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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2001
COMMISSION FILE NO. 1-12620
------------------------
PLAYTEX PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0312772
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 NYALA FARMS ROAD, WESTPORT, CONNECTICUT 06880
(Address of principal executive offices) (zip code)
(203) 341-4000
(Registrant's telephone number, including area code)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
At May 3, 2001 60,983,899 shares of Playtex Products, Inc. common stock, par
value $.01 per share, were outstanding.
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PLAYTEX PRODUCTS, INC.
INDEX
PAGE
--------
PART I--FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements................. 3 - 13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 14 - 21
PART II--OTHER INFORMATION
Item 1. Legal Proceedings........................................... 22
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits................................................ 22
(b) Reports on Form 8-K..................................... 22
Item 7A. Quantitative and Qualitative Disclosure about Market Risk... 22
Signatures.................................................. 23
2
PLAYTEX PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
MARCH 31, DECEMBER 30,
2001 2000
----------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash...................................................... $ 8,266 $ 10,282
Receivables, less allowance for doubtful accounts......... 162,184 130,970
Inventories............................................... 88,257 85,326
Deferred income taxes..................................... 12,999 13,321
Other current assets...................................... 3,412 5,416
---------- ----------
Total current assets.................................. 275,118 245,315
Net property, plant and equipment........................... 120,152 118,155
Intangible assets, net...................................... 670,248 675,263
Deferred financing costs.................................... 11,327 12,334
Due from related party...................................... 80,017 80,017
Other noncurrent assets..................................... 8,599 8,300
---------- ----------
Total assets.......................................... $1,165,461 $1,139,384
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 48,119 $ 51,535
Accrued expenses.......................................... 68,414 69,800
Income taxes payable...................................... 11,049 4,622
Current maturities of long-term debt...................... 49,000 45,125
---------- ----------
Total current liabilities............................. 176,582 171,082
Long-term debt.............................................. 895,019 886,438
Due to related party........................................ 78,386 78,386
Other noncurrent liabilities................................ 13,512 12,814
Deferred income taxes....................................... 50,615 46,727
---------- ----------
Total liabilities..................................... 1,214,114 1,195,447
---------- ----------
Stockholders' equity:
Common stock, $0.01 par value, authorized 100,000,000
shares,
issued 60,970,899 shares at March 31, 2001 and
at December 30, 2000.................................... 609 609
Additional paid-in capital................................ 523,706 523,706
Retained earnings (deficit)............................... (564,376) (577,220)
Accumulated other comprehensive earnings.................. (8,592) (3,158)
---------- ----------
Total stockholders' equity............................ (48,653) (56,063)
---------- ----------
Total liabilities and stockholders' equity............ $1,165,461 $1,139,384
========== ==========
See the accompanying notes to condensed consolidated financial statements.
3
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share data)
THREE MONTHS ENDED
--------------------
MARCH 31, APRIL 1,
2001 2000
--------- --------
Net sales................................................... $220,776 $223,507
Cost of sales............................................... 94,709 93,805
-------- --------
Gross profit.............................................. 126,067 129,702
Operating expenses:
Advertising and sales promotion........................... 46,199 45,694
Selling, distribution and research........................ 23,004 22,693
Administrative............................................ 7,965 7,491
Amortization of intangibles............................... 5,515 5,592
-------- --------
Total operating expenses................................ 82,683 81,470
Operating earnings.................................... 43,384 48,232
Interest expense including related party interest expense
of $3,037 for both periods presented, net of related party
interest income of $3,001 for both periods presented...... 21,103 22,042
-------- --------
Earnings before income taxes.......................... 22,281 26,190
Income taxes................................................ 9,437 10,921
-------- --------
Net earnings.......................................... $ 12,844 $ 15,269
======== ========
Earnings per share:
Basic..................................................... $ 0.21 $ 0.25
======== ========
Diluted................................................... $ 0.21 $ 0.25
======== ========
Weighted average shares outstanding:
Basic..................................................... 60,971 60,684
======== ========
Diluted................................................... 63,663 64,007
======== ========
See the accompanying notes to condensed consolidated financial statements.
4
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND ACCUMULATED OTHER COMPREHENSIVE EARNINGS
(Unaudited, in thousands)
ACCUMULATED
COMMON ADDITIONAL RETAINED OTHER
SHARES COMMON PAID-IN EARNINGS COMPREHENSIVE
OUTSTANDING STOCK CAPITAL (DEFICIT) EARNINGS TOTAL
----------- -------- ---------- --------- ------------- --------
Balance, December 30, 2000... 60,971 $609 $523,706 $(577,220) $(3,158) $(56,063)
Net earnings................. -- -- -- 12,844 -- 12,844
Unrealized loss on hedging
instruments................ -- -- -- -- (4,872) (4,872)
Foreign currency translation
adjustment................. -- -- -- -- (562) (562)
--------
Comprehensive earnings... 7,410
------ ---- -------- --------- ------- --------
Balance, March 31,
2001................... 60,971 $609 $523,706 $(564,376) $(8,592) $(48,653)
====== ==== ======== ========= ======= ========
See the accompanying notes to condensed consolidated financial statements.
5
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
THREE MONTHS ENDED
--------------------
MARCH 31, APRIL 1,
2001 2000
--------- --------
Cash flows from operations:
Net earnings.............................................. $ 12,844 $ 15,269
Non-cash items included in earnings:
Amortization of intangibles............................. 5,515 5,592
Amortization of deferred financing costs................ 1,016 937
Depreciation............................................ 3,111 2,708
Deferred income taxes................................... 4,193 5,319
Other, net.............................................. (410) 228
Net increase in working capital accounts.................. (35,090) (37,668)
-------- --------
Net cash flows (used for) operations.................. (8,821) (7,615)
Cash flows used for investing activities:
Purchases of property, plant and equipment................ (5,151) (7,075)
Purchase of patent rights................................. (500) --
-------- --------
Net cash flows used for investing activities.......... (5,651) (7,075)
Cash flows provided by (used for) financing activities:
Net borrowings under credit facilities.................... 21,800 17,500
Long-term debt repayments................................. (9,344) (2,563)
Issuance of shares of common stock........................ -- 1,694
-------- --------
Net cash flows provided by (used for) financing
activities.......................................... 12,456 16,631
(Decrease) increase in cash................................. (2,016) 1,941
Cash at beginning of period................................. 10,282 7,526
-------- --------
Cash at end of period....................................... $ 8,266 $ 9,467
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the periods for:
Interest................................................ $ 16,116 $ 16,150
Income taxes, net of refunds............................ $ 1,184 $ 865
See the accompanying notes to condensed consolidated financial statements.
6
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The quarterly condensed consolidated financial statements, which are a part
of our Quarterly Report on Form 10-Q, are unaudited. In preparing our financial
statements, we make certain adjustments (consisting of normal recurring
adjustments) considered necessary in our opinion for a fair presentation of our
financial position and results of operations. The results of the three month
period ended March 31, 2001 are not necessarily indicative of the results that
you may expect for the full year.
Our results for the first quarter of 2001 are for the 13-week period ended
March 31, 2000 and our results for the first quarter of 2000 are for the 14-week
period ended April 1, 2000. Our fiscal year end is on the last Saturday nearest
to December 31 and, as a result, a fifty-third week is added every 6 or
7 years. Our fiscal year ending December 30, 2000 included the extra week, or 53
weeks.
We presume you have access to the audited financial statements contained in
our Annual Report on Form 10-K for the year ended December 30, 2000. As a
result, we have not included footnote disclosures that would substantially
duplicate the disclosures contained in the 10-K. If you do not have a copy of
our Annual Report on Form 10-K you can obtain one by contacting our Director of
Investor Relations at (203) 341-4000 or view it on-line at the SEC's web site
WWW.SEC.GOV.
2. ADOPTION OF NEW ACCOUNTING POLICY
On December 31, 2000, we adopted Statement of Financial Accounting Standard
No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities," as amended. SFAS 133 requires us to recognize all derivative
instruments on our balance sheet at fair value. We use derivatives as a means to
hedge against interest rate risk on our variable rate indebtedness. As of
adoption date and during the quarter, we were parties to two interest rate
swaps, (the "Swaps"). These Swaps are designated as cash flow hedges.
Upon adoption of SFAS 133, we recorded the fair value of our Swaps on our
Balance Sheet. On an ongoing basis, we will adjust our Balance Sheet to reflect
the current fair value of our Swaps. The related unrealized gains or losses on
these Swaps are deferred in Shareholders' Equity (as a component comprehensive
income). These unrealized gains or losses are recognized in earnings as a
component of interest expense over the term of the Swaps. However, to the extent
that change in the value of our Swaps does not perfectly offset the change in
the interest expense payments being hedged, that ineffective portion is
immediately recognized in earnings.
At the adoption date of SFAS 133, we recorded a reduction to comprehensive
earnings of approximately $1.7 million and an offsetting current liability
attributed to the fair value of the interest rate swaps at the adoption date.
The impact on earnings for the quarter ended March 31, 2001 was immaterial. At
March 31, 2001, the change in the fair value of the Swaps, due to changes in the
interest rate market place, resulted in an additional reduction to comprehensive
earnings of approximately $3.2 million and an offsetting increase to current
liability.
3. COMPREHENSIVE EARNINGS
For the three months ended March 31, 2001, foreign currency translation
adjustment and the unrealized loss on our interest rate hedging instruments were
the only reconciling items between net earnings and comprehensive earnings. For
the three months ended April 1, 2000, foreign currency
7
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. COMPREHENSIVE EARNINGS (CONTINUED)
translation adjustment was the only reconciling item between net earnings and
comprehensive earnings. Our comprehensive earnings were (unaudited, in
thousands):
THREE MONTHS ENDED
-----------------------
MARCH 31, APRIL 1,
2001 2000
---------- ----------
Net earnings......................................... $ 12,844 $ 15,269
Unrealized loss on hedging instruments............... (4,872) --
Foreign currency translation adjustment.............. (562) 14
-------- --------
Comprehensive earnings............................. $ 7,410 $ 15,283
======== ========
4. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are as follows (in
thousands):
MARCH 31, DECEMBER 30,
2001 2000
----------- -------------
(UNAUDITED)
Receivables.......................................... $164,117 $133,207
Less allowance for doubtful accounts................. (1,933) (2,237)
-------- --------
Net.............................................. $162,184 $130,970
======== ========
Inventories:
Raw materials...................................... $ 21,937 $ 25,140
Work in process.................................... 1,570 1,747
Finished goods..................................... 64,750 58,439
-------- --------
Total............................................ $ 88,257 $ 85,326
======== ========
Net property, plant and equipment:
Land............................................... $ 2,376 $ 2,376
Buildings.......................................... 39,447 38,601
Machinery and equipment............................ 177,267 173,226
-------- --------
219,090 214,203
Less accumulated depreciation...................... (98,938) (96,048)
-------- --------
Net.............................................. $120,152 $118,155
======== ========
Accrued expenses:
Advertising and sales promotion.................... $ 13,388 $ 23,519
Employee compensation and benefits................. 10,645 13,912
Interest........................................... 15,204 11,233
Insurance.......................................... 3,300 3,200
Other.............................................. 25,877 17,936
-------- --------
Total............................................ $ 68,414 $ 69,800
======== ========
8
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
MARCH 31, DECEMBER 30,
2001 2000
----------- -------------
(UNAUDITED)
Variable Rate Indebtedness:
Term A Loan........................................ $121,094 $129,813
Revolving Credit Facility.......................... 21,800 --
Term Loan.......................................... 241,125 241,750
Fixed Rate Indebtedness:
6% Convertible Subordinated Notes due 2004......... 50,000 50,000
8 7/8% Senior Notes due 2004....................... 150,000 150,000
9% Senior Subordinated Notes due 2003.............. 360,000 360,000
-------- --------
944,019 931,563
Less current maturities............................ (49,000) (45,125)
-------- --------
Total long-term debt............................. $895,019 $886,438
======== ========
Our long-term debt consists of the following:
Variable rate indebtedness:
- senior secured credit facilities, as amended (the "Senior Credit
Facilities") comprised of:
-- $155.0 million term loan facility (the "Term A Loan") and
-- $115.0 million revolving credit facility (the "Revolving Credit
Facility").
- $250.0 million senior secured term loan due September 15, 2003 (the "Term
Loan") as amended.
The Term A Loan matures on June 15, 2003. Scheduled principal repayments on
the Term A Loan are made quarterly, and remaining amounts include:
$33.9 million in fiscal 2001, $56.2 million in fiscal 2002, and $31.0 million in
fiscal 2003. Principal repayments we make on the Term A Loan cannot be
re-borrowed by us.
The Revolving Credit Facility matures on June 15, 2003. On December 15,
2000, our Revolving Credit Facility commitments were automatically and
permanently reduced by $5.0 million. Additional reductions in our Revolving
Credit Facility commitments are as follows:
- $5.0 million on June 15, 2001, - $8.0 million on December 15, 2002, and
- $7.0 million on December 15, 2001, - $8.0 million on June 15, 2003
- $7.0 million on June 15, 2002,
At March 31, 2001, we had $86.0 million of unused borrowings available to us
under the Revolving Credit Facility.
The Term Loan matures on September 15, 2003. Scheduled principal repayments
on the Term Loan are made quarterly, and remaining amounts include:
$1.9 million in fiscal 2001, $2.5 million in fiscal 2002, and $236.7 million in
fiscal 2003. Our quarterly principal repayment obligations are fixed at
9
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
$0.6 million through June 15, 2003. The final principal payment of
$235.5 million is due on September 15, 2003. Principal repayments we make on the
Term Loan cannot be re-borrowed by us.
Fixed rate Indebtedness:
- $50.0 million principal amount of 6% convertible subordinated notes due
January 31, 2004 (the "Convertible Notes"),
- $150.0 million principal amount of 8 7/8% senior notes due July 15, 2004
(the "8 7/8% Notes"), and
- $360.0 million principal amount of 9% senior subordinated notes due
December 15, 2003 (the "9% Notes").
The Convertible Notes are convertible into approximately 2.6 million shares
of our common stock. The conversion price is approximately $19.15 per common
share. The Convertible Notes will mature in 2004 and are callable by us after
January 29, 2002. Interest on the notes is paid semi-annually on each
January 31 and July 31.
Interest on the 8 7/8% Notes is paid semi-annually on each January 15 and
July 15. The 8 7/8% Notes are redeemable by us commencing July 15, 2001.
Redemption prices, expressed as a percentage of the principal amount are as
follows:
- 104.438% if redeemed between July 15, 2001 and July 14, 2002,
- 102.219% if redeemed between July 15, 2002 and July 14, 2003, and
- 100.000% if redeemed after July 15, 2003.
Interest on the 9% Notes is paid semi-annually on each June 15 and
December 15. The 9% Notes are currently redeemable by us at 101.5%, expressed as
a percentage of the principal amount. The 9% Notes can be redeemed by us after
December 15, 2001 at par, 100.0% expressed as a percentage of the principal
amount.
We periodically use financial instruments, such as derivatives, to manage
the impact of interest rate changes on our variable rate debt. We do not enter
into financial instruments for trading or speculative purposes. Derivative
instruments we are a party to include:
- An interest rate swap agreement that we entered into in November 2000 and
which effectively fixed the LIBOR rate on $150.0 million of our variable
rate debt at 6.3475% until the termination date of August 30, 2001. The
counter party may at its discretion extend the swap agreement for an
additional nine months, and
- Another interest rate swap agreement, which we entered into in
November 2000 and which effectively fixed the LIBOR rate on
$150.0 million of our variable rate debt at 6.3825% until December 4,
2001, when the agreement is scheduled to terminate.
We entered into the swap agreements for no other purpose than to hedge against
interest rate volatility on $300 million of our variable rate indebtedness under
the Term A Loan and Term Loan. At March 31, 2001, our total indebtedness
consisted of $560.0 million in fixed rate debt and $384.0 million in variable
rate debt. Based on our interest rate exposure at March 31, 2001, a 1% increase
in interest rates would result in an estimated $0.8 million of additional
interest expense on an annualized basis. The rates of interest we pay on our
variable rate debt are, at our option, a function of various alternative short
term borrowing rates. At March 31, 2001 and April 1, 2000, the weighted average
10
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
interest rate on our variable rate debt, excluding the hedging effect of the
swaps, was 7.32% and 7.39%, respectively. The weighted average interest rate on
our variable rate debt, excluding the hedging effect of the swaps, for the three
months ended March 31, 2001 and April 1, 2000 was 7.89% and 7.36%, respectively.
We also pay fees equal to three-eighths of 1% on the unused portion of the
Revolving Credit Facility.
6. BUSINESS SEGMENTS
We are organized in three divisions:
Our PERSONAL PRODUCTS DIVISION includes Infant Care and Feminine Care
products sold in the United States primarily to mass merchandisers, grocery and
drug classes of trade. The Infant Care product category includes the following
brands:
- PLAYTEX disposable nurser system, - BABY MAGIC infant toiletries
cups and reusable hard bottles - MR. BUBBLE children's bubble bath
- WET ONES hand and face towelettes - BABY MAGIC/CHUBS baby wipes, and
- DIAPER GENIE diaper disposal system - BINKY pacifiers.
The Feminine Care product category includes a wide range of plastic and
cardboard applicator tampons marketed under such brand names as PLAYTEX: GENTLE
GLIDE, SILK GLIDE and SLIMFITS. In addition, the Feminine Care product category
includes a personal cleansing wipe for use in feminine hygiene. This product was
introduced in the first quarter of 2001.
Our CONSUMER PRODUCTS DIVISION includes Sun Care, Household Products, and
Personal Grooming products sold in the United States primarily to mass
merchandisers, grocery and drug classes of trade.
SUN CARE HOUSEHOLD PRODUCTS
-------- ------------------
- BANANA BOAT - PLAYTEX Gloves
- WOOLITE rug and upholstery cleaning
products
PERSONAL GROOMING
------------------------------------------
- BINACA breath spray and drops - TEK toothbrushes
- OGILVIE at-home permanents - BETTER OFF depilatories, and
- TUSSY deodorant - DOROTHY GRAY skin care products
- DENTAX oral care products
Our INTERNATIONAL/CORPORATE SALES DIVISION includes:
- Sales to specialty classes of trade in - export sales
the - sales in Puerto Rico
United States including: warehouse - results from our Canadian and
clubs, Australian subsidiaries
military, convenience stores, - sales of private label tampons
specialty
stores, and telemarketing
The International/Corporate Sales Division sells the same products as are
available to our U.S. customers.
11
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. BUSINESS SEGMENTS (CONTINUED)
We evaluate division performance based on product contribution before
allocating any general corporate overhead costs. Product contribution is defined
as gross profit less advertising and sales promotion expenses. All other
operating expenses are managed at the corporate level and are not used by our
management to evaluate the results of the divisions. We do not consider assets,
amortization, capital expenditures, or interest income and interest expense in
assessing division performance. The results of our divisions for the three
months ended March 31, 2001 and April 1, 2000 are as follows (unaudited, dollars
in thousands):
THREE MONTHS ENDED
-----------------------------------------
MARCH 31, 2001 APRIL 1, 2000
------------------- -------------------
NET PRODUCT NET PRODUCT
SALES CONTRIB. SALES CONTRIB.
-------- -------- -------- --------
Personal Products..................................... $114,947 $41,697 $121,298 $50,686
Consumer Products..................................... 69,674 25,706 68,353 21,866
International and Other............................... 36,155 14,535 33,856 12,814
Unallocated Charges(1)................................ -- (2,070) -- (1,358)
-------- ------- -------- -------
Total Consolidated.................................. $220,776 79,868 $223,507 84,008
======== ========
RECONCILIATION TO OPERATING EARNINGS:
Selling, distribution and research.................... 23,004 22,693
Administrative........................................ 7,965 7,491
Amortization of intangibles........................... 5,515 5,592
------- -------
Operating earnings.................................. $43,384 $48,232
======= =======
------------------------
(1) Certain unallocated corporate charges such as business license taxes,
pension expense and product liability insurance are included in consolidated
gross margin, but not included in the evaluation of division performance.
12
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. EARNINGS PER SHARE
The following table explains how our basic and diluted Earnings Per Share
("EPS") were calculated for the three months ended March 31, 2001 and April 1,
2000 (unaudited, in thousands, except per share amounts):
THREE MONTHS ENDED
---------------------
MARCH 31, APRIL 1,
2001 2000
---------- --------
Numerator:
Net earnings--as reported................................. $12,844 $15,269
Adjustment for interest on Convertible Note............... 473 473
------- -------
Net earnings--as adjusted............................... $13,317 $15,742
======= =======
Denominator:
Weighted average shares outstanding--as reported.......... 60,971 60,684
Adjustment for dilutive effect of employee stock
options................................................. 81 712
Adjustment for dilutive effect of Convertible Notes....... 2,611 2,611
------- -------
Weighted average shares outstanding--as adjusted.......... 63,663 64,007
======= =======
Basic Earnings Per Share.................................... $ .21 $ .25
Diluted Earnings Per Share.................................. $ .21 $ .25
Basic EPS excludes all potentially dilutive securities. Basic EPS is
computed by dividing net earnings by the weighted average number of common
shares outstanding for the period. Diluted EPS includes all potentially dilutive
securities. Diluted EPS is computed by dividing net earnings, adjusted by the
if-converted method for convertible securities, by the weighted average number
of common shares outstanding for the period plus the number of additional common
shares that would have been outstanding if the dilutive securities were issued.
In the event the dilutive securities are anti-dilutive (have the affect of
increasing EPS), the impact of the dilutive securities is not included in the
computation.
8. CONTINGENT LIABILITIES
In our opinion, there are no claims, commitments, guarantees or litigation
pending to which we or any of our subsidiaries is a party which would have a
material adverse effect on the consolidated financial position, results of
operations or cash flows of the Company.
13
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with:
- the condensed financial statements and notes included in this report and
- audited consolidated financial statements and notes to consolidated
financial statements included in our report on Form 10-K for the year
ended December 30, 2000.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This document includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future results. When we use words in this document such as "anticipates,"
"intends," "plans," "believes," "estimates," "expects," and similar expressions
we do so to identify forward-looking statements. Our actual results may differ
materially from those anticipated in these forward-looking statements. These
forward-looking statements are affected by risks, uncertainties, and assumptions
that we make, including, among other things the Risk Factors that are listed in
Item I. of our Annual Report on Form 10-K for the year ended
December 30, 2000, and:
- price and product changes, - our level of debt,
- promotional activity by competitors, - interest rate fluctuations,
- the loss of a significant customer, - future cash flows,
- capacity limitations, - dependence on key employees,
- the difficulties of integrating - highly competitive nature of consumer
acquisitions, products business, and
- raw material and manufacturing costs, - general economic conditions which may
- adverse publicity and product liability impact the level of consumer spending.
claims,
- impact of weather conditions, especially
on our Sun Care product sales,
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. We have no duty to, and do not
intend to, update or revise the forward-looking statements in this document
after the date hereof. In light of these risks and uncertainties, you should
keep in mind that any forward-looking statement made in this report or elsewhere
might not occur.
TRADEMARKS
We have proprietary rights to a number of trademarks important to our
businesses, such as:
ACTIVE SPORT, BABY MAGIC, BANANA BOAT, BINACA, BINKY, BLASTERS, BIG SIPSTER,
CHUBS, COOL COLORZ, COMFORTFLOW, COOLSTRAW, DENTAX, DIAPER GENIE, DROP-INS, FAST
BLAST, FUNKY FRUIT, GENTLE GLIDE, GET ON THE BOAT, HANDSAVER, LIPPOPS, MOST LIKE
MOTHER, MR. BUBBLE, NATURAL ACTION, OGILVIE, PRECISELY RIGHT, PRECISION FLO,
QUICKSTRAW, QUIK BLOK, SAFE'N SURE, SILK GLIDE, SIPEASE, SLIMFITS, TUB MATE,
TEK, TUSSY,
14
VENTAIRE, WET ONES and WHISPER WAVE. We also own a royalty free license in
perpetuity to the PLAYTEX and LIVING trademarks, and to the WOOLITE trademark
for rug and upholstery cleaning products in the United States and Canada.
ITEMS AFFECTING COMPARABILITY
Our results for the first quarter of 2001 are for the 13-week period ended
March 31, 2001 and our results for the first quarter of 2000 are for the 14-week
period ended April 1, 2000. All references to market share and market share data
are for comparable 13-week periods and represent our percentage of the total
U.S. dollar volume of products purchased by consumers in the applicable category
(dollar market share, or retail consumption). This information is provided to us
from the ACNielsen Company.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO
THREE MONTHS ENDED APRIL 1, 2000
CONSOLIDATED NET SALES--Our consolidated net sales decreased $2.7 million, or
1%, to $220.8 million in the first quarter of 2001. Our comparative first
quarter results were negatively impacted by: a sluggish economic environment,
competitive pressures primarily in Infant Care, and the impact of the extra week
in the first quarter of 2000.
PERSONAL PRODUCTS DIVISION--Net sales decreased $6.4 million, or 5%, to
$114.9 million in the first quarter of 2001.
Net sales of INFANT CARE products decreased $3.4 million, or 5%, to
$65.5 million in the first quarter of 2001. The sales decline was primarily
the result of continued competitive activity and the recall of two of our
latex pacifier products during the second quarter of 2000. We estimate the
recall negatively impacted our net sales by an estimated $1.3 million on a
comparative basis. We believe our Infant Care businesses will remain highly
competitive in the future. As a result, we will continue to defend our
competitive positions through product innovation, the introduction of new
products and targeted advertising and promotional activity.
In INFANT FEEDING, our dollar market share decreased 2.0 percentage
points in the first quarter of 2001, to 38.7%, from 40.7% in the first
quarter of 2000. The dollar market share decline was the result of
increased competitive activity in our Cups business and, to a lesser
extent, our recall of two pacifier products in May 2000.
In CUPS, our dollar market share decreased 3.7 percentage points
in the first quarter of 2001, to 54.0%, from 57.7% in the first
quarter of 2000. The cups category, based on total dollar volume of
cups purchased by consumers, grew 2% in the first quarter of 2001 and
our retail consumption decreased 5%. The cups category has become
increasingly competitive with an influx of additional product
offerings, many of which are priced lower than ours. We extended our
line of Cup products with two new offerings in late 2000. These line
extensions and other defensive actions we have recently taken helped
increase our dollar market share 3.5 percentage points compared to
the fourth quarter of 2000. We believe the category will remain
competitive but we believe our market share has stabilized over the
last six months.
In DISPOSABLE FEEDING, our dollar market share increased
2.2 percentage points in the first quarter of 2001, to 83.3%, from
81.1% in the first quarter of 2000. Retail consumption in the
category decreased 3.7% in the first quarter of 2001 and our
consumption decreased 1.1%. We believe our market share gains are
attributable to consumers returning to our franchise after a
competitor decreased promotional spending behind a new product
offering. We believe the decline in consumption is attributable to
15
new innovative products in the reusable hard bottle segment, driven
in part by our innovation in the hard bottle segment.
In REUSABLE HARD BOTTLES, our dollar market share increased
2.8 percentage points in the first quarter of 2001, to 15.6%, from
12.8% in the first quarter of 2000. Retail consumption of our
reusable hard bottles increased 24.2% while the category grew 2.0%.
This success was the result of our introduction of two new innovative
hard bottles, VeNTAIRE and PRECISION FLO.
In DIAPER PAILS (pails and liner refills), our dollar market share
increased 2.5 percentage points in the first quarter of 2001, to 90.4%,
from 87.9% in the first quarter of 2000. Retail consumption in the
category decreased 3.8% and our consumption decreased 1%.
In PRE-MOISTENED TOWELETTES (hands and face segment), our dollar
market share decreased 15.6 percentage points in the first quarter of
2001, to 60.3%, from 75.9% in the first quarter of 2000. Retail
consumption of our WET ONES brand increased 3.9% in the first quarter of
2001 while the category grew 30.8%. There has been a steady influx of new
competitors to the category since the first quarter of 2000. The new
competitors are making significant investments in advertising and
promotion to generate trial use of their products. This is negatively
impacting our market share levels but favorably impacting our consumption
levels as more consumers enter the hands and face segment. We believe the
influx of new consumers to the category will benefit our product
offerings when our competitors return to more normal promotional support
levels. We are preparing for the summer season, which typically is the
highest consumption period, with significant display activity. In
addition, we recently introduced a new product, Ultra WET ONES, a larger
sized wipe positioned as a head-to-toe portable washcloth.
In INFANT TOILETRIES, our dollar market share decreased
1.3 percentage points in the first quarter of 2001, to 11.3%, from 12.6%
in the first quarter of 2000. Retail consumption of our BABY MAGIC brand
decreased 3.3% while the category grew 7.8%. We are preparing to launch
new BABY MAGIC packaging and graphics, as well as new product offerings
during the second half of 2001.
Net sales of FEMININE CARE products decreased $2.9 million, or 6%, to
$49.4 million in the first quarter of 2001. Our share of the U.S. tampon
category declined 0.4 percentage points in the first quarter of 2001, to
30.0%, from 30.4% in the first quarter of 2000. Our retail consumption grew
3.5%, in dollars, while the category grew 4.7%. The tampon category
experienced an increase in price promotional activity in the first quarter
of 2001.
CONSUMER PRODUCTS DIVISION--Net sales increased $1.3 million, or 2%, to
$69.7 million in the first quarter of 2001.
Net sales of SUN CARE products decreased $0.4 million, or 1%, to
$45.4 million in the first quarter of 2001. For the 2001 Sun Care season to
date, from the beginning of fiscal December 2000 through the end of fiscal
March 2001, net sales are up 3% versus the same period in 2000. Our dollar
market share of the sun care category grew 0.8 percentage points in the
first quarter of 2001, to 18.0%, from 17.2% in the first quarter of 2000.
Retail consumption of our Sun Care products increased 9.8%, in dollars,
surpassing the category, which grew 5.0%. The first quarter is not a heavy
sun care consumption period. Our dollar market share tends to be lower in
the first and fourth quarters, since consumption during these time frames is
more heavily weighted to sunless products.
Net sales of HOUSEHOLD PRODUCTS increased $0.8 million, or 6%, to
$13.1 million in the first quarter of 2001. The increase was due primarily
to our WOOLITE business, which grew its dollar market share to 18.9% of the
rug and upholstery cleaning category, an increase of 0.4 percentage
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points compared to the first quarter of 2000. In the first quarter of 2001,
we launched WOOLITE Spot & Stain Wipes, an innovative new entry in the
category. Our Gloves business had similar results. Our dollar market share
of the category grew 0.6 percentage points in the first quarter of 2001, to
36.4%, from 35.8% in the first quarter of 2000. Retail consumption of our
gloves products increased 3.4%, in dollars, surpassing the category, which
grew 1.9%. This growth was driven by our disposable gloves segment, which
has made distribution gains since the first quarter of 2000.
Net sales of PERSONAL GROOMING products increased $0.9 million, or 9%,
to $11.2 million in the first quarter of 2001. Our two largest Personal
Grooming brands, OGILVIE and BINACA, each experienced growth in market share
and retail consumption. OGILVIE increased its dollar market share to 69.8%
of the at-home permanents/straighteners category, which was a gain of
5.6 percentage points compared to the first quarter of 2000. Retail
consumption of our OGILVIE products increased 6.3%, in dollars, surpassing
the category, which declined 2.3%. BINACA increased its dollar market share
to 49.6% of the breath spray and drops category, which was a gain of
3.7 percentage points compared to the first quarter of 2000. The successful
introduction of FAST BLAST and more front-end store placements helped
increase our retail consumption 4.9% despite a 2.8% decline in the category.
INTERNATIONAL/CORPORATE SALES DIVISION--Net sales increased $2.3 million, or
7%, to $36.2 million in the first quarter of 2001. The increase was due
primarily to higher net sales in our non-North America markets and the
specialty classes of trade. The growth in net sales in our non-North America
businesses was due primarily to strong results in our Baby Wipes and Sun
Care product lines. The growth in the specialty classes of trade was due
primarily to increased net sales of Cups products.
CONSOLIDATED GROSS PROFIT--Our consolidated gross profit decreased
$3.6 million, or 3%, to $126.1 million in the first quarter of 2001. As a
percent of net sales, gross profit decreased 0.9 percentage points, to 57.1%.
Our gross profit was negatively impacted by higher fixed manufacturing costs for
products sold. We reduced our manufacturing volumes in the first quarter of 2001
to adjust inventory to an appropriate level following the fourth quarter 2000
shortfall in sales.
CONSOLIDATED PRODUCT CONTRIBUTION--Our consolidated product contribution
decreased $4.1 million, or 5%, to $79.9 million in the first quarter of 2001. As
a percent of net sales, product contribution decreased 1.4 percentage points to
36.2%. The decreases were due to our lower net sales, higher fixed manufacturing
costs, as noted above, and our continued investment in our brands. Advertising
and promotional expenditures increased $0.5 million to 20.9% of net sales versus
20.4% in the first quarter of 2000, due primarily to higher spending behind our
Infant Care brands.
PERSONAL PRODUCTS DIVISION--Product contribution decreased $9.0 million, or
18%, to $41.7 million in the first quarter of 2001. As a percent of net
sales, product contribution decreased 5.5 percentage points to 36.3%. The
decrease was due primarily to lower net sales driven by a sluggish economic
environment and competitive pressures in some of our Infant Care businesses.
In addition, we increased our advertising and promotional spending.
CONSUMER PRODUCTS DIVISION--Product contribution increased $3.8 million, or
18%, to $25.7 million in the first quarter of 2001. As a percent of net
sales, product contribution increased 4.9 percentage points to 36.9%. The
increases were due primarily to higher net sales, improved product cost in
key brands and lower advertising and promotional expenses as a percent of
net sales.
INTERNATIONAL/CORPORATE SALES DIVISION--Product contribution increased
$1.7 million, or 13%, to $14.5 million in the first quarter of 2001. As a
percent of net sales, product contribution increased 2.4 percentage points
to 40.2%. The increase in product contribution was due primarily to higher
net sales and lower advertising and promotional expenses as a percent of net
sales.
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CONSOLIDATED OPERATING EARNINGS--Our consolidated operating earnings decreased
$4.8 million, or 10%, to $43.4 million in the first quarter of 2001. The
decrease in operating earnings was the result of lower consolidated product
contribution as discussed above, and higher selling, distribution, research and
administrative expenses reflecting normal inflationary increases.
CONSOLIDATED INTEREST EXPENSE--Our consolidated interest expense decreased
$0.9 million, or 4%, to $21.1 million in the first quarter of 2001, due to lower
average debt balances compared to the same period in the prior year. We reduced
our average level of debt by $50.6 million, or 5%, since the first quarter of
2000 due to excess cash provided from operations and our desire to reduce our
debt levels. The weighted average interest rate we pay on our variable rate debt
increased 53 basis points, to 7.89%, from 7.36% in the first quarter of 2000.
CONSOLIDATED INCOME TAXES--Our consolidated income taxes decreased
$1.5 million, or 14%, to $9.4 million in the first quarter of 2001. As a percent
of pre-tax earnings, our effective tax rate increased 0.7 percentage points to
42.4% of pre-tax earnings. Our effective tax rate increases as the portion of
goodwill amortization that is non-deductible for tax purposes becomes a larger
portion of operating earnings.
FINANCIAL CONDITION AND LIQUIDITY
Historically, we have funded our working capital, debt service requirements
and capital expenditures through cash flow from operations and borrowings under
our Senior Credit Facilities. At March 31, 2001, our working capital (current
assets net of current liabilities) increased $24.3 million to $98.5 million as
compared to December 30, 2000.
- Total current assets increased $29.8 million to $275.1 million at
March 31, 2001 compared to December 30, 2000. Our receivables increased
$31.2 million as sales increased by $30.7 million compared to the fourth
quarter of 2000, due in part, to the seasonal nature of our Sun Care
business. All other current assets decreased by $1.4 million.
- Total current liabilities increased $5.5 million at March 31, 2001
compared to December 30, 2000. This occurred primarily as a result of an
increase of $6.4 million in accrued income tax payments and $3.9 million
associated with principal debt obligations due within the next twelve
months. Our accounts payable balances declined $3.4 million due primarily
to the timing of payments. All other current liabilities decreased
$1.4 million.
Sun care shipments are highly seasonal, with at least 80 percent of our
sales in the last two years to retailers occurring from December through June.
This seasonality requires increased inventory from December to June to support
the selling season. We experience higher receivables from February to September
due to extended credit terms on a portion of our Sun Care sales. In accordance
with industry practice, we also allow our customers to return unsold Sun Care
products at the end of the sun care season. We reserve amounts on our balance
sheet as we sell our Sun Care products based upon an estimated return level. The
level of returns may fluctuate from our estimates due to several factors
including weather conditions, customer inventory levels, and competitive
conditions. However, actual historical return rates as a percentage of net sales
have fluctuated within a fairly narrow range.
Capital expenditures for equipment and facility improvements were
$5.2 million for the first quarter of 2001. These expenditures were used
primarily to expand capacity in key product areas, upgrade production equipment
and maintain our facilities. Capital expenditures for 2001 are expected to be
between $23.0 million and $25.0 million.
At March 31, 2001, long-term debt (including current portion but excluding
obligations due to related party) was $944.0 million compared to $931.6 million
at December 30, 2000. The increase of $12.4 million relates to Revolving Credit
Facility borrowings of $21.8 million to fund the working capital needs of our
Sun Care business, offset, in part, by scheduled principal repayments on our
Term
18
Loan and Term A Loan of $9.4 million. At March 31, 2001, we had $86.0 million
available to borrow under our Revolving Credit Facility. The amount of money we
are able to borrow from our Revolving Credit Facility reduces over time. The
first reduction of $5.0 million occurred on December 15, 2000.
Terms of the Revolving Credit Facility, Term A Loan and the Term Loan
require us to meet certain financial tests and also include conditions or
restrictions on:
- new indebtedness and liens, - capital expenditures and asset sales,
and
- major acquisitions or mergers, - dividends and other distributions.
In December 2000, we amended our agreements relating to the Revolving Credit
Facility, Term A Loan and the Term Loan. The amendment changed certain of our
financial tests as well as the spread over LIBOR that we pay on our variable
rate indebtedness. In consideration for amending the agreements we paid an
amendment fee of $0.6 million to the banking group. Our 9% Senior Subordinated
Notes due December 15, 2003 (the "9% Notes") and our 8 7/8% Senior Notes due
July 15, 2004 (the "8 7/8% Senior Notes") also contain similar restrictions and
requirements.
We believe that we will generate sufficient cash flow from operations for:
- working capital, - interest payments on all of our debt,
and
- capital expenditures, - scheduled principal payments under the
Term A Loan and the Revolving
Credit Facility.
However, we do not expect to generate sufficient cash flow from operations to
make the final principal payment due in 2003 on the Term Loan and the 9% Notes,
which collectively total $595.5 million, nor the $150 million principal payment
due in 2004 on the 8 7/8% Senior Notes. Accordingly, we will either refinance
our obligations (which is our intention, as described below), sell assets, or
raise equity capital to repay the principal amounts of these obligations.
Historically, our cash flows 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.
Our remaining fixed principal debt repayment obligations are (excluding
balances outstanding under the Revolving Credit Facility and due to related
party):
- $35.7 million in 2001, - $627.8 million in 2003, and
- $58.7 million in 2002, - $200.0 million in 2004.
At present, we have no debt obligations due after June 15, 2004. We are
currently in the process of refinancing our indebtedness. We expect to call for
redemption our 9% Notes and our 8 7/8% Notes. We also expect to repay all
borrowings outstanding under our Senior Credit Facilities. We will not call the
Convertible Notes.
We have entered into a commitment letter with Credit Suisse First Boston
providing for a new senior secured credit facility (the "New Credit Facility")
and a new receivables purchase facility (the "Receivables Facility"). The New
Credit Facility will provide for borrowings of up to an aggregate principal
amount of $625.0 million with a syndicate of financial institutions. The New
Credit Facility will consist of a $100.0 million tranche A term loan,
$400.0 million tranche B term loan, and a $125.0 million revolving credit
facility. The New Credit Facility will require us to meet certain financial
tests and also include conditions or restrictions on:
- new indebtedness and liens, - capital expenditures and asset sales,
and
- major acquisitions or mergers, - dividends and other distributions.
19
The Receivables Facility will be for up to $100.0 million, and we will enter
into it through a newly formed, wholly owned, bankruptcy-remote special purpose
subsidiary. We intend to sell certain trade accounts receivables to this
subsidiary, and in return will receive cash proceeds and an equity interest in
this subsidiary. The subsidiary will obtain funds to purchase the trade accounts
through a receivables purchase facility with affiliates of Credit Suisse First
Boston.
We also intend to issue $350.0 million aggregate principal amount of senior
subordinated notes (the "Senior Subordinated Notes"). The Senior Subordinated
Notes are expected to bear interest at a fixed rate and mature in 2011. The
Senior Subordinated Notes will be guaranteed by certain of our domestic
subsidiaries, subject to optional redemption under certain circumstances, and
will contain similar restrictions and requirements as the New Credit Facility.
We expect to incur an extraordinary loss in the second quarter of 2001 as a
result of this offering and the Refinancing Transactions. This extraordinary
loss is expected to be between $18.0 million and $19.0 million, net of income
tax benefits, and will be the result of:
- call premiums payable upon the redemption of the 8 7/8% Notes and the 9%
Notes;
- write-off of unamortized deferred financing costs from early
extinguishment of existing indebtedness;
- break-up fees payable upon the termination of our two existing interest
rate swap agreements related to our Existing Credit Facility; and
- duplicative interest expense pending the redemption of the 8 7/8% Notes
and the 9% Notes from the closing of this offering and the satisfaction
and discharge of the 8 7/8% Notes and the 9% Notes to the time of their
cash redemption in accordance with the required notice periods.
If the refinancing of our indebtedness is completed substantially as
described, then over the next twelve months, we expect to be able to meet our
operating cash, capital expenditure, and debt service requirements through cash
flow from operations and borrowings under the New Credit Facility.
Since the beginning of 1998, we have made a number of acquisitions including
PCH, Carewell, BINKY, DIAPER GENIE and BABY MAGIC. We financed these
transactions by borrowing additional money on our Term Loan and Term A Loan,
utilizing available borrowings under our Revolving Credit Facility and issuing
the Convertible Notes and shares of our Common Stock. In total, we borrowed
$332.9 million and issued 9,257,345 shares of our Common Stock. We will continue
to consider the acquisition of other companies or businesses that may require us
to seek additional debt or equity financing. As we cannot assure you that such
financing will be available to us, our ability to expand our operations through
acquisitions may be restricted.
Inflation in the United States and Canada has not had a significant effect
on our operations during recent periods.
RECENTLY ISSUED ACCOUNTING STANDARDS
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS 137 and SFAS 138. It
requires an entity to recognize all derivatives as either assets or liabilities
in the statement of financial position and measure those instruments at fair
value. This statement became effective for us on December 31, 2000. We are
currently a party to two derivative instruments that we entered into in
November 2000, for no other purpose than to hedge against interest rate
volatility on $300 million of our variable rate indebtedness associated with our
Term A Loan and Term Loan. Upon implementation of SFAS 133, we recorded a
current liability on our balance sheet with a corresponding charge to other
comprehensive earnings. The adoption of SFAS 133 may cause increased volatility
in our results of operations in the future if we change our policies or
20
enter into new derivative instruments, which do not meet the requirements for
hedge accounting under SFAS 133.
In May 2000, the Emerging Issues Task Force of the Financial Accounting
Standards Board reached a consensus on Issue No. 00-14, "Accounting for Certain
Sales Incentives", which becomes effective for us in the second quarter of 2001.
This issue addresses the recognition, measurement, and income statement
classification for certain sales incentives, including: discounts, coupons,
rebates, and free products or services, offered voluntarily to customers. We
have made a preliminary evaluation of the effect of this statement on our
financial statements. As required by this Issue, we will restate our net sales
and advertising and promotion expenses. This restatement will reduce both our
net sales and advertising and promotion expenses by equal and offsetting
amounts. This issue will not have any impact on our reported operating earnings,
net income, or earnings per share. It will, however, lower our reported gross
margins and advertising and sales promotion expenses as a percent of net sales,
while increasing our operating earnings margin. For our first quarter ended
March 31, 2001, this issue would have had the following effect on our reported
results (unaudited, in thousands):
THREE MONTHS ENDED MARCH 31, 2001
--------------------------------------
AS REPORTED ADJUSTMENT AS ADJUSTED
----------- ---------- -----------
Net sales.................................. $220,776 $(12,762) $208,014
Gross profit............................... 126,067 (12,762) 113,305
Advertising and sales promotion............ 46,199 (12,762) 33,437
Operating earnings......................... $ 43,384 $ -- $ 43,384
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PLAYTEX PRODUCTS, INC.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following should be read in conjunction with Part 1, Item 3., "Legal
Proceedings" in our Annual Report on Form 10-K for the year ended December 30,
2000.
As of the end of April 2001, there were approximately 12 pending toxic shock
syndrome claims relating to Playtex tampons, although additional claims may be
made in the future.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
b. Reports on Form 8-K
On January 11, 2001, we filed a Current Report on Form 8-K with the
Securities and Exchange Commission pursuant to Item 5 of that Form. Pursuant to
Item 5, we provided information on earnings expectations for the fourth quarter
of 2000 and for the year 2001.
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 earnings 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. At March 31, 2001, our total indebtedness consisted of
$560.0 million in fixed rate debt and $384.1 million in variable rate debt. We
are currently a party to two derivative instruments that we entered into in
November 2000, for no other purpose than to hedge against interest rate
volatility on $300.0 million of our variable rate indebtedness associated with
our Term A Loan and Term Loan. These two swaps effectively fix the interest rate
on $300.0 million of our variable rate indebtedness under the Term and Term A
loans. Based on our interest rate exposure at March 31, 2001, a 1% increase in
interest rates would result in an estimated $0.8 million of additional interest
expense on an annualized basis.
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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.
DATE: May 7, 2001 BY: /S/ MICHAEL R. GALLAGHER
----------------------------------------
Michael R. Gallagher
CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
DATE: May 7, 2001 BY: /S/ GLENN A. FORBES
----------------------------------------
Glenn A. Forbes
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
23