SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 1995 COMMISSION FILE NUMBER
--------------
33-7264
FIRST BRANDS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1171404
State of Incorporation (IRS Employer
Identification No.)
83 Wooster Heights Rd., Building 301
P.O. Box 1911
Danbury, Connecticut 06813-1911
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-731-2300
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS Outstanding at March, 31 1995
---------------------------- -----------------------------
Common Stock, $.01 par value 22,067,503 shares
FIRST BRANDS CORPORATION
INDEX TO FORM 10-Q
PAGE
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Condensed Statements of Income
For the Three Month Periods
Ended March 31, 1995 and 1994......................................................... 3
Consolidated Condensed Statements of Income
For the Nine Month Periods
Ended March 31, 1995 and 1994......................................................... 4
Consolidated Condensed Balance Sheets -
March 31, 1995 and June 30, 1994...................................................... 5
Consolidated Condensed Statement of Stockholders'
Equity - For the Nine Month Period
Ended March 31, 1995.................................................................. 6
Consolidated Condensed Statements of Cash
Flows - For the Nine Month Periods
Ended March 31, 1995 and 1994......................................................... 7
Notes to Consolidated Condensed Financial
Statements............................................................................ 8-10
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition...................................... 11-13
Independent Accountants' Report........................................................ 14
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings.............................................................. 15
Items 2 - 6............................................................................ 15-18
SIGNATURE.............................................................................. 19
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-2-
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1994
---- ----
(in thousands - except per share amounts)
Net sales................................................... $ 247,932 $ 244,364
Cost of goods sold........................................ 155,553 152,984
Selling, general and
administrative expenses.................................. 57,918 60,311
Amortization and other depreciation....................... 4,173 4,976
Interest expense and amortization of debt discount
and expense............................................. 4,453 5,536
Discount on sale of receivables........................... 1,007 1,035
Other income (expense), net............................... (250) (15)
--------- --------
Income before provision for income taxes.................... 24,578 19,507
Provision for income taxes.................................. 10,324 8,120
--------- --------
Net income.................................................. $ 14,254 $ 11,387
--------- --------
--------- --------
Net income per common share and common
equivalent share (Note 6)................................. $ 0.67 $ 0.51
------- -------
------- -------
Weighted average common and common
equivalent shares outstanding (Note 6).................... 21,175 22,251
-------- --------
-------- --------
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
-3-
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1994
---- ----
(in thousands - except per share amounts)
Net sales................................................... $ 745,107 $ 794,570
Cost of goods sold........................................ 460,160 492,764
Selling, general and
administrative expenses.................................. 184,257 188,763
Amortization and other depreciation....................... 12,291 15,588
Interest expense and amortization of debt discount
and expense............................................. 13,993 17,306
Discount on sale of receivables........................... 2,943 3,059
Other income (expense), net............................... (492) (303)
--------- --------
Income before provision for income taxes
and extraordinary loss.................................... 70,971 76,787
Provision for income taxes.................................. 29,801 32,636
--------- --------
Income before extraordinary loss............................ 41,170 44,151
Extraordinary loss relating to the repurchase
of subordinated note, net of taxes........................ (4,493) --
--------- ---------
Net income.................................................. $ 36,677 $ 44,151
------ ------
------ ------
Net income per common share and common equivalent share (Note 6):
Income before extraordinary loss........................ $ 1.91 $ 1.99
Extraordinary loss..................................... (.21) -
------ ------
Net income.............................................. $ 1.70 $ 1.99
------ ------
------ ------
Weighted average common and common
equivalent shares outstanding (Note 6).................... 21,554 22,138
------ ------
------ ------
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
-4-
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, JUNE 30,
(in thousands) 1995 1994
------------------- -----------
(UNAUDITED)
ASSETS:
Cash and cash equivalents....................................... $ 15,329 $ 13,384
Accounts and notes receivable - net............................. 89,369 89,769
Inventories..................................................... 161,544 155,737
Deferred tax assets............................................. 35,366 26,239
Prepaid expenses................................................ 4,583 5,756
---------- ---------
Total current assets.......................................... 306,191 290,885
Property, plant and equipment (net of accumulated
depreciation of $87,615 and $87,584).......................... 272,822 266,357
Patents, trademarks, proprietary technology
and other intangibles (net of accumulated
amortization of $168,462 and $193,429)........................ 201,972 232,666
Deferred charges and other assets (net of
accumulated amortization of $49,749 and $48,479).............. 29,575 24,077
---------- ----------
Total assets.......................................... $ 810,560 $ 813,985
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable................................................... $ 8,382 $ 156
Current maturities of long-term debt............................ 48 48
Accrued income and other taxes.................................. 29,814 35,640
Accounts payable................................................ 43,420 60,510
Accrued liabilities............................................. 117,688 141,753
--------- ----------
Total current liabilities.................................. 199,352 238,107
Long-term debt.................................................. 184,554 153,430
Deferred taxes payable.......................................... 59,078 44,177
Deferred gain on sale of assets................................. 2,989 5,393
Other long-term obligations..................................... 13,125 12,148
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value, 10,000,000
shares authorized; none issued................................ - -
Common stock, $0.01 par value,
50,000,000 shares authorized; issued
22,067,503 shares at March 31, 1995
and 22,005,656 shares at June 30, 1994........................ 221 220
Capital in excess of par value.................................. 118,479 117,085
Cumulative foreign currency translation adjustment.............. (8,002) (4,542)
Common stock in treasury, at cost; 1,147,100 shares............. (37,958) -
Retained earnings............................................... 278,722 247,967
---------- ----------
Total stockholders' equity................................. 351,462 360,730
---------- ----------
Total liabilities and stockholders' equity............ $ 810,560 $ 813,985
---------- ----------
---------- ----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
-5-
FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 1995
(UNAUDITED)
Cumulative
Capital Foreign
Common in Excess Currency
Stock of Par Translation Treasury Retained
(in thousands) Par Value Value Adjustment Stock Earnings Total
--------- --------- ----------- --------- -------- -----
Balance as of
June 30, 1994 .............. $ 220 $ 117,085 $ (4,542) - $ 247,967 $ 360,730
Exercise of
Stock Options............... 1 1,394 - - - 1,395
Common Stock
Dividends................... - - - - (5,922) (5,922)
Purchase of
Treasury Stock.............. - - - (37,958) - (37,958)
Net Income................... - - - - 36,677 36,677
Foreign Currency
Translation Adjustment...... - - (3,460) - - (3,460)
------ ------------ --------- ------------- ------------ -----------
Balance as of
March 31, 1995.............. $ 221 $ 118,479 $ (8,002) $ (37,958) $ 278,722 $ 351,462
------ ------------ --------- ------------- ------------ -----------
------ ------------ --------- ------------- ------------ -----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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FIRST BRANDS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
(in thousands) 1995 1994
------------------ -------------
Cash flows from operating activities:
Net income................................................... $ 36,677 $ 44,151
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.............................. 30,976 31,227
Deferred income taxes...................................... 5,826 12,833
Loss on repurchase of subordinated note.................... 7,463 -
Gain on sale of antifreeze and car care business........... (4,202) -
Change in certain non-cash current assets and liabilities:
Net of effect of businesses sold and acquired:
Decrease in accounts receivable......................... 5,785 19,099
(Increase) Decrease in inventories...................... (32,848) 15,412
Decrease in prepaid expenses............................ 1,348 1,280
(Decrease) in accrued income and other taxes............ (5,859) (752)
(Decrease) in accounts payable.......................... (7,202) (52,420)
(Decrease) in accrued liabilities....................... (7,304) (12,187)
Net change in current assets and current liabilities
of businesses sold........................................ (20,991) -
Other changes................................................ (2,919) (304)
--------- ----------
Total adjustments........................................ (29,927) 14,188
--------- ----------
Net cash provided by operating activities...................... 6,750 58,339
--------- ----------
Cash flows from investing activities:
Capital expenditures........................................ (26,048) (21,778)
Acquisition of leased assets................................ (13,240) -
Proceeds from sale of antifreeze/coolant and car
care business, net of note received....................... 142,000 -
Acquisition of business..................................... (45,972) -
Other....................................................... (4,900) -
--------- ----------
Net cash provided (used) for investing activities.............. 51,840 (21,778)
--------- ----------
Cash flows from financing activities:
Increase (Decrease) in revolving credit borrowings, net 76,300 (15,500)
Increase in other borrowings, net.......................... 8,050 7,251
(Decrease) in accounts receivable securitization, net...... (45,000) -
Repurchase of subordinated notes........................... (52,115) -
Purchase of common stock for treasury...................... (37,958) -
Repayment of term loan..................................... - (23,569)
Dividends paid............................................. (5,922) (4,828)
--------- ----------
Net cash (used) for financing activities....................... (56,645) (36,646)
--------- ----------
Net Increase (Decrease) in cash and cash equivalents........... 1,945 (85)
Cash and cash equivalents at beginning of period............... 13,384 11,672
--------- ----------
Cash and cash equivalents at end of period..................... $ 15,329 $ 11,587
--------- ----------
--------- ----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
-7-
FIRST BRANDS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements include all adjustments (all of which were of a normal
recurring nature) necessary to fairly present the results of operations for the
interim periods. Certain prior year amounts have been reclassified to conform
with the current year's presentation. All material intercompany transactions and
balances have been eliminated. Due to the seasonal nature of some of its former
product lines, primarily the PRESTONE antifreeze/coolant and car care business
which was sold on August 26, 1994, the results of operations for the nine month
period ended March 31, 1995 are not indicative of the results for a full year.
First Brands Corporation ("First Brands" or the "Company") is engaged in the
development, manufacture, marketing and sales of consumer products under branded
and private labels. Principal branded products include: GLAD and GLAD-LOCK
(plastic wrap and bags); STP (oil and fuel additives and other specialty
automotive products); SIMONIZ (car waxes and polishes) and SCOOP AWAY, EVER
CLEAN and JONNY CAT (cat litters).
On July 13, 1994, the Company purchased substantially all of the assets of
Excel-Mineral Inc. and Excel International Inc., the manufacturer and marketer
of the JONNY CAT brand of pet care products, for $45,000,000.
On August 26, 1994, the Company sold the PRESTONE antifreeze/coolant and car
care business for $155,000,000 and received $142,000,000 in cash and a
$13,000,000 7 1/2% subordinated debenture maturing in 2003, which for financial
statement purposes has been valued at $9,000,000. The net assets of that
business have been removed from the balance sheet, resulting in a pre-tax gain
of $4,202,000 which was included in other income (expense), net, in the
Consolidated Condensed Statement of Income. Sales from the PRESTONE business
were $31,684,000 for the period ended August 25, 1994, and $25,786,000 and
$153,031,000 for the quarter and nine months ended March 31, 1994, respectively.
INVENTORIES
Inventories were comprised of:
March 31, June 30,
1995 1994
--------- ---------
(in thousands)
Raw materials............................................. $ 26,992 $ 24,666
Work-in-process........................................... 6,021 5,844
Finished goods............................................ 128,531 125,227
--------- ---------
Total................................................. $ 161,544 $ 155,737
--------- ---------
--------- ---------
During the nine months ended March 31, 1995, the Company purchased with the
Excel acquisition inventories valued at $2,804,000, and sold inventories
totaling $36,490,000 with the divestiture of the PRESTONE business.
-8-
2. LONG-TERM DEBT
First Brands had long-term debt outstanding as of March 31, 1995 and June 30,
1994 as follows:
March 31, June 30,
1995 1994
--------- ---------
(in thousands)
Senior Debt:
$300,000,000 Revolving Credit Facility, 5 year term
expiring December, 1999, interest at prime rate,
LIBOR plus .30% or CD rate plus .425%; facility
fee of .20%............................................. $ 80,000 $ 3,700
Other..................................................... 4,602 4,778
---------- ----------
84,602 8,478
Less: current maturities.................................. (48) (48)
---------- ----------
Senior Debt........................................... 84,554 8,430
---------- ----------
Subordinated Debt:
9 1/8% Senior Subordinated Notes Due 1999................. 100,000 100,000
13 1/4% Subordinated Notes Due 2001....................... - 45,000
--------- ----------
Subordinated Debt..................................... 100,000 145,000
--------- ----------
Total Long Term Debt.............................. $ 184,554 $ 153,430
--------- ---------
--------- ---------
On February 3, 1995, the Company entered into a new Revolving Credit Facility,
increasing its' line of credit to $300,000,000. The new facility has no
compensating balance requirements, however, it does contain certain restrictive
covenants pertaining to the ratio of subordinated debt to equity, dividend
payments and capital stock repurchases. These covenants are no more restrictive
than covenants associated with the Company's previous credit facility.
The 9 1/8% Notes Indenture has restrictive covenants or limitations on the
payment of dividends, the distribution of capital stock or the redeeming of
capital stock, as well as limitations on Company and subsidiary debt and
limitations on the sale of assets.
On December 29, 1994, the Company signed an agreement to repurchase, at a 15.8%
premium, the $45,000,000 13 1/4% Subordinated Notes, this repurchase was
completed on January 4, 1995. The premium and unamortized issuance costs, net of
taxes, are reflected as an extraordinary loss in the Company's Consolidated
Condensed Statement of Income.
First Brands was in compliance with all the covenants of all debt agreements at
March 31, 1995.
3. ACCOUNTS RECEIVABLE
In May 1992, the Company entered into a $100,000,000 extendable three year
agreement to sell fractional ownership interest, without recourse, in a defined
pool of eligible trade accounts receivable. The terms of the current agreement
have been extended while the Company negotiates for a new receivable program. It
is expected that any receivable sale entered into will have provisions no more
restrictive than the current receivable program. The fractional interest sold as
of March 31, 1995 totalled $55,000,000, which is $45,000,000 less than at the
beginning of the fiscal year. The amounts sold are reflected as a reduction in
accounts receivable on the accompanying balance sheet and costs associated with
this program are recorded on the Consolidated Condensed Statement of Income as
discount on sale of receivables.
-9-
4. NOTES PAYABLE
Notes payable at March 31, 1995 of $8,382,000 consisted of a $7,500,000
unsecured domestic line of credit and international subsidiaries' working
capital borrowings with local lenders. The Company's international working
capital credit facilities aggregated $19,225,000 at March 31, 1995 and are
generally secured by the assets of the respective international subsidiary, with
approximately $1,474,000 of the availability at one subsidiary being guaranteed
by First Brands Corporation (U.S.).
5. TAXES
The provision for income tax expense attributable to income before extraordinary
loss for the three and nine months ended March 31, 1995 and 1994 consists of the
following:
Three Months Nine Months
Ended Ended
March 31, March 31,
-------------------- ---------------------
1995 1994 1995 1994
---------- ---------- ---------- --------
(in thousands)
Current:
Federal............................. $ 6,609 $ 3,019 $ 17,638 $ 13,956
State............................... 1,510 714 4,058 3,191
Foreign............................. 594 794 2,279 2,656
------ ------ ------ ------
Total current................... 8,713 4,527 23,975 19,803
Deferred:
Federal............................. 1,373 2,998 4,919 10,776
State............................... 292 685 1,055 2,317
Foreign............................. (54) (90) (148) (260)
------- ------- -------- -------
Total deferred.................. 1,611 3,593 5,826 12,833
------ ------ ------ -------
Total Provision............. $ 10,324 $ 8,120 $ 29,801 $ 32,636
------ ------ ------ -------
------ ------ ------ -------
6. EARNINGS PER SHARE
Net income per share has been computed using the weighted average number of
common shares and common share equivalents outstanding for the periods.
During the first quarter of Fiscal 1995 the Company paid to it's shareholders
cash dividends of $ 0.08 cents per share and during the second and third
quarters, the Company paid dividends of $ 0.10 cents per share.
-10-
FIRST BRANDS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis of the consolidated results of operations
for the three and nine month periods ended March 31, 1995 should be read in
conjunction with the accompanying unaudited Consolidated Condensed Financial
Statements and related Notes. The Company is primarily engaged in the
development, manufacture, marketing and sale of branded and private label
consumer products for the home and automotive markets. The Company's products
which include "GLAD", "GLAD-LOCK" "STP", "SIMONIZ", "SCOOP AWAY", "EVER CLEAN"
and "JONNY CAT" can be found in large mass merchandise stores, chain
supermarkets and other retail outlets. The Company believes that the significant
market positions occupied by its products are attributable to brand name
recognition, comprehensive product offerings, continued product innovation,
strong emphasis on vendor support and aggressive advertising and promotion.
The PRESTONE antifreeze/coolant and car care business was sold on August 26,
1994. Financial data below includes the operating information related to this
business while it was still a part of the Company. Therefore, comparison of
results of operations between the two time periods should take the effect of the
divested business into consideration.
RESULTS OF OPERATIONS
The following table sets forth the percentages of net sales of the Company
represented by the components of income and expense for the three and nine month
periods ended March 31, 1995 and 1994.
Three Months Nine Months
Ended Ended
March 31, March 31,
----------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
Net sales........................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.................................. 62.7 62.6 61.8 62.0
------ ------ ------ -----
Gross profit........................................ 37.3 37.4 38.2 38.0
Selling, general, and
administrative expenses........................... 23.4 24.7 24.7 23.8
Amortization and other depreciation................. 1.7 2.0 1.6 1.9
Interest expense and amortization of debt
discount and expense.............................. 1.8 2.3 1.9 2.2
Discount on sale of receivables..................... 0.4 0.4 0.4 0.4
Other income (expense), net......................... (0.1) 0.0 (0.1) 0.0
------ ----- ------ ----
Income before provision for income taxes and
extraordinary loss.................................. 9.9 8.0 9.5 9.7
Provision for income taxes........................... 4.2 3.3 4.0 4.1
----- ----- ----- ----
Income before extraordinary loss..................... 5.7 4.7 5.5 5.6
Extraordinary loss relating to the repurchase
of subordinated notes, net of taxes................ 0.0 0.0 (0.6) 0.0
---- ----- ------ ----
Net income........................................... 5.7% 4.7% 4.9% 5.6%
---- ----- ------ ----
---- ----- ------ ----
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QUARTER AND NINE MONTHS ENDED MARCH 31, 1995 COMPARED TO THE QUARTER AND
NINE MONTHS ENDED MARCH 31, 1994
First Brands' consolidated sales for the three month period ended March 31, 1995
were $247,932,000, 101% of last year's $244,364,000, bringing nine month
revenues to $745,107,000 versus last year's $794,570,000. The nine month sales
reduction reflects only eight weeks of sales during the first quarter of fiscal
1995 for the PRESTONE antifreeze/coolant and car care business ("the divested
business") which was sold on August 26, 1994, compared to sales from the
divested business for the nine month period of fiscal 1994. On a proforma basis
(excluding sales from the divested business) fiscal 1995 third quarter sales
were 13% above the prior year's comparable sales of $218,578,000. Proforma sales
for the nine months were $713,423,000 versus $641,539,000 last year, an increase
of 11%. During the quarter, plastic wrap and bag product sales increased 8%, due
primarily to the strong performance of GLADLOCK products, automotive specialty
and appearance products increased 6% and pet product sales were up 70%. Cat
litter sales for the quarter were significantly ahead of the prior year's level
due to the new JONNY CAT business, which was acquired on July 13, 1994. However,
excluding the JONNY CAT sales, pet product revenues for the quarter increased
12%.
Cost of goods sold for the quarter was $155,553,000, 102% of last year's
$152,984,000. Excluding the divested business, cost of goods sold for the
quarter was 19% above the prior year's $131,007,000. Year to date, cost of goods
sold was $460,160,000, 93% of last year's $492,764,000. On a proforma basis
(excluding the divested business) cost of goods sold for the nine months was
$438,992,000, 15% above the prior year's $381,459,000. Higher proforma costs for
the three and nine month periods reflect the increased volumes and higher raw
material costs.
Gross profit for the quarter of $92,379,000 (37.3% of sales) was 101% of last
year's $91,380,000 (37.4% of sales). Year-to-date, gross profit of $284,947,000
(38.2% of sales) was 94% of last year's $301,806,000 (38.0% of sales). Excluding
the divested business, the gross profit for the quarter was 106% of the prior
year's $87,571,000 (40.1% of sales); and the gross profit for nine months was
$274,431,000 (38.5% of sales), 106% of the prior year's $260,080,000 (40.5% of
sales). The higher proforma gross profit for the quarter and nine months was due
to increased sales volumes, while the lower gross margin reflected increased raw
material costs and sales mix.
Selling, general and administrative expenses during the quarter of $57,918,000
(23.4% of sales), were 96% of last year's third quarter. Year-to-date, overhead
expenses of $184,257,000 (24.7% of sales), were 98% of the comparable period
last year. Excluding the divested business, which includes allocations of
corporate overhead to such business, these expenses for the quarter were 103% of
the prior year's $56,373,000 (25.8% of sales). Year-to-date expenses totalled
$176,417,000 (24.7% of sales), 104% of the prior year's $169,684,000 (26.4% of
sales). The major reason for the increase (for both the quarter and nine months)
is higher selling expense related to the new JONNY CAT business, and increased
marketing expenditures to support the continued growth of the SCOOP AWAY and
EVER CLEAN business. This was partially offset by lower spending in the plastic
wrap and bag and automotive specialty businesses, to counter the lower gross
margin caused by increased raw material costs.
Amortization and other depreciation expense of $4,173,000 and $12,291,000, was
84% and 79% of the prior year's three and nine month periods, respectively. This
reduction reflects lower amortization expense for fiscal 1995, as certain
intangible assets were either sold to the divested business or were fully
amortized during fiscal 1994, partially offset by slightly higher depreciation
expense during fiscal 1994 due to the write-down of certain fixed assets.
Interest expense of $4,453,000 and $13,993,000 for the three and nine month
periods, respectively, was 80% and 81% of prior year levels due to lower debt
levels. Discount on sale of receivables reflects the costs associated with the
sale of a fractional ownership interest, without recourse, in a defined pool of
the Company's eligible trade accounts receivable.
-12-
Year-to-date, the extraordinary loss of $4,493,000 or $0.21 per share reflects
the premium paid and the write-off of unamortized debt issuance costs related to
the December 29, 1994 agreement to repurchase $45,000,000 of the Company's
Subordinated Notes.
The Company's provision for income taxes for the three and nine months was
10,324,000, 127% of last year, and $29,801,000, 91% of last year, respectively.
The higher tax expense during the quarter reflects increased pre-tax income.
Year-to-date, the lower tax expense reflects the reduced pre-tax income and a
marginally higher effective tax rate during the first quarter of fiscal 1994,
which reflected the inclusion of the retroactive U.S. Federal tax increase and
its effect on deferred taxes.
FINANCIAL CONDITION
Worldwide credit facilities in place at March 31, 1995 aggregated $330,265,000
of which $240,843,000 was available, but unused. The Company expects to borrow
and repay up to $10,000,000 from these credit facilities over the next twelve
months, primarily for working capital purposes. On February 3, 1995, the Company
entered into a new five year $300,000,000 unsecured revolving credit facility.
This new credit facility contains lower costs and certain covenants which are no
more restrictive than the credit facility which it replaced (see Note 2).
The Company's current forecast for the 1995 fiscal year reflects capital
expenditures of approximately $47,000,000 (this is a $12,000,000 increase over
the previously disclosed estimate, reflecting an accelerated plan for the
acquisition of certain machinery and equipment, ), and fixed payments (interest,
principal, discount on sale of receivables and lease payments) of approximately
$45,000,000.
Based on the Company's ability to generate funds from operations and the
availability of credit under its financing facilities, management believes it
will have the funds necessary to meet all of its described financing
requirements and all other financial obligations.
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
First Brands' independent certified public accountants have preformed a limited
review of the financial information furnished herein in accordance with
standards established by the American Institute of Certified Public Accountants.
The Independent Accountants' Report is presented on Page 14 of this report.
-13-
Independent Accountants' Report
The Board of Directors
First Brands Corporation:
We have reviewed the consolidated condensed balance sheet of First Brands
Corporation and subsidiaries as of March 31, 1995, and the related consolidated
condensed statements of income for the three and nine month periods ended March
31, 1995 and 1994 and the consolidated condensed statements of cash flows for
the nine month periods ended March 31, 1995 and 1994, and the consolidated
condensed statement of stockholders' equity for the nine month period ended
March 31, 1995. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated condensed financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of First Brands Corporation and
subsidiaries as of June 30, 1994, and the related consolidated statement of
income, stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated August 9, 1994 (except as to Note 19,
which is as of August 26, 1994), we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated condensed balance sheet as of June 30, 1994, is
fairly presented, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
May 2, 1995
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
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Item 6. Exhibits and Reports on Form 8-K
A. Exhibit Index:
Exhibit
Number Description of Exhibit
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10.1* -- Credit Agreement, dated as of February 3, 1995, among the
Company, Chemical Bank, as Agent, and The Several Lenders
Parties thereto.
10.2 (a) -- Leasing Agreement between the Company and Citicorp North
America, Inc., relating to its Glad Plastic Bag and Wrap
facility in Cartersville, Georgia, dated as of November 16,
1993. Incorporated by reference to Exhibit 10.2 to Form 10-Q
for Quarter ended December 31, 1993, filed by the Registrant on
February 14, 1994.
(b) -- Rider No. 1 thereto, dated as of December 1, 1993.
(c) -- Rider No. 2 thereto, dated as of May 11, 1994.
10.3 -- Equipment Lease Agreement between the Company and PNC Leasing
Corp, relating to its Glad Plastic Bag and Wrap facility in
Rogers, Arkansas, dated as of October 15, 1993. Incorporated by
reference to Exhibit 10.6 to Form 10-Q for Quarter ended
December 31, 1993, filed by the Registrant on February 14,
1994.
10.4 -- Purchase Agreement, dated as of December 23, 1991, between the
Company and Pitney Bowes Credit Corporation, relating to the
sale and leaseback of equipment at the Company's GLAD Plastic
Wrap and Bag facility in Rogers, Arkansas. Incorporated by
reference to Exhibit 10.8 to Form S-1 filed by the Registrant
on February 7, 1992.
10.5 (a) -- Agreement dated December 23, 1994 between the Company and
Pitney Bowes Credit Corporation ("Pitney Bowes") to the
exercise by the Company of an Early Purchase Option with regard
to certain equipment at the Company's GLAD Plastic Wrap and Bag
facility at Rogers, Arkansas. This equipment was subject to the
Equipment Lease Agreement (the "Lease") dated as of December
23, 1991 between Pitney Bowes and the Company. Incorporated by
reference to Exhibit 10.5(a) to Form 10-Q for Quarter ended
December 31, 1994, filed by the Registrant on February 14, 1995.
(b) -- Bill of Sale by Pitney Bowes dated December 23, 1994 for
certain equipment repurchased by the Company pursuant to the
Company's exercise of the Early Purchase Option provided for in
the Lease. Incorporated by reference to Exhibit 10.5(b) to Form
10-Q for Quarter ended December 31, 1994, filed by the
Registrant on February 14, 1995.
10.6 -- Purchase Agreement, dated as of June 25, 1992, between the
Company and Nationsbanc Leasing Corporation of Georgia,
relating to the sale and leaseback of certain equipment at the
Company's GLAD plastic wrap and bag facility in Amherst,
Virginia. Incorporated by reference to Exhibit 10.13 to form
10-K filed by the Registrant on September 25, 1992.
10.7 (a) -- Equipment Lease Agreement, dated as of June 25, 1992,
between the Company and Nationsbanc Leasing Corporation of
Georgia, relating to the sale and leaseback of certain
equipment at the Company's GLAD plastic wrap and bag facility
in Amherst, Virginia. Incorporated by reference to Exhibit
10.14 to form 10-K filed by the Registrant on September 25,
1992.
(b) -- First Amendment thereto, dated as of March 30, 1993.
Incorporated by reference to Exhibit 10.15(b) to Form 10-K
filed by the Registrant on September 28, 1993.
10.8 -- Purchase Agreement, dated as of June 25, 1993, between the
Company and Nationsbanc Leasing Corporation, relating to the
sale and leaseback of certain equipment at the Company's GLAD
plastic wrap and bag facility in Amherst, Virginia.
Incorporated by reference to Exhibit 10.16 to Form 10-K filed
by the Registrant on September 28, 1993.
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10.9 -- Equipment Lease Agreement, dated as of June 25, 1993, between
the Company and Nationsbanc Leasing Corporation, relating to
the sale and leaseback of certain equipment at the Company's
GLAD plastic wrap and bag facility in Amherst, Virginia.
Incorporated by reference to Exhibit 10.17 to Form 10-K filed
by the Registrant on September 29, 1993.
10.10 (a) -- Sales Agreement, dated as of January 1, 1989 between Union
Carbide Chemicals & Plastics Company, Inc. (formerly Union
Carbide Corporation) and the Company, (confidential treatment
has been granted with respect to certain portions of the Sales
Agreement; such portions were omitted and filed separately with
the Securities and Exchange Commission). Incorporated by
reference to Exhibit 10.22(b) to Form 10-K filed by the
Registrant on September 19, 1989.
(b) -- Sales Agreement, dated March 1, 1991, between Union Carbide
Chemicals and Plastics Company Inc. and the Company,
(confidential treatment has been granted with respect to
certain portions of the Sales Agreement, such portions were
omitted and filed separately with the Securities and Exchange
Commission). Incorporated by reference to Post-Effective
Amendment No. 1 to Form S-1 filed by the Registrant on June 12,
1991.
10.11 (a) -- Subordinated Notes Registration Rights Agreement, dated as
of July 1, 1986, between the Company and Metropolitan Life
Insurance Company, the current Note holder ("Metropolitan"),
relating to the 13.25% Subordinated Note due 2001 (the "Note").
Incorporated by reference to Exhibit 10(xii) to form S-1 filed
by the Registrant on July 15, 1986.
(b) -- Agreement between the Company and Metropolitan dated
December 29, 1994, for the purchase of the Note, outstanding in
the principle amount of $45,000,000, by the Company on January
4, 1995. Incorporated by reference to Exhibit 10.11(b) to Form
10-Q for Quarter ended December 31, 1994, filed by the
Registrant on February 14, 1995.
10.12 -- Underwriting Agreement among the Company, certain stockholders
and The First Boston Corporation and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner and Smith Incorporated as
representatives of the Several Underwriters, relating to
8,400,000 shares of Common Stock of the Company. Incorporated
by reference to Exhibit 1.1 to Form S-1 filed by the
Registrant on March 5, 1991.
10.13 -- Subscription Agreement among the Company, certain stockholders
and Credit Suisse First Boston Limited and Merrill Lynch
International Limited as Managers, relating to 2,110,000 shares
of Common Stock of the Company. Incorporated by reference to
Exhibit 1.2 to Form S-1 filed by the Registrant on March 5,
1991.
10.14 -- Underwriting Agreement, dated as of February 26, 1992, between
the Company and The First Boston Corporation, relating to
$100,000,000 in 9 1/8% Senior Subordinated Notes due 1999.
Incorporated by reference to Exhibit 10.19 to form 10-K filed
by the Registrant on September 25, 1992.
10.15 (a) -- Pooling and Servicing Agreement, dated as of May 21, 1992,
between the Company, First Brands Funding Inc and Chemical
Bank, as Trustee, relating to First Brands Funding Master Trust
trade receivables-backed financing. Incorporated by reference
to Exhibit 10.20(a) to form 10-K filed by the Registrant on
September 25, 1992.
(b) -- Variable Funding Supplement thereto, dated as of May 21, 1992.
Incorporated by reference to Exhibit 10.20(b) to form 10-K
filed by the Registrant on September 25, 1992.
(c) -- Amendment No. 1 thereto, dated as of December 22, 1993.
Incorporated by reference to Exhibit 10.18(c) to Form 10-Q for
Quarter ended December 31, 1993, filed by the Registrant on
February 14, 1994.
10.16 -- Asset Purchase and Sale Agreement, dated as of May 21, 1992,
between the Company and First Brands Funding Inc, relating to
First Brands Funding Master Trust trade receivables-backed
financing. Incorporated by reference to Exhibit 10.21 to form
10-K filed by the Registrant on September 25, 1992.
10.17 -- Asset Purchase and Sale Agreement, dated as of May 21, 1992,
between the Company and Himolene Incorporated, relating to
First Brands Funding Master Trust trade receivables-backed
financing. Incorporated by reference to Exhibit 10.22 to form
10-K filed by the Registrant on September 25, 1992.
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10.18 -- Amended and Restated Letter of Credit Reimbursement Agreement,
dated as of December 2, 1993, between the Company, First Brands
Funding Inc, Westdeutsche Landesbank Girozentrale, The
Long-Term Credit Bank of Japan, Limited, and First Brands
Funding Master Trust, amending and restating the Letter of
Credit Reimbrusement Agreement, dated as of May 21, 1992,
relating to First Brands Funding Master Trust trade
receivables-backed financing. Incorporated by reference to
Exhibit 10.21 to Form 10-Q for Quarter ended December 31, 1993,
filed by the Registrant on February 14, 1994.
10.19 -- Amended Long-Term Incentive Plan. Incorporated by reference to
Exhibit 10.34 to Form 10-K filed by the Registrant on September
12, 1990.
10.20 -- First Brands Corporation 1994 Performance Stock Option and
Incentive Plan. Incorporated by reference to Exhibit A to the
Definitive Proxy Statement for Annual Meeting of Stockholders,
filed by the Registrant on September 28, 1993.
10.21 (a) -- Purchase and Sale Agreement, dated as of June 30, 1994, between
the Registrant and Vestar/Freeze Holdings Corporation and
Vestar Equity Partners, L.P., relating to the sale by the
Registrant of its businesses of developing, manufacturing,
marketing, selling and/or distributing automotive antifreeze,
cooling system tools, cooling system chemicals for cleaning and
sealing leaks in automotive cooling systems, ice fighting
products, PRESTONE brake fluid products, PRESTONE power
steering fluid products, and PRESTONE transmission stop-leak
fluid products, and antifreeze recycling business. Incorporated
by reference to Exhibit 2.1 to Form 8-K filed by the Registrant
on September 12, 1994.
(b)-- Amendment No. 1 thereto, dated as of August 25, 1994.
Incorporated by reference to Exhibit 2.2 to Form 8-K filed by
the Registrant on September 12, 1994.
11* -- Computation of Net Income Per Common Share
15* -- Accountants' Acknowledgment
27* -- Financial Data Schedule
- ------------
* Filed herewith
B. Reports on Form 8-K
None.
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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.
FIRST BRANDS CORPORATION
(Registrant)
Date: May 9th, 1995 By: Donald A. DeSantis
------------------
Donald A. DeSantis
Senior Vice President,
Chief Financial Officer
and Treasurer
(Principal Accounting
and Duly Authorized
Officer)
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