SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2001
OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 33-83734
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J. B. WILLIAMS HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 06-1387159
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification number)
65 Harristown Road
Glen Rock, New Jersey 07452
(Address of Principal Executive Offices, including Zip Code)
(201) 251-8100
(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 No x
--- ---
Number of shares of the issuer's Common Stock, par value $0.01, outstanding as
of May 1, 2001: 10,000
J.B. Williams Holdings, Inc.
I N D E X
Page
Part I - Financial Information
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Item 1: Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations for the ... 1
Thirteen Weeks Ended March 31, 2001 and April 1, 2000
Condensed Consolidated Balance Sheets at March 31, 2001 ... 2
and December 30, 2000
Condensed Consolidated Statements of Cash Flows for the ... 3
Thirteen Weeks Ended March 31, 2001 and April 1, 2000
Notes to Condensed Consolidated Financial Statements ...... 4
Item 2: Management's Discussion and Analysis of Financial ......... 5
Condition and Results of Operations
Part II - Other Information
-----------------
Item 6: Exhibits and Reports on Form 8-K .......................... 8
Signature .......................................................... 9
J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands)
Thirteen Weeks Ended
March 31, April 1,
2001 2000
Net sales .......................................... $ 12,078 $ 12,597
Cost of sales ...................................... 4,230 4,597
-------- --------
Gross margin ....................................... 7,848 8,000
Distribution and cash discounts .................... 758 880
Advertising and promotion .......................... 2,695 3,980
Selling, general and administrative expenses ....... 2,596 2,919
Depreciation and amortization ...................... 979 1,053
-------- --------
Operating income/(loss) ............................ 820 (832)
Interest expense-net ............................... 1,147 1,325
-------- --------
Loss before income tax benefit ..................... (327) (2,157)
Income tax benefit ................................. (131) (884)
-------- --------
Net loss ........................................... $ (196) $ (1,273)
======== ========
Loss per share - basic and diluted ................. $ 19.60 $ 127.30
Weighted average shares outstanding ................ 10,000 10,000
See Notes to Condensed Consolidated Financial Statements
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J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In Thousands)
At March 31, 2001 At December 30, 2000
ASSETS
Current Assets:
Cash and cash equivalents ..................... $ 14,288 $ 12,770
Accounts receivable, net ...................... 7,883 12,953
Inventories ................................... 7,986 8,384
Other current assets .......................... 839 695
-------- --------
Total Current Assets ...................... 30,996 34,802
Property and Equipment, Net .......................... 1,626 1,710
Intangible Assets, Net ............................... 36,234 36,896
Other Assets ......................................... 3,852 3,965
-------- --------
TOTAL ASSETS ......................................... $ 72,708 $ 77,373
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable .............................. $ 1,783 $ 2,600
Accrued expenses .............................. 5,339 8,991
-------- --------
Total Current Liabilities ................. 7,122 11,591
-------- --------
Due to Sellers of Acquired Businesses ................ 239 239
-------- --------
Long Term Debt ....................................... 44,856 44,856
-------- --------
Shareholders' Equity:
Common stock and paid-in capital .............. 10,805 10,805
Notes receivable from sales of common stock ... (1,205) (1,205)
Retained earnings ............................. 10,891 11,087
-------- --------
Total Shareholders' Equity .................... 20,491 20,687
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........... $ 72,708 $ 77,373
======== ========
See Notes to Condensed Consolidated Financial Statements
-2-
J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In Thousands)
Thirteen Weeks Ended
March 31, April 1,
2001 2000
OPERATING ACTIVITIES:
Net loss ..................................................... $ (196) $ (1,273)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization of intangibles and debt issuance costs ... 810 893
Depreciation and amortization of property and equipment 169 160
Changes in operating assets and liabilities:
Accounts receivable ................................ 5,070 5,230
Inventories ........................................ 398 (1,800)
Other current assets ............................... (144) 374
Accounts payable ................................... (817) 366
Accrued expenses ................................... (3,652) (2,895)
Other assets ....................................... 41 (81)
-------- --------
Net Cash Provided by Operating Activities ............. 1,679 974
-------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment ................ (85) (206)
Contingent acquisition payments .................... (76) --
-------- --------
Net Cash Used in Investing Activities ................. (161) (206)
INCREASE IN CASH AND CASH EQUIVALENTS ......................... 1,518 768
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ................ 12,770 11,113
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ...................... $ 14,288 $ 11,881
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid ............................................ $ 944 $ 2
Interest paid ................................................ $ 2,691 $ 3,021
See Notes to Condensed Consolidated Financial Statements
-3-
J.B. Williams Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BASIS OF ACCOUNTING AND ORGANIZATION
The consolidated financial statements include J.B. Williams Holdings,
Inc. ("Holdings") and its wholly-owned subsidiaries: J.B. Williams
Company, Inc., After Shave Products Inc., Pre-Shave Products Inc., Hair
Care Products Inc., and CEP Holdings Inc. (collectively the "Company").
Brynwood Partners II L.P., a private partnership formed under Delaware
law, is the majority owner of the issued and outstanding capital stock of
the Company.
The accompanying unaudited condensed consolidated financial statements as
of March 31, 2001 and for the thirteen weeks ended March 31, 2001 and
April 1, 2000 have been prepared in accordance with the instructions to
Form 10-Q. All adjustments, which in the opinion of the management of the
Company are necessary for a fair presentation of the condensed
consolidated financial statements for the thirteen weeks ended March 31,
2001 and April 1, 2000, have been reflected. All such adjustments are of
a normal recurring nature. The March 31, 2001 condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 30,
2000 included in the Company's Annual Report on Form 10-K.
The results of operations for the period ended March 31, 2001 are not
necessarily indicative of the operating results for the full year.
2. LONG TERM DEBT
Long term debt consists of $44.9 million 12% Senior Notes, due 2004 (the
"Senior Notes").
3. FINANCIAL INFORMATION CONCERNING GUARANTORS
The Senior Notes are guaranteed by each of the Holdings' wholly-owned
subsidiaries, which constitute all of the Holdings' direct or indirect
subsidiaries (the "Subsidiary Guarantors"). The Subsidiary Guarantors
have fully and unconditionally guaranteed the Senior Notes on a joint and
several basis; and the aggregate assets, liabilities, earnings and equity
of the Subsidiary Guarantors are substantially equivalent to the assets,
liabilities, earnings and equity of the Company on a consolidated basis.
There are no restrictions on the ability of the Subsidiary Guarantors to
make distributions to the Holdings. In management's opinion separate
financial statements and other disclosures concerning the Subsidiary
Guarantors would not be material to investors. Accordingly, separate
financial statements and other disclosures concerning the Subsidiary
Guarantors are not included herein.
4. RECLASSIFICATIONS
Certain reclassifications have been made to the 2000 financial statements
to conform with the current year's presentation.
-4-
J. B. Williams Holdings, Inc.
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations
GENERAL
J. B. Williams Holdings, Inc. ("Holdings"), through its subsidiaries
(collectively with Holdings, the "Company"), distributes and sells personal and
health care products in the United States, Canada and Puerto Rico. The personal
care products business includes the Aqua Velva, Brylcreem, Williams Lectric
Shave, Williams Mug Soap, Total Hair Fitness and the San Francisco Soap Company
brands. The health care products business is comprised of the Cepacol and
Viractin brands, a broad line of oral health care products that includes
mouthwash, sore throat lozenges and sprays, sore throat formulas and cold sore
medications.
RESULTS OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED MARCH 31, 2001
The following table sets forth certain operating data for the thirteen weeks
ended March 31, 2001 and April 1, 2000.
Periods Ended March 31, 2001 and April 1, 2000
----------------------------------------------------------------------
(In Thousands)
Personal Care Products Health Care Products Total Company
---------------------- -------------------- -------------
2001 2000 2001 2000 2001 2000
---- ---- ----- ---- ---- ----
Net sales $ 6,973 $ 8,315 $ 5,105 $ 4,282 $ 12,078 $ 12,597
Cost of goods sold 2,445 2,964 1,785 1,633 4,230 4,597
-------- -------- -------- -------- -------- --------
Gross margin 4,528 5,351 3,320 2,649 7,848 8,000
Distribution and cash discounts 389 519 369 361 758 880
Advertising and promotion 1,231 2,169 1,464 1,811 2,695 3,980
-------- -------- -------- -------- -------- --------
Brand contribution $ 2,908 $ 2,663 $ 1,487 $ 477 4,395 3,140
======== ======== ======== ======== ======== ========
Selling, general and admin. exp 2,596 2,919
Depreciation and amortization 979 1,053
-------- --------
Operating income/(loss) 820 (832)
Interest expense, net 1,147 1,325
-------- --------
Loss before income tax benefit (327) (2,157)
Income tax benefit (131) (884)
-------- --------
Net loss $ (196) $ (1,273)
======== ========
For the period ended March 31, 2001, net sales decreased 4.1% to $12,078,000
from $12,597,000 for the comparable period in 2000. This decrease is due to
lower sales on the personal care products business, particularly on the San
Francisco Soap products. Sales of the San Francisco Soap products are
approximately $900,000 lower during this period in 2001 versus the same period
in 2000. This decrease is primarily due to the combined effect of reduced
distribution and shelf space in several large mass, drug and wholesale customers
and the loss of one-time internet retailer sales volume.
-5-
For the period ended March 31, 2001, cost of goods sold decreased 8.0% to
$4,230,000 from $4,597,000 for the comparable period in 2000. This decrease is
directly linked to the Company's lower sales volumes combined with an improved
sales mix resulting from higher sales of the lower cost Cepacol products and
lower sales on the higher cost San Francisco Soap products.
For the period ended March 31, 2001, distribution expenses and cash discounts
decreased 13.9% to $758,000 from $880,000 for the comparable period in 2000.
This decrease is primarily due to lower sales volumes and generally improved
delivery and order fulfillment costs.
For the period ended March 31, 2001, advertising and promotion expenses of
$2,695,000 decreased 32.3% versus the $3,980,000 spent during the comparable
period in 2000. Most of this decrease is related to lower levels of advertising
support on both the Aqua Velva and Cepacol businesses combined with the absence
in 2001 of a national marketing program supporting the Cepacol business that
occurred in January 2000.
For the period ended March 31, 2001, selling, general and administrative
expenses decreased by 11.1% to $2,596,000 from $2,919,000 for the comparable
period in 2000. This decrease is related to generally lower levels of salaries
and management consulting expenses combined with lower broker commission
payments associated with the decline in net sales.
For the period ended March 31, 2001, depreciation and amortization of $979,000
decreased 7.0% from $1,053,000 for the comparable period in 2000. This decrease
is directly related to lower levels of amortization of the Company's intangible
assets.
For the period ended March 31, 2001, interest expense, net of interest income,
decreased 13.4% to $1,147,000 from $1,325,000 for the comparable period in 2000.
Generally higher levels of cash yielded a corresponding increase in interest
income and combined with lower interest expense, as a result of the May 2000
repurchase by the Company of $5,489,000 in outstanding principal amount of its
Senior Notes, resulted in an overall net decrease in interest expense.
For the period ended March 31, 2001, the Company recorded an income tax benefit
of $131,000 versus an income tax benefit of $884,000 for the comparable period
in 2000. The effective tax rate was 40% for the 2001 interim period and 41% for
the comparable 2000 interim period.
-6-
LIQUIDITY AND CAPITAL RESOURCES
The following chart summarizes the net funds provided and/or used in operating
and investing activities for the thirteen weeks ended March 31, 2001 and April
1, 2000 (in thousands).
Period Ended
-------------
March 31, 2000 April 1, 2000
-------------- -------------
Net cash provided by operating activities ..... $ 1,679 $ 974
Net cash used in investing activities ......... $ (161) $ (206)
------- -------
Increase in cash and cash equivalents ......... $ 1,518 $ 768
======= =======
The principal adjustments to reconcile net loss of $196,000 for the period ended
March 31, 2001 to net cash provided by operating activities of $1,679,000 are
depreciation and amortization of $979,000, combined with a net decrease in
working capital requirements of $896,000. The working capital decrease is
primarily linked to generally lower levels of accounts receivable partially
offset by lower accrued expenses.
Capital expenditures, which were $85,000 for the period ended March 31, 2001,
are generally not significant in the Company's business. However, the Company
has approximately $.8 million budgeted in 2001 for continued enhancements to its
computer network and for the development of certain new plastic bottle molds.
As a result of the Senior Notes, the Company had $44.9 million of total debt
outstanding as of December 30, 2000 and March 31, 2001. Management expects that
cash on hand and internally generated funds will provide sufficient capital
resources to finance the Company's operations and meet interest requirements on
the Senior Notes, both in respect of the short term as well as during the long
term. Since there can be no guarantee that the Company will generate internal
funds sufficient to finance its operations and debt requirements, the Company
has arranged for a secured line of credit with the Bank of New York through
August 31, 2001 to provide funds, should they be required, in order for the
Company to meet its liquidity requirements. The line of credit is in the maximum
amount of $5,000,000, with the amount available being subject to reduction based
on certain criteria relative to the Company's accounts receivable and inventory.
-7-
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during
the period covered by this report.
-8-
SIGNATURE
Pursuant to the requirements 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.
J.B. WILLIAMS HOLDINGS, INC.
Date: May 15, 2001 /s/ Kevin C. Hartnett
------------ -------------------------------------------------
Name: Kevin C. Hartnett
Title: Vice President and Chief Financial Officer
-9-
