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 July 3, 1999
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, 1999: 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 3
Thirteen Weeks and Twenty Six Weeks Ended July 3, 1999
and the Three Months and Six Months Ended June 30, 1998
Condensed Consolidated Balance Sheets at July 3, 1999 4
and December 31, 1998
Condensed Consolidated Statements of Cash Flows for the 5
Thirteen Weeks and Twenty Six Weeks Ended July 3, 1999
and the Three Months and Six Months Ended June 30, 1998
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
Part II - Other Information
-----------------
Item 2: Changes in Securities 13
Item 6: Exhibits and Reports on Form 8-K 13
Signature 14
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J.B. Williams Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands)
Thirteen Three Twenty-Six Six
Weeks Months Weeks Months
Ended Ended Ended Ended
July 3, June 30, July 3, June 30,
1999 1998 1999 1998
---- ---- ---- ----
NET SALES $15,488 $14,942 $29,697 $30,719
Cost of sales 5,614 5,090 11,265 10,817
------ ------- ------- -------
GROSS MARGIN 9,874 9,852 18,432 19,902
Distribution and cash discounts 1,365 1,470 2,608 2,825
Advertising and promotion 3,225 4,825 7,129 8,730
Selling, general and administrative expenses 2,769 2,578 5,559 5,437
Depreciation and amortization 1,033 1,032 2,082 2,059
----- ----- ------ ------
OPERATING INCOME (LOSS) 1,482 (53) 1,054 851
Interest expense-net 1,452 1,462 2,955 2,900
----- ----- ----- ------
INCOME (LOSS) BEFORE INCOME TAXES 30 (1,515) (1.901) (2,049)
Income tax provision (benefit) 12 (591) (779) (799)
-------- ------- -------- --------
NET INCOME (LOSS) $ 18 $ (924) $(1,122) $(1,250)
========= ======= ======== ========
Income (loss) per share - basic and diluted $1.80 $(95.62) $(112.20) $(129.36)
Weighted average shares outstanding 10,000 9,663 10,000 9,663
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 3, 1999 At December 31, 1998
---------------- ---------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $6,912 $6,263
Accounts receivable, net 8,590 15,187
Inventories 12,015 10,809
Other current assets 570 662
------- --------
Total Current Assets 28,087 32,921
PROPERTY AND EQUIPMENT, NET 1,823 1,350
INTANGIBLE ASSETS, NET 41,101 42,638
OTHER ASSETS 5,345 3,252
------ ------
TOTAL ASSETS $76,355 $80,161
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $3,295 $3,510
Accrued expenses 5,494 7,963
---------------- ----- -----
Total Current Liabilities 8,789 11,473
----- ------
DUE TO SELLERS OF ACQUIRED BUSINESSES 674 674
--- ---
LONG TERM DEBT 50,345 50,345
------ ------
SHAREHOLDER'S EQUITY:
Common stock and paid-in capital 10,800 10,800
Notes receivable from sales of common stock (1,200) (1,200)
Retained earnings 6,947 8,069
----- -----
Total Shareholder's Equity 16,547 17,669
------ ------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $76,355 $80,161
======= =======
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 Six Months
Ended Ended
July 3, June 30,
1999 1998
---- ----
OPERATING ACTIVITIES:
Net income (loss) $(1,122) $(1,250)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Amortization of intangibles and debt issuance costs 1,795 1,822
Depreciation and amortization of property and equipment 287 237
Changes in operating assets and liabilities:
Accounts receivable 6,237 5,934
Inventories (1,206) (5,352)
Other current assets 92 127
Accounts payable (215) (1,247)
Accrued expenses and other liabilities (2,469) (2,757)
Other assets (1,990) (102)
------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,409 (2,588)
------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment (760) (374)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (760) (374)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 649 (2,962)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,263 7,375
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $6,912 $4,413
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 242 $ 424
Interest paid $3,021 $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 all of the issued and outstanding capital stock of the
Company.
Commencing January 1, 1999, the Company changed its annual fiscal period
to a fifty two week period consisting of four thirteen weeks interim
periods with the fiscal year ending January 1, 2000. The change did not
materially impact reported results of operations for the first interim
period of fiscal 1999.
The accompanying unaudited condensed consolidated financial statements as
of July 3, 1999 and for the thirteen and twenty six weeks ended July 3,
1999 and the three month and six month periods ended June 30, 1998 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
3, 1999 and for the three month and six month periods ended June 30, 1998
have been reflected. All such adjustments are of a normal recurring
nature. The July 3, 1999 condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements
and notes thereto for the year ended December 31, 1998 included in the
Company's Annual Report on Form 10-K.
The results of operations for the period ended July 3, 1999 are not
necessarily indicative of the operating results for the full year.
2. LONG TERM DEBT
Long term debt consists of $50.3 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
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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. CHANGES IN SECURITIES
As of March 1, 1998, the Company issued 1,000 shares of common stock for
an aggregate purchase price of $1,196,233. These shares were issued to
certain employees of the Company as a result of the exercise of options
issued to the employees under the Company=s 1994 Stock Option Plan. The
shares were in each case paid for by a recourse promissory note in favor
of the Company.
5. RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 financial statements
to conform with 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 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
elixirs and cold sore medications.
CHANGE IN ANNUAL FISCAL YEAR
Commencing January 1, 1999, the Company changed its annual fiscal period to a
fifty two week period consisting of four thirteen weeks interim periods with the
fiscal year ending January 1, 2000. The change did not materially impact
reported results of operations for the first interim period of fiscal 1999.
RESULTS OF OPERATIONS FOR THE THIRTEEN WEEK PERIOD ENDED JULY 3, 1999
The following table sets forth certain operating data for the thirteen weeks
ended July 3, 1999 and the three months ended June 30, 1998.
Periods Ended July 3, 1999 and June 30, 1998
--------------------------------------------
(In Thousands)
Personal Care Products Health Care Products Total Company
---------------------- -------------------- -------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
NET SALES $11,145 $10,561 $4,343 $4,381 $15,488 $14,942
Cost of Goods Sold 3,806 3,505 1,808 1,585 5,614 5,090
----- ----- ----- ------ ------- -------
GROSS MARGIN 7,339 7,056 2,535 2,796 9,874 9,852
Distribution and Cash Discounts 877 986 488 484 1,365 1,470
Advertising and Promotion 2,316 3,829 909 996 3,225 4,825
------ ----- ------ ------ ------- -------
BRAND CONTRIBUTION $4,146 $2,241 $1,138 $1,316 5,284 3,557
====== ====== ====== ======
Selling, General and Admin. Exp. 2,769 2,578
Depreciation and Amortization 1,033 1,032
----- ------
OPERATING INCOME (LOSS) 1,482 (53)
Interest Expense, Net 1,452 1,462
----- ------
INCOME (LOSS) BEFORE INCOME TAXES 30 (1,515)
Income Tax Provision (Benefit) 12 (591)
------- -------
NET INCOME (LOSS) $ 18 $ (924)
======= =======
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For the thirteen week period ended July 3,1999, net sales increased 3.7% to
$15,488,000 from $14,942,000 for the same period in 1998. This increase is
primarily related to strong sales on the San Francisco Soap product line
resulting from new distribution at several large new customers.
For the thirteen week period ended July 3,1999, cost of goods sold increased
10.3% to $5,614,000 from $5,090,000 for the same period in 1998. This increase
is primarily related to the higher sales volumes and to higher manufacturing
costs, particularly costs related to the sales of several discontinued products
at close out pricing.
For the thirteen week period ended July 3,1999, distribution expenses and cash
discounts decreased 7.1% to $1,365,000 from $1,470,000 for the same period in
1998. This decrease reflects savings versus 1998 during which period of time the
Company had relocated the distribution operation associated with the San
Francisco Soap business.
For the thirteen week period ended July 3,1999, advertising and promotion
expenses decreased 33.2% to $3,225,000 from $4,825,000 for the same period in
1998. During this period of time in 1998, the Company was spending heavily in
support of the introduction of the Total Hair Fitness business. Advertising and
promotion support in 1999 does not require the same high levels of introductory
spending on this business.
For the thirteen week period ended July 3,1999, selling, general, and
administrative expenses increased 7.4% to $2,769,000 from $2,578,000 for the
same period in 1998. This increase is related to a combination of increased
staffing levels versus the same period in 1998 and to higher broker commission
payments associated with the increase in net sales.
For the thirteen week period ended July 3,1999, depreciation and amortization of
$1,033,000 is essentially unchanged from $1,032,000 for the same period in 1998.
For the thirteen week period ended July 3,1999, interest expense, net of
interest income, decreased slightly to $1,452,000 from $1,462,000 for the same
period in 1998.
For the thirteen week period ended July 3,1999, the Company recorded an income
tax expense of $12,000 versus an income tax benefit of $591,000 for the same
period in 1998. The effective tax rate was 41% for the 1999 interim period and
39% for the comparable interim period in 1998.
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RESULTS OF OPERATIONS FOR THE TWENTY SIX WEEK PERIOD ENDED JULY 3, 1999
The following table sets forth certain operating data for the twenty-six weeks
ended July 3, 1999 and the six months ended June 30, 1998.
Periods Ended July 3, 1999 and June 30, 1998
--------------------------------------------
(In Thousands)
Personal Care Products Health Care Products Total Company
---------------------- -------------------- -------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
NET SALES $19,884 $21.090 $9,813 $9,629 $29,697 $30,719
Cost of Goods Sold 7,457 7,476 3,808 3,341 11,265 10,817
------- ------- ------ ------ ------- -------
GROSS MARGIN 12,427 13,614 6,005 6,288 18,432 19,902
Distribution and Cash Discounts 1,622 1,872 986 953 2,608 2,825
Advertising and Promotion 5,056 6,025 2,073 2,705 7,129 8,730
------- ------ ------ ------ ------ -----
BRAND CONTRIBUTION $ 5,749 $5,717 $2,946 $2,630 8,695 8,347
======= ====== ====== ======
Selling, General and Admin. Exp. 5,559 5,437
Depreciation and Amortization 2,082 2,059
----- ------
OPERATING INCOME 1,054 851
Interest Expense, Net 2,955 2,900
----- ------
(LOSS) BEFORE INCOME TAXES (1,901) (2,049)
Income Tax Benefit (779) (799)
------- -------
NET (LOSS) $(1,122) $(1,250)
======== ========
For the twenty-six week period ended July 3,1999, net sales decreased 3.3% to
$29,697,000 from $30,719,000 for the same period in 1998. This decrease is due
to lower sales associated with the personal care business, particularly on the
Total Hair Fitness line of shampoo's and conditioners. Net sales for this period
in 1999 of Total Hair Fitness during the first half of 1999 are down
approximately $1,900,000 reflecting the impact of the retail inventory build
associated with the launch of this business in 1998.
For the twenty-six week period ended July 3,1999, cost of goods sold increased
4.1% to $11,265,000 from $10,817,000 for the same period in 1998. The increase
in manufacturing costs is primarily related to one time expenses associated with
the shutdown of the gift set/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 3,1999, distribution expenses and cash
discounts decreased 7.7% to $2,608,000 from $2,825,000 for the same period in
1998. This decrease reflects savings versus 1998 during which period of time the
Company had relocated the distribution operation associated with the San
Francisco Soap business.
For the twenty-six week period ended July 3,1999, advertising and promotion
expenses decreased 18.3% to $7,129,000 from $8,730,000 for the same period in
1998. During the first half of 1998, the Company spent heavily in support of the
introduction of the Total Hair Fitness business. Advertising and promotion
support in 1999 does not require the same high levels of introductory spending.
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For the twenty-six week period ended July 3,1999, selling, general, and
administrative expenses increased by 2.2% to $5,559,000 from $5,437,000 for the
same period in 1998. This increase reflects somewhat higher staffing levels
during the first half of 1999 versus the same period in 1998.
For the twenty-six week period ended July 3,1999, depreciation and amortization
of $2,082,000 increased slightly from $2,059,000 for the same period in 1998.
For the twenty-six week period ended July 3,1999, interest expense, net of
interest income, increased 1.9% to $2,955,000 from $2,900,000 for the same
period in 1998.
For the twenty-six week period ended July 3,1999, an income tax benefit of
$779,000 was recorded compared with a similar tax benefit of $799,000 recorded
during the same period in 1998. The effective tax rate was 41% for the 1999
interim period and 39% for the 1998 interim period.
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 3, 1999
and June 30, 1998 (in thousands).
Period Ended
------------
July 3,1999 June 30,1998
----------- ------------
Net cash provided by (used in)operating activities $1,409 $(2,588)
Net cash used in investing activities (760) (374)
Increase (decrease) in cash and cash equivalents $ 649 $(2,962)
The principal adjustments to reconcile net loss of $1,122,000 for the period
ended July 3, 1999 to net cash provided by operating activities of $1,409,000
are depreciation and amortization of $2,082,000, combined with a net decrease in
working capital requirements of $449,000. The working capital decrease is
primarily linked to lower levels of accounts receivable.
Capital expenditures, which were $760,000 for the six months ended July 3, 1999,
are generally not significant in the Company's business. Except for
approximately $800,000 that the Company has budgeted for the replacement and
upgrade of its financial operating system which should also address Year 2000
compliance requirements, 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 December 31, 1998 and July 3, 1999. 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
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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, 2000 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.
YEAR 2000 READINESS DISCLOSURE
As part of a plan to improve its overall system capabilities, the Company
initiated a Year 2000 program in 1997 to upgrade its internal use software and
hardware to address possible issues that may arise from using two digits rather
than four to define the applicable year for dates. As part of this effort the
Company is reviewing the compliance of material third parties (significant
vendors and customers) on the operations of the business in order to determine
the risks to the Company for a third party's failure to re-mediate its own Year
2000 issues. While this information will be used to mitigate these risks, due to
the complexity of the problem, there can be no assurance that any third party
systems will be Year 2000 compliant on a timely basis or that non-compliance
will not have an adverse material impact on the company.
The Company believes that the planned modifications and conversions of internal
systems and hardware will allow it to meet its Year 2000 compliance schedule and
prevent any material adverse impact on its results of operations, liquidity and
financial condition. However, due to the inherent uncertainty of the Year 2000
problem, the Company cannot determine whether its overall program, including
third party compliance, or any future contingency plans will, in fact, prevent a
material adverse impact on its results of operations, liquidity and financial
condition. It is believed that the most likely worst case scenario would involve
the temporary disruption of fulfilling and billing customer orders, which would
require manual resolution. No material adverse impact on the Company's financial
condition is expected from this specific scenario.
Estimated costs for the complete system upgrade, including any specific Year
2000 requirements, are projected to be approximately $950,000 of which $730,000
have been incurred through July 3, 1999 and $220,000 are estimated for the
remainder of 1999. The funds for these costs have and will continue to come from
normal operating cash flows of the business. It is expected that all internal
systems will be implemented, tested and validated by September 1999.
The contingency planning process is ongoing and, as additional information
becomes available, the Company will consider the results of the systems
conversion and the status of third party Year 2000 readiness.
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Part II - Other Information
ITEM 2 - CHANGES IN SECURITIES
As of March 1, 1998, the Company issued 1,000 shares of common stock for an
aggregate purchase price of $1,196,233. These shares were issued to certain
employees of the Company as a result of the exercise of options issued to
the employees under the Company's 1994 Stock Option Plan, and pursuant to
the exemption from registration under the Securities Act of 1933 provided
for by Rule 701 of Regulation S-K. The shares were in each case paid for by
a recourse promissory note in favor of the Company.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
- Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
- On May 15, 1999, the registrant filed one report on Form 8-K
reflecting a change in its annual fiscal year to a fifty-two
week period consisting of four thirteen week interim
periods, with the fiscal year ending on January 1, 2000.
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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 12, 1999 /s/ Kevin C. Hartnett
---------------- ----------------------------------
Name: Kevin C. Hartnett
Title: Vice President and
Chief Financial Officer
qtr699
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