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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 29, 2003

Commission File No. 1-12620

PLAYTEX PRODUCTS, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)		   51-0312772
(I.R.S. Employer Identification No.)

300 Nyala Farms Road
Westport, Connecticut 06880
(Address of principal executive offices)

Telephone number: (203) 341-4000
(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 ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes ý    No o

        At May 9, 2003 61,215,856 shares of Playtex Products, Inc. common stock, par value $.01 per share, were outstanding.


PLAYTEX PRODUCTS, INC.
INDEX

 
    
   PAGE
PART I—FINANCIAL INFORMATION

Item 1.
 
Condensed Consolidated Financial Statements
 
3-17

Item 2.
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
18-25

Item 3.
 
Quantitative and Qualitative Disclosure about Market Risk
 
26

Item 4.
 
Controls and Procedures
 
26

PART II—OTHER INFORMATION

Item 1.
 
Legal Proceedings
 
27

Item 6.
 
Exhibits and Reports on Form 8-K:
 
 

 
 
(a) Exhibits
 
27

 
 
(b) Reports on Form 8-K
 
27

 
 
Signatures
 
28

 
 
Certifications
 
29-30

2


PLAYTEX PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

 
   March 29,
2003
   December 28,
2002
  
 
   (Unaudited)

    
  
ASSETS              
Current assets:              
  Cash   $ 53,575   $ 31,605  
  Receivables, less allowance for doubtful accounts     36,984     27,735  
  Retained interest in receivables     64,337     59,774  
  Inventories     84,519     85,160  
  Due from related party     80,017     80,017  
  Deferred income taxes     7,730     8,130  
  Other current assets     7,059     7,782  
   
 
 
    Total current assets     334,221     300,203  
Net property, plant and equipment     121,427     121,199  
Intangible assets, net:              
  Goodwill     494,307     494,307  
  Trademarks, patents and other     138,948     139,174  
Deferred financing costs     13,103     13,592  
Other noncurrent assets     9,324     9,712  
   
 
 
    Total assets   $ 1,111,330   $ 1,078,187  
   
 
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
Current liabilities:              
  Accounts payable   $ 37,597   $ 47,088  
  Accrued expenses     50,845     54,217  
  Due to related party     78,386     78,386  
  Income taxes payable     6,481     1,086  
  Current maturities of long-term debt     34,500     4,500  
   
 
 
    Total current liabilities     207,809     185,277  
Long-term debt     821,250     823,250  
Other noncurrent liabilities     14,919     14,526  
Deferred income taxes, net     49,578     49,601  
   
 
 
    Total liabilities     1,093,556     1,072,654  
   
 
 
Stockholders' equity:              
  Common stock, $0.01 par value, authorized 100,000,000 shares, issued 61,215,856 shares at March 29, 2003 and December 28, 2002     612     612  
  Additional paid-in capital     526,233     526,233  
  Retained earnings (deficit)     (505,368 )   (516,771 )
  Accumulated other comprehensive earnings     (3,703 )   (4,541 )
   
 
 
    Total stockholders' equity     17,774     5,533  
   
 
 
    Total liabilities and stockholders' equity   $ 1,111,330   $ 1,078,187  
   
 
 

See the accompanying notes to condensed consolidated financial statements.

3


PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share data)

 
   Three Months Ended
  
 
   March 29,
2003
   March 30,
2002
  
Net sales   $ 180,933   $ 196,751  
Cost of sales     84,183     85,711  
   
 
 
 
Gross profit
 
 
96,750
 
 
111,040
 

Operating expenses:
 
 
 
 
 
 
 
  Selling, general and administrative     64,721     63,734  
  Restructuring and asset impairment     —     7,599  
  Amortization of intangibles     226     226  
   
 
 
    Total operating expenses     64,947     71,559  
     
Operating earnings
 
 
31,803
 
 
39,481
 

Interest expense including related party interest expense of $3,037 for both periods presented, net of related party interest income of $3,001 for both periods presented
 
 
13,447
 
 
16,106
 
Other expense     453     890  
   
 
 
     
Earnings before income taxes and cumulative effect of change in accounting principle
 
 
17,903
 
 
22,485
 

Income tax expense (benefit)
 
 
6,500
 
 
(6,055
)
   
 
 
     
Earnings before cumulative effect of change in accounting principle
 
 
11,403
 
 
28,540
 
   
 
 

Cumulative effect of change in accounting principle, net of $7,141 tax benefit
 
 
—
 
 
(12,423
)
   
 
 
     
Net earnings
 
$
11,403
 
$
16,117
 
   
 
 

Earnings per share—Basic:
 
 
 
 
 
 
 
  Earnings before cumulative effect of change in accounting principle   $ 0.19   $ 0.47  
  Cumulative effect of change in accounting principle     —     (0.20 )
   
 
 
  Earnings per share—Basic   $ 0.19   $ 0.26  
   
 
 

Earnings per share—Diluted:
 
 
 
 
 
 
 
  Earnings before cumulative effect of change in accounting principle   $ 0.19   $ 0.45  
  Cumulative effect of change in accounting principle     —     (0.20 )
   
 
 
  Earnings per share—Diluted   $ 0.19   $ 0.26  
   
 
 

Weighted average shares outstanding:
 
 
 
 
 
 
 
  Basic     61,216     61,049  
   
 
 
  Diluted     62,805     63,849  
   
 
 

See the accompanying notes to condensed consolidated financial statements.

4


PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE EARNINGS
(Unaudited, in thousands)

 
   Common
Shares
Outstanding
   Common
Stock
   Additional
Paid
Capital
   Retained
Earnings
(Deficit)
   Accumulated
Other
Comprehensive
Earnings
   Total
Balance, December 28, 2002   61,216   $ 612   $ 526,233   $ (516,771 ) $ (4,541 ) $ 5,533

Net earnings
 
—
 
 
—
 
 
—
 
 
11,403
 
 
—
 
 
11,403
Foreign currency translation adjustment   —     —     —     —     838     838
                               
  Comprehensive earnings                                 12,241
   
 
 
 
 
 
Balance, March 29, 2003   61,216   $ 612   $ 526,233   $ (505,368 ) $ (3,703 ) $ 17,774
   
 
 
 
 
 

See the accompanying notes to condensed consolidated financial statements.

5


PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

 
   Three Months Ended
  
 
   March 29,
2003
   March 30, 2002
  
Cash flows from operations:              
  Net earnings   $ 11,403   $ 16,117  
  Non-cash items included in earnings:              
    Asset impairment charge     —     4,222  
    Cumulative effect of change in accounting principle     —     12,423  
    Depreciation     3,471     3,495  
    Amortization of deferred financing costs     489     588  
    Amortization of intangibles     226     226  
    Deferred income taxes     396     (10,388 )
    Other, net     1,631     567  
  Net increase in working capital accounts     (19,973 )   (17,594 )
   
 
 
      Net cash flows (used for) from operations     (2,357 )   9,656  

Cash flows used for investing activities:
 
 
 
 
 
 
 
  Purchases of property, plant and equipment     (3,673 )   (2,974 )
   
 
 
      Net cash flows used for investing activities     (3,673 )   (2,974 )

Cash flows provided by (used for) financing activities:
 
 
 
 
 
 
 
  Net borrowings (repayments) under credit facilities     28,000     (12,000 )
  Issuance of shares of common stock     —     116  
   
 
 
      Net cash flows provided by (used for) financing activities     28,000     (11,884 )

Increase (decrease) in cash
 
 
21,970
 
 
(5,202
)
Cash at beginning of period     31,605     34,006  
   
 
 
Cash at end of period   $ 53,575   $ 28,804  
   
 
 
Supplemental disclosures of cash flow information              
 
Cash paid (received) during the periods for:
 
 
 
 
 
 
 
    Interest   $ 5,674   $ 8,171  
    Income taxes, net of refunds   $ 707   $ (4,761 )

See the accompanying notes to condensed consolidated financial statements.

6


PLAYTEX PRODUCTS, INC.
PART I—FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Consolidated Financial Statements

        The quarterly condensed consolidated financial statements, which are a part of our Quarterly Report on Form 10-Q, are unaudited. In preparing our financial statements, we make certain adjustments (consisting of normal recurring adjustments) considered necessary in our opinion for a fair presentation of our financial position and results of operations. The results of operations for the thirteen-week period ended March 29, 2003 are not necessarily indicative of the results that you may expect for the full year.

        We presume you have access to the audited financial statements contained in our Annual Report on Form 10-K for the year ended December 28, 2002. As a result, we have not included footnote disclosures that would substantially duplicate the disclosures contained in the 10-K. We file our annual, quarterly, current reports, proxy statements, and other documents with the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1933 and 1934. You may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The SEC also maintains an internet website that contains our filed reports at www.sec.gov. In addition, we make our filings with the SEC available at the Investors Relations section of our website www.playtexproductsinc.com. You can call our Investor Relations Department at (203) 341-4017 or via email at invrel@playtex.com to request a copy of any of our reports filed with the SEC.

2. Stock-Based Compensation

        We account for stock-based compensation in accordance with Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure". As permitted by SFAS No. 123 and SFAS No. 148, we follow the intrinsic value approach of Accounting Principles Board Opinion No. 25 ("APB No. 25"), and Financial Accounting Standards Board ("FASB") Interpretation No. 44, "Accounting for Certain Transactions Involving Stock-Based Compensation, an Interpretation of APB No. 25" issued for determining compensation expense related to the issuance of stock options. Accordingly, we do not recognize compensation expense related to our stock option program. Had we recognized compensation expense under the fair value approach permitted by SFAS No. 123, which measures and expenses the fair value of each stock option on the date of grant, our earnings and earnings per share would have been reduced to the pro forma amounts listed below (unaudited, in thousands, except per share data):

 
   Three Months Ended
 
   March 29,
2003
   March 30,
2002
Net Earnings:            
  As reported   $ 11,403   $ 16,117
  Pro forma   $ 10,840   $ 15,609

Earnings Per share:
 
 
 
 
 
 
  As reported            
    Basic   $ 0.19   $ 0.26
    Diluted   $ 0.19   $ 0.26
  Pro forma            
    Basic   $ 0.17   $ 0.25
    Diluted   $ 0.17   $ 0.24

Weighted average common shares and common equivalent shares outstanding:
 
 
 
 
 
 
    Basic     61,216     61,049
    Diluted     62,805     63,849

7

        The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model, which uses a number of assumptions to estimate the value of stock option grants. Assumptions used in the Black-Scholes option-pricing model include: risk-free interest rates, dividend yield if applicable, expected option life and the volatility of the underlying stock price.

3. Impact of Adopting New Accounting Pronouncements

        Effective December 30, 2001, the beginning of our 2002 fiscal year, we adopted the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"), which changed our accounting for goodwill and other intangible assets with indefinite lives from an amortization method to an impairment only approach. In accordance with the requirements of SFAS No. 142, we tested the goodwill attributable to each of our reporting units for impairment as of December 30, 2001, the first day of fiscal 2002, and determined that none of our goodwill was impaired. Also, in accordance with the requirements of SFAS No. 142, we tested each of our trademarks for impairment by comparing the fair value of each trademark to its carrying value at December 30, 2001. Fair value was estimated using the relief from royalty method (a discounted cash flow methodology). Based on these impairment tests, we recorded a charge, reported as a cumulative effect of change in accounting principle, of $19.6 million ($12.4 million or $0.20 per diluted share, net of tax benefits) in the first quarter of 2002. This charge reduced the trademark carrying value of certain non-core brands, primarily Chubs and Diaparene, to their estimated fair value. We are required to test our goodwill and trademarks for impairment, based on the methodologies as outlined in SFAS No. 142, on an annual basis and more frequently if events or circumstances indicate a likelihood of impairment. We performed additional tests, as part of the required annual goodwill impairment testing, during the second quarter of 2002 and no reduction in goodwill or trademark balances were required.

        In April 2002, the FASB issued SFAS No. 145 ("SFAS No. 145"), "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." We adopted this statement effective December 29, 2002, the first day of fiscal 2003. This statement updates, clarifies and simplifies existing accounting pronouncements and requires that gains and losses on extinguishments of debt be classified as income or loss from continuing operations rather than as extraordinary items as previously required under the old accounting rules. Any gain or loss on extinguishment of debt previously classified as an extraordinary item in prior periods that does not meet the criteria of APB 30 for such classification has been reclassified to conform to the provisions of SFAS No. 145. In accordance with SFAS No. 145, we have reclassified our historical results and there was no impact on our previously reported net earnings.

4. Restructuring and Impairment Costs

        In the first quarter of 2002, we recorded a pre-tax restructuring and asset impairment charge of $7.6 million, or $0.08 per diluted share, as a result of our decision to close our Watervliet, New York plastic molding facility. The write-off of assets associated with the closure of the facility was approximately $4.2 million and severance and other exit costs related to the termination of employees were estimated at $3.4 million. As of March 29, 2003, we spent $2.6 million related to severance and other exit costs since we announced our intent to close the facility in the first quarter of 2002. The Watervliet facility manufactured component parts primarily for our infant feeding category and employed approximately 160 people at the time of the announcement.

8

5. Impact of New Tax Regulations

        In the first quarter of 2002, the U.S. Treasury issued new regulations that replaced the loss disallowance rules applicable to the sale of stock of a subsidiary member of a consolidated tax group. These regulations permit us to utilize a previously disallowed $135.1 million tax capital loss that resulted from the sale of Playtex Beauty Care Inc. during fiscal 1999. We can utilize the tax capital loss associated with the sale of Playtex Beauty Care Inc. to offset capital gains during the statutory five-year carry forward period. We anticipate utilizing $40.0 million of the capital loss to offset a capital gain, in fiscal 2003, related to the retirement of our related party notes, which come due on December 15, 2003. Accordingly, we recorded a tax benefit of $14.3 million, or $0.22 per diluted share, in the first quarter of 2002. The remaining capital loss carryover will expire on December 25, 2004, if not utilized. The remaining tax benefit associated with the capital loss carryforward has been reduced by a valuation allowance, as we do not currently expect to realize it. The tax benefit related to the new regulations, recorded in the first quarter of 2002, does not impact our effective tax rate during fiscal 2003. We expect our effective tax rate during fiscal 2003 to be between 36% - 37% of earnings before income taxes.

6. Accumulated Other Comprehensive Earnings

        The accumulated balances for each classification of comprehensive earnings are as follows (unaudited, in thousands):

 
   Foreign
Currency
Translation
Adjustment
   Minimum
Pension
Liability
Adjustment
   Accumulated
Other
Comprehensive
Earnings
  
Balance, December 28, 2002   $ (3,778 ) $ (763 ) $ (4,541 )
  Change in period     838     —     838  
   
 
 
 
Balance, March 29, 2003   $ (2,940 ) $ (763 ) $ (3,703 )
   
 
 
 

7. Balance Sheet Components

        The components of certain balance sheet accounts are as follows (in thousands):

 
   March 29,
2003
   December 28,
2002
  
 
   (Unaudited)

    
  
Cash   $ 25,145   $ 23,105  
Cash—lock box(a)     9,330     8,500  
Cash—restricted(b)     19,100     —  
   
 
 
  Net   $ 53,575   $ 31,605  
   
 
 

Receivables
 
$
37,883
 
$
28,707
 
Less allowance for doubtful accounts     (899 )   (972 )
   
 
 
  Net   $ 36,984   $ 27,735  
   
 
 
(a)
Cash held in lock box pending weekly settlement procedure for Receivables Facility (see Note 9).

(b)
In accordance with the terms of our senior secured credit facility, we deposited $19.1 million into an excess cash flow account in March of 2003. We used the $19.1 million in the excess cash flow account, together with $0.9 million of cash, to redeem $20.0 million of our 6% Convertible Subordinated Notes due 2004 (the "6% Convertible Notes") on April 24, 2003, subsequent to March 29, 2003, the balance sheet date (see Notes 8 and 13).

9

 
   March 29,
2003
   December 28,
2002
  
 
   (Unaudited)

    
  
Inventories:              
  Raw materials   $ 17,130   $ 18,780  
  Work in process     2,014     2,125  
  Finished goods     65,375     64,255  
   
 
 
      Total   $ 84,519   $ 85,160  
   
 
 

Net property, plant and equipment:
 
 
 
 
 
 
 
  Land   $ 2,376   $ 2,376  
  Buildings     39,941     39,694  
  Machinery and equipment     186,861     183,200  
   
 
 
      229,178     225,270  
  Less accumulated depreciation     (107,751 )   (104,071 )
   
 
 
      Net   $ 121,427   $ 121,199  
   
 
 

Accrued expenses:
 
 
 
 
 
 
 
  Advertising and sales promotion   $ 11,336   $ 16,665  
  Employee compensation and benefits     5,398     15,769  
  Interest     15,147     7,864  
  Insurance     1,512     1,501  
  Other     17,452     12,418  
   
 
 
      Total   $ 50,845   $ 54,217  
   
 
 

8. Long-Term Debt

        Long-term debt consists of the following (in thousands):

 
   March 29,
2003
   December 28,
2002
  
 
   (Unaudited)

    
  
Variable rate indebtedness:              
  Term C Loan   $ 447,750   $ 447,750  
  Revolving Credit Facility     28,000     —  
Fixed rate indebtedness:              
  93/8% Senior Subordinated Notes due 2011     350,000     350,000  
  6% Convertible Subordinated Notes due 2004     30,000     30,000  
   
 
 
      855,750     827,750  
  Less current maturities     (34,500 )   (4,500 )
   
 
 
      Total long-term debt   $ 821,250   $ 823,250  
   
 
 

        At March 29, 2003, our borrowings under the Revolving Credit Facility increased by $28.0 million, to fund our working capital needs associated with our seasonal Sun Care business.

10

        On May 22, 2001, we completed a refinancing of our senior indebtedness (the "Refinancing Transaction"). As part of the Refinancing Transaction we issued:

        In addition, we entered into a receivables purchase agreement (the "Receivables Facility") with a third party through a wholly-owned consolidated special purpose bankruptcy remote subsidiary of ours, Playtex A/R LLC. The net proceeds from the Refinancing Transaction and the Receivables Facility were used to pay-off all of our then outstanding indebtedness, except for the 6% Convertible Notes.

        On May 29, 2002, we amended our senior secured credit facility (the "Credit Facility") and issued a new $450.0 million Term C Loan and, together with $21.8 million of cash, we repaid in full our outstanding obligations under our Term A Loan and Term B Loan, which collectively totaled $471.8 million. Borrowings under the Term C Loan are less costly to us than borrowings under either the Term A Loan or Term B Loan. Under the Term C Loan, at our option, we pay LIBOR plus 2.25% for borrowings compared to LIBOR plus 2.75% for the Term A Loan and LIBOR plus 3.0% for the Term B Loan.

Fixed Rate Indebtedness

        Our fixed rate indebtedness at March 29, 2003 of $380.0 million consists of $350.0 million of our 93/8% Notes and $30.0 million of our 6% Convertible Notes. We pay interest on the 93/8% Notes semi-annually on June 1 and December 1 of each year. At any time prior to June 1, 2004, we may redeem up to 35% of the principal amount of the 93/8% Notes with the proceeds of one or more equity offerings at a redemption price of 109.375% of the principal amount, plus accrued and unpaid interest to the redemption date. We do not have the option to redeem the 93/8% Notes from June 1, 2004 through May 31, 2006. At our option, we may redeem the notes on or after June 1, 2006 at the redemption prices (expressed as a percentage of principal amount) listed below plus accrued and unpaid interest to the redemption date.

Year
   Percentage
2006   104.688
2007   103.125
2008   101.563
2009 and thereafter   100.000

        The 6% Convertible Notes are currently redeemable by us, in whole or in part, at our option at a redemption price equal to 100% of the principal amount, together with accrued and unpaid interest to the redemption date. As noted above, we redeemed $20.0 million principal amount of our 6% Convertible Notes on November 6, 2002, and an additional $20.0 million principal amount on April 24, 2003 subsequent to the balance sheet date (see Note 13). The remaining $10.0 million principal amount of 6% Convertible Notes are convertible into approximately 0.5 million shares of our common stock at a conversion price of approximately $19.15 per common share. The 6% Convertible Notes mature on January 31, 2004.

11

Variable Rate Indebtedness

        Our variable rate indebtedness of $475.8 million at March 29, 2003 consists of the $447.8 million outstanding under the Term C Loan and the $28.0 million borrowed against the Revolving Credit Facility. The rates of interest we pay under the Term C Loan and Revolving Credit Facility vary over time depending on short-term interest rates. We also pay fees on our Revolving Credit Facility commitments, which vary depending on our credit rating. Loans made under the Revolving Credit Facility mature on May 22, 2007 and our final principal payment on the Term C Loan is due May 31, 2009. Scheduled principal payments on the Term C Loan are made semi-annually and amount to: $4.5 million per year in fiscal years 2003 through 2007, $213.7 million in 2008, and $211.5 million in 2009.

        We paid one $2.3 million semi-annual payment on the Term C Loan during fiscal 2002. At March 29, 2003, we had $93.6 million of unused borrowings available to us under the Revolving Credit Facility, net of outstanding letters of credit.

        We periodically use financial instruments, such as derivatives, to manage the impact of interest rate changes on our variable rate debt. At March 29, 2003, we were not a party to any derivative or other type of financial instrument that hedged the impact of interest rate changes on our variable rate debt. Based on our interest rate exposure at March 29, 2003, a 1% increase in interest rates would result in an estimated $4.8 million of additional interest expense on an annualized basis.

        The rates of interest we pay on our variable rate debt are, at our option, a function of various alternative short term borrowing rates, such as the Prime Rate or LIBOR.

        The provisions of the credit agreement for our Credit Facility require us to meet certain financial covenants and ratios and include limitations and restrictions, including:

•   indebtedness and liens,   •   certain dividends and other distributions,
•   major acquisitions or mergers,   •   the application of excess cash flow, and
•   capital expenditures and asset sales,   •   prepayment and modification of all indebtedness or equity capitalization.

        We anticipate that we may require greater flexibility under the leverage ratio test under the Credit Facility in the next few quarters. We have had discussions with our agent bank and expect that we will be able to obtain any necessary amendment.

        The 93/8% Notes also contain certain restrictions and requirements. Under the terms of each of these agreements, payment of cash dividends on our common stock is restricted. Certain of our wholly owned subsidiaries are guarantors of the 93/8% Notes.

        At March 29, 2003, our required principal repayments (excluding balances outstanding on our Revolving Credit Facility and amounts due to related party) were:

•   $4.5 million in 2003,   •   $4.5 million in 2006,
•   $34.5 million in 2004,   •   $4.5 million in 2007, and
•   $4.5 million in 2005,   •   $775.3 million thereafter.

        On April 24, 2003, after the balance sheet date, we redeemed $20.0 million of our 6% Convertible Notes that were due in January 2004 (see Note 13).

12

        In the event that we have excess cash flow, as defined in our Credit Facility, we are, within 90 days of each year-end, required to: make either mandatory debt repayments on the Term C Loan equal to the amount of the excess cash flow, as defined, or make deposits into the excess cash flow account equal to the amount of the excess cash flow. At the end of fiscal 2002, we determined that we had excess cash flow as defined in our Credit Facility and we deposited, in March of 2003, $19.1 million into the excess cash flow account. This $19.1 million along with $0.9 million of cash was used to redeem $20.0 million of our 6% Convertible Notes as allowed under our Credit Agreement (see Note 13).

9. Receivables Facility

        On May 22, 2001, we entered into the Receivables Facility through a wholly-owned, special purpose bankruptcy remote subsidiary of ours; Playtex A/R LLC. Through the Receivables Facility, we sell on a continuous basis to Playtex A/R LLC substantially all of our domestic customers' trade invoices that we generate. Playtex A/R LLC sells to a third-party commercial paper conduit (the "Conduit") an undivided fractional ownership interest in these trade accounts receivable. The Conduit issues short-term commercial paper to finance the purchase of the undivided fractional interest in the receivables. The total funding available to us on a revolving basis under the Receivables Facility is up to $100.0 million, depending primarily on: the amount of receivables generated by us and sold to Playtex A/R LLC, the rate of collection on those receivables, and other characteristics of the receivables pool which affects their eligibility. Our Retained Interest in Receivables represents our subordinated fractional undivided interest in receivables sold to Playtex A/R LLC and the net unamortized deferred financing costs incurred by Playtex A/R LLC.

        We have agreed to continue servicing the sold receivables at market rates; accordingly, no servicing asset or liability has been recorded. Playtex A/R LLC shares credit risk with the Conduit as the undivided fractional interest in the receivables are sold without recourse. We believe, however, that Playtex A/R LLC has most of the credit risk associated with customers that do not pay, as the Conduit has preferential treatment with regard to cash settlement procedures and other conditions that limit its credit exposure. Our retained interest in receivables will be negatively impacted if Playtex A/R LLC writes-off any receivable balances as uncollectible. We believe the Receivables Facility is beneficial to us as: (1) we convert trade receivables to cash faster, and (2) although we sell our invoices to Playtex A/R LLC at a discount and pay fees to the Conduit, these expenses are lower than our borrowing costs under our Credit Facility.

        At March 29, 2003, Playtex A/R LLC had approximately $117.0 million of receivables, of which $52.8 million of undivided fractional interest therein was sold to the Conduit. For the three months ended March 29, 2003, we sold in aggregate approximately $160.2 million of accounts receivable to Playtex A/R LLC. In return, we've received from Playtex A/R LLC approximately $153.5 million of cash.

        We sell receivables at a discount, which is included in Other Expenses in the Consolidated Statements of Earnings. This discount, which was $0.5 million in the three month period ended March 29, 2003, reflects the estimated fees required by the Conduit to purchase a fractional undivided interest in the receivables. The fees are based on the payment characteristics of the receivables, most notably their average life, interest rates in the commercial paper market and historical credit losses. Also included in Other Expenses is the impact of the amortization of deferred financing costs incurred by Playtex A/R LLC to establish the Receivables Facility.

        We account for the sale of accounts receivable to Playtex A/R LLC and related transactions with the Conduit in accordance with SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." At the time the receivables are sold, the balances are removed from our balance sheet. Playtex A/R LLC pays fees on the value of the undivided interest of the receivables sold to the Conduit equal to the 30 day LIBOR rate, which is reset weekly. In addition, Playtex A/R LLC pays a 0.25% per annum fee on the utilized portion of the Receivables Facility and a 0.45% per annum liquidity fee on the entire committed amount of the Receivables Facility.

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Because of the short-term nature, generally less than 60 days, of our trade accounts receivable sold to Playtex A/R LLC and the historically low credit risk associated with these receivables, the carrying value of our Retained Interest in Receivables approximates the fair value.

        The Receivables Facility reaches the end of its current term on May 20, 2003. We anticipate that the Receivables Facility will be renewed prior to this date. The Receivables Facility may be terminated prior to its term in the event of:

•   nonpayment of fees or other amounts when due,   •   bankruptcy events,
•   violation of covenants,   •   material judgments,
•   failure of any representation or warranty to be true in   •   defaults under the Receivables Facility,
    all material respects when made,   •   a servicing default, and
        •   a downgrade in the Senior Secured Credit Facility to less than B- by S&P and less than B3 by Moody's.

10. Business Segments

        We are organized in three divisions:

        Our Personal Products Division includes Infant Care and Feminine Care products sold in the United States primarily to mass merchandisers, grocery and drug classes of trade. The Infant Care product category includes the following brands:

•   Playtex disposable nurser system, cups and reusable   •   Baby Magic infant toiletries
    hard bottles   •   Mr. Bubble children's bubble bath
•   Wet Ones pre-moistened towelettes   •   Baby Magic baby wipes, and
•   Diaper Genie diaper disposal system   •   Binky pacifiers.

The Feminine Care product category includes a wide range of plastic and cardboard applicator tampons. As well as complementary products, marketed under such brand names as:

Tampons
   Complementary Products
•   Playtex Gentle Glide,   •   Playtex Personal Cleansing Cloths for use in
•   Playtex Portables,       feminine hygiene, and
•   Playtex Slimfits,   •   Playtex Heat Therapy patch to alleviate
•   Playtex Silk Glide,       discomfort associated with menstrual pain.

        Our Consumer Products Division includes a number of leading and well-recognized brands sold in the United States primarily to mass merchandisers, grocery and drug classes of trade. The Consumer Products Division includes the following brands:

•   Banana Boat Sun Care products   •   Binaca breath spray and drops
•   Woolite rug and upholstery cleaning products   •   Tussy deodorant
•   Playtex Gloves   •   Dentax oral care products, and
•   Ogilvie at-home permanents   •   Tek toothbrushes.

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        Our International/Corporate Sales Division includes:

•   Sales to specialty classes of trade in   •   Export sales
    the United States including: warehouse   •   Sales in Puerto Rico
    clubs, military, convenience stores,   •   Results from our Canadian and Australian subsidiaries
    specialty stores, and telemarketing   •   Sales of private label tampons.

The International/Corporate Sales Division sells many of the same products as are available to our U.S. customers.

        We evaluate division performance based on their product contribution excluding general corporate allocations. Product contribution is defined as gross profit less advertising and sales promotion expenses. All other operating expenses are managed at a corporate level and are not used by us to evaluate division results. We do not segregate assets, amortization, capital expenditures, or interest income and interest expense to divisions.

        The results of our divisions for the three months ended March 29, 2003 and March 30, 2002 are as follows (dollars in thousands):

 
   Three Months Ended
  
 
   March 29, 2003
   March 30, 2002
  
 
   Net
Sales
   Product
Contrib.
   Net
Sales
   Product
Contrib.
  
Personal Products   $ 86,156   $ 32,593   $ 103,462   $ 49,425  
Consumer Products     65,419     25,357     58,529     20,614  
International and Other     29,358     12,898     34,760     16,431  
Unallocated Charges     —     (146 )   —     (131 )
   
 
 
 
 
  Total Consolidated   $ 180,933     70,702   $ 196,751     86,339  
   
       
       

Reconciliation to operating earnings:
 
 
 
 
 
 
 
 
 
 
 
 
 

Selling, distribution, research and administrative
 
 
 
 
 
38,673
 
 
 
 
 
39,033
 
Restructuring and asset impairment           —           7,599  
Amortization of intangibles           226           226  
         
       
 
  Operating earnings         $ 31,803         $ 39,481  
         
       
 

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11. Earnings Per Share

        The following table explains how our basic and diluted Earnings Per Share ("EPS") were calculated for the three months ended March 29, 2003 and March 30, 2002 (unaudited, in thousands, except per share amounts):

 
   Three Months Ended
 
   March 29,
2003
   March 30,
2002
Numerator:            
  Earnings before cumulative effect of change in accounting principle—as reported   $ 11,403   $ 28,540
  Adjustment for interest on Convertible Note     284     473
   
 
    Earnings before cumulative effect of change in accounting principle—as adjusted   $ 11,687   $ 29,013
             
  Net earnings—as reported   $ 11,403   $ 16,117
  Adjustment for interest on Convertible Note     284     473
   
 
  Net earnings—as adjusted   $ 11,687   $ 16,590
   
 

Denominator:
 
 
 
 
 
 
  Weighted average shares outstanding—as reported     61,216     61,049
  Adjustment for dilutive effect of employee stock options     22     189
  Adjustment for dilutive effect of Convertible Notes     1,567     2,611
   
 
  Weighted average shares outstanding—as adjusted     62,805     63,849
   
 

Earnings per share—Basic:
 
 
 
 
 
 
  Earnings before cumulative effect of change in accounting principle   $ 0.19   $ 0.47
    Net earnings   $ 0.19   $ 0.26

Earnings per share—Diluted:
 
 
 
 
 
 
  Earnings before cumulative effect of change in accounting principle   $ 0.19   $ 0.45
    Net earnings   $ 0.19   $ 0.26

        Basic EPS excludes all potentially dilutive securities. Basic EPS is computed by dividing net earnings by the weighted average number of common shares outstanding for the period. Diluted EPS includes all potentially dilutive securities. Diluted securities include stock options granted to our employees and shares that may be exchanged for the 6% Convertible Notes, if determined to be dilutive. Diluted EPS is computed by dividing net earnings, adjusted by the if-converted method for convertible securities, by the weighted average number of common shares outstanding for the period plus the number of additional common shares that would have been outstanding if the dilutive securities were issued. In the event the dilutive securities are anti-dilutive (have the affect of increasing EPS), the impact of the dilutive securities is not included in the computation.

12. Contingent Liabilities

        In our opinion, there are no claims, commitments, guarantees or litigation pending to which we or any of our subsidiaries is a party which would have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

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13. Subsequent Event

        On April 24, 2003, we redeemed $20.0 million principal amount of our 6% Convertible Notes for an aggregate consideration of approximately $20.3 million, including accrued and unpaid interest to the redemption date. The remaining $10.0 million principal of 6% Convertible Notes mature on January 31, 2004 and are convertible into approximately 0.5 million shares of our common stock. The conversion price is approximately $19.15 per common share (see Note 8).

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PLAYTEX PRODUCTS, INC.
PART I—FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with:

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995

        This document includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future results. When we use words in this document such as "anticipates," "intends," "plans," "believes," "estimates," "expects," and similar expressions we do so to identify forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements. These forward-looking statements are affected by risks, uncertainties, and assumptions that we make, including, among other things, the Risk Factors that are listed in Item I. of our Annual Report on Form 10-K for the year ended December 28, 2002 and:

•   price and product changes,   •   impact of weather conditions,
•   promotional activity by competitors,       especially on Sun Care product sales,
•   the loss or bankruptcy of a significant customer,   •   our level of debt and its restrictive covenants,
•   capacity limitations,   •   interest rate fluctuations,
•   the difficulties of integrating acquisitions,   •   future cash flows,
•   raw material and manufacturing costs,   •   dependence on key employees, and
•   adverse publicity and product liability claims,   •   highly competitive nature of consumer products business.

You should keep in mind that any forward-looking statement made by us in this document, or elsewhere, speaks only as of the date on which we make it. New risks and uncertainties come up from time to time, and it's impossible for us to predict these events or how they may affect us. In light of these risks and uncertainties, you should keep in mind that any forward-looking statements made in this report or elsewhere might not occur.

        On November 13, 2002, we announced our intent to undertake a process to evaluate strategic alternatives for maximizing shareholder value. The strategic alternatives to be considered include, but are not limited to, business combinations with one or more parties to form a larger personal care and household products company, selling the entire company, divesting one or more lines of business, and acquiring strategic lines of business. We cannot assure you that this process will result in a transaction.

        In addition, the preparation of financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions. These estimates and assumptions affect:

        Actual results may vary from our estimates and assumptions. These estimates and assumptions are based on historical results, assumptions that we make as well as assumptions by third parties. The level of reserves for Sun Care product returns, bad debts and advertising and promotional costs are three areas of which you should be aware (see Management's Discussion and Analysis—Critical Accounting Policies).

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Trademarks

        We have proprietary rights to a number of trademarks important to our business, such as: Active Sport, Baby Magic (in United States and Canada), Banana Boat, Binaca, Binky, Blasters, Big Sipster, CoolStraw, Diaper Genie, Dentax, DrinkUp, Drop-Ins, Fast Blast, Gentle Glide, Get On The Boat, Gripster, HandSaver, Heat Therapy, Heavy Traffic, Insulator, LipPops, Most Like Mother, Mr. Bubble, Natural Action, Ogilvie, Oxy Deep, Power Blasts, Power Shot, Precisely Right, QuickStraw, Quik Blok, Safe'N Sure, Silk Glide, SipEase, Slimfits, Soft Comfort, Sooth-A-Caine, Suntanicals, Tub Mate, Tek, Tussy, VentAire, VitaSkin, and Wet Ones. We also own a royalty free license in perpetuity to the Playtex and Living trademarks, and to the Woolite trademark for rug and upholstery cleaning products in the United States and Canada.

Items Affecting Comparability

        Our results for the first quarter of 2003 and 2002 are for the 13-week periods ended March 29, 2003 and March 30, 2002, respectively. All references to market share and market share data are for comparable 13 week periods and represent our percentage of the total U.S. dollar volume of products purchased by consumers in the applicable category (dollar market share or retail consumption). This information is provided to us from the ACNielsen Company and is subject to revisions. The market share data does not include scanner/consumption data from Wal-Mart Stores, Inc., as they ceased providing this information to third parties.

Results of Operations

Three Months Ended March 29, 2003 Compared To
Three Months Ended March 30, 2002

Consolidated Net Sales—Our consolidated net sales decreased $15.8 million, or 8%, to $180.9 million in the first quarter of 2003.

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Consolidated Gross Profit—Our consolidated gross profit decreased $14.3 million, to $96.8 million in the first quarter of 2003. As a percent of net sales, gross profit decreased 3.0 percentage points, to 53.5% in the first quarter of 2003. The decrease in gross profit and gross profit as a percent of net sales was due primarily to lower net sales, the mix of products sold and the impact of fixed manufacturing costs on lower production volumes.

Consolidated Product Contribution—Product contribution is defined as gross profit less advertising and sales promotion expenses. See Note 10 for a reconciliation of product contribution to operating earnings. Our consolidated product contribution decreased $15.6 million, or 18%, to $70.7 million in the first quarter of 2003. As a percent of net sales, product contribution decreased 4.8 percentage points to 39.1% in the first quarter of 2003. The decrease in product contribution and product contribution as a percent of net sales

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was due primarily to lower gross profit, as discussed, combined with higher overall advertising and sales promotion expenses. Our overall advertising and sales promotion expenses increased in absolute dollars as well as a percent of net sales. We increased our advertising and promotional expenses to defend our tampon franchise as discussed previously.

Consolidated Operating Earnings—Our consolidated operating earnings decreased $7.7 million, or 19%, to $31.8 million in the first quarter of 2003. The decrease in operating earnings was the result of lower consolidated product contribution as discussed, and higher selling, general and administrative expenses reflecting normal salary and wage increases. In the first quarter of 2002, we recorded a pre-tax restructuring and asset impairment charge of $7.6 million, or $0.08 per diluted share, as a result of our decision to close our Watervliet, New York plastic molding facility (see Note 4). Excluding the impact of the restructuring and asset impairment charge in the first quarter of 2002, our consolidated operating earnings would have decreased $15.3 million, or 32%, in the first quarter of 2003.

Consolidated Interest Expense—Our consolidated interest expense decreased $2.7 million, or 17%, to $13.4 million in the first quarter of 2003. The decrease in interest expense was due to the combined impact of:

Consolidated Other Expenses—Our consolidated other expenses decreased $0.4 million, or 49%, to $0.5 million in the first quarter of 2003. On May 22, 2001, we entered into a receivables purchase agreement with a third party as part of the refinancing transaction (see Notes 8 and 9). The amount charged to other expenses represents the discount offered to the third party on the sale of receivables and the amortization of deferred financing costs associated with the formation of the Receivables Facility. The decrease, in the first quarter of 2003, was due primarily to a lower utilization rate of the Receivables Facility compared to the first quarter of 2002 and lower costs associated with the Receivables Facility as market interest rates have declined.

21

Consolidated Income Taxes—Our consolidated income taxes were $6.5 million in the first quarter of 2003 compared to an income tax benefit of $6.1 million in the first quarter of 2002. In the first quarter of 2002, we recorded a tax benefit of $14.3 million, or $0.22 per diluted share, due to new regulations issued by the U.S. Treasury on March 7, 2002 (see Note 5). The new regulations permit us to partially utilize a previously disallowed capital loss on the sale of Playtex Beauty Care Inc., which we sold during fiscal 1999. We expect our effective tax rate during fiscal 2003 to be between 36% - 37% of earnings before income taxes.

Cumulative Effect of Change in Accounting Principle—In connection with the adoption of SFAS No. 142 (see Note 3), we performed impairment tests on our indefinite-lived intangible assets based on a fair value concept as prescribed by SFAS No. 142. We recorded an after-tax impairment charge of $12.4 million, or $0.20 per diluted share, as a cumulative effect of change in accounting principle as a result of the adoption of SFAS No. 142. The impairment related to certain trademarks acquired in our acquisition of Personal Care Holdings, Inc., which we acquired on January 28, 1998. We determined the fair values of all of our trademarks at December 29, 2001 and compared them with their carrying values. The trademarks impact by this write-off included our non-core brands of: Chubs, Diaparene, Tussy, Dorothy Gray, and Better Off.

Liquidity and Capital Resources

        On November 13, 2002, we announced our intent to undertake a process to evaluate certain strategic alternatives including, but not limited to, business combinations, selling the entire company, divesting one or more lines of business, and acquiring strategic lines of business. We cannot assure you that this process will result in a transaction. Also certain scenarios may require us to seek additional debt or equity financing, in certain situations, in connection with some of the strategic alternatives available to us. As we cannot assure you that such financing will be available to us, our ability to execute certain strategic alternatives may be restricted.

        At March 29, 2003, long-term debt (including current portion but excluding obligations due to related party) was $855.8 million compared to $827.8 million at December 28, 2002. We increased our short-term borrowings by $28.0 million at March 29, 2003, to fund our working capital needs associated with our seasonal Sun Care business. One of our major corporate objectives has been to reduce our indebtedness. We reduced our indebtedness by $61.0 million in fiscal 2002, $42.8 million in fiscal 2001, and $56.3 million in fiscal 2000. Highlights of this strategy include:

22

        As of the balance sheet date, our remaining scheduled principal repayment obligations were (excluding balances outstanding under our Revolving Credit Facility and amounts due to related party):

•   $4.5 million in 2003,   •   $4.5 million in 2006,
•   $34.5 million in 2004,   •   $4.5 million in 2007, and
•   $4.5 million in 2005,   •   $775.3 million thereafter.

        On April 24, 2003, subsequent to March 29, 2003 the balance sheet date, we redeemed $20.0 million of our 6% Convertible Notes that were due in January of 2004.

        In the event that we have excess cash flow, as defined in our Credit Facility, we are, within 90 days of each year-end, required to: make either mandatory debt repayments on the Term C Loan equal to the amount of the excess cash flow, as defined, or make deposits into the excess cash flow account equal to the amount of the excess cash flow. At the end of fiscal 2002, we determined that we had excess cash flow as defined in our Credit Facility and we deposited, in March of 2003, $19.1 million into the excess cash flow account. This $19.1 million along with $0.9 million of cash was used to redeem $20.0 million of our 6% Convertible Notes as allowed under our Credit Agreement.

        Our Revolving Credit Facility provides for borrowings of up to $125.0 million and matures on May 22, 2007. At March 29, 2003, we had $93.6 million available to borrow under the Revolving Credit Facility, net of outstanding letters of credit. At March 29, 2003, the undivided fractional interest sold by Playtex A/R LLC to a third party commercial paper conduit under the Receivables Facility was $52.8 million. The Receivables Facility reaches the end of its current term on May 20, 2003. We anticipate that the Receivables Facility will be renewed prior to this date.

        The terms of the Credit Facility require us to meet certain financial tests and also include conditions or restrictions on:

•   indebtedness and liens,   •   certain dividends and other distributions,
•   major acquisitions or mergers,   •   the application of excess cash flow, and
•   capital expenditures and asset sales,   •   prepayment and modification of all indebtedness or equity capitalization.

        We anticipate that we may require greater flexibility under the leverage ratio test under the Credit Facility in the next few quarters. We have had discussions with our agent bank and expect that we will be able to obtain any necessary amendment.

        At March 29, 2003, our working capital (current assets net of current liabilities) increased $11.5 million to $126.4 million compared to $114.9 million at December 28, 2002.

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        Our net cash flows used for operations were $2.4 million. The use of cash by operations was driven primarily by Sun Care working capital needs and lower operating earnings as previously discussed. Our capital expenditures for equipment and facility improvements were $3.7 million for the three months ended March 29, 2003. Our capital expenditures were used primarily to support new products and product improvements, expand capacity in key product areas, upgrade production equipment, invest in new technologies, and improve our facilities. We anticipate 2003 capital expenditures to be approximately $25.0 million.

        We intend to fund our operations, capital expenditures and debt service requirements through cash flow generated from operations, including proceeds from the Receivables Facility, and borrowings under the Revolving Credit Facility through fiscal 2007. However, we do not expect to generate sufficient cash flow from operations to pay in full the 2008 and 2009 scheduled principal payments on the Term C Loan, which collectively total $425.3 million. In addition, we do not expect to generate sufficient cash flow from operations to fund the $350.0 million scheduled principal payment on the 93/8% Notes due in fiscal 2011. Accordingly, we will have to refinance our obligations, sell assets or raise equity capital to repay the principal amounts of these obligations. Historically, our cash flows from operations and refinancing activities have enabled us to meet all of our obligations. However, we cannot guarantee that our operating results will continue to be sufficient or that future borrowing facilities will be available for the payment or refinancing of our debt on economically attractive terms.

Off Balance Sheet Arrangements and Other Commitments

        On occasion, we enter into certain off-balance sheet arrangements and other commitments with unaffiliated third parties. At March 29, 2003, we had two-off balance sheet arrangements.

        On May 22, 2001, we entered into the Receivables Facility through a wholly owned, special purpose bankruptcy remote subsidiary of ours, Playtex A/R LLC (see Note 9). Through the Receivables Facility, we sell on a continuous basis to Playtex A/R LLC substantially all of our domestic customers' trade invoices that we generate. Playtex A/R LLC sells to a third-party commercial paper conduit (the "Conduit") an undivided fractional ownership interest in these trade accounts receivable. We believe the Receivables Facility is beneficial to us as: (1) we convert trade receivables to cash faster, and (2) although we sell our invoices to Playtex A/R LLC at a discount and pay fees to the Conduit, these expenses are lower than our borrowing costs under the Credit Facility. We sold $52.8 million of undivided fractional interest in our receivables, at March 29, 2003 and $39.0 million of undivided fractional interest in our receivables, at December 28, 2002, to the Conduit.

        We also enter into operating leases with unaffiliated third parties. These leases are primarily for buildings, manufacturing equipment, automobiles and information technology equipment. At March 29, 2003 and December 28, 2002, we had in aggregate approximately $32.0 million of committed expenses associated with operating leases that are not reflected on our Condensed Consolidated Balance Sheet as a liability, in accordance with generally accepted accounting principles. We believe operating leases are beneficial as they allow us to better match cash flows associated with the asset and the benefits derived from it. Operating leases also provide us with greater flexibility in regards to technological change, minimizing the risk of our productive assets becoming obsolete.

Critical Accounting Policies

        The preparation of financial statements in accordance with generally accepted accounting principles requires us to make estimates and assumptions. These estimates and assumptions affect:

        Actual results could vary from our estimates and assumptions. These estimates and assumptions are based on historical results, assumptions that we make as well as assumptions by third parties.

24

        The level of reserves for Sun Care product returns, bad debts and advertising and promotional costs are three areas of which you should be aware.

Recently Issued Accounting Standards

        In December 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure" ("SFAS No. 148"). SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation as originally provided by SFAS No. 123 "Accounting for Stock-Based Compensation". Additionally, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosure in both the annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used on reported results. The transitional requirements of SFAS No. 148 are effective for all financial statements for fiscal years ending after December 15, 2002. We adopted the disclosure portion of this statement for the current fiscal quarter ended March 29, 2003. The application of the disclosure portion of this standard will have no impact on our consolidated financial position or results of operations. The FASB recently indicated that they will likely require stock-based employee compensation to be recorded as a charge to earnings pursuant to a standard they are currently deliberating, which they believe will become effective on January 1, 2004. We will continue to monitor their progress on the issuance of this standard and the impact it may have on our financial statements.

25


PLAYTEX PRODUCTS, INC.
PART I—FINANCIAL INFORMATION
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK AND
QUALITY OF CONTROLS AND PROCEDURES

Item 3. Quantitative and Qualitative Disclosure about Market Risk

        We periodically use financial instruments, such as derivatives, to manage the impact of interest rate changes on our variable rate debt and its effect on our earnings and cash flows. Our policies prohibit the use of derivative instruments for the sole purpose of trading for profit on price fluctuations or to enter into contracts, which intentionally increase our underlying interest rate exposure. At March 29, 2003, our total indebtedness consisted of $380.0 million in fixed rate debt and $475.8 million in variable rate debt. We currently are not a party to any financial instruments, such as derivatives, to manage the impact of interest rate changes on our variable rate debt. Based on our interest rate exposure at March 29, 2003, a 1% increase in interest rates would result in an estimated $4.8 million of additional interest expense on an annualized basis.


Item 4. Controls and Procedures

(a)
Evaluation of disclosure controls and procedures. Within 90 days prior to the date of this report (the "Evaluation Date"), our Chief Executive Officer and our Executive Vice President and Chief Financial Officer carried out an evaluation of the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c). Based on that evaluation, these officers have concluded that as of the Evaluation Date, our disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company would be made to known to them, particularly during the period in which this report was being prepared.
(b)
Changes in internal controls. There have been no significant changes in our internal controls or in other factors that could significantly affect our internal controls after the date of their evaluation, nor any significant deficiencies or material weaknesses in such internal controls requiring corrective actions. As a result, no corrective actions were taken.

26


PLAYTEX PRODUCTS INC.
PART II—OTHER INFORMATION

Item 1. Legal Proceedings

        The following should be read in conjunction with Part 1, Item 3., "Legal Proceedings" in our Annual Report on Form 10-K for the year ended December 28, 2002.

        As of the end of April 2003, there were approximately 6 pending toxic shock syndrome claims relating to Playtex tampons, although additional claims may be made in the future.


Item 6. Exhibits and Reports on Form 8-K

a.
Exhibits:

99.1
Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2
Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

b.
Reports on Form 8-K

        None.

27


SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) 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.

    PLAYTEX PRODUCTS, INC.

Date: May 13, 2003
 
By:
 
/s/    MICHAEL R. GALLAGHER
Michael R. Gallagher
 Chief Executive Officer
(Principal Executive Officer)

Date: May 13, 2003
 
By:
 
/s/    GLENN A. FORBES
Glenn A. Forbes
 Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)

28


PLAYTEX PRODUCTS, INC.
CERTIFICATIONS

I, Michael R. Gallagher, Chief Executive Officer, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Playtex Products, Inc.;

2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a.
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b.
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c.
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a.
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b.
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.
The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 13, 2003   By:   /s/    MICHAEL R. GALLAGHER
Michael R. Gallagher
 Chief Executive Officer
(Principal Executive Officer)

29


PLAYTEX PRODUCTS, INC.
CERTIFICATIONS

I, Glenn A. Forbes, Executive Vice President and Chief Financial Officer, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Playtex Products, Inc.;

2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a.
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b.
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c.
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a.
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b.
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.
The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: May 13, 2003   By:   /s/    GLENN A. FORBES
Glenn A. Forbes
 Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)

30



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PLAYTEX PRODUCTS, INC. INDEX
PLAYTEX PRODUCTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
PLAYTEX PRODUCTS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited, in thousands, except per share data)
PLAYTEX PRODUCTS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE EARNINGS (Unaudited, in thousands)
PLAYTEX PRODUCTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)
PLAYTEX PRODUCTS, INC. PART I—FINANCIAL INFORMATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PLAYTEX PRODUCTS, INC. PART I—FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS
PLAYTEX PRODUCTS, INC. PART I—FINANCIAL INFORMATION QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK AND QUALITY OF CONTROLS AND PROCEDURES
PLAYTEX PRODUCTS INC. PART II—OTHER INFORMATION
SIGNATURES
PLAYTEX PRODUCTS, INC. CERTIFICATIONS
PLAYTEX PRODUCTS, INC. CERTIFICATIONS