SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended July 1, 2000
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 July 31, 2000: 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
Thirteen Weeks and Twenty Six Weeks Ended July 1, 2000
and July 3, 1999 ......................................... 3
Condensed Consolidated Balance Sheets at July 1, 2000
and January 1, 2000 ...................................... 4
Condensed Consolidated Statements of Cash Flows for the
Thirteen Weeks and Twenty Six Weeks Ended July 1, 2000
and July 3, 1999 ......................................... 5
Notes to Condensed Consolidated Financial Statements ..... 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................... 7
Part II - Other Information
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Item 6: Exhibits and Reports on Form 8-K ......................... 11
Signature ........................................................ 12
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J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands)
Thirteen Thirteen Twenty-Six Twenty-Six
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
------ ------ ------ ------
Net sales ...................................... $ 14,501 $ 15,488 $ 27,098 $ 29,697
Cost of sales .................................. 4,946 5,614 9,543 11,265
-------- -------- -------- --------
Gross margin ................................... 9,555 9,874 17,555 18,432
Distribution and cash discounts ................ 956 1,265 1,836 2,608
Advertising and promotion ...................... 2,594 3,225 6,574 7,129
Selling, general and administrative expenses ... 2,901 2,769 5,820 5,559
Depreciation and amortization .................. 1,067 1,033 2,120 2,082
-------- -------- -------- --------
Operating income ............................... 2,037 1,482 1,205 1,054
Interest expense-net ........................... 1,290 1,452 2,615 2,955
-------- -------- -------- --------
Income (loss) before income taxes .............. 747 30 (1,410) (1,901)
Income tax provision (benefit) ................. 306 12 (578) (779)
-------- -------- -------- --------
Net income (loss) .............................. $ 441 $ 18 $ (832) $ (1,122)
======== ======== ======== ========
Income (loss) per share - basic and diluted $ 44.10 $ 1.80 $ (83.20) $(112.20)
Weighted average shares outstanding ............ 10,000 10,000 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 July 1, 2000 At January 1, 2000
--------------- ------------------
ASSETS
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Current Assets:
Cash and cash equivalents ................. $ 6,022 $ 11,113
Accounts receivable, net .................. 8,785 14,144
Inventories ............................... 11,786 6,404
Other current assets ...................... 587 831
-------- --------
Total Current Assets .................. 27,180 32,492
Property and Equipment, Net ...................... 2,115 2,005
Intangible Assets, Net ........................... 38,273 39,744
Other Assets ..................................... 4,777 4,956
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TOTAL ASSETS ..................................... $ 72,345 $ 79,197
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LIABILITIES AND SHAREHOLDER'S EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable .......................... $ 3,802 $ 3,195
Accrued expenses .......................... 6,152 7,290
Total Current Liabilities ............. 9,954 10,485
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Due To Sellers Of Acquired Businesses ............ 463 463
-------- --------
Long Term Debt ................................... 44,856 50,345
-------- --------
Shareholders' Equity:
Common stock and paid-in capital .......... 10,804 10,804
Notes receivable from sales of common stock (1,204) (1,204)
Retained earnings ......................... 7,472 8,304
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Total Shareholders' Equity ....................... 17,072 17,904
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....... $ 72,345 $ 79,197
======== ========
See Notes to Condensed Consolidated Financial Statements
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J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In Thousands)
Twenty Six Weeks Twenty Six Weeks
Ended Ended
July 1, July 3,
2000 1999
---- ----
OPERATING ACTIVITIES:
Net (loss) .................................................. $ (832) $ (1,122)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Amortization of intangibles and debt issuance costs ...... 1,788 1,795
Depreciation and amortization of property and equipment 332 287
Changes in operating assets and liabilities:
Accounts receivable ...................................... 5,359 6,237
Inventories .............................................. (5,382) (1,206)
Other current assets ..................................... 244 92
Accounts payable ......................................... 607 (215)
Accrued expenses and other liabilities ................... (1,138) (2,469)
Other assets ............................................. 44 (1,990)
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Net Cash Provided By Operating Activities ....................... 1,022 1,409
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INVESTING ACTIVITIES:
Purchases of property and equipment ......................... (450) (760)
Acquisition of trademark and contingent payments ............ (174) --
-------- --------
Net Cash Used in Investing Activities .................... (624) (760)
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FINANCING ACTIVITIES:
Repayment of Senior Notes ................................... (5,489) --
-------- --------
Net Cash Used in Financing Activities .................... (5,489) --
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................ (5,091) 649
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .................. 11,113 6,263
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........................ $ 6,022 $ 6,912
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid ........................................... $ 54 $ 242
Interest paid ............................................... $ 3,156 $ 3,021
See Notes to Condensed Consolidated Financial Statements
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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. 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 capital stock of the Company.
The accompanying unaudited condensed consolidated financial statements as
of July 1, 2000 and for the thirteen week and twenty six week periods
ended July 1, 2000 and the thirteen week and twenty six week periods
ended July 3, 1999 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 week and twenty six
week periods ended July 1, 2000 and for the thirteen week and twenty six
week periods ended July 3, 1999, have been reflected. All such
adjustments are of a normal recurring nature. The July 1, 2000 condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended
January 1, 2000 included in the Company's Annual Report on Form 10-K.
The results of operations for the period ended July 1, 2000 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 Company's wholly-owned
subsidiaries, which constitute all of the Company's 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 Company. 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 1999 financial statements
to conform to the current year's presentation.
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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. (the "Company"), through its subsidiaries,
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, children's
sore throat formulas and cold sore medications.
RESULTS OF OPERATIONS FOR THE THIRTEEN WEEK PERIOD ENDED JULY 1, 2000
The following table sets forth certain operating data for the thirteen weeks
ended July 1, 2000 and July 3, 1999.
Periods Ended July 1, 2000 and July 3, 1999
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(In Thousands)
Personal Care Products Health Care Products Total Company
---------------------- -------------------- -----------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
Net Sales ......................... $10,054 $11,145 $ 4,447 $ 4,343 $14,501 $15,488
Cost of Goods Sold ................ 3,230 3,806 1,716 1,808 4,946 5,614
------- ------- ------- ------- ------- -------
Gross Margin ...................... 6,824 7,339 2,731 2,535 9,555 9,874
Distribution and Cash Discounts ... 603 877 353 488 956 1,365
Advertising and Promotion ......... 1,902 2,316 692 909 2,594 3,225
------- ------- ------- ------- ------- -------
Brand Contribution ................ $ 4,317 $ 4,146 $ 1,688 $ 1,138 6,005 5,284
======= ======= ======= =======
Selling, General and Admin. Exp ... 2,901 2,769
Depreciation and Amortization ..... 1,067 1,033
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Operating Income .................. 2,037 1,482
Interest Expense, Net ............. 1,290 1,452
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Income Before Income Taxes ........ 747 30
Income Tax Provision .............. 306 12
------- -------
Net Income ........................ $ 441 $ 18
======= =======
For the thirteen week period ended July 1, 2000, net sales decreased 6.4% to
$14,501,000 from $15,488,000 for the same period in 1999. This decrease is
primarily related to lower sales on the San Francisco Soap product line
resulting from the absence of any large distribution gains, as realized during
this same period in 1999 when the entire line was being relaunched.
For the thirteen week period ended July 1, 2000, cost of goods sold decreased
11.9% to $4,946,000 from $5,614,000 for the same period in 1999. This decrease
is primarily related to the lower sales volumes and to lower manufacturing
costs, as 1999 was impacted unfavorably by the sales of several discontinued
products at close out pricing.
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For the thirteen week period ended July 1, 2000, distribution expenses and cash
discounts decreased 30.0% to $956,000 from $1,365,000 for the same period in
1999. This decrease is due to lower sales volumes and the absence of certain
extraordinary charges incurred during 1999 that were primarily related to order
fulfillment and shipping issues on the San Francisco Soap business.
For the thirteen week period ended July 1, 2000, advertising and promotion
expenses decreased 19.6% to $2,594,000 from $3,225,000 for the same period in
1999. During this period of time in 1999, the Company had spent heavily in
support of the re-launch of the San Francisco Soap business and the 1999 Mothers
Day gift set program.
For the thirteen week period ended July 1, 2000, selling, general, and
administrative expenses increased 4.8% to $2,901,000 from $2,769,000 for the
same period in 1999. Most of this increase is related to generally higher levels
of salaries and management consulting expenses partially offset by lower broker
commission payments associated with the decline in net sales.
For the thirteen week period ended July 1, 2000, depreciation and amortization
of $1,067,000 is slightly higher from the $1,033,000 expensed for the same
period in 1999.
For the thirteen week period ended July 1, 2000, interest expense, net of
interest income, decreased 11.0% to $1,290,000 from $1,452,000 for the same
period in 1999. Higher levels of cash yielded a corresponding increase in
interest income, resulting in an overall net decrease in interest expense.
For the thirteen week period ended July 1, 2000, the Company recorded income tax
expense of $306,000 versus $12,000 for the same period in 1999. The effective
tax rate was 41% for both interim periods.
RESULTS OF OPERATIONS FOR THE TWENTY SIX WEEK PERIOD ENDED JULY 1, 2000
The following table sets forth certain operating data for the twenty-six weeks
ended July 1, 2000 and July 3, 1999.
Periods Ended July 1, 2000 and July 3, 1999
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(In Thousands)
Personal Care Products Health Care Products Total Company
---------------------- -------------------- --------------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
Net Sales ......................... $ 18,369 $ 19,884 $ 8,729 $ 9,813 $ 27,098 $ 29,697
Cost of Goods Sold ................ 6,193 7,457 3,350 3,808 9,543 11,265
-------- -------- -------- -------- -------- --------
Gross Margin ...................... 12,176 12,427 5,379 6,005 17,555 18,432
Distribution and Cash Discounts ... 1,123 1,622 713 986 1,836 2,608
Advertising and Promotion ......... 4,072 5,056 2,502 2,073 6,574 7,129
-------- -------- -------- -------- -------- --------
Brand Contribution ................ $ 6,981 $ 5,749 $ 2,164 $ 2,946 9,145 8,695
======== ======== ======== ========
Selling, General and Admin. Exp ... 5,820 5,559
Depreciation and Amortization ..... 2,120 2,082
-------- --------
Operating Income .................. 1,205 1,054
Interest Expense, Net ............. 2,615 2,955
-------- --------
(Loss) Before Income Taxes ........ (1,410) (1,901)
Income Tax Benefit ................ (578) (779)
-------- --------
Net (Loss) ........................ $ (832) $ (1,122)
======== ========
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For the twenty-six week period ended July 1, 2000, net sales decreased 8.8% to
$27,098,000 from $29,697,000 for the same period in 1999. This decrease is
primarily due to lower sales of the Cepacol cough/cold products caused by an
abrupt end to the cough/cold season as compared to 1999 and lower sales on the
San Francisco Soap product line, resulting from distribution losses at several
customers and the Company's decision to not offer a gift set program for the
2000 Mothers Day season.
For the twenty-six week period ended July 1, 2000, cost of goods sold decreased
15.3% to $9,543,000 from $11,265,000 for the same period in 1999. This decrease
is directly linked to the Company's lower sales volumes combined with generally
lower manufacturing costs on the San Francisco Soap products. During 1999, the
San Francisco Soap business incurred certain one-time expenses associated with
the shutdown of the gift set and special pack assembly operation that the
Company operated during 1998 and with the March 1999 re-launch of the entire San
Francisco Soap product line.
For the twenty-six week period ended July 1, 2000, distribution expenses and
cash discounts decreased 29.6% to $1,836,000 from $2,608,000 for the same period
in 1999. This decrease is due to lower sales volumes and the absence of certain
extraordinary charges incurred during 1999 that were primarily related to order
fulfillment and shipping issues on the San Francisco Soap business.
For the twenty-six week period ended July 1, 2000, advertising and promotion
expenses decreased 7.8% to $6,574,000 from $7,129,000 for the same period in
1999. This overall reduction in marketing support reflects program savings
associated with the San Francisco Soap business, which incurred significant
expenses during this period of time in 1999 associated with the re-launch of the
brand and with the 1999 Mothers Day gift set program. These savings were
partially offset by an increase in spending on the Health Care Products business
as there was a national marketing program supporting the Cepacol brand that
occurred in January 2000.
For the twenty-six week period ended July 1, 2000, selling, general, and
administrative expenses increased by 4.7% to $5,820,000 from $5,559,000 for the
same period in 1999. This increase reflects somewhat higher staffing levels and
consulting expenses during the first half of 2000 versus the same period in
1999.
For the twenty-six week period ended July 1, 2000, depreciation and amortization
of $2,120,000 increased slightly from $2,082,000 for the same period in 1999.
For the twenty-six week period ended July 1, 2000, interest expense, net of
interest income, decreased 26.7% to $2,615,000 from $2,955,000 for the same
period in 1999. Higher levels of cash yielded a corresponding increase in
interest income and combined with lower interest expense, as a result of the
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 twenty-six week period ended July 1, 2000, an income tax benefit of
$578,000 was recorded compared with a similar tax benefit of $779,000 recorded
during the same period in 1999. The effective tax rate was 41% for both interim
periods.
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LIQUIDITY AND CAPITAL RESOURCES
The following chart summarizes the net funds provided by and/or used in
operating, financing and investing activities for the periods ended July 1, 2000
and July 3, 1999 (in thousands).
Period Ended
------------
July 1,2000 July 3, 1999
----------- ------------
Net cash provided by operating activities ........... $ 1,022 $ 1,409
Net cash used in investing activities ............... (624) (760)
Net cash used in financing activities ............... (5,489) --
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Increase (decrease) in cash and cash equivalents .... $(5,091) $ 649
The principal adjustments to reconcile net loss of $832,000 for the period ended
July 1, 2000 to net cash provided by operating activities of $1,022,000 are
depreciation and amortization of $2,120,000, offset by a net increase in working
capital requirements of $266,000. The working capital increase is primarily
linked to higher levels of inventory and lower levels of accruals partially
offset by lower accounts receivable balances.
Capital expenditures, which were $450,000 for the six months ended July 1, 2000,
are generally not significant in the Company's business. Except for funds
previously identified for certain packaging improvements and computer system
upgrades, the Company currently has no material commitments for future capital
expenditures.
As a result of the Senior Notes, the Company had $50.3 million of total debt
outstanding as of January 1, 2000. Pursuant to the terms of the Senior Notes, on
April 12, 2000, the Company made an offer to purchase from the holders thereof,
on a pro rata basis, an aggregate principal amount of Senior Notes equal to the
Company's Free Cash Flow (as defined in the Senior Notes) at the purchase price
equal to 100% of the principal amount of the Senior Notes plus accrued interest.
Pursuant to this offer, on May 16, 2000, the Company purchased Senior Notes from
certain holders thereof for an aggregate of $5,489,000.
As a result of this repurchase, the Company's cash position and total debt
outstanding have both been reduced accordingly. 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 is
planning to extend its 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.
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Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
- Exhibit 27 - Financial Data Schedule
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SIGNATURES
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: August 11, 2000 /s/ Kevin C. Hartnett
---------------- ------------------------
Name: Kevin C. Hartnett
Title: Vice President and
Chief Financial Officer
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