaynabo,
PR |
|
|
1 |
|
|
|
15,700 |
|
Orlando,
FL |
|
|
1 |
|
|
|
10,400 |
|
In addition, we also lease regional sales offices
throughout the U.S.
| Item 3. |
|
Legal Proceedings |
Beginning in 1980, published studies reported a
statistical association between tampon use and Toxic Shock Syndrome (“TSS”), a rare, but potentially serious illness. Since these studies,
numerous claims have been filed against all tampon manufacturers, a small percentage of which have been litigated to conclusion. The number of TSS
claims relating to our tampons has declined substantially over the years. As of the end of February 2005, there was one pending claim. Additional
claims, however, may be asserted in the future.
We are a defendant in various other legal
proceedings, claims and investigations that arise in the normal course of business. In our opinion, the ultimate disposition of these matters,
including those described above, will not have a material adverse effect on our consolidated financial position, results of operations or cash
flows.
| Item 4. |
|
Submission of Matters to a Vote of Security
Holders |
Not applicable
11
| Item 4A. |
|
Our Executive Officers |
Listed below are our executive officers as of March
1, 2005 and a short description of their prior work experiences. There are no family relationships or arrangements between any of them pursuant to
which they were hired or promoted by the Company.
Name
|
|
|
|
Age
|
|
Position
|
Neil P.
DeFeo |
|
|
|
|
58 |
|
|
President, Chief
Executive Officer and Director |
Kris J.
Kelley |
|
|
|
|
45 |
|
|
Executive Vice
President and Chief Financial Officer |
Perry R.
Beadon |
|
|
|
|
54 |
|
|
Senior Vice
President, Global Sales |
James S.
Cook |
|
|
|
|
53 |
|
|
Senior Vice
President, Operations |
Paul A.
Siracusa, Ph.D. |
|
|
|
|
48 |
|
|
Senior Vice
President, Research and Development |
Gretchen R.
Crist |
|
|
|
|
37 |
|
|
Vice President,
Human Resources |
Vincent S.
Viviani |
|
|
|
|
52 |
|
|
Vice President,
Quality Systems |
Paul E.
Yestrumskas |
|
|
|
|
53 |
|
|
Vice President,
General Counsel and Secretary |
Neil P. DeFeo has been President, Chief
Executive Officer and a Director since October 2004. Prior to joining the Company, Mr. DeFeo served as President and Chief Executive Officer of
Remington Products Company, L.L.C. (“Remington”), a consumer products company, and as Chairman of the Board of Remington from 2001 to
September 30, 2003. From 1993 to 1996, Mr. DeFeo served as Group Vice President of U.S. Operations of The Clorox Company, and from 1968 to 1993 he held
positions of increasing responsibility at Procter & Gamble. Presently he serves as a director of American Woodmark Corporation (AMWD), The Rayovac
Corporation (ROV) and several privately held companies.
Kris J. Kelley has been Executive Vice
President and Chief Financial Officer since December 2004 and was Senior Vice President Finance since joining the Company in October 2004. Mr. Kelley
was Vice President of Finance and Controller at Remington from 1997 to 2004. Prior to that Mr. Kelley held various positions in financial management at
Uniroyal Chemical Company, Kendall International, Inc. and the Henley Group.
Perry R. Beadon has been Senior Vice
President, Global Sales since 2005. Prior to joining us in January 2005, Mr. Beadon was Senior Vice President, Sales — North America with
Remington from 1998 to 2004. From 1992 to 1998, he was President of Remington, Canada and from 1987 to 1992, he was Director of Canadian Sales. Prior
to that, Mr. Beadon held various marketing and merchandising positions with several specialty retail chains.
James S. Cook has been Senior Vice President,
Operations since 1991. From 1990 to 1991, he was our Vice President of Dover Operations. From 1988 to 1990, he was our Vice President of Distribution,
Logistics & Management Information Systems. Prior to that, Mr. Cook held various senior level positions in manufacturing and distribution with the
Company and with Procter & Gamble Co.
Paul A. Siracusa, Ph.D. has been Senior Vice
President, Research and Development since 2000. From 1997 to 2000, he was Senior Vice President Research and Development for Reckitt & Colman
(“R&C”), a consumer products company. From 1995 to 1997, he was Divisional Vice President of Research & Development, North America
for R&C. Prior to that, he held various research and development positions with Lehn & Fink Group of Sterling Drug, Henkel Corporation,
International Flavors and Fragrances, and Union Carbide Corporation.
Gretchen R. Crist has been Vice President of
Human Resources for the Company since 2005. From 2003 to 2004, she was our Director of Human Resources. Prior to that, from 2000 to 2003, Ms. Crist was
Vice President of Human Resources at The New Power Company. From 1996 to 2000 she was the Director of Human Resources at Playtex Products, Inc. Prior
to that she held various positions within Human Resources at Philip Morris Companies, Inc., Nestle Waters North America and Kraft General Foods
Corporation.
Vincent S. Viviani has been Vice President of
Quality Systems since 1998. Mr. Viviani was Director of Canadian & External Manufacturing for R&C from 1994 to 1998 and held the same position
for Eastman Kodak’s L&F Products subsidiary from 1988 to 1994. Prior to that, he held various manufacturing and distribution positions at
Revlon.
Paul E. Yestrumskas has been Vice President,
General Counsel and Secretary since 1995. Prior to joining us, Mr. Yestrumskas was Senior Counsel of Rhone–Poulenc, Inc. from 1991 to 1995. Prior
to 1991, Mr. Yestrumskas held various positions in legal and government relations at Timex, Hubbell, Inc. and General Motors.
12
PART II
| Item 5. |
|
Market for Registrant’s Common Equity and Related
Stockholder Matters |
Our common stock is traded on the New York Stock
Exchange under the symbol “PYX”. No cash dividends have ever been paid on our stock. Because we are restricted in our ability to pay
dividends by the terms of our debt agreements (see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
— Liquidity and Capital Resources and Note 6 to our consolidated financial statements in this Annual Report on Form 10-K), we do not expect to pay
any dividends in the foreseeable future.
The following table lists the high and low sale
price per share of our stock during fiscal 2004 and fiscal 2003 as reported by the New York Stock Exchange — Composite
Transactions:
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Fiscal
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
|
$ |
8.69 |
|
|
$ |
7.85 |
|
|
$ |
7.95 |
|
|
$ |
7.80 |
|
Low |
|
|
|
$ |
6.02 |
|
|
$ |
6.32 |
|
|
$ |
6.05 |
|
|
$ |
5.47 |
|
Fiscal
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
|
$ |
9.90 |
|
|
$ |
8.93 |
|
|
$ |
7.15 |
|
|
$ |
7.95 |
|
Low |
|
|
|
$ |
7.51 |
|
|
$ |
5.55 |
|
|
$ |
5.82 |
|
|
$ |
5.81 |
|
We have two classes of authorized
stock:
• |
|
Common Stock, par value $.01 per share 226 holders of record,
authorized 100,000,000 shares, issued and outstanding 61,216,723 shares at March 1, 2005, and |
• |
|
Preferred stock, par value $.01 per share, authorized 50,000,000
shares, none issued or outstanding as of March 1, 2005. |
| Item 6. |
|
Selected Financial Data |
The following selected financial data are extracted
from our Consolidated Financial Statements and should be read in conjunction with our audited consolidated financial statements and notes, included in
Item 8 of this Annual Report on Form 10-K presented on pages F-4 through F-37.
(In thousands)
|
|
|
|
Year Ended(1)
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
|
December 28,
2002
|
|
December 29,
2001
|
|
December 30,
2000
|
Statements
of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
|
|
$ |
666,896 |
|
|
$ |
643,874 |
|
|
$ |
703,617 |
|
|
$ |
708,763 |
|
|
$ |
718,368 |
|
Gross
profit |
|
|
|
|
343,739 |
|
|
|
326,573 |
|
|
|
375,184 |
|
|
|
374,956 |
|
|
|
383,385 |
|
Operating
income |
|
|
|
|
131,143 |
(2) |
|
|
85,834 |
(3) |
|
|
141,507 |
(4) |
|
|
133,991 |
|
|
|
147,937 |
|
Interest
expense, net |
|
|
|
|
69,561 |
|
|
|
55,038 |
|
|
|
59,543 |
|
|
|
75,861 |
|
|
|
84,884 |
|
Net
income |
|
|
|
$ |
55,507 |
(5) |
|
$ |
18,232 |
|
|
$ |
48,904 |
(5)(6) |
|
$ |
11,545 |
(5) |
|
$ |
35,544 |
|
Net earnings
per share — diluted |
|
|
|
$ |
0.91 |
|
|
$ |
0.30 |
|
|
$ |
0.79 |
|
|
$ |
0.19 |
|
|
$ |
0.58 |
|
Weighted
average shares — diluted |
|
|
|
|
61,225 |
|
|
|
61,227 |
|
|
|
63,948 |
|
|
|
61,115 |
|
|
|
62,585 |
|
Cash Flow
and Related Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by operations |
|
|
|
$ |
72,729 |
|
|
$ |
47,159 |
|
|
$ |
77,797 |
|
|
$ |
127,394 |
|
|
$ |
78,726 |
|
Capital
expenditures |
|
|
|
|
13,871 |
|
|
|
18,564 |
|
|
|
16,445 |
|
|
|
19,550 |
|
|
|
22,724 |
|
Depreciation |
|
|
|
|
14,768 |
|
|
|
14,102 |
|
|
|
14,011 |
|
|
|
13,140 |
|
|
|
11,547 |
|
Amortization
of intangibles |
|
|
|
$ |
1,293 |
|
|
$ |
903 |
|
|
$ |
928 |
(7) |
|
$ |
22,060 |
|
|
$ |
22,350 |
|
Balance
Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
|
|
$ |
137,766 |
|
|
$ |
27,453 |
|
|
$ |
31,605 |
|
|
$ |
34,006 |
|
|
$ |
10,282 |
|
Working
capital(8) |
|
|
|
|
61,974 |
|
|
|
86,497 |
|
|
|
83,321 |
|
|
|
73,774 |
|
|
|
63,951 |
|
Total
assets |
|
|
|
|
1,091,390 |
|
|
|
993,298 |
|
|
|
1,078,187 |
|
|
|
1,105,172 |
|
|
|
1,139,384 |
|
Total
long-term debt, excluding due to related party |
|
|
|
|
800,000 |
|
|
|
793,250 |
|
|
|
827,750 |
|
|
|
888,800 |
|
|
|
931,563 |
|
Stockholders’ equity (deficit) |
|
|
|
$ |
83,935 |
|
|
$ |
27,788 |
|
|
$ |
5,533 |
|
|
$ |
(44,570 |
) |
|
$ |
(56,063 |
) |
13
(1) |
|
Our fiscal year end is on the last Saturday in December nearest
to December 31 and, as a result, a fifty-third week is added every five or six years. Fiscal 2000 was a fifty-three week year. All other years
presented are fifty-two week years. |
(2) |
|
Includes net restructuring charges of $10.0 million and $3.5
million of restructuring related costs included in SG&A, as a result of our operational restructuring initiated in December 2003 and our recently
announced strategic realignment (see Note 3 to our consolidated financial statements in this Annual Report on Form 10-K). Includes an intangible asset
impairment charge of $16.4 million related to the write-down of certain trademarks due to a change in the competitive environment for Baby Magic
and a declining liquid breath fresheners category coupled with a strategy shift in our non-core Binaca brand. Also includes a gain on the sale
of our Woolite rug and upholstery brand assets of $56.5 million. |
(3) |
|
Includes a restructuring charge of $3.9 million, and $0.7
million of other related expenses included in SG&A, as a result of our operational restructuring announced in December 2003 (see Note 3 to our
consolidated financial statements in this Annual Report on Form 10-K). |
(4) |
|
Includes an aggregate restructuring and asset impairment charge
of $7.6 million as a result of the closing of our Watervliet, New York plastic molding facility (see Note 3 to our consolidated financial statements in
this Annual Report on Form 10-K). |
(5) |
|
Includes, in 2004, a write off of unamortized deferred financing
fees of $6.7 million associated with the February 2004 refinancing and termination of our then outstanding bank indebtedness and receivables facility.
In addition, this includes a net gain related to the repurchase on the open market of $10.0 million principal amount of our 9-3/8% Notes, resulting in
a gain of approximately $0.5 million, which was offset in part by approximately $0.2 million write-off of unamoritzed deferred financing fees. In 2002,
we recorded a write-off of unamortized deferred financing fees of $5.9 million related to the retirement of our then outstanding indebtedness. In 2001,
we recorded a write-off of $32.2 million of fees and other costs associated with the retirement of our then outstanding indebtedness. |
(6) |
|
Includes a charge for the cumulative effect of accounting change
of $12.4 million, net of income tax benefit of $7.1 million, as a result of our implementation of SFAS No. 142 “Goodwill and Other Intangible
Assets” (see Note 1 to our consolidated financial statements in this Annual Report on Form 10-K). More than offsetting this charge is a tax
benefit of $14.3 million recorded as a result of new tax regulation associated with loss disallowance rules (see Note 10 to our consolidated financial
statements in this Annual Report on Form 10-K). |
(7) |
|
Amortization of intangible assets with indefinite lives was
discontinued as a result of our implementation of SFAS No. 142 (see Note 1 to our consolidated financial statements in this Annual Report on Form
10-K). |
(8) |
|
Defined as current assets (excluding cash and cash equivalents)
less current liabilities. |
14
| Item 7. |
|
Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
Overview
We are a leading manufacturer and marketer of a
diversified portfolio of well-recognized branded consumer products. For the year ended December 25, 2004, we generated approximately 98% of our sales
from products in the number one or number two market share position in the United States. Our lines of business include Infant Care, Feminine Care, Sun
Care and Household and Personal Grooming products.
In February 2005, we announced a realignment plan to
improve focus on our core categories, reduce organizational complexity and obtain a more competitive cost structure. This is a continuation of our
operational restructuring that began in late 2003. Some of the specific realignment initiatives include: consolidation of the U.S./International
divisional structure in favor of a product category structure, realignment of the sales and marketing organizations and related support functions,
rationalization of manufacturing, warehousing and office facilities, including the outsourcing of gloves production to Malaysia and a reduction in the
corporate headquarters office space. We estimate that annual savings related to this phase will be between $22 and $24 million, which will be fully
realized in 2006. We expect net savings from the actions to be between $4 and $8 million in 2005.
We estimate that charges related to the realignment
are expected to total between $17 and $19 million by the end of 2005. Of this amount, we recorded $10.2 million of restructuring costs and $0.4 million
of other related costs (in SG&A) in the fourth quarter of 2004 related primarily to severance costs under our existing severance policy. Management
estimates that: cost for and related to severance for employee terminations and a voluntary early retirement program will be in the range of $13 to $14
million; costs for contract termination will be in the range of $2 to $3 million; and other related expenses will be approximately $1 to $2 million. We
estimate that cash payments associated with this realignment will total between $15 and $17 million and will occur during 2005 and into 2006 (see Note
3 to our consolidated financial statements in this Annual Report on Form 10-K).
In the fourth quarter of 2004, we concluded that an
asset impairment charge was required due to the impact of increased competition in baby toiletries and the impact of a change in strategic focus and
the decline in the liquid breath freshener category for our Binaca brand. This non-cash charge of $16.4 million was required to write down the
value of our Baby Magic and Binaca trademarks (see Note 1 to our consolidated financial statements in this Annual Report on Form
10-K).
On November 2, 2004, we completed the sale of the
assets of our Woolite rug and upholstery brand to Bissell Homecare, Inc. (see Note 8 to our consolidated financial statements in this Annual Report on
Form 10-K). This transaction resulted in a gain of $56.5 million on net proceeds of $59.9 million. Woolite accounted for approximately 4% of
consolidated net sales in fiscal 2004 compared to 5% in fiscal 2003 and 4% in fiscal 2002. Our 2004 results include the impact of Woolite sales and
operating income through November 2, 2004.
In October 2004, a new management team took over the
leadership at Playtex. Mr. Neil P. DeFeo was named President and Chief Executive Officer. Mr. Kris J. Kelley joined Playtex as Senior Vice President
Finance and in December 2004 was named Executive Vice President and Chief Financial Officer. The new management team has worked extensively to
understand our brands and our operations.
In February 2004, we refinanced our then outstanding
senior indebtedness. The new financing provides improved liquidity and eliminates financial maintenance covenants and near term principal amortization
that were part of our prior credit facility. Since our new debt is predominately long-term bonds, an effort to reduce debt requires us to repurchase
bonds on the open market, in privately negotiated transactions or otherwise from time to time. While our intent is to utilize a portion of excess cash
to repurchase bonds in the future, such actions will depend on bond availability and premium levels and are subject to certain limitations and
conditions contained in our credit facility.
Fiscal 2003 includes $3.9 million in restructuring
costs, primarily for severance costs for employee terminations and costs associated with a voluntary early retirement program, related to the first
phase of our operational restructuring announced in 2003. This is compared with the fiscal 2002 restructuring charge of $3.4 million and an associated
asset impairment charge of $4.2 million related to the closure of our Watervliet, New York plastic molding facility (see Note 3 to our consolidated
financial statements in this Annual Report on Form 10-K).
As part of a review of the classification of certain
expenses, in the second quarter of 2004, we reclassified cash discount expense as a reduction of revenue. Previously, this expense was included in
SG&A. This reclassification amounted to $13.8 million in fiscal 2003 and $15.5 million in fiscal 2002. While this discount is a payment incentive,
we are now including this with other trade incentives previously reported as a reduction to net sales by employing a broader definition of the Emerging
Issues Task Force (“EITF”) No. 01-9, “Accounting for Consideration Given By a Vendor to a Customer (Including a Reseller of the
Vendor’s Products).”
15
Results of Operations
The following table sets forth our Consolidated
Statements of Income, including net sales by major product lines, as well as our consolidated results of operations expressed as a percentage of net
sales for the years ended December 25, 2004, December 27, 2003 and December 28, 2002. The discussion should be read in conjunction with our
Consolidated Financial Statements and accompanying notes in this Annual Report on Form 10-K.
($ in thousands)
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25, 2004
|
|
December 27, 2003
|
|
December 28, 2002
|
|
|
|
|
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
Net
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infant
Care |
|
|
|
$ |
260,534 |
|
|
|
39.1 |
|
|
$ |
254,847 |
|
|
|
39.6 |
|
|
$ |
266,774 |
|
|
|
37.9 |
|
Feminine
Care |
|
|
|
|
227,057 |
|
|
|
34.0 |
|
|
|
213,326 |
|
|
|
33.1 |
|
|
|
250,816 |
|
|
|
35.6 |
|
Sun
Care |
|
|
|
|
111,834 |
|
|
|
16.8 |
|
|
|
98,224 |
|
|
|
15.3 |
|
|
|
100,415 |
|
|
|
14.3 |
|
Household and
Personal Grooming |
|
|
|
|
41,958 |
|
|
|
6.3 |
|
|
|
46,559 |
|
|
|
7.2 |
|
|
|
56,545 |
|
|
|
8.1 |
|
|
|
|
|
|
641,383 |
|
|
|
96.2 |
|
|
|
612,956 |
|
|
|
95.2 |
|
|
|
674,550 |
|
|
|
95.9 |
|
Woolite |
|
|
|
|
25,513 |
|
|
|
3.8 |
|
|
|
30,918 |
|
|
|
4.8 |
|
|
|
29,067 |
|
|
|
4.1 |
|
|
|
|
|
|
666,896 |
|
|
|
100.0 |
|
|
|
643,874 |
|
|
|
100.0 |
|
|
|
703,617 |
|
|
|
100.0 |
|
Cost of
sales |
|
|
|
|
323,157 |
|
|
|
48.5 |
|
|
|
317,301 |
|
|
|
49.3 |
|
|
|
328,433 |
|
|
|
46.7 |
|
Gross
profit |
|
|
|
|
343,739 |
|
|
|
51.5 |
|
|
|
326,573 |
|
|
|
50.7 |
|
|
|
375,184 |
|
|
|
53.3 |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
|
|
241,428 |
|
|
|
36.2 |
|
|
|
235,963 |
|
|
|
36.7 |
|
|
|
225,150 |
|
|
|
32.0 |
|
Restructuring, net |
|
|
|
|
9,969 |
|
|
|
1.5 |
|
|
|
3,873 |
|
|
|
0.6 |
|
|
|
3,377 |
|
|
|
0.5 |
|
Loss on
impairment of assets |
|
|
|
|
16,449 |
|
|
|
2.5 |
|
|
|
— |
|
|
|
— |
|
|
|
4,222 |
|
|
|
0.6 |
|
Amortization
of intangibles |
|
|
|
|
1,293 |
|
|
|
0.2 |
|
|
|
903 |
|
|
|
0.1 |
|
|
|
928 |
|
|
|
0.1 |
|
Total
operating expenses |
|
|
|
|
269,139 |
|
|
|
40.4 |
|
|
|
240,739 |
|
|
|
37.4 |
|
|
|
233,677 |
|
|
|
33.2 |
|
Gain on sale of
assets |
|
|
|
|
56,543 |
|
|
|
8.6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Operating
income |
|
|
|
|
131,143 |
|
|
|
19.7 |
|
|
|
85,834 |
|
|
|
13.3 |
|
|
|
141,507 |
|
|
|
20.1 |
|
Interest
expense |
|
|
|
|
69,561 |
|
|
|
10.4 |
|
|
|
55,038 |
|
|
|
8.5 |
|
|
|
59,543 |
|
|
|
8.5 |
|
Expenses
related to retirement of
debt, net |
|
|
|
|
6,432 |
|
|
|
1.0 |
|
|
|
— |
|
|
|
— |
|
|
|
5,882 |
|
|
|
0.8 |
|
Other
expenses |
|
|
|
|
353 |
|
|
|
0.1 |
|
|
|
1,975 |
|
|
|
0.3 |
|
|
|
2,653 |
|
|
|
0.4 |
|
Income before
income taxes and cumulative effect of accounting change |
|
|
|
|
54,797 |
|
|
|
8.2 |
|
|
|
28,821 |
|
|
|
4.5 |
|
|
|
73,429 |
|
|
|
10.4 |
|
Provision
(benefit) for income taxes |
|
|
|
|
(710 |
) |
|
|
(0.1 |
) |
|
|
10,589 |
|
|
|
1.7 |
|
|
|
12,102 |
|
|
|
1.7 |
|
Income before
cumulative effect of accounting change |
|
|
|
|
55,507 |
|
|
|
8.3 |
|
|
|
18,232 |
|
|
|
2.8 |
|
|
|
61,327 |
|
|
|
8.7 |
|
Cumulative
effect of accounting change,
net of $7,141 tax benefit |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12,423 |
) |
|
|
(1.8 |
) |
Net
income |
|
|
|
$ |
55,507 |
|
|
|
8.3 |
|
|
$ |
18,232 |
|
|
|
2.8 |
|
|
$ |
48,904 |
|
|
|
6.9 |
|
Year Ended December 25, 2004 Compared To Year Ended December 27,
2003
Net Sales — Our consolidated net sales increased $23.0 million, or 4%,
to $666.9 million in 2004.
Net sales of Infant Care products increased $5.7
million, or 2%, to $260.5 million in 2004 due to higher shipment volume versus the comparable period, primarily due to Wet Ones hand and face
towelettes and disposable and reusable bottles. The gains in these areas were partially offset by lower shipments in cups as competitive activity
continues in this category.
Net sales of Feminine Care products increased $13.7
million, or 6%, to $227.1 million in 2004. This increase is due primarily to higher shipment volume driven by the launch of Beyond, our new
cardboard applicator tampon,
16
in the first quarter of 2004 and stabilization of our overall
tampon market share. Our tampon market share has been relatively flat since the fourth quarter of 2003.
Net sales of Sun Care products increased $13.6
million, or 14%, to $111.8 million in 2004. The increase in net sales is due primarily to higher shipment volume related to improved weather versus the
prior year. In 2003, poor weather conditions resulted in decreased consumption. We continue to shift product shipments closer to consumption. As a
result, 2004 was positively impacted by the shift of approximately $3 million of shipments from the fourth quarter of 2003 into the first quarter of
2004. This was a continuation of a trend noted in 2003.
Net sales of Household and Personal Grooming
products decreased $4.6 million, or 10%, to $42.0 million in 2004. This decrease was due to lower shipment volumes in our Personal Grooming categories,
which was a continuation of a declining category trend, and lower glove shipments due to competitive activity.
Net sales of Woolite decreased $5.4 million, or 17%,
to $25.5 million in 2004, primarily as a result of our sale of the assets of the Woolite rug and upholstery brand to Bissell Homecare, Inc. on November
2, 2004.
Gross Profit — Our consolidated gross profit increased $17.2 million,
or 5%, to $343.7 million in 2004. As a percent of net sales, gross profit increased 0.8 percentage points to 51.5% in 2004 versus 2003. The increase in
gross profit was due primarily to the increase in net sales, which accounted for approximately $12 million. The increase in gross profit as a percent
of net sales was due primarily to improved product costs due, in part, to the first phase of our operational restructuring efforts announced in
2003.
Operating Income — Our consolidated operating income increased $45.3
million, or 53%, to $131.1 million in fiscal 2004. This increase was driven by a gain on the sale of Woolite assets of $56.5 million partially offset
by a loss on asset impairment of $16.4 million and net restructuring charges of $10.0 million. In fiscal 2003, operating income was negatively impacted
by a restructuring charge of $3.9 million. Exclusive of these items, consolidated operating income increased $11.3 million or 13% as compared to fiscal
2003. This increase was due to higher gross profit of $17.2 million driven by higher net sales partially offset by higher SG&A of $5.5 million as
compared to fiscal 2003.
The increase in SG&A of $5.5 million as compared
to fiscal 2003 was driven by $3.5 million of consulting and restructuring related costs as a result of our realignment initiatives, $2.2 million of
costs associated with implementation of the internal control requirements of the Sarbanes-Oxley Act of 2002 and higher advertising and promotional
expenses of $2.1 million. Included in SG&A for fiscal 2003 were $3.8 million of tampon litigation costs, which were reduced to $0.4 million in
fiscal 2004. Operating income in 2003 was also positively impacted by $1.7 million of out-of-period adjustments related primarily to a reduction of our
estimate for advertising and promotional costs.
Amortization of intangibles increased by $0.4
million as compared to fiscal 2003 due primarily to the commencement of amortization of the non-compete agreement for the former CEO in the fourth
quarter of 2004.
Interest Expense — Our consolidated interest expense increased $14.5
million to $69.6 million in 2004. The increase in interest expense is the result of higher interest rates on outstanding debt driven by the refinancing
of our then existing senior debt in February 2004. The refinancing changed the composition of our debt such that we have considerably less variable
rate indebtedness, although at higher interest rates, and more fixed rate debt. In 2004, our weighted average interest rate for all debt was 8.27% for
the year ended December 25, 2004, up 1.78 percentage points versus the prior year. Our average debt balances decreased by $1.4 million in 2004 versus
2003.
Expenses Related to Retirement of Debt — On February 19, 2004, we
refinanced our then outstanding credit facility and terminated our receivables facility. We wrote off approximately $6.6 million in unamortized
deferred financing costs relating to our then outstanding Term C Loan, revolver, credit agreement and related amendments and $0.1 million of an
unamortized fee paid to originate the receivables facility in 2001. In addition, we recorded a net gain of $0.3 million, which included a write-off of
$0.2 million of unamortized deferred financing fees, as the result of the repurchase on the open market of the $10.0 million principal of our 9-3/8%
Notes (see Notes 6 and 7 to our consolidated financial statements in this Annual Report on Form 10-K).
Other Expenses — Our consolidated other expenses were primarily the
costs associated with our receivables facility. Since this facility was terminated as a result of our refinancing, costs associated with this facility
decreased for fiscal 2004, versus the prior year, by $1.6 million.
17
Provision (Benefit) for Income Taxes — Our consolidated income tax
benefit was $0.7 million for fiscal 2004 compared to $10.6 million of consolidated income tax expense in fiscal 2003. Included in 2004 was a $17.8
million income tax benefit resulting from the reversal of a previously established valuation allowance on a capital loss carryforward. We had
established a valuation allowance because we did not believe that we would utilize this capital loss carryforward before its expiration in December
2004. However, as a result of the gain generated by the sale of certain Woolite assets, we were able to utilize a portion of this capital loss
carryforward resulting in a reversal of the valuation allowance noted. In addition, we recorded an income tax benefit of $2.8 million in 2004 as a
result of the favorable outcome of certain tax audits. Exclusive of these two income tax benefits, our effective tax rate would have been 36.3%
compared to 36.7% in fiscal 2003.
Year Ended December 27, 2003 Compared To Year Ended December 28,
2002
Net Sales — Our consolidated net sales decreased $59.7 million, or 8%,
to $643.9 in 2003.
Net sales of Infant Care products decreased $11.9
million, or 4%, to $254.8 million in 2003. This decrease was due primarily to lower shipments in our non-core baby wipes business and in Baby
Toiletries (approximately $11.3 million) and, to a lesser extent, mix of products sold. Our U.S. dollar market share across our core Infant Care
categories, including Baby Toiletries, had been declining since the end of 2002. Baby Magic toiletries was impacted by competitive activity
resulting in its continued market share decline through 2003. In Wet Ones, our U.S. dollar market share increased over seven percentage points
in 2003. The Diaper Genie brand remained the U.S. market leader in overall dollar market share in 2003.
Net sales of Feminine Care products decreased $37.5
million, or 15%, to $213.3 million in 2003. This decrease is related primarily to lower shipment volume. Our U.S. dollar market share in tampons
decreased 3.0 percentage points in 2003 versus 2002. This decline in our net sales and our dollar market share reflects the impact of extensive
competitive spending in the tampon category behind the launch of a new competitive entry in the plastic applicator segment at the end of 2002. This
product launch was aimed directly at our plastic applicator tampon product and negatively impacted our shipments and market share in 2003. In addition,
our promotional activities in 2002 led to a build up of inventories of our product at retailers that negatively impacted our shipments in 2003 when the
product was sold through to our consumers. Our shipment patterns for the second half of 2003 and throughout 2004 were more closely aligned with
consumer purchases from the retailer for this period. We introduced improved products, which reached retail shelves in the second quarter of 2003. We
defended our business aggressively with advertising and promotional spending as well as product enhancements and new product
offerings.
Net sales of Sun Care products decreased $2.2
million, or 2%, to $98.2 million in 2003. This decrease in net sales was due primarily to lower shipment volumes caused by unfavorable weather patterns
in the U.S. in the 2003 sun care season. This was partially offset by a shift in shipments from the fourth quarter of 2002 to the first quarter of
2003. The sun care category was negatively impacted by unfavorable weather patterns early in the 2003 sun care season with the U.S. category off by 5%
versus the prior year, the first category decline since our acquisition of Banana Boat. As part of our initiative to reduce the impact of
seasonal returns, which are typically higher in years when the weather is unfavorable, we more closely monitored customer shipments throughout the
season by reviewing their inventory levels and consumption trends. This proactive process resulted in a reduced level of product returns despite the
unfavorable weather impact on consumption.
Net sales of Household and Personal Grooming
products declined $10.0 million, or 18%, to $46.6 million in 2003. This decrease is the result of lower unit shipments in Ogilvie and
Binaca, despite U.S. market share gains in each product, as the at-home permanent and liquid breath freshener categories continue to decline. In
Gloves, our U.S. dollar market share continued to decline in 2003 versus the comparable period in 2002. This decline was due to a continuation of
competitive activities and higher growth in the disposable glove segment of the category. While we offer a disposable glove product, we have a greater
market share of the reusable glove segment.
Net sales of Woolite rug and upholstery products
increased $1.9 million, or 6%, to $30.9 million in 2003 due to the success of the Woolite Oxy Deep product, which was launched in
2002.
Gross Profit — Our consolidated gross profit decreased $48.6 million to
$326.6 million in 2003. As a percent of net sales, gross profit decreased 2.6 percentage points, to 50.7% in 2003. The decrease in gross profit and
gross
18
profit as a percent of net sales was due primarily to the decrease in net
sales, which accounted for approximately $30 million, and to a lesser extent the mix of products sold.
Operating Income — Our consolidated operating income decreased $55.7
million in fiscal 2003 as compared to fiscal 2002. This decrease was due primarily to lower gross profit of $48.6 million driven by lower net sales. In
addition, SG&A increased $10.8 million in fiscal 2003 versus fiscal 2002. Operating income in 2003 included a restructuring charge of $3.9 million
related to the first phase of our operational restructuring announced in December 2003. As a result of closing our Watervliet, New York plastic molding
facility, operating income in fiscal 2002 was negatively impacted by a $3.4 million restructuring charge and a $4.2 million asset impairment
charge.
The increase in SG&A of $10.8 million in fiscal
2003 as compared to fiscal 2002 was driven by $3.8 million of tampon litigation costs incurred in the defense of our tampon business, higher
advertising and promotional expenses of $2.0 million due, in part, to our tampon defense and $2.3 million of costs associated with our search for a
potential acquirer.
Interest Expense — Our consolidated interest expense decreased $4.5
million, or 8%, to $55.0 million in 2003. The decrease in interest expense was due to the combined impact of lower average debt balances and lower
interest rates when compared to the prior year. Our average debt decreased $44.8 million, or 5%, in 2003. Additionally, our weighted average variable
interest rate in 2003 was 4.25% compared to 4.50% in 2002.
Expenses Related to Retirement of Debt — On May 29, 2002, we amended
our then outstanding credit facility and issued a $450.0 million Term C Loan and, together with $21.8 million of cash, we repaid in full our
obligations under our then outstanding Term A Loan and Term B Loan, which collectively totaled $471.8 million. During the second quarter ended June 29,
2002, we wrote-off $5.9 million of unamortized deferred financing costs relating to our Term A Loan and Term B Loan.
Other Expenses — Our consolidated other expenses decreased $0.7
million, or 26%, to $2.0 million in 2003. The amount charged to other expenses primarily represents the fees to the third party on the sale of
receivables and the amortization of deferred fees associated with the formation of the receivables facility (see Note 7 to our consolidated financial
statements in this Annual Report on Form 10-K). Since this cost is based, in part, on short-term interest rates, it declined in comparison to 2002 as
interest rates declined.
Provision for Income Taxes — Our consolidated income taxes decreased
$1.5 million, or 13%, to $10.6 million in 2003. As a percent of pretax income, our effective tax rate increased 20.2 percentage points to 36.7% of
income before income taxes and cumulative effect of change in accounting principle. Included in the 2003 effective tax rate is a benefit of
approximately $0.5 million related to the reversal of tax reserves associated with tax years where the statute of limitations for assessment had
expired. Absent this benefit, the 2003 effective tax rate would have been approximately 38.2%. This is compared to 2002, during which we recorded a tax
benefit of $14.3 million due to new regulations issued by the U.S. Treasury on March 7, 2002 (see Note 10 to our consolidated financial statements in
this Annual Report on Form 10-K). The new regulations permitted us to partially utilize a previously disallowed capital loss on the sale of Playtex
Beauty Care, Inc., which we sold during fiscal 1999. The remaining tax benefit associated with the sale of Playtex Beauty Care, Inc. of $34.8 million
had been fully reserved by a valuation allowance, as we did not expect to realize it. Subsequently, we utilized a portion of the capital loss
carryforward to offset a capital gain on the sale of the Woolite brand assets in late 2004. The remaining portion of the Playtex Beauty Care, Inc.
capital loss carryforward expired at the end of 2004. Another benefit, recognized in 2002, was the reversal of tax reserves associated with the
favorable settlement of a foreign tax audit in Canada. Excluding the benefit of the previously disallowed capital loss and the benefit related to the
foreign tax audit settlement, our effective tax rate in 2002 would have been approximately 39.1%.
Cumulative Effect of Accounting Change — We adopted, on December 30,
2001, Statement of Financial Accounting Standard (“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 were determined to have
indefinite lives. 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 accounting change in the first quarter of 2002. The trademark impairment from this initial
19
implementation was directly attributable to the different approach in
evaluating impairment upon adoption of SFAS No. 142 (discounted cash flow method) as compared to SFAS No. 121, “Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of,” (undiscounted cash flow coverage of carrying value). Consistent with the
requirements of SFAS No. 142, an impairment resulting from the change in methodology was handled as a cumulative effect of accounting change (see Note
1 to our consolidated financial statements in this Annual Report on Form 10-K).
Liquidity and Capital Resources
Cash and Cash Equivalents
At December 25, 2004, we had $137.8 million of cash
and cash equivalents as compared to $27.5 million at December 27, 2003. This balance was positively impacted by the net proceeds from the sale of the
Woolite brand assets on November 2, 2004 of $59.9 million. The remaining increase resulted from cash provided by operations. This cash will be used to
finance the seasonal inventory build for the sun care season, to make scheduled bond interest payments and to finance investments in our core brands.
In addition, we may repurchase long-term bonds in the open market from time to time depending on availability and premium rates in the marketplace and
are subject to certain limitations and conditions contained in our credit facility. Subsequent to year-end, as of March 1, 2005, we have repurchased
$22.8 million principal amount of our 8% Notes.
Cash Flows Analysis (in thousands)
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
|
December 28,
2002
|
Net cash
provided by operations |
|
|
|
$ |
72,729 |
|
|
$ |
47,159 |
|
|
$ |
77,797 |
|
Net cash
provided by (used for) investing activities |
|
|
|
|
42,549 |
|
|
|
(18,564 |
) |
|
|
(17,420 |
) |
Net cash used
for financing activities |
|
|
|
|
(5,650 |
) |
|
|
(34,493 |
) |
|
|
(62,880 |
) |
Net Cash Provided by Operations — Our net cash provided by
operations increased $25.5 million, to $72.7 million in fiscal 2004. The increase in net cash provided by operations was due primarily to improved cash
flow from changes in working capital components.
For the year ended December 25, 2004, the working
capital components impacted operating cash flow as follows:
• |
|
Accounts receivable increased by $8.8 million as compared to
fiscal year end 2003. However, this increase includes the fact that $21.0 million of receivables had been sold to a third party as part of the
receivables facility at fiscal year-end 2003. This facility was terminated in 2004. Thus, all receivables returned to the balance sheet. Exclusive of
the increase due to the termination of the receivables facility, accounts receivable declined year over year by $12.1 million due equally to the timing
of shipments and an overall improvement in days sales outstanding. |
• |
|
Inventories decreased at December 25, 2004 as compared to
December 27, 2003 by $5.3 million. This decrease was due to the impact of the first phase of our operational restructuring, which was initiated in
December 2003. This initiative included improved supply chain processes targeted to reduce inventory investment. |
• |
|
Accrued expenses increased by $29.9 million at December 25, 2004
as compared to December 27, 2003. This increase included a number of items most notably, higher accrued interest of $7.0 million as the refinancing in
early 2004 changed the timing of interest payments, higher accrued employee compensation and benefits of $7.7 million, higher accruals for
restructuring costs of $7.9 million resulting from our realignment plan and higher advertising and sales promotion accruals of $3.7 million due
primarily to the timing of programs and payments. |
Net Cash Provided by Investing Activities — Our cash provided by
investing activities of $42.5 million was primarily driven by the proceeds from the sale of our Woolite brand assets of $59.9 million. This was
partially offset by capital expenditures to support new products, upgrade production equipment, invest in new technologies, and improve our facilities.
Capital expenditures for 2005 are expected to be approximately $14 million. Additionally in 2004, we paid $3.5 million for intangible assets including
$2.5 million to our former CEO as part of a non-compete
20
agreement, which represents the initial payment. An additional $2.5 million
will be paid over each of the next two years.
Net Cash Used for Financing Activities — Our cash used for financing
activities of $5.7 million in 2004 represented net long-term debt borrowings of $16.8 million, the payment of fees of $12.9 million associated with our
2004 refinancing and payment of $9.5 million to repurchase $10.0 million principal of our 9-3/8% Notes on the open market. This increase in long-term
borrowings was due, in part, to the termination of our off-balance sheet receivables facility, which brought $21.0 million of debt back on the balance
sheet.
We intend to fund our operating cash, capital
expenditures and debt service requirements through cash generated from operations and borrowings under our revolver through fiscal 2009. However, we
may not generate sufficient cash from operations to make either the $437.2 million scheduled principal payment on the 8% Notes, as adjusted for note
repurchases subsequent to year-end, or the $340.0 million 9-3/8% Notes, both due in fiscal 2011. Accordingly, we may have to refinance our obligations,
sell assets or raise equity capital to repay the principal amounts of these obligations. Historically, our cash from operations and refinancing
activities have enabled us to meet all of our obligations. However, we cannot guarantee that our operating results will continue to be sufficient or
that future borrowing facilities will be available for the payment or refinancing of our debt on economically attractive terms.
2004 Refinancing — As fully described in
Notes 6 and 7 of our consolidated financial statements, on February 19, 2004, we refinanced our indebtedness under our then existing credit facility
(the “2004 Refinancing Transaction”). This refinancing provided improved liquidity and eliminates financial maintenance covenants and near
term principal amortization that were part of our prior credit facility. Proceeds from this refinancing transaction were used to repay our outstanding
indebtedness under our existing credit agreement and to terminate the receivables facility.
The 2004 Refinancing Transaction consisted
of:
• |
|
$460.0 million principal amount of 8% Notes, and |
• |
|
a five-year $150.0 million variable rate credit facility (the
“Credit Facility”), comprised of:
— a $7.5 million term loan, which we repaid and terminated in the third quarter of 2004,
and
— a $142.5 million Revolving Credit Facility (the “Revolver”). |
The availability under the Revolver is subject to a
borrowing base calculation, which is dependent upon the level of certain assets including eligible receivables, eligible inventory and eligible
equipment, as defined in the Credit Facility. As of December 25, 2004, our availability under the Revolver, based on our borrowing base calculation, is
$70.2 million, as reduced for our outstanding letters of credit, as defined in the Credit Facility.
The rates of interest we have paid in the past, and
will continue to pay in the future, on our variable rate debt are, at our option, a function of various alternative short term borrowing rates, such as
the prime rate or the London Inter-Bank Offer Rate (“LIBOR”). As a result of the 2004 Refinancing Transaction, we incurred an estimated $12.9
million in fees and expenses, which have been deferred and are being amortized over the term of the 8% Notes and the Credit Facility. Additionally, on
February 19, 2004, we repurchased on the open market $10.0 million principal of our 9-3/8% Notes at a discount. In conjunction with this refinancing,
we wrote off approximately $6.9 million in unamortized fees associated with the refinanced debt.
As a result of the 2004 Refinancing Transaction, our
debt portfolio and interest rate profile has changed substantially. All of our indebtedness at December 25, 2004 is comprised of fixed rate notes, as
the 2004 Refinancing Transaction substantially reduced our exposure to variable rate indebtedness. As a result, our exposure to changing interest rates
is dramatically reduced. A one percentage point change in our variable interest rate would not have a material impact on our consolidated interest
expense due to the reduction of our variable rate indebtedness based on balances at December 25, 2004. Due to the attributes of our debt portfolio,
reductions of our outstanding debt may require that we repurchase bonds on the open market, in privately negotiated transactions or otherwise from time
to time. Such repurchases are subject to bond availability and may require substantial premiums depending on prices in the
marketplace.
21
Our Credit Facility contains various restrictions
and limitations that may impact us. These restrictions and limitations relate to:
• |
|
• incurrence of indebtedness,
• contingent
obligations,
• liens,
• capital expenditures,
• mergers and acquisitions,
• asset sales, dividends
and distributions,
• redemption or repurchase of equity interests,
• certain debt payments and modifications,
• loans
and investments,
• transactions with affiliates,
• changes of control,
• payment of consulting and management
fees,
and
• compliance with laws and regulations. |
On October 27, 2004, we amended
our Credit Facility to allow for the sale of the Woolite brand assets. This amendment also allows us to use the proceeds of the Woolite sale and excess
cash to repurchase long-term bonds, subject to certain conditions and availability requirements under the Credit Facility.
Contractual Obligations
The following table summarizes our contractual
obligations at December 25, 2004, (in thousands):
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
Total
|
|
Less than
1 Year
|
|
1–3 Years
|
|
3–5 Years
|
|
More than
5 Years
|
Long-term
debt(1) |
|
|
|
$ |
800,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
800,000 |
|
Operating
lease obligations |
|
|
|
|
31,457 |
|
|
|
9,117 |
|
|
|
10,865 |
|
|
|
5,829 |
|
|
|
5,646 |
|
Purchase
obligations and other(2) |
|
|
|
|
47,004 |
|
|
|
43,769 |
|
|
|
3,217 |
|
|
|
18 |
|
|
|
— |
|
Total |
|
|
|
$ |
878,461 |
|
|
$ |
52,886 |
|
|
$ |
14,082 |
|
|
$ |
5,847 |
|
|
$ |
805,646 |
|
(1) |
|
Does not include interest. |
(2) |
|
Includes open purchase orders primarily for the procurement of
raw materials, packaging and supplies for use in the production process. Excludes severance payments under the strategic realignment plan (see Note 3
to our consolidated financial statements in this Annual Report on Form 10-K). |
Off-Balance Sheet Arrangements
We do not have any significant off-balance sheet
arrangements that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital
expenditures or capital resources.
Critical Accounting Policies
The preparation of financial statements in
accordance with GAAP 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 assets and liabilities. |
Actual results could 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.
Key areas where assumptions and estimates are used
include:
Sun Care Returns — Our practice is not
to accept returned goods unless authorized by management of the sales organization. Returns result primarily from damage and shipping discrepancies.
Exceptions to this policy include our Sun Care seasonal returns. We allow customers to return Sun Care products that have not been sold by the end of
the sun care season, which is normal practice in the sun care industry. We record sales at the time the products are shipped and title transfers. The
terms of these sales vary but, in all instances, the following conditions are met: the sales arrangement is evidenced by purchase orders submitted by
customers; the selling price
22
is fixed or determinable; product has shipped
and title transferred; there is an obligation to pay at a specified date or dates without any additional conditions or actions required by us; and
collectibility is reasonably assured. Simultaneously with the time of the shipment, we reduce sales and cost of sales, and reserve amounts on our
consolidated balance sheet for anticipated returns based upon an estimated return level, in accordance with GAAP. Customers are required to pay for the
Sun Care product purchased during the season under the required terms. We offer a variety of terms options, due to the seasonal nature of sun care, for
qualified customers. In all cases, these terms require substantial cash payments prior to or during the summer sun care season. We generally receive
returns of our Sun Care products from September through March following the summer sun care season. We estimate the level of sun care returns using a
variety of inputs including historical experience, consumption trends during the sun care season and inventory positions at key retailers as we move
through the sun care season. We monitor shipment activity and inventory levels at key retailers during the season in an effort to gauge potential
returns issues. This allows us to manage shipment activity to our customers, especially in the latter stages of the sun care season, to reduce the
potential for returned product. The level of returns may fluctuate from our estimates due to several factors including weather conditions, customer
inventory levels, and competitive conditions. Based on our 2004 Sun Care results, each percentage point change in our returns rate would have impacted
our reported net sales by $1.3 million and our reported operating income by $1.1 million.
Bad Debt Reserves — The extension of
trade credit carries with it the chance that the customer may not pay for the goods when payment is due. We review our receivables portfolio and
provide reserves for potential bad debts including those we know about and those that have not been identified but may exist due to the risk associated
with the granting of credit. The estimated reserves required to cover potential losses are developed using historical experience, analysis of our
accounts receivable aging and the overall credit worthiness of our portfolio of customers. Reserve balances are based on the best information available
to us and are re-evaluated and adjusted as additional information is received. The adequacy of the estimated reserve may be impacted by the
deterioration of a large customer and/or significant weakness in the economic environment resulting in a higher level of customer bankruptcy
filings.
Long-Lived Assets — Long-lived assets,
including fixed assets and intangible assets with finite useful lives, are evaluated periodically for impairment whenever events or changes in
circumstances indicate that the carrying amount of any such asset may not be recoverable. If the sum of the undiscounted cash flows is less than the
carrying value, we recognize an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset. The estimate
of cash flow requires significant management judgment and requires, among other things, certain assumptions about future volume, revenue and expense
growth rates, and as such, may differ from actual cash flows.
Goodwill and Indefinite-Lived Intangible
Assets — Carrying values of goodwill and intangible assets with indefinite lives are reviewed periodically for possible impairment in
accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” Our impairment review is based on a discounted cash flow approach that
requires significant management judgments, similar to those noted above for long-lived assets, and for the selection of an appropriate discount rate.
We measure fair value for purposes of testing our trademarks for impairment using the relief from royalty method (a discounted cash flow methodology).
Our research indicates that this is the most widely used approach for valuing assets of this type. We consider a number of factors in determining the
relevant variables for this calculation including royalty rates for similar products licensed in the marketplace and the additional rights and
obligations inherent in the ownership of a trademark as opposed to a licensing arrangement including product extension, geographical expansion
opportunities, exclusivity of use and transferability. In addition, we utilize a discount rate that reflects the rights and obligations of ownership,
which results in an inherent premium as compared to a valuation of a licensing agreement since the discount rate of a licensee would reflect the
additional risks of a license-only arrangement. An impairment charge is recorded for the difference between the carrying value and the net present
value of estimated future cash flows, which represents the estimated fair value of the asset. We use our judgment in assessing whether assets may have
become impaired between annual valuations. Indicators such as unexpected adverse economic factors, unanticipated technological change or competitive
activities may signal that an asset has become impaired. We performed our annual goodwill and other intangible assets impairment testing during the
second quarter of 2004. In December 2004, we reviewed certain trademark intangibles for impairment based on a change in the competitive environment in
our baby toiletries business, the continued decline in product categories for certain non-core brands and the decision by management to no longer
invest capital and promotional
23
resources in certain of these non-core
businesses. This review resulted in a non-cash charge of $16.4 million as it was determined that two trademarks, Baby Magic and Binaca,
were impaired (see Note 1 to our consolidated financial statements in this Annual Report on Form 10-K).
Promotion Accruals — We offer a variety
of sales incentive programs to customers and consumers, such as cooperative advertising programs, feature price discounts, in store display incentives
and consumer coupons. The recognition of the costs for these programs, which are classified as a reduction of revenue, involves the use of judgment
related to performance and redemption estimates. Accruals for trade promotions are recorded primarily at the time of sale of product to the customer
based on expected levels of performance. Settlement of these liabilities typically occurs in subsequent periods primarily through an authorized process
for deductions taken by a customer from amounts otherwise due to us. As a result, the ultimate cost of a trade promotion program is dependent on the
relative success of the events. Accruals for consumer coupons are made at the time the coupon is distributed. These estimates are made utilizing the
value of the coupon and the expected redemption rates. Expected redemption rates are determined using historical redemption experience for similar
programs. We monitor monthly redemption activity with the assistance of a third party, which tracks actual redemptions and provides updated estimates
for future redemptions of the coupons. Actual expenses may differ if the level of redemption rates and performance vary from
estimates.
Restructuring and Related Charges —
Restructuring liabilities are recorded for estimated costs of facility closures, significant organizational adjustments, and measures undertaken by us
to exit certain activities. We estimate the costs of such activities after evaluating detailed analyses of the cost to be incurred. Such liabilities
could include amounts for items such as severance costs and related benefits (including settlements of pension plans), impairment of property and
equipment, other current or long term assets, lease termination payments, plus any other items directly related to the exit activities. While the
actions are carried out as expeditiously as possible, restructuring and related charges are estimates. Changes in estimates resulting in an increase to
or a reversal of a previously recorded liability may be required as we execute the restructuring plan. During fiscal 2003, we adopted the requirements
of SFAS No.146, “Accounting for Costs Associated with Exit or Disposal Activities,” which impacts the timing of recognition of certain exit
or disposal costs.
Restructuring and related charges, which are
reflected in operating expenses, include but are not limited to, termination and related costs, any asset impairments relating to the restructuring,
and other costs directly related to the initiatives implemented.
See Note 3 to the Consolidated Financial Statements
for a more complete discussion of recent restructuring initiatives and related costs.
Pension and Postretirement Benefits —
Included in our results of operations are pension and postretirement costs and credits, which are measured using actuarial valuations. Inherent in
these valuations are key assumptions including assumptions about discount rates, expected return on plan assets, annualized increases in salaries and
wages, the future number of participants and the future cost of health care. These assumptions are updated on an annual basis. We are required to
consider market conditions, including changes in interest rates, in making these assumptions. A 0.25 percentage point change in the discount rate, with
all other assumptions held constant, would impact net periodic pension expense and net periodic postretirement benefit expense by approximately $0.1
million, respectively. A 0.25 percentage point change in the long-term rate of return on plan assets would impact net periodic pension expense by
approximately $0.1 million. A 0.25 percentage point change in the long-term health care cost trend would have less than a $0.1 million impact on the
service and interest components of net periodic postretirement benefit expense.
Other Significant Accounting Policies —
Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed above, are also critical to understanding
our Consolidated Financial Statements. The notes to our Consolidated Financial Statements contain additional information related to our accounting
policies and should be read in conjunction with this discussion.
Recently Issued Accounting Standards
In May 2004, the Financial Accounting Standards
Board (“FASB”) issued FASB Staff Position (“FSP”) SFAS No. 106-2, “Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“the Act”).” The Act was signed into law on December 8, 2003 and
expanded
24
Medicare to include prescription drugs. We
sponsor retiree medical programs and this legislation includes a federal subsidy for qualifying companies. FSP SFAS 106-2 requires that the effects of
the federal subsidy be considered an actuarial gain and treated like similar gains and losses if it is determined that the prescription drug benefits
of the retiree medical program are determined to be actuarially equivalent to those offered under Medicare Part D. We adopted FSP SFAS 106-2 during our
third quarter ended September 25, 2004 and concluded that we are unable to determine whether the benefits under our plan are actuarially equivalent to
Medicare Part D under the Act because the guidance provided thus far is unclear. We will monitor our plan and assess actuarial equivalence as new
information becomes available.
In November 2004, the FASB issued SFAS No. 151,
“Inventory Costs — an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 seeks to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs and wasted material (spoilage) in the determination of inventory carrying costs. The statement requires such
costs to be treated as a current period expense. This statement is effective for fiscal years beginning after June 15, 2005. We are currently
evaluating what impact this change may have on our Consolidated Financial Statements.
In December 2004, the FASB issued SFAS No. 123
(revised 2004), “Share-based Payment.” SFAS No. 123 R will require us to measure all employee stock-based compensation awards using a fair
value method and recognize such expense in our financial statements. In addition, the SFAS No. 123 R will require additional accounting related to the
income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements. SFAS No. 123 R is
effective for the first interim or annual period beginning after June 15, 2005. We are in the process of evaluating the impact the adoption of SFAS No.
123 R will have on our Consolidated Financial Statements.
In December 2004, the FASB issued SFAS No. 153,
“Exchanges of Nonmonetary Assets — an amendment of APB Opinion No. 29.” This statement addresses the measurement of exchanges of
nonmonetary assets and redefines the scope of transactions that should be measured based on the fair value of the assets exchanged. SFAS No. 153 is
effective for fiscal periods beginning after June 15, 2005. We do not believe the adoption of SFAS No. 153 will have a material impact on our
Consolidated Financial Statements.
The American Jobs Creation Act of 2004 (the
“Act”), signed into law in October 2004, makes a number of changes to the income tax laws, which will affect the company in future years. In
December 2004, the FASB issued FSP FASB 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Jobs Creation act of 2004.” The Act introduces a special one-time dividends received deduction on the repatriation of certain foreign
earnings to a U.S. taxpayer (repatriation provision), provided certain criteria are met. FSP FAS 109-2 provides accounting and disclosure guidance for
the repatriation provision, and is effective immediately. At December 25, 2004, we were examining the impact of the repatriation provision awaiting
further guidance from the U.S. Treasury. On January 13, 2005, Treasury issued Notice 2005-10 that provided initial guidance for the repatriation
provision. Management continued this evaluation process through February 22, 2005 at which time a Domestic Reinvestment Plan (the “DRP”) was
completed. The DRP provides for our Canadian subsidiary to pay a C$18 million dividend in one or more installments during 2005 that will be used to
partially fund our 2005 U.S. advertising programs. We have fully provided U.S. taxes for the undistributed earnings of our Canadian subsidiary at the
statutory rate of 35%. In the first quarter of 2005, we will record a tax benefit of approximately $4 million to reflect the reduced tax rate
associated with this special repatriation, which is substantially below our statutory rate noted above.
| Item 7A. |
|
Quantitative and Qualitative Disclosure about Market
Risk |
We periodically use financial instruments, such as
derivatives, to manage the impact of interest rate changes on our variable rate debt and its effect on our income and cash flows. Our 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 our underlying interest rate exposure. As a result of the 2004 Refinancing Transaction on February 19, 2004 (see Notes 6 and 7 to our
consolidated financial statements in this Annual Report on Form 10-K), our debt portfolio and interest rate profile has changed substantially. Our
indebtedness at December 25, 2004 was comprised of $340.0 million of 9-3/8% Notes and $460.0 million of 8% Notes. As such, at December 25, 2004, a one
percentage point change in our variable interest rate would not have a material impact on our consolidated interest expense.
25
For the fiscal year ended December 25, 2004, we
derived approximately 9% of net sales in currencies denominated other than the U.S. dollar, of which approximately 6% was from our Canadian subsidiary.
We conduct our international operations in a variety of countries and derive our sales in currencies including: the Euro, British pound, Canadian
dollar and Australian dollar, as well as the U.S. dollar. Our results may be subject to volatility because of currency changes, inflation changes and
changes in political and economic conditions in the countries in which we operate. The majority of our products are manufactured in the U.S., but we do
source some equipment, finished goods, componentry and raw materials from overseas.
| Item 8. |
|
Financial Statements and Supplementary Data |
Our Consolidated Financial Statements and related
Notes to Consolidated Financial Statements are filed as part of this Form 10-K and can be found on pages F-4 to F-37. The Reports of our Independent
Registered Public Accounting Firm, dated March 10, 2005, are included in the financial statements filed as part of this Form 10-K.
| Item 9. |
|
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure |
None
| Item 9A. |
|
Controls and Procedures
|
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), the Company’s management carried out an evaluation, with the participation of the
Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as
defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act), as of the end of the latest fiscal quarter. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that, as of December 25, 2004, the Company’s disclosure controls and procedures were
effective to ensure that material information required to be disclosed by the Company in the reports the Company files or submits under the Exchange
Act is recorded, summarized and reported, within the time periods specified in the SEC’s rules and forms.
Management’s Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and
maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Securities Exchange Act of
1934, as amended). Our management carried out an evaluation, with the participation of the Company’s Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our internal control over financial reporting as of December 25, 2004. In making this assessment, our management used
the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated
Framework. Our management has concluded that, as of December 25, 2004, our internal control over financial reporting is effective based on these
criteria. Our independent registered public accounting firm, KPMG LLP, has issued an audit report on our assessment of our internal control over
financial reporting, which is included in the financial statements filed as part of this Form 10-K.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal controls over
financial reporting during the quarter ended December 25, 2004 that have materially affected, or are reasonably likely to materially affect our
internal controls over financial reporting.
| Item 9B. |
|
Other Information |
None
26
PART III
| Item 10. |
|
Directors and Executive Officers of the
Registrant |
Directors and Executive Officers — The
name, age and background of each of our directors nominated for election are contained under the caption “Election of Directors — Information
Regarding Nominees” in our 2005 Proxy Statement for our Annual Meeting of Stockholders (the “2005 Proxy Statement”) and are incorporated
herein by reference. Pursuant to Item 401(b) of Regulation S-K, our executive officers are reported under the caption “Our Executive
Officers” in Part I, Item 4A of this Annual Report on Form 10-K.
Beneficial Ownership Reporting Compliance
— Information on the beneficial ownership reporting for our directors and executive officers is contained under the caption “Section 16(a)
Beneficial Ownership Reporting Compliance” in our 2005 Proxy Statement, which is incorporated herein by reference.
Audit Committee Financial Expert —
Information on our audit committee financial expert is contained in our 2005 Proxy Statement, which is incorporated herein by
reference.
Code of Conduct and Ethics — We have a
Code of Conduct and Ethics that applies to all of our employees, including our directors, Chief Executive Officer, Chief Financial Officer and
Controller. Our Code of Conduct and Ethics was distributed to employees and is available free of charge on our website at www.playtexproductsinc.com
under the section entitled, “Investor Relations — Corporate Governance.” We intend to post on our web site any amendments to, or waivers
from our Code of Conduct and Ethics applicable to Senior Financial Executives.
Corporate Governance Guidelines — Our
Board of Directors has adopted Corporate Governance Guidelines in accordance with the revised New York Stock Exchange Listing Standards and rules
adopted by the Securities and Exchange Commission, which are available free of charge on our website at www.playtexproductsinc.com under the section
entitled, “Investor Relations — Corporate Governance.”
| Item 11. |
|
Executive Compensation |
The information required by this item, which appears
in the 2005 Proxy Statement under the caption, “Executive Compensation,” is incorporated by reference.
| Item 12. |
|
Security Ownership of Certain Beneficial Owners and
Management |
The information required by this item, which appears
in the 2005 Proxy Statement under the caption, “Security Ownership of Certain Beneficial Owners and Management,” is incorporated by
reference.
| Item 13. |
|
Certain Relationships and Related Transactions |
The information required by this item, which appears
in the 2005 Proxy Statement under the caption, “Certain Transactions,” is incorporated by reference.
| Item 14. |
|
Principal Accountant Fees and Services |
The information required by this item, which appears
in the 2005 Proxy Statement under the caption, “Independent Registered Public Accountants,” is incorporated by reference.
27
PART IV
| Item 15. |
|
Exhibits and Financial Statement Schedule
|
|
(1) |
The Reports of Independent
Registered Public Accounting Firm, dated March 10, 2005, are on pages F-2 and F-3 of this Form 10-K. Our Consolidated Financial Statements and related
Notes to Consolidated Financial Statements are filed as part of this Form 10-K and can be found on pages F-4 to F-37. |
|
(2) |
Financial Statement
Schedule |
The following financial statement schedule —
Schedule II — Valuation and Qualifying Accounts, is filed as part of this Form 10-K and is on page F-38.
All other schedules are omitted as the required
information is not applicable to us or the information is already presented in our Consolidated Financial Statements or related Notes to Consolidated
Financial Statements.
Please see our Exhibit Index on Pages X-1 to X-4 of
this Form 10-K.
28
PLAYTEX
PRODUCTS, INC.
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.
(Registrant)
March 10, 2005
|
By: |
/S/ KRIS J.
KELLEY
Kris J. Kelley
Executive Vice President and
Chief Financial Officer |
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
10th day of March, 2005.
Signatures
|
|
|
|
Title
|
/S/
DOUGLAS D. WHEAT
Douglas D. Wheat
|
|
|
|
Chairman of the Board and Director
|
|
|
|
|
|
/S/ NEIL
P. DEFEO
Neil P. DeFeo
|
|
|
|
President, Chief Executive Officer and Director
(Principal Executive Officer) |
|
|
|
|
|
/S/
HERBERT M. BAUM
Herbert M. Baum
|
|
|
|
Director |
|
|
|
|
|
/S/
MICHAEL R. EISENSON
Michael R. Eisenson
|
|
|
|
Director |
|
|
|
|
|
/S/ ROBERT
B. HAAS
Robert B. Haas
|
|
|
|
Director |
|
|
|
|
|
/S/ R.
JEFFREY HARRIS
R. Jeffrey Harris
|
|
|
|
Director |
|
|
|
|
|
/S/ C. ANN
MERRIFIELD
C. Ann Merrifield
|
|
|
|
Director |
|
|
|
|
|
/S/ SUSAN
R. NOWAKOWSKI
Susan R. Nowakowski
|
|
|
|
Director |
|
|
|
|
|
/S/ TODD
D. ROBICHAUX
Todd D. Robichaux
|
|
|
|
Director |
|
|
|
|
|
/S/ KRIS
J. KELLEY
Kris J. Kelley
|
|
|
|
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
29
PLAYTEX
PRODUCTS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
|
|
|
|
PAGE
|
Reports of
Independent Registered Public Accounting Firm |
|
|
|
F-2 |
Consolidated
Statements of Income |
|
|
|
F-4 |
Consolidated
Balance Sheets |
|
|
|
F-5 |
Consolidated
Statements of Stockholders’ Equity |
|
|
|
F-6 |
Consolidated
Statements of Cash Flows |
|
|
|
F-7 |
Notes to
Consolidated Financial Statements |
|
|
|
F-8 |
Schedule II
— Valuation and Qualifying Accounts |
|
|
|
F-38 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of
Directors and Stockholders
Playtex Products, Inc.:
We have audited
management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing under Item
9A, that Playtex Products, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 25, 2004, based on the
criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Management of Playtex Products, Inc. is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an
opinion on the effectiveness of the internal control over financial reporting of Playtex Products, Inc. based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal
control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
A company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that Playtex Products, Inc. and
subsidiaries maintained effective internal control over financial reporting as of December 25, 2004, is fairly stated, in all material respects, based
on criteria established in Internal Control — Integrated Framework issued by COSO. Also, in our opinion, Playtex Products, Inc. maintained, in all
material respects, effective internal control over financial reporting as of December 25, 2004, based on the criteria established in Internal Control
— Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of Playtex Products, Inc. and subsidiaries as of December 25, 2004 and
December 27, 2003, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years ended December
25, 2004, December 27, 2003 and December 28, 2002, and our report dated March 10, 2005 expressed an unqualified opinion on those consolidated financial
statements.
/s/ KPMG LLP
Stamford, Connecticut
March 10, 2005
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 25, 2004 and December 27, 2003, and the related
consolidated statements of income, stockholders’ equity, and cash flows for each of the years ended December 25, 2004, December 27, 2003 and
December 28, 2002. In connection with our audits of the consolidated financial statements, we also have audited the accompanying financial statement
schedule. These consolidated financial statements and financial statement schedule are the responsibility of the management of Playtex Products, Inc.
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 the standards of the Public Company
Accounting Oversight Board (United States). 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 financial position of Playtex Products, Inc. and subsidiaries as of December 25, 2004 and December 27, 2003, and
the results of their operations and their cash flows for each of the years ended December 25, 2004, December 27, 2003 and December 28, 2002, in
conformity with U.S. generally accepted accounting principles.
As disclosed in Note 1 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” as of December 30,
2001.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the internal control over financial reporting of Playtex Products, Inc. and
subsidiaries as of December 25, 2004, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 10, 2005 expressed an unqualified opinion on management’s
assessment of, and the effective operation of, internal control over financial reporting.
/S/ KPMG LLP
Stamford, Connecticut
March 10, 2005
F-3
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands,
except per share data)
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
|
December 28,
2002
|
Net
sales |
|
|
|
$ |
666,896 |
|
|
$ |
643,874 |
|
|
$ |
703,617 |
|
Cost of
sales |
|
|
|
|
323,157 |
|
|
|
317,301 |
|
|
|
328,433 |
|
Gross
profit |
|
|
|
|
343,739 |
|
|
|
326,573 |
|
|
|
375,184 |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
|
|
241,428 |
|
|
|
235,963 |
|
|
|
225,150 |
|
Restructuring, net |
|
|
|
|
9,969 |
|
|
|
3,873 |
|
|
|
3,377 |
|
Loss on
impairment of assets |
|
|
|
|
16,449 |
|
|
|
— |
|
|
|
4,222 |
|
Amortization
of intangibles |
|
|
|
|
1,293 |
|
|
|
903 |
|
|
|
928 |
|
Total
operating expenses |
|
|
|
|
269,139 |
|
|
|
240,739 |
|
|
|
233,677 |
|
Gain on sale
of assets |
|
|
|
|
56,543 |
|
|
|
— |
|
|
|
— |
|
Operating
income |
|
|
|
|
131,143 |
|
|
|
85,834 |
|
|
|
141,507 |
|
Interest
expense, including related party
interest expense of $11,644 for 2003 and $12,150 for 2002,
net of related party interest income of $11,502 for 2003
and $12,003 for 2002 |
|
|
|
|
69,561 |
|
|
|
55,038 |
|
|
|
59,543 |
|
Expenses
related to retirement of debt, net |
|
|
|
|
6,432 |
|
|
|
— |
|
|
|
5,882 |
|
Other
expenses |
|
|
|
|
353 |
|
|
|
1,975 |
|
|
|
2,653 |
|
Income before
income taxes and cumulative effect
of accounting change |
|
|
|
|
54,797 |
|
|
|
28,821 |
|
|
|
73,429 |
|
Provision
(benefit) for income taxes |
|
|
|
|
(710 |
) |
|
|
10,589 |
|
|
|
12,102 |
|
Income before
cumulative effect of accounting change |
|
|
|
|
55,507 |
|
|
|
18,232 |
|
|
|
61,327 |
|
Cumulative
effect of accounting change, net of $7,141
tax benefit |
|
|
|
|
— |
|
|
|
— |
|
|
|
(12,423 |
) |
Net
income |
|
|
|
$ |
55,507 |
|
|
$ |
18,232 |
|
|
$ |
48,904 |
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
cumulative effect of accounting change |
|
|
|
$ |
0.91 |
|
|
$ |
0.30 |
|
|
$ |
1.00 |
|
Cumulative
effect of accounting change |
|
|
|
|
— |
|
|
|
— |
|
|
|
(0.20 |
) |
Earnings per
share |
|
|
|
$ |
0.91 |
|
|
$ |
0.30 |
|
|
$ |
0.80 |
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
cumulative effect of accounting change |
|
|
|
$ |
0.91 |
|
|
$ |
0.30 |
|
|
$ |
0.98 |
|
Cumulative
effect of accounting change |
|
|
|
|
— |
|
|
|
— |
|
|
|
(0.19 |
) |
Earnings per
share |
|
|
|
$ |
0.91 |
|
|
$ |
0.30 |
|
|
$ |
0.79 |
|
Weighted
average shares of common stock and equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
61,216 |
|
|
|
61,216 |
|
|
|
61,148 |
|
Diluted |
|
|
|
|
61,225 |
|
|
|
61,227 |
|
|
|
63,948 |
|
See accompanying notes to consolidated financial statements.
F-4
PLAYTEX PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except
share data)
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
Assets
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
|
|
$ |
137,766 |
|
|
$ |
27,453 |
|
Receivables,
less allowance for doubtful accounts of $1,314 and $409 for 2004
and 2003, respectively |
|
|
|
|
97,188 |
|
|
|
23,478 |
|
Retained
interest in receivables |
|
|
|
|
— |
|
|
|
64,633 |
|
Inventories |
|
|
|
|
71,711 |
|
|
|
78,413 |
|
Deferred
income taxes, net |
|
|
|
|
9,789 |
|
|
|
8,994 |
|
Other current
assets |
|
|
|
|
8,266 |
|
|
|
12,196 |
|
Total current
assets |
|
|
|
|
324,720 |
|
|
|
215,167 |
|
Net property,
plant and equipment |
|
|
|
|
120,638 |
|
|
|
125,425 |
|
Goodwill |
|
|
|
|
494,307 |
|
|
|
494,307 |
|
Trademarks and
other intangibles, net |
|
|
|
|
128,304 |
|
|
|
138,271 |
|
Deferred
financing costs, net |
|
|
|
|
16,586 |
|
|
|
13,109 |
|
Other noncurrent
assets |
|
|
|
|
6,835 |
|
|
|
7,019 |
|
Total
assets |
|
|
|
$ |
1,091,390 |
|
|
$ |
993,298 |
|
|
Liabilities and Stockholders’ Equity
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable |
|
|
|
$ |
41,758 |
|
|
$ |
39,306 |
|
Accrued
expenses |
|
|
|
|
81,112 |
|
|
|
53,242 |
|
Income taxes
payable |
|
|
|
|
2,110 |
|
|
|
4,169 |
|
Current
maturities of long-term debt |
|
|
|
|
— |
|
|
|
4,500 |
|
Total current
liabilities |
|
|
|
|
124,980 |
|
|
|
101,217 |
|
Long-term
debt |
|
|
|
|
800,000 |
|
|
|
788,750 |
|
Deferred income
taxes, net |
|
|
|
|
61,403 |
|
|
|
59,139 |
|
Other noncurrent
liabilities |
|
|
|
|
21,072 |
|
|
|
16,404 |
|
Total
liabilities |
|
|
|
|
1,007,455 |
|
|
|
965,510 |
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
Common
stock; $0.01 par value; authorized 100,000,000 shares;
issued and outstanding 61,215,856 shares |
|
|
|
|
612 |
|
|
|
612 |
|
Additional
paid-in capital |
|
|
|
|
526,233 |
|
|
|
526,233 |
|
Retained
earnings (accumulated deficit) |
|
|
|
|
(443,032 |
) |
|
|
(498,539 |
) |
Accumulated
other comprehensive income (loss) |
|
|
|
|
122 |
|
|
|
(518 |
) |
Total
stockholders’ equity |
|
|
|
|
83,935 |
|
|
|
27,788 |
|
Total
liabilities and stockholders’ equity |
|
|
|
$ |
1,091,390 |
|
|
$ |
993,298 |
|
See accompanying notes to consolidated financial statements.
F-5
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(In thousands)
|
|
Common
Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
(Accumulated
Deficit)
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total
|
|
|
Shares
|
|
Amount
|
|
|
|
|
Balance,
December 29, 2001 |
|
|
61,044 |
|
|
$ |
610 |
|
|
$ |
524,384 |
|
|
$ |
(565,675 |
) |
|
$ |
(3,889 |
) |
|
$ |
(44,570 |
) |
Net
income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
48,904 |
|
|
|
— |
|
|
|
48,904 |
|
Foreign
currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
111 |
|
|
|
111 |
|
Minimum
pension liability
adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(763 |
) |
|
|
(763 |
) |
Total
comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,252 |
|
Exercise
of stock options |
|
|
172 |
|
|
|
2 |
|
|
|
1,849 |
|
|
|
— |
|
|
|
— |
|
|
|
1,851 |
|
Balance,
December 28, 2002 |
|
|
61,216 |
|
|
|
612 |
|
|
|
526,233 |
|
|
|
(516,771 |
) |
|
|
(4,541 |
) |
|
|
5,533 |
|
Net
income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18,232 |
|
|
|
— |
|
|
|
18,232 |
|
Foreign
currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,075 |
|
|
|
4,075 |
|
Minimum
pension liability
adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(52 |
) |
|
|
(52 |
) |
Total
comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,255 |
|
Balance,
December 27, 2003 |
|
|
61,216 |
|
|
|
612 |
|
|
|
526,233 |
|
|
|
(498,539 |
) |
|
|
(518 |
) |
|
|
27,788 |
|
Net
income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
55,507 |
|
|
|
— |
|
|
|
55,507 |
|
Foreign
currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
702 |
|
|
|
702 |
|
Minimum
pension liability
adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(62 |
) |
|
|
(62 |
) |
Total
comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,147 |
|
Balance,
December 25, 2004 |
|
|
61,216 |
|
|
$ |
612 |
|
|
$ |
526,233 |
|
|
$ |
(443,032 |
) |
|
$ |
122 |
|
|
$ |
83,935 |
|
See accompanying notes to consolidated financial statements.
F-6
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
|
December 28,
2002
|
Cash flows
from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
|
|
$ |
55,507 |
|
|
$ |
18,232 |
|
|
$ |
48,904 |
|
Adjustments
to reconcile net income to net cash
provided by operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
14,768 |
|
|
|
14,102 |
|
|
|
14,011 |
|
Amortization
of intangibles |
|
|
|
|
1,293 |
|
|
|
903 |
|
|
|
928 |
|
Amortization
of deferred financing costs |
|
|
|
|
2,574 |
|
|
|
2,107 |
|
|
|
2,138 |
|
Deferred
income taxes |
|
|
|
|
1,531 |
|
|
|
8,748 |
|
|
|
2,342 |
|
Prepaid
pension asset and postretirement benefits |
|
|
|
|
749 |
|
|
|
4,815 |
|
|
|
1,959 |
|
Write-off of
deferred fees related to retirement of debt, net of gain
on note buyback |
|
|
|
|
6,432 |
|
|
|
— |
|
|
|
5,882 |
|
Gain on sale
of assets |
|
|
|
|
(56,543 |
) |
|
|
— |
|
|
|
— |
|
Cumulative
effect of accounting change, net of
tax benefit |
|
|
|
|
— |
|
|
|
— |
|
|
|
12,423 |
|
Loss on
impairment of assets |
|
|
|
|
16,449 |
|
|
|
— |
|
|
|
4,222 |
|
Other,
net |
|
|
|
|
1,855 |
|
|
|
671 |
|
|
|
477 |
|
Changes in
operating assets and liabilities, net of dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
and retained interests |
|
|
|
|
(8,763 |
) |
|
|
759 |
|
|
|
(3,609 |
) |
Inventories |
|
|
|
|
5,264 |
|
|
|
8,176 |
|
|
|
(2,940 |
) |
Accounts
payable |
|
|
|
|
(130 |
) |
|
|
(7,744 |
) |
|
|
3,331 |
|
Accrued
expenses |
|
|
|
|
29,862 |
|
|
|
(2,189 |
) |
|
|
(10,308 |
) |
Other |
|
|
|
|
1,881 |
|
|
|
(1,421 |
) |
|
|
(1,963 |
) |
Net cash
provided by operations |
|
|
|
|
72,729 |
|
|
|
47,159 |
|
|
|
77,797 |
|
Cash flows
from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
|
|
(13,871 |
) |
|
|
(18,564 |
) |
|
|
(16,445 |
) |
Net proceeds
from sale of assets |
|
|
|
|
59,924 |
|
|
|
— |
|
|
|
— |
|
Intangible
assets acquired |
|
|
|
|
(3,504 |
) |
|
|
— |
|
|
|
(975 |
) |
Net cash
provided by (used for) investing activities |
|
|
|
|
42,549 |
|
|
|
(18,564 |
) |
|
|
(17,420 |
) |
Cash flows
from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
under revolving credit facilities |
|
|
|
|
115,800 |
|
|
|
288,250 |
|
|
|
164,150 |
|
Repayments
under revolving credit facilities |
|
|
|
|
(115,800 |
) |
|
|
(288,250 |
) |
|
|
(181,150 |
) |
Long-term
debt borrowings |
|
|
|
|
467,500 |
|
|
|
— |
|
|
|
450,000 |
|
Long-term
debt repayments |
|
|
|
|
(460,300 |
) |
|
|
(34,500 |
) |
|
|
(494,050 |
) |
Payment of
financing costs |
|
|
|
|
(12,850 |
) |
|
|
(1,624 |
) |
|
|
(3,681 |
) |
Proceeds from
net settlement of related party notes |
|
|
|
|
— |
|
|
|
1,631 |
|
|
|
— |
|
Proceeds from
exercise of stock options |
|
|
|
|
— |
|
|
|
— |
|
|
|
1,851 |
|
Net cash used
for financing activities |
|
|
|
|
(5,650 |
) |
|
|
(34,493 |
) |
|
|
(62,880 |
) |
Effect of
exchange rate changes on cash |
|
|
|
|
685 |
|
|
|
1,746 |
|
|
|
102 |
|
Increase
(decrease) in cash and cash equivalents |
|
|
|
|
110,313 |
|
|
|
(4,152 |
) |
|
|
(2,401 |
) |
Cash and cash
equivalents at beginning of period |
|
|
|
|
27,453 |
|
|
|
31,605 |
|
|
|
34,006 |
|
Cash and cash
equivalents at end of period |
|
|
|
$ |
137,766 |
|
|
$ |
27,453 |
|
|
$ |
31,605 |
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid
during the periods for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
$ |
60,055 |
|
|
$ |
53,148 |
|
|
$ |
55,939 |
|
Income tax
(refunds) payments, net |
|
|
|
$ |
(4,009 |
) |
|
$ |
2,472 |
|
|
$ |
10,527 |
|
See accompanying notes to consolidated financial statements.
F-7
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
| 1. |
|
Summary of Significant Accounting Policies |
Description of Business — We are a
leading manufacturer and marketer of a diversified portfolio of well-recognized branded consumer products. Our major product lines include Infant Care,
Feminine Care, Sun Care and Household and Personal Grooming products.
Basis of Presentation — Our Consolidated
Financial Statements include the accounts of Playtex Products, Inc. and all of our subsidiaries. All significant intercompany balances have been
eliminated in consolidation.
The preparation of financial statements in
accordance with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions. These
estimates and assumptions affect the reported amounts and classification of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported amounts and timing of revenue and expenses. Actual results could vary from our estimates and
assumptions.
Certain amounts in the prior year financial
statements have been reclassified to conform to our current year presentation. Our fiscal year end is on the last Saturday in December nearest to
December 31 and, as a result, a fifty-third week is added every 5 or 6 years. Fiscal 2004, 2003 and 2002 were fifty-two week years.
Revenue Recognition — We derive revenue
from the sale of consumer products. In accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition,” revenue is recognized
when the following conditions are met: a purchase order submitted by a customer has been received; the selling price is fixed or determinable; products
have been shipped and title transferred; and there is reasonable assurance of collectibility. Estimated shipping and handling costs are considered in
establishing product prices billed to customers.
Our practice is not to accept returned goods unless
authorized by management of the sales organization. Returns result primarily from damage and shipping discrepancies. We accrue for damaged product and
shipping discrepancies, and thus reduce net sales, based on historical experience related to these types of returns. We authorize customers to return
Sun Care products that have not been sold by the end of the sun care season, which is normal practice in the sun care industry. We record sales at the
time the products are shipped and title transfers. The terms of these sales vary but, in all instances, the revenue recognition conditions noted above
are met. Simultaneously with the time of the shipment, we reduce sales and cost of sales, and increase an accrued liability on our Consolidated Balance
Sheet for anticipated returns based upon an estimated return level. Customers are required to pay for the Sun Care product purchased during the season
under the required terms. Due to the seasonal nature of sun care, we offer a variety of term options to our qualified customers. In all cases, these
terms require substantial cash payments prior to or during the summer sun care season. We generally receive returns of our Sun Care products from
September through March following the summer sun care season.
We routinely commit to customer trade promotions and
consumer coupon programs that require us to estimate and accrue the ultimate costs of such programs. Customer trade promotions include introductory
marketing funds (slotting fees), cooperative marketing programs, shelf price reductions on our products, advantageous end of aisle or in-store
displays, graphics, and other trade promotion activities conducted by the customer. We accrue a liability at the end of each period for the estimated
expenses incurred, but unpaid, for these programs. Costs of trade promotions, cash discounts offered to the trade as a payment incentive and consumer
coupons are recorded as a reduction of net sales.
As part of a review of the classification of certain
expenses, in the second quarter of 2004, we reclassified cash discount expense as a reduction of revenue. Previously, this expense was included in
SG&A. This reclassification amounted to $13.8 million in fiscal 2003 and $15.5 million in fiscal 2002. While this discount is a payment incentive,
we are now including this with other trade incentives previously reported as a reduction to net sales by employing a broader definition of the Emerging
Issues Task Force (“EITF”) No. 01-9, “Accounting for Consideration Given By a Vendor to a Customer (Including a Reseller of the
Vendor’s Products).”
F-8
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Summary of Significant Accounting Policies
(Continued)
Research and Development — Research and
development costs are expensed in selling, general and administrative (“SG&A”) as incurred and amounted to $16.9 million in fiscal 2004,
$16.3 million in fiscal 2003 and $15.2 million in fiscal 2002.
Advertising and Promotion Expenditures —
Costs associated with advertising and promotion, including fees to advertising agencies, are expensed in SG&A as incurred. Media advertising
production costs are expensed the first time the advertising takes place. Our advertising and promotion expenditures were $91.7 million in fiscal 2004,
$89.3 million in fiscal 2003 and $86.7 million in fiscal 2002.
Warehousing and Handling Costs — Costs
associated with inventory storage and handling costs at our distribution centers are included as a component of SG&A. These costs are expensed as
incurred and amounted to $19.0 million, $20.4 million and $20.5 million in fiscal 2004, 2003 and 2002, respectively. Warehousing and handling costs
exclude inbound and outbound freight, which are included in cost of sales.
Cash and cash equivalents — Cash
equivalents are short-term, highly liquid investments with original maturities of 90 days or less. Outstanding checks are not deducted from reported
cash and cash equivalents until presentment. The associated liability is included as a component of accounts payable in the current liability section
of the Consolidated Balance Sheets. Cash and cash equivalents at December 27, 2003 included $7.6 million of cash held in lock box pending weekly
settlement procedure for our receivables facility (see Note 7).
Inventories — Inventories are stated at
the lower of cost (first-in, first-out basis) or market. Inventory costs include material, labor and manufacturing overhead.
Property, Plant and Equipment —
Property, plant and equipment are stated at cost. Depreciation and amortization is determined on the straight-line method over the estimated useful
life of the respective asset. Our estimated useful lives for our fixed asset classes are as follows:
|
|
• land improvements range from 15 to 40 years,
• building and improvements range from 20 to 40 years,
• leasehold improvements vary based on the shorter of asset life
or lease term,
• furniture and fixtures range from 5 to 10 years,
• computer hardware and software range from 3 to 4 years, and
• machinery and equipment range from 4 to 20 years. |
Capitalized Software Costs
— We follow the accounting guidance for capitalized software costs as specified in Statement of Position 98-1, “Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use.” We capitalize significant costs incurred in the acquisition and development of software
for internal use, including the costs of the software, materials, and consultants incurred in developing internal-use computer software once final
selection of the software is made. Costs incurred prior to the final selection of software and costs not qualifying for capitalization are charged to
expense.
Goodwill and Indefinite-Lived Assets —
Effective December 30, 2001, the beginning of our 2002 fiscal year, we adopted the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires that goodwill and certain intangibles with
indefinite lives no longer be amortized, but instead be tested for impairment annually. In addition, an intangible asset that is not subject to
amortization should be tested for impairment more frequently if events or changes in circumstances indicate that the asset might be impaired. We
recorded a charge upon adoption of SFAS No. 142 of $12.4 million, net of $7.1 million in tax benefits, in the first quarter of 2002, reported as a
cumulative effect of accounting change. The trademark impairment from this initial implementation was directly attributable to the different approach
in evaluating impairment upon adoption of SFAS No. 142 (discounted cash flow method) as compared to SFAS No. 121, “Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of,” (undiscounted cash flow coverage of carrying value). We measure fair value for
purposes of testing our trademarks for impairment using the relief from royalty method (a discounted cash flow methodology). Our research
indicates
F-9
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Summary of Significant Accounting Policies
(Continued)
that this is the most widely used approach for
valuing assets of this type. We consider a number of factors in determining the relevant variables for this calculation including royalty rates for
similar products licensed in the marketplace and the additional rights and obligations inherent in the ownership of a trademark as opposed to a
licensing arrangement including product extension, geographical expansion opportunities, exclusivity of use and transferability. In addition, we
utilize a discount rate that reflects the rights and obligations of ownership, which results in an inherent premium as compared to a valuation of a
licensing agreement since the discount rate of a licensee would reflect the additional risks of a license-only arrangement. We conducted the required
annual impairment review during the second quarter of 2004 and 2003 and did not identify any goodwill or intangible asset impairment. In the fourth
quarter of 2004, we recorded an asset impairment charge of approximately $16.4 million. This non-cash charge was required to write down the value of
the Baby Magic trademark due to a change in the competitive environment and the Binaca trademark, due to a continual decline in the
liquid breath freshener category and a decision by new management to not invest in non-core brands.
Long-Lived Assets — We review long-lived
assets, including fixed assets and intangible assets with definitive lives, such as patents, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal
of Long-Lived Assets.” The vast majority of our long-lived assets are located in the United States (“U.S.”). In 2002, we recorded an
asset impairment charge of $4.2 million as a result of the closing of our Watervliet, New York plastic molding facility (see Note 3). Amortization of
patents and other intangible assets is expected to be approximately $2.4 million a year in fiscal 2005 through fiscal 2008 and $1.5 million in fiscal
2009. Intangible assets subject to amortization are amortized on a straight-line basis over the estimated useful lives. Useful lives for patents are 17
years or the remaining legal life, whichever is shorter, and others are determined by contractual obligations. The weighted average useful life of our
long-lived intangible assets is approximately 10 years.
Deferred Financing Costs — Expenses
incurred to issue debt are capitalized and amortized on a straight line basis, which approximates the effective yield method, over the life of the
related debt agreements, and are included as a component of interest expense in the Consolidated Statements of Income.
Income Taxes — Deferred tax assets and
liabilities are provided using the asset and liability method for temporary differences between financial and tax reporting bases 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 we expect to recover.
Foreign Currency Translation — Assets
and liabilities of our foreign subsidiaries are translated into U.S. dollars at period-end exchange rates. Revenues and expenses are translated at
average exchange rates during the period. Net foreign currency translation gains or losses are shown as a component of accumulated other comprehensive
income (loss).
Stock-Based Compensation — We account
for stock-based compensation (see Note 11) in accordance with 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, no compensation expense related to our
stock options is reflected in our Consolidated Statements of Income as stock options granted under the stock option plan had an exercise price equal to
or greater than the market value of the underlying common stock on the date of grant.
F-10
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Summary of Significant Accounting Policies
(Continued)
The following table illustrates the pro forma effect
of stock-based compensation on net income and earnings per share as if we had applied the fair value recognition provisions of SFAS No.
123:
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
|
December 28,
2002
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
reported |
|
|
|
$ |
55,507 |
|
|
$ |
18,232 |
|
|
$ |
48,904 |
|
Deduct: Total
stock-based employee compensation expense determined under the fair value method for stock option awards, net of related tax effect |
|
|
|
|
(2,280 |
) |
|
|
(3,207 |
) |
|
|
(3,772 |
) |
Pro forma
— Basic |
|
|
|
|
53,227 |
|
|
|
15,025 |
|
|
|
45,132 |
|
Add: Interest
on Convertible Notes, net of related tax effect |
|
|
|
|
— |
|
|
|
— |
|
|
|
1,780 |
|
Pro forma
— Diluted |
|
|
|
$ |
53,227 |
|
|
$ |
15,025 |
|
|
$ |
46,912 |
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
$ |
0.91 |
|
|
$ |
0.30 |
|
|
$ |
0.80 |
|
Diluted |
|
|
|
$ |
0.91 |
|
|
$ |
0.30 |
|
|
$ |
0.79 |
|
Pro
forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
$ |
0.87 |
|
|
$ |
0.25 |
|
|
$ |
0.74 |
|
Diluted |
|
|
|
$ |
0.87 |
|
|
$ |
0.25 |
|
|
$ |
0.73 |
|
Weighted
average common shares and common equivalent
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
61,216 |
|
|
|
61,216 |
|
|
|
61,148 |
|
Diluted |
|
|
|
|
61,225 |
|
|
|
61,227 |
|
|
|
63,948 |
|
The fair value of stock options used to compute the
pro forma net income disclosure is the estimated fair value on the date of grant using the Black-Scholes option-pricing model with the following
assumptions:
|
|
|
|
2004
|
|
2003
|
|
2002
|
Risk-free
interest rates |
|
|
|
|
4.32 |
% |
|
|
3.63 |
% |
|
|
4.60 |
% |
Dividend
yield |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Expected
option life in years |
|
|
|
|
8 |
|
|
|
8 |
|
|
|
8 |
|
Expected
volatility |
|
|
|
|
41 |
% |
|
|
41 |
% |
|
|
35 |
% |
| 2. |
|
Impact of New Accounting Pronouncements |
In May 2004, the FASB issued FASB Staff Position
(“FSP”) SFAS No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization
Act of 2003 (“the Act”).” The Act was signed into law on December 8, 2003 and expanded Medicare to include prescription drugs. We
sponsor retiree medical programs and this legislation includes a federal subsidy for qualifying companies. FSP SFAS 106-2 requires that the effects of
the federal subsidy be considered an actuarial gain and treated like similar gains and losses if it is determined that the prescription drug benefits
of the retiree medical program are determined to be actuarially equivalent to those offered under Medicare Part D. We adopted FSP SFAS 106-2 during our
third quarter ended September 25, 2004 and concluded that we are unable to determine whether the benefits under our plan are actuarially equivalent to
Medicare Part D under the Act because the guidance provided thus far is unclear. We will monitor our plan and assess actuarial equivalence as new
information becomes available.
In November 2004, the FASB issued SFAS No. 151,
“Inventory Costs — an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 seeks to clarify the accounting for abnormal amounts of idle
facility expense, freight,
F-11
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Impact of New Accounting Pronouncements
(Continued)
handling costs and wasted material (spoilage) in
the determination of inventory carrying costs. The statement requires such costs to be treated as a current period expense. This statement is effective
for fiscal years beginning after June 15, 2005. We are currently evaluating what impact this change may have on our Consolidated Financial
Statements.
In December 2004, the FASB issued SFAS No. 123
(revised 2004), “Share-based Payment.” SFAS No. 123 R will require us to measure all employee stock-based compensation awards using a fair
value method and recognize such expense in our financial statements. In addition, the SFAS No. 123 R will require additional accounting related to the
income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements. SFAS No. 123 R is
effective for the first interim or annual period beginning after June 15, 2005. We are in the process of evaluating the impact the adoption of SFAS No.
123 R will have on our Consolidated Financial Statements.
In December 2004, the FASB issued SFAS No. 153,
“Exchanges of Nonmonetary Assets — an amendment of APB Opinion No. 29.” This statement addresses the measurement of exchanges of
nonmonetary assets and redefines the scope of transactions that should be measured based on the fair value of the assets exchanged. SFAS No. 153 is
effective for fiscal periods beginning after June 15, 2005. We do not believe the adoption of SFAS No. 153 will have a material impact on our
Consolidated Financial Statements.
The American Jobs Creation Act of 2004 (the
“Act”), signed into law in October 2004, makes a number of changes to the income tax laws, which will affect the company in future years. In
December 2004, the FASB issued FSP FASB 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Jobs Creation act of 2004.” The Act introduces a special one-time dividends received deduction on the repatriation of certain foreign
earnings to a U.S. taxpayer (repatriation provision), provided certain criteria are met. FSP FAS 109-2 provides accounting and disclosure guidance for
the repatriation provision, and is effective immediately. At December 25, 2004, we were examining the impact of the repatriation provision awaiting
further guidance from the U.S. Treasury. On January 13, 2005, Treasury issued Notice 2005-10 that provided initial guidance for the repatriation
provision. Management continued this evaluation process through February 22, 2005 at which time a Domestic Reinvestment Plan (the “DRP”) was
completed. The DRP provides for our Canadian subsidiary to pay a C$18 million dividend in one or more installments during 2005 that will be used to
partially fund our 2005 U.S. advertising programs. We have fully provided U.S. taxes for the undistributed earnings of our Canadian subsidiary at the
statutory rate of 35%. In the first quarter of 2005, we will record a tax benefit of approximately $4 million to reflect the reduced tax rate
associated with this special repatriation, which is substantially below our statutory rate noted above.
In February 2005, we announced a realignment plan to
improve focus on our core categories, reduce organizational complexity and obtain a more competitive cost structure. This is a continuation of our
operational restructuring that began in late 2003. We estimate that charges related to the realignment are expected to total between $17 and $19
million by the end of 2005. Of this amount, we recorded $10.2 million of restructuring costs and $0.4 million of other related costs (in SG&A) in
the fourth quarter of 2004 related primarily to severance costs under our existing severance policy. The majority of these charges are associated with
the U.S. Division. Management estimates that: cost for and related to severance for employee terminations and a voluntary early retirement program will
be in the range of $13 to $14 million; costs for contract termination will be in the range of $2 to $3 million; and other related expenses will be
approximately $1 to $2 million. Some of the specific realignment initiatives include:
• |
|
consolidation of the
U.S./International divisional structure in favor of a product category structure, |
• |
|
realignment of the sales and marketing organizations and related
support functions, and |
• |
|
rationalization of manufacturing, warehousing and office
facilities, including the outsourcing of gloves production to Malaysia and a reduction in the corporate headquarters office
space. |
F-12
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. Restructuring (Continued)
As a result, there will be a reduction of more than
300 positions by the end of 2005, or approximately 20% of the workforce. The reduction will be obtained through a combination of attrition, early
retirement and layoffs.
In the fourth quarter of 2003, with the assistance
of an outside operations consultant, we initiated our restructuring program to increase operational effectiveness and profitability. As part of this
program, we incurred $3.9 million in restructuring charges in the fourth quarter of 2003, primarily for severance costs for employee terminations and
costs associated with a voluntary early retirement program. We recorded a restructuring benefit of $0.2 million to reduce the restructuring liability
for a change in estimate. Approximately 100 positions were impacted by this phase of our restructuring, all of which were in manufacturing operations
and supporting functions. At December 25, 2004, all of these positions have been eliminated. In 2004, we paid $1.8 million in severance and related
expenses associated with this phase of the restructuring. In addition, through December 25, 2004, we incurred $3.1 million of other related expenses
(primarily consulting), which are included in our SG&A expenses. We expect the remaining $0.6 million of restructuring liabilities associated with
this initial restructuring at December 25, 2004 to be paid in cash by the end of the first half of 2005. At the beginning of the first quarter 2003,
our restructuring balance was solely related to our March 2002 decision to close our Watervliet, New York plastic molding facility. The closure of the
plant was complete as of December 27, 2003 and no further restructuring liabilities remain.
The following tables summarize the restructuring
activities for fiscal 2004, 2003 and 2002 (in thousands):
|
|
|
|
|
|
|
|
|
|
Utilized, Net
|
|
|
|
|
|
Beginning
Balance
|
|
Charge to
Income
|
|
Adjustments
and Changes
to Estimates
|
|
Cash
|
|
Non-Cash
|
|
Ending
Balance
|
Fiscal
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and
related expenses |
|
|
|
$ |
2,478 |
|
|
$ |
10,168 |
|
|
$ |
(200 |
) |
|
$ |
(1,771 |
) |
|
$ |
— |
|
|
$ |
10,675 |
|
Fiscal
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
write-downs |
|
|
|
$ |
349 |
|
|
$ |
— |
|
|
$ |
(349 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Severance and
related expenses |
|
|
|
|
870 |
|
|
|
2,650 |
|
|
|
391 |
|
|
|
(1,433 |
) |
|
|
— |
|
|
|
2,478 |
|
Accelerated
pension obligations |
|
|
|
|
80 |
|
|
|
1,223 |
|
|
|
(80 |
) |
|
|
— |
|
|
|
(1,223 |
) |
|
|
— |
|
Excess
purchase commitments |
|
|
|
|
51 |
|
|
|
— |
|
|
|
(33 |
) |
|
|
(18 |
) |
|
|
— |
|
|
|
— |
|
Other exit
costs |
|
|
|
|
814 |
|
|
|
— |
|
|
|
71 |
|
|
|
(885 |
) |
|
|
— |
|
|
|
— |
|
Total |
|
|
|
$ |
2,164 |
|
|
$ |
3,873 |
|
|
$ |
— |
|
|
$ |
(2,336 |
) |
|
$ |
(1,223 |
) |
|
$ |
2,478 |
|
Fiscal
2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
write-downs |
|
|
|
$ |
— |
|
|
$ |
4,222 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(3,873 |
) |
|
$ |
349 |
|
Severance and
related expenses |
|
|
|
|
— |
|
|
|
2,011 |
|
|
|
— |
|
|
|
(1,141 |
) |
|
|
— |
|
|
|
870 |
|
Accelerated
pension obligations |
|
|
|
|
— |
|
|
|
400 |
|
|
|
— |
|
|
|
(320 |
) |
|
|
— |
|
|
|
80 |
|
Excess
purchase commitments |
|
|
|
|
— |
|
|
|
108 |
|
|
|
— |
|
|
|
(57 |
) |
|
|
— |
|
|
|
51 |
|
Other exit
costs |
|
|
|
|
— |
|
|
|
858 |
|
|
|
— |
|
|
|
(44 |
) |
|
|
— |
|
|
|
814 |
|
Total |
|
|
|
$ |
— |
|
|
$ |
7,599 |
|
|
$ |
— |
|
|
$ |
(1,562 |
) |
|
$ |
(3,873 |
) |
|
$ |
2,164 |
|
| 4. |
|
Business Segments and Geographic Area
Information |
Previously, we were organized in three divisions. As
a result of the first phase of our operational restructuring, we reorganized and consolidated our business structure, effective April 2004.
Subsequently, we were organized in two divisions in 2004, which are categorized as business segments in accordance with GAAP, as follows: U.S. Division
and International Division.
Our U.S. Division includes products sold in
the United States primarily to mass merchandisers, grocery, drug and specialty classes of trade. Specialty classes of trade include warehouse clubs,
military, convenience stores, specialty stores and telemarketing.
F-13
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Business Segments and Geographic Area Information
(Continued)
Our International Division includes the
results from our Canadian and Australian subsidiaries, sales in Puerto Rico and export sales. The International Division sells substantially the same
products as are available to our U.S. customers.
We evaluate division performance based on their
operating income excluding general corporate allocations. We do not segregate assets, amortization, capital expenditures, or interest income and
interest expense at the divisional level.
Our division results for the last three fiscal
periods are as follows (in thousands):
|
|
Year
Ended
|
|
|
|
December
25, 2004
|
|
December
27, 2003
|
|
December
28, 2002
|
|
|
|
Net
Sales
|
|
Operating
Income
|
|
Net
Sales
|
|
Operating
Income
|
|
Net
Sales
|
|
Operating
Income
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
595,871 |
|
|
$ |
228,461 |
|
|
$ |
574,444 |
|
|
$ |
214,138 |
|
|
$ |
641,475 |
|
|
$ |
269,592 |
|
International(1) |
|
|
71,025 |
|
|
|
28,427 |
|
|
|
69,430 |
|
|
|
27,567 |
|
|
|
62,142 |
|
|
|
22,999 |
|
Total
segment |
|
$ |
666,896 |
|
|
|
256,888 |
|
|
$ |
643,874 |
|
|
|
241,705 |
|
|
$ |
703,617 |
|
|
|
292,591 |
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
selling, general and administrative |
|
|
|
|
|
|
154,025 |
|
|
|
|
|
|
|
150,637 |
|
|
|
|
|
|
|
141,915 |
|
Gain
on sale of assets |
|
|
|
|
|
|
(56,543 |
) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Restructuring, net |
|
|
|
|
|
|
9,969 |
|
|
|
|
|
|
|
3,873 |
|
|
|
|
|
|
|
3,377 |
|
Loss
on asset impairments |
|
|
|
|
|
|
16,449 |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
4,222 |
|
Unallocated
charges |
|
|
|
|
|
|
552 |
|
|
|
|
|
|
|
458 |
|
|
|
|
|
|
|
642 |
|
Amortization
of intangibles |
|
|
|
|
|
|
1,293 |
|
|
|
|
|
|
|
903 |
|
|
|
|
|
|
|
928 |
|
Consolidated
operating income |
|
|
|
|
|
$ |
131,143 |
|
|
|
|
|
|
$ |
85,834 |
|
|
|
|
|
|
$ |
141,507 |
|
(1) |
|
The results of the Puerto Rico branch are included in the
International Division. Our divisional results also represent our geographic results. |
The amount of depreciation and amortization
allocated to the divisions is as follows (in thousands):
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
|
December 28,
2002
|
U.S. |
|
|
|
$ |
11,342 |
|
|
$ |
10,272 |
|
|
$ |
10,193 |
|
International |
|
|
|
|
89 |
|
|
|
74 |
|
|
|
78 |
|
Depreciation
and amortization included in segment
operating income |
|
|
|
|
11,431 |
|
|
|
10,346 |
|
|
|
10,271 |
|
Depreciation
and amortization not allocated to divisions |
|
|
|
|
3,337 |
|
|
|
3,756 |
|
|
|
3,740 |
|
Consolidated
depreciation and amortization |
|
|
|
$ |
14,768 |
|
|
$ |
14,102 |
|
|
$ |
14,011 |
|
F-14
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Business Segments and Geographic Area Information
(Continued)
Identifiable assets by geographic area represent
those assets that are used in our operations in each area. U.S. includes all 50 states and its territories and International represents assets outside
of the U.S. and its territories (in thousands):
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
Identifiable
Assets
|
|
|
|
|
|
|
|
|
|
|
United
States(1) |
|
|
|
$ |
1,052,865 |
|
|
$ |
960,266 |
|
International(2) |
|
|
|
|
38,525 |
|
|
|
33,032 |
|
Total |
|
|
|
$ |
1,091,390 |
|
|
$ |
993,298 |
|
(1) |
|
All goodwill resides in the U.S. Division. |
(2) |
|
The majority of our International identifiable assets are
related to our Canadian subsidiary. In 2005, our Canadian subsidiary is expected to pay C$18 million dividend to us in one or more installments (see
Note 10). |
F-15
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 25,
2004
|
|
December 27,
2003
|
Inventories:
|
|
|
|
|
|
|
|
|
|
|
Raw
materials |
|
|
|
$ |
13,587 |
|
|
$ |
15,076 |
|
Work in
process |
|
|
|
|
1,714 |
|
|
|
1,884 |
|
Finished
goods |
|
|
|
|
56,410 |
|
|
|
61,453 |
|
Total |
|
|
|
$ |
71,711 |
|
|
$ |
78,413 |
|
Net property,
plant and equipment:
|
|
|
|
|
|
|
|
|
|
|
Land and land
improvements |
|
|
|
$ |
4,389 |
|
|
$ |
4,374 |
|
Building and
building improvements |
|
|
|
|
36,964 |
|
|
|
36,153 |
|
Leasehold
improvements |
|
|
|
|
4,851 |
|
|
|
4,701 |
|
Furniture and
fixtures |
|
|
|
|
8,839 |
|
|
|
8,785 |
|
Information
technology |
|
|
|
|
17,382 |
|
|
|
16,642 |
|
Machinery and
equipment |
|
|
|
|
176,487 |
|
|
|
170,490 |
|
|
|
|
|
|
248,912 |
|
|
|
241,145 |
|
Less
accumulated depreciation and amortization |
|
|
|
|
(128,274 |
) |
|
|
(115,720 |
) |
Total |
|
|
|
$ |
120,638 |
|
|
$ |
125,425 |
|
Trademarks and
other intangibles, net:
|
|
|
|
|
|
|
|
|
|
|
Trademarks |
|
|
|
$ |
114,100 |
|
|
$ |
131,288 |
|
Patents and
other |
|
|
|
|
21,084 |
|
|
|
12,570 |
|
Less
accumulated amortization |
|
|
|
|
(6,880 |
) |
|
|
(5,587 |
) |
Net |
|
|
|
|
14,204 |
|
|
|
6,983 |
|
Total |
|
|
|
$ |
128,304 |
|
|
$ |
138,271 |
|
Accrued
expenses:
|
|
|
|
|
|
|
|
|
|
|
Advertising
and sales promotion |
|
|
|
$ |
21,154 |
|
|
$ |
17,423 |
|
Employee
compensation and benefits |
|
|
|
|
20,044 |
|
|
|
12,284 |
|
Interest |
|
|
|
|
14,577 |
|
|
|
7,645 |
|
Restructuring
costs — current |
|
|
|
|
8,268 |
|
|
|
2,478 |
|
Sun Care
returns reserve |
|
|
|
|
5,994 |
|
|
|
5,961 |
|
Other |
|
|
|
|
11,075 |
|
|
|
7,451 |
|
Total |
|
|
|
$ |
81,112 |
|
|
$ |
53,242 |
|
Accumulated
other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation, net of tax effect of $0.5 million |
|
|
|
$ |
999 |
|
|
$ |
297 |
|
Minimum
pension liability adjustment, net of tax effect of $0.6 million |
|
|
|
|
(877 |
) |
|
|
(815 |
) |
Total |
|
|
|
$ |
122 |
|
|
$ |
(518 |
) |
F-16
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Long-term debt consists of the following (in
thousands):
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
8% Senior
Secured Notes due 2011 |
|
|
|
$ |
460,000 |
|
|
$ |
— |
|
9-3/8% Senior
Subordinated Notes due 2011 |
|
|
|
|
340,000 |
|
|
|
350,000 |
|
Term C
Loan |
|
|
|
|
— |
|
|
|
443,250 |
|
|
|
|
|
|
800,000 |
|
|
|
793,250 |
|
Less current
maturities |
|
|
|
|
— |
|
|
|
(4,500 |
) |
Total |
|
|
|
$ |
800,000 |
|
|
$ |
788,750 |
|
2004 Refinancing — On February 19, 2004,
we completed a refinancing (the “2004 Refinancing Transaction”) of our then outstanding credit facility (“Senior Debt”) and
receivables facility (see Note 7). As part of the 2004 Refinancing Transaction, we entered into:
• |
|
$460.0 million principal amount of 8% Senior Secured Notes due
2011 (the “8% Notes”), and |
• |
|
a five-year $150.0 million variable rate credit facility (the
“Credit Facility”), comprised of:
— a $7.5 million term loan, which we repaid and terminated in the third quarter of 2004,
and
— a $142.5 million Revolving Credit Facility (the “Revolver”). |
The net proceeds from the 2004 Refinancing
Transaction including borrowings under the Credit Facility were used to repay and/or terminate commitments under our Senior Debt and our receivables
facility.
Also on February 19, 2004, we repurchased on the
open market $10.0 million principal of our 9-3/8% Senior Subordinated Notes due 2011 (the “9-3/8% Notes,” together with the 8% Notes, the
“Notes”), at a discount, which resulted in a net gain, including a $0.2 million write-off of unamortized deferred financing fees associated
with the repurchased notes, of $0.3 million.
As a result of the 2004 Refinancing Transaction, we
incurred approximately $12.9 million in fees and expenses, which have been deferred and are being amortized over the term of the related indebtedness.
Additionally, approximately $6.7 million in unamortized deferred financing fees associated with the terminated Senior Debt were written off in February
2004.
8% Notes — We pay interest on the 8%
Notes semi-annually on March 1 and September 1 of each year. At any time prior to March 1, 2007, we may redeem up to 35% of the principal amount of the
8% Notes with the proceeds of certain equity offerings or asset sales, at a redemption price of 100.000% of the principal amount of notes redeemed plus
the Applicable Premium, plus accrued and unpaid interest to the redemption date. In addition, at any time prior to March 1, 2007, we may also redeem
the 8% Notes, in whole but not in part, upon the occurrence of a change of control, at the redemption price of 100.000% of the principal amount of
notes redeemed plus the Applicable Premium, plus accrued and unpaid interest to the redemption date.
“Applicable Premium” means (i) with
respect to an equity offering redemption, 8% of the principal amount of the notes redeemed and (ii) with respect to an asset sale redemption or a
change of control redemption, the percentage (expressed as percentages of principal amount of notes redeemed) set forth in the following table if
redeemed during the twelve-month period prior to March 1 of the years indicated as follows:
Year
|
|
Percentage
|
2005 |
|
|
12.000 |
|
2006 |
|
|
10.000 |
|
2007 |
|
|
8.000 |
|
F-17
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. Long-Term Debt (Continued)
The 8% Notes are secured by a first lien on
intellectual property owned by Playtex Products, Inc. and its domestic subsidiaries, the guarantors of the 8% Notes, and by a second lien on
substantially all personal property and material owned real property, other than intellectual property, owned by us and the guarantors of the 8% Notes.
We do not have the option to redeem the 8% Notes from March 1, 2007 through March 1, 2008. At our option, we may redeem the 8% Notes on or after March
1, 2008 at the redemption prices (expressed as percentages of principal amount) listed below plus accrued and unpaid interest to the redemption
date:
Year
|
|
|
|
Percentage
|
2008 |
|
|
|
|
104.000 |
|
2009 |
|
|
|
|
102.000 |
|
2010 and
thereafter |
|
|
|
|
100.000 |
|
9-3/8% Notes — We pay interest on the
9-3/8% Notes semi-annually on June 1 and December 1 of each year. At our option, we may redeem the 9-3/8% Notes on or after June 1, 2006 at the
redemption prices (expressed as percentages of principal amount) listed below plus accrued and unpaid interest to the redemption date:
Year
|
|
|
|
Percentage
|
2006 |
|
|
|
|
104.688 |
|
2007 |
|
|
|
|
103.125 |
|
2008 |
|
|
|
|
101.563 |
|
2009 and
thereafter |
|
|
|
|
100.000 |
|
Revolver — The Revolver has a term of
five years. The rates of interest we pay on the Revolver are, at our option, a function of certain alternative short term borrowing rates such as the
London Inter Bank Offer Rate (“LIBOR”) plus 250 basis points or an index rate based upon the prime rate or federal funds rate plus 125 basis
points. The availability under our Revolver is subject to a borrowing base calculation, which is dependent upon the level of certain assets including
eligible receivables, eligible inventory and eligible equipment, as defined in the Credit Facility. As of December 25, 2004, our availability under the
Revolver, was $70.2 million, as reduced for $4.5 million of open letters of credit. We pay a quarterly commitment fee on the available but unused
revolver balance ranging between 0.375% and 0.50% depending on the average outstanding revolver balance.
Our Credit Facility is secured by a lien on all
personal property and other assets owned by us and the guarantors, and contains various restrictions and limitations that may impact us. These
restrictions and limitations relate to:
|
|
• incurrence of indebtedness,
• contingent
obligations,
• liens,
• capital expenditures,
• mergers and acquisitions,
• asset sales, dividends
and distributions,
• redemption or repurchase of equity interests,
• certain debt payments and modifications,
• loans
and investments,
• transactions with affiliates,
• changes of control,
• payment of consulting and
management fees, and
• compliance with laws and regulations. |
On October 27, 2004, we amended
our Credit Facility. This amendment allows us to repurchase the Notes provided we meet certain specified conditions and a certain minimum availability
target under our Revolver over a forecasted twelve month period.
Our Credit Facility and the indenture for our 8%
Notes also grant rights of inspection, access to management, the submission of certain financial reports, and requires us to make prepayments with the
proceeds generated by us resulting from the disposition of assets, the receipt of condemnation settlements and insurance settlements from casualty
losses and from the sale of equity securities.
F-18
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. Long-Term Debt (Continued)
The indentures to the 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. Our
wholly-owned domestic subsidiaries are guarantors of the Notes (see Note 19).
The only required principal repayments during the
next five years is on our Credit Facility, which requires us to pay any outstanding principal at the February 2009 termination date.
On February 19, 2004, the receivables purchase
facility agreement (the “Receivables Facility”), was terminated as part of the 2004 Refinancing Transaction (see Note 6). At the time of
termination, our wholly-owned subsidiary, Playtex A/R LLC, was merged into Playtex Products, Inc.
On May 22, 2001, we entered into the Receivables
Facility through our wholly-owned subsidiary, Playtex A/R LLC. Through the Receivables Facility, we sold on a continuous basis to Playtex A/R LLC
substantially all of our domestic customers’ trade invoices that we generated. Playtex A/R LLC sold to a third-party commercial paper conduit (the
“Conduit”) an undivided fractional ownership interest in these trade accounts receivable. Our retained interest in receivables represented
our subordinated fractional undivided interest in receivables sold to Playtex A/R LLC and the net unamortized securitization fee incurred by Playtex
A/R LLC.
We sold receivables at a discount, which we included
in other expenses in the Consolidated Statements of Income. This discount, which was $0.3 million for 2004, through the termination date of February
19, 2004 and $1.9 million for 2003, reflected the fees required by the Conduit to purchase a fractional undivided interest in the receivables. The fees
were 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 a securitization fee incurred by Playtex A/R LLC to
establish the Receivables Facility. As a result of the termination of the Receivables Facility in February 2004, we wrote off the unamortized balance
of $0.1 million of this securitization fee.
The following table summarizes the cash flows
between Playtex A/R LLC and us for the years ended December 25, 2004 and December 27, 2003 (in thousands):
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
Cash Flows
from Playtex A/R LLC to Playtex Products, Inc.
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
collections used to purchase additional receivables
from Playtex Products, Inc. |
|
|
|
$ |
82,506 |
|
|
$ |
600,496 |
|
Decrease in
fractional interest sold |
|
|
|
|
(21,000 |
) |
|
|
(18,000 |
) |
Net cash flow
to Playtex Products, Inc. |
|
|
|
$ |
61,506 |
|
|
$ |
582,496 |
|
We accounted 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 were sold, the balances were removed from our Consolidated Balance Sheet.
Playtex A/R LLC paid fees on the value of the undivided interest of the receivables sold to the Conduit equal to the 30 day LIBOR rate, which was reset
weekly. We retained the servicing responsibilities under the receivables facility. The servicing was valued at zero since fees from the servicing were
just adequate to compensate us for our servicing responsibilities.
F-19
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
| 8. |
|
Gain on Sale of Assets |
On November 2, 2004, we completed the sale of the
assets of the Woolite rug and upholstery brand to Bissell Homecare, Inc. We recorded a gain of $56.5 million as a result of the transaction. Gross
proceeds from the Woolite sale were $61.9 million. The carrying value of the assets sold, including inventory, equipment and intellectual property, was
$3.4 million and we incurred fees and expenses directly related to the transaction of $2.0 million.
| 9. |
|
Expenses Related to Retirement of Debt |
On February 19, 2004, we refinanced our then
outstanding credit facility and terminated our Receivables Facility. We wrote off approximately $6.6 million in unamortized deferred financing costs
relating to our then outstanding Term C Loan, revolver, credit agreement and related amendments and $0.1 million of an unamortized fee paid to
originate the Receivables Facility in 2001. In addition, we recorded a net gain of $0.3 million, which included a write-off of $0.2 million of
unamortized deferred financing fees, as the result of the repurchase on the open market of $10.0 million principal of our 9-3/8% Notes (see Notes 6 and
7).
We recorded a pretax loss during fiscal 2002 of $5.9
million associated with the write-off of unamortized deferred financing costs relating to the retirement of our then outstanding Term A Loan and Term B
Loan.
The provision (benefit) 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. Deferred income tax assets and
liabilities are calculated for differences between the financial statement and tax bases of assets and liabilities. These differences will result in
taxable or deductible amounts in the future. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts we expect
to realize.
Income before income taxes and cumulative effect of
accounting change are as follows (in thousands):
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
|
December 28,
2002
|
U.S. |
|
|
|
$ |
51,421 |
|
|
$ |
23,568 |
|
|
$ |
71,097 |
|
Foreign |
|
|
|
|
3,376 |
|
|
|
5,253 |
|
|
|
2,332 |
|
Total |
|
|
|
$ |
54,797 |
|
|
$ |
28,821 |
|
|
$ |
73,429 |
|
Our provisions (benefit) for income taxes are as
follows (in thousands):
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
|
December 28,
2002
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
|
$ |
(5,083 |
) |
|
$ |
(1,481 |
) |
|
$ |
11,114 |
|
State and
local |
|
|
|
|
896 |
|
|
|
1,195 |
|
|
|
621 |
|
Foreign |
|
|
|
|
1,946 |
|
|
|
2,127 |
|
|
|
(1,975 |
) |
|
|
|
|
|
(2,241 |
) |
|
|
1,841 |
|
|
|
9,760 |
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
|
|
1,985 |
|
|
|
9,352 |
|
|
|
1,412 |
|
State and
local |
|
|
|
|
250 |
|
|
|
(586 |
) |
|
|
631 |
|
Foreign |
|
|
|
|
(704 |
) |
|
|
(18 |
) |
|
|
299 |
|
|
|
|
|
|
1,531 |
|
|
|
8,748 |
|
|
|
2,342 |
|
Total |
|
|
|
$ |
(710 |
) |
|
$ |
10,589 |
|
|
$ |
12,102 |
|
F-20
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. Income Taxes (Continued)
Our provision (benefit) for income taxes before
cumulative effect of accounting change differed from the amount computed using the federal statutory rate of 35% as follows (in
thousands):
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
|
December 28,
2002
|
Expected
federal income tax at statutory rates |
|
|
|
$ |
19,179 |
|
|
$ |
10,087 |
|
|
$ |
25,701 |
|
Deferred tax
expense for undistributed foreign income |
|
|
|
|
755 |
|
|
|
1,050 |
|
|
|
1,975 |
|
State and
local income taxes |
|
|
|
|
745 |
|
|
|
396 |
|
|
|
813 |
|
Benefit of
capital loss carryforward |
|
|
|
|
(17,793 |
) |
|
|
— |
|
|
|
(14,298 |
) |
Benefit of
favorable foreign tax audit |
|
|
|
|
(2,800 |
) |
|
|
— |
|
|
|
(2,275 |
) |
Other,
net |
|
|
|
|
(796 |
) |
|
|
(944 |
) |
|
|
186 |
|
Total
(benefit) provision for income taxes |
|
|
|
$ |
(710 |
) |
|
$ |
10,589 |
|
|
$ |
12,102 |
|
In 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. Accordingly, we recorded a tax benefit of $14.3 million in 2002 in anticipation of utilizing a portion of the tax capital loss to offset the
deferred capital gain associated with the 1988 spin-off of the Playtex Apparel business. This was utilized on December 15, 2003 in conjunction with the
retirement of the then outstanding related party notes. In 2004, we recorded a tax benefit of $17.8 million for an additional utilization of the
capital loss carryforward to offset a capital gain resulting from the sale of the Woolite assets (see Note 8). The remaining $44.3 million capital loss
carryforward expired on December 25, 2004.
Taxable and deductible temporary differences and tax
credit carryforwards which give rise to our deferred tax assets and liabilities at December 25, 2004 and December 27, 2003 are as follows (in
thousands):
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
Deferred tax
assets:
|
|
|
|
|
|
|
|
|
|
|
Allowances
and reserves not currently deductible |
|
|
|
$ |
12,699 |
|
|
$ |
10,394 |
|
Postretirement benefits reserve |
|
|
|
|
6,450 |
|
|
|
6,461 |
|
Net operating
loss carryforwards |
|
|
|
|
3,993 |
|
|
|
641 |
|
Tax credits
and contribution carryforward |
|
|
|
|
1,148 |
|
|
|
574 |
|
Capital loss
carryover |
|
|
|
|
— |
|
|
|
34,750 |
|
Other |
|
|
|
|
1,639 |
|
|
|
1,563 |
|
Subtotal |
|
|
|
|
25,929 |
|
|
|
54,383 |
|
Less:
valuation allowance |
|
|
|
|
— |
|
|
|
(34,750 |
) |
Total |
|
|
|
|
25,929 |
|
|
|
19,633 |
|
Deferred tax
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Trademarks |
|
|
|
|
35,137 |
|
|
|
31,213 |
|
Property,
plant and equipment |
|
|
|
|
32,483 |
|
|
|
30,986 |
|
Undistributed
income of foreign subsidiary |
|
|
|
|
6,633 |
|
|
|
5,765 |
|
Other |
|
|
|
|
3,290 |
|
|
|
1,814 |
|
Total |
|
|
|
|
77,543 |
|
|
|
69,778 |
|
Deferred tax
liabilities, net |
|
|
|
$ |
51,614 |
|
|
$ |
50,145 |
|
We have available net operating loss carryforwards
(“NOLs”) of $10.3 million at December 25, 2004 that expire in years 2009 through 2024. These NOLs relate to losses generated in 2004 and to
operations of Banana
F-21
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. Income Taxes (Continued)
Boat Holdings and Carewell Industries, Inc. prior to our
acquisition of them. We can utilize these NOLs, with certain limitations, on our federal, state and local tax returns. We expect to utilize these NOLs
prior to their expiration.
The American Jobs Creation Act of 2004 (the
“Act”), signed into law in October 2004, makes a number of changes to the income tax laws, which will affect the company in future years. In
December 2004, the FASB issued FSP FASB 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Jobs Creation act of 2004.” The Act introduces a special one-time dividends received deduction on the repatriation of certain foreign
earnings to a U.S. taxpayer (repatriation provision), provided certain criteria are met. FSP FAS 109-2 provides accounting and disclosure guidance for
the repatriation provision, and is effective immediately. At December 25, 2004, we were examining the impact of the repatriation provision awaiting
further guidance from the U.S. Treasury. On January 13, 2005, Treasury issued Notice 2005-10 that provided initial guidance for the repatriation
provision. Management continued this evaluation process through February 22, 2005 at which time a Domestic Reinvestment Plan (the “DRP”) was
completed. The DRP provides for our Canadian subsidiary to pay a C$18 million dividend in one or more installments during 2005 that will be used to
partially fund our 2005 U.S. advertising programs. We have fully provided U.S. taxes for the undistributed earnings of our Canadian subsidiary at the
statutory rate of 35%. In the first quarter of 2005, we will record a tax benefit of approximately $4 million to reflect the reduced tax rate
associated with this special repatriation, which is substantially below our statutory rate noted above.
Stock Option Plan — We have a long-term
incentive plan under which awards of stock options are granted. Options granted under the plan must have an exercise price equal to or greater than the
price of the stock on the date of grant and have an expiration date no more than ten years from the grant date.
Except for formula grants to certain non-employee
directors, which vest over three, four and five-year periods, options vest over a period determined by the Compensation Committee of the Board of
Directors (“Compensation Committee”), which requires continued employment of the optionee and generally vests over a three-year period.
Additionally, during 2004, we granted 1,145,520 performance-based options. The vesting of the performance-based options is dependent upon continued
employment of the optionee and the attainment of certain financial performance targets as determined by the Compensation Committee. Under this plan, we
have 9,968,966 options authorized but unissued, 7,642,303 options outstanding, and 2,326,663 options available to grant under the plan at December 25,
2004.
F-22
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. Equity Plans (Continued)
The following table summarizes our stock option
activity over the past three fiscal years:
|
|
|
|
2004
|
|
2003
|
|
2002
|
|
|
|
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
Outstanding
at beginning of year |
|
|
|
|
7,426,016 |
|
|
$ |
10.91 |
|
|
|
6,846,681 |
|
|
$ |
11.34 |
|
|
|
6,356,330 |
|
|
$ |
11.17 |
|
Granted |
|
|
|
|
2,820,421 |
|
|
|
6.99 |
|
|
|
856,500 |
|
|
|
7.60 |
|
|
|
840,000 |
|
|
|
12.38 |
|
Exercised |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(171,657 |
) |
|
|
9.57 |
|
Expired |
|
|
|
|
(84,500 |
) |
|
|
13.00 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Forfeited |
|
|
|
|
(2,519,634 |
) |
|
|
10.88 |
|
|
|
(277,165 |
) |
|
|
11.33 |
|
|
|
(177,992 |
) |
|
|
12.16 |
|
Outstanding
at end of year |
|
|
|
|
7,642,303 |
|
|
|
9.44 |
|
|
|
7,426,016 |
|
|
|
10.91 |
|
|
|
6,846,681 |
|
|
|
11.34 |
|
|
Options
exercisable at year-end |
|
|
|
|
4,155,852 |
|
|
|
11.15 |
|
|
|
5,653,724 |
|
|
|
11.33 |
|
|
|
4,602,593 |
|
|
|
11.51 |
|
Weighted-average fair value
of options granted during
the year |
|
|
|
|
|
|
|
$ |
2.62 |
|
|
|
|
|
|
$ |
4.32 |
|
|
|
|
|
|
$ |
6.08 |
|
The following table summarizes information about our
stock options outstanding at December 25, 2004:
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
|
Amount
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Weighted
Average
Exercise
Prices
|
|
Amount
|
|
Weighted
Average
Exercise
Prices
|
Range
of Exercise Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$6.34 to
6.80 |
|
|
|
|
2,133,103 |
|
|
|
9.70 |
|
|
$ |
6.3881 |
|
|
|
— |
|
|
$ |
— |
|
$6.80 to
8.00 |
|
|
|
|
1,093,961 |
|
|
|
6.09 |
|
|
|
7.6726 |
|
|
|
573,723 |
|
|
|
7.7606 |
|
$8.00 to
9.70 |
|
|
|
|
940,084 |
|
|
|
7.18 |
|
|
|
9.0826 |
|
|
|
337,266 |
|
|
|
9.2301 |
|
$9.70 to
10.25 |
|
|
|
|
1,049,495 |
|
|
|
5.65 |
|
|
|
10.0203 |
|
|
|
1,042,295 |
|
|
|
10.0215 |
|
$10.25 to
12.40 |
|
|
|
|
818,160 |
|
|
|
5.47 |
|
|
|
10.8160 |
|
|
|
810,160 |
|
|
|
10.8107 |
|
$12.40 to
14.38 |
|
|
|
|
1,110,500 |
|
|
|
5.80 |
|
|
|
13.1547 |
|
|
|
895,408 |
|
|
|
13.3360 |
|
$15.00 to
15.50 |
|
|
|
|
497,000 |
|
|
|
4.30 |
|
|
|
15.3853 |
|
|
|
497,000 |
|
|
|
15.3853 |
|
$6.34 to
15.50 |
|
|
|
|
7,642,303 |
|
|
|
6.95 |
|
|
|
9.4446 |
|
|
|
4,155,852 |
|
|
|
11.1546 |
|
Restricted Stock Plan — Contingent upon
approval by our stockholders of a new stock award plan at our presently scheduled May 2005 Annual Meeting of Stockholders, as of December 25, 2004, we
have agreed to sell at par value of $0.01, 712,568 shares of common stock to certain of our key employees. The purpose of this new stock award plan is
to permit grants of shares, subject to restrictions, to our key employees as a means of retaining and rewarding them for long-term performance and to
increase their ownership, in our stock. Stock awarded under the plan entitles the stockholder to all rights of common stock ownership except that the
shares may not be sold, transferred, pledged, exchanged, or otherwise disposed of during the restriction period. The Compensation Committee determines
the restriction period and the period may not exceed ten years. Vesting of these shares depends upon continued employment of the awardee and the
attainment of certain financial performance targets as determined annually by the Compensation Committee. Upon the approval of the new stock award plan
and the establishment of financial performance targets, these shares will be recorded at the market value on the date of issuance as deferred
compensation and the related amount will be amortized to operations over the respective vesting period. As the new stock award plan has not yet been
approved and the measurement date can not be determined, there was no compensation expense related to restricted stock grants for the year ended
December 25, 2004.
F-23
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following table explains how our basic and
diluted Earnings Per Share (“EPS”) were calculated for the last three fiscal years (in thousands, except per share data):
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
|
December 28,
2002
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
cumulative effect of accounting change |
|
|
|
$ |
55,507 |
|
|
$ |
18,232 |
|
|
$ |
61,327 |
|
Effect of
Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
for interest on convertible notes, net of tax |
|
|
|
|
— |
|
|
|
— |
|
|
|
1,780 |
|
Income before
cumulative effect of accounting change
adjusted for assumed dilutive conversion |
|
|
|
|
55,507 |
|
|
|
18,232 |
|
|
|
63,107 |
|
Cumulative
effect of accounting change, net of tax benefits |
|
|
|
|
— |
|
|
|
— |
|
|
|
(12,423 |
) |
Net income
— Diluted |
|
|
|
$ |
55,507 |
|
|
$ |
18,232 |
|
|
$ |
50,684 |
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding — Basic |
|
|
|
|
61,216 |
|
|
|
61,216 |
|
|
|
61,148 |
|
Effect of
Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
for dilutive effect of stock options |
|
|
|
|
9 |
|
|
|
11 |
|
|
|
341 |
|
Adjustment
for dilutive effect of convertible notes |
|
|
|
|
— |
|
|
|
— |
|
|
|
2,459 |
|
Weighted
average common shares outstanding — Diluted |
|
|
|
|
61,225 |
|
|
|
61,227 |
|
|
|
63,948 |
|
Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
cumulative effect of accounting change |
|
|
|
$ |
0.91 |
|
|
$ |
0.30 |
|
|
$ |
1.00 |
|
Cumulative
effect of accounting change, net of tax benefits |
|
|
|
|
— |
|
|
|
— |
|
|
|
(0.20 |
) |
Net
income |
|
|
|
$ |
0.91 |
|
|
$ |
0.30 |
|
|
$ |
0.80 |
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
cumulative effect of accounting change |
|
|
|
$ |
0.91 |
|
|
$ |
0.30 |
|
|
$ |
0.98 |
|
Cumulative
effect of accounting change, net of tax benefits |
|
|
|
|
— |
|
|
|
— |
|
|
|
(0.19 |
) |
Net
income |
|
|
|
$ |
0.91 |
|
|
$ |
0.30 |
|
|
$ |
0.79 |
|
Basic EPS excludes all potentially dilutive
securities. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS
includes all dilutive securities. Potentially dilutive securities include stock options granted and shares that may have been exchanged for the 6%
Convertible Notes, if determined to be dilutive. At December 25, 2004, December 27, 2003 and December 28, 2002, stock options to purchase our common
stock totaling 7.6 million shares, 7.4 million shares and 6.5 million shares, respectively, were not included in the diluted EPS calculation, since
their impact would have been anti-dilutive. In addition, at December 27, 2003, potentially dilutive shares totaling 0.7 million relating to our 6%
Convertible Notes were not included in the diluted EPS calculation since their impact would have been anti-dilutive. Our last outstanding 6%
Convertible Notes were redeemed in the third quarter of 2003. Diluted EPS is computed by dividing net income, 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 net income (i.e., have
the effect of increasing EPS), the impact of the dilutive securities is not included in the computation.
F-24
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
| 13. |
|
Commitments and Contingencies |
Our leases are primarily for facilities,
manufacturing equipment, automobiles and information technology equipment. We lease certain facilities, which have original lease terms ranging from
one to fifteen years. The majority of our facility leases provide for a renewal option at our discretion, some of which may require increased rent
expense. Some of our facility leases also contain pre-determined rent increases over the lease term, although such increases are not material to our
operating results. In addition, certain of our facility leases require payment of operating expenses, such as common area charges and real estate
taxes. The majority of our leased equipment contains fair value purchase options at the end of the lease term. Future minimum payments under
non-cancelable operating leases, with initial terms exceeding one year, for fiscal years ending after December 25, 2004 are as follows: $9.1 million in
2005, $6.6 million in 2006, $4.3 million in 2007, $3.0 million in 2008, $2.8 million in 2009 and $5.6 million in later years. Sublease rental income
commitments are $0.4 million in each of the next three fiscal years.
Rent expense for operating and month-to-month leases
amounted to $13.6 million, $13.8 million and $13.1 million for fiscal 2004, 2003 and 2002, respectively. Sublease rental income was $0.4 million for
fiscal 2004, 2003 and 2002. Our two largest rental agreements include a provision for scheduled rent increases. We have not recorded expense on a
straight-line basis over the rental term as described in SFAS No. 13, “Accounting for Leases” and FASB Technical Bulletin 85-3,
“Accounting for Operating Leases with Scheduled Rent Increases”. However, we have compared rent expense as recorded to the amount of rent
expense using the straight-line method and determined that the difference was immaterial. For perspective, the use of the straight-line method would
have resulted in an increase to reported net income of $0.1 million in fiscal 2004 and fiscal 2003 and would have had no impact on reported net income
in fiscal 2002. All future leases and lease renewals will follow all of the requirements of SFAS No. 13.
In the ordinary course of our business, we may
become involved in legal proceedings concerning contractual and employment relationships, product liability claims, intellectual property rights and a
variety of other matters. We do not believe that any pending legal proceedings will have a material impact on our financial position or results of
operations.
| 14. |
|
Pension and Other Postretirement Benefits |
Defined Benefit Pension Plans —
Substantially all of our U.S. hourly and most of our Canadian employees participate in company-sponsored pension plans. At December 25, 2004,
approximately 1,300 participants were covered by these plans and approximately 440 of them were receiving benefits. We use a December 31 measurement
date for our plans.
Changes in pension benefits, which are retroactive
to previous service of employees, and gains and losses on pension assets, that occur because actual experience differs from assumptions, are amortized
over the estimated average future service period of employees. Actuarial assumptions for the plans include the following and are based on a calendar
year-end measurement date:
• |
|
expected long-term rate of return on plan assets of 8.75% at
December 25, 2004 and at December 27, 2003, |
• |
|
discount rate of 6.00% at December 25, 2004 and 6.25% at
December 27, 2003, and |
• |
|
the assumed rate of future compensation increases at December
25, 2004 and December 27, 2003 was 4.00%. |
F-25
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
14. Pension and Other Postretirement Benefits
(Continued)
Net pension expense for fiscal 2004, 2003 and 2002
is included in operating income in the Consolidated Statements of Income and includes the following components (in thousands):
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
|
December 28,
2002
|
Net
Pension Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost |
|
|
|
$ |
1,427 |
|
|
$ |
1,383 |
|
|
$ |
1,264 |
|
Interest
cost |
|
|
|
|
3,177 |
|
|
|
2,958 |
|
|
|
2,809 |
|
Expected
return on plan assets |
|
|
|
|
(4,304 |
) |
|
|
(3,713 |
) |
|
|
(4,358 |
) |
Special
termination benefits |
|
|
|
|
— |
|
|
|
1,223 |
|
|
|
— |
|
Amortization
of prior service cost |
|
|
|
|
18 |
|
|
|
— |
|
|
|
55 |
|
Recognized
actuarial loss (gain) |
|
|
|
|
131 |
|
|
|
426 |
|
|
|
(7 |
) |
Loss due to
curtailments |
|
|
|
|
419 |
|
|
|
— |
|
|
|
320 |
|
Amortization
of transition obligation |
|
|
|
|
37 |
|
|
|
35 |
|
|
|
29 |
|
Net pension
expense |
|
|
|
$ |
905 |
|
|
$ |
2,312 |
|
|
$ |
112 |
|
Reconciliation’s of the change in benefit
obligation, change in plan assets, and the funded status of the plans for fiscal 2004 and 2003 are as follows (in thousands):
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
Change in
Benefit Obligation
|
|
|
|
|
|
|
|
|
|
|
Benefit
obligation at beginning of year |
|
|
|
$ |
51,440 |
|
|
$ |
44,380 |
|
Service
cost |
|
|
|
|
1,427 |
|
|
|
1,383 |
|
Interest
cost |
|
|
|
|
3,177 |
|
|
|
2,958 |
|
Actuarial
loss |
|
|
|
|
1,119 |
|
|
|
2,798 |
|
Benefits
paid |
|
|
|
|
(2,677 |
) |
|
|
(2,220 |
) |
Curtailments |
|
|
|
|
(419 |
) |
|
|
— |
|
Special
termination benefits |
|
|
|
|
— |
|
|
|
1,223 |
|
Amendments(1) |
|
|
|
|
260 |
|
|
|
— |
|
Foreign currency
exchange rate changes |
|
|
|
|
355 |
|
|
|
918 |
|
Benefit
obligation at end of year |
|
|
|
$ |
54,682 |
|
|
$ |
51,440 |
|
Change in
Plan Assets
|
|
|
|
|
|
|
|
|
|
|
Fair value of
plan assets at beginning of year |
|
|
|
$ |
50,304 |
|
|
$ |
43,047 |
|
Actual return on
plan assets |
|
|
|
|
5,343 |
|
|
|
8,701 |
|
Benefits
paid |
|
|
|
|
(2,677 |
) |
|
|
(2,220 |
) |
Employer
contributions |
|
|
|
|
629 |
|
|
|
83 |
|
Foreign currency
exchange rate changes |
|
|
|
|
258 |
|
|
|
693 |
|
Fair value of
plan assets at end of year |
|
|
|
$ |
53,857 |
|
|
$ |
50,304 |
|
Reconciliation of the Funded Status
|
|
|
|
|
|
|
|
|
|
|
Funded
status |
|
|
|
$ |
(825 |
) |
|
$ |
(1,136 |
) |
Unrecognized
transition asset |
|
|
|
|
146 |
|
|
|
420 |
|
Unrecognized
prior service cost |
|
|
|
|
86 |
|
|
|
— |
|
Unrecognized
actuarial loss |
|
|
|
|
6,968 |
|
|
|
7,341 |
|
Net amount
recognized |
|
|
|
$ |
6,375 |
|
|
$ |
6,625 |
|
(1) |
|
In 2004, our Canadian Pension Plan was amended. The plan was
updated for current pension benefit earned data using employee career average earnings. |
F-26
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
14. Pension and Other Postretirement Benefits
(Continued)
Included in the totals above are our Canadian plans,
which have accumulated benefit obligations in excess of plan assets as follows (in thousands):
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
Projected
benefit obligation |
|
|
|
$ |
6,960 |
|
|
$ |
5,676 |
|
Accumulated
benefit obligation |
|
|
|
|
6,723 |
|
|
|
5,061 |
|
Fair value of
plan assets |
|
|
|
|
5,029 |
|
|
|
4,125 |
|
The accumulated benefit obligation for all defined
benefit pension plans at December 25, 2004 and December 27, 2003 was $51.4 million and $47.9 million, respectively.
The pension plans assets are invested primarily in
equity and fixed income mutual funds, marketable equity securities, insurance contracts, and cash and cash equivalents. The weighted average asset
allocations at December 25, 2004 and December 27, 2003, by asset category, were as follows:
|
|
|
|
|
|
Plan Asset Allocation at:
|
|
|
|
|
|
Target
Allocation
|
|
December 25,
2004
|
|
December 27,
2003
|
Asset
Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
40 |
% |
|
|
40 |
% |
|
|
69 |
% |
Debt
securities |
|
|
|
|
60 |
% |
|
|
60 |
% |
|
|
31 |
% |
Total |
|
|
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
The plan asset allocation percentages changed at the
end of 2004 to position the plan to meet our new 2005 asset allocations.
The main objectives of the plans are to: maintain
the purchasing power of the current assets and all future contributions, to have the ability to pay all benefits and expense obligations when due, to
achieve a “funding cushion,” to maximize return within prudent levels of risk, and to control the cost of administering the plan and managing
investments. The investment horizon is greater than five years and the plan’s strategic asset allocation is based on a long-term
perspective.
In selecting the expected long-term rate of return
on assets assumption, we considered the average rate of income on the funds invested or to be invested to provide for the benefits of these plans. This
included considering the trust’s asset allocation and the expected returns likely to be earned over the life of the plans.
Postretirement Benefits Other than Pensions
— We provide postretirement health care and life insurance benefits to certain U.S. retirees. These plans require employees to share in the costs.
Practically all of our U.S. personnel would become eligible for these postretirement health care and life insurance benefits if they were to retire
from the Company.
In May 2004, the FASB issued FASB Staff Position
(“FSP”) SFAS No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization
Act of 2003 (“the Act”).” The Act was signed into law on December 8, 2003 and expanded Medicare to include prescription drugs. We
sponsor retiree medical programs and this legislation includes a federal subsidy for qualifying companies. FSP SFAS 106-2 requires that the effects of
the federal subsidy be considered an actuarial gain and treated like similar gains and losses if it is determined that the prescription drug benefits
of the retiree medical program are determined to be actuarially equivalent to those offered under Medicare Part D. We have adopted FSP SFAS 106-2
during our third quarter ended September 25, 2004 and concluded that we are unable to determine whether the benefits under our plan are actuarially
equivalent to Medicare Part D under the Act because the guidance provided thus far is unclear. We will monitor our plan and assess actuarial
equivalence as new information becomes available.
F-27
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
14. Pension and Other Postretirement Benefits
(Continued)
The components of the net periodic postretirement
benefit expense, which is included in operating income in the Consolidated Statements of Income for fiscal 2004, 2003, and 2002, are as follows (in
thousands):
|
|
|
|
Year Ended
|
|
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
|
December 28,
2002
|
Net
Periodic Postretirement Benefit Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
— benefits earned during the period |
|
|
|
$ |
676 |
|
|
$ |
1,076 |
|
|
$ |
792 |
|
Interest cost
on accumulated benefit obligation |
|
|
|
|
1,143 |
|
|
|
1,731 |
|
|
|
1,358 |
|
Amortization
of prior service benefit |
|
|
|
|
(2,334 |
) |
|
|
(94 |
) |
|
|
(94 |
) |
Gain due to
curtailment |
|
|
|
|
— |
|
|
|
(358 |
) |
|
|
— |
|
Recognized
actuarial loss |
|
|
|
|
1,282 |
|
|
|
728 |
|
|
|
403 |
|
Net periodic
postretirement benefit expense |
|
|
|
$ |
767 |
|
|
$ |
3,083 |
|
|
$ |
2,459 |
|
Reconciliation’s of the change in benefit
obligation, change in plan assets, and the funded status of the plans for fiscal 2004 and 2003 are as follows (in thousands):
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
Change in
Benefit Obligation
|
|
|
|
|
|
|
|
|
|
|
Benefit
obligation at beginning of year |
|
|
|
$ |
17,457 |
|
|
$ |
23,055 |
|
Service
cost |
|
|
|
|
676 |
|
|
|
1,076 |
|
Interest
cost |
|
|
|
|
1,143 |
|
|
|
1,731 |
|
Employee
contributions |
|
|
|
|
480 |
|
|
|
381 |
|
Amendments(1) |
|
|
|
|
— |
|
|
|
(13,147 |
) |
Actuarial
loss |
|
|
|
|
1,884 |
|
|
|
5,295 |
|
Benefits
paid |
|
|
|
|
(1,358 |
) |
|
|
(934 |
) |
Benefit
obligation at end of year |
|
|
|
$ |
20,282 |
|
|
$ |
17,457 |
|
Change in
Plan Assets
|
|
|
|
|
|
|
|
|
|
|
Fair value of
plan assets at beginning of year |
|
|
|
$ |
— |
|
|
$ |
— |
|
Employer
contributions |
|
|
|
|
878 |
|
|
|
553 |
|
Employee
contributions |
|
|
|
|
480 |
|
|
|
381 |
|
Benefits
paid |
|
|
|
|
(1,358 |
) |
|
|
(934 |
) |
Fair value of
plan assets at end of year |
|
|
|
$ |
— |
|
|
$ |
— |
|
(1) |
|
Our postretirement welfare plan was amended and the
implementation impact was booked in the fourth quarter of 2003. Changes were made to the eligibility requirement for benefits and a maximum was
established for employer provided benefits. These changes were put in place to control costs. |
|
|
|
|
December 25,
2004
|
|
December 27,
2003
|
Reconciliation of the Funded Status
|
|
|
|
|
|
|
|
|
|
|
Funded
status |
|
|
|
$ |
(20,282 |
) |
|
$ |
(17,457 |
) |
Unrecognized
prior service gain |
|
|
|
|
(11,073 |
) |
|
|
(13,407 |
) |
Unrecognized
actuarial loss |
|
|
|
|
15,191 |
|
|
|
14,589 |
|
Net amount
accrued at year-end |
|
|
|
$ |
(16,164 |
) |
|
$ |
(16,275 |
) |
F-28
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
14. Pension and Other Postretirement Benefits
(Continued)
The assumed health care cost trend rate and discount
rate were 9.00% and 6.00% in 2004, respectively, compared to 9.00% and 6.25% in 2003, respectively. The assumed health care cost trend rate is
anticipated to trend down until the final trend rate of 5.00% is reached in 2012. A one percentage point increase or decrease in the assumed health
care cost trend rate would change the sum of the service and interest cost components of the fiscal 2004 net periodic postretirement benefit expense by
less than 1%. A one percentage point increase or decrease in the assumed health care cost trend rate would change the accumulated postretirement
benefit obligation as of December 25, 2004 by less than 1%.
Cash Flows
We are required to contribute approximately $0.5
million to our pension plans during the next fiscal year beginning on December 26, 2004 and ending on December 31, 2005. In addition, we estimate that
we will be required to pay approximately $1.0 million to fund the current year cost of our postretirement benefit plans for our
retirees.
The following benefit payments, which reflect
expected future service, as appropriate, are expected to be paid (in thousands):
|
|
|
|
Pension
Benefits
|
|
Other
Benefits
|
2005 |
|
|
|
$ |
6,878 |
|
|
$ |
1,041 |
|
2006 |
|
|
|
|
2,535 |
|
|
|
1,122 |
|
2007 |
|
|
|
|
2,634 |
|
|
|
1,193 |
|
2008 |
|
|
|
|
2,707 |
|
|
|
1,282 |
|
2009 |
|
|
|
|
2,839 |
|
|
|
1,346 |
|
Years 2010
through 2014 |
|
|
|
|
17,109 |
|
|
|
8,010 |
|
Defined Contribution Benefit Plans — We
also provide four defined contribution plans covering various employee groups, two of which have non-contributory features. The amounts charged to
income for the defined contribution plans totaled $7.5 million, $7.1 million and $6.7 million for our last three fiscal years ended 2004, 2003, and
2002, respectively.
| 15. |
|
Business and Credit Concentrations |
Most of our customers are dispersed throughout the
United States and Canada. Two customers accounted for more than 10% of our consolidated net sales in fiscal 2004. Our largest customer accounted for
approximately 28% of our consolidated net sales in 2004, 27% in 2003 and 25% in 2002. Our second largest customer accounted for approximately 11% of
our consolidated net sales in 2004 and 2003, and 9% in 2002. Outstanding trade accounts receivable related to transactions with our largest customer
were $22.2 million at December 25, 2004 and $23.3 million at December 27, 2003. Outstanding trade accounts receivable, including balances sold to
Playtex A/R LLC, related to transactions with our customers ranked second through tenth in net sales, ranged from $10.3 million to $0.9 million at
December 25, 2004 and ranged from $12.7 million to $1.5 million at December 27, 2003. Sales to these customers were made primarily from our U.S.
Division.
F-29
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
| 16. |
|
Disclosure about the Fair Value of Financial
Instruments |
Cash, Receivables, Retained Interest in
Receivables, Accounts Payable — The carrying amounts approximate fair value because of the short-term nature of these
instruments.
Long-term Debt and Other Financial
Instruments — The fair value of the following financial instruments was estimated at December 25, 2004 and December 27, 2003 as follows (in
thousands):
|
|
December
25, 2004
|
|
December
27, 2003
|
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
8%
Senior Secured Notes due 2011(1) |
|
$ |
460,000 |
|
|
$ |
506,000 |
|
|
$ |
— |
|
|
$ |
— |
|
9-3/8%
Senior Subordinated Notes
due 2011(1) |
|
|
340,000 |
|
|
|
362,100 |
|
|
|
350,000 |
|
|
|
350,000 |
|
Term
C Loan(2) |
|
|
— |
|
|
|
— |
|
|
|
443,250 |
|
|
|
443,250 |
|
Other
noncurrent assets(3) |
|
|
6,835 |
|
|
|
6,774 |
|
|
|
7,019 |
|
|
|
6,978 |
|
Noncurrent
liabilities(3) |
|
|
21,072 |
|
|
|
20,929 |
|
|
|
16,404 |
|
|
|
16,400 |
|
(1) |
|
The estimated fair value was based on quotes provided by
independent securities dealers. |
(2) |
|
Our Term C Loan was a variable rate instrument and the carrying
amount approximated its fair value because the rate of interest on borrowing under that credit agreement was, at our option, a function of various
alternative short-term borrowing rates. |
(3) |
|
The estimated fair values were based on a combination of actual
cost associated with recent purchases or the amount of future cash flows discounted using our borrowing rate for similar instruments. |
F-30
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
| 17. |
|
Quarterly Data (Unaudited) |
The following is a summary of our quarterly results
of operations and market price data for our common stock for fiscal 2004 and 2003 (in thousands, except share and stock price data):
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Fiscal
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
|
|
$ |
191,928 |
|
|
$ |
185,522 |
|
|
$ |
148,531 |
|
|
$ |
140,915 |
|
Gross
profit |
|
|
|
|
100,229 |
|
|
|
97,274 |
|
|
|
76,997 |
|
|
|
69,239 |
|
Operating
income |
|
|
|
|
36,972 |
|
|
|
27,279 |
|
|
|
20,311 |
|
|
|
46,581 |
|
Net
income |
|
|
|
|
8,376 |
|
|
|
8,255 |
|
|
|
1,380 |
|
|
|
37,496 |
|
Earnings per
share, basic and diluted(1) |
|
|
|
$ |
0.14 |
|
|
$ |
0.13 |
|
|
$ |
0.02 |
|
|
$ |
0.61 |
|
Stock market
price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
|
$ |
8.69 |
|
|
$ |
7.85 |
|
|
$ |
7.95 |
|
|
$ |
7.80 |
|
Low |
|
|
|
$ |
6.02 |
|
|
$ |
6.32 |
|
|
$ |
6.05 |
|
|
$ |
5.47 |
|
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Fiscal
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
|
|
$ |
177,314 |
|
|
$ |
176,096 |
|
|
$ |
146,827 |
|
|
$ |
143,637 |
|
Gross
profit |
|
|
|
|
93,131 |
|
|
|
89,310 |
|
|
|
74,780 |
|
|
|
69,352 |
|
Operating
income |
|
|
|
|
31,803 |
|
|
|
21,267 |
|
|
|
19,617 |
|
|
|
13,147 |
|
Net income
(loss) |
|
|
|
|
11,403 |
|
|
|
4,654 |
|
|
|
3,134 |
|
|
|
(959 |
) |
Earnings
(loss) per share, basic and diluted (1) |
|
|
|
$ |
0.19 |
|
|
$ |
0.08 |
|
|
$ |
0.05 |
|
|
$ |
(0.02 |
) |
Stock market
price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
|
$ |
9.90 |
|
|
$ |
8.93 |
|
|
$ |
7.15 |
|
|
$ |
7.95 |
|
Low |
|
|
|
$ |
7.51 |
|
|
$ |
5.55 |
|
|
$ |
5.82 |
|
|
$ |
5.81 |
|
(1) |
|
Earnings per share data are computed independently for each of
the periods presented. As a result, the sum of the earnings per share amounts for the quarters may not equal the total for the year. |
| 18. |
|
Condensed Consolidating Financial Information |
The payment obligations of our Notes are guaranteed
by our wholly-owned domestic subsidiaries (the “Guarantors”). The Guarantors are joint and several guarantors of the Notes. Such guarantees
are irrevocable, full and unconditional. The guarantees are senior subordinated obligations and are subordinated to all senior obligations including
guarantees of our obligations under the Credit Facility. Our wholly-owned foreign subsidiaries (the “Non-Guarantors”) do not guarantee the
payment of our Notes.
The following information presents our condensed
consolidated financial position as of December 25, 2004 and December 27, 2003 and our condensed statements of income and cash flows for each of the
last three fiscal years 2004, 2003 and 2002. The presentation is made as follows:
|
|
• the Company on a consolidated basis,
• the parent
company only,
• the combined Guarantors, and
• the combined
Non-Guarantors. |
F-31
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. Condensed Consolidating Financial Information
(Continued)
Condensed
Consolidating Balance Sheet
as of December 25, 2004
(In thousands)
|
|
|
|
Consolidated
|
|
Eliminations
|
|
Parent
Company
|
|
Guarantors
|
|
Non-
Guarantors
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets |
|
|
|
$ |
324,720 |
|
|
$ |
— |
|
|
$ |
216,300 |
|
|
$ |
73,645 |
|
|
$ |
34,775 |
|
Investment in
subsidiaries |
|
|
|
|
— |
|
|
|
(461,887 |
) |
|
|
438,514 |
|
|
|
23,373 |
|
|
|
— |
|
Intercompany
receivable |
|
|
|
|
— |
|
|
|
(138,982 |
) |
|
|
— |
|
|
|
138,982 |
|
|
|
— |
|
Net property,
plant and equipment |
|
|
|
|
120,638 |
|
|
|
— |
|
|
|
92 |
|
|
|
119,863 |
|
|
|
683 |
|
Intangible
assets |
|
|
|
|
622,611 |
|
|
|
— |
|
|
|
435,092 |
|
|
|
187,519 |
|
|
|
— |
|
Other
noncurrent assets |
|
|
|
|
23,421 |
|
|
|
(1,059 |
) |
|
|
22,934 |
|
|
|
1,965 |
|
|
|
(419 |
) |
Total
assets |
|
|
|
$ |
1,091,390 |
|
|
$ |
(601,928 |
) |
|
$ |
1,112,932 |
|
|
$ |
545,347 |
|
|
$ |
35,039 |
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
$ |
124,980 |
|
|
$ |
(1,059 |
) |
|
$ |
110,848 |
|
|
$ |
7,954 |
|
|
$ |
7,237 |
|
Intercompany
payable |
|
|
|
|
— |
|
|
|
(138,982 |
) |
|
|
79,972 |
|
|
|
56,872 |
|
|
|
2,138 |
|
Long-term
debt |
|
|
|
|
800,000 |
|
|
|
— |
|
|
|
800,000 |
|
|
|
— |
|
|
|
— |
|
Other
noncurrent liabilities |
|
|
|
|
82,475 |
|
|
|
— |
|
|
|
38,177 |
|
|
|
44,726 |
|
|
|
(428 |
) |
Total
liabilities |
|
|
|
|
1,007,455 |
|
|
|
(140,041 |
) |
|
|
1,028,997 |
|
|
|
109,552 |
|
|
|
8,947 |
|
Stockholders’ equity |
|
|
|
|
83,935 |
|
|
|
(461,887 |
) |
|
|
83,935 |
|
|
|
435,795 |
|
|
|
26,092 |
|
Total
liabilities and
stockholders’ equity |
|
|
|
$ |
1,091,390 |
|
|
$ |
(601,928 |
) |
|
$ |
1,112,932 |
|
|
$ |
545,347 |
|
|
$ |
35,039 |
|
Condensed Consolidating Balance Sheet
as of December 27, 2003
(In
thousands)
|
|
|
|
Consolidated
|
|
Eliminations
|
|
Parent
Company
|
|
Guarantors
|
|
Non-
Guarantors
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets |
|
|
|
$ |
215,167 |
|
|
$ |
9 |
|
|
$ |
105,851 |
|
|
$ |
79,569 |
|
|
$ |
29,738 |
|
Investment in
subsidiaries |
|
|
|
|
— |
|
|
|
(445,359 |
) |
|
|
425,241 |
|
|
|
20,118 |
|
|
|
— |
|
Intercompany
receivable |
|
|
|
|
— |
|
|
|
(127,594 |
) |
|
|
— |
|
|
|
127,594 |
|
|
|
— |
|
Net property,
plant and equipment |
|
|
|
|
125,425 |
|
|
|
— |
|
|
|
101 |
|
|
|
124,670 |
|
|
|
654 |
|
Intangible
assets |
|
|
|
|
632,578 |
|
|
|
— |
|
|
|
440,460 |
|
|
|
192,118 |
|
|
|
— |
|
Other
noncurrent assets |
|
|
|
|
20,128 |
|
|
|
(555 |
) |
|
|
19,653 |
|
|
|
1,030 |
|
|
|
— |
|
Total
assets |
|
|
|
$ |
993,298 |
|
|
$ |
(573,499 |
) |
|
$ |
991,306 |
|
|
$ |
545,099 |
|
|
$ |
30,392 |
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
$ |
101,217 |
|
|
$ |
(546 |
) |
|
$ |
86,711 |
|
|
$ |
8,619 |
|
|
$ |
6,433 |
|
Intercompany
payable |
|
|
|
|
— |
|
|
|
(127,594 |
) |
|
|
52,708 |
|
|
|
72,120 |
|
|
|
2,766 |
|
Long-term
debt |
|
|
|
|
788,750 |
|
|
|
— |
|
|
|
788,750 |
|
|
|
— |
|
|
|
— |
|
Other
noncurrent liabilities |
|
|
|
|
75,543 |
|
|
|
— |
|
|
|
35,349 |
|
|
|
40,825 |
|
|
|
(631 |
) |
Total
liabilities |
|
|
|
|
965,510 |
|
|
|
(128,140 |
) |
|
|
963,518 |
|
|
|
121,564 |
|
|
|
8,568 |
|
Stockholders’ equity |
|
|
|
|
27,788 |
|
|
|
(445,359 |
) |
|
|
27,788 |
|
|
|
423,535 |
|
|
|
21,824 |
|
Total
liabilities and
stockholders’ equity |
|
|
|
$ |
993,298 |
|
|
$ |
(573,499 |
) |
|
$ |
991,306 |
|
|
$ |
545,099 |
|
|
$ |
30,392 |
|
F-32
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. Condensed Consolidating Financial Information
(Continued)
Condensed Consolidating Statement of Income
For the Year Ended December 25,
2004
(In thousands)
|
|
|
|
Consolidated
|
|
Eliminations
|
|
Parent
Company
|
|
Guarantors
|
|
Non-
Guarantors
|
Net
revenues |
|
|
|
$ |
666,896 |
|
|
$ |
(420,182 |
) |
|
$ |
624,360 |
|
|
$ |
411,253 |
|
|
$ |
51,465 |
|
Cost of
sales |
|
|
|
|
323,157 |
|
|
|
(314,159 |
) |
|
|
307,288 |
|
|
|
299,347 |
|
|
|
30,681 |
|
Gross
profit |
|
|
|
|
343,739 |
|
|
|
(106,023 |
) |
|
|
317,072 |
|
|
|
111,906 |
|
|
|
20,784 |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
|
|
241,428 |
|
|
|
(106,023 |
) |
|
|
249,260 |
|
|
|
83,534 |
|
|
|
14,657 |
|
Restructuring, net |
|
|
|
|
9,969 |
|
|
|
— |
|
|
|
2,621 |
|
|
|
5,389 |
|
|
|
1,959 |
|
Loss on
impairment of assets |
|
|
|
|
16,449 |
|
|
|
— |
|
|
|
12,683 |
|
|
|
3,766 |
|
|
|
— |
|
Amortization
of intangibles |
|
|
|
|
1,293 |
|
|
|
— |
|
|
|
460 |
|
|
|
833 |
|
|
|
— |
|
Total
operating expenses |
|
|
|
|
269,139 |
|
|
|
(106,023 |
) |
|
|
265,024 |
|
|
|
93,522 |
|
|
|
16,616 |
|
Gain on sale
of assets |
|
|
|
|
56,543 |
|
|
|
— |
|
|
|
56,543 |
|
|
|
— |
|
|
|
— |
|
Operating
income |
|
|
|
|
131,143 |
|
|
|
— |
|
|
|
108,591 |
|
|
|
18,384 |
|
|
|
4,168 |
|
Interest
expense, net |
|
|
|
|
69,561 |
|
|
|
— |
|
|
|
69,833 |
|
|
|
— |
|
|
|
(272 |
) |
Expenses
related to retirement of debt, net |
|
|
|
|
6,432 |
|
|
|
— |
|
|
|
6,432 |
|
|
|
— |
|
|
|
— |
|
Other
expenses |
|
|
|
|
353 |
|
|
|
— |
|
|
|
298 |
|
|
|
— |
|
|
|
55 |
|
Equity in net
income of subsidiaries |
|
|
|
|
— |
|
|
|
15,603 |
|
|
|
(13,333 |
) |
|
|
(2,270 |
) |
|
|
— |
|
Income before
income taxes |
|
|
|
|
54,797 |
|
|
|
(15,603 |
) |
|
|
45,361 |
|
|
|
20,654 |
|
|
|
4,385 |
|
Provision
(benefit) for income taxes |
|
|
|
|
(710 |
) |
|
|
— |
|
|
|
(10,146 |
) |
|
|
8,331 |
|
|
|
1,105 |
|
Net
income |
|
|
|
$ |
55,507 |
|
|
$ |
(15,603 |
) |
|
$ |
55,507 |
|
|
$ |
12,323 |
|
|
$ |
3,280 |
|
Condensed Consolidating Statement of Income
For the Year Ended December 27,
2003
(In thousands)
|
|
|
|
Consolidated
|
|
Eliminations
|
|
Parent
Company
|
|
Guarantors
|
|
Non-
Guarantors
|
Net
revenues |
|
|
|
$ |
643,874 |
|
|
$ |
(414,405 |
) |
|
$ |
606,924 |
|
|
$ |
403,758 |
|
|
$ |
47,597 |
|
Cost of
sales |
|
|
|
|
317,301 |
|
|
|
(307,471 |
) |
|
|
303,008 |
|
|
|
294,111 |
|
|
|
27,653 |
|
Gross
profit |
|
|
|
|
326,573 |
|
|
|
(106,934 |
) |
|
|
303,916 |
|
|
|
109,647 |
|
|
|
19,944 |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
|
|
235,963 |
|
|
|
(106,934 |
) |
|
|
247,952 |
|
|
|
81,211 |
|
|
|
13,734 |
|
Restructuring, net |
|
|
|
|
3,873 |
|
|
|
— |
|
|
|
75 |
|
|
|
3,798 |
|
|
|
— |
|
Amortization
of intangibles |
|
|
|
|
903 |
|
|
|
— |
|
|
|
70 |
|
|
|
833 |
|
|
|
— |
|
Total
operating expenses |
|
|
|
|
240,739 |
|
|
|
(106,934 |
) |
|
|
248,097 |
|
|
|
85,842 |
|
|
|
13,734 |
|
Operating
income |
|
|
|
|
85,834 |
|
|
|
— |
|
|
|
55,819 |
|
|
|
23,805 |
|
|
|
6,210 |
|
Interest
expense, net |
|
|
|
|
55,038 |
|
|
|
— |
|
|
|
66,647 |
|
|
|
(11,502 |
) |
|
|
(107 |
) |
Other
expenses |
|
|
|
|
1,975 |
|
|
|
— |
|
|
|
1,894 |
|
|
|
— |
|
|
|
81 |
|
Equity in net
income of subsidiaries |
|
|
|
|
— |
|
|
|
29,273 |
|
|
|
(25,942 |
) |
|
|
(3,331 |
) |
|
|
— |
|
Income before
income taxes |
|
|
|
|
28,821 |
|
|
|
(29,273 |
) |
|
|
13,220 |
|
|
|
38,638 |
|
|
|
6,236 |
|
Provision for
income taxes |
|
|
|
|
10,589 |
|
|
|
— |
|
|
|
(5,012 |
) |
|
|
13,680 |
|
|
|
1,921 |
|
Net
income |
|
|
|
$ |
18,232 |
|
|
$ |
(29,273 |
) |
|
$ |
18,232 |
|
|
$ |
24,958 |
|
|
$ |
4,315 |
|
F-33
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. Condensed Consolidating Financial Information
(Continued)
Condensed Consolidating Statement of Income
For the Year Ended December 28,
2002
(In thousands)
|
|
|
|
Consolidated
|
|
Eliminations
|
|
Parent
Company
|
|
Guarantors
|
|
Non-
Guarantors
|
Net
revenues |
|
|
|
$ |
703,617 |
|
|
$ |
(432,759 |
) |
|
$ |
670,572 |
|
|
$ |
425,728 |
|
|
$ |
40,076 |
|
Cost of
sales |
|
|
|
|
328,433 |
|
|
|
(323,783 |
) |
|
|
318,956 |
|
|
|
307,459 |
|
|
|
25,801 |
|
Gross
profit |
|
|
|
|
375,184 |
|
|
|
(108,976 |
) |
|
|
351,616 |
|
|
|
118,269 |
|
|
|
14,275 |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
|
|
225,150 |
|
|
|
(108,976 |
) |
|
|
240,559 |
|
|
|
82,074 |
|
|
|
11,493 |
|
Restructuring, net |
|
|
|
|
3,377 |
|
|
|
— |
|
|
|
1,688 |
|
|
|
1,689 |
|
|
|
— |
|
Loss on
impairment of assets |
|
|
|
|
4,222 |
|
|
|
— |
|
|
|
2,111 |
|
|
|
2,111 |
|
|
|
— |
|
Amortization
of intangibles |
|
|
|
|
928 |
|
|
|
— |
|
|
|
95 |
|
|
|
833 |
|
|
|
— |
|
Total
operating expenses |
|
|
|
|
233,677 |
|
|
|
(108,976 |
) |
|
|
244,453 |
|
|
|
86,707 |
|
|
|
11,493 |
|
Operating
income |
|
|
|
|
141,507 |
|
|
|
— |
|
|
|
107,163 |
|
|
|
31,562 |
|
|
|
2,782 |
|
Interest
expense, net |
|
|
|
|
59,543 |
|
|
|
— |
|
|
|
71,620 |
|
|
|
(12,003 |
) |
|
|
(74 |
) |
Expenses
related to retirement of debt, net |
|
|
|
|
5,882 |
|
|
|
— |
|
|
|
5,882 |
|
|
|
— |
|
|
|
— |
|
Other
expenses |
|
|
|
|
2,653 |
|
|
|
— |
|
|
|
2,653 |
|
|
|
— |
|
|
|
— |
|
Equity in net
income of subsidiaries |
|
|
|
|
— |
|
|
|
17,249 |
|
|
|
(15,821 |
) |
|
|
(1,428 |
) |
|
|
— |
|
Income before
income taxes and cumulative effect of accounting change |
|
|
|
|
73,429 |
|
|
|
(17,249 |
) |
|
|
42,829 |
|
|
|
44,993 |
|
|
|
2,856 |
|
Provision for
income taxes |
|
|
|
|
12,102 |
|
|
|
— |
|
|
|
(6,075 |
) |
|
|
17,274 |
|
|
|
903 |
|
Income before
cumulative effect of accounting change |
|
|
|
|
61,327 |
|
|
|
(17,249 |
) |
|
|
48,904 |
|
|
|
27,719 |
|
|
|
1,953 |
|
Cumulative
effect of accounting change |
|
|
|
|
(12,423 |
) |
|
|
— |
|
|
|
— |
|
|
|
(12,423 |
) |
|
|
— |
|
Net
income |
|
|
|
$ |
48,904 |
|
|
$ |
(17,249 |
) |
|
$ |
48,904 |
|
|
$ |
15,296 |
|
|
$ |
1,953 |
|
F-34
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. Condensed Consolidating Financial Information
(Continued)
Condensed Consolidating Statement of Cash Flows
For the Year Ended December
25, 2004
(In thousands)
|
|
|
|
Consolidated
|
|
Eliminations
|
|
Parent
Company
|
|
Guarantors
|
|
Non-
Guarantors
|
Cash flows
from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
|
|
$ |
55,507 |
|
|
$ |
(15,603 |
) |
|
$ |
55,507 |
|
|
$ |
12,323 |
|
|
$ |
3,280 |
|
Adjustments
to reconcile net income to net cash provided by operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
14,768 |
|
|
|
— |
|
|
|
15 |
|
|
|
14,545 |
|
|
|
208 |
|
Amortization
of intangibles |
|
|
|
|
1,293 |
|
|
|
— |
|
|
|
460 |
|
|
|
833 |
|
|
|
— |
|
Amortization
of deferred financing costs |
|
|
|
|
2,574 |
|
|
|
— |
|
|
|
2,574 |
|
|
|
— |
|
|
|
— |
|
Deferred
taxes |
|
|
|
|
1,531 |
|
|
|
— |
|
|
|
(278 |
) |
|
|
2,626 |
|
|
|
(817 |
) |
Write-off of
deferred fees related to retirement of debt, net of gain on note buyback |
|
|
|
|
6,432 |
|
|
|
— |
|
|
|
6,432 |
|
|
|
— |
|
|
|
— |
|
Gain on sale
of assets |
|
|
|
|
(56,543 |
) |
|
|
— |
|
|
|
(56,543 |
) |
|
|
— |
|
|
|
— |
|
Loss on
impairment of assets |
|
|
|
|
16,449 |
|
|
|
— |
|
|
|
12,683 |
|
|
|
3,766 |
|
|
|
— |
|
Other,
net |
|
|
|
|
2,604 |
|
|
|
15,595 |
|
|
|
(15,322 |
) |
|
|
1,160 |
|
|
|
1,171 |
|
Increase in
net working capital |
|
|
|
|
28,114 |
|
|
|
— |
|
|
|
21,791 |
|
|
|
5,035 |
|
|
|
1,288 |
|
Increase in
amounts due to Parent |
|
|
|
|
— |
|
|
|
— |
|
|
|
27,264 |
|
|
|
(26,636 |
) |
|
|
(628 |
) |
Net cash
provided by operations |
|
|
|
|
72,729 |
|
|
|
(8 |
) |
|
|
54,583 |
|
|
|
13,652 |
|
|
|
4,502 |
|
Cash flows
from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
|
|
(13,871 |
) |
|
|
— |
|
|
|
(9 |
) |
|
|
(13,652 |
) |
|
|
(210 |
) |
Net proceeds
from sale of assets |
|
|
|
|
59,924 |
|
|
|
— |
|
|
|
59,924 |
|
|
|
— |
|
|
|
— |
|
Intangible
assets acquired |
|
|
|
|
(3,504 |
) |
|
|
— |
|
|
|
(3,504 |
) |
|
|
— |
|
|
|
— |
|
Net cash
provided by investing activities |
|
|
|
|
42,549 |
|
|
|
— |
|
|
|
56,411 |
|
|
|
(13,652 |
) |
|
|
(210 |
) |
Cash flows
from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
under revolving credit facilities |
|
|
|
|
115,800 |
|
|
|
— |
|
|
|
115,800 |
|
|
|
— |
|
|
|
— |
|
Repayments
under revolving credit facilities |
|
|
|
|
(115,800 |
) |
|
|
— |
|
|
|
(115,800 |
) |
|
|
— |
|
|
|
— |
|
Long-term
debt borrowings |
|
|
|
|
467,500 |
|
|
|
— |
|
|
|
467,500 |
|
|
|
— |
|
|
|
— |
|
Long-term
debt repayments |
|
|
|
|
(460,300 |
) |
|
|
— |
|
|
|
(460,300 |
) |
|
|
— |
|
|
|
— |
|
Payment of
financing costs |
|
|
|
|
(12,850 |
) |
|
|
— |
|
|
|
(12,850 |
) |
|
|
— |
|
|
|
— |
|
Net cash used
for financing activities |
|
|
|
|
(5,650 |
) |
|
|
— |
|
|
|
(5,650 |
) |
|
|
— |
|
|
|
— |
|
Effect of
exchange rate changes on cash |
|
|
|
|
685 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
685 |
|
Increase
(decrease) in cash and cash equivalents |
|
|
|
|
110,313 |
|
|
|
(8 |
) |
|
|
105,344 |
|
|
|
— |
|
|
|
4,977 |
|
Cash and cash
equivalents
at beginning of period |
|
|
|
|
27,453 |
|
|
|
8 |
|
|
|
13,341 |
|
|
|
1 |
|
|
|
14,103 |
|
Cash and cash
equivalents at end of period |
|
|
|
$ |
137,766 |
|
|
$ |
— |
|
|
$ |
118,685 |
|
|
$ |
1 |
|
|
$ |
19,080 |
|
F-35
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. Condensed Consolidating Financial Information
(Continued)
Condensed Consolidating Statement of Cash Flows
For the Year Ended December
27, 2003
(In thousands)
|
|
|
|
Consolidated
|
|
Eliminations
|
|
Parent
Company
|
|
Guarantors
|
|
Non-
Guarantors
|
Cash flows
from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
|
|
$ |
18,232 |
|
|
$ |
(29,273 |
) |
|
$ |
18,232 |
|
|
$ |
24,958 |
|
|
$ |
4,315 |
|
Adjustments
to reconcile net income to net cash provided by operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
14,102 |
|
|
|
— |
|
|
|
16 |
|
|
|
13,859 |
|
|
|
227 |
|
Amortization
of intangibles |
|
|
|
|
903 |
|
|
|
— |
|
|
|
70 |
|
|
|
833 |
|
|
|
— |
|
Amortization
of deferred
financing costs |
|
|
|
|
2,107 |
|
|
|
— |
|
|
|
2,107 |
|
|
|
— |
|
|
|
— |
|
Deferred
taxes |
|
|
|
|
8,748 |
|
|
|
— |
|
|
|
19,180 |
|
|
|
(10,247 |
) |
|
|
(185 |
) |
Other,
net |
|
|
|
|
5,486 |
|
|
|
29,273 |
|
|
|
(17,534 |
) |
|
|
(6,116 |
) |
|
|
(137 |
) |
(Decrease)
increase in net working capital |
|
|
|
|
(2,419 |
) |
|
|
— |
|
|
|
(13,014 |
) |
|
|
10,692 |
|
|
|
(97 |
) |
Increase in
amounts due to Parent |
|
|
|
|
— |
|
|
|
— |
|
|
|
24,660 |
|
|
|
(23,309 |
) |
|
|
(1,351 |
) |
Net cash
provided by operations |
|
|
|
|
47,159 |
|
|
|
— |
|
|
|
33,717 |
|
|
|
10,670 |
|
|
|
2,772 |
|
Cash flows
from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
|
|
(18,564 |
) |
|
|
— |
|
|
|
(106 |
) |
|
|
(18,259 |
) |
|
|
(199 |
) |
Net cash used
for investing activities |
|
|
|
|
(18,564 |
) |
|
|
— |
|
|
|
(106 |
) |
|
|
(18,259 |
) |
|
|
(199 |
) |
Cash flows
from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
under revolving credit facilities |
|
|
|
|
228,250 |
|
|
|
— |
|
|
|
228,250 |
|
|
|
— |
|
|
|
— |
|
Repayments
under revolving credit facilities |
|
|
|
|
(228,250 |
) |
|
|
— |
|
|
|
(228,250 |
) |
|
|
— |
|
|
|
— |
|
Long-term
debt repayments |
|
|
|
|
(34,500 |
) |
|
|
— |
|
|
|
(34,500 |
) |
|
|
— |
|
|
|
— |
|
Payment of
financing costs |
|
|
|
|
(1,624 |
) |
|
|
— |
|
|
|
(1,624 |
) |
|
|
— |
|
|
|
— |
|
Maturity of
due to/due from related party |
|
|
|
|
1,631 |
|
|
|
— |
|
|
|
(78,886 |
) |
|
|
80,517 |
|
|
|
— |
|
Receipt
(payment) of dividends |
|
|
|
|
— |
|
|
|
— |
|
|
|
72,928 |
|
|
|
(72,928 |
) |
|
|
— |
|
Net cash used
for financing activities |
|
|
|
|
(34,493 |
) |
|
|
— |
|
|
|
(42,082 |
) |
|
|
7,589 |
|
|
|
— |
|
Effect of
exchange rate changes on cash |
|
|
|
|
1,746 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,746 |
|
(Decrease)
increase in cash and cash equivalents |
|
|
|
|
(4,152 |
) |
|
|
— |
|
|
|
(8,471 |
) |
|
|
— |
|
|
|
4,319 |
|
Cash and cash
equivalents
at beginning of period |
|
|
|
|
31,605 |
|
|
|
8 |
|
|
|
21,812 |
|
|
|
1 |
|
|
|
9,784 |
|
Cash and cash
equivalents at end of period |
|
|
|
$ |
27,453 |
|
|
$ |
8 |
|
|
$ |
13,341 |
|
|
$ |
1 |
|
|
$ |
14,103 |
|
F-36
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. Condensed Consolidating Financial Information
(Continued)
Condensed Consolidating Statement of Cash Flows
For the Year Ended December
28, 2002
(In thousands)
|
|
|
|
Consolidated
|
|
Eliminations
|
|
Parent
Company
|
|
Guarantors
|
|
Non-
Guarantors
|
Cash flows
from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
|
|
$ |
48,904 |
|
|
$ |
(17,249 |
) |
|
$ |
48,904 |
|
|
$ |
15,296 |
|
|
$ |
1,953 |
|
Adjustments
to reconcile net income to
net cash provided by operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
14,011 |
|
|
|
— |
|
|
|
13 |
|
|
|
13,735 |
|
|
|
263 |
|
Amortization
of intangibles |
|
|
|
|
928 |
|
|
|
— |
|
|
|
95 |
|
|
|
833 |
|
|
|
— |
|
Amortization
of deferred financing costs |
|
|
|
|
2,138 |
|
|
|
— |
|
|
|
2,138 |
|
|
|
— |
|
|
|
— |
|
Deferred
taxes |
|
|
|
|
2,342 |
|
|
|
— |
|
|
|
(4,902 |
) |
|
|
7,203 |
|
|
|
41 |
|
Write-off of
deferred fees related to retirement of debt |
|
|
|
|
5,882 |
|
|
|
— |
|
|
|
5,882 |
|
|
|
— |
|
|
|
— |
|
Cumulative
effect of accounting change,
net of tax |
|
|
|
|
12,423 |
|
|
|
— |
|
|
|
— |
|
|
|
12,423 |
|
|
|
— |
|
Loss on
impairment of assets |
|
|
|
|
4,222 |
|
|
|
— |
|
|
|
2,111 |
|
|
|
2,111 |
|
|
|
— |
|
Other,
net |
|
|
|
|
2,436 |
|
|
|
17,249 |
|
|
|
(13,388 |
) |
|
|
(1,428 |
) |
|
|
3 |
|
(Decrease)
increase in net working capital |
|
|
|
|
(15,489 |
) |
|
|
— |
|
|
|
(18,927 |
) |
|
|
4,573 |
|
|
|
(1,135 |
) |
Increase in
amounts due to Parent |
|
|
|
|
— |
|
|
|
— |
|
|
|
27,534 |
|
|
|
(29,914 |
) |
|
|
2,380 |
|
Net cash
provided by operations |
|
|
|
|
77,797 |
|
|
|
— |
|
|
|
49,460 |
|
|
|
24,832 |
|
|
|
3,505 |
|
Cash flows
from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
|
|
(16,445 |
) |
|
|
— |
|
|
|
(54 |
) |
|
|
(16,237 |
) |
|
|
(154 |
) |
Intangible
assets acquired, net |
|
|
|
|
(975 |
) |
|
|
200 |
|
|
|
(225 |
) |
|
|
(950 |
) |
|
|
— |
|
Net cash used
for investing activities |
|
|
|
|
(17,420 |
) |
|
|
200 |
|
|
|
(279 |
) |
|
|
(17,187 |
) |
|
|
(154 |
) |
Cash flows
from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
under revolving credit facilities |
|
|
|
|
164,150 |
|
|
|
— |
|
|
|
164,150 |
|
|
|
— |
|
|
|
— |
|
Repayments
under revolving
credit facilities |
|
|
|
|
(181,150 |
) |
|
|
— |
|
|
|
(181,150 |
) |
|
|
— |
|
|
|
— |
|
Long-term
debt borrowings |
|
|
|
|
450,000 |
|
|
|
— |
|
|
|
450,000 |
|
|
|
— |
|
|
|
— |
|
Long-term
debt repayments |
|
|
|
|
(494,050 |
) |
|
|
— |
|
|
|
(494,050 |
) |
|
|
— |
|
|
|
— |
|
Payment of
financing costs |
|
|
|
|
(3,681 |
) |
|
|
— |
|
|
|
(3,681 |
) |
|
|
— |
|
|
|
— |
|
Issuance of
shares of common stock, net |
|
|
|
|
1,851 |
|
|
|
(200 |
) |
|
|
1,851 |
|
|
|
— |
|
|
|
200 |
|
Receipt
(payment) of dividends |
|
|
|
|
— |
|
|
|
— |
|
|
|
8,813 |
|
|
|
(7,645 |
) |
|
|
(1,168 |
) |
Net cash used
for financing activities |
|
|
|
|
(62,880 |
) |
|
|
(200 |
) |
|
|
(54,067 |
) |
|
|
(7,645 |
) |
|
|
(968 |
) |
Effect of
exchange rate changes on cash |
|
|
|
|
102 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
102 |
|
(Decrease)
increase in cash and
cash equivalents |
|
|
|
|
(2,401 |
) |
|
|
— |
|
|
|
(4,886 |
) |
|
|
— |
|
|
|
2,485 |
|
Cash and cash
equivalents at beginning of period |
|
|
|
|
34,006 |
|
|
|
8 |
|
|
|
26,698 |
|
|
|
1 |
|
|
|
7,299 |
|
Cash and cash
equivalents at end of period |
|
|
|
$ |
31,605 |
|
|
$ |
8 |
|
|
$ |
21,812 |
|
|
$ |
1 |
|
|
$ |
9,784 |
|
F-37
PLAYTEX PRODUCTS, INC.
SCHEDULE II — VALUATION AND QUALIFYING
ACCOUNTS
Years Ended December 25, 2004, December 27, 2003 and December 28, 2002
(In thousands)
|
|
|
|
Balance at
Beginning
of Period
|
|
Additions
Charged to
Income
|
|
Write-off
|
Balance
at End
of Period
|
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 28,
2002
Allowance for doubtful accounts(1) |
|
|
|
$ |
(2,065 |
) |
|
$ |
(1,053 |
) |
|
$ |
1,844 |
|
$(1,274) |
|
December 27,
2003
Allowance for doubtful accounts(1) |
|
|
|
$ |
(1,274 |
) |
|
$ |
(763 |
) |
|
$ |
960 |
|
$(1,077) |
|
December 25,
2004
Allowance for doubtful accounts |
|
|
|
$ |
(1,077 |
) |
|
$ |
(71 |
) |
|
$ |
(166) |
(2) |
$(1,314) |
|
(1) |
|
Includes allowance for doubtful accounts of our wholly-owned
special purpose subsidiary used in conjunction with the Receivable Facility of $668 in 2003 and $302 in 2002 (see Note 7 to our consolidated financial
statements included in Item 8 of this Annual Report on Form 10-K). |
(2) |
|
Represents a net recovery for fiscal 2004 due primarily to the
sale of Kmart Holding Corporation stock received in the bankruptcy settlement. |
F-38
PLAYTEX PRODUCTS, INC.
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.) |
3(b) |
|
|
|
By-laws of the Company, as amended through May 31, 2001. (Incorporated herein by reference to Exhibit 3 of Playtex’s Form 10-Q for the
period ended June 30, 2001, dated August 14, 2001.) |
4(a) |
|
|
|
Indenture dated, May 22, 2001 relating to the 9-3/88% Senior Subordinated Notes due 2011 (the “Senior Subordinated Notes”)
among Playtex Products, Inc., as issuer, Playtex Sales & Services, Inc., Playtex Manufacturing, Inc., Playtex Investment Corp., Playtex
International Corp., TH Marketing Corp., Smile-Tote, Inc., Sun Pharmaceuticals Corp., Personal Care Group, Inc., Personal Care Holdings, Inc., and
Carewell Industries, Inc., as Guarantors and the Bank of New York, as Trustee. (Incorporated herein by reference to Exhibit 4.1 of Playtex’s
Registration Statement on Form S-4 dated June 28, 2001, File No. 333-64070-03.) |
4(a)(1) |
|
|
|
Registration Rights Agreement relating to the Senior Subordinated Notes among Playtex Products, Inc., as issuer, the guarantors named therein,
Credit Suisse First Boston Corporation and Wells Fargo Brokerage Services, LLC (the “Initial Purchasers”). (Incorporated herein by reference
to Exhibit 4.2 of Playtex’s Registration Statement on Form S-4 dated June 28, 2001, File No. 333-64070-03.) |
4(b) |
|
|
|
Indenture, dated as of February 19, 2004 relating to the 8% Senior Secured Notes due 2011 (the “8% Notes”), among Playtex Products,
Inc., the guarantors named therein and Wells Fargo Bank Minnesota, National Association, as trustee, in as an exhibit thereto the form of the note.
(Incorporated herein by reference to Exhibit 4.1 of Playtex’s registration statement on Form S-4, dated April 30, 2004.) |
4(c) |
|
|
|
Security Agreement, dated as of February 19, 2004 relating to the 8% Notes, among Playtex Products, Inc., the guarantors named therein and
Wells Fargo Bank Minnesota, National Association, as trustee. (Incorporated herein by reference to Exhibit 4.2 of Playtex’s registration statement
on Form S-4, dated April 30, 2004.) |
4(d) |
|
|
|
Restricted Account Agreement, dated as of February 19, 2004 relating to the 8% Notes, among Playtex Products, Inc., Wells Fargo Bank
Minnesota, National Association, as trustee, and Wells Fargo Bank, N.A. and acknowledged by the guarantors named therein. (Incorporated herein by
reference to Exhibit 4.3 of Playtex’s registration statement on Form S-4, dated April 30, 2004.) |
4(e) |
|
|
|
Pledge Agreement, dated as of February 19, 2004 relating to the 8% Notes, among Playtex Products, Inc., Personal Care Holdings, Inc., Personal
Care Group, Inc., Playtex International Corp. and TH Marketing Corp. in favor of Wells Fargo Bank Minnesota, National Association, as trustee.
(Incorporated herein by reference to Exhibit 4.4 of Playtex’s registration statement on Form S-4, dated April 30, 2004.) |
10(a) |
|
|
|
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.) |
10(a)(1) |
|
|
|
Deferred Benefit Equalization Plan, amended and restated effective January 1, 2002. (Incorporated herein by reference to Exhibit 10(e)(1) of
Playtex’s Annual Report on Form 10-K for the year ended December 28, 2002.) |
10(a)(2) |
|
|
|
Amendment 2003-1 to the Deferred Benefit Equalization Plan, dated February 27, 2003. (Incorporated herein by reference to Exhibit 10(e)(2) of
Playtex’s Annual Report on Form 10-K for the year ended December 28, 2002.) |
10(b) |
|
|
|
Playtex Management Incentive Plan. (Incorporated herein by reference to Exhibit 10(e) of Playtex’s Annual Report on Form 10-K for the
year ended December 30, 2000.) |
X-1
Exhibit
No.
|
|
|
|
Description
|
10(c) |
|
|
|
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(c)(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.) |
10(c)(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.) |
10(c)(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.) |
10(c)(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.) |
10(c)(5) |
|
|
|
Amendment No. 5 to the 1994 Stock Option Plan. (Incorporated herein by reference to Exhibit 10(l)(5) of Playtex’s Annual Report on Form
10-K for the fiscal year ended December 26, 1998.) |
10(c)(6) |
|
|
|
Amendment No. 6 to the 1994 Stock Option Plan. (Incorporated herein by reference to Exhibit 10(1)(6) of Playtex’s Annual Report on Form
10-K for the fiscal year ended December 26, 1998.) |
10(c)(7) |
|
|
|
Playtex 1994 Stock Option Plan for Directors and Executive and Key Employees as amended through April 6, 1999. (Incorporated herein by
reference to Exhibit 10.1 of Playtex’s Form 10-Q for the period ended June 26, 1999, dated August 4, 1999.) |
10(c)(8) |
|
|
|
Playtex 1994 Stock Option Plan for Directors and Executive and Key Employees as amended through April 2001. (Incorporated herein by reference
to Exhibit 10(1) of Playtex’s Form 10-Q for the period ended June 30, 2001, dated August 14, 2001.) |
10(c)(9) |
|
|
|
Playtex 1994 Stock Option Plan for Directors and Executive and Key Employees as amended through May 2003. (Incorporated herein by reference to
Exhibit 10.1 of Playtex’s Form 10-Q for the period ended June 28, 2003, dated August 11, 2003.) |
10(d) |
|
|
|
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.) |
10(d)(1) |
|
|
|
Memorandum of Understanding, dated May 18, 1999 with Michael R. Gallagher, Chief Executive Officer. (Incorporated herein by reference to
Exhibit 10(m) of Playtex’s Form 10-Q for the period ended June 26, 1999, dated August 4, 1999.) |
10(d)(2) |
|
|
|
Memorandum of Understanding, dated April 15, 2003 with Michael R. Gallagher, Chief Executive Officer. (Incorporated herein by reference to
Exhibit 10(e)(2) of Playtex’s Form 10-K for the period ended December 27, 2003, dated March 9, 2004.) |
10(e) |
|
|
|
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(f) |
|
|
|
Retirement Agreement and General Release, between Michael R. Gallagher and the Company. (Incorporated herein by reference to Exhibit 10.1 of
Playtex’s Form 8-K filed by the Company on June 23, 2004 (SEC file no. 1-12620.)) |
*10(g) |
|
|
|
Employment Agreement, dated October 2, 2004 between Neil P. DeFeo, President and Chief Executive Officer, and the Company. |
*10(h) |
|
|
|
Employment Agreement, dated October 2, 2004 between Kris J. Kelley, Senior Vice President Finance, and the Company. |
*10(h)(1) |
|
|
|
Amendment to Employment Agreement, dated December 9, 2004 between Kris J. Kelley, Executive Vice President and Chief Financial Officer, and
the Company. |
X-2
Exhibit
No.
|
|
|
|
Description
|
10(i) |
|
|
|
Form
of Retention Agreement dated as of July 22, 1997 between each of, James S. Cook, John D. Leahy, Richard G. Powers, Frank M. Sanchez, and Paul E.
Yestrumskas 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(j) |
|
|
|
Form
of Retention Agreement dated as of March 13, 2000 between Paul A. Siracusa and the Company. (Incorporated herein by reference to Exhibit 10(j) of
Playtex’s Annual Report on Form 10-K for the year ended December 30, 2000.) |
10(k) |
|
|
|
Form
of Retention Agreement dated as of March 21, 2000 between Glenn A. Forbes and the Company. (Incorporated herein by reference to Exhibit 10(k) of
Playtex’s Annual Report on Form 10-K for the year ended December 30, 2000.) |
10(k)(1) |
|
|
|
Amended Form of Retention Agreement dated as of March 20, 2003 between Glenn A. Forbes and the Company. (Incorporated herein by reference to
Exhibit 10(l)(1) of Playtex’s Annual Report on Form 10-K for the year ended December 28, 2002.) |
10(l) |
|
|
|
Form
of Retention Agreement dated as of August 1, 2000 between Kevin M. Dunn and the Company. (Incorporated herein by reference to Exhibit 10(l) of
Playtex’s Annual Report on Form 10-K for the year ended December 30, 2000.) |
10(m) |
|
|
|
Form
of Retention Agreement dated as of August 1, 2000 between Vincent S. Viviani and the Company. (Incorporated herein by reference to Exhibit 10(m) of
Playtex’s Annual Report on Form 10-K for the year ended December 30, 2000.) |
10(n) |
|
|
|
Amendment to Retention Agreements, dated as of March 21, 2003 between each of Michael R. Gallagher, James S. Cook, John D. Leahy, Richard G.
Powers, Frank M. Sanchez, Paul E. Yestrumskas, Paul A. Siracusa, Kevin M. Dunn and Vincent S. Viviani and the Company. (Incorporated herein by
reference to Exhibit 10(o) of Playtex’s Annual Report on Form 10-K for the year ended December 28, 2002.) |
10(o) |
|
|
|
Amended Trademark License Agreement dated November 19, 1991 among Marketing Corporation, Apparel and Playtex Family Products. (Incorporated
herein by reference to Exhibit 10(r) of Playtex’s Registration Statement on Form S-1, File No. 33-43771.) |
10(p) |
|
|
|
Amended Trademark License Agreement dated November 19, 1991 by and between Apparel and Playtex Family Products. (Incorporated herein by
reference to Exhibit 10(s) of Playtex’s Registration Statement on Form S-1, File No. 33-43771.) |
10(q) |
|
|
|
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(r) |
|
|
|
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(r)(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, File No. 333-50099.) |
10(r)(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-3
Exhibit
No.
|
|
|
|
Description
|
10(r)(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. (Incorporated herein by reference to Exhibit 10(t)(3) of Playtex’s Annual Report on Form 10-K for
the fiscal year ended December 26, 1998.) |
10(s) |
|
|
|
Sublease Agreement between Playtex and AMBAC Capital Management, Inc. dated as of February 20, 1998. (Incorporated herein by reference to
Exhibit 10(ah) of Playtex’s Annual Report on Form 10-K for the fiscal year ended December 26, 1998.) |
10(t) |
|
|
|
Agreement of Lease between Playtex Manufacturing, Inc. and Trammell Crow NE, Inc. (Incorporated herein by reference to Exhibit 10(ai) of
Playtex’s Annual Report on Form 10-K for the fiscal year ended December 26, 1998.) |
10(u) |
|
|
|
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.) |
10(v) |
|
|
|
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.) |
10(w) |
|
|
|
Credit Agreement, dated February 19, 2004, amongst Playtex Products, Inc., the guarantors named therein and General Electric Capital
Corporation, as agent, L/C issuer and a lender. (Incorporated herein by reference to Exhibit 10.1 of Playtex’s Form 10-Q filed by the Company on
May 5, 2004). |
10(w)(1) |
|
|
|
Amendment No. 1 to the Credit Agreement, dated October 27, 2004, amongst Playtex Products, Inc.,
the guarantors named therein and General
Electric Capital Corporation, as agent and a lender (Incorporated herein by reference to Exhibit 10.1 of Playtex’s Form 10-Q filed by the Company
on November 2, 2004). |
*21(a) |
|
|
|
Subsidiaries of Playtex. |
*23 |
|
|
|
Consent of KPMG LLP. |
*31.1 |
|
|
|
Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
*31.2 |
|
|
|
Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
*32.1 |
|
|
|
Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
*32.2 |
|
|
|
Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
Exhibits marked
with an “*” are filed as a part of this Annual Report on Form 10-K, all other exhibits are incorporated by reference as individually noted.
Exhibits listed as 10(b) through and including 10(n) could be considered compensatory plans or in some manner benefit certain
employees.
X-4