SECURITIES AND EXCHANGE COMMISSION Washington, D.C. Form 10Q QUARTER REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 1994 Commission File 1-8919 CONAIR CORPORATION (Exact name of registrant as specified on its charter) Delaware 11-1950030 (State or other jurisdiction of (I.R.S. Identification Number) Incorporation or organization) 150 Milford Road, East Windsor, NJ 08520 (Address of principal executive (Zip Code) offices) Registrant's telephone number including area code (609) 426-1300 Not Applicable Former name, former address and former fiscal year, if changed since last year Indicate by check mark whether this 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 Common Stock $100.00 par value Authorized Shares 5,000 Issued and Outstanding Shares as of April 29, 1994 2,814 CONAIR CORPORATION AND SUBSIDIARIES I N D E X PAGE NO. PART I FINANCIAL INFORMATION Item 1: Financial Statements Consolidated Balance Sheets March 31, 1994 (Unaudited), December 31, 1993 and March 31, 1993 (Unaudited) -1- Consolidated Statements of Operations Three months ended March 31, 1994 and 1993 (Unaudited) -2- Consolidated Statements of Cash Flows Three months ended March 31, 1994 and 1993 (Unaudited) -3- Notes to Consolidated Financial Statements (Unaudited) -4- Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations -5- PART II OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K -7- CONAIR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except number of shares) ASSETS 3/31/94 12/31/93 3/31/93 CURRENT ASSETS (Unaudited) Note (Unaudited) Cash, including cash equivalents of $3,687, $4,096 and $3,045, respectively........................ $ 4,546 $ 15,856 $ 4,805 Accounts receivable, net of allowance for doubtful accounts of $1,416, $1,337 and $1,375, respectively..... 62,845 70,244 59,192 Inventories (Note 2)................. 105,788 85,416 94,184 Prepaid expenses..................... 1,298 1,753 2,475 Deferred income taxes................ 2,885 2,885 3,213 177,362 176,154 163,869 PROPERTY, PLANT AND EQUIPMENT - AT COST Net of accum. depreciation & amort... 64,669 44,685 43,933 INVESTMENTS AND OTHER ASSETS Investments in affiliated companies.. 1,026 1,141 995 Excess of cost over net assets of acquired companies.................. 73,196 73,829 75,728 Deferred expenses and other assets... 13,693 14,309 14,043 87,915 89,279 90,766 $329,946 $310,118 $298,568 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and other current liabilities......................... $ 48,107 $ 41,014 $ 39,558 Income taxes......................... 4,079 6,756 3,557 Current portion of long-term debt.... 3,625 3,625 1,407 Notes payable........................ - - 11,000 55,811 51,395 55,522 OTHER LIABILITIES Long-term debt....................... 101,115 87,575 80,018 Deferred income taxes................ 19,860 19,511 17,172 120,975 107,086 97,190 STOCKHOLDERS' EQUITY Convertible preferred stock, $1.00 par value: 5 5 5 Authorized 10,000 shares Issued and outstanding - 5,000 shares Common stock, $100 par value: Authorized - 3,000 shares Issued and outstanding - 2,814 shares 281 281 281 Reduction for ESOP loan guarantee... (5,000) (5,000) - Additional paid-in capital........... 7,633 7,633 7,633 Cumulative translation adjustments... 130 129 214 Retained earnings.................... 150,111 148,589 137,723 153,160 151,637 145,856 $329,946 $310,118 $298,568 NOTE: The balance sheet at December 31, 1993, has been taken from the audited financial statements at that date. CONAIR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months ended March 31, 1994 and 1993 (in thousands) 1994 1993 NET SALES............................... $95,575 $83,987 COSTS AND EXPENSES: Cost of goods sold.................... 63,761 55,293 Selling, general and administrative....................... 27,401 25,021 91,162 80,314 INCOME FROM OPERATIONS ................. 4,413 3,673 INTEREST: Interest expense...................... 1,598 1,846 Interest income....................... (51) (25) 1,547 1,821 INCOME BEFORE INCOME TAXES 2,866 1,852 Income tax provision.................. 1,263 945 NET INCOME ............................. $ 1,603 $ 907 CONAIR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three months ended March 31, 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net income ................................. $ 1,603 $ 907 Adjustments to reconcile net income to net cash used in operating activities: Depreciation............................... 1,655 1,551 Amortization of goodwill................... 633 633 Amortization of deferred expenses and other assets.................................... 616 548 Deferred income taxes...................... 349 409 Tax benefit on dividends paid to ESOP...... 44 - Other, net................................. 116 70 Changes in operating assets and liabilities: Accounts receivable....................... 7,399 (1,130) Inventories............................... (20,372) (15,640) Prepaid expenses.......................... 455 112 Accounts payable and other current liabilities...................... 7,093 4,946 Income taxes.............................. (2,677) (451) Net cash used in operating activities........ (3,086) (8,045) CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment. (21,639) (1,946) CASH FLOWS FROM FINANCING ACTIVITIES: Increase in short-term debt................ - 11,000 Increase in long-term debt................. 20,000 2,500 Reduction of long-term debt................ (6,460) (18,133) Dividends ................................. (125) (125) 13,415 (4,758) DECREASE IN CASH AND CASH EQUIVALENTS........ (11,310) (14,749) CASH AND CASH EQUIVALENTS, January 1,................................. 15,856 19,554 CASH AND CASH EQUIVALENTS, March 31,.................................. $ 4,546 $ 4,805 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the quarter for: Interest.................................. $ 1,417 $ 1,482 Income taxes.............................. $ 3,547 $ 987 CONAIR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. FINANCIAL STATEMENTS The accompanying financial information is submitted in response to the requirements of Form 10Q and does not purport to be financial statements prepared in accordance with generally accepted accounting principles. Therefore, they do not include all disclosures which might be associated with such financial statements. In the opinion of management, this includes all adjustments, consisting only of normal recurring accruals, necessary for a fair statement of the results for the interim periods presented. March 31, 1993 financial statements have been reclassified to conform to current presentation. 2. INVENTORIES Inventories are summarized as follows: March 31, Dec. 31, March 31, 1994 1993 1993 Components and raw materials $ 12,676 $11,441 $14,768 Finished goods 93,112 73,975 79,416 $105,788 $85,416 $94,184 3. PURCHASE OF BUILDING On March 15, 1994, the Company acquired its Stamford, Connecticut executive office facility from Leandro P. Rizzuto, President and sole common stockholder of the Company. The purchase price of $20,000,000 was determined based on an independent appraisal. A ten-year unsecured loan in the amount of $20,000,000 was obtained by the Company on the above date to finance this transaction. The interest rate on this new loan is 7%. Principal repayments on this loan begin on June 1, 1996 with the payment of $625,000 and variable sums are due semi- annually on June 1 and December 1 until a final payment of $4,000,000 at maturity on February 28, 2004. The Company leased back to Leandro P. Rizzuto a portion of the facility for a period of 99 years subject to the Company's option, for a period of 10 years, to buy back the lease rights. The option price for the Company to repurchase the lease rights is $4,000,000 for the first five years, escalating to $6,400,000 million over the remaining five years. The initial option price was determined based on an independent appraisal. CONAIR CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS SALES Net sales for the quarter ended March 31, 1994 increased 13.8% over the comparable period in 1993. The increase resulted primarily from an increase in sales of Consumer Electronics, due to sales of Southwestern Bell and Freedom Phone products which were not sold in the first quarter of 1993. Increases in the sales of Consumer Toiletries and Cuisinarts products were offset by a decline in the sales of Consumer Appliances. GROSS MARGINS Gross margins in the first quarter of 1994 were 33.3% of net sales as compared to 34.2% for the comparable period in 1993. The variance in gross margins is primarily due to product mix. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses in the first quarter of 1994 were 28.7% of net sales as compared to 29.8% for the comparable period in 1993. The decline resulted from the fixed and semi-variable nature of certain costs in this category. INTEREST Interest expense has decreased from the same period last year due to a reduction of average borrowings. INCOME TAXES The effective income tax rate varied for the first quarter of 1994 as compared to the same period in 1993. This was primarily due to the amortization of the excess cost of investments over net assets acquired, not deductible for tax purposes. CONAIR CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Company's working capital was $121,551,000 at March 31, 1994 and the current ratio was 3.2 to 1. The Company's cash balance was $4,546,000, long- term debt was $101,115,000 and there were no short-term borrowings at March 31, 1994. The Company believes its capital resources are adequate to finance normal growth and service the Company's debt obligations. At March 31, 1994, the Company had lines of credit with banks in the United States and abroad aggregating $64,400,000. On March 15, 1994, the Company acquired its Stamford, Connecticut executive office facility from Leandro P. Rizzuto, President and sole common stockholder of the Company. The purchase price of $20,000,000 was determined based on an independent appraisal. A ten-year unsecured loan in the amount of $20,000,000 was obtained by the Company on the above date to finance this transaction. The interest rate on this new loan is 7%. Principal repayments on this loan begin on June 1, 1996 with the payment of $625,000 and variable sums are due semi- annually on June 1 and December 1 until a final payment of $4,000,000 at maturity on February 28, 2004. The Company leased back to Leandro P. Rizzuto a portion of the facility for a period of 99 years subject to the Company's option, for a period of 10 years, to buy back the lease rights. The option price for the Company to repurchase the lease rights is $4,000,000 for the first five years, escalating to $6,400,000 million over the remaining five years. The initial option price was determined based on an independent appraisal. CONAIR CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K (b) The company was not required to file reports on Form 8-K during the quarter ended March 31, 1994. CONAIR CORPORATION AND SUBSIDIARIES 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. CONAIR CORPORATION (Registrant) /s/ Leandro P. Rizzuto (Date) By: Leandro P. Rizzuto Chairman of the Board and President /s/ Patrick P. Yannotta (Date) By: Patrick P. Yannotta Senior Vice President - Finance /s/ James A. Porcelli (Date) By: James A. Porcelli Corporate Controller