AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 2001
REGISTRATION NO. 333-64070
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PLAYTEX PRODUCTS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 2676 51-0312772
(State or other jurisdiction (Primary Standard (IRS Employer
of Industrial Identification No.)
incorporation or organization) Classification Code Number)
300 NYALA FARMS ROAD
WESTPORT, CONNECTICUT 06880
203-341-4000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
PAUL E. YESTRUMSKAS, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
PLAYTEX PRODUCTS, INC.
300 NYALA FARMS ROAD
WESTPORT, CONNECTICUT 06880
203-341-4000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
COPIES TO:
JOHN C. KENNEDY, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
212-373-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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TABLE OF ADDITIONAL REGISTRANTS
STATE OR OTHER PRIMARY STANDARD IRS
JURISDICTION OF INDUSTRIAL EMPLOYER
INCORPORATION OR CLASSIFICATION IDENTIFICATION
NAME ORGANIZATION CODE NUMBER NUMBER
---- ---------------- ---------------- --------------
Playtex Sales & Services, Inc..................... Delaware 5199 51-0369908
Playtex Manufacturing, Inc........................ Delaware 2676 51-0369884
Playtex Investment Corp........................... Delaware 6719 51-0312688
Playtex International Corp........................ Delaware 6719 51-0338126
TH Marketing Corp................................. Delaware 6719 51-0316823
Smile-Tote, Inc................................... California 3089 95-4048687
Sun Pharmaceuticals Corp.......................... Delaware 2844 04-3169080
Personal Care Group, Inc.......................... Delaware 2676 22-3428291
Personal Care Holdings, Inc....................... Delaware 6719 51-0379213
Carewell Industries, Inc.......................... New York 3991 11-2967533
The address of each of the additional registrants is 300 Nyala Farms Road,
Westport, Connecticut 06880.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 19, 2001
PRELIMINARY PROSPECTUS
PLAYTEX PRODUCTS, INC.
EXCHANGE OFFER FOR $350,000,000 OF ITS
9 3/8% SENIOR SUBORDINATED NOTES DUE 2011
------------------------
TERMS OF THE EXCHANGE OFFER
- It will expire at 5:00 p.m., New York City time, on 2001, unless we
extend it.
- If all the conditions to this exchange offer are satisfied, we will
exchange all of our 9 3/8% Senior Subordinated Notes due 2011 issued on
May 22, 2001, which we refer to as the initial notes, that are validly
tendered and not withdrawn for new notes, which we refer to as the
exchange notes.
- You may withdraw your tender of initial notes at any time before the
expiration of this exchange offer.
- The exchange notes that we will issue you in exchange for your initial
notes will be substantially identical to your initial notes except that,
unlike your initial notes, the exchange notes will have no transfer
restrictions or registration rights.
- The exchange notes that we will issue you in exchange for your initial
notes are new securities with no established market for trading.
BEFORE PARTICIPATING IN THIS EXCHANGE OFFER, PLEASE REFER TO THE SECTION IN
THIS PROSPECTUS ENTITLED "RISK FACTORS" COMMENCING ON PAGE 13.
Each broker-dealer that receives exchange notes for its own account pursuant
to this exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the exchange notes. The letter of transmittal
accompanying this prospectus states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of exchange notes received in exchange for initial
notes where the initial notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. We have agreed that, for a
period of 180 days after the expiration date of this exchange offer, we will
make this prospectus available to any broker-dealer for use in connection with
any such resale. Please refer to the section of this prospectus entitled "Plan
of Distribution."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is , 2001.
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TABLE OF CONTENTS
PAGE
--------
Incorporation of Certain Documents by Reference............. ii
Forward-Looking Statements.................................. iii
Prospectus Summary.......................................... 1
Risk Factors................................................ 13
Use of Proceeds............................................. 19
Capitalization.............................................. 19
Selected Historical Consolidated Financial Data............. 20
Management's Discussion and Analysis of Financial Condition 22
and Results of Operations.................................
Business.................................................... 37
Management.................................................. 51
Principal Stockholders...................................... 54
Description of the Receivables Facility..................... 56
Description of Other Indebtedness........................... 58
The Exchange Offer.......................................... 61
Description of the Notes.................................... 69
Book-Entry, Delivery and Form............................... 107
Certain Federal Income Tax Consequences to Non-United States 111
Holders...................................................
Plan of Distribution........................................ 114
Legal Matters............................................... 114
Experts..................................................... 114
Where You Can Find More Information......................... 115
Index to Financial Statements............................... F-1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus incorporates by reference important business and financial
information about our company that is not included in or delivered with this
document. The information incorporated by reference is considered to be part of
this prospectus, and later information that we file with the Commission will
automatically update and supersede this information. Any statement modified or
superseded by subsequently filed materials shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus. Subject to the
preceding, the information in this prospectus is qualified in its entirety by
the information appearing in the documents incorporated by reference. We
incorporate by reference the documents listed below and any other filings made
with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 prior to termination of this offering:
- Our Annual Report on Form 10-K for the fiscal year ended December 30,
2000.
- Our Proxy Statement for our 2001 Annual Meeting of Shareholders.
- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
- Our Current Reports on Form 8-K filed January 11, May 7 and May 9, 2001.
You may request a copy of any of these documents, at no cost, by contacting
us in writing or by telephone at our principal executive office: Playtex
Products, Inc., Chief Financial Officer, 300 Nyala Farms Road, Westport,
Connecticut 06880, Telephone: (203) 341-4000. TO OBTAIN TIMELY DELIVERY OF ANY
COPIES OF FILINGS REQUESTED, PLEASE WRITE OR TELEPHONE NO LATER THAN ,
2001, FIVE DAYS PRIOR TO THE TERMINATION OF THIS EXCHANGE OFFER.
EXCEPT AS DESCRIBED ABOVE, NO OTHER INFORMATION IS INCORPORATED BY REFERENCE
IN THIS PROSPECTUS (INCLUDING, WITHOUT LIMITATION, INFORMATION ON OUR WEBSITE).
ii
FORWARD-LOOKING STATEMENTS
This prospectus 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 factors that are described in
"Risk Factors" and:
- price and product changes, - our level of debt,
- promotional activity by competitors, - interest rate fluctuations,
- the loss of a significant customer, - future cash flows,
- capacity limitations, - dependence on key employees,
- the difficulties of integrating - highly competitive nature of consumer
acquisitions, products business, and
- raw material and manufacturing costs, - general economic conditions which may
- adverse publicity and product impact the level of consumer spending.
liability claims,
- impact of weather conditions,
especially on our Sun Care product
sales,
You should keep in mind that any forward-looking statement made by us in
this prospectus 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 is impossible for us
to predict these events or how they may affect us. We have no duty to, and do
not intend to, update or revise the forward-looking statements in this
prospectus after the date hereof. In light of these risks and uncertainties, you
should keep in mind that any forward-looking statement made in this prospectus
or elsewhere might not occur.
TRADEMARKS
We have proprietary rights to a number of trademarks important to our
businesses, such as: ACTIVE SPORT, BABY MAGIC, BANANA BOAT, BINACA, BINKY,
BLASTERS, BIG SIPSTER, CHUBS, COOL COLORZ, COMFORTFLOW, COOLSTRAW, DENTAX,
DIAPER GENIE, DROP-INS, FAST BLAST, FUNKY FRUIT, GENTLE GLIDE, GET ON THE BOAT,
HANDSAVER, LIPPOPS, MOST LIKE MOTHER, MR. BUBBLE, NATURAL ACTION, OGILVIE,
PRECISELY RIGHT, PRECISION FLO, QUICKSTRAW, QUIK BLOK, SAFE'N SURE, SILK GLIDE,
SIPEASE, SLIMFITS, TUB MATE, TEK, TUSSY, VENTAIRE, WET ONES AND WHISPER WAVE. 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.
iii
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS BASIC INFORMATION ABOUT PLAYTEX AND THIS
EXCHANGE OFFER. IT MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO
YOU. FOR A MORE COMPREHENSIVE UNDERSTANDING OF OUR COMPANY AND THE EXCHANGE
OFFER, YOU SHOULD READ THIS ENTIRE DOCUMENT, INCLUDING "RISK FACTORS," AND THE
DOCUMENTS INCORPORATED BY REFERENCE. UNLESS OTHERWISE INDICATED, THE SOURCE OF
ALL MARKET SHARE DATA IN THIS PROSPECTUS IS ACNIELSEN COMPANY, AND THESE DATA
INCLUDE DATA REPORTED BY FOOD STORES, DRUG STORES AND MASS MERCHANDISERS. UNLESS
OTHERWISE INDICATED, ALL REFERENCES TO MARKET SHARE AND MARKET SHARE DATA ARE
FOR THE PERIODS INDICATED 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). UNLESS THE CONTEXT INDICATES OR OTHERWISE
REQUIRES, REFERENCES IN THIS PROSPECTUS TO "PLAYTEX," THE "COMPANY," "WE" OR
"US" ARE TO PLAYTEX PRODUCTS, INC. AND ITS CONSOLIDATED SUBSIDIARIES. THE TERM
"INITIAL NOTES" REFERS TO THE 9 3/8% SENIOR SUBORDINATED NOTES DUE 2011 THAT
WERE ISSUED ON MAY 22, 2001 IN A PRIVATE OFFERING. THE TERM "EXCHANGE NOTES"
REFERS TO THE 9 3/8% SENIOR SUBORDINATED NOTES DUE 2011 OFFERED WITH THIS
PROSPECTUS. THE TERM "NOTES" REFERS TO THE INITIAL NOTES AND THE EXCHANGE NOTES,
COLLECTIVELY. SOME OF THE STATEMENTS IN THIS "PROSPECTUS SUMMARY" ARE
FORWARD-LOOKING STATEMENTS. PLEASE REFER TO THE SECTION OF THIS PROSPECTUS
ENTITLED "FORWARD-LOOKING STATEMENTS."
THE COMPANY
We are a leading manufacturer and marketer of a diversified portfolio of
well-recognized branded consumer and personal products. In fiscal 2000, we
generated approximately 95% of our sales from products in which we held the
number one or two market share position. Our brand name recognition, leading
market positions in attractive categories, consumer-focused product innovation,
acquisition strategy and well-established distribution channels have enabled us
to grow sales over the last five years, and maintain a leading market position
in our principal brand names.
The following table sets forth our principal product lines and related data
for the year ended December 30, 2000 for each of our divisions--Personal
Products, Consumer Products and International/ Corporate Sales (dollars in
millions):
PERCENT
PRINCIPAL BRAND MARKET MARKET OF NET
DIVISIONS NAMES POSITION SHARE NET SALES SALES
--------- --------------- -------- -------- --------- --------
PERSONAL PRODUCTS DIVISION:
Infant Care -- Infant Feeding & Soothing......... PLAYTEX 1 39.3% $119.1 14.3%
-- Diaper Disposal System.............. DIAPER GENE 1 89.8 46.5 5.6
-- Infant Toiletries................... BABY MAGIC 2 12.6 43.0 5.2
-- Hands & Face Towelettes............. WET ONES 1 75.7 36.2 4.3
-- Bath Additives...................... MR. BUBBLE 2 19.8 9.7 1.2
-- Other............................... 17.7 2.1
Feminine Care.................................... PLAYTEX 2 30.7 214.3 25.8
------ -----
Total Personal Products Division............... 486.5 58.5
CONSUMER PRODUCTS DIVISION:
Sun Care......................................... BANANA BOAT 2 21.6 110.3 13.2
Household Products -- Carpet Cleaning............ WOOLITE 2 19.0 26.5 3.2
-- Household Gloves............. PLAYTEX 1 36.8 25.7 3.1
Personal Grooming -- At-Home Permanents.......... OGILVIE 1 66.2 19.2 2.3
-- Breath Spray & Drops......... BINACA 1 46.7 8.0 1.0
-- Other........................ 15.9 1.9
------ -----
Total Consumer Products Division............... 205.6 24.7
INTERNATIONAL/CORPORATE SALES DIVISION............. 139.2 16.8
------ -----
Total........................................ $831.3 100.0%
====== =====
1
COMPETITIVE STRENGTHS
We believe we are distinguished by the following competitive strengths:
- EXCEPTIONAL CONSUMER FRANCHISE. Our principal brand names--PLAYTEX, DIAPER
GENIE, BABY MAGIC, WET ONES, MR. BUBBLE, BANANA BOAT, WOOLITE, OGILVIE and
BINACA--are well known and respected by both consumers and retailers for
their high quality and innovative products. To further develop and
maintain our significant brand equity and consumer loyalty, we have spent,
on average, in excess of $165 million annually on advertising and
promotional support over the past three years.
- STRONG CASH FLOWS. Our historically strong cash flows and operating
margins, together with our low levels of capital expenditures, have
enabled us to reduce the ratio of our net debt to EBITDA from 7.2 in 1995
to 5.1 in 2000 and to implement our business strategy.
- LEADING MARKET POSITIONS IN ATTRACTIVE CATEGORIES. In 2000, we generated
approximately 95% of our net sales from categories in which we held the
number one or two market share position. Furthermore, we believe that the
core categories in which we compete, infant care, feminine care and sun
care, are attractive. The tampon market is characterized by steady growth,
a high degree of customer brand loyalty and a relatively low sensitivity
to economic cycles. The infant care and sun care markets have grown more
rapidly. The growth in the infant care market is principally due to the
receptiveness of consumers to new products, and the growth in the sun care
market is principally due to increased consumer awareness of sun care
issues coupled with more active lifestyles.
- CONSUMER-FOCUSED PRODUCT INNOVATION. We devote significant resources and
attention to product innovation and consumer research to develop
differentiated products with new and distinctive features which provide
increased convenience and value to our consumers. Innovative products we
have launched recently include:
-- ODOR ABSORBING TAMPONS: plastic and cardboard applicator tampons with
an all natural material in the tampon that absorbs odors without the
use of a fragrance or deodorant. The products appeal to a large group
of women who are concerned with odor protection yet reluctant to use a
fragranced tampon;
-- BIG SIPSTER and DRINKUP: spill-proof cups for older children which
extend the age range of the users of our products. In addition, THE
GRIPSTER: a spill-proof cup made to fit a smaller child's hand, which
helps children start using a drinking cup at an earlier age;
-- VENTAIRE and PRECISION FLO: two new innovative entries in the reusable
hard bottle category. Each of these bottles has a removable bottom to
make cleaning easier, and a patented nipple that reduces the amount of
air that gets into the bottle. These items helped increase our market
share 2.2 percentage points and grow our retail consumption more than
five times faster than the category in 2000;
-- In Sun Care, we continue to provide innovative ways to deliver sun
protection. The use of trigger sprays has made the application of our
Sun Care products easier, especially for parents with small children.
We have recently extended some of our popular sun protection formulas
to quick drying gels, which are not as messy as traditional sun
protection lotions; and
-- WOOLITE Spot & Stain Wipes: pre-moistened towelettes that clean up
spills and carpet stains without the need for towels, soap and water.
This product is a good example of our ability to use a familiar
manufacturing capability--the production of pre-moistened wipes--and
extend it to a new product line.
2
- WELL-ESTABLISHED DISTRIBUTION CHANNELS. Our products are distributed in
virtually every major food chain, drug chain, mass merchandiser and
warehouse club in the United States. We believe that the depth and breadth
of these distribution channels permit us to rapidly introduce new
products. To further enhance our relationship with our retailers, we are
focusing sales and marketing efforts on category management programs. In
these programs, we work with retailers to increase category sales and
profitability through detailed analysis of consumer buying habits and
improved merchandising techniques. We believe that these programs
strengthen our relationships with retailers and increase our sales.
GROWTH STRATEGY
The principal features of our growth strategy are outlined below:
- CONTINUE TO INCREASE SALES AND GAIN MARKET SHARE. We have increased sales
and gained market share in our key businesses over the last five years due
to consumer-focused product innovations, creative merchandising
techniques, targeted consumer marketing programs and successful
acquisitions. The compound annual growth rate of our net sales, excluding
the impact of acquisitions, was 6% over the last five years. We use a
number of techniques to grow our existing brands, including product
innovation derived from extensive consumer research and product
development skills, consumer-focused marketing programs to promote trial
use and strengthen consumer loyalty, and innovative category management
tools to strengthen our relationships with our retail partners and improve
on-shelf presence.
- SELECTIVELY EXTEND BRANDS INTO NEW PRODUCT CATEGORIES. We consider brand
building to be one of our core competencies. We will look to extend our
PLAYTEX, BANANA BOAT and other brand names into new product categories to
capitalize on our brand equity, our reputation for customer-focused
product development and our well-established distribution network. Recent
examples include co-branding the PLAYTEX brand name with the BABY MAGIC
and DIAPER GENIE lines.
- CONSIDER SELECTIVE ACQUISITIONS. Since 1998, we have made five
acquisitions which added a number of well-known brands, including WET
ONES, DIAPER GENIE, BABY MAGIC, OGILVIE, BINACA and MR. BUBBLE. Net sales
of our acquired brands were approximately $225 million in 2000. On an
opportunistic basis, we will continue to consider acquisitions that are
consistent with our strategic plans.
- BUILD SALES IN ALTERNATE MARKETS. Historically, less than 4% of our net
sales have been generated outside of North America. This has allowed us to
focus our efforts on expanding our business in the geographic area with
which we are most familiar. While this has been beneficial, we continue to
look to expand our sales outside of North America in a profitable manner
by partnering with experienced distributors familiar with the countries in
which they operate. In addition, we established a corporate sales team in
2000, which focuses exclusively on expanding our presence in alternate
distribution channels in the United States, including warehouse clubs,
convenience stores, military establishments, telemarketing and the
internet.
3
THE REFINANCING TRANSACTIONS
In connection with the offering of initial notes on May 22, 2001, we entered
into the following transactions (collectively, the "Refinancing Transactions"):
- A new senior secured credit facility (the "New Credit Facility") providing
for aggregate borrowings of $625.0 million, consisting of (i) a
$100.0 million six-year tranche A term loan facility (the "Tranche A
Facility"), (ii) a $400.0 million eight-year tranche B term loan facility
(the "Tranche B Facility") and (iii) a $125.0 million six-year revolving
credit facility (the "Revolving Facility").
- A new receivables purchase facility (the "Receivables Facility") entered
into by a newly formed, wholly-owned, bankruptcy-remote special purpose
subsidiary, with a maximum commitment of $100.0 million, of which
$75.0 million was funded at the closing of the offering of the initial
notes.
We used a portion of the net proceeds from the offering of initial notes on
May 22, 2001, the New Credit Facility and the Receivables Facility to:
- Repay all amounts outstanding under our previous credit agreements
(collectively, the "Existing Credit Facility") and terminate two related
interest rate swap agreements.
- Redeem on June 21, 2001 all of our then outstanding 9% senior subordinated
notes due 2003 (the "9% Notes") for an aggregate redemption price of
$382.1 million, including interest of approximately $16.7 million.
We used the remainder of the net proceeds from the offering of initial
notes, the New Credit Facility and the Receivables Facility to redeem on
July 15, 2001 all of our outstanding 8 7/8% senior notes due 2004 (the "8 7/8%
Notes") for an aggregate redemption price of $163.3 million, including interest
of approximately $6.7 million. At the closing of the offering of initial notes
on May 22, 2001, we took steps to satisfy and discharge the indenture relating
to the 8 7/8% Notes.
For additional information on the Refinancing Transactions, please refer to
the sections of this prospectus entitled "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," "Description of the Receivables
Facility" and "Description of Other Indebtedness."
4
SUMMARY OF THE EXCHANGE OFFER
We are offering to exchange $350,000,000 aggregate principal amount of our
exchange notes for a like aggregate principal amount of our initial notes. In
order to exchange your initial notes, you must properly tender them and we must
accept your tender. We will exchange all outstanding initial notes that are
validly tendered and not validly withdrawn.
Exchange Offer............................ We will exchange our exchange notes for a like aggregate
principal amount at maturity of our initial notes.
Expiration Date........................... This exchange offer will expire at 5:00 p.m., New York
City time, on , 2001, unless we decide to extend
it.
Conditions to the Exchange Offer.......... We will complete this exchange offer only if:
- there is no litigation or threatened litigation which
would impair our ability to proceed with this exchange
offer,
- there is no change in the laws and regulations which
would impair our ability to proceed with this exchange
offer,
- there is no change in the current interpretation of
the staff of the Commission which permits resales of the
exchange notes,
- there is no stop order issued by the Commission which
would suspend the effectiveness of the registration
statement which includes this prospectus or the
qualification of the exchange notes under the Trust
Indenture Act of 1939, and
- we obtain all the governmental approvals we deem
necessary to complete this exchange offer.
Please refer to the section in this prospectus entitled
"The Exchange Offer--Conditions to the Exchange Offer."
Procedures for Tendering Initial Notes.... To participate in this exchange offer, you must
complete, sign and date the letter of transmittal or its
facsimile and transmit it, together with your initial
notes to be exchanged and all other documents required
by the letter of transmittal, to The Bank of New York,
as exchange agent, at its address indicated under "The
Exchange Offer--Exchange Agent." In the alternative, you
can tender your initial notes by book-entry delivery
following the procedures described in this prospectus.
If your initial notes are registered in the name of a
broker, dealer, commercial bank, trust company or other
nominee, you should contact that person promptly to
tender your initial notes in this exchange offer. For
more information on tendering your notes, please refer
to the section in this prospectus entitled "The Exchange
Offer--Procedures for Tendering Initial Notes."
5
Guaranteed Delivery Procedures............ If you wish to tender your initial notes and you cannot
get the required documents to the exchange agent on
time, you may tender your notes by using the guaranteed
delivery procedures described under the section of this
prospectus entitled "The Exchange Offer--Procedures for
Tendering Initial Notes--Guaranteed Delivery Procedure."
Withdrawal Rights......................... You may withdraw the tender of your initial notes at any
time before 5:00 p.m., New York City time, on the
expiration date of the exchange offer. To withdraw, you
must send a written or facsimile transmission notice of
withdrawal to the exchange agent at its address
indicated under the "The Exchange Offer--Exchange Agent"
before 5:00 p.m., New York City time, on the expiration
date of the exchange offer.
Acceptance of Initial Notes and Delivery
of Exchange Notes....................... If all the conditions to the completion of this exchange
offer are satisfied, we will accept any and all initial
notes that are properly tendered in this exchange offer
on or before 5:00 p.m., New York City time, on the
expiration date. We will return any initial note that we
do not accept for exchange to you without expense as
promptly as practicable after the expiration date. We
will deliver the exchange notes to you as promptly as
practicable after the expiration date and acceptance of
your initial notes for exchange. Please refer to the
section in this prospectus entitled "The Exchange
Offer--Acceptance of Initial Notes for Exchange;
Delivery of Exchange Notes."
Federal Income Tax Considerations Relating
to the Exchange Offer for Non-United
States Holders.......................... Exchanging your initial notes for exchange notes will
not be a taxable event to you for United States federal
income tax purposes. Please refer to the section of this
prospectus entitled "Certain Federal Income Tax
Consequences to Non-United States Holders."
Exchange Agent............................ The Bank of New York is serving as exchange agent in the
exchange offer.
Fees and Expenses......................... We will pay all expenses related to this exchange offer.
Please refer to the section of this prospectus entitled
"The Exchange Offer--Fees and Expenses."
Use of Proceeds........................... We will not receive any proceeds from the issuance of
the exchange notes. We are making this exchange offer
solely to satisfy certain of our obligations under our
registration rights agreement entered into in connection
with the offering of the initial notes.
6
Consequences to Holders Who Do Not
Participate in the Exchange Offer....... If you do not participate in this exchange offer:
- you will not necessarily be able to require us to
register your initial notes under the Securities Act,
- you will not be able to resell, offer to resell or
otherwise transfer your initial notes unless they are
registered under the Securities Act or unless you
resell, offer to resell or otherwise transfer them
under an exemption from the registration requirements
of, or in a transaction not subject to, the Securities
Act, and
- the trading market for your initial notes will become
more limited to the extent other holders of initial
notes participate in the exchange offer.
Please refer to the section of this prospectus entitled
"Risk Factors--Your failure to participate in the
exchange offer will have adverse consequences."
Resales................................... It may be possible for you to resell the notes issued in
the exchange offer without compliance with the
registration and prospectus delivery provisions of the
Securities Act, subject to some conditions. Please refer
to the section of this prospectus entitled "Risk
Factors--Risks Relating to the Exchange Offer--Some
persons who participate in the exchange offer must
deliver a prospectus in connection with resales of the
exchange notes" and "Plan of Distribution."
SUMMARY OF TERMS OF THE EXCHANGE NOTES
Issuer.................................... Playtex Products, Inc.
Exchange Notes............................ $350.0 million aggregate principal amount of 9% Senior
Subordinated Notes due 2011. The forms and terms of the
exchange notes are the same as the form and terms of the
initial notes except that the issuance of the exchange
notes is registered under the Securities Act, will not
bear legends restricting their transfer and will not be
entitled to registration rights under our registration
rights agreement. The exchange notes will evidence the
same debt as the initial notes, and both the initial
notes and the exchange notes will be governed by the
same indenture.
Maturity Date............................. June 1, 2011.
Interest Payment Dates.................... Every June 1 and December 1, beginning December 1, 2001.
Ranking................................... The exchange notes and the guarantees will rank:
- junior to all of our and the guarantors' existing and
future senior indebtedness and secured indebtedness,
including any borrowings under our New Credit
Facility;
7
- equally with any of our and the guarantors' future
senior subordinated indebtedness; and
- effectively junior to all of the liabilities of our
subsidiaries that have not guaranteed the exchange
notes.
Our 6% convertible subordinated notes due 2004 are not
guaranteed, and will rank equally with the exchange
notes.
As of March 31, 2001, on a pro forma basis, after giving
effect to the offering of the initial notes and the
Refinancing Transactions, we would have had $516.3
million of outstanding indebtedness that is structurally
or contractually senior in right of payment to the
exchange notes.
Optional Redemption....................... We may redeem any of the exchange notes at any time on
or after June 1, 2006, in whole or in part, in cash at
the redemption prices described in this prospectus, plus
accrued and unpaid interest to the date of redemption.
In addition, on or before June 1, 2004, we may redeem up
to 35% of the aggregate principal amount of notes
originally issued at a redemption price of 109.375%,
plus accrued and unpaid interest to the date of
redemption, with the proceeds of certain equity
offerings within 90 days of the closing of those equity
offerings. We may make that redemption only if, after
that redemption, at least 65% of the aggregate principal
amount of notes originally issued remain outstanding.
Change of Control......................... Upon the occurrence of specified change of control
events, we will be required to make an offer to
repurchase all of the exchange notes. The purchase price
will be 101% of the outstanding principal amount of the
exchange notes plus any accrued and unpaid interest to
the date of repurchase on them. Please refer to the
section of this prospectus entitled "Description of the
Notes--Repurchase at the Option of Holders--Change of
Control." Our ability to complete the change of control
repurchase may be limited by the terms of our New Credit
Facility or our other indebtedness.
Guarantees................................ The exchange notes will be jointly and severally
guaranteed on an unsecured, senior subordinated basis by
certain of our existing and future domestic subsidiaries
(other than the Securitization Entity under the
Receivables Facility).
Certain Covenants......................... The terms of the exchange notes restrict our ability and
the ability of certain of our subsidiaries to:
- pay or permit payment of certain dividends on, redeem
or repurchase our capital stock and the capital stock of
our subsidiaries;
- make certain investments;
- incur additional indebtedness;
- allow the imposition of dividend restrictions on
certain subsidiaries;
- sell assets;
8
- guarantee indebtedness;
- create certain liens;
- engage in certain transactions with affiliates; and
- consolidate or merge or sell all or substantially all
our assets and the assets of our subsidiaries.
However, these limitations will be subject to a number
of important qualifications and exceptions described
under "Description of the Notes."
Use of Proceeds........................... We will not receive any proceeds from the issuance of
the exchange notes in exchange for the outstanding
initial notes. We are making this exchange solely to
satisfy our obligations under the registration rights
agreement which we entered into in connection with the
offering of the initial notes.
Absence of a Public Market for the
Exchange Notes.......................... The exchange notes are new securities with no
established market for them. We cannot assure you that a
market for these exchange notes will develop or that
this market will be liquid. Please refer to the section
of this prospectus entitled "Risk Factors--Risks
Relating to the Exchange Offer--There may be no active
or liquid market for the exchange notes."
Form of the Exchange Notes................ The exchange notes will be represented by one or more
permanent global securities in registered form deposited
on behalf of The Depository Trust Company with The Bank
of New York, as custodian. You will not receive exchange
notes in certificated form unless one of the events
described in the section of this prospectus entitled
"Description of Notes--Book Entry; Delivery and
Form--Exchange of Book Entry Notes for Certificated
Notes" occurs. Instead, beneficial interests in the
exchange notes will be shown on, and transfers of these
exchange notes will be effected only through, records
maintained in book-entry form by The Depository Trust
Company with respect to its participants.
RISK FACTORS
Please refer to the section of this prospectus entitled "Risk Factors"
beginning on page 13 for a discussion of some of the risks you should consider
before participating in the exchange offer.
INFORMATION ABOUT THE COMPANY
Playtex was incorporated in Delaware on September 1, 1988. Our principal
executive office is located at 300 Nyala Farms Road, Westport, Connecticut
06880, and our telephone number is (203) 341-4000. Our common stock is listed on
The New York Stock Exchange under the symbol "PYX."
9
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
Set forth in the following table are certain consolidated historical
financial data as of and for each of the periods specified and selected
unaudited pro forma financial data for the twelve months ended March 31, 2001.
The balance sheet data and statement of earnings data as of and for each of the
twelve months ended December 26, 1998, December 25, 1999 and December 30, 2000
is derived from our audited consolidated financial statements for these periods.
Each of our audited consolidated financial statements has been audited by KPMG
LLP, independent certified public accountants. The balance sheet data as of
March 31, 2001 and the statement of earnings data as of and for the three months
ended April 1, 2000 and March 31, 2001 is derived from our unaudited
consolidated financial statements for these periods, which, in the opinion of
our management, reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of this data. The results for any
interim period are not necessarily indicative of the results that may be
expected for the full year. Our fiscal year end is on the last Saturday nearest
to December 31 and, as a result, a fifty-third week is added every 6 or
7 years. Fiscal year 2000 was a fifty-three week period. Fiscal years 1998 and
1999 were fifty-two week periods. The fiscal quarter ended April 1, 2000 was a
fourteen week period, whereas the fiscal quarter ended March 31, 2001 was a
thirteen week period. The following information should be read in conjunction
with "Use of Proceeds," "Capitalization," "Selected Historical Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our historical consolidated financial statements
and related notes thereto included elsewhere in this prospectus.
THREE MONTHS ENDED
TWELVE MONTHS ENDED (UNAUDITED)
------------------------------------------ --------------------
DECEMBER 26, DECEMBER 25, DECEMBER 30, APRIL 1, MARCH 31,
1998 1999 2000 2000 2001
------------ ------------ ------------ -------- ---------
(DOLLARS IN THOUSANDS)
STATEMENT OF EARNINGS DATA:
Net sales........................... $669,613 $787,711 $831,343 $223,507 $220,776
Gross profit........................ 392,058 456,469 479,169 129,702 126,067
Operating expenses, excluding
amortization of intangibles....... 243,288 280,176 308,882 75,878 77,168
Amortization of intangibles......... 17,336 21,064 22,350 5,592 5,515
Operating earnings.................. 131,434 155,229 147,937 48,232 43,384
OTHER DATA:
EBITDA(1)........................... $158,460 $186,140 $181,834 $ 56,532 $ 52,010
Depreciation........................ 9,690 9,847 11,547 2,708 3,111
Capital expenditures................ 16,405 20,802 22,724 7,075 5,151
Gross margin(2)..................... 58.5% 57.9% 57.6% 58.0% 57.1%
EBITDA margin(3).................... 23.7% 23.6% 21.9% 25.3% 23.6%
Ratio of earnings to fixed charges
(4)............................... 1.81x 1.93x 1.71x 2.14x 2.01x
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER 30, ENDED MARCH 31,
2000 2001
------------------ ---------------
(UNAUDITED) (UNAUDITED)
PRO FORMA DATA(5):
Cash interest expense, net(6)............................... $84,676 $18,743
Ratio of EBITDA to cash interest expense, net............... 2.15x 2.77x
Ratio of net debt to EBITDA(7).............................. 5.12x
Ratio of earnings to fixed charges(4)....................... 1.62x 2.12x
10
MARCH 31, 2001
(UNAUDITED)
------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 30, AS
1998 1999 2000 ACTUAL ADJUSTED(8)
------------ ------------ ------------ ---------- -----------
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA (AT PERIOD
END):
Working capital.................. $ 78,548 $ 92,006 $ 74,233 $ 98,536 $ 91,705
Total assets..................... 899,221 1,148,652 1,139,384 1,165,461 1,099,447
Total long-term debt(9).......... 811,750 987,876 931,563 944,019 916,331
Total stockholders' equity....... (140,975) (94,868) (56,063) (48,653) (61,223)
(1) EBITDA is defined as operating earnings plus depreciation and amortization.
EBITDA should not be considered as an alternative to operating earnings or
net income (as determined in accordance with generally accepted accounting
principles) as a measure of our operating performance or to net cash
provided by operating, investing and financing activities (as determined in
accordance with generally accepted accounting principles) as a measure of
our ability to meet cash needs. We believe that EBITDA is a measure commonly
reported and widely used by investors and other interested parties as a
measure of a company's operating performance and debt servicing ability
because it assists in comparing performance on a consistent basis without
regard to depreciation and amortization, which can vary significantly
depending upon accounting methods (particularly when acquisitions are
involved) or nonoperating factors (such as historical cost). Accordingly,
this information has been disclosed to permit a more complete comparative
analysis of our operating performance relative to other companies and of our
debt servicing ability. However, EBITDA may not be comparable in all
instances to other similar types of measures used.
(2) Gross profit as a percentage of net sales for the period presented.
(3) EBITDA as a percentage of net sales for the period presented.
(4) For purposes of determining the ratio of earnings to fixed charges,
"earnings" include pre-tax income before extraordinary loss adjusted for
fixed charges. "Fixed charges" consist of net interest expense and that
portion of operating lease rental expense representative of interest (deemed
to be one-third of rental expense).
(5) The pro forma data are presented for the twelve months ended December 30,
2000 and the three months ended March 31, 2001 and give pro forma effect to
the offering of the initial notes and the Refinancing Transactions as if
they had occurred on the first day of the period presented for income
statement purposes and as if the offering of the initial notes and the
Refinancing Transactions had occurred on the last day of the period
presented for balance sheet purposes. The pro forma adjustments are based
upon available information and certain assumptions that we believe are
reasonable. The pro forma results of operations are not necessarily
indicative of the results of operations that would have been achieved had
the offering of the initial notes and the Refinancing Transactions been
consummated on the first day of the period presented.
(6) Cash interest expense, net is defined as total interest expense less
amortization of deferred financing costs and net of interest expense on our
15 1/2% Junior Subordinated Notes due 2003. For more information on our
15 1/2% Junior Subordinated Notes due 2003, see Note 9 below.
(7) Net debt is defined as total debt less cash and cash equivalents at
March 31, 2001 on a pro forma basis and excludes our 15 1/2% Junior
Subordinated Notes due 2003. EBITDA is for the twelve months ended
March 31, 2001.
(8) As adjusted for the offering of the initial notes and the Refinancing
Transactions as if they had occurred on March 31, 2001 and assumes that the
8 7/8% Notes and the 9% Notes were redeemed on March 31, 2001. Please refer
to the sections of this prospectus entitled "Description of the Receivables
Facility" and "Description of Other Indebtedness."
11
(9) Includes current portion of long-term debt, but excludes obligations due to
related party. Obligations due to related party consist of our 15 1/2%
Junior Subordinated Notes due 2003, which are held by Playtex Apparel
Partners, L.P. (the "Apparel Partnership"). In connection with our 1988 sale
of Playtex Apparel, Inc. to the Apparel Partnership, we received 15%
debentures due 2003 that were issued by the Apparel Partnership. The terms
of the 15% debentures are substantially similar to those of the 15 1/2%
Junior Subordinated Notes issued by us. We receive interest income in cash
on the 15% debentures and consequently interest expense on the 15 1/2%
Junior Subordinated Notes is shown net of cash interest income from the 15%
debentures in our consolidated financial statements. Our 15 1/2% Junior
Subordinated Notes do not appear as long-term debt in our financial
statements or elsewhere in this prospectus. Please refer to the section of
this prospectus entitled "Description of Other Indebtedness--Due to Related
Party" and our historical consolidated financial statements and related
notes thereto included elsewhere in this prospectus.
12
RISK FACTORS
AN INVESTMENT IN THE EXCHANGE NOTES INVOLVES A SIGNIFICANT DEGREE OF RISK.
BEFORE YOU DECIDE TO INVEST, YOU SHOULD CONSIDER CAREFULLY ALL OF THE
INFORMATION IN THIS PROSPECTUS AND, IN PARTICULAR, THE FOLLOWING FACTORS. SOME
STATEMENTS IN "RISK FACTORS" ARE FORWARD-LOOKING STATEMENTS. PLEASE REFER TO THE
SECTION OF THIS PROSPECTUS ENTITLED "FORWARD-LOOKING STATEMENTS."
RISKS RELATING TO THE EXCHANGE NOTES
OUR SUBSTANTIAL DEBT COULD IMPAIR OUR FINANCIAL CONDITION.
We are highly leveraged and have substantial debt service obligations. As of
March 31, 2001, on a pro forma basis, after giving effect to the offering of the
initial notes and the Refinancing Transactions, our long-term debt would have
been $916.3 million, and our stockholders' deficit would have been
$61.2 million. In addition, we would have had $108.7 million available for
future borrowings under the New Credit Facility, excluding outstanding letters
of credit. Our consolidated pro forma ratio of earnings to fixed charges for the
twelve months ended December 30, 2000 and the three months ended March 31, 2001
would have been 1.6x and 2.1x, respectively. Also, we may incur additional debt
in the future, subject to certain limitations contained in our debt instruments.
The degree to which we are leveraged could have important consequences to
us, including:
- our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or
other purposes may be impaired;
- a significant portion of our cash flow from operations must be dedicated
to the payment of principal and interest on our debt, which reduces the
funds available to us for our operations;
- some of our debt is and will continue to be at variable rates of interest,
which may result in higher interest expense in the event of increases in
interest rates; and
- our debt contains, and any refinancing of our debt likely will contain,
financial and restrictive covenants, the failure to comply with which may
result in an event of default which, if not cured or waived, could have a
material adverse effect on us.
THE TERMS OF THE NEW CREDIT FACILITY AND THE INDENTURE RELATING TO THE EXCHANGE
NOTES MAY RESTRICT OUR CURRENT AND FUTURE OPERATIONS, PARTICULARLY OUR ABILITY
TO RESPOND TO CHANGES OR TO TAKE SOME ACTIONS.
The New Credit Facility contains, and any future refinancing of the New
Credit Facility likely would contain, a number of restrictive covenants that
impose significant operating and financial restrictions on us. The New Credit
Facility includes covenants restricting, among other things, our ability to:
- incur additional debt,
- pay dividends and make restricted payments,
- create liens,
- use the proceeds from sales of assets and subsidiary stock,
- enter into sale and leaseback transactions,
- enter into transactions with affiliates, and
- enter into certain mergers, consolidations and transfers of all or
substantially all of our assets.
13
The indenture relating to the notes also contains numerous operating and
financial covenants including, among other things, restrictions on our ability
to:
- incur additional debt,
- create liens or other encumbrances,
- make certain payments and investments, and
- sell or otherwise dispose of assets and merge or consolidate with another
entity.
The New Credit Facility also includes financial covenants, including
requirements that we maintain:
- a minimum coverage ratio, and
- a maximum leverage ratio.
A failure by us to comply with the covenants contained in the New Credit
Facility or the indenture could result in an event of default which could
materially and adversely affect our operating results and our financial
condition. In addition, our other debt could contain financial and other
covenants more restrictive than those applicable to the notes.
WE MAY NOT BE ABLE TO GENERATE SUFFICIENT CASH FLOW TO MEET OUR DEBT SERVICE
OBLIGATIONS, INCLUDING PAYMENTS ON THE EXCHANGE NOTES.
Our ability to generate sufficient cash flow from operations to make
scheduled payments on our debt obligations will depend on our future financial
performance, which will be affected by a range of economic, competitive and
business factors, many of which are outside of our control. If we do not
generate sufficient cash flow from operations to satisfy our debt obligations,
including payments on the exchange notes, we may have to undertake alternative
financing plans, such as refinancing or restructuring our debt, selling assets,
reducing or delaying capital investments or seeking to raise additional capital.
We cannot assure you that any refinancing would be possible, that any assets
could be sold, or, if sold, of the timing of the sales and the amount of
proceeds realized from those sales, or that additional financing could be
obtained on acceptable terms, if at all. Our inability to generate sufficient
cash flow to satisfy our debt obligations, or to refinance our obligations on
commercially reasonable terms, would have an adverse effect on our business,
financial condition and results of operations, as well as on our ability to
satisfy our obligations on the exchange notes.
YOUR RIGHT TO RECEIVE PAYMENTS ON THE EXCHANGE NOTES IS UNSECURED AND IS JUNIOR
TO A SIGNIFICANT PORTION OF OUR AND OUR SUBSIDIARY GUARANTORS' EXISTING
INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. FURTHERMORE, THE CLAIMS
OF CREDITORS OF OUR NON-GUARANTOR SUBSIDIARIES WILL HAVE PRIORITY WITH RESPECT
TO THE ASSETS AND EARNINGS OF THESE SUBSIDIARIES OVER YOUR CLAIMS.
The exchange notes and the subsidiary guarantees will be subordinated to the
prior payment in full of our and the subsidiary guarantors' current and future
senior debt. As of March 31, 2001, on a pro forma basis, after giving effect to
the offering of the initial notes and the Refinancing Transactions, we and our
subsidiary guarantors would have had approximately $516.3 million of outstanding
senior debt (consisting solely of borrowings under and guarantees of the New
Credit Facility) and $50.0 million of outstanding debt that ranks equally with
the notes and guarantees. An additional $108.7 million would have been available
for future borrowings under the New Credit Facility, excluding outstanding
letters of credit, and all of such borrowings would be senior to the notes. The
indenture relating to the exchange notes permits us and our subsidiary
guarantors to incur additional senior debt under certain circumstances. Because
the exchange notes are unsecured and because of the subordination provisions of
the exchange notes, in the event of the bankruptcy, liquidation or dissolution
of Playtex or any subsidiary guarantor, our assets or the assets of the
subsidiary guarantors would be available to pay
14
obligations under the exchange notes only after all payments had been made on
our or the subsidiary guarantors' senior debt (including the New Credit
Facility). We cannot assure you that sufficient assets will remain after all
these payments have been made to make any payments on the exchange notes,
including payments of interest when due. Also, because of these subordination
provisions, you may recover less ratably than our other creditors in a
bankruptcy, liquidation or dissolution. In addition, all payments on the
exchange notes and the guarantees will be blocked in the event of a payment
default on senior debt and may be blocked for up to 179 of 360 consecutive days
in the event of certain non-payment defaults on senior debt.
NOT ALL OF OUR SUBSIDIARIES ARE GUARANTORS. AS A RESULT, YOUR RIGHT TO RECEIVE
PAYMENTS ON THE EXCHANGE NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR
NON-GUARANTOR SUBSIDIARIES DECLARE BANKRUPTCY, LIQUIDATE, OR REORGANIZE.
Some but not all of our subsidiaries will guarantee the exchange notes. In
the event of a bankruptcy, liquidation or reorganization of any of the
non-guarantor subsidiaries, holders of their indebtedness and their trade
creditors will generally be entitled to payment of their claims from the assets
of those subsidiaries before any assets are made available for distribution to
us. As of March 31, 2001, on a pro forma basis, after giving effect to the
offering of the initial notes and the Refinancing Transactions, the notes would
have been effectively junior to approximately $4.0 million of other liabilities
(including trade payables) of the non-guarantor subsidiaries. The non-guarantor
subsidiaries generated 5.5% of our consolidated net sales in the twelve-month
period ended March 31, 2001 and held 1.5% of our consolidated assets as of
March 31, 2001. At the closing of the offering of the initial notes,
approximately $75.0 million of net assets (representing approximately 6.4% of
our consolidated assets as of March 31, 2001) was sold to the Securitization
Entity under the Receivables Facility. The Securitization Entity will not
guarantee the exchange notes. Please refer to the section of this prospectus
entitled "Description of the Receivables Facility."
FRAUDULENT CONVEYANCE LAWS COULD VOID OUR OBLIGATIONS UNDER THE NOTES.
We incurred substantial debt under the notes. Our incurrence of debt under
the notes and the incurrence by some of our subsidiaries of debt under their
guarantees may be subject to review under federal and state fraudulent
conveyance laws if a bankruptcy, reorganization or rehabilitation case or a
lawsuit (including circumstances in which bankruptcy is not involved) were
commenced by, or on behalf of, our unpaid creditors or unpaid creditors of our
subsidiary guarantors at some future date. Federal and state statutes allow
courts, under specific circumstances, to void the notes and the subsidiary
guarantees and require noteholders to return payments received from Playtex or
the subsidiary guarantors.
An unpaid creditor or representative of creditors, such as a trustee in
bankruptcy of Playtex as a debtor-in-possession in a bankruptcy proceeding,
could file a lawsuit claiming that the issuances of the notes constituted a
"fraudulent conveyance." To make such a determination, a court would have to
find that we did not receive fair consideration or reasonably equivalent value
for the notes, and that, at the time the notes were issued, we:
- were insolvent;
- were rendered insolvent by the issuance of the notes;
- were engaged in a business or transaction for which our remaining assets
constituted unreasonably small capital; or
- intended to incur, or believed that we would incur, debts beyond our
ability to repay those debts as they matured.
15
If a court were to make such a finding, it could void our obligations under
the notes, subordinate the notes to our other indebtedness or take other actions
detrimental to you as a holder of the notes.
The measure of insolvency for these purposes will vary depending upon the
law of the jurisdiction being applied. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than the fair value of all of that company's property, or if the present
fair salable value of that company's assets is less than the amount that will be
required to pay its probable liability on its existing debts as they mature.
Moreover, regardless of solvency, a court could void an incurrence of
indebtedness, including the notes, if it determined that the transaction was
made with intent to hinder, delay or defraud creditors, or a court could
subordinate the indebtedness, including the notes, to the claims of all existing
and future creditors on similar grounds. We cannot determine in advance what
standard a court would apply to determine whether we were "insolvent" in
connection with the sale of the notes.
The making of the subsidiary guarantees might also be subject to similar
review under relevant fraudulent conveyance laws. A court could impose legal and
equitable remedies, including subordinating the obligations under the subsidiary
guarantees to a fund for the benefit of other creditors or taking other actions
detrimental to you as a holder of the notes.
WE MAY NOT BE ABLE TO FULFILL OUR REPURCHASE OBLIGATIONS IN THE EVENT OF A
CHANGE OF CONTROL.
Upon the occurrence of any change of control under the indenture, we will be
required to make a change of control offer under the exchange notes, and under
the terms of the New Credit Facility we will be required to repay all of our
outstanding obligations and terminate our commitments under the New Credit
Facility. In addition, upon the occurrence of a change of control under the New
Credit Facility, the lenders may terminate their commitments thereunder and will
have the right to accelerate all amounts outstanding under the New Credit
Facility. Accordingly we would be required to obtain the consent of the lenders
under the New Credit Facility prior to the repayment of the exchange notes upon
a change of control.
If a change of control offer is made, there can be no assurance that we will
have available funds sufficient to pay the change of control purchase price for
any or all of the exchange notes that might be delivered by holders of the notes
seeking to accept the change of control offer and, accordingly, none of the
holders of the exchange notes may receive the change of control purchase price
for their exchange notes. Our failure to make or consummate the change of
control offer or pay the change of control purchase price when due will give the
trustee and the holders of the exchange notes the rights described under the
section in this prospectus entitled "Description of the Notes--Events of Default
and Remedies."
THERE MAY BE NO ACTIVE TRADING MARKET FOR THE NOTES.
Before the offering of the notes, there has been no established trading
market for the notes. We do not intend to list the notes on any national
securities exchange or to seek the admission of the notes for quotation through
the National Association of Securities Dealers Automated Quotation System.
Although the initial purchasers have advised us that they currently intend to
make a market in the notes, they are not obligated to do so and may discontinue
such market making activity at any time without notice. In addition, market
making activity will be subject to the limits imposed by the Securities Act and
the Exchange Act, and may be limited during the exchange offer and the pendency
of any shelf registration statement. There can be no assurance as to the
development or liquidity of any market for the exchange notes, the ability of
the holders of the exchange notes to sell their exchange notes or the price at
which the holders would be able to sell their exchange notes. Any notes traded
after they are initially issued may trade at a discount from their initial
offering price. The trading price of the exchange notes depends on prevailing
interest rates, the market for similar securities and other
16
factors, including economic conditions and our financial condition, performance
and prospects. Historically, the market for noninvestment grade debt has been
subject to disruptions that have caused substantial fluctuations in the prices
of the securities.
RISKS RELATED TO THE EXCHANGE OFFER
THE ISSUANCE OF THE EXCHANGE NOTES MAY ADVERSELY AFFECT THE MARKET FOR THE
INITIAL NOTES.
If initial notes are tendered for exchange and accepted in the exchange
offer, the trading market for the untendered and tendered but unaccepted initial
notes could be adversely affected. Please refer to the section in this
prospectus entitled "--Your failure to participate in the exchange offer will
have adverse consequences."
YOUR FAILURE TO PARTICIPATE IN THE EXCHANGE OFFER WILL HAVE ADVERSE
CONSEQUENCES.
The initial notes were not registered under the Securities Act or under the
securities laws of any state and you may not resell them, offer them for resale
or otherwise transfer them unless they are subsequently registered or resold
under an exemption from the registration requirements of the Securities Act and
applicable state securities laws. If you do not exchange your initial notes for
exchange notes pursuant to this exchange offer, or if you do not properly tender
your initial notes in this exchange offer, you will not be able to resell, offer
to resell or otherwise transfer the initial notes unless they are registered
under the Securities Act or unless you resell them, offer to resell or otherwise
transfer them under an exemption from the registration requirements of, or in a
transaction not subject to, the Securities Act. In addition, you may no longer
be able to obligate us to register the initial notes under the Securities Act.
SOME PERSONS WHO PARTICIPATE IN THE EXCHANGE OFFER MUST DELIVER A PROSPECTUS IN
CONNECTION WITH RESALES OF THE EXCHANGE NOTES.
Based on certain no-action letters issued by the staff of the Commission, we
believe that you may offer for resale, resell or otherwise transfer the exchange
notes without compliance with the registration and prospectus delivery
requirements of the Securities Act. However, in some instances described in this
prospectus under "Plan of Distribution," you will remain obligated to comply
with the registration and prospectus delivery requirements of the Securities Act
to transfer your exchange notes. In these cases, if you transfer any exchange
note without delivering a prospectus meeting the requirements of the Securities
Act or without an exemption from registration of your exchange notes under the
Securities Act, you may incur liability under this act. We do not and will not
assume, or indemnify you against, this liability.
RISKS RELATING TO OUR BUSINESS
WE FACE SIGNIFICANT COMPETITION FROM OTHER CONSUMER PRODUCTS COMPANIES.
The markets for our products are highly competitive and are characterized by
the frequent introduction of new products, often accompanied by major
advertising and promotional programs. We believe that the market for consumer
packaged goods will continue to be highly competitive and that the level of
competition may intensify in the future. Our competitors consist of a large
number of domestic and foreign companies, a number of which have significantly
greater financial resources than we do and are not as highly leveraged as we
are. If we are unable to continue to introduce new and innovative products that
are attractive to consumers, or are unable to allocate sufficient resources to
effectively market and advertise our products so that they achieve widespread
market acceptance, we may not be able to compete effectively and our operating
results and financial condition will be adversely affected.
17
WE RELY ON A FEW LARGE CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR SALES.
A few of our customers are material to our business and operations. For
fiscal 1999 and fiscal 2000, Wal-Mart Stores, Inc., our largest customer,
represented approximately 21% and 23%, respectively, of our consolidated net
sales. Aggregate consolidated net sales to our next three largest customers
represented approximately 15% of our total consolidated net sales in fiscal 1999
and 18% in fiscal 2000. The loss of sales to a large customer could materially
and adversely affect us, our operating results, our financial condition and our
projections and beliefs as to our future performance.
WE MAY BE ADVERSELY AFFECTED BY THE TREND TOWARDS RETAIL TRADE CONSOLIDATION.
With the growing trend towards retail trade consolidation, we are
increasingly dependent upon key retailers whose bargaining strength is growing.
We may be negatively affected by changes in the policies of our retail trade
customers, such as inventory destocking, limitations on access to shelf space
and other conditions.
SALES OF SOME OF OUR PRODUCTS MAY SUFFER BECAUSE OF UNFAVORABLE WEATHER
CONDITIONS.
Our businesses, especially Sun Care, may be negatively impacted by
unfavorable weather conditions. In accordance with industry practice, we permit
retailers to return unsold Sun Care products to us at the end of the summer and
these product returns may be higher in years when the weather is poor. This
could adversely affect our business and operating results. In addition,
consumption of our Feminine Care and WET ONES products may be affected by
unfavorable weather, although to a lesser extent than the Sun Care business, due
primarily to reduced levels of outdoor activities.
OUR ACQUISITION STRATEGY IS SUBJECT TO RISKS AND MAY NOT BE SUCCESSFUL.
We consider the acquisition of other companies engaged in the manufacture
and sale of consumer products. At any given time, we may be in various stages of
looking at these opportunities. Acquisitions are subject to the negotiation of
definitive agreements and to other matters typical in acquisition transactions.
There can be no assurance that we will be able to identify desirable acquisition
candidates or will be successful in entering into definitive agreements relating
to them. Even if definitive agreements are entered into, we can not assure you
that any future acquisition will be completed or that anticipated benefits of
the acquisition will be realized. The process of integrating acquired operations
into our operations may result in unforeseen operating difficulties, may absorb
significant management attention and may require significant financial resources
that would otherwise be available for the ongoing development or expansion of
our existing operations. Future acquisitions by us could result in the
incurrence of additional debt and contingent liabilities, which may have a
negative effect on our operating results.
HAAS WHEAT CONTROLS A MAJORITY OF OUR BOARD OF DIRECTORS AND ITS INTERESTS MAY
CONFLICT WITH YOURS.
Haas Wheat & Partners, L.P. and its affiliates together hold approximately
33% of the outstanding shares of our common stock and will likely continue to
exercise control over our business by virtue of their voting power with respect
to the election of directors. In addition, under our by-laws and agreements
among our stockholders, Haas Wheat and its affiliates have the right to approve
a majority of the nominations to our board of directors. Haas Wheat and its
affiliates may authorize actions that are not in your best interests, and in
general, their interests may not be fully aligned with yours.
18
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes in exchange for the outstanding initial notes. We are making this exchange
solely to satisfy our obligations under the registration rights agreement which
we entered into in connection with the offering of the initial notes. In
consideration for issuing the exchange notes, we will receive initial notes in
like aggregate principal amount.
CAPITALIZATION
The following table sets forth the actual cash, long-term debt and
capitalization of Playtex at March 31, 2001, and as adjusted to give effect to
the offering of the initial notes and the Refinancing Transactions, assuming
they occurred on that date. Please refer to the sections of this prospectus
entitled "Use of Proceeds," "Selected Historical Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Description of Other Indebtedness." This table is presented and
should be read in conjunction with our consolidated financial statements,
together with the related notes thereto, included elsewhere in this prospectus.
MARCH 31, 2001
-----------------------
AS
ACTUAL ADJUSTED
---------- ----------
(IN THOUSANDS, EXCEPT
SHARE DATA, UNAUDITED)
Cash and cash equivalents................................... $ 8,266 $ 8,266
========= =========
Long Term Debt(1):
New Credit Facility(2).................................... $ -- $ 516,331
9 3/8% Senior Subordinated Notes due 2011................. -- 350,000
6% Convertible Subordinated Notes due 2004................ 50,000 50,000
Existing Credit Facility.................................. 384,019 --
8 7/8% Senior Notes due 2004.............................. 150,000 --
9% Senior Subordinated Notes due 2003..................... 360,000 --
--------- ---------
Total long-term debt........................................ 944,019 916,331
Stockholders' Equity:
Common Stock ($0.01 par value; authorized 100,000,000
shares; issued and outstanding 60,970,899 shares)....... 609 609
Additional paid-in capital................................ 523,706 523,706
Retained earnings (deficit)............................... (564,376) (581,818)
Accumulated other comprehensive earnings.................. (8,592) (3,720)
--------- ---------
Total stockholders' equity.................................. (48,653) (61,223)
--------- ---------
Total capitalization........................................ $ 895,366 $ 855,108
========= =========
------------------------
(1) Excludes our 15 1/2% Junior Subordinated Notes due 2003. Please refer to the
section of this prospectus entitled "Description of Other Indebtedness--Due
to Related Party" and our consolidated financial statements, together with
the related notes thereto, included elsewhere in this prospectus.
(2) Based on initial borrowings in the amount of $100.0 million under the
Tranche A Facility, $400.0 million under the Tranche B Facility and
$16.3 million under the Revolving Facility. The $16.3 million drawn under
the Revolving Facility consists of borrowings to fund seasonal working
capital needs. Because our working capital fluctuates based on our seasonal
needs, the amount borrowed under the Revolving Facility may vary. Please
refer to the section of this prospectus entitled "Description of Other
Indebtedness--New Credit Facility."
19
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Set forth in the following table are certain consolidated historical
financial data as of and for each of the periods specified. The balance sheet
and statement of earnings data as of and for each of the twelve months ended
December 28, 1996, December 27, 1997, December 26, 1998, December 25, 1999, and
December 30, 2000 is derived from our audited consolidated financial statements
for these periods. Our consolidated financial statements for each of these
periods have been audited by KPMG LLP, independent certified public accountants.
The balance sheet data as of April 1, 2000 and March 31, 2001 and the statement
of earnings data for the three months ended April 1, 2000 and March 31, 2001 is
derived from our unaudited consolidated financial statements for these periods,
which, in the opinion of our management, reflect all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of this data.
The results for any interim period are not necessarily indicative of the results
that may be expected for the full year. Our fiscal year end is on the last
Saturday nearest to December 31 and, as a result, a fifty-third week is added
every 6 or 7 years. Fiscal year 2000 was a fifty-three week period. Fiscal years
1996, 1997, 1998 and 1999 were fifty-two week periods. The fiscal quarter ended
April 1, 2000 was a fourteen week period whereas the fiscal quarter ended
March 31, 2001 was a thirteen week period. The following table should be read in
conjunction with "Use of Proceeds," "Capitalization," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our
consolidated financial statements, including the related notes thereto,
appearing elsewhere in this prospectus.
THREE MONTHS ENDED
TWELVE MONTHS ENDED (UNAUDITED)
------------------------------------------------------------------------ -----------------------
DECEMBER 28, DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 30, APRIL 1, MARCH 31,
1996 1997(1) 1998 1999 2000 2000 2001
------------ ------------ ------------ ------------ ------------ ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF EARNINGS DATA:
Net sales................... $ 498,742 $ 500,632 $ 669,613 $ 787,711 $ 831,343 $ 223,507 $ 220,776
Gross profit................ 306,230 304,652 392,058 456,469 479,169 129,702 126,067
Operating expenses,
excluding amortization of
intangibles............... 194,184 192,056 243,288 280,176 308,882 75,878 77,168
Amortization of
intangibles............... 12,846 12,894 17,336 21,064 22,350 5,592 5,515
Operating earnings.......... 99,200 99,702 131,434 155,229 147,937 48,232 43,384
Interest expense, net....... 64,860 64,470 71,518 78,961 84,884 22,042 21,103
Net earnings................ $ 18,199 $ 14,653 $ 34,230 $ 44,071 $ 35,544 $ 15,269 $ 12,844
Net earnings per share:
Basic..................... $ .36 $ .29 $ .58 $ .73 $ .58 $ .25 $ .21
Diluted................... $ .36 $ .29 $ .57 $ .72 $ .58 $ .25 $ .21
OTHER DATA:
EBITDA(2)................... $ 120,975 $ 120,116 $ 158,460 $ 186,140 $ 181,834 $ 56,532 $ 52,010
Depreciation................ 8,929 7,520 9,690 9,847 11,547 2,708 3,111
Capital expenditures........ 9,740 9,004 16,405 20,802 22,724 7,075 5,151
Gross margin(3)............. 61.4% 60.9% 58.5% 57.9% 57.6% 58.0% 57.1%
EBITDA margin(4)............ 24.3% 24.0% 23.7% 23.6% 21.9% 25.3% 23.6%
Ratio of earnings to fixed
charges(5)................ 1.52x 1.53x 1.81x 1.93x 1.71x 2.14x 2.01x
BALANCE SHEET DATA
(AT PERIOD END):
Working capital............. $ 6,522 $ 56,402 $ 78,548 $ 92,006 $ 74,233 $ 123,080 $ 98,536
Total assets................ 660,331 652,558 899,221 1,148,652 1,139,384 1,170,042 1,165,461
Total long-term debt(6)..... 739,700 737,800 811,750 987,876 931,563 1,002,813 944,019
Stockholders' equity
(deficit)................. $(282,727) $(268,063) $(140,975) $ (94,868) $ (56,063) $ (77,891) $ (48,653)
------------------------------
(1) In July 1997, in connection with a refinancing of debt, we recorded an
extraordinary loss of $4.1 million (net of income tax benefit of
$2.3 million) for costs and expenses related to the write-off of the
unamortized portion of deferred financing costs associated with our previous
credit agreement.
(2) EBITDA is defined as operating earnings plus depreciation and amortization.
EBITDA should not be considered as an alternative to operating earnings or
net income (as determined in accordance with generally accepted accounting
principles) as a measure of our operating performance or to net cash
provided by operating, investing and financing activities (as
20
determined in accordance with generally accepted accounting principles) as a
measure of our ability to meet cash needs. We believe that EBITDA is a
measure commonly reported and widely used by investors and other interested
parties as a measure of a company's operating performance and debt servicing
ability because it assists in comparing performance on a consistent basis
without regard to depreciation and amortization, which can vary
significantly depending upon accounting methods (particularly when
acquisitions are involved) or nonoperating factors (such as historical
cost). Accordingly, this information has been disclosed to permit a more
complete comparative analysis of our operating performance relative to other
companies and of our debt servicing ability. However, EBITDA may not be
comparable in all instances to other similar types of measures used.
(3) Gross profit as a percentage of net sales for the period presented.
(4) EBITDA as a percentage of net sales for the period presented.
(5) For purposes of determining the ratio of earnings to fixed charges,
"earnings" include pre-tax income adjusted for fixed charges. "Fixed
charges" consist of net interest expense and that portion of operating lease
rental expense representative of interest (deemed to be one-third of rental
expense).
(6) Includes current portion of long-term debt, but excludes our 15 1/2% Junior
Subordinated Notes due 2003. Please refer to the section of this prospectus
entitled "Description of Other Indebtedness--Due to Related Party" and our
consolidated financial statements and related notes thereto included
elsewhere in this prospectus.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
We are organized in three divisions, which are categorized as business
segments in accordance with generally accepted accounting principles. Our three
divisions are:
- Personal Products Division,
- Consumer Products Division, and
- International/Corporate Sales Division.
Our PERSONAL PRODUCTS DIVISION accounted for 58.5% of our 2000 consolidated
net sales. 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:
PRIOR TO 1998 ACQUISITIONS 1998 ACQUIRED BRANDS 1999 ACQUIRED BRANDS
----------------------------- ----------------------------- -----------------------------
PLAYTEX: - BINKY pacifiers - DIAPER GENIE diaper
- Disposable nurser system - MR. BUBBLE children's disposal
- Cups and mealtime products bubble system
- Reusable hard bottles and bath - BABY MAGIC infant
pacifiers - CHUBS baby wipes toiletries
- DIAPARENE infant care
products
- WET ONES hand and face
towelettes
The Feminine Care product category includes a wide range of plastic and
cardboard applicator tampons marketed under such brand names as PLAYTEX: GENTLE
GLIDE, SILK GLIDE and SLIMFITS. In addition, the Feminine Care product category
includes a personal cleansing wipe for use in feminine hygiene. This product was
introduced in the first quarter of 2001.
Our CONSUMER PRODUCTS DIVISION accounted for 24.7% of our 2000 consolidated
net sales. Our Consumer Products Division includes Sun Care, Household Products,
and Personal Grooming products sold in the United States primarily to mass
merchandisers, grocery and drug classes of trade.
SUN CARE HOUSEHOLD PRODUCTS
--------------------------------------------- ---------------------------------------------
- BANANA BOAT - PLAYTEX Gloves
- WOOLITE rug and upholstery cleaning
products
Our Personal Grooming business includes:
PRIOR TO 1998 ACQUISITIONS 1998 ACQUIRED BRANDS
--------------------------------------------- ---------------------------------------------
- JHIRMACK hair care products - BETTER OFF depilatories
- TEK toothbrushes - BINACA breath sprays and drops
- DENTAX oral care products
- DOROTHY GRAY skin care products
- OGILVIE at-home permanents, and
- TUSSY deodorant
In May 1999, we sold our U.S. JHIRMACK business.
22
Our INTERNATIONAL/CORPORATE SALES DIVISION accounted for 16.8% of our 2000
consolidated net sales and includes:
- sales to specialty classes of trade in the - export sales
United States including: warehouse clubs, - sales in Puerto Rico
military, convenience stores, specialty - results from our Canadian and Australian
stores, and telemarketing subsidiaries
- sales of private label tampons
The International/Corporate Sales Division sells the same products as are
available to our U.S. customers. In May 1999, we sold our International JHIRMACK
business, excluding the Canadian business.
EXTRAORDINARY LOSS
We will incur an extraordinary loss in the second quarter of 2001 as a
result of the offering of the initial notes and the Refinancing Transactions.
This extraordinary loss is expected to be approximately $19.1 million, net of
income tax benefits, and will be the result of:
- call premiums payable upon the redemption of the 8 7/8% Notes and the 9%
Notes;
- write-off of unamortized deferred financing costs from early
extinguishment of existing indebtedness;
- break-up fees payable upon the termination of our two then existing
interest rate swap agreements related to our Existing Credit Facility;
and
- duplicative interest expense pending the redemption of the 8 7/8% Notes
and the 9% Notes from the closing of the offering of the initial notes
and the satisfaction and discharge of the 8 7/8% Notes and the 9% Notes
to the time of their cash redemption in accordance with the required
notice periods.
RESULTS OF OPERATIONS
Our net sales for each of the past three fiscal years and for the first
quarter of 2000 and 2001 are provided based on our divisional structure. The
results for 1998 and 1999 include the results of the acquired brands since the
date of their acquisition by us. We acquired Carewell Industries Inc., on
January 6, 1998, the BINKY pacifier business on January 26, 1998, Personal Care
Holdings Inc., on January 28, 1998, the DIAPER GENIE business on January 29,
1999 and the BABY MAGIC business on June 30, 1999 (dollars in millions):
THREE MONTHS
TWELVE MONTHS ENDED ENDED
------------------------------------------ --------------------
(UNAUDITED)
DECEMBER 26, DECEMBER 25, DECEMBER 30, APRIL 1, MARCH 31,
1998 1999 2000 2000 2001
------------ ------------ ------------ -------- ---------
DIVISIONS
PERSONAL PRODUCTS DIVISION:
Infant Care.............................. $188.0 $255.1 $272.2 $ 68.9 $ 65.5
Feminine Care............................ 177.9 201.8 214.3 52.4 49.4
------ ------ ------ ------ ------
Total Personal Products Division..... 365.9 456.9 486.5 121.3 114.9
CONSUMER PRODUCTS DIVISION:
Sun Care................................. 82.5 96.9 110.3 45.8 45.4
Household Products....................... 52.6 51.0 52.2 12.3 13.1
Personal Grooming........................ 49.2 47.6 43.1 10.3 11.2
------ ------ ------ ------ ------
Total Consumer Products Division..... 184.3 195.5 205.6 68.4 69.7
INTERNATIONAL/CORPORATE SALES DIVISION....... 119.4 135.3 139.2 33.8 36.2
------ ------ ------ ------ ------
Total................................ $669.6 $787.7 $831.3 $223.5 $220.8
====== ====== ====== ====== ======
23
In fiscal 2000, our divisional structures were reorganized. The
International/Corporate Sales Division includes the U.S. specialty classes of
trade including: warehouse clubs, convenience stores, telemarketing, e-commerce,
military and other specialty classes of trade. The net sales and product
contribution from the specialty classes of trade were reported in fiscal 1998
and fiscal 1999 in the Personal and Consumer Products divisions. We reclassified
our fiscal 1998 and fiscal 1999 business segment disclosures and product line
data presented above to conform to the current year presentation. The net sales
of the specialty classes of trade represented approximately 8% of consolidated
net sales for fiscal 1998, 1999 and 2000.
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. Although
allocated to the divisions, depreciation is not a measurement used by us to
evaluate their performance.
The following discussion presents a consolidated view of our results and,
where appropriate, also provides insight to key indicators of division
performance. Our results for the years ended December 26, 1998 and December 25,
1999 are for a fifty-two week period and our results for the year ended
December 30, 2000 are for a fifty-three week period. Our results for the three
months ended April 1, 2000 are for a fourteen week period and our results for
the three months ended March 31, 2001 are for a thirteen week period.
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED APRIL 1, 2000
CONSOLIDATED NET SALES--Our consolidated net sales decreased $2.7 million, or
1%, to $220.8 million in the first quarter of 2001. Our comparative first
quarter results were negatively impacted by: a sluggish economic environment,
competitive pressures primarily in Infant Care, and the impact of the extra week
in the first quarter of 2000.
PERSONAL PRODUCTS DIVISION--Net sales decreased $6.4 million, or 5%, to
$114.9 million in the first quarter of 2001.
Net sales of INFANT CARE products decreased $3.4 million, or 5%, to
$65.5 million in the first quarter of 2001. The sales decline was
primarily the result of continued competitive activity and the recall of
two of our latex pacifier products during the second quarter of 2000. We
estimate the recall negatively impacted our net sales by an estimated
$1.3 million on a comparative basis. We believe our Infant Care
businesses will remain highly competitive in the future. As a result, we
will continue to defend our competitive positions through product
innovation, the introduction of new products and targeted advertising and
promotional activity.
In INFANT FEEDING, our dollar market share decreased 2.0 percentage
points in the first quarter of 2001, to 38.7%, from 40.7% in the
first quarter of 2000. The dollar market share decline was the result
of increased competitive activity in our Cups business and, to a
lesser extent, our recall of two pacifier products in May 2000.
In CUPS, our dollar market share decreased 3.7 percentage points in
the first quarter of 2001, to 54.0%, from 57.7% in the first quarter
of 2000. The cups category, based on total dollar volume of cups
purchased by consumers, grew 2% in the first quarter of 2001 and our
retail consumption decreased 5%. The cups category has become
increasingly competitive with an influx of additional product
offerings, many of which are priced lower than ours. We extended our
line of Cup products with two new offerings in late 2000. These line
extensions and other defensive actions we have recently taken helped
increase
24
our dollar market share 3.5 percentage points compared to the fourth
quarter of 2000. We believe the category will remain competitive but
we believe our market share has stabilized over the last six months.
In DISPOSABLE FEEDING, our dollar market share increased
2.2 percentage points in the first quarter of 2001, to 83.3%, from
81.1% in the first quarter of 2000. Retail consumption in the
category decreased 3.7% in the first quarter of 2001 and our
consumption decreased 1.1%. We believe our market share gains are
attributable to consumers returning to our franchise after a
competitor decreased promotional spending behind a new product
offering. We believe the decline in consumption is attributable to
new innovative products in the reusable hard bottle segment, driven
in part by our innovation in the hard bottle segment.
In REUSABLE HARD BOTTLES, our dollar market share increased
2.8 percentage points in the first quarter of 2001, to 15.6%, from
12.8% in the first quarter of 2000. Retail consumption of our
reusable bottles increased 24.2% while the category grew 2.0%. This
success was the result of our introduction of two new innovative hard
bottles, VENTAIRE and PRECISION FLO.
In DIAPER PAILS (pails and liner refills), our dollar market share
increased 2.5 percentage points in the first quarter of 2001, to
90.4%, from 87.9% in the first quarter of 2000. Retail consumption in
the category decreased 3.8% and our consumption decreased 1%.
In PRE-MOISTENED TOWELETTES (hands and face segment), our dollar
market share decreased 15.6 percentage points in the first quarter of
2001, to 60.3%, from 75.9% in the first quarter of 2000. Retail
consumption of our WET ONES brand increased 3.9% in the first quarter
of 2001 while the category grew 30.8%. There has been a steady influx
of new competitors to the category since the first quarter of 2000.
The new competitors are making significant investments in advertising
and promotion to generate trial use of their products. This is
negatively impacting our market share levels but favorably impacting
our consumption levels as more consumers enter the hands and face
segment. We believe the influx of new consumers to the category will
benefit our product offerings when our competitors return to more
normal promotional support levels. We are preparing for the summer
season, which typically is the highest consumption period, with
significant display activity. In addition, we recently introduced a
new product, Ultra WET ONES, a larger sized wipe positioned as a
head-to-toe portable washcloth.
In INFANT TOILETRIES, our dollar market share decreased
1.3 percentage points in the first quarter of 2001, to 11.3%, from
12.6% in the first quarter of 2000. Retail consumption of our BABY
MAGIC brand decreased 3.3% while the category grew 7.8%. We are
preparing to launch new BABY MAGIC packaging and graphics, as well as
new product offerings during the second half of 2001.
Net sales of FEMININE CARE products decreased $2.9 million, or 6%, to
$49.4 million in the first quarter of 2001. Our share of the U.S. tampon
category declined 0.4 percentage points in the first quarter of 2001, to
30.0%, from 30.4% in the first quarter of 2000. Our retail consumption
grew 3.5%, in dollars, while the category grew 4.7%. The tampon category
experienced an increase in price promotional activity in the first
quarter of 2001.
CONSUMER PRODUCTS DIVISION--Net sales increased $1.3 million, or 2%, to
$69.7 million in the first quarter of 2001.
Net sales of SUN CARE products decreased $0.4 million, or 1%, to
$45.4 million in the first quarter of 2001. For the 2001 Sun Care season
to date, from the beginning of fiscal December 2000 through the end of
fiscal March 2001, net sales are up 3% versus the same
25
period in 2000. Our dollar market share of the sun care category grew
0.8 percentage points in the first quarter of 2001, to 18.0%, from 17.2%
in the first quarter of 2000. Retail consumption of our Sun Care products
increased 9.8%, in dollars, surpassing the category, which grew 5.0%. The
first quarter is not a heavy sun care consumption period. Our dollar
market share tends to be lower in the first and fourth quarters, since
consumption during these time frames is more heavily weighted to sunless
products.
Net sales of HOUSEHOLD PRODUCTS increased $0.8 million, or 6%, to
$13.1 million in the first quarter of 2001. The increase was due
primarily to our WOOLITE business, which grew its dollar market share to
18.9% of the rug and upholstery cleaning category, an increase of
0.4 percentage points compared to the first quarter of 2000. In the first
quarter of 2001, we launched WOOLITE Spot & Stain Wipes, an innovative
new entry in the category. Our Gloves business had similar results. Our
dollar market share of the category grew 0.6 percentage points in the
first quarter of 2001, to 36.4%, from 35.8% in the first quarter of 2000.
Retail consumption of our gloves products increased 3.4%, in dollars,
surpassing the category, which grew 1.9%. This growth was driven by our
disposable gloves segment, which has made distribution gains since the
first quarter of 2000.
Net sales of PERSONAL GROOMING products increased $0.9 million, or 9%, to
$11.2 million in the first quarter of 2001. Our two largest Personal
Grooming brands, OGILVIE and BINACA, each experienced growth in market
share and retail consumption. OGILVIE increased its dollar market share
to 69.8% of the at-home permanents/straighteners category, which was a
gain of 5.6 percentage points compared to the first quarter of 2000.
Retail consumption of our OGILVIE products increased 6.3%, in dollars,
surpassing the category, which declined 2.3%. BINACA increased its dollar
market share to 49.6% of the breath spray and drops category, which was a
gain of 3.7 percentage points compared to the first quarter of 2000. The
successful introduction of FAST BLAST and more front-end store placements
helped increase our retail consumption 4.9% despite a 2.8% decline in the
category.
INTERNATIONAL/CORPORATE SALES DIVISION--Net sales increased $2.3 million, or
7%, to $36.2 million in the first quarter of 2001. The increase was due
primarily to higher net sales in our non-North America markets and the
specialty classes of trade. The growth in net sales in our non-North America
businesses was due primarily to strong results in our Baby Wipes and Sun
Care product lines. The growth in the specialty classes of trade was due
primarily to increased net sales of Cups products.
CONSOLIDATED GROSS PROFIT--Our consolidated gross profit decreased
$3.6 million, or 3%, to $126.1 million in the first quarter of 2001. As a
percent of net sales, gross profit decreased 0.9 percentage points, to 57.1%.
Our gross profit was negatively impacted by higher fixed manufacturing costs for
products sold. We reduced our manufacturing volumes in the first quarter of 2001
to adjust inventory to an appropriate level following the fourth quarter 2000
shortfall in sales.
CONSOLIDATED PRODUCT CONTRIBUTION--Our consolidated product contribution
decreased $4.1 million, or 5%, to $79.9 million in the first quarter of 2001. As
a percent of net sales, product contribution decreased 1.4 percentage points to
36.2%. The decreases were due to our lower net sales, higher fixed manufacturing
costs, as noted above, and our continued investment in our brands. Advertising
and promotional expenditures increased $0.5 million to 20.9% of net sales versus
20.4% in the first quarter of 2000, due primarily to higher spending behind our
Infant Care brands.
PERSONAL PRODUCTS DIVISION--Product contribution decreased $9.0 million, or
18%, to $41.7 million in the first quarter of 2001. As a percent of net
sales, product contribution decreased 5.5 percentage points to 36.3%. The
decrease was due primarily to lower net sales driven by a sluggish economic
environment and competitive pressures in some of our Infant Care businesses.
In addition, we increased our advertising and promotional spending.
26
CONSUMER PRODUCTS DIVISION--Product contribution increased $3.8 million, or
18%, to $25.7 million in the first quarter of 2001. As a percent of net
sales, product contribution increased 4.9 percentage points to 36.9%. The
increases were due primarily to higher net sales, improved product cost in
key brands and lower advertising and promotional expenses as a percent of
net sales.
INTERNATIONAL/CORPORATE SALES DIVISION--Product contribution increased
$1.7 million, or 13%, to $14.5 million in the first quarter of 2001. As a
percent of net sales, product contribution increased 2.4 percentage points
to 40.2%. The increase in product contribution was due primarily to higher
net sales and lower advertising and promotional expenses as a percent of net
sales.
CONSOLIDATED OPERATING EARNINGS--Our consolidated operating earnings decreased
$4.8 million, or 10%, to $43.4 million in the first quarter of 2001. The
decrease in operating earnings was the result of lower consolidated product
contribution as discussed above, and higher selling, distribution, research and
administrative expenses, reflecting normal inflationary increases.
CONSOLIDATED INTEREST EXPENSE--Our consolidated interest expense decreased
$0.9 million, or 4%, to $21.1 million in the first quarter of 2001, due to lower
average debt balances compared to the same period in the prior year. We reduced
our average level of debt by $50.6 million, or 5%, since the first quarter of
2000 due to excess cash provided from operations and our desire to reduce our
debt levels. The weighted average interest rate we pay on our variable rate debt
increased 53 basis points, to 7.89%, from 7.36% in the first quarter of 2000.
CONSOLIDATED INCOME TAXES--Our consolidated income taxes decreased
$1.5 million, or 14%, to $9.4 million in the first quarter of 2001. As a percent
of pre-tax earnings, our effective tax rate increased 0.7 percentage points to
42.4% of pre-tax earnings. Our effective tax rate increases as the portion of
goodwill amortization that is non-deductible for tax purposes becomes a larger
portion of operating earnings.
TWELVE MONTHS ENDED DECEMBER 30, 2000 COMPARED TO TWELVE MONTHS ENDED
DECEMBER 25, 1999
CONSOLIDATED NET SALES--Our consolidated net sales increased $43.6 million, or
6%, to $831.3 million in 2000. Excluding the impact of the 1999 acquisitions and
the divested portion of our JHIRMACK business, our consolidated net sales grew
by $15.9 million in 2000, or 2%, compared to 1999.
PERSONAL PRODUCTS DIVISION--Net sales increased $29.6 million, or 6%, to
$486.5 million in 2000. Excluding the impact of the 1999 acquisitions, the
net sales of the division grew by $2.2 million, or 1%, compared to 1999.
Net sales of INFANT CARE products increased $17.1 million, or 7%, to
$272.2 million in 2000. Excluding the impact of the 1999 acquisitions,
our Infant Care net sales decreased $10.3 million, or 5%, compared to
1999. During 2000, we experienced an unusually high level of competitive
activity across many of our key Infant Care businesses. Competitors
launched new products that were supported by extensive advertising and
promotional activities that, we believe, impacted the growth rates in our
Infant Care businesses. In addition, we instituted a voluntary recall of
two of our latex pacifier products in May 2000. This impacted our net
sales by an estimated $3.0 million. We believe this will remain a highly
competitive category in the future. As a result, we will continue to
defend our competitive positions through product innovation, the
introduction of new products and targeted advertising and promotional
activity.
In INFANT FEEDING, our dollar market share was 39.3% in 2000, a
decrease of 2.6 percentage points compared to 1999. We remained the
market leader in the infant feeding category with a dollar market
share almost double that of our nearest competitor. The dollar market
share decline was the result of increased competitive activity in our
27
Cups and Disposable Feeding businesses and, to a lesser extent, our
recall of two pacifier products.
In CUPS, our dollar market share was 54.9% in 2000, a decrease of
5.6 percentage points compared to 1999. The Cups category, based on
total dollar volume of Cups purchased by consumers, grew 13% in 2000
and our retail consumption increased 2%. We have been the leader in
the infant cup segment since our development and introduction of the
first spill-proof cup. This innovation led to significant growth in
the infant cup market attracting a number of new competitors. Our
closest competitor in the Cup segment had a dollar market share of
less than 20% in 2000. We continue to defend our competitive position
and introduced two innovative new products to the category in 2000
including; THE GRIPSTER, designed for small hands and the DRINKUP
cup, a spill-proof cup for older children transitioning to adult
cups.
In DISPOSABLE FEEDING, our dollar market share was 82.5% in 2000, a
decrease of 1.5 percentage points compared to 1999. Retail
consumption in the category declined 2% in 2000 and our consumption
declined 3%. Our dollar market share decline was due to a new
competitive offering that was heavily supported with promotional
spending. Recent market share data indicates that our dollar market
share of the disposable feeding category has returned to the level
held prior to the introduction of the new competitive offering. We
believe the decline in the category experienced in 2000 was the
result of innovative new products introduced in the reusable hard
bottle segment.
In REUSABLE HARD BOTTLES, our dollar market share was 13.6% in 2000,
an increase of 2.2 percentage points compared to 1999. Retail
consumption of our reusable hard bottles increased 24% while the
category grew 4%. This success was the result of our introduction of
two new innovative hard bottles, VENTAIRE and PRECISION FLO.
As mentioned previously, our PACIFIER business was negatively
impacted in 2000 by a voluntary recall of two of our latex pacifier
products. These pacifiers passed all federal testing requirements and
there were no reported incidents requiring medical attention.
However, we became concerned about the aging properties of the latex
used in the pacifiers. A new latex pacifier is scheduled for
re-launch in 2001.
In DIAPER PAILS (pails and liner refills), we continued to lead the
category with our DIAPER GENIE diaper disposal system. Our dollar
market share was 89.8% in 2000, which was down 3.7 percentage points
compared to 1999. Retail consumption in the category increased 5% and
our consumption increased 1%. A competitor launched a new product
that made some in-roads in the mass distribution channel, which
negatively impacted our dollar market share and consumption levels.
In PRE-MOISTENED TOWELETTES (hands and face), our dollar market share
was 75.7% in 2000, a decrease of 2.8 percentage points compared to
1999. Retail consumption of our WET ONES brand increased 14% in 2000
while the category grew 18%. The category had a number of new
competitive entries in 2000, which negatively impacted our dollar
market share, but significantly contributed to consumption gains in
the category and in WET ONES. We recently introduced Ultra WET ONES,
a larger pre-moistened wipe to expand our offerings in the hands and
face towelette category.
In INFANT TOILETRIES, our dollar market share was 12.6% in 2000, a
decrease of 2.1 percentage points compared to 1999. Retail
consumption of our BABY MAGIC brand decreased 9% while the category
grew 7%. A new competitor in the category introduced a full line of
toiletries supported by an aggressive advertising campaign. Despite
our
28
dollar market share loss, we maintained our position as the number
two branded offering in the category.
In BABY WIPES, our dollar market share was 2.9% in 2000, a decrease
of 1.0 percentage point compared to 1999. In the fourth quarter of
2000, we re-launched our baby wipes product under the BABY MAGIC
brand name in the United States. This brought the recognizable BABY
MAGIC cleansing formula and fragrance to our baby wipes. It remains
too early to measure the overall results of the re-launch.
Net sales of FEMININE CARE products increased $12.5 million, or 6%, to
$214.3 million in 2000. Our share of the U.S. tampon category grew to
30.7% in 2000, which was a gain of 1.1 percentage points compared to
1999. Our retail consumption grew 4.6%, in dollars, outpacing the
category, which grew at 1.0%. We have achieved consistent growth in
market share and consumption over the last three years. We believe our
continued success in the tampon category is attributable to:
- targeted advertising and consumer sampling programs,
- product innovation, and
- our category building skills.
Our targeted advertising focuses on key product attributes important for
today's active lifestyles. We use a number of methods to introduce our
products to potential users including sampling programs and educational
materials for young teens. Our history of product innovation has
attracted new, younger consumers to the market with such products as
SLIMFITS developed for young teens and GENTLE GLIDE and SILK GLIDE Odor
Absorbing tampons. We believe we are contributing to the growth of the
tampon category by educating consumers, attracting young first time
users, and converting feminine protection pad users to tampon users.
CONSUMER PRODUCTS DIVISION--Net sales increased $10.1 million, or 5%, to
$205.6 million in 2000. Excluding the impact of the divested portion of our
JHIRMACK business, net sales of the division grew by $12.4 million, or 6%,
compared to 1999.
Net sales of SUN CARE products increased $13.4 million, or 14%, to
$110.3 million in 2000. Our dollar market share of the Sun Care
category grew to 21.6% in 2000 an increase of 1.4 percentage points
compared to 1999. The retail consumption of our Sun Care products
increased 9.4%, in dollars, surpassing the category, which grew 2.5%.
While dollar market share and retail consumption growth for our
products were strong in 2000, we believe our net sales were
negatively impacted by weather during the summer months. We believe
our market share and retail consumption growth is attributable to a
number of factors including increased consumer awareness of the need
for sun care products, our array of attractive new products and
strong sales and market execution skills including effective shelf
placement and displays. Our BANANA BOAT line offers a full spectrum
of sunblock, sunless tanning and after-sun products. BANANA BOAT is
the second largest brand in the U.S. sun care market and the number
one brand in after-sun care.
Net sales of HOUSEHOLD PRODUCTS increased $1.2 million, or 2%, to
$52.2 million in 2000. The increase was due primarily to our gloves
business, which grew its dollar market share to 36.8% in 2000 an
increase of 3.2 percentage points compared to 1999. Retail
consumption of our gloves increased 9.9% versus category growth of
0.4% during the same period. This growth was driven by retail
consumption growth of 41% in our disposable gloves segment associated
with distribution gains during the year. Our WOOLITE brands' dollar
market share for fiscal 2000 was 19.0% of the rug and upholstery
cleaning
29
category which is a decline of 0.7 percentage points compared to
1999. The rug and upholstery cleaning category decreased 0.6% in 2000
and the retail consumption of WOOLITE decreased 4.4%, primarily due
to competitive activity. In early 2001, we introduced WOOLITE Spot &
Stain Wipes, an innovative new entry in the rug and upholstery
cleaning category, which enhances our shelf presence.
Net sales of PERSONAL GROOMING products decreased $4.5 million, or
9%, to $43.1 million in 2000. Personal Grooming net sales excluding
the divested U.S. JHIRMACK line decreased $2.1 million, or 5%,
compared to 1999. Our two largest Personal Grooming brands OGILVIE
and BINACA each experienced growth in market share and retail
consumption. OGILVIE increased its dollar market share to 66.2% of
the at-home permanents/straighteners category, which was a gain of
8.5 percentage points compared to 1999. The introduction of OGILVIE
Straightener and 7-Day Curls helped increase our retail consumption
12.8% in 2000 and slowed the declining trend experienced in the
category. BINACA increased its dollar market share to 46.7% of the
breath spray and drops category, which was a gain of 5.7 percentage
points compared to 1999. The successful introduction of FAST BLAST
and more front-end store placements helped increase our retail
consumption 5.4% despite a 7.4% decline in the category. While our
dollar market share and consumption growth for OGILVIE and BINACA
were strong in 2000, we believe net sales were negatively impacted by
a reduction in trade inventories.
INTERNATIONAL/CORPORATE SALES DIVISION--Net sales increased $3.9 million, or
3%, to $139.2 million in 2000. The increase was due primarily to higher net
sales in the specialty classes of trade and in Puerto Rico. Net sales in the
U.S. specialty classes of trade were $67.5 million in 2000, an increase of
5.9% compared to 1999. We believe this growth was due primarily to the
increased focus on these distribution channels. Our international net sales
including our Canadian subsidiary were $65.6 million in 2000, down 1.6%
compared to 1999. The decrease was due primarily to a 1.7% decline in our
Canadian subsidiary's net sales.
CONSOLIDATED GROSS PROFIT--Our consolidated gross profit increased
$22.7 million, or 5%, to $479.2 million in 2000. As a percent of net sales,
gross profit decreased 0.3 percentage points, to 57.6% in 2000. The dollar
increase in gross profit was due primarily to our higher net sales and the lower
gross margins were due primarily to costs associated with capacity constraints
in Feminine Care, higher expenses related to Sun Care returns, costs associated
with the pacifier recall, and to lesser extent product mix. Gross profit was
positively impacted by 0.3 percentage points related to favorable pension income
in 2000.
CONSOLIDATED PRODUCT CONTRIBUTION--Our consolidated product contribution
increased $5.0 million, or 2%, to $292.6 million in 2000. The increase was due
to our higher net sales. As a percent of net sales, product contribution
decreased 1.3 percentage points to 35.2% in 2000. The decrease was primarily the
result of higher overall advertising and sales promotion expenses as a
percentage of net sales as we defended against an unusually high level of
competitive activity and, to a lesser extent, lower gross margins.
PERSONAL PRODUCTS DIVISION--Product contribution increased $2.1 million,
or 1%, to $183.8 million in 2000. The increase was due primarily to
higher net sales. As a percent of net sales, product contribution
decreased 2.0 percentage points to 37.8% in 2000. The decrease was
primarily the result of costs associated with capacity constraints in our
Feminine Care business, lower gross margins in our Infant Care businesses
due primarily to the impact of costs associated with the pacifier recall,
and higher overall advertising and sales promotion expenses as a
percentage of net sales.
CONSUMER PRODUCTS DIVISION--Product contribution decreased $3.6 million,
or 6%, to $57.1 million in 2000. As a percent of net sales, product
contribution decreased 3.2 percentage
30
points to 27.8% in 2000. The decreases were due primarily to higher
advertising and sales promotion expenses as a percent of net sales in our
Sun Care and WOOLITE businesses, higher expenses associated with Sun Care
returns, and to a lesser extent product mix.
INTERNATIONAL/CORPORATE SALES DIVISION--Product contribution increased
$1.7 million, or 3%, to $55.1 million in 2000. The increase in product
contribution was due primarily to higher net sales. As a percent of net
sales, product contribution increased 0.1 percentage points to 39.6% in
2000. The increase was due primarily to higher net sales in our corporate
sales channel, which generally has better margins.
CONSOLIDATED OPERATING EARNINGS--Our consolidated operating earnings decreased
$7.3 million, or 5%, to $147.9 million in 2000. The decrease in operating
earnings was the result of lower consolidated product contribution as discussed
and higher selling, distribution, research and administrative expenses
reflecting normal inflationary increases and the full year impact of the 1999
acquisitions.
CONSOLIDATED INTEREST EXPENSE--Our consolidated interest expense increased
$5.9 million, or 7%, to $84.9 million in 2000. Average debt for 2000 exceeded
the prior year by approximately $14.6 million, or 2%, due primarily to the
purchases of the DIAPER GENIE business in January 1999 and the BABY MAGIC
business in June 1999. The impact of the additional debt was compounded by
higher weighted average interest rates in 2000 compared to 1999. Our weighted
average variable interest rate in 2000 was 7.76% compared to 6.75% in 1999.
CONSOLIDATED INCOME TAXES--Our consolidated income taxes decreased
$4.7 million, or 15%, to $27.5 million in 2000. As a percent of pre-tax
earnings, our effective tax rate increased 1.4 percentage points to 43.6% of
pre-tax earnings in 2000. Our effective tax rate increases as the portion of
goodwill amortization that is non-deductible for tax purposes becomes a larger
portion of operating earnings.
TWELVE MONTHS ENDED DECEMBER 25, 1999 COMPARED TO TWELVE MONTHS ENDED
DECEMBER 26, 1998
CONSOLIDATED NET SALES--Our consolidated net sales increased $118.1 million, or
18%, to $787.7 million in 1999. Excluding the impact of the 1999 acquisitions
and the divested portion of our JHIRMACK business, our consolidated net sales
grew by $55.3 million, or 8%, compared to 1998.
PERSONAL PRODUCTS DIVISION--Net sales increased $90.9 million, or 25%, to
$456.9 million in 1999. Excluding the impact of the 1999 acquisitions,
the net sales of the division grew by $29.0 million, or 8%, compared to
1998.
Net sales of INFANT CARE products increased $67.1 million, or 36%, to
$255.1 million in 1999. Excluding the impact of the 1999
acquisitions, our Infant Care net sales increased by $5.1 million, or
3%, compared to 1998. Our dollar market share of the infant feeding
category decreased 0.2 percentage points to 41.9% in 1999. This
slight decline comes after a number of years of market share growth,
which was at 30% just four years ago. Competitive pressures in cups,
where our dollar market share declined 6.4 percentage points to
60.5%, negatively affected our 1999 results. Also, to a lesser
extent, capacity issues in our DROP-INS disposable feeding product
limited sales in 1999 as growth in product demand exceeded available
capacity. We added additional DROP-INS capacity late in 1999 by
adding an additional manufacturing line. The infant feeding category
grew 6.7% in dollars in 1999 versus 1998, and the retail consumption
of our products grew 6.3%, slightly below the category.
Net sales of FEMININE CARE products increased $23.9 million, or 13%,
to $201.8 million in 1999. We experienced dollar market share gains
of 2.6 percentage points to 29.6% of the tampon category in 1999. The
tampon category, in dollars, grew 4.3% versus 1998, and the retail
consumption of our products grew 14.3%. This level of performance is
the result of our innovative product development efforts and consumer
marketing initiatives.
31
CONSUMER PRODUCTS DIVISION--Net sales increased $11.2 million, or 6%, to
$195.5 million in 1999. Excluding the impact of the divested portion of
our JHIRMACK business, net sales of the division grew by $18.5 million,
or 11%, compared to 1998.
Net sales of SUN CARE products increased $14.4 million, or 17%, to
$96.9 million in 1999. Our dollar market share increased
1.4 percentage points to 20.2% for 1999. The sun care category, in
dollars, grew 12.5% and the retail consumption of our products
increased 23.3% compared to 1998. The category growth and the growth
in our consumption were due largely to high consumer demand for the
BANANA BOAT product, increased consumer awareness of the need for
sunscreen protection, and favorable weather across the country during
the sun care season. We also benefited from the successful
introduction of new BANANA BOAT products in 1999, including, a
colored sunscreen product with disappearing color indicator.
Net sales of HOUSEHOLD PRODUCTS decreased $1.6 million, or 3%, to
$51.0 million in 1999. The shortfall was due to a decrease in WOOLITE
net sales during 1999. The shortfall in sales was due to strong
WOOLITE shipments in 1998 as a result of the launch of a new WOOLITE
product and promotional activity to defend against a new product
introduced by a competitor. In 1999, the retail consumption of
WOOLITE increased 0.8% versus 1998, despite a decrease in the
category of 1.9%, and our dollar market share increased
0.5 percentage points to 19.7%. Retail consumption of our gloves
increased 6.1% versus category growth of 3.1% during the same period.
The growth in the gloves category is largely centered in the
disposable segment.
Net sales of PERSONAL GROOMING decreased $1.6 million, or 3%, to
$47.6 million in 1999. Personal Grooming net sales excluding the
divested U.S. JHIRMACK line increased $5.7 million, or 14%, compared
to 1998. Contributing to this growth were dollar market share gains
in both BINACA and OGILVIE. The dollar market share for BINACA grew
five percentage points to 41.0% in 1999 as a result of the
introduction of a new product, FAST BLAST, and efforts to secure
front-end store placement. The dollar market share for OGILVIE
increased eight percentage points to 57.7% due primarily to new
packaging and the introduction of a new product, OGILVIE
Straightener.
INTERNATIONAL/CORPORATE SALES DIVISION--Net sales increased
$16.0 million, or 13%, to $135.3 million in 1999. Excluding the impact of
the 1999 acquisitions, net sales of the division increased 7% compared to
1998. The increase was due primarily to 19% growth in net sales by our
Canadian subsidiary, which was attributable primarily to 40% growth in
Infant Care and 13% growth in Feminine Care net sales. Excluding the
impact of the 1999 acquisitions, the Canadian Infant Care product line
increased 9% versus 1998.
CONSOLIDATED GROSS PROFIT--Our consolidated gross profit increased
$64.4 million, or 16% to $456.5 million in 1999. As a percent of net sales,
gross profit decreased 0.6 percentage points, to 57.9% in 1999. The lower gross
profit as a percent of net sales was due primarily to lower overall gross
margins for acquired brands, costs associated with new product launches and
costs associated with keeping up with increased demand. The dollar increase in
gross profit was due primarily to our higher net sales.
CONSOLIDATED PRODUCT CONTRIBUTION--Our consolidated product contribution
increased $40.9 million, or 17%, to $287.6 million in 1999. The increase was due
primarily to our higher net sales. As a percent of net sales, product
contribution decreased 0.3 percentage points to 36.5% in 1999. The decrease was
primarily the result of lower gross margins offset, in part, by lower overall
advertising and sales promotion expenses as a percentage of net sales.
32
PERSONAL PRODUCTS DIVISION--Product contribution increased
$31.3 million, or 21%, to $181.6 million in 1999. As a percent of net
sales, product contribution decreased 1.3 percentage points to 39.8% in
1999. The increase in product contribution was due primarily to higher
net sales. As a percent of net sales, product contribution decreased due
to:
- a change in sales mix to lower gross margin products primarily
associated with the 1999
acquisitions,
- costs associated with new product launches, and
- costs related to capacity constraints in our Feminine Care and DROP-INS
businesses.
CONSUMER PRODUCTS DIVISION--Product contribution increased $3.8 million,
or 7%, to $60.7 million in 1999. As a percent of net sales, product
contribution increased 0.1 percentage points to 31.0% in 1999. The
increase in product contribution was due primarily to higher net sales.
INTERNATIONAL/CORPORATE SALES DIVISION--Product contribution increased
$6.9 million, or 15%, to $53.4 million in 1999. The increase in product
contribution was due primarily to higher net sales, most notably the
increase in our Canadian subsidiary's net sales. As a percent of net
sales, product contribution increased 0.6 percentage points to 39.5% in
1999. This is due primarily to higher gross margins offset, in part, by
higher advertising and sales promotion expenses as a percentage of net
sales.
CONSOLIDATED OPERATING EARNINGS--Our consolidated operating earnings increased
$23.8 million, or 18%, to $155.2 million in 1999. The increase in operating
earnings was in line with the growth in our consolidated product contribution.
CONSOLIDATED INTEREST EXPENSE--Our consolidated interest expense increased
$7.5 million, or 10%, to $79.0 million in 1999. Average debt for 1999 exceeded
the prior year by approximately $120.0 million, or 15%, due primarily to our
purchases of the DIAPER GENIE business in January 1999 and the BABY MAGIC
business in June 1999. The impact of the additional debt was offset, in part, by
lower interest rates in 1999 compared to 1998.
CONSOLIDATED INCOME TAXES--Our consolidated income taxes increased
$6.5 million, or 25%, to $32.2 million in 1999. As a percent of pretax earnings,
our effective tax rate decreased 0.7 percentage points to 42.2% of pretax
earnings in 1999. Our effective tax rate decreases as non-deductible goodwill
amortization becomes a smaller portion of operating earnings.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have funded our working capital, debt service requirements
and capital expenditures through cash flow from operations and borrowings under
our Existing Credit Facility. At March 31, 2001, our working capital (current
assets net of current liabilities) increased $24.3 million to $98.5 million as
compared to December 30, 2000.
- Total current assets increased $29.8 million to $275.1 million at
March 31, 2001 compared to
December 30, 2000. Our receivables increased
$31.2 million as sales increased by $30.7 million compared
to the fourth quarter of 2000, due in part, to the
seasonal nature of our Sun Care business. All other
current assets decreased by $1.4 million.
- Total current liabilities increased $5.5 million at March 31, 2001
compared to December 30,
2000. This occurred primarily as a result of an increase
of $6.4 million in accrued income tax payments and
$3.9 million associated with principal debt obligations
due within the next twelve months. Our accounts payable
33
balances declined $3.4 million due primarily to the timing
of payments. All other current liabilities decreased
$1.4 million.
Sun Care shipments are highly seasonal, with at least 80 percent of our
sales in the last two years to retailers occurring from December through June.
This seasonality requires increased inventory from December to June to support
the selling season. We experience higher receivables from February to September
due to a portion of the sales having extended credit terms. In accordance with
industry practice, we allow our customers to return unsold sun care product at
the end of the sun care season. We reserve amounts on our balance sheet as we
sell our Sun Care products based upon an estimated return level. The level of
returns may fluctuate from our estimates due to several factors including
weather conditions, customer inventory levels, and competitive conditions.
However, actual historical return rates as a percentage of net sales have
fluctuated within a fairly narrow range.
Capital expenditures for equipment and facility improvements were
$16.4 million for fiscal 1998, $20.8 million for fiscal 1999 and $22.7 million
for fiscal 2000. These expenditures were used primarily to expand capacity in
key product areas, upgrade production equipment and maintain our facilities.
Capital expenditures in 2001 and 2002 are expected to be comparable to the 2000
level.
At March 31, 2001, long-term debt (including current portion) was
$944.0 million compared to $931.6 million at December 30, 2000. The increase of
$12.4 million relates to revolving credit facility borrowings of $21.8 million
to fund the working capital needs of our Sun Care business, offset, in part, by
scheduled principal repayments on our term loan and term A loan of
$9.4 million. At March 31, 2001, we had $86.0 million available to borrow under
our revolving credit facility. The amount of money we were able to borrow from
our revolving credit facility reduces over time. The first reduction of
$5.0 million occurred on December 15, 2000.
We used the approximately $934.0 million in gross proceeds from the offering
of the initial notes, the New Credit Facility and the Receivables Facility, to
repay all amounts outstanding under the Existing Credit Facility and terminate
our two existing interest rate swap agreements, to redeem all our outstanding
8 7/8% Notes and 9% Notes, and to pay interest on satisfied and discharged debt,
call premiums, transaction fees and expenses. For more information, please refer
to the sections of this prospectus entitled "Use of Proceeds," "Description of
the Receivables Facility" and "Description of Other Indebtedness." After
repayment of all amounts outstanding under the Existing Credit Facility, we
terminated the facility. On a pro forma basis as of March 31, 2001, after giving
effect to the offering of the initial notes and the Refinancing Transactions,
our long-term debt would have been $916.3 million.
We intend to fund our future operating cash, capital expenditure and debt
service requirements through cash flow from operations and borrowings under the
New Credit Facility and proceeds from the Receivables Facility. The New Credit
Facility consists of a $100.0 million term loan under the Tranche A Facility, a
$400.0 million term loan under the Tranche B Facility and up to $125.0 million
under the Revolving Facility. The Tranche A Facility and the Revolving Facility
have a final maturity in 2007 and the Tranche B Facility has a final maturity in
2009, with varying principal repayment and commitment reduction requirements
prior thereto. Borrowings under the New Credit Facility bear interest at a
floating rate based upon (and including spreads over), at our option, Adjusted
LIBOR or the higher of Credit Suisse First Boston's Prime Rate or the Federal
Funds Effective Rate. The New Credit Facility also has various mandatory
prepayment provisions and financial and other covenants. At March 31, 2001, on a
pro forma basis, after giving effect to the offering of the initial notes and
the Refinancing Transactions, we would have had $108.7 million of undrawn
availability under the Revolving Facility, excluding outstanding letters of
credit. For more information, please refer to the section of this prospectus
entitled "Description of Other Indebtedness--New Credit Facility."
Over the next twelve months, we expect to be able to meet our working
capital, capital expenditure and debt service requirements through cash flow
from operations and borrowings under the Revolving Facility and proceeds from
the Receivables Facility. Over the longer term, our ability to
34
generate sufficient cash flow from operations to make scheduled payments on our
debt obligations will depend on our future financial performance, which will be
affected by a range of economic, competitive and business factors, many of which
are outside of our control. If we do not generate sufficient cash flow from
operations to satisfy our debt obligations, including payments on the notes, we
may have to undertake alternative financing plans. We cannot assure you that
completion of any such alternative financing plans will be possible. Our
inability to generate sufficient cash flow to satisfy our debt obligations, or
to refinance our obligations on commercially reasonable terms, would have an
adverse effect on our business, financial condition and results of operations,
as well as on our ability to satisfy our obligations on the notes. Please refer
to the section of this prospectus entitled "Risk Factors."
Since the beginning of 1998, we have made a number of acquisitions including
Personal Care Holdings, Inc., Carewell Industries, Inc., BINKY, DIAPER GENIE and
BABY MAGIC. We financed these transactions by borrowing additional money under
our Existing Credit Facility and issuing a convertible note and shares of our
common stock. In total, we borrowed $332.9 million and issued approximately
9.3 million shares of our common stock. We will continue to consider the
acquisition of other companies or businesses that may require us to seek
additional debt or equity financing. As we cannot assure you that such financing
will be available to us, our ability to expand our operations through
acquisitions may be restricted.
Inflation in the United States and Canada has not had a significant effect
on our operations during recent periods.
RECENTLY ISSUED ACCOUNTING STANDARDS
In 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS 137 and
SFAS 138. It requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This statement became effective for us on December 31, 2000. We
were a party to two derivative instruments that we entered into in
November 2000, for no other purpose than to hedge against interest rate
volatility on $300 million of our variable rate indebtedness associated with our
term A loan and term loan under the Existing Credit Facility. As a result of the
Refinancing Transactions, these instruments were terminated on May 22, 2001.
Upon implementation of SFAS 133, we recorded a current liability on our balance
sheet with a corresponding charge to other comprehensive earnings. The adoption
of SFAS 133 may cause increased volatility in our results of operations in the
future if we change our policies or enter into new derivative instruments which
do not meet the requirements for hedge accounting under SFAS 133.
In May 2000, the Emerging Issues Task Force of the FASB reached a consensus
on Issue No. 00-14, "Accounting for Certain Sales Incentives," which becomes
effective for us in the first quarter of 2002. This issue addresses the
recognition, measurement, and income statement classification for certain sales
incentives, including: discounts, coupons, rebates, and free products or
services, offered voluntarily to customers. We have made a preliminary
evaluation of the effect of this statement on our financial statements. As
required by the issue, we will restate our net sales and advertising and
promotion expenses. This restatement will reduce both our net sales and
advertising and promotion expenses by equal and offsetting amounts. This issue
will not have any impact on our reported operating earnings, net income, or
earnings per share. It will, however, lower our reported gross margins and
advertising and sales promotion expenses as a percentage of net sales, while
increasing our
35
operating earnings margin. For our first quarter ended March 31, 2001, this
issue would have had the following effect on our reported results (unaudited, in
thousands):
THREE MONTHS ENDED MARCH 31, 2001
--------------------------------------
AS REPORTED ADJUSTMENT AS ADJUSTED
----------- ---------- -----------
Net sales................................................. $220,776 $(12,762) $208,014
Gross profit.............................................. 126,067 (12,762) 113,305
Advertising and sales promotion........................... 46,199 (12,762) 33,437
Operating earnings........................................ $ 43,384 $ -- $ 43,384
On February 14, 2001, the FASB issued an Exposure Draft ("ED"), BUSINESS
COMBINATIONS AND INTANGIBLE ASSETS--ACCOUNTING FOR GOODWILL. In the ED, the FASB
proposes that goodwill such as ours will no longer be amortized on a systematic
basis, but rather would be tested for impairment when events or circumstances
indicate the goodwill of a reporting entity (which is defined as the lowest
level of an entity that is a business and that can be distinguished, physically
operationally and for internal reporting purposes, from other activities,
operations, and assets of the entity) might be impaired. We would record a
goodwill impairment loss if the implied fair value of one of our reporting
entities' goodwill is less than its carrying amount.
In its current form, if we adopted the ED, our net earnings would increase
to the extent that amortization expense on goodwill is no longer recorded,
however, EBITDA would not be affected. The FASB has indicated that the final
statement relating to this ED may become effective in 2001.
In September 2000, the FASB issued Statement of Financial Accounting
Standards No. 140, ("SFAS 140"), "Accounting for Transfers and Servicing of
Financial Assets on Extinguishments of Liabilities--A Replacement of FASB
Statement No. 125." This statement revises the standards for accounting for
securitizations and other transfers of financial assets and extinguishments of
liabilities, based on a consistent application of a "financial components"
approach that focuses on control. The statement provides consistent standards
for distinguishing transfers of financial assets that are sales, from transfers
that are secured borrowings. The statement requires that a liability be
derecognized if and only if either (a) the debtor pays the creditor and is
relieved of its obligation for the liability or (b) the debtor is legally
released from being the primary obligor under the liability either judicially or
by the creditor.
The statement is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after March 31, 2001, accordingly
this statement governs our accounting for the Receivables Facility.
36
BUSINESS
We are a leading manufacturer and marketer of a diversified portfolio of
well-recognized branded consumer and personal products, including:
- PLAYTEX Infant Care products, - PLAYTEX GLOVES, and
- PLAYTEX Feminine Care products, - WOOLITE rug and upholstery cleaning
- BANANA BOAT Sun Care products, products.
As a result of our acquisitions in 1998 and 1999, we added a number of
widely-recognized branded consumer products to further strengthen and diversify
our product line, including:
- WET ONES pre-moistened towelettes, - OGILVIE at-home permanents,
- CHUBS baby wipes, - DENTAX oral care products,
- BINACA breath sprays and drops, - DIAPER GENIE diaper disposal system,
and
- MR. BUBBLE children's bubble bath - BABY MAGIC baby toiletries.
products,
- BINKY Pacifiers,
Our net sales for each of the past three fiscal years and for the first
quarters of 2000 and 2001 are provided based on our divisional structure
(dollars in millions). The results for 1998 and 1999 include the results of the
acquired brands since the date of their acquisition by us. We acquired:
- Carewell Industries Inc., on January 6, 1998 (DENTAX oral care products),
- the BINKY pacifier business on January 26, 1998,
- Personal Care Holdings Inc., on January 28, 1998 (including the brands:
WET ONES, MR. BUBBLE, OGILVIE and BINACA),
- the DIAPER GENIE business on January 29, 1999 and
- the BABY MAGIC business on June 30, 1999:
THREE MONTHS
ENDED
TWELVE MONTHS ENDED (UNAUDITED)
------------------------------------------ --------------------
DECEMBER 26, DECEMBER 25, DECEMBER 30, APRIL 1, MARCH 31,
DIVISIONS 1998 1999 2000 2000 2001
--------- ------------ ------------ ------------ -------- ---------
PERSONAL PRODUCTS DIVISION:
Infant Care.......................... $188.0 $255.1 $272.2 $ 68.9 $ 65.5
Feminine Care........................ 177.9 201.8 214.3 52.4 49.4
------ ------ ------ ------ ------
Total Personal Products Division... 365.9 456.9 486.5 121.3 114.9
CONSUMER PRODUCTS DIVISION:
Sun Care............................. 82.5 96.9 110.3 45.8 45.4
Household Products................... 52.6 51.0 52.2 12.3 13.1
Personal Grooming.................... 49.2 47.6 43.1 10.3 11.2
------ ------ ------ ------ ------
Total Consumer Products Division... 184.3 195.5 205.6 68.4 69.7
INTERNATIONAL/CORPORATE SALES
DIVISION............................. 119.4 135.3 139.2 33.8 36.2
------ ------ ------ ------ ------
Total.............................. $669.6 $787.7 $831.3 $223.5 $220.8
====== ====== ====== ====== ======
HISTORY
Our business was founded in 1932 under the name International Latex Company
and operated for many years prior to 1986 under the name International
Playtex, Inc. In the mid-1950's, using latex technology developed for the
manufacture of girdles, we began to market household gloves. This was the first
of many products to constitute our consumer products division. Through the
marketing of gloves, the addition of disposable nursers in the mid-1960's and
the acquisition in 1967 and the
37
expansion of our tampon manufacturing business, we established a major presence
in the drug store, supermarket and mass merchandise channels of distribution.
In 1986, we were taken private in a management led leveraged buyout and, in
1988, we were reorganized by management investors and others. In the
reorganization, Playtex Apparel, Inc., which manufactures women's intimate
apparel, was spun-off to the management of that business. Today, we no longer
have any corporate relationship with Playtex Apparel, Inc., except that we each
own 50% of the stock of Playtex Marketing Corporation, which owns the PLAYTEX
and LIVING trademarks. Playtex Marketing licenses the PLAYTEx and LIVING
trademarks to us in perpetuity on a royalty-free basis. In 1994, we completed an
initial public offering of our common stock.
In 1995, a group of investors associated with Haas Wheat & Partners
Incorporated purchased approximately 40% of our then outstanding common stock
and individuals associated with Haas Wheat were elected by our stockholders as a
simple majority of our Board of Directors.
COMPETITIVE STRENGTHS
We believe we are distinguished by the following competitive strengths:
- EXCEPTIONAL CONSUMER FRANCHISE. Our principal brand names--PLAYTEX, DIAPER
GENIE, BABY MAGIC, WET ONES, MR. BUBBLE, BANANA BOAT, WOOLITE, OGILVIE and
BINACA--are well known and respected by both consumers and retailers for
their high quality and innovative products. To further develop and
maintain our significant brand equity and consumer loyalty, we have spent,
on average, in excess of $165 million annually on advertising and
promotional support over the past three years.
- STRONG CASH FLOWS. Our historically strong cash flows and operating
margins, together with our low levels of capital expenditures, have
enabled us to reduce the ratio of our net debt to EBITDA from 7.2 in 1995
to 5.1 in 2000 and to implement our business strategy.
- LEADING MARKET POSITIONS IN ATTRACTIVE CATEGORIES. In 2000, we generated
approximately 95% of our net sales from categories in which we held the
number one or two market share position. Furthermore, we believe that the
core categories in which we compete, infant care, feminine care and sun
care, are attractive. The tampon market is characterized by steady growth,
a high degree of customer brand loyalty and a relatively low sensitivity
to economic cycles. The infant care and sun care markets have grown more
rapidly. The growth in the infant care market is principally due to the
receptiveness of consumers to new products, and the growth in the sun care
market is principally due to increased consumer awareness of sun care
issues coupled with more active lifestyles.
- CONSUMER-FOCUSED PRODUCT INNOVATION. We devote significant resources and
attention to product innovation and consumer research to develop
differentiated products with new and distinctive features which provide
increased convenience and value to our consumers. Innovative products we
have launched recently include:
-- Odor Absorbing tampons: plastic and cardboard applicator tampons with
an all natural material in the tampon that absorbs odors without the
use of a fragrance or deodorant. The products appeal to a large group
of women who are concerned with odor protection yet reluctant to use a
fragranced tampon;
-- BIG SIPSTER and DRINKUP: spill-proof cups for older children which
extend the age range of the users of our products. In addition, THE
GRIPSTER: a spill-proof cup made to fit a smaller child's hand, which
helps children start using a drinking cup at an earlier age;
-- VENTAIRE and PRECISION FLO: two new innovative entries in the reusable
hard bottle category. Each of these bottles has a removable bottom to
make cleaning easier, and a patented nipple that reduces the amount of
air that gets into the bottle. These items helped increase
38
our market share 2.2 percentage points and grow our retail consumption
more than five times faster than the category in 2000;
-- In Sun Care, we continue to provide innovative ways to deliver sun
protection. The use of trigger sprays has made the application of our
Sun Care products easier, especially for parents with small children.
We have recently extended some of our popular sun protection formulas
to quick drying gels, which are not as messy as traditional sun
protection lotions; and
-- WOOLITE Spot & Stain Wipes: pre-moistened towelettes that clean up
spills and carpet stains without the need for towels, soap and water.
This product is a good example of our ability to use a familiar
manufacturing capability--the production of pre-moistened wipes--and
extend it to a new product line.
- WELL-ESTABLISHED DISTRIBUTION CHANNELS. Our products are distributed in
virtually every major food chain, drug chain, mass merchandiser and
warehouse club in the United States. We believe that the depth and breadth
of these distribution channels permit us to rapidly introduce new
products. To further enhance our relationship with our retailers, we are
focusing sales and marketing efforts on category management programs. In
these programs, we work with retailers to increase category sales and
profitability through detailed analysis of consumer buying habits and
improved merchandising techniques. We believe that these programs
strengthen our relationships with retailers and increase our sales.
GROWTH STRATEGY
The principal features of our growth strategy are outlined below:
- CONTINUE TO INCREASE SALES AND GAIN MARKET SHARE. We have increased sales
and gained market share in our key businesses over the last five years due
to consumer-focused product innovations, creative merchandising
techniques, targeted consumer marketing programs and successful
acquisitions. The compound annual growth rate of our net sales, excluding
the impact of acquisitions, was 6% over the last five years. We use a
number of techniques to grow our existing brands, including product
innovation derived from extensive consumer research and product
development skills, consumer-focused marketing programs to promote trial
use and strengthen consumer loyalty, and innovative category management
tools to strengthen our relationships with our retail partners and improve
on-shelf presence.
- SELECTIVELY EXTEND BRANDS INTO NEW PRODUCT CATEGORIES. We consider brand
building to be one of our core competencies. We will look to extend our
PLAYTEX, BANANA BOAT and other brand names into new product categories to
capitalize on our brand equity, our reputation for customer-focused
product development and our well-established distribution network. Recent
examples include co-branding the PLAYTEX brand name with the BABY MAGIC
and DIAPER GENIE lines.
- CONSIDER SELECTIVE ACQUISITIONS. Since 1998, we have made five
acquisitions which added a number of well-known brands, including WET
ONES, DIAPER GENIE, BABY MAGIC, OGILVIE, BINACA and MR. BUBBLE. Net sales
of our acquired brands were approximately $225 million in 2000. On an
opportunistic basis, we will continue to consider acquisitions that are
consistent with our strategic plans.
- BUILD SALES IN ALTERNATE MARKETS. Historically, less than 4% of our net
sales have been generated outside of North America. This has allowed us to
focus our efforts on expanding our business in the geographic area with
which we are most familiar. While this has been beneficial, we continue to
look to expand our sales outside of North America in a profitable manner
by partnering with experienced distributors familiar with the countries in
which they operate. In addition, we established a corporate sales team in
2000, which focuses exclusively on expanding
39
our presence in alternate distribution channels in the United States,
including warehouse clubs, convenience stores, military establishments,
telemarketing and the internet.
PRODUCTS
We are organized in three divisions, which allows us to focus more
effectively on individual product lines, category management initiatives, and
the efficient integration of acquired brands. Our two largest divisions, the
Personal Products Division and the Consumer Products Division, constituted
approximately 83% of our consolidated net sales in fiscal 2000.
PERSONAL PRODUCTS DIVISION--The Personal Products Division accounted for
approximately 55% of our consolidated net sales in fiscal 1998 and 58% in fiscal
1999 and 2000. This 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:
- PLAYTEX disposable nurser system, cups - MR. BUBBLE children's bubble bath,
and reusable hard bottles, - CHUBS/BABY MAGIC baby wipes,
- WET ONES pre-moistened towelettes, - BINKY pacifiers, and
- BABY MAGIC toiletries, - DIAPER GENIE diaper disposal system.
The Feminine Care product category includes a wide range of plastic and
cardboard applicator tampons marketed under such brand names as PLAYTEX: GENTLE
GLIDE, SILK GLIDE and SLIMFITS. Also included in the Feminine Care product
category is a recently launched feminine hygiene pre-moistened towelette.
INFANT CARE--Infant Care accounted for approximately 51% of Personal
Products net sales in fiscal 1998 and 56% in fiscal 1999 and 2000. As a result
of the 1998 and 1999 acquisitions, Infant Care has surpassed Feminine Care as
our largest product category in terms of net sales.
Our largest Infant Care business is infant feeding products, in which we
held a market leading 39% dollar market share in 2000. We are particularly
strong in both the disposable feeding and the infant cup categories, with 2000
dollar market shares of 83% and 55%, respectively. We are also strong in the
diaper pail category with our 90% dollar market share leading DIAPER GENIE
brand. Our MR. BUBBLE and BABY MAGIC brands held 20% and 13% of their respected
categories and hold number two market share positions. In the pre-moistened
towelette business, our WET ONES hand and face towelette brand held a 76% dollar
market share of the hand and face segment, while our baby wipe brands held a 3%
dollar market share in 2000.
The PLAYTEX disposable feeding system, introduced in 1960, was the first
disposable system on the market. Since that time, we have provided innovative
product improvements as a healthy alternative to breast feeding. In 1996, we
introduced our DROP-INS ready formed disposable bottle. Since its introduction
in 1996, DROP-INS has significantly increased its market share in the disposable
feeding category. In 2000, DROP-INS constituted approximately 35% of total
disposable liners used by consumers based on consumption data from the ACNielsen
Company. In 1999, a competitor launched a new product entry in the disposable
feeding category supported by strong marketing promotions and trade spending.
This new product offering gained market share in the category and negatively
impacted our sales growth during 2000. We aggressively defended our market share
position and we believe that recent market share trends indicate that our share
of the category has returned to the level experienced prior to the competitive
launch.
In 1994, we introduced the spill-proof cup. Sales of our spill-proof cups
have increased our market share in the infant cup category to 55% in 2000 from
29% in 1994. Prior to our introduction of the spill-proof cup, there was really
no distinct market segment for children's cups. The spill-proof cup
revolutionized this category. The cup category increased in dollar terms from
approximately $34 million in 1994 to $119 million in 2000. Over the last few
years, we expanded our cup offerings. In 1996, we introduced the QUICKSTRAW cup,
and in 1997 introduced an insulated version of the QUICKSTRAW cup, the COOLSTRAW
cup. In 1999, we added a six-color version of our spill-proof cup and the BIG
SIPSTER, a cup
40
targeted at older children. Retail consumption in the cup category grew by 12.7%
in 2000 versus the same period in 1999 while our retail consumption grew by 2.4%
over 1999. Our 2000 market share is down approximately 6 percentage points
versus 1999. We believe that this decline is due to the influx of additional
product offerings, many of which are lower priced than ours, as competitors
looked to profit on this growing category. In late 2000, we extended our line of
spill-proof cups with THE GRIPSTER, made to fit small hands, and the DRINKUP, a
cup for older children ready to make the transition from infant cups to regular
drinking. In addition, as a market leader, we continue to explore innovative
opportunities in the cup category to drive category growth.
Through our recent acquisitions of the DIAPER GENIE business and the BABY
MAGIC brand, we have added two premium brands and expanded the growth potential
of our Infant Care category. DIAPER GENIE leads the diaper disposal market with
a 90% market share in 2000. The DIAPER GENIE business is comprised of two
segments:
- DIAPER GENIE diaper pail unit, and
- DIAPER GENIE liner refills, the largest component of the business.
The diaper pail unit individually seals diapers in an odor-proof, germ-proof
chain. The unit uses our proprietary refill liners. A supply of liners lasts
approximately one month. A large percentage of the diaper pail units are given
to expectant mothers as gifts. We believe that this provides a unique
opportunity to begin cross-marketing our entire line of infant care products
before the baby arrives.
BABY MAGIC occupies the number two position among the branded products in
the U.S. baby toiletries category, which is defined as lotions, shampoos,
powders, bath products, oils and gift packs, with a 13% dollar market share in
2000. BABY MAGIC has a strong position in the bath and lotion segments. Our 2000
dollar market share is down approximately 2 percentage points from 1999 as a
result of a new competitor entering the category. Our MR. BUBBLE children's
bubble bath brand is a widely recognized brand name among consumers and holds a
number two position in the bath additives category, with a 20% dollar market
share.
We entered the pre-moistened towelette business in early 1998 with the
acquisition of WET ONES, the market leader in the hands and face towelette
category. These products are used by parents in applications other than diaper
changing, such as cleaning up after meals or traveling away from home.
Historically, WET ONES has been offered in both canister and travel pack form,
but in 1998, we introduced new individually wrapped towelettes, called WET ONES
Singles, and another individually wrapped product targeted for children's lunch
boxes called WET ONES For Kids. WET ONES had a 76% market share in 2000.
We also entered the baby wipe business in early 1998 with the acquisition of
the CHUBS and DIAPARENE brands. Our initial focus had been on improving product
quality and consumer appeal including softer, quilted material and greater
refill count sizes. In 2000, we decided to sell our domestic baby wipes under
the BABY MAGIC name to provide more synergistic advertising and consumer
recognition. In addition we feel our baby wipes were improved by adding the BABY
MAGIC cleaning formula and fragrance. Our dollar market share in the baby wipes
category was 3% in 2000, down 1 percentage point versus 1999.
We are committed to offering the best and most innovative infant care
products to the market. In fiscal 2000, some of our internal testing indicated
that latex used in the manufacture of two of our latex pacifier products may
cause the pacifier nipple to age at an accelerated rate. Even though the
pacifiers passed all federal test requirements and there were no reported
incidents requiring medical attention, we voluntarily recalled the product. We
estimate that this impacted net sales by approximately $3.0 million in 2000. A
new latex pacifier is scheduled to launch in 2001.
Our carefully designed message of quality, health and convenience for our
infant care products is delivered in a variety of ways including a professional
sampling and advertising program targeting
41
pediatricians and pediatric nurses. Programs directed to new mothers include
distribution of millions of samples and coupons prenatally via childbirth
instructors and postnatally in hospitals and at home.
FEMININE CARE--PLAYTEX tampons accounted for approximately 49% of Personal
Products net sales in fiscal 1998 and 44% in fiscal 1999 and 2000. Feminine Care
net sales in fiscal 1999 and fiscal 2000 represent a smaller portion of the
Personal Products Division compared to prior years as a result of the 1998 and
1999 acquisitions.
Tampons represented approximately 38% of the U.S. feminine sanitary
protection market in 2000 and accounted for approximately $865.0 million in
retail sales. In 2000, the tampon market grew 1% in dollar terms versus 4% in
1999 and 5% in 1998. Our research indicates that brand loyalty rates in the
tampon category are high relative to other consumer product categories. The
research further suggests that women generally develop brand preferences during
their adolescent years and early twenties and are likely to maintain a high
degree of brand loyalty over time.
We have two major product lines in the Feminine Care category: plastic
applicator tampons and cardboard applicator tampons. The plastic applicator
business represented approximately 85% of our branded domestic tampon business
in 2000 and is comprised of two primary product offerings:
- GENTLE GLIDE, our original plastic applicator tampon, and
- SLIMFITS, marketed to first-time tampon users.
The SILK GLIDE brand is our line of cardboard applicator tampons. This
product line features a rounded-tip cardboard applicator and a unique surface
coating that provides the consumer with a quality product in the cardboard
applicator segment of the tampon market.
Our market share of the U.S. tampon market increased to 31% in 2000 from 30%
in 1999 and 27% in 1998. We believe this growth in market share is attributable
to our consumer marketing strategy, our focus on product innovation, and our
category building initiatives, which include attracting young first time users
and converting feminine protection pad users to tampon users or dual users (i.e.
women who use pads and tampons).
Product improvement and innovation have been key components of our recent
market share growth. Since the end of 1996, we introduced three innovative
feminine care products to the market:
- SLIMFITS, marketed to young teens,
- GENTLE GLIDE Odor Absorbing, and
- SILK GLIDE Odor Absorbing.
The introductions of SLIMFITS in 1996, GENTLE GLIDE Odor Absorbing in 1997
and SILK GLIDE Odor Absorbing in 1998 are examples of our innovative product
development and new advertising and promotional strategies. SLIMFITS were
developed to appeal to a key segment of the tampon market: young teens. SLIMFITS
have a softer and more narrow plastic applicator providing for greater comfort.
We believe that SLIMFITS will build our business by encouraging young women to
use tampons rather than pads at an earlier age, and by developing brand loyalty
for our tampons at a time when lifelong preferences are being formed. GENTLE
GLIDE Odor Absorbing tampons and SILK GLIDE Odor Absorbing tampons are plastic
and cardboard applicator tampons with an all natural material in the tampons
that absorbs odors without the use of a fragrance or deodorant. These products
are designed to appeal to a large group of women who are concerned with odor
protection yet reluctant to use a fragranced tampon.
An additional avenue for growth is to convert women who are pad users into
tampon users or dual users. We believe this strategy will benefit the tampon
category and result in higher sales for our Feminine Care business.
Our long-term strategy focuses on:
- consumer-driven brand-building activities such as advertising and product
sampling,
- product innovation, and
42
- building the tampon category by attracting first time users and converting
pad users to tampon users or dual users.
We achieved consistent growth in market share and consumption over the last
three years. This growth is attributable to our strong consumer marketing
initiatives and our innovative product development efforts, as outlined above.
We added three new tampon forming machines in fiscal 2000 to increase our
ability to meet consumer demand and provide a more efficient and flexible
operation. This added manufacturing capability is expected to increase capacity
by an estimated 23% on an annual basis. In addition, we expect to add two
additional machines in early 2001.
CONSUMER PRODUCTS DIVISION--The Consumer Products Division accounted for
approximately 27% of our consolidated net sales in fiscal 1998 and 25% in fiscal
1999 and fiscal 2000. This division includes Sun Care, Household Products, and
Personal Grooming products sold in the United States, primarily to mass
merchandisers, grocery and drug classes of trade. The Sun Care business consists
of an extensive line of sun care products marketed under the BANANA BOAT trade
name. The Household Products category includes PLAYTEX Gloves and WOOLITE rug
and upholstery cleaning products. Our Personal Grooming product lines consist
of:
- BINACA breath spray and drops, - DOROTHY GRAY skin care products,
- OGILVIE at-home permanents, - TUSSY deodorants,
- DENTAX oral care products, - BETTER OFF depilatories, and
- TEK toothbrushes, - JHIRMACK hair care products (through
May 12, 1999).
On May 12, 1999 we sold the U.S. JHIRMACK business.
SUN CARE--Our Sun Care product line accounted for approximately 45% of
Consumer Products net sales in fiscal 1998, 50% in fiscal 1999 and 54% in fiscal
2000. Our offerings consist of an extensive line of sun care products designed
for specific uses, such as sun protection in sun protection factors ("SPFs")
from 4 to 50, waterproof and sweat proof formulas and infant and children's
products. We also sell a variety of BANANA BOAT skin care products, including
sunless tanning lotion and after-sun moisturizers containing additional
ingredients such as vitamin E and aloe vera. Our Sun Care products are the
number two brand in the U.S. sun care category with a 22% market share in 2000,
up from 20% in 1999 and 19% in 1998.
Retail consumption of our Sun Care products grew 9.4% in 2000 compared to
23.3% in 1999 and 6.6% in 1998. In 2000, the Sun Care category, as a whole, grew
3% in dollar terms versus 13% in 1999 and 3% in 1998. We believe that the lower
category growth experienced in 2000 was due to the unfavorable summer weather
across much of the country. Category growth in 1998 was also impacted by
unfavorable weather, including the effects of El Nino. We believe the growth
prospects for the sun care market are favorable as a result of increasing
consumer awareness of the need for sunscreen protection and consumers' desire
for sun care products targeted towards their specific age and needs.
For the 2001 season, we launched several new items to complement key
segments within our BANANA BOAT portfolio. In the sunless segment, we introduced
unique color indicator cremes in two blends, Deep Dark and Soft Medium. For
kids, we added COOL COLORZ Berry Blue Foaming Sunblock Lotion and Berry Blue
Spray and our new Sport products include ACTIVE SPORT Quick Dry Gel SPF 30. In
BANANA BOAT tanning, we introduced GALACTIC Sparkling Tanning Gel in barrel
packaging and in the BANANA BOAT general protection segment we introduced Quick
Dry Spray SPF 15 and Quick Dry Spray SPF 30, both with UVA and UVB protection.
Lastly, we introduced Grape LIPPOPS lip balm in SPF 30 which extends our LIPPOP
offerings.
We focus on a number of different distribution outlets to deliver our Sun
Care products to consumers including mass merchandisers, grocery stores, drug
stores, convenience stores, and specialty stores. BANANA BOAT is strong with
mass merchandisers, with a 25% market share of the mass distribution channel in
2000. We also use direct sales people to call on key outlets in the southern and
43
coastal areas of the country. They keep BANANA BOAT inventory in their vans,
which ensures product availability and selection in the key locations during the
prime sun care buying season. They manage product inventory at the store level,
invoice customers and transmit key marketing data to us through a network of
hand-held computers. We believe this technology and the information it supplies
provides us with a competitive advantage over our smaller competitors.
Industry convention and the seasonal nature of the sun care business
suggests that manufacturers of Sun Care products provide retailers with the
opportunity to return unsold products at the end of the season. To better
reflect the impact of potential returns, we provide for estimated returns in our
reported operating results as sales are made throughout the year. As mentioned
previously, weather patterns may impact the success of the sun care season and
the amount of sun care returns we receive at the end of the season.
HOUSEHOLD PRODUCTS--We compete in two product lines of the Household
Products category: household gloves and rug and upholstery cleaning products.
These products accounted for approximately 28% of Consumer Products net sales in
fiscal 1998, 26% in fiscal 1999, and 25% in fiscal 2000. Household Products net
sales in fiscal 1999 and fiscal 2000 represent a smaller portion of the Consumer
Products Divisions net sales as compared to prior years as a result of the above
average growth of our BANANA BOAT business.
Since we introduced the first household latex glove in the U.S. in 1954,
PLAYTEX gloves have held the number one market share. Our dollar market share of
this category increased three percentage points in fiscal 2000 to 37% of the
category. We believe our nationally recognized brand name, based upon our
reputation for nearly 50 years of superior quality, durability and protection,
provides a strong competitive advantage in this category. The rubber glove
category had retail sales of approximately $116.0 million in 2000. Growth in the
category is primarily in the disposable segment. In late 1997, we launched
PLAYTEX Home Health Care Disposable Gloves to participate in the fastest growing
part of the category. In 2000, our disposable gloves had a 7% share of the
entire rubber glove category.
WOOLITE is the number two rug and upholstery cleaning product in the United
States with a 19% dollar market share in 2000. Since acquiring the brand in
1995, we have introduced a number of new products and product enhancements,
including:
- new distinctive packaging, - a new foam pet carpet cleaner in early 1997,
and
- an improved pet stain spray in 1996, - a spot and stain wipe product in early 2001.
PERSONAL GROOMING--Personal Grooming contributed approximately 27% of
Consumer Products net sales in fiscal 1998, 24% in fiscal 1999, and 21% in
fiscal 2000. In January 1998, we added the following brands to our Personal
Grooming portfolio as a result of the acquisition of Personal Care
Holdings, Inc., or "PCH," and Carewell Industries, Inc.:
- OGILVIE at-home permanents, - TUSSY deodorants,
- BINACA breath spray and drops, - DOROTHY GRAY skin care products, and
- DENTAX oral care products, - BETTER OFF depilatories.
Prior to January 1998, our Personal Grooming business consisted of JHIRMACK
hair care products and TEK toothbrushes. On May 12, 1999, we sold the U.S.
JHIRMACK hair care products business to a third party.
Our OGILVIE brand is the market leader of the $39.0 million market for
at-home permanents and straighteners, with a 66% market share in 2000. Because
this category has declined at an annual rate of approximately 10% per year since
1992 (2% in 2000), our strategy is to continue to grow our market leadership
position and to reposition the brand to younger consumers. Since our acquisition
of the OGILVIE brand we have successfully launched OGILVIE Straightener and
7-Day Curls. OGILVIE Straightener removes the curl from permed hair, controls
the curl from naturally curly hair, and delivers smooth texture to hair. 7-Day
Curls is a soft gentle perm which aims to create longer lasting waves and curls
than hot rollers and doesn't require the commitment of a regular perm. These
products are targeted to
44
younger consumers. As a result of the apparent early success of these new
products, we believe there are indications of a slowdown in the decline in the
at-home permanents/straighteners category.
Our BINACA brand of breath fresheners is also a well known brand. It is the
leader in the spray & drops segment of the breath fresheners market with a 47%
market share in 2000. Our research indicates that BINACA has the highest brand
awareness among breath freshener users. Since our acquisition of BINACA we have
expanded front-end store placements and launched a new breath freshener product
in 1999, FAST BLAST. We believe these two initiatives resulted in improved
dollar market share for BINACA, up five percentage points in 1999 and up an
additional six percentage points in 2000.
We also compete in the value-priced end of the toothbrush business with our
TEK and DENTAX brands of toothbrushes and in certain skin care categories with
our TUSSY deodorants, BETTER OFF depilatories, and DOROTHY GRAY skin care
products.
INTERNATIONAL/CORPORATE SALES DIVISION--The International/Corporate Sales
Division constituted approximately 18% of our consolidated net sales in fiscal
1998 and 17% in fiscal 1999 and fiscal 2000. The International/Corporate Sales
Division includes:
- Sales to specialty classes of trade in - export sales
the United States including wholesale - sales in Puerto Rico
clubs, military, convenience stores, - results from our Canadian and Australian
specialty stores, and telemarketing subsidiaries, and
- sales of private label tampons.
The International/Corporate Sales Division sells the same products as are
available to our U.S. customers. Sales to specialty classes of trade represented
47% of the total division's net sales in fiscal 1998, 48% in fiscal 1999, and
49% in fiscal 2000.
MARKETING
We allocate a significant portion of our revenues to the advertising and
promotion of our products. Our advertising and promotion expenditures for the
past three years were (in thousands):
TWELVE MONTHS ENDED
------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 30,
1998 1999 2000
------------ ------------ ------------
Total advertising and promotion................. $145,379 $168,878 $186,596
As a percentage of net sales.................. 21.7% 21.4% 22.4%
Since 1996, we have gradually shifted a greater percentage of our
advertising and promotion budget to brand-building activities, such as
advertising and sampling programs, and have decreased price-oriented promotional
trade activities.
It is our opinion that we are accountable for, and will benefit from, the
building and development of the product categories in which we compete. As a
result, we are aggressively developing category management programs--the process
of working with our retailers to increase product category sales and
profitability through analysis of consumer buying habits and improved
merchandising techniques.
COMPETITION
The markets for our products are highly competitive and they are
characterized by the frequent introduction of new products, often accompanied by
major advertising and promotional programs. We compete primarily on the basis of
product quality, product differentiation and brand name recognition supported by
advertising and promotional programs.
Our competitors consist of a large number of domestic and foreign companies,
a number of which have significantly greater financial resources and less debt
than we do.
45
We believe that the market for consumer packaged goods is very competitive
and may intensify in the future. Competitive pressures on our products may
result from:
- new competitors, - new product initiatives by competitors,
and
- higher spending for advertising and - continued activity in the private label
promotion, sector.
In 2000, we experienced unusual competitive activity across most of our
infant care segments. Our cups business was challenged by competitors offering
less expensive products and new competitors entered the disposable feeding,
infant toiletries and hands and face towelette categories with products that
were heavily supported with trade spending and media campaigns.
REGULATION
Government regulation has not materially restricted or impeded our
operations. Some of our products are subject to regulation under the Federal
Food, Drug and Cosmetic Act and the Fair Packaging and Labeling Act. We are also
subject to regulation by the Federal Trade Commission in connection with the
content of our advertising, our trade practices and other matters. We are
subject to regulation by the United States Food and Drug Administration in
connection with our manufacture and sale of tampons.
DISTRIBUTION
We sell our products using approximately 165 direct sales personnel,
independent food brokers and exclusive distributors. Independent brokers
supplement the direct sales force in the food class of trade, by providing more
effective coverage at the store level. For the twelve months ended December 25,
1999 and December 30, 2000, our net sales in the U.S. were distributed to the
following classes of trade:
DECEMBER 25, DECEMBER 30,
CLASS OF TRADE 1999 2000
-------------- ------------ ------------
Mass merchandisers.......................................... 43% 44%
Supermarkets................................................ 32% 32%
Drug stores................................................. 17% 16%
Specialty................................................... 8% 8%
--- ---
Total................................................... 100% 100%
=== ===
Our field sales force makes sales presentations at the headquarters or home
offices of our customers, where applicable, as well as to individual retail
outlets. The sales representatives focus their efforts on selling our products,
providing services to our customers and executing programs to ensure sales to
the ultimate consumer. Consumer-directed programs include arranging for on-shelf
and separate displays and coordinating cooperative advertising participation.
We use four third-party distribution centers to ship the majority of our
products to customers. These distribution centers are located strategically to
maximize our ability to service our customers.
46
RESEARCH AND DEVELOPMENT
In March 1999, we moved our research and development group into a new
state-of-the-art technical center in Allendale, New Jersey. Prior to
March 1999, we maintained our research and development programs in Paramus, New
Jersey. Approximately 70 employees are engaged in these programs, for which
expenditures were $8.4 million in fiscal 1998, $10.1 million in fiscal 1999 and
$11.6 million in fiscal 2000.
The primary focus of our research and development group is to design and
develop new and improved products that address our customers' wants and needs.
In addition, our research and development group provides technology support to
both in-house and contract manufacturing and safety and regulatory support to
all of our businesses.
TRADEMARKS AND PATENTS
We have proprietary rights to a number of trademarks important to our
businesses, such as: ACTIVE SPORT, BABY MAGIC, BANANA BOAT, BINACA, BINKY,
BLASTERS, BIG SIPSTER, CHUBS, COOL COLORZ, COMFORTFLOW, COOLSTRAW, DENTAX,
DIAPER GENIE, DROP-INS, FAST BLAST, FUNKY FRUIT, GENTLE GLIDE,
GET ON THE BOAT, HANDSAVER, LIPPOPS, MOST LIKE MOTHER, MR. BUBBLE,
NATURAL ACTION, OGILVIE, PRECISELY RIGHT, PRECISION FLO, QUICKSTRAW, QUIK BLOK,
SAFE'N SURE, SILK GLIDE, SIPEASE, SLIMFITS, TUB MATE, TEK, TUSSY, VENTAIRE,
WET ONES AND WHISPER WAVE. The PLAYTEX and LIVING trademarks in the United
States and Canada are owned by Playtex Marketing Corporation. Playtex Marketing
is responsible for protecting, exercising quality control over and enforcing the
trademarks. Along with Playtex Apparel, Inc., which was spun off from Playtex in
1988, we have a license from Playtex Marketing for the use of these trademarks
in the United States and Canada on a perpetual, royalty-free basis. Playtex
Apparel's license is for apparel and apparel-related products, and our license
is for all other products. In all other countries, Playtex Apparel retains title
to the PLAYTEX and LIVING trademarks. We have a perpetual, royalty-free license
to use these trademarks for all products other than apparel products in all
other countries. We also own a royalty-free license in perpetuity to use the
WOOLITE trademark for rug and upholstery cleaning products in the United States
and Canada.
We also own various patents related to some products and their method of
manufacture, including patents for: cardboard and plastic applicators for
tampons, special over-wrap for tampons, baby bottles and nipples, disposable
liners and plastic holders for the nurser systems, children's drinking cups,
pacifiers, sunscreen formulation, carpet cleaning compositions, various
containers for liquid and moist wipes products, including special containers for
children's bubble bath.
The patents expire at varying times, ranging from 2002 to 2020. We also have
pending patent applications for various products and methods of manufacture
relating to our tampons, infant feeding and sun care businesses. While we
consider our patents to be important to our business, we believe that the
success of our products is more dependent upon the quality of these products and
the effectiveness of our marketing programs. No single patent is material to our
business.
RAW MATERIALS AND SUPPLIERS
The principal raw materials used in the manufacture of our products are
synthetic fibers, resin-based plastics and other chemicals and certain natural
materials, all of which are normally readily available. While all raw materials
are purchased from outside sources, we are not dependent upon a single supplier
in any of our operations for any material essential to our business or not
otherwise commercially available to us. We have been able to obtain an adequate
supply of raw materials, and no shortage of any materials is currently
anticipated.
47
CUSTOMERS AND BACKLOG
No single customer or affiliated group of customers, except Wal-Mart
Stores, Inc., accounted for over 10% of our net sales in fiscal 1998, fiscal
1999, and fiscal 2000. Our next three largest customers represented in total
approximately 14% of our total consolidated net sales in fiscal 1998 compared to
approximately 15% in fiscal 1999 and 18% in fiscal 2000. See note 14 of notes to
our consolidated financial statements. In accordance with industry practice, we
grant credit to our customers at the time of purchase. In addition, we may grant
extended payment terms to new customers and for the initial sales of
introductory products and product line extensions. We also may grant extended
terms on our Sun Care products due to industry convention and the seasonal
nature of this business.
Our practice is not to accept returned goods unless authorized by management
of the sales organization. Returns result primarily from damage and shipping
discrepancies. Exceptions to this policy include our Sun Care seasonal returns.
Retailers have the right to return Sun Care product that has not been sold by
the end of the Sun Care season, which is normal practice in the sun care
industry. They are required to pay for the Sun Care product purchased during the
season under the required terms. In instances where extended terms are granted
on initial Sun Care orders, the terms require a substantial payment be made in
the June time frame. We generally receive returns of our Sun Care products from
September through March following the summer season. We reduce our Sun Care
sales and increase accrued liabilities for these returns throughout the year
based on management's estimates of these returns as a percent of Sun Care
products sold. Refunds made to our customers for returned Sun Care products
subsequently reduce accrued liabilities.
Because of the short period between order and shipment dates, which are
generally less than one month, for most of our orders, the dollar amount of
current backlog is not considered to be a reliable indication of future sales
volume.
EMPLOYEES AND LABOR RELATIONS
Our worldwide work force consisted of approximately 2,200 employees as of
December 30, 2000, of whom approximately 180 were located outside the United
States, primarily in Canada. Of the United States facilities, only the operation
at Watervliet, New York has union representation; it is organized by The Brush
Workers Union Local No. 20466 I.U.E. A.F.L.-C.I.O. The collective bargaining
agreement covered approximately 185 workers at December 30, 2000 and expires on
June 28, 2003. We believe that our labor relations are satisfactory and no
material labor cost increases are anticipated in the near future.
ENVIRONMENTAL
We believe that we are in substantial compliance with federal, state and
local provisions enacted or adopted regulating the discharge of materials
hazardous to the environment. There are no significant environmental
expenditures anticipated for the current year.
PROPERTIES
Our principal executive office is located at 300 Nyala Farms Road, Westport,
Connecticut 06880 and is occupied pursuant to a lease which expires in 2005. Our
principal manufacturing and distribution facilities are located in:
- Dover, Delaware, - Watervliet, New York, and
- Sidney and Streetsboro, Ohio, - Arnprior and Malton, Canada.
We maintain a research and development facility in Allendale, New Jersey.
This facility is leased for a term of 15 years with two five-year renewal
options. We operate two facilities in Canada. We own the Arnprior facility,
which is primarily a warehouse and assembly operation, and we lease the Malton
facility, which is a warehouse and office site. This lease expires in 2004. The
lease on the Montvale,
48
New Jersey facility, expiring in 2002, was acquired by us in the Personal Care
Holdings, Inc. acquisition and a substantial portion of the facility has been
subleased, for the duration of the lease term, to third parties. For 2000, our
average utilization rate of manufacturing capacity was an estimated 78%.
The following table lists our principal properties as of December 30, 2000,
which are located in seven states, Puerto Rico and Canada. The facilities in
Arnprior and Malton, Canada and Guaynabo, Puerto Rico are used specifically by
the International/Corporate Sales Division. All of the other facilities are
shared amongst our three segments.
ESTIMATED
NUMBER OF SQUARE
FACILITIES FOOTAGE
---------- ---------
FACILITIES OWNED
MANUFACTURING/OFFICE/DISTRIBUTION/WAREHOUSE
Dover, DE............................................... 3 710,000
Streetsboro, OH......................................... 1 176,700
Watervliet, NY.......................................... 1 159,600
Arnprior, Canada........................................ 1 91,800
Sidney, OH.............................................. 1 54,400
FACILITIES LEASED
OFFICE/DISTRIBUTION/WAREHOUSE
Dover, DE............................................... 3 251,104
Sidney, OH.............................................. 2 216,800
Malton, Canada.......................................... 1 72,800
Westport, CT............................................ 1 63,100
Allendale, NJ........................................... 1 43,500
Montvale, NJ............................................ 1 19,500
Guaynabo, PR............................................ 1 15,700
Orlando, FL............................................. 1 10,400
Spokane, WA............................................. 1 8,400
LEGAL PROCEEDINGS
Beginning in 1980, published studies reported a statistical association
between tampon use and Toxic Shock Syndrome ("TSS"), a rare, but potentially
serious illness. Since these studies, numerous claims have been filed against
all tampon manufacturers, a small percentage of which have been litigated to
conclusion. The number of TSS claims relating to our tampons has declined
substantially over the years. During the mid-1980s, there were approximately 200
pending claims at any one time relating to our tampons. As of the end of
February 2001, there were approximately 12 pending claims. Additional claims,
however, may be asserted in the future. For TSS claims filed from October 1,
1985 until November 30, 1995, we are self-insured and bear the costs of
defending those claims, including settlements and trials. Effective December 1,
1995, we obtained insurance coverage with certain limits in excess of the
self-insured retention of $1.0 million per occurrence, $4.0 million in total,
for claims occurring on or after December 1, 1995.
The incidence rate of menstrually associated TSS has declined significantly
over the years. The number of confirmed menstrually related TSS cases peaked in
1980 at 814, with 38 deaths. At that time, the United States Center for Disease
Control found that 71% of women who developed the condition had been using a new
brand of tampons. That brand of product was removed from the market and the Food
and Drug Administration proposed regulations, which required all tampon
manufacturers to provide TSS warnings on their labeling. In 1981, the incidence
of menstrually related TSS was reported to be 470, with 13 deaths. It has
continued to fall since then. Compared with the 814 menstrual TSS cases in 1980,
there were only three confirmed cases in 1998 and six in 1997.
49
We believe that there are no claims or litigation pending against us,
including the TSS cases, which, individually or in the aggregate, would have a
material effect on us. This assessment is based on:
- our experience with TSS cases,
- the federally mandated warnings about
TSS
- our evaluation of the 12 pending on and in our tampon packages, and
claims,
- the reported decline in the incidence
of
menstrually associated TSS, - development of case law upholding the
adequacy of tampon warnings which
comply with federally mandated TSS
warnings.
We have joined a group of potentially responsible parties with respect to
the Kent County Landfill Site in Houston, Delaware, which has been designated a
"Superfund" site by the State of Delaware. Based on the information currently
available to us, the nature and quantity of material deposited by us and the
number of other entities in the group which are expected to share in the costs
and expenses, we do not believe that our costs will be material. We will share
equally with Playtex Apparel, Inc. all expenses and costs associated with our
involvement with this site.
We are a litigant in various other legal proceedings, claims and
investigations that arise in the normal course of business. In our opinion, the
ultimate disposition of these matters, including those described above, will not
have a material adverse effect on our consolidated financial position, results
of operations or cash flows.
50
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding our directors and our
executive officers as of July 18, 2001:
NAME AGE POSITION
---- -------- --------
Robert B. Haas............................ 54 Chairman and Director
Michael R. Gallagher...................... 55 Chief Executive Officer and Director
Glenn A. Forbes........................... 50 Executive Vice President, Chief Financial Officer
and Director
Richard C. Blum........................... 65 Director
James S. Cook............................. 49 Senior Vice President, Operations
Kevin M. Dunn............................. 48 President, Consumer Products Division
Michael R. Eisenson....................... 45 Director
Timothy O. Fisher......................... 51 Director
John D. Leahy............................. 47 President, International/Corporate Sales Division
C. Ann Merrifield......................... 50 Director
Richard G. Powers......................... 55 President, Personal Products Division
Paul A. Siracusa, Ph.D.................... 44 Senior Vice President, Research and Development
John C. Walker............................ 40 Director
Wyche H. Walton........................... 35 Director
Douglas D. Wheat.......................... 50 Director
Paul E. Yestrumskas....................... 49 Vice President, General Counsel and Secretary
Kenneth F. Yontz.......................... 56 Director
ROBERT B. HAAS has been Chairman and a director of the Company since 1995.
Mr. Haas has been actively involved in private business investments since 1978,
specializing in leveraged buyouts. He has served as Chairman of the Board and
Chief Executive Officer of Haas Wheat & Partners, L.P. and its predecessor
("Haas Wheat") since 1992. Haas Wheat is a private investment firm specializing
in leveraged acquisitions. Mr. Haas serves as Chairman and a director of
Nebraska Book Company, Inc., NBC Acquisition Corporation, and AMN Healthcare
Services, Inc. Mr. Haas also serves as a director of Walls Holding
Company, Inc.
MICHAEL R. GALLAGHER has been our Chief Executive Officer and a director
since 1995. Prior to joining the Company, Mr. Gallagher was Chief Executive
Officer of North America for Reckitt & Colman PLC ("R&C"), a consumer products
company, from 1994 to 1995. Mr. Gallagher was President and Chief Executive
Officer of Eastman Kodak's L&F Products subsidiary from 1988 until the
subsidiary was sold to R&C in 1994. From 1984 to 1988, Mr. Gallagher held
various executive positions with the Lehn and Fink Group of Sterling Drug. From
1982 to 1984, he was Corporate Vice President and General Manager of the
Household Products Division of The Clorox Company. Prior to that, Mr. Gallagher
had various marketing and general management assignments with Clorox and with
The Procter & Gamble Company. Presently he serves as a director of
Allergan, Inc. and the Grocery Manufacturers Association.
GLENN A. FORBES has been our Executive Vice President and Chief Financial
Officer and a director since March 2000. He has served us for the past 29 years
in various finance and accounting positions, including Vice President, Finance
from 1988 to 2000.
RICHARD C. BLUM has been a director of the Company since 1998. Since 1975,
Mr. Blum has been Chairman and President of Richard C. Blum & Associates, Inc.
the General Partner of BLUM Capital Partners, L.P., an investment firm that
specializes in private equity and strategic public investments.
51
Mr. Blum also serves as a director of Northwest Airlines, Shaklee Corporation,
URS Corporation, CB Richard Ellis, Inc., and Glenborough Realty Trust, Inc., and
is also a director of several private companies.
JAMES S. COOK has been Senior Vice President, Operations since 1991. From
1990 to 1991, he was our Vice President of Dover Operations. From 1988 to 1990,
he was our Vice President of Distribution, Logistics & Management Information
Systems. From 1982 to 1988, Mr. Cook held various senior level positions in
manufacturing and distribution with us. From 1974 to 1982, he held various
manufacturing and engineering positions at P&G.
KEVIN M. DUNN has been President, Consumer Products Division since
July 2000. Prior to joining us, Mr. Dunn was President of R&C's North American
Household Products Division since 1998 and President, Food Products
Division--North America from 1994 to 1997. He also held various executive
positions with Eastman Kodak's L&F Products subsidiary from 1988 until the
subsidiary was sold to R&C in 1994.
MICHAEL R. EISENSON has been a director of the Company since 1997.
Mr. Eisenson is a Managing Director and the Chief Executive Officer of
Charlesbank Capital Partners, LLC, an investment firm which is the successor to
Harvard Private Capital Group, Inc. He was a Managing Director of Harvard
Private Capital Group from 1986 to 1998, and a Manager with the Boston
Consulting Group from 1981 to 1985. He serves on the Board of Directors of CCC
Information Services Group, Inc., ImmunoGen, Inc., and United Auto Group, Inc.,
as well as those of several private companies.
TIMOTHY O. FISHER has been a director of the Company since 1966. Mr. Fisher
has been employed by The Hillman Company, a company of diversified investments
and operations, in various capacities, since 1972. He has been a Vice President
of The Hillman Company since 1986 and is also a director of several private
companies.
JOHN D. LEAHY has been president of the International/Corporate Sales
Division since August 2000 and Senior Vice President, International/Corporate
Sales since 1998. From 1996 until 1998 he was Vice President of
International/Corporate Sales. From 1993 to 1996, he was our Vice President of
Sales. From 1982 to 1993, Mr. Leahy held various sales positions with us.
C. ANN MERRIFIELD has been a director of the Company since 1997.
Ms. Merrifield currently serves as Executive Vice President, Genzyme Biosurgery,
a division of Genzyme Corporation. Previously, she was employed by Genzyme
Genetics, a unit of Genzyme Corporation, serving as President from 1996 to 2001
and by Bain & Company, a consulting firm, where she was a Partner from 1987 to
1992.
RICHARD G. POWERS has been President, Personal Products Division since 1996.
Prior to joining us, Mr. Powers was President of R&C's North American Personal
Products Division. From 1992 to 1995, he was Vice President of Sales for R&C,
and from 1990 to 1992 he was Vice President of Marketing for R&C's Durkee-French
Foods Division. From 1973 to 1990, Mr. Powers held various positions in
marketing and general management at General Foods Corp.
PAUL A. SIRACUSA, PH.D. has been Senior Vice President, Research and
Development since March 2000. From 1997 to March 2000, he was Senior Vice
President Research and Development for R&C. From 1995 to 1997, he was Divisional
Vice President of Research & Development, North America for R&C. From 1992 to
1995, he was Director of Technology for the Lehn & Fink Group of Sterling Drug.
Prior to that, he held various Research and Development positions with Henkel
Corporation, International Flavors and Fragrances, and Union Carbide
Corporation.
JOHN C. WALKER has been a director since May 2001. Mr. Walker has been a
Partner of BLUM Capital Partners, L.P. since 1997, an investment firm that
specializes in private equity and strategic block investments in public
companies. From 1992 to 1997, Mr. Walker was a Vice President of Pexco
Holdings, Inc., a private investment holding company. From 1986 to 1992,
Mr. Walker served in various
52
managerial and technical positions in the energy industry. Mr. Walker serves as
a director of EFTC Corporation, K*Tec Corporation, and Smarte Carte, Inc.
WYCHE H. WALTON has been a director of the Company since 1998. Mr. Walton
has served as a Senior Vice President of Haas Wheat, a private investment firm,
since 1995. From 1994 to 1995, he was Chief Financial Officer of McGarr Capital
Management Corp. (a private investment firm). Mr. Walton also serves as a
director of Smarte Carte Corporation and AMN Healthcare, Inc.
DOUGLAS D. WHEAT has been a director of the Company since June 1995.
Mr. Wheat has been President of Haas Wheat, a private investment firm
specializing in leveraged acquisitions, since 1992. He was Co-Chairman of
Grauer & Wheat, Inc. (a private investment firm) from 1989 to 1992 and Senior
Vice President of Donaldson, Lufkin & Jenrette Securities Corporation from 1985
to 1989. Mr. Wheat serves as a director of Smarte Carte Corporation, Walls
Holding Company, Inc., NBC Acquisition Corp., Nebraska Book Company, and AMN
Healthcare Services, Inc.
PAUL E. YESTRUMSKAS has been Vice President, General Counsel and Secretary
since December 1995. Prior to joining us, Mr. Yestrumskas was Senior Counsel of
Rhone-Poulenc, Inc. from 1991 to 1995. Prior to 1991, Mr. Yestrumskas held
various positions in legal and governmental relations at Timex, Hubbell, Inc.
and General Motors.
KENNETH F. YONTZ has been a director of the Company since 1995. Mr. Yontz is
currently Chairman of the Board of Apogent Technologies, Inc. (formerly Sybron
International), a manufacturer of life science and laboratory products, and
Chairman of the Board of Sybron Dental Specialties, Inc., a manufacturer of
dental products. From 1987 to 2001, he was Chairman, President, and CEO of
Sybron International. He previously served as Executive Vice President of the
Allen-Bradley Company. He is a director of Viasystems, Inc., a manufacturer of
printed circuit boards.
There are no family relationships among any of the foregoing persons.
53
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of
our common stock as of July 18, 2001 by (i) each director, (ii) each of our five
most highly compensated executive officers in fiscal 2000 (the "Named Executive
Officers"), (iii) each person we believe to own beneficially more than five
percent of our outstanding common stock and (iv) all directors and Named
Executive Officers as a group.
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENT
------------------------ --------------------- --------
Robert B. Haas.............................................. 20,000,000(2) 32.8%
Richard C. Blum............................................. 13,197,500(3) 21.6%
Michael R. Eisenson......................................... 2,915,963(4) 4.8%
Michael R. Gallagher........................................ 1,322,668(5) 2.1%
Glenn A. Forbes............................................. 200,154 *
John D. Leahy............................................... 198,669 *
Richard G. Powers........................................... 171,669 *
James S. Cook............................................... 285,001 *
Timothy O. Fisher........................................... 21,663(6) *
Kenneth F. Yontz............................................ 25,000 *
C. Ann Merrifield........................................... 28,534 *
John C. Walker.............................................. -- --
Wyche H. Walton............................................. -- --
Douglas D. Wheat............................................ -- --
Partnerships managed by Haas Wheat & Partners Inc........... 20,000,000(2) 32.8%
BLUM Capital Partners, L.P., et al.......................... 13,197,500(3) 21.6%
The Carpenters Pension Trust for Southern California........ 4,511,700(3) 7.4%
Shapiro Capital Management Company, Inc..................... 6,304,100(7) 10.3%
All directors and Named Executive Officers as a group (14
persons).................................................. 35,451,558 56.3%
------------------------
* Indicates less than one percent.
(1) Based on filings under Sections 13 and 16 of the Securities Exchange Act of
1934, as amended. Except as otherwise indicated, we believe that each person
listed has sole voting and dispositive power over all shares of common stock
listed in the table. Includes shares that may be acquired upon the exercise
of stock options granted by us that are exercisable within 60 days of
July 18, 2001. The shares beneficially owned include 1,266,668; 131,001;
198,669; 171,669; 195,001; 25,000 and 18,534 shares subject to currently
exercisable options granted to Messrs. Gallagher, Forbes, Leahy, Powers,
Cook, Yontz, and Ms. Merrifield, respectively, and 2,006,542 shares subject
to currently exercisable options granted to all current directors and
executive officers as a group.
(2) Includes 8,055,555 shares (approximately 13.2% of the outstanding shares)
owned by HWH Capital Partners, L.P., 9,028,482 shares (approximately 14.8%
of the outstanding shares) owned by HWH Valentine Partners, L.P. and
2,915,963 shares (approximately 4.8% of the outstanding shares) owned by HWH
Surplus Valentine Partners, L.P. The address of each of the foregoing
partnerships is c/o Haas Wheat & Partners Incorporated, 300 Crescent Court,
Suite 1700, Dallas, Texas 75201. The sole general partner of each of such
partnerships is a limited partnership, and the sole general partner of each
of such limited partnerships is a corporation controlled by Mr. Haas. By
virtue of his control of such corporations, Mr. Haas has sole voting and
dispositive power over 17,084,037 shares and shared voting and dispositive
power over 2,915,963 shares.
(3) BLUM Capital Partners reports ownership of an aggregate of 13,197,500 shares
(approximately 21.6% of the outstanding shares). These shares may be deemed
to be owned indirectly by the
54
following parties (i) BLUM Capital Partners, (ii) Richard C. Blum &
Associates, Inc. ("RCBA Inc."), the general partner of BLUM Capital
Partners, (iii) RCBA GP, L.L.C. ("RCBA GP") and (iv) Richard C. Blum, a
significant stockholder and chairman of RCBA Inc. and a managing member of
RCBA GP. These shares are owned directly as follows: (i) five limited
partnerships for which BLUM Capital Partners serves as the general partner,
Stinson Capital Partners, L.P. (1,509,700 shares--2.5% of the outstanding
shares), Stinson Capital Partners II, L.P. (802,200 shares--1.3% of the
outstanding shares), Stinson Capital Partners III (162,100 shares--0.3% of
the outstanding shares), BK Capital Partners IV, L.P. (414,600 shares--0.7%
of the outstanding shares), and RCBA-Playtex, L.P. (1,893,600 shares--3.1%
of the outstanding shares); (ii) four investment advisory accounts for which
BLUM Capital Partners has voting and investment discretion, The Carpenters
Pension Trust for Southern California (4,511,700 shares--7.4% of the
outstanding shares), The Common Fund for its Multi-Strategy and Value
Opportunity funds (1,465,100 shares collectively--2.4% of the outstanding
shares), The United Brotherhood of Carpenters Pension Plan (403,700
shares--0.6% of the outstanding shares) and Stinson Capital Fund
(Cayman), Ltd. (135,300 shares--0.2% of the outstanding shares); and
(iii) one limited partnership for which RCBA GP serves as the general
partner, RCBA Strategic Partners, L.P. (1,899,500 shares--3.1% of the
outstanding shares). The Common Fund disclaims membership in a group with
any of the Reporting Persons and disclaims beneficial ownership of any
shares held by the Reporting Persons. As the sole general partner of BLUM
Capital Partners, RCBA Inc. might be deemed the beneficial owner of the
securities over which BLUM Capital Partners has voting and investment power.
As Chairman and a substantial shareholder of RCBA Inc., and a Managing
Member of RCBA GP, Richard C. Blum might be deemed to be the beneficial
owner of the securities beneficially owned by RCBA Inc. and RCBA GP. BLUM
Capital Partners, RCBA Inc., RCBA GP and Mr. Blum disclaim beneficial
ownership of these shares, except to the extent of any pecuniary interest
therein. The address of BLUM Capital Partners, L.P. is 909 Montgomery
Street, Suite 400, San Francisco, California 94113.
(4) Represents shares owned by HWH Surplus Valentine Partners, L.P., of which
Phemus Corporation is the sole Limited Partner. Mr. Eisenson is the Managing
Director and Chief Executive Officer of Charlesbank Capital Partners, LLC,
which is the successor to Harvard Private Capital Group, the investment
advisor for Phemus Corporation. While Mr. Eisenson has shared voting and
dispositive power over the shares, he disclaims beneficial ownership of such
shares. The address of Phemus Corporation and Mr. Eisenson is c/o
Charlesbank Capital Partners, LLC, 600 Atlantic Avenue, 26th Floor, Boston,
Massachusetts 02210.
(5) Includes 21,000 shares held by Mr. Gallagher's children. Mr. Gallagher
disclaims beneficial ownership of these shares.
(6) Includes 16,663 shares held of record by Mr. Fisher's spouse and children.
Mr. Fisher disclaims beneficial ownership of these shares.
(7) Shapiro Capital Management Company, Inc. is an investment advisor registered
under Section 203 of the Investment Advisors Act of 1940, and is considered
to be the "beneficial owner" of an aggregate of 6,304,100 shares of Common
Stock. Information contained in a Schedule 13G filed with the Commission by
Shapiro Capital Management, Inc. and Mr. Samuel R. Shapiro indicates that
such shares were acquired solely for investment purposes. The Schedule 13G
also indicates that Mr. Shapiro may be deemed to beneficially own an
additional 61,100 shares owned by his wife. We have not attempted to verify
independently any of the information contained in the Schedule 13G. The
address of Shapiro Capital Management Company, Inc. is 3060 Peachtree Road,
N.W., Atlanta, Georgia 30305.
55
DESCRIPTION OF THE RECEIVABLES FACILITY
On May 22, 2001, a newly formed special purpose bankruptcy remote subsidiary
of ours (the "Securitization Entity") entered into a Receivables Purchase
Agreement with CSFB, individually and as agent, and Gramercy Capital Corporation
("Gramercy"), as investor. Under the Receivables Purchase Agreement, the
Receivables Facility was established allowing the Securitization Entity, upon
satisfaction of certain conditions, to sell an undivided fractional ownership
interest in certain trade accounts receivable up to $100 million. Under the
Receivables Purchase Agreement, Gramercy may purchase accounts receivable with
proceeds from the issuance of commercial paper, and if Gramercy does not
purchase, CSFB will purchase the accounts receivable. The Receivables Facility
is secured by, among other things, certain trade accounts receivable that have
been sold or contributed by us to the Securitization Entity in which the
Securitization Entity has subsequently sold an undivided fractional ownership
interest to the purchasers under the Receivables Purchase Agreement. The
Receivables Facility is intended to be treated as a sale of receivables for
financial reporting purposes.
The initial proceeds from the Receivables Facility were utilized by the
Securitization Entity to simultaneously purchase accounts receivable from us.
Any future proceeds will be utilized by the Securitization Entity to
simultaneously purchase accounts receivable from us and we are permitted to
utilize these proceeds for our general corporate purposes.
TERM
The Receivables Facility will terminate and any advances outstanding will
become due on the earliest to occur (this date being referred to as the
"Termination Date") of (i) 364 days after the closing date of the Receivables
Facility, (ii) the occurrence of certain events that would cause the declaration
of the Termination Date, and (iii) thirty days after notice of termination is
given by the Securitization Entity. The Receivables Facility may be renewed,
subject to the discretion of CSFB.
SECURITY
The Receivables Facility is secured by a first priority security interest in
the accounts receivable owned by the Securitization Entity and these assets will
not be available for use by us or to satisfy any obligation owed to you under
the exchange notes.
MATURITY AND AMORTIZATION
To the extent purchases of accounts receivable by the Securitization Entity
from us are financed under the Receivables Facility, these advances shall be
repaid out of collections on such accounts receivable unless such collections
are reinvested in additional accounts receivable as permitted under the
Receivables Purchase Agreement. Any amounts outstanding under the facility will
be due on the Termination Date.
INTEREST
Borrowings by the Securitization Entity under the Receivables Facility bear
interest, to the extent such borrowings may be funded by the issuance of
commercial paper, at a floating rate based on LIBOR, and to the extent such
borrowing may not be financed by the issuance of commercial paper, at a floating
rate based upon LIBOR plus a spread of 1%. Upon the occurrence of an event of
termination under the Receivables Purchase Agreement, borrowings by the
Securitization Entity under the Receivables Facility will bear interest at LIBOR
plus 2%. We and the Securitization Entity, as applicable, have agreed to pay
administration fees, commitment fees and certain other fees and expenses and to
provide certain indemnities, all of which we and the Securitization Entity
believed to be customary for financings of this type.
56
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Receivables Purchase Agreement contains representations, warranties,
affirmative and negative covenants customary for these financings including,
without limitation, representations concerning the quality of the underlying
trade receivables that serve as collateral for the facility, as well as
separateness covenants regarding the bankruptcy remoteness of the Securitization
Entity from us and our subsidiaries.
REPURCHASE OBLIGATION
We are required to repurchase from the Securitization Entity any account
receivable which we sold to the Securitization Entity if it is subsequently
determined that we breached a representation or warranty relating to eligibility
criteria concerning these accounts receivable as of the date of sale of these
accounts receivable to the Securitization Entity.
SERVICING
We are engaged to perform certain administrative and reporting functions on
behalf of the Securitization Entity under the Receivables Purchase Agreement. We
are compensated with a market rate fee for performing these services.
EVENTS OF TERMINATION
The Receivables Purchase Agreement contains events of termination customary
for this type of financing, including, but not limited to: nonpayment of
principal, interest fees or other amounts when due; violation of covenants;
failure of any representation or warranty to be true in all material respects
when made or deemed made; change of control; bankruptcy events; material
judgments; in certain circumstances, defaults under the Receivables Facility;
actual or Securitization Entity or Playtex-asserted invalidity of the facility
documents; non-perfection of security interests; a servicing default under the
Servicing Agreement (including a cross default to acceleration of our material
indebtedness); and a violation of certain financial covenants concerning the
financial quality of the receivables sold under the Receivables Facility. These
events of default allow for grace periods and materiality concepts.
57
DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITY
On May 22, 2001, we entered into a credit agreement (the "New Credit
Agreement") with Credit Suisse First Boston ("CSFB"), as administrative agent,
collateral agent and sole and exclusive lead arranger and bookrunner and the
lenders, pursuant to which the lenders, subject to some conditions, provided to
us a credit facility of up to $625.0 million.
STRUCTURE
The New Credit Facility consists of:
- term loans of up to $100.0 million (the "Tranche A Facility");
- term loans of up to $400.0 million (the "Tranche B Facility"); and
- revolving loans of up to $125.0 million (the "Revolving Facility").
AVAILABILITY AND USE OF PROCEEDS
On May 22, 2001, the proceeds of the Tranche A Facility were deposited with
the trustee for the 8 7/8% Notes, to be used only for partial payment of the
8 7/8% Notes redemption consideration. On May 22, 2001, the proceeds of the
Tranche B Facility, together with the proceeds of the offering of the initial
notes and the Receivables Facility, were used for partial payment of the 8 7/8%
Notes redemption consideration, payment of the 9% Notes redemption
consideration, repayment of amounts outstanding under the Existing Credit
Facility, termination of our two then existing interest rate swap agreements,
and payment of all transaction fees and expenses relating to the refinancing
transactions. The undrawn portion of the Revolving Facility is available to us
for general corporate purposes, including to effect permitted acquisitions. As
of March 31, 2001, on a pro forma basis, after giving effect to the offering of
the initial notes and the Refinancing Transactions, we would have had
approximately $108.7 million of additional borrowing availability under the New
Credit Facility, excluding outstanding letters of credit.
INTEREST
Borrowings under the Tranche A Facility and the Revolving Facility bear
interest at a floating rate based upon (and including a spread over), at our
option, Adjusted LIBOR or the higher of CSFB's Prime Rate or the Federal Funds
Effective Rate ("ABR"). Borrowings under the Tranche B Facility bear interest at
a floating rate based upon (and including a spread over), at our option,
Adjusted LIBOR or ABR. We have agreed to pay administration fees, commitment
fees and certain expenses and to provide certain indemnities, all of which we
believe are customary for financings of this type.
MATURITY AND AMORTIZATION
Loans made under the Tranche A Facility will mature on the sixth anniversary
of the closing date of the New Credit Facility (the "Credit Closing Date"), and
the amounts due under the Tranche A Facility will amortize on a semi-annual
basis in equal amounts commencing six months after the Credit Closing Date, with
up to $12.0 million due at final maturity.
Loans made under the Tranche B Facility will mature on the eighth
anniversary of the Credit Closing Date, and the amounts due thereunder will
amortize on a semi-annual basis in equal amounts commencing six months after the
Credit Closing Date, with up to $195.1 million due at final maturity.
Loans made under the Revolving Facility will mature on the sixth anniversary
of the Credit Closing Date.
58
MANDATORY REPAYMENTS
Beginning in the fiscal year ending December 28, 2002, we will be required
to prepay borrowings under the New Credit Facility with (i) 75% of consolidated
excess cash flow (as this term is defined in the New Credit Agreement) (to be
reduced if the total leverage ratio is less than 4 to 1), (ii) 100% of net cash
proceeds of certain dispositions by us and our subsidiaries, subject to a
reinvestment option (including any initial net cash proceeds in excess of
$75.0 million under the Receivables Facility) (subject to some exceptions) and
(iii) 100% of net cash proceeds of issuances of debt obligations by us and our
subsidiaries. Mandatory repayments will be applied to the different tranches of
the New Credit Facility in accordance with a fixed schedule, subject to some
exceptions.
PREPAYMENT UPON CHANGE OF CONTROL
On the date which is the earlier of (1) 30 days after the date of a change
of control (as defined in the indenture) or (2) the date on which we shall have
made a change of control offer under the terms of the indenture, we are required
to repay all amounts outstanding under the New Credit Facility and terminate the
commitments thereunder.
VOLUNTARY PREPAYMENTS
We are permitted to make voluntary prepayments and/or permanently reduce the
Revolving Facility (in principal amounts of at least $5 million) in whole or in
part, at our option, without premium or penalty, subject to reimbursement of the
lenders' redeployment costs in the case of prepayment of Adjusted LIBOR
borrowings, other than at the end of an interest period. All voluntary
prepayments of the Term Loan Facility will be applied, at our option, in order
of maturity or PRO RATA among the tranches under the New Credit Facility.
SECURITY AND GUARANTEES
All of our existing and future domestic subsidiaries (other than the
Securitization Entity) have unconditionally guaranteed the repayment of the New
Credit Facility. The New Credit Facility is secured by substantially all of our
tangible and intangible assets, including the assets of our existing and future
domestic subsidiaries (other than the Securitization Entity). Substantially all
of the capital stock of our domestic subsidiaries and 65% of the capital stock
of our foreign subsidiaries is pledged as part of the security for the New
Credit Facility.
COVENANTS
The New Credit Agreement contains affirmative and negative covenants
customary for this type of financing. The New Credit Agreement also contains the
following financial covenants customary for such financings: maximum ratio of
funded debt to EBITDA; minimum ratio of EBITDA to interest expense; and a
limitation on capital expenditures.
EVENTS OF DEFAULT
The New Credit Agreement contains events of default customary for this type
of financing, including, but not limited to: nonpayment of principal, interest
fees or other amounts when due; violation of covenants; failure of any
representation or warranty to be true in all material respects when made or
deemed made; cross default; ERISA; change of control; bankruptcy events;
material judgments; and actual or Playtex-asserted invalidity of the loan
documents, security interests or other material agreements or the subordination
provisions of the notes, Convertible Notes (as defined below) or Junior
Subordinated Notes (as defined below). These events of default allow for grace
periods and materiality concepts.
59
CONVERTIBLE SUBORDINATED NOTES
In connection with our acquisition of the DIAPER GENIE business in
January 1999, we issued $50.0 million aggregate principal amount of 6%
Convertible Subordinated Notes due 2004 (the "Convertible Notes"). The
Convertible Notes bear interest at 6% and may be converted, at the holders'
option, into shares of our common stock at a conversion price of approximately
$19.15 per share. The Convertible Notes will mature in 2004 and are callable by
us after January 29, 2002. The Convertible Notes are not guaranteed by any of
our subsidiaries. The exchange notes will rank equally with the Convertible
Notes.
DUE TO RELATED PARTY
Our 15 1/2% Junior Subordinated Notes (the "Junior Subordinated Notes") are
held by Playtex Apparel Partners, L.P. (the "Apparel Partnership"). The interest
on the 15 1/2% Junior Subordinated Notes is payable annually on December 15.
Commencing with the interest payment due December 15, 1994, we have made these
interest payments in cash. However, with respect to any such interest amount
payable prior to maturity, we may satisfy such payments through the issuance of
additional 15 1/2% Junior Subordinated Notes. The principal and any unpaid
accrued interest on the 15 1/2% Junior Subordinated Notes are payable in cash on
December 15, 2003. The exchange notes and the guarantees will rank senior to the
15 1/2% Junior Subordinated Notes.
In connection with our 1988 sale of Playtex Apparel, Inc. to the Apparel
Partnership, we received 15% debentures (the "15% Debentures") that were issued
by the Apparel Partnership and contain corresponding provisions to the 15 1/2%
Junior Subordinated Notes issued by us. The 15% Debentures held by us are
reflected in our consolidated balance sheet as "Due from Related Party." As of
March 31, 2001, the balance of our obligation to the Apparel Partnership (shown
on the balance sheet as a liability titled "Due to Related Party") was
$78.0 million, while the corresponding balance of the obligation of the Apparel
Partnership to us (shown on the balance sheet as an asset titled "Due from
Related Party") was $80.0 million. We receive interest income in cash on the 15%
Debentures and consequently interest expense on the 15 1/2% Junior Subordinated
Notes is shown net of cash interest income from the 15% Debentures in our
consolidated financial statements. Our 15 1/2% Junior Subordinated Notes do not
appear as long-term debt in our financial statements or elsewhere in this
prospectus.
60
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
We are offering to exchange our exchange notes for a like aggregate
principal amount of our initial notes.
The exchange notes that we propose to issue in this exchange offer will be
substantially identical to our initial notes except that, unlike our initial
notes, the exchange notes will have no transfer restrictions or registration
rights. You should read the description of the exchange notes in the section in
this prospectus entitled "Description of the Notes."
We reserve the right in our sole discretion to purchase or make offers for
any initial notes that remain outstanding following the expiration or
termination of this exchange offer and, to the extent permitted by applicable
law, to purchase initial notes in the open market or privately negotiated
transactions, one or more additional tender or exchange offers or otherwise. The
terms and prices of these purchases or offers could differ significantly from
the terms of this exchange offer. In addition, nothing in this exchange offer
will prevent us from exercising our right to discharge our obligations on the
initial notes by depositing certain securities with the trustee and otherwise.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
This exchange offer will expire at 5:00 p.m., New York City time, on ,
2001, unless we extend it in our reasonable discretion. The expiration date of
this exchange offer will be at least 20 business days after the commencement of
the exchange offer in accordance with Rule 14e-1(a) under the Securities
Exchange Act of 1934.
We expressly reserve the right to delay acceptance of any initial notes,
extend or terminate this exchange offer and not accept any initial notes that we
have not previously accepted if any of the conditions described below under
"--Conditions to the Exchange Offer" have not been satisfied or waived by us. We
will notify the exchange agent of any extension by oral notice promptly
confirmed in writing or by written notice. We will also notify the holders of
the initial notes by mailing an announcement or by a press release or other
public announcement communicated before 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date unless
applicable laws require us to do otherwise.
We also expressly reserve the right to amend the terms of this exchange
offer in any manner. If we make any material change, we will promptly disclose
this change in a manner reasonably calculated to inform the holders of our
initial notes of the change including providing public announcement or giving
oral or written notice to these holders. A material change in the terms of this
exchange offer could include a change in the timing of the exchange offer, a
change in the exchange agent and other similar changes in the terms of this
exchange offer. If we make any material change to this exchange offer, we will
disclose this change by means of a post-effective amendment to the registration
statement which includes this prospectus and will distribute an amended or
supplemented prospectus to each registered holder of initial notes. In addition,
we will extend this exchange offer for an additional five to ten business days
as required by the Exchange Act, depending on the significance of the amendment,
if the exchange offer would otherwise expire during that period. We will
promptly notify the exchange agent by oral notice, promptly confirmed in
writing, or written notice of any delay in acceptance, extension, termination or
amendment of this exchange offer.
61
PROCEDURES FOR TENDERING INITIAL NOTES
PROPER EXECUTION AND DELIVERY OF LETTERS OF TRANSMITTAL
To tender your initial notes in this exchange offer, you must use ONE OF THE
THREE alternative procedures described below:
(1) REGULAR DELIVERY PROCEDURE: Complete, sign and date the letter of
transmittal, or a facsimile of the letter of transmittal. Have the
signatures on the letter of transmittal guaranteed if required by the
letter of transmittal. Mail or otherwise deliver the letter of
transmittal or the facsimile together with the certificates representing
the initial notes being tendered and any other required documents to the
exchange agent on or before 5:00 p.m., New York City time, on the
expiration date.
(2) BOOK-ENTRY DELIVERY PROCEDURE: Send a timely confirmation of a
book-entry transfer of your initial notes, if this procedure is
available, into the exchange agent's account at The Depository Trust
Company in accordance with the procedures for book-entry transfer
described under "--Book-Entry Delivery Procedure" below, on or before
5:00 p.m., New York City time, on the expiration date.
(3) GUARANTEED DELIVERY PROCEDURE: If time will not permit you to complete
your tender by using the procedures described in (1) or (2) above before
the expiration date and this procedure is available, comply with the
guaranteed delivery procedures described under "--Guaranteed Delivery
Procedure" below.
The method of delivery of the initial notes, the letter of transmittal and
all other required documents is at your election and risk. Instead of delivery
by mail, we recommend that you use an overnight or hand-delivery service. If you
choose the mail, we recommend that you use registered mail, properly insured,
with return receipt requested. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ASSURE TIMELY DELIVERY. You should not send any letters of transmittal or
initial notes to us. You must deliver all documents to the exchange agent at its
address provided below. You may also request your broker, dealer, commercial
bank, trust company or nominee to tender your initial notes on your behalf.
Only a holder of initial notes may tender initial notes in this exchange
offer. A holder is any person in whose name initial notes are registered on our
books or any other person who has obtained a properly completed bond power from
the registered holder.
If you are the beneficial owner of initial notes that are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
you wish to tender your notes, you must contact that registered holder promptly
and instruct that registered holder to tender your notes on your behalf. If you
wish to tender your initial notes on your own behalf, you must, before
completing and executing the letter of transmittal and delivering your initial
notes, either make appropriate arrangements to register the ownership of these
notes in your name or obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time.
You must have any signatures on a letter of transmittal or a notice of
withdrawal guaranteed by:
(1) a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.,
(2) a commercial bank or trust company having an office or correspondent in
the United States, or
62
(3) an eligible guarantor institution within the meaning of Rule 17Ad-15
under the Exchange Act, UNLESS the initial notes are tendered:
(1) by a registered holder or by a participant in The Depository Trust
Company whose name appears on a security position listing as the
owner, who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the letter of
transmittal and only if the exchange notes are being issued directly
to this registered holder or deposited into this participant's
account at The Depository Trust Company, or
(2) for the account of a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent
in the United States or an eligible guarantor institution within the
meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934.
If the letter of transmittal or any bond powers are signed by:
(1) the recordholder(s) of the initial notes tendered: the signature must
correspond with the name(s) written on the face of the initial notes
without alteration, enlargement or any change whatsoever.
(2) a participant in The Depository Trust Company: the signature must
correspond with the name as it appears on the security position listing
as the holder of the initial notes.
(3) a person other than the registered holder of any initial notes: these
initial notes must be endorsed or accompanied by bond powers and a proxy
that authorize this person to tender the initial notes on behalf of the
registered holder, in satisfactory form to us as determined in our sole
discretion, in each case, as the name of the registered holder or holders
appears on the initial notes.
(4) trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or
representative capacity: these persons should so indicate when signing.
Unless waived by us, evidence satisfactory to us of their authority to so
act must also be submitted with the letter of transmittal.
To effectively tender notes through The Depository Trust Company, the
financial institution that is a participant in The Depository Trust Company will
electronically transmit its acceptance through the Automatic Tender Offer
Program. The Depository Trust Company will then edit and verify the acceptance
and send an agent's message to the exchange agent for its acceptance. An agent's
message is a message transmitted by The Depository Trust Company to the exchange
agent stating that The Depository Trust Company has received an express
acknowledgment from the participant in The Depository Trust Company tendering
the notes that this participant has received and agrees to be bound by the terms
of the letter of transmittal, and that we may enforce this agreement against
this participant.
BOOK-ENTRY DELIVERY PROCEDURE
Any financial institution that is a participant in The Depository Trust
Company's systems may make book-entry deliveries of initial notes by causing The
Depository Trust Company to transfer these initial notes into the exchange
agent's account at The Depository Trust Company in accordance with The
Depository Trust Company's procedures for transfer. To effectively tender notes
through The Depository Trust Company, the financial institution that is a
participant in The Depository Trust Company will electronically transmit its
acceptance through the Automatic Tender Offer Program. The Depository Trust
Company will then edit and verify the acceptance and send an agent's message to
the exchange agent for its acceptance. An agent's message is a message
transmitted by The Depository Trust Company to the exchange agent stating that
The Depository Trust Company has received an
63
express acknowledgment from the participant in The Depository Trust Company
tendering the notes that this participation has received and agrees to be bound
by the terms of the letter of transmittal, and that we may enforce this
agreement against this participant. The exchange agent will make a request to
establish an account for the initial notes at The Depository Trust Company for
purposes of the exchange offer within two business days after the date of this
prospectus.
A delivery of initial notes through a book-entry transfer into the exchange
agent's account at The Depository Trust Company will only be effective if an
agent's message or the letter of transmittal or a facsimile of the letter of
transmittal with any required signature guarantees and any other required
documents is transmitted to and received by the exchange agent at the address
indicated below under "--Exchange Agent" on or before the expiration date unless
the guaranteed delivery procedures described below are complied with. DELIVERY
OF DOCUMENTS TO THE DEPOSITORY TRUST COMPANY DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
GUARANTEED DELIVERY PROCEDURE
If you are a registered holder of initial notes and desire to tender your
notes, and (1) these notes are not immediately available, (2) time will not
permit your notes or other required documents to reach the exchange agent before
the expiration date or (3) the procedures for book-entry transfer cannot be
completed on a timely basis and an agent's message delivered, you may still
tender in this exchange offer if:
(1) you tender through a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States, or an eligible guarantor institution within the meaning of
Rule 17Ad-15 under the Exchange Act,
(2) on or before the expiration date, the exchange agent receives a properly
completed and duly executed letter of transmittal or facsimile of the
letter of transmittal, and a notice of guaranteed delivery, substantially
in the form provided by us, with your name and address as holder of the
initial notes and the amount of notes tendered, stating that the tender
is being made by that letter and notice and guaranteeing that within
three New York Stock Exchange trading days after the expiration date the
certificates for all the initial notes tendered, in proper form for
transfer, or a book-entry confirmation with an agent's message, as the
case may be, and any other documents required by the letter of
transmittal will be deposited by the eligible institution with the
exchange agent, and
(3) the certificates for all your tendered initial notes in proper form for
transfer or a book-entry confirmation as the case may be, and all other
documents required by the letter of transmittal are received by the
exchange agent within three New York Stock Exchange trading days after
the expiration date.
ACCEPTANCE OF INITIAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Your tender of initial notes will constitute an agreement between you and us
governed by the terms and conditions provided in this prospectus and in the
related letter of transmittal.
We will be deemed to have received your tender as of the date when your duly
signed letter of transmittal accompanied by your initial notes tendered, or a
timely confirmation of a book-entry transfer of these notes into the exchange
agent's account at The Depository Trust Company with an agent's message, or a
notice of guaranteed delivery from an eligible institution is received by the
exchange agent.
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All questions as to the validity, form, eligibility, including time of
receipt, acceptance and withdrawal of tenders will be determined by us in our
sole discretion. Our determination will be final and binding.
We reserve the absolute right to reject any and all initial notes not
properly tendered or any initial notes which, if accepted, would, in our opinion
or our counsel's opinion, be unlawful. We also reserve the absolute right to
waive any conditions of this exchange offer or irregularities or defects in
tender as to particular notes. Our interpretation of the terms and conditions of
this exchange offer, including the instructions in the letter of transmittal,
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of initial notes must be cured within
such time as we shall determine. We, the exchange agent or any other person will
be under no duty to give notification of defects or irregularities with respect
to tenders of initial notes. We and the exchange agent or any other person will
incur no liability for any failure to give notification of these defects or
irregularities. Tenders of initial notes will not be deemed to have been made
until such irregularities have been cured or waived. The exchange agent will
return without cost to their holders any initial notes that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived as promptly as practicable following the expiration date.
If all the conditions to the exchange offer are satisfied or waived on the
expiration date, we will accept all initial notes properly tendered and will
issue the exchange notes promptly thereafter. Please refer to the section of
this prospectus entitled "--Conditions to the Exchange Offer" below. For
purposes of this exchange offer, initial notes will be deemed to have been
accepted as validly tendered for exchange when, as and if we give oral or
written notice of acceptance to the exchange agent.
We will issue the exchange notes in exchange for the initial notes tendered
pursuant to a notice of guaranteed delivery by an eligible institution only
against delivery to the exchange agent of the letter of transmittal, the
tendered initial notes and any other required documents, or the receipt by the
exchange agent of a timely confirmation of a book-entry transfer of initial
notes into the exchange agent's account at The Depository Trust Company with an
agent's message, in each case, in form satisfactory to us and the exchange
agent.
If any tendered initial notes are not accepted for any reason provided by
the terms and conditions of this exchange offer or if initial notes are
submitted for a greater principal amount than the holder desires to exchange,
the unaccepted or non-exchanged initial notes will be returned without expense
to the tendering holder, or, in the case of initial notes tendered by book-entry
transfer procedures described above, will be credited to an account maintained
with the book-entry transfer facility, as promptly as practicable after
withdrawal, rejection of tender or the expiration or termination of the exchange
offer.
By tendering into this exchange offer, you will irrevocably appoint our
designees as your attorney-in-fact and proxy with full power of substitution and
resubstitution to the full extent of your rights on the notes tendered. This
proxy will be considered coupled with an interest in the tendered notes. This
appointment will be effective only when, and to the extent that we accept your
notes in this exchange offer. All prior proxies on these notes will then be
revoked and you will not be entitled to give any subsequent proxy. Any proxy
that you may give subsequently will not be deemed effective. Our designees will
be empowered to exercise all voting and other rights of the holders as they may
deem proper at any meeting of note holders or otherwise. The initial notes will
be validly tendered only if we are able to exercise full voting rights on the
notes, including voting at any meeting of the note holders, and full rights to
consent to any action taken by the note holders.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw tenders of
initial notes at any time before 5:00 p.m., New York City time, on the
expiration date.
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For a withdrawal to be effective, you must send a written or facsimile
transmission notice of withdrawal to the exchange agent before 5:00 p.m., New
York City time, on the expiration date at the address provided below under
"--Exchange Agent" and before acceptance of your tendered notes for exchange by
us.
Any notice of withdrawal must:
(1) specify the name of the person having tendered the initial notes to be
withdrawn,
(2) identify the notes to be withdrawn, including, if applicable, the
registration number or numbers and total principal amount of these notes,
(3) be signed by the person having tendered the initial notes to be
withdrawn in the same manner as the original signature on the letter of
transmittal by which these notes were tendered, including any required
signature guarantees, or be accompanied by documents of transfer
sufficient to permit the trustee for the initial notes to register the
transfer of these notes into the name of the person having made the
original tender and withdrawing the tender,
(4) specify the name in which any of these initial notes are to be
registered, if this name is different from that of the person having
tendered the initial notes to be withdrawn, and
(5) if applicable because the initial notes have been tendered through the
book-entry procedure, specify the name and number of the participant's
account at The Depository Trust Company to be credited, if different than
that of the person having tendered the initial notes to be withdrawn.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of all notices of withdrawal and our determination
will be final and binding on all parties. Initial notes that are withdrawn will
be deemed not to have been validly tendered for exchange in this exchange offer.
The exchange agent will return without cost to their holders all initial
notes that have been tendered for exchange and are not exchanged for any reason,
as promptly as practicable after withdrawal, rejection of tender or expiration
or termination of this exchange offer.
You may retender properly withdrawn initial notes in this exchange offer by
following one of the procedures described under "--Procedures for Tendering
Initial Notes" above at any time on or before the expiration date.
CONDITIONS TO THE EXCHANGE OFFER
We will complete this exchange offer only if:
(1) there is no action or proceeding instituted or threatened in any court
or before any governmental agency or body that in our judgment would
reasonably be expected to prohibit, prevent or otherwise impair our
ability to proceed with this exchange offer,
(2) there is no change in the laws and regulations which, in our judgment,
would reasonably be expected to impair our ability to proceed with this
exchange offer,
(3) there is no change in the current interpretation of the staff of the
Commission which permits resales of the exchange notes,
(4) there is no stop order issued by the Commission or any state securities
authority suspending the effectiveness of the registration statement
which includes this prospectus or the qualification of the indenture for
our exchange notes under the Trust Indenture Act of 1939 and there are no
proceedings initiated or, to our knowledge, threatened for that purpose,
and
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(5) we obtain all governmental approvals that we deem in our sole discretion
necessary to complete this exchange offer.
These conditions are for our sole benefit. We may assert any one of these
conditions regardless of the circumstances giving rise to it and may also waive
any one of them, in whole or in part, at any time and from time to time, if we
determine in our reasonable discretion that it has not been satisfied, subject
to applicable law. We will not be deemed to have waived our rights to assert or
waive these conditions if we fail at any time to exercise any of them. Each of
these rights will be deemed an ongoing right which we may assert at any time and
from time to time.
If we determine that we may terminate this exchange offer because any of
these conditions is not satisfied, we may:
(1) refuse to accept and return to their holders any initial notes that have
been tendered,
(2) extend the exchange offer and retain all notes tendered before the
expiration date, subject to the rights of the holders of these notes to
withdraw their tenders, or
(3) waive any condition that has not been satisfied and accept all properly
tendered notes that have not been withdrawn or otherwise amend the terms
of this exchange offer in any respect as provided under the section in
this prospectus entitled "--Expiration Date; Extensions; Amendments;
Termination."
ACCOUNTING TREATMENT
We will record the exchange notes at the same carrying value as the initial
notes as reflected in our accounting records on the date of the exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes. We
will amortize the costs of the exchange offer and the unamortized expenses
related to the issuance of the exchange notes over the term of the exchange
notes.
EXCHANGE AGENT
We have appointed The Bank of New York as exchange agent for this exchange
offer. You should direct all questions and requests for assistance on the
procedures for tendering and all requests for additional copies of this
prospectus or the letter of transmittal to the exchange agent as follows:
By mail:
The Bank of New York
101 Barclay Street--7E
New York, New York 10286
By hand/overnight delivery:
The Bank of New York
101 Barclay Street--1st Floor
New York, New York 10286
Facsimile Transmission: (212) 815-6330
Confirm by Telephone: (212) 815-5920
Attention:Carolle Montreuil
Corporate Trust Department
FEES AND EXPENSES
We will bear the expenses of soliciting tenders in this exchange offer,
including fees and expenses of the exchange agent and trustee and accounting,
legal, printing and related fees and expenses.
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We will not make any payments to brokers, dealers or other persons
soliciting acceptances of this exchange offer. However, we will pay the exchange
agent reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket expenses in connection with this
exchange offer. We will also pay brokerage houses and other custodians, nominees
and fiduciaries their reasonable out-of-pocket expenses for forwarding copies of
the prospectus, letters of transmittal and related documents to the beneficial
owners of the initial notes and for handling or forwarding tenders for exchange
to their customers.
We will pay all transfer taxes, if any, applicable to the exchange of
initial notes in accordance with this exchange offer. However, tendering holders
will pay the amount of any transfer taxes, whether imposed on the registered
holder or any other persons, if:
(1) certificates representing exchange notes or initial notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or
are to be registered or issued in the name of, any person other than the
registered holder of the notes tendered,
(2) tendered initial notes are registered in the name of any person other
than the person signing the letter of transmittal, or
(3) a transfer tax is payable for any reason other than the exchange of the
initial notes in this exchange offer.
If you do not submit satisfactory evidence of the payment of any of these
taxes or of any exemption from this payment with the letter of transmittal, we
will bill you directly the amount of these transfer taxes.
YOUR FAILURE TO PARTICIPATE IN THE EXCHANGE OFFER WILL HAVE ADVERSE CONSEQUENCES
The initial notes were not registered under the Securities Act or under the
securities laws of any state and you may not resell them, offer them for resale
or otherwise transfer them unless they are subsequently registered or resold
under an exemption from the registration requirements of the Securities Act and
applicable state securities laws. If you do not exchange your initial notes for
exchange notes in accordance with this exchange offer, or if you do not properly
tender your initial notes in this exchange offer, you will not be able to
resell, offer to resell or otherwise transfer the initial notes unless they are
registered under the Securities Act or unless you resell them, offer to resell
or otherwise transfer them under an exemption from the registration requirements
of, or in a transaction not subject to, the Securities Act. In addition, you
will not necessarily be able to obligate us to register the initial notes under
the Securities Act.
DELIVERY OF PROSPECTUS
Each broker-dealer that receives exchange notes for its own account in
exchange for initial notes, where such initial notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes. See "Plan of Distribution."
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DESCRIPTION OF THE NOTES
You can find the definitions of certain terms used in this description under
the subheading "--Certain Definitions." In this description, the word "Playtex"
refers only to Playtex Products, Inc. and not to any of its subsidiaries.
Playtex issued the initial notes under an indenture among itself, the
Guarantors and The Bank of New York, as trustee, in a private transaction that
was not subject to the registration requirements of the Securities Act. Both the
initial notes and the exchange notes are governed by that indenture. The terms
of the notes include those stated in the indenture and those made part of the
indenture by reference to the Trust Indenture Act of 1939.
The following description is a summary of the material provisions of the
indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
Holders of the notes. Copies of the indenture are available as set forth in the
section of this prospectus entitled "Where You Can Find More Information."
Certain defined terms used in this description but not defined below under the
caption "Certain Definitions" have the meanings assigned to them in the
indenture.
The registered Holder of a note will be treated as the owner of it for all
purposes. Only registered Holders will have rights under the indenture.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
THE NOTES:
- are general unsecured obligations of Playtex;
- are subordinated in right of payment to all existing and future Senior
Indebtedness of Playtex;
- are PARI PASSU in right of payment with all existing and future unsecured
senior subordinated Indebtedness of Playtex;
- are senior in right of payment to our 15 1/2% Junior Subordinated Notes
due 2003 and any future junior subordinated Indebtedness of Playtex; and
- are unconditionally guaranteed by the Guarantors on a senior subordinated
basis.
As of the date of the indenture, all of our subsidiaries were "Restricted
Subsidiaries" except for the Securitization Entity, which was created to serve
as a special purpose entity in connection with the Receivables Facility. The
Securitization Entity is an "Unrestricted Subsidiary" for indenture purposes. In
addition, under the circumstances described below under the caption "--Certain
Covenants--Designation of Restricted and Unrestricted Subsidiaries," we will be
permitted to designate other of our subsidiaries to be "Unrestricted
Subsidiaries." Our Unrestricted Subsidiaries (including the Securitization
Entity) will not be subject to any of the restricted covenants in the indenture.
Our Unrestricted Subsidiaries and foreign subsidiaries will not guarantee the
notes.
THE GUARANTEES
The notes are guaranteed by all of Playtex's current and future Domestic
Subsidiaries.
Each guarantee of the notes:
- is a general unsecured obligation of the Guarantor;
- is subordinated in right of payment to all existing and future Senior
Indebtedness of that Guarantor;
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- is PARI PASSU in right of payment with any future senior subordinated
Indebtedness of that Guarantor; and
- is senior in right of payment to any future junior subordinated
Indebtedness of the Guarantors.
On a pro forma basis as of March 31, 2001, after giving effect to this
offering and the Refinancing Transactions, Playtex and the Guarantors would have
had total Senior Indebtedness of approximately $516.3 million, $50.0 million of
PARI PASSU Indebtedness and $0 of subordinated Indebtedness (excluding our
15 1/2% Junior Subordinated Notes). As indicated above and as discussed in
detail below under the caption "--Subordination," payments on the notes and
under these Guarantees will be subordinated to the payment of Senior
Indebtedness. The Company may incur additional Senior Indebtedness in the
future, subject to the limitations imposed by the Credit Agreement and the
indenture. See "Description of Other Indebtedness--New Credit Facility" and
"--Certain Covenants--Limitation on Indebtedness."
Each Guarantee will provide that upon any voluntary or involuntary
liquidation or dissolution of any such Guarantor or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to any
such Guarantor or its respective property, all Senior Indebtedness of any such
Guarantor must be paid in full in cash or Cash Equivalents before any payment or
distribution is made (excluding a distribution of Permitted Junior Securities)
upon principal, interest, premium, if any, and Liquidated Damages, if any, on
the notes. By reason of such subordination, in the event of liquidation or
insolvency, creditors of any such Guarantor who are holders of Senior
Indebtedness of any such Guarantor may recover more ratably than the Holders of
the notes and the Holders of the notes may not recover any amounts in such
event.
Playtex's ability to make interest and principal payments under its
indebtedness will depend on its financial and operating performance, which, in
turn, is subject to prevailing economic conditions and to financial, business
and other factors beyond its control. Although Playtex's cash flow from
operations have been sufficient to meet its historical debt obligations, there
can be no assurance that Playtex's operating results will continue to be
sufficient or that future borrowing facilities will be available for the payment
or refinancing of Playtex's indebtedness. See "Risk Factors."
PRINCIPAL, MATURITY AND INTEREST
Playtex may issue notes with a maximum aggregate principal amount of
$500,000,000, of which $350,000,000 were issued in the offering of the initial
notes on May 22, 2001. Playtex may issue additional notes from time to time
after this exchange offer. Any offering of additional notes is subject to the
covenant described below under the caption "--Certain Covenants--Limitation on
Indebtedness." The notes and any additional notes subsequently issued under the
indenture will be treated as a single class for all purposes under the
indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase. Playtex will issue notes in denominations of $1,000 and
integral multiples of $1,000. The notes will mature on June 1, 2011.
Interest on the notes will accrue at the rate of 9 3/8% per annum and will
be payable semi-annually in arrears on June 1 and December 1, commencing on
December 1, 2001. Playtex will make each interest payment to the Holders of
record on the immediately preceding May 15 and November 15.
Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a Holder has given wire transfer instructions to Playtex, Playtex will
pay all principal, interest, premium, if any, and Liquidated Damages, if any, on
that Holder's notes in accordance with those instructions. All other payments on
notes will be made at the office or agency of the paying agent and
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registrar within the City and State of New York unless Playtex elects to make
interest payments by check mailed to the Holders at their address set forth in
the register of Holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as paying agent and registrar. Playtex may
change the paying agent or registrar without prior notice to the Holders of the
notes, and Playtex or any of its Subsidiaries may act as paying agent or
registrar.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a Holder to furnish appropriate
endorsements and transfer documents in connection with a transfer of notes.
Holders will be required to pay all taxes due on transfer. Playtex is not
required to transfer or exchange any Note selected for redemption. Also, Playtex
is not required to transfer or exchange any note for a period of 15 days before
a selection of notes to be redeemed.
SUBORDINATION
The payment of the principal, interest, premium, if any, and Liquidated
Damages, if any, on the notes will be subordinated, as set forth in the
indenture, in right of payment to the prior payment in full of all Senior
Indebtedness in cash or Cash Equivalents or in any other manner acceptable to
the holders of Senior Indebtedness. The notes and the Guarantees will be senior
subordinated Indebtedness of Playtex and each Guarantor, ranking PARI PASSU with
all future senior subordinated Indebtedness of Playtex and each Guarantor, and
senior to all future Subordinated Indebtedness of Playtex and each Guarantor.
During the continuance of any default in the payment of any Designated
Senior Indebtedness no payment (other than payments previously made pursuant to
the provisions described under "--Satisfaction and Discharge" or "--Defeasance
or Covenant Defeasance") or distribution of any assets of Playtex of any kind or
character (excluding Permitted Junior Securities) shall be made on account of
the principal, interest, premium, if any, and Liquidated Damages, if any, on the
notes or on account of the purchase, redemption or other acquisition of, the
notes unless and until such default has been cured, waived or has ceased to
exist or such Designated Senior Indebtedness shall have been discharged or paid
in full in cash or Cash Equivalents or in any other manner acceptable to the
requisite holders of such Designated Senior Indebtedness.
During the continuance of any non-payment default with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
accelerated (a "NON-PAYMENT DEFAULT") and after the receipt by the trustee from
a representative of holders of any Designated Senior Indebtedness of a written
notice of such default, no payment (other than payments previously made pursuant
to the provisions described under "--Satisfaction and Discharge" or
"--Defeasance or Covenant Defeasance") or distribution of any assets of Playtex
of any kind or character (excluding Permitted Junior Securities) may be made by
Playtex on account of the principal, interest, premium, if any, and Liquidated
Damages, if any, on the notes or on account of the purchase, redemption or other
acquisition of the notes for the period specified below (the "PAYMENT BLOCKAGE
PERIOD").
The Payment Blockage Period shall commence upon the receipt of notice of the
Non-payment Default by the trustee from a representative of the holders of any
Designated Senior Indebtedness and shall end on the earliest to occur of:
(1) 179 days having elapsed since the receipt of such written notice;
(2) the date on which such Non-payment Default (and all Non-payment Defaults
as to which notice is given after such Payment Blockage Period is
initiated) is cured, waived or ceases to
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exist or on which such Designated Senior Indebtedness is discharged or
paid in full in Cash or Cash Equivalents or in any other manner
acceptable to the holders of such Designated Senior Indebtedness; or
(3) the date on which such Payment Blockage Period shall have been
terminated by written notice to Playtex or the trustee from a
representative of holders of Designated Senior Indebtedness initiating
such Payment Blockage Period,
after which, in each such case, Playtex shall promptly resume making any and all
required payments in respect of the notes, including any missed payments.
In no event will a Payment Blockage Period extend beyond 179 days from the
date of the receipt by the trustee of the notice initiating such Payment
Blockage Period (such 179-day period referred to as the "INITIAL BLOCKAGE
PERIOD"). Any number of notices of Non-payment Defaults may be given during the
Initial Blockage Period; PROVIDED that during any 365-consecutive-day period
only one such period during which payment of principal, interest, premium and
Liquidated Damages, if any, on the notes may not be made may commence and the
duration of such period may not exceed 179 days.
No Non-payment Default with respect to Designated Senior Indebtedness that
existed or was continuing on the date of the commencement of any Payment
Blockage Period will be, or can be, made the basis for the commencement of a
second Payment Blockage Period, whether or not within a period of 365
consecutive days, unless such Non-payment Default has been cured or waived for a
period of not less than 90 consecutive days.
If Playtex fails to make any payment on the notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of Default
under the indenture and would enable the Holders of the notes to accelerate the
maturity thereof. See "--Events of Default and Remedies."
The indenture provides that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to Playtex or its
assets, or any liquidation, dissolution or other winding up of Playtex, whether
voluntary or involuntary, or any assignment for the benefit of creditors or
other marshalling of assets or liabilities of Playtex, all Senior Indebtedness
must be paid in full in cash or Cash Equivalents or in any other manner
acceptable to the holders of Senior Indebtedness before any payment or
distribution (excluding Permitted Junior Securities) is made on account of the
principal, interest, premium, if any, and Liquidated Damages, if any, on the
notes. Accordingly, the Holders of the notes may recover nothing in the event of
such a liquidation, dissolution or other winding up of Playtex.
"SENIOR INDEBTEDNESS" is defined as the principal of, premium, if any, and
interest (including interest accruing after the filing of a petition initiating
any proceeding under any state, federal or foreign bankruptcy laws whether or
not allowable as a claim in such proceedings), fees, costs, expenses,
reimbursements, indemnifications and all other obligations on any Indebtedness
of Playtex or any Guarantor (other than as otherwise provided in this
definition), whether outstanding on the date of the indenture or thereafter
created, incurred or assumed, and whether at any time owing, actually or
contingent, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the notes.
Without limiting the generality of the foregoing, "SENIOR INDEBTEDNESS"
shall include the principal of, premium, if any, and interest (including
interest accruing after the filing of a petition initiating any proceeding under
any state, federal or foreign bankruptcy laws whether or not allowable as a
claim in such proceedings) on all obligations of every nature of Playtex or any
Guarantor from time to time owed to the lenders under the Credit Agreement:
PROVIDED, HOWEVER, that any Indebtedness under any refinancing, refunding, or
replacement of the Credit Agreement shall not constitute Senior
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Indebtedness to the extent that the Indebtedness thereunder is expressly
subordinate in right of payment to any other Indebtedness of Playtex.
Notwithstanding the foregoing, "SENIOR INDEBTEDNESS" shall not include:
(1) Indebtedness evidenced by the notes;
(2) Indebtedness that is subordinate or junior in right of payment to any
Indebtedness of Playtex;
(3) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without
recourse to Playtex;
(4) Indebtedness which is represented by Redeemable Capital Stock;
(5) any liability for foreign, federal, state, local or other taxes owed or
owing by Playtex;
(6) Indebtedness of Playtex to a Subsidiary;
(7) that portion of any Indebtedness which at the time of issuance is issued
in violation of the indenture; and
(8) Playtex's 8 7/8% Senior Notes due 2004, Playtex's 9% Senior Subordinated
Notes due 2003, the 15 1/2% Junior Subordinated Notes and Playtex's 6%
Convertible Subordinated Notes due 2004.
"DESIGNATED SENIOR INDEBTEDNESS" is defined as:
(1) all Senior Indebtedness under the Credit Agreement; and
(2) any other Senior Indebtedness which, at the time of determination has an
aggregate principal amount outstanding, together with any commitments to
lend additional amounts, of at least $50,000,000 and is specifically
designated by Playtex, with the consent of the administrative agent under
the Credit Agreement if the Credit Agreement is then in effect, in the
instrument evidencing such Senior Indebtedness or the agreement under
which such Senior Indebtedness arises as "DESIGNATED SENIOR
INDEBTEDNESS."
OPTIONAL REDEMPTION
At any time prior to June 1, 2004, Playtex may on any one or more occasions
redeem up to 35% of the aggregate principal amount of notes issued under the
indenture at a redemption price of 109.375% of the principal amount, plus
accrued and unpaid interest to the redemption date, with the net cash proceeds
of one or more Equity Offerings; PROVIDED that:
(1) at least 65% of the aggregate principal amount of notes issued under the
indenture remains outstanding immediately after the occurrence of such
redemption (excluding notes held by Playtex and its Subsidiaries); and
(2) the redemption occurs within 90 days of the date of the closing of such
Equity Offering.
Except pursuant to the preceding paragraph, the notes will not be redeemable
at Playtex's option prior to June 1, 2006.
On or after June 1, 2006, Playtex may redeem all or some of the notes upon
not less than 30 nor more than 90 days' notice, at the redemption prices
(expressed as percentages of principal amount) set
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forth below plus accrued and unpaid interest on the notes redeemed, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on June 1 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2006........................................................ 104.688%
2007........................................................ 103.125%
2008........................................................ 101.563%
2009 and thereafter......................................... 100.000%
SINKING FUND
The notes will not be entitled to the benefit of any sinking fund.
SUBSIDIARY GUARANTEES
The notes will be guaranteed by each of Playtex's current and future
Domestic Subsidiaries. These Guarantees will be joint and several obligations of
the Guarantors. Each Guarantee will be subordinated to the prior payment in full
in cash or Cash Equivalents of all Senior Indebtedness of that Guarantor. The
obligations of each Guarantor under its Guarantee will be limited as necessary
to prevent that Guarantee from constituting a fraudulent conveyance under
applicable law. See "Risk Factors--Fraudulent conveyance laws could void our
obligation under the notes."
A Guarantor may not sell or otherwise dispose of all or substantially all of
its assets to, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another Person, other than Playtex or
another Guarantor, unless:
(1) (a) the Person acquiring the property in any such sale or disposition
or the Person formed by or surviving any such consolidation or
merger assumes all the obligations of that Guarantor under the
indenture, its Guarantee and the registration rights agreement
pursuant to a supplemental indenture satisfactory to the trustee;
or
(b) such sale, disposition, merger or consolidation is permitted by the
terms of the indenture and, to the extent required, the Net Cash
Proceeds are applied in accordance with the applicable provisions of
the indenture.
The Guarantee of a Guarantor will be released:
(1) in connection with any consolidation or merger if the Guarantor or
surviving Person shall cease to be a Subsidiary of Playtex, if the
consolidation or merger complies with the provisions of the indenture;
(2) in connection with any sale or other disposition of all or substantially
all of the assets of that Guarantor (including by way of merger or
consolidation) to a Person that is not (either before or after giving
effect to such transaction) a Subsidiary of Playtex, if the sale or other
disposition complies with the "Asset Sale" provisions of the indenture;
(3) if the Guarantor is declared to be an Unrestricted Subsidiary in
accordance with the provisions of the indenture; or
(4) in connection with any sale of all of the Capital Stock of a Guarantor
to a Person that is not (either before or after giving effect to such
transaction) a Subsidiary of Playtex, if the sale complies with the
"Asset Sale" provisions of the indenture.
See "--Repurchase at the Option of Holders--Asset Sales."
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REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each Holder of notes will have the right to
require Playtex to repurchase all or any part (equal to $1,000 or an integral
multiple of $1,000) of that Holder's notes pursuant to a Change of Control Offer
on the terms set forth in the indenture. In the Change of Control Offer, Playtex
will offer a Change of Control Payment in cash equal to 101% of the aggregate
principal amount of notes repurchased plus accrued and unpaid interest and
Liquidated Damages, if any, on the notes repurchased, to the date of purchase.
Within 15 days following any Change of Control, Playtex will mail a notice to
each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase notes on the Change of Control
Payment Date specified in the notice, which date will be no earlier than
30 days and no later than 60 days from the date such notice is mailed, pursuant
to the procedures required by the indenture and described in such notice.
Playtex will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent those
laws and regulations are applicable in connection with the repurchase of the
notes as a result of a Change of Control. To the extent that the provisions of
any securities laws or regulations conflict with the Change of Control
provisions of the indenture, Playtex will comply with the applicable securities
laws and regulations and will not be deemed to have breached its obligations
under the Change of Control provisions of the indenture by virtue of such
conflict.
The indenture provides that, prior to the commencement of a Change of
Control Offer, but in any event within 30 days following any Change of Control,
we will:
(1) (a) repay in full and terminate all commitments under Indebtedness
under the Credit Agreement and all other Senior Indebtedness, the
terms of which require repayment upon a Change of Control, or
(b) offer to repay in full and terminate all commitments under all
Indebtedness under the Credit Agreement and all other Senior
Indebtedness and repay the Indebtedness owed to each lender that has
accepted such offer in full, or
(2) obtain the requisite consents under the Credit Agreement and all such
other Senior Indebtedness to permit the repurchase of the notes as
provided herein.
On the Change of Control Payment Date, Playtex will, to the extent lawful:
(1) accept for payment all notes or portions of notes properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of Control
Payment in respect of all notes or portions of notes properly tendered;
and
(3) deliver or cause to be delivered to the trustee the notes properly
accepted together with an officers' certificate stating the aggregate
principal amount of notes or portions of notes being purchased by
Playtex.
Playtex will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by Playtex including any
requirements to repay in full all Indebtedness under the Credit Agreement, any
such Senior Indebtedness or Senior Indebtedness of any Guarantor or obtains the
consent of such lenders to such Change of Control Offer and purchases all notes
properly tendered and not withdrawn under the Change of Control Offer. The
provisions under the indenture relative to Playtex's obligation to make an offer
to repurchase the notes as a result of a Change of Control may
75
be waived or modified with the written consent of the holders of a majority in
principal amount of the notes then outstanding.
The paying agent will promptly mail to each Holder of notes properly
tendered the Change of Control Payment for such notes, and the trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new note equal in principal amount to any unpurchased portion of
the notes surrendered, if any; PROVIDED that each new note will be in a
principal amount of $1,000 or an integral multiple of $1,000.
If a Change of Control Offer is made, there can be no assurance that Playtex
will have available funds sufficient to make the Change of Control Payment for
any or all of the notes that might be delivered by Holders of the notes seeking
to accept the Change of Control Offer and, accordingly, none of the Holders of
the notes may receive the Change of Control Payment for their notes in the event
of a Change of Control. The failure of Playtex to make or consummate the Change
of Control Offer or pay the Change of Control Payment when due will give the
trustee and the Holders of the notes the rights described under "--Events of
Default and Remedies."
The term "ALL OR SUBSTANTIALLY ALL" as used in the definition of "Change of
Control" has not been interpreted under New York law (which is the governing law
of the indenture) to represent a specific quantitative test. There can be no
assurance as to how a court interpreting New York law would interpret the phrase
if a dispute were to arise whether a specific event was a Change of Control.
The existence of a Holder's right to require Playtex to repurchase such
Holder's notes upon a Change of Control may deter a third party from acquiring
Playtex in a transaction which constitutes a Change of Control.
In addition to the obligations of Playtex under the indenture with respect
to the notes in the event of a "Change of Control," the Credit Agreement
requires Playtex to repay all amounts outstanding under the Credit Agreement and
terminate the commitments thereunder on the date which is the earlier of
(1) 30 days after the date of a Change of Control and (2) the date on which
Playtex shall have made a Change of Control Offer. In addition, a "change of
control" as defined in the Credit Agreement is an event of default thereunder
and upon such event, the lenders under the Credit Agreement may terminate their
commitments and accelerate all amounts outstanding under the Credit Agreement.
Accordingly, Playtex would be required to obtain the consent of the lenders
under the Credit Agreement prior to the repayment of the notes upon a Change of
Control. See "Description of Other Indebtedness--New Credit Facility--Prepayment
Upon a Change of Control."
ASSET SALES
Playtex will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, consummate an Asset Sale unless:
(1) at least 75% of the proceeds from such Asset Sale are received in cash;
PROVIDED, HOWEVER, that the amount of (a) any Senior Indebtedness of
Playtex or any Guarantor (or any Indebtedness of a Restricted Subsidiary
that is not a Guarantor) that is assumed by the transferee of any asset
in connection with any Asset Sale and (b) any securities, notes or other
obligations received by Playtex or any such Restricted Subsidiary from
such transferee or purchaser that are converted by Playtex or such
Restricted Subsidiary into cash or Cash Equivalents within 60 days after
receipt (to the extent of any cash or Cash Equivalents received in that
conversion), shall be deemed to be cash for purposes of this provision;
and
(2) Playtex or such Restricted Subsidiary receives consideration at the time
of such Asset Sale at least equal to the fair market value of the shares
or assets sold (as determined by the Board of Directors of Playtex and
evidenced by a board resolution for Asset Sales in excess of
$15,000,000).
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Notwithstanding the foregoing, clause (1) of the preceding paragraph shall
not apply to any Asset Sale or portions thereof involving Excluded Assets or the
making of any Permitted Investment pursuant to the definition of "PERMITTED
INVESTMENT" or any Restricted Payment permitted pursuant to the covenant
entitled "--Limitation on Restricted Payments."
If all or a portion of the Net Cash Proceeds of any Asset Sale are not
applied to prepay or repay permanently any Senior Indebtedness then outstanding
as provided by the terms thereof (and to effect a corresponding commitment
reduction in the event that the Senior Indebtedness prepaid or repaid is not a
term loan) within 12 months of the closing of such Asset Sale, or if no such
Senior Indebtedness is then outstanding, then Playtex may within 12 months of
the Asset Sale, invest the Net Cash Proceeds in properties and assets that (as
determined by the Board of Directors) replace the properties and assets that
were the subject of the Asset Sale or in properties and assets that will be used
in the businesses of Playtex or its Restricted Subsidiaries existing on the date
of the indenture or in businesses reasonably related thereto which for purposes
of the indenture shall include any consumer products business. The amount of
such Net Cash Proceeds neither used to permanently repay or prepay Senior
Indebtedness nor used or invested as set forth in this paragraph constitutes
"EXCESS PROCEEDS."
When the aggregate amount of Excess Proceeds equals $25,000,000 or more,
Playtex shall apply the Excess Proceeds to the repayment of the notes and any
Pari Passu Indebtedness required to be repurchased under the instrument
governing such Pari Passu Indebtedness as follows:
(1) Playtex shall make an offer to purchase (an "OFFER") from all Holders of
the notes in accordance with the procedures set forth in the indenture in
the maximum principal amount (expressed as a multiple of $1,000) of notes
that may be purchased out of an amount (the "NOTE AMOUNT") equal to the
product of such Excess Proceeds multiplied by a fraction, the numerator
of which is the outstanding principal amount of the notes, and the
denominator of which is the sum of the outstanding principal amount of
the notes and such Pari Passu Indebtedness (subject to proration in the
event such amount is less than the aggregate Offered Price (as defined
herein) of all notes tendered); and
(2) to the extent required by such Pari Passu Indebtedness to permanently
reduce the principal amount of such Pari Passu Indebtedness, Playtex
shall make an offer to purchase or otherwise repay or repurchase or
redeem Pari Passu Indebtedness (a "PARI PASSU OFFER") in an amount (the
"PARI PASSU DEBT AMOUNT") equal to the excess of the Excess Proceeds over
the Note Amount; PROVIDED that in no event shall the Pari Passu Debt
Amount exceed the principal amount of such Pari Passu Indebtedness plus
the amount of any premium required to be paid to repurchase such Pari
Passu Indebtedness.
The offer price shall be payable in cash in an amount equal to 100% of the
principal amount of the notes plus accrued and unpaid interest, if any, to the
date (the "PURCHASE DATE") such Offer is consummated (the "OFFERED PRICE"), in
accordance with the procedures set forth in the indenture.
To the extent that the aggregate Offered Price of the notes tendered
pursuant to the Offer is less than the Note Amount relating thereto or the
aggregate amount of Pari Passu Indebtedness that is purchased is less than the
Pari Passu Debt Amount (the amount of such shortfall, if any, constituting a
"DEFICIENCY"), Playtex shall use such Deficiency in the business of Playtex and
its Restricted Subsidiaries or for any other purpose permitted under the terms
of the indenture. Upon completion of the purchase of all the notes tendered
pursuant to an Offer and repurchase of the Pari Passu Indebtedness pursuant to a
Pari Passu Offer, the amount of Excess Proceeds, if any, shall be reset at zero.
Such Excess Proceeds may be invested in Temporary Cash Investments or used
to temporarily repay amounts outstanding under a revolving credit facility until
they are applied as provided above. Playtex shall be entitled to any interest or
dividends accrued, earned or paid on such Temporary Cash Investments.
77
If Playtex becomes obligated to make an Offer pursuant to the fourth
paragraph of this covenant, the notes shall be purchased by Playtex, at the
option of the Holder thereof, in whole or in part in integral multiples of
$1,000, on a date that is not earlier than 30 days and not later than 60 days
from the date the notice is given to Holders, or such later date as may be
necessary for Playtex to comply with the requirements under the Exchange Act,
subject to proration in the event the Note Amount is less than the aggregate
Offered Price of all notes tendered.
Playtex shall comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with an Offer.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the notes are listed; or
(2) if the notes are not listed on any national securities exchange, on a
pro rata basis, by lot or by such method as the trustee deems fair and
appropriate.
No notes of $1,000 or less can be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of notes to be redeemed at its registered
address, except that redemption notices may be mailed more than 60 days prior to
a redemption date if the notice is issued in connection with a defeasance of the
notes or a satisfaction and discharge of the indenture. Notices of redemption
may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note will state the portion of the principal amount of that note
that is to be redeemed. A new note in principal amount equal to the unredeemed
portion of the original note will be issued in the name of the Holder of notes
upon cancellation of the original note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on notes or portions of them called for redemption.
CERTAIN COVENANTS
The indenture contains, among others, the following covenants:
LIMITATION ON INDEBTEDNESS. Playtex will not, and will not permit any of
its Restricted Subsidiaries to, create, issue, assume, guarantee, or otherwise
in any manner become directly or indirectly liable for or with respect to or
otherwise incur (collectively, "INCUR") any Indebtedness (including any Acquired
Indebtedness but excluding any Permitted Indebtedness) except for:
(1) Indebtedness of Playtex or any Guarantor; or
(2) Indebtedness of any other Restricted Subsidiary constituting Acquired
Indebtedness;
PROVIDED that, in each case, the Consolidated Fixed Charge Coverage Ratio for
Playtex for the four full fiscal quarters immediately preceding the incurrence
of such Indebtedness taken as one period would have been at least 2.0 to 1.0
(calculated after giving pro forma effect to:
(1) the incurrence of such Indebtedness and (if applicable) the application
of the net proceeds therefrom, including to refinance other Indebtedness,
as if such Indebtedness was incurred, and the application of such
proceeds occurred, at the beginning of such four-quarter period;
(2) the incurrence, repayment or retirement of any other Indebtedness by
Playtex and its Restricted Subsidiaries since the first day of such
four-quarter period as if such Indebtedness was incurred, repaid or
retired at the beginning of such four-quarter period (except that, in
making such computation, the amount of Indebtedness under any revolving
credit facility shall
78
be computed based upon the average daily balance of such Indebtedness
during such four-quarter period);
(3) in the case of Acquired Indebtedness, the related acquisition (as if
such acquisition had been consummated on the first day of such
four-quarter period); and
(4) any acquisition or disposition by Playtex and its Restricted
Subsidiaries of any company or any business or any assets out of the
ordinary course of business, whether by merger, stock purchase or sale,
or asset purchase or sale and any related repayment of Indebtedness, in
each case since the first day of such four-quarter period, as if such
acquisition or disposition had been consummated on the first day of such
four-quarter period and giving effect only to those acquisition-related
cost savings that have been realized or that Playtex's chief financial
officer reasonably believes will be realized).
The accrual or accretion of interest or dividends and the payment of interest or
dividends in kind shall not be deemed to be an incurrence of Indebtedness.
LIMITATION ON RESTRICTED PAYMENTS.
Playtex will not and will not permit any Restricted Subsidiary to, directly
or indirectly:
(1) declare or pay any dividend on, or make any distribution in respect of,
Playtex's Capital Stock (other than dividends or distributions payable in
shares of Playtex's Qualified Capital Stock or in options, warrants or
other rights to acquire such Qualified Capital Stock);
(2) purchase, redeem or otherwise acquire or retire for value, directly or
indirectly:
(a) any Capital Stock of Playtex; or
(b) any Capital Stock of any Restricted Subsidiary of Playtex held by any
Affiliate of Playtex (other than any Permitted Investments); or
(c) options, warrants or other rights to acquire any such Capital Stock;
(3) make any principal payment on, or repurchase, redeem, defease, retire or
otherwise acquire for value any Subordinated Indebtedness prior to any
scheduled principal payment, any sinking fund payment, or payment at
final maturity;
(4) declare or pay any dividend or distribution on any Capital Stock of any
Restricted Subsidiary to any Person (other than with respect to any
Capital Stock held by Playtex or any of its Restricted Subsidiaries or
with respect to Capital Stock held by any other Person made on a pro rata
basis consistent with the ownership interests in such Capital Stock to
the owners of such Capital Stock); or
(5) make any Investment in any Person (other than any Permitted
Investments),
(any of the payments described in clauses (1) through (5) above, other than any
such action that is a Permitted Payment, being referred to, collectively, herein
as "RESTRICTED PAYMENTS") unless at the time of and after giving effect to the
proposed Restricted Payment (the amount of any such Restricted Payment, if other
than cash, as determined by the Board of Directors, whose determination shall be
conclusive and evidenced by a board resolution):
(1) no Default or Event of Default shall have occurred and be continuing;
(2) immediately before and immediately after giving effect to such
transaction on a pro forma basis, Playtex could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the first
paragraph of the covenant described above under the caption "--Limitation
on Indebtedness;" and
79
(3) the aggregate amount of all such Restricted Payments declared or made
after the date of the indenture does not exceed the sum, without
duplication, of:
(a) $30,000,000;
(b) 50% of the aggregate cumulative Consolidated Net Income of Playtex
accrued on a cumulative basis during the period beginning on the
first day of Playtex's fiscal quarter commencing prior to the date of
the indenture and ending on the last day of Playtex's last fiscal
quarter ending prior to the date of the Restricted Payment (or, if
such aggregate cumulative Consolidated Net Income shall be a loss,
minus 100% of such loss);
(c) the aggregate Net Cash Proceeds received after the date of the
indenture by Playtex from the issuance or sale (other than to any of
its Subsidiaries) of its Qualified Capital Stock or any option,
warrants or rights to purchase such Qualified Capital Stock of
Playtex (except, in each case, to the extent such proceeds are used
to purchase, redeem or otherwise retire Capital Stock or Subordinated
Indebtedness as set forth below);
(d) the aggregate Net Cash Proceeds received after the date of the
indenture by Playtex (other than from any of its Subsidiaries) upon
the exercise of any options or warrants to purchase Qualified Capital
Stock of Playtex;
(e) the aggregate Net Cash Proceeds received before or after the date of
the indenture by Playtex from the sale of debt securities or
Redeemable Capital Stock that has been converted after the date of
the indenture into or exchanged for Qualified Capital Stock of
Playtex to the extent such debt securities or Redeemable Capital
Stock were originally sold for cash (assuming, in the case of the 6%
Convertible Subordinated Notes of Playtex due 2004, that they were
sold for $50.0 million in cash) plus the aggregate Net Cash Proceeds
received by Playtex at the time of such conversion or exchange;
(f) if any Unrestricted Subsidiary (A) is redesignated as a Restricted
Subsidiary, the fair market value of such redesignated Subsidiary (as
determined in good faith by the Board of Directors) as of the date of
its redesignation or (B) pays any cash dividends or cash
distributions to Playtex or any of its Restricted Subsidiaries, 100%
of any such cash dividends or cash distributions made after the date
of the indenture; and
(g) the aggregate amount returned to the extent that any Restricted
Investment is sold for cash or otherwise liquidated or repaid for
cash (less the cost of disposition, if any).
Notwithstanding the foregoing, and in the case of clauses (2), (3) and
(4) below, so long as there is no Default or Event of Default continuing, the
foregoing provisions shall not prohibit the following actions (which are,
collectively, referred to as "PERMITTED PAYMENTS"):
(1) the payment of any dividend or distribution within 60 days after the
date of declaration thereof, if at such date of declaration such payment
would be permitted by the provisions of the first paragraph of this
covenant and such payment shall be deemed to have been paid on such date
of declaration for purposes of the calculation required by the first
paragraph of this covenant;
(2) the repurchase, redemption or other acquisition or retirement of any
shares of Capital Stock of Playtex in exchange for (including any such
exchange pursuant to the exercise of a conversion right or privilege
where in connection therewith cash is paid in lieu of the issuance of
fractional shares or scrip), or out of the Net Cash Proceeds of, a
substantially concurrent issue and sale for cash (other than to a
Subsidiary) of other Qualified Capital Stock of Playtex; PROVIDED that
the Net Cash Proceeds from the issuance of such shares of Qualified
Capital Stock are excluded from clause (3)(c) of the first paragraph of
this covenant;
(3) any repurchase, redemption, defeasance, retirement or acquisition for
value or payment of principal of any Subordinated Indebtedness in
exchange for, or out of the net proceeds of a
80
substantially concurrent issuance and sale for cash (other than to any
Subsidiary of Playtex) of, any Qualified Capital Stock of Playtex;
PROVIDED that the Net Cash Proceeds from the issuance of such Qualified
Capital Stock are excluded from clause (3)(c) of the first paragraph of
this covenant;
(4) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) (a "REFINANCING")
through the issuance of new Subordinated Indebtedness of Playtex;
PROVIDED that any such new Subordinated Indebtedness:
(a) shall be in a principal amount that does not exceed the principal
amount so refinanced (or, if such old Subordinated Indebtedness
provides for an amount less than the principal amount thereof to be
due and payable upon a declaration or acceleration thereof, then such
lesser amount as of the date of determination), plus the amount of
any premium required to be paid in connection with such refinancing
pursuant to the terms of the Subordinated Indebtedness refinanced or
the amount of any premium reasonably determined by Playtex as
necessary to accomplish such refinancing, plus, in either case, the
amount of expenses of Playtex incurred in connection with such
refinancing;
(b) has an Average Life to Stated Maturity greater than the remaining
Average Life to Stated Maturity of the Indebtedness being refinanced;
(c) has a Stated Maturity for its final scheduled principal payment later
than the Stated Maturity for the final scheduled principal payment of
the Indebtedness being refinanced; and
(d) is expressly subordinated in right of payment to the notes at least
to the same extent as the Indebtedness to be refinanced; and
(5) the repurchase or other retirement of Playtex's 15 1/2% Junior
Subordinated Notes due 2003 in exchange for or in connection with a
simultaneous retirement of the 15% Debentures due 2003 of Playtex Apparel
Partners, L.P., in a transaction that does not involve any transfer of
cash.
In determining whether any payment is permitted by the foregoing covenant,
Playtex may allocate or reallocate, among clauses (1)-(5) of the preceding
paragraph or among such clauses and the first paragraph of this covenant all or
any portion of such payment and all or any portion of any payment previously
allocated; PROVIDED that, after giving effect to such allocation or
reallocation, all such payments (or allocated portions of such payments) would
be permitted under the various provisions of this covenant.
LIMITATION ON TRANSACTIONS WITH AFFILIATES.
Playtex will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate of Playtex
(other than Playtex or a Restricted Subsidiary) unless:
(1) such transaction or series of related transactions is on terms that are
no less favorable to Playtex or such Restricted Subsidiary, as the case
may be, than would be available in a comparable transaction in arm's
length dealings with an unrelated third party; and
(2) with respect to any transaction or series of related transactions
involving aggregate consideration in excess of $5,000,000, Playtex
delivers an officers' certificate to the trustee certifying that such
transaction or series of related transactions complies with clause (1)
above and such transaction or series of related transactions has been
approved by a majority of the Disinterested Directors of the Board of
Directors;
81
PROVIDED that any transaction or series of related transactions otherwise
permitted under this paragraph (other than any transaction or series of related
transactions with respect to the making of any Permitted Investment pursuant to
the definition of "Permitted Investment" or any Restricted Payment permitted
pursuant to the covenant described above under the caption "--Limitation on
Restricted Payments") pursuant to which Playtex or any Restricted Subsidiary of
Playtex shall receive or render value exceeding $25,000,000 shall not be
permitted unless, prior to the consummation of any such transaction or series of
related transactions, Playtex shall have received an opinion, from an
independent nationally recognized investment banking firm or firm experienced in
the appraisal or similar review of similar types of transactions, that the
financial terms of such transaction are fair to Playtex from a financial point
of view.
Notwithstanding the foregoing, the provisions of this covenant shall not
apply to:
(1) any transaction with an officer or member of the Board of Directors of
Playtex entered into in the ordinary course of business (including,
without limitation, the Playtex Products, Inc. Stock Option Plan and
other employment, indemnification, compensation or employee benefit
arrangements with any officer or member of the Board of Directors of
Playtex);
(2) transactions or agreements in existence on the date of the indenture
(and extensions or amendments thereof on terms which are not materially
less favorable to Playtex than the terms of any such transaction or
agreement as in existence on the date of the indenture);
(3) directors' fees;
(4) employment agreements approved by the Board of Directors of Playtex;
(5) loans to employees in the ordinary course of business plus up to
$5,000,000 of additional loans to employees in the aggregate at any one
time outstanding;
(6) transactions effected as part of a Qualified Securitization Transaction;
(7) any employee benefit plan available to employees of Playtex generally;
and
(8) sales by Playtex of its products in the ordinary course of business on
arm's-length terms.
In addition, Playtex will cause Playtex Investment Corp. not to amend,
modify or in any way alter the terms of the Agreement, dated as of November 5,
1991, between Playtex Investment Corp. and Playtex Apparel Partners, L.P. in a
manner adverse to Playtex or any Subsidiary.
LIMITATION ON OTHER SUBORDINATED INDEBTEDNESS. Neither Playtex nor any
Guarantor will create, incur, issue, assume, guarantee or otherwise in any
manner become directly or indirectly liable for or with respect to or otherwise
permit to exist any Indebtedness that is subordinate in right of payment to any
Indebtedness of Playtex or such Guarantor, as the case may be, unless such
Indebtedness is also PARI PASSU with the notes or the Guarantee of such
Guarantor, as the case may be, or subordinate in right of payment to the notes
or such Guarantee in the same manner as the notes are subordinate in right of
payment to Senior Indebtedness or such Guarantee is subordinate to Senior
Indebtedness, as the case may be, as set forth in the indenture, or in a manner
that is more favorable to the Holders of notes.
LIMITATION ON LIENS.
Playtex will not, and will not permit any Restricted Subsidiary to create,
incur, affirm or suffer to exist any Lien of any kind securing any Pari Passu
Indebtedness or Subordinated Indebtedness (including any assumption, guarantee
or other liability with respect thereto by any Restricted Subsidiary) upon any
property or assets (including any intercompany notes) of Playtex or any
Restricted Subsidiary owned on the date of the indenture or acquired after the
date of the indenture, or any
82
income or profits therefrom, unless the notes are directly secured equally and
ratably with (or prior to in the case of Subordinated Indebtedness) the
obligation or liability secured by such Lien, except for:
(1) any Lien securing Acquired Indebtedness (and not created in connection
with, or in contemplation of the related acquisition) in each case which
Indebtedness is permitted under the provisions of "--Limitation on
Indebtedness;" PROVIDED that any such Lien only extends to the assets
that were subject to such Lien securing such Acquired Indebtedness prior
to the related acquisition by Playtex or its Restricted Subsidiaries;
(2) Liens securing other Indebtedness having an aggregate principal amount
not to exceed $20,000,000 at any one time outstanding;
(3) Liens on assets transferred to a Securitization Entity or on assets of a
Securitization Entity, in either case incurred in connection with a
Qualified Securitization Transaction; and
(4) any Liens that may arise in connection with the satisfaction and
discharge of the 8 7/8% Senior Notes due 2004 and the 9% Senior
Subordinated Notes due 2003 prior to their redemption.
Notwithstanding the foregoing, any security interest granted by Playtex or
any Restricted Subsidiary to secure the notes created pursuant to the first
paragraph of this covenant shall provide by its terms that such security
interest shall be automatically and unconditionally released and discharged upon
the release by the holders of the Indebtedness of Playtex or any Restricted
Subsidiary described in the first paragraph of this covenant of their security
interest (including any deemed release upon payment in full of all obligations
under such Indebtedness or as a result of the satisfaction and discharge or
legal or covenant defeasance of such Indebtedness) at a time when:
(1) no other Pari Passu Indebtedness and Subordinated Indebtedness of
Playtex or any Restricted Subsidiary has been secured by such property or
assets of Playtex or any such Restricted Subsidiary; or
(2) the holders of all such other Pari Passu Indebtedness and Subordinated
Indebtedness which is secured by such property or assets of Playtex or
any such Restricted Subsidiary also release their security interest in
such property or assets (including any deemed release upon payment in
full of all obligations under such Indebtedness or as a result of the
satisfaction and discharge or legal or covenant defeasance of such
Indebtedness).
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
Playtex will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distribution on its Capital Stock to
Playtex or any other Restricted Subsidiary;
(2) pay any Indebtedness owed to Playtex or any Restricted Subsidiary;
(3) make any Investment in Playtex; or
(4) transfer any of its properties or assets to Playtex or any Restricted
Subsidiary, except:
(a) any encumbrance or restriction pursuant to the Credit Agreement and
any related security agreement in each case as in effect on the date
of the indenture or any other agreement in effect on the date of the
indenture;
(b) any encumbrance or restriction, with respect to a Restricted
Subsidiary that is not a Restricted Subsidiary of Playtex on the date
of the indenture, in existence at the time such Person becomes a
Restricted Subsidiary of Playtex and not incurred in connection with,
or in contemplation of, such Person becoming a Restricted Subsidiary;
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(c) customary provisions restricting assignment of contracts or
subletting, licensing or assignment of any lease governing a
leasehold interest of Playtex or any Restricted Subsidiary;
(d) restrictions contained in any agreement relating to the sale of all
or substantially all of the Capital Stock or assets of a Restricted
Subsidiary that are only applicable to the Restricted Subsidiary
whose Capital Stock or assets are being sold;
(e) any encumbrance or restriction contained in a working capital
facility permitted to be incurred pursuant to clause (11) of the
definition of "Permitted Indebtedness" provided that Playtex's chief
financial officer determines in good faith that such restrictions
will not materially adversely affect Playtex's ability to make
payments of interest and principal on the notes when due;
(f) any Purchase Money Note or other Indebtedness or other contractual
requirements of a Securitization Entity in connection with a
Qualified Securitization Transaction; PROVIDED that such restrictions
apply only to such Securitization Entity; and
(g) any encumbrance or restriction existing under any agreement that
amends, restates, modifies, renews, refunds, replaces or refinances,
in whole or in part, any of the encumbrances or restrictions
described in the foregoing clauses (a) and (b), provided that the
terms and conditions of any such encumbrances or restrictions are not
materially less favorable to the Holders of the notes than those
under or pursuant to the agreement evidencing the Indebtedness so
amended, restated, modified, renewed, refunded, replaced or
refinanced.
PROVISION OF FINANCIAL STATEMENTS.
Whether or not Playtex is subject to Section 13(a) or 15(d) of the Exchange
Act, Playtex will, to the extent permitted under the Exchange Act, file with the
Commission the annual reports, quarterly reports and other documents which
Playtex would have been required to file with the Commission pursuant to such
Sections 13(a) or 15(d) if Playtex were so subject, such documents to be filed
with the Commission on or prior to the respective dates (the "REQUIRED FILING
DATES") by which Playtex would have been required so to file such documents if
Playtex were so subject. Playtex will also in any event within 15 days of each
Required Filing Date:
(1) transmit all such reports and other documents by mail to all Holders of
notes, as their names and addresses appear in the security register,
without cost to such Holders of notes;
(2) file with the trustee copies of the annual reports, quarterly reports
and other documents which Playtex would have been required to file with
the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act if
Playtex was subject to such Sections; and
(3) if filing such documents by Playtex with the Commission is not permitted
under the Exchange Act, promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such
documents to any prospective purchaser of notes at Playtex's cost.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by Playtex and its
Restricted Subsidiaries in the Subsidiary properly designated will be deemed to
be an Investment made as of the time of the designation and will reduce the
amount available for Restricted Payments under the first paragraph of the
covenant described above under the caption "--Limitation on Restricted Payments"
or one or more of the clauses of the defined term Permitted Investments, as
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determined by Playtex. That designation will only be permitted if the Investment
would be permitted at that time and if the Restricted Subsidiary otherwise meets
the definition of an Unrestricted Subsidiary.
PAYMENTS FOR CONSENT.
Playtex will not, and will not permit any of its Subsidiaries to, directly
or indirectly, pay or cause to be paid any consideration to or for the benefit
of any Holder of notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the indenture or the notes unless
such consideration is offered to be paid and is paid to all Holders of the notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
CONSOLIDATION, MERGER, SALE OF ASSETS
The indenture provides that Playtex will not, in a single transaction or a
series of related transactions, consolidate with or merge with or into any other
Person or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets to any Person or group of
affiliated Persons, or permit any of its Restricted Subsidiaries to enter into
any such transaction or transactions if such transaction or transactions, in the
aggregate, would result in an assignment, conveyance, transfer, lease or
disposition of all or substantially all of the properties and assets of Playtex
and its Restricted Subsidiaries on a consolidated basis to any other Person or
group of affiliated Persons, unless at the time and after giving effect thereto:
(1) either:
(a) Playtex will be the continuing corporation; or
(b) the Person (if other than Playtex) formed by such consolidation or
into which Playtex is merged or the Person which acquires by sale,
assignment, conveyance, transfer, lease or disposition all or
substantially all of the properties and assets of Playtex and its
Restricted Subsidiaries on a consolidated basis (the "SURVIVING
ENTITY") shall be a corporation duly organized and validly existing
under the laws of the United States of America, any state thereof or
the District of Columbia and such Person assumes by a supplemental
indenture in a form reasonably satisfactory to the trustee, all the
obligations of Playtex under the notes and the indenture, and the
indenture shall remain in full force and effect;
(2) immediately before and immediately after giving effect to such
transaction on a pro forma basis, no Default or Event of Default shall
have occurred and be continuing;
(3) except in the case of a merger with or into any Person solely for the
purpose of changing Playtex's jurisdiction of incorporation or a merger
whose sole purpose is to create a holding company whose only significant
asset is the stock of Playtex, either:
(a) immediately after giving effect to such transaction on a pro forma
basis (on the assumption that the transaction occurred on the first
day of the four-quarter period immediately prior to the consummation
of such transaction with the appropriate adjustments with respect to
the transaction being included in such pro forma calculation),
Playtex (or, the Surviving Entity if Playtex is not the continuing
obligor under the indenture) could incur $1.00 of additional
Indebtedness under the provisions of the covenant described above
under the caption "--Certain Covenants--Limitations on Indebtedness"
(other than Permitted Indebtedness); or
(b) Playtex's pro forma Consolidated Fixed Charge Coverage Ratio after
giving effect to such transaction (calculated as provided above) is
equal to or higher than Playtex's actual Consolidated Fixed Charge
Coverage Ratio for such four-quarter period;
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(4) Playtex or the Surviving Entity shall have delivered, or caused to be
delivered, to the trustee, in form and substance reasonably satisfactory
to the trustee, an officers' certificate and an opinion of counsel, each
to the effect that such consolidation, merger, transfer, sale,
assignment, lease or other transaction and the supplemental indenture in
respect thereto comply with the provisions described herein and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
In the event of any transaction described in and complying with the
conditions listed in the preceding paragraph in which Playtex is not the
continuing corporation, the successor Person formed or remaining shall succeed
to, and be substituted for, and may exercise every right and power of, Playtex
and Playtex will be discharged from all obligations and covenants under the
indenture and the notes.
In addition, Playtex may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions to any other Person. This "Consolidation, Merger, Sale of Assets"
covenant will not apply to the sale, assignment, transfer, conveyance or other
disposition of assets between or among Playtex and any of its Restricted
Subsidiaries.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default will occur under the indenture if:
(1) there shall be a default in the payment of any interest or Liquidated
Damages, if any, with respect to any note when it becomes due and
payable, and such default shall continue for a period of 30 days;
(2) there shall be a default in the payment of the principal of (or premium,
if any, on) any note when and as the same shall become due and payable at
maturity (upon acceleration, optional or mandatory redemption, required
repurchase or otherwise);
(3) (a) there shall be a default in the performance, or breach, of any
covenant or agreement of Playtex or any Guarantor under the
indenture (other than a default in the performance, or breach, of a
covenant or agreement which is specifically dealt with in clauses
(1) or (2) above or in sub-clauses (b) or (c) of this clause (3))
and such default or breach shall continue for a period of 60 days
after written notice has been given, by certified mail, to Playtex
by the trustee or to Playtex and the trustee by the Holders of at
least 25% in aggregate principal amount of the outstanding notes;
(b) there shall be a default in the performance or breach of the
provisions described in "--Consolidation, Merger, Sale of Assets;"
or
(c) Playtex shall have failed to make or consummate a Change of Control
Offer in accordance with the provisions described above under the
caption "--Certain Covenants--Purchase of Notes Upon a Change of
Control;"
(4) one or more defaults shall have occurred under any agreements,
indentures or instruments under which Playtex, any Guarantor or any
Restricted Subsidiary then has outstanding Indebtedness in excess of
$25,000,000 in the aggregate and, if not already matured at its final
maturity in accordance with its terms, such Indebtedness shall have been
accelerated;
(5) any Guarantee shall for any reason cease to be, or be asserted in
writing by any Guarantor or Playtex not to be, in full force and effect,
enforceable in accordance with its terms, except to the extent
contemplated by the indenture and any such Guarantee;
(6) one or more final judgments, orders or decrees for the payment of money
in excess of $15,000,000, either individually or in the aggregate, shall
be entered against Playtex or any Restricted Subsidiary or any of their
respective properties and shall not be discharged and either
(a) enforcement proceedings shall have been commenced upon such judgment,
order or decree or (b) there shall have been a period of 60 consecutive
days during which a stay of
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enforcement of such judgment or order, by reason of an appeal or
otherwise, shall not be in effect;
(7) there shall have been the entry by a court of competent jurisdiction of
(a) a decree or order for relief in respect of Playtex, any Guarantor or
any Material Subsidiary in an involuntary case or proceeding under any
applicable Bankruptcy Law or (b) a decree or order adjudging Playtex, any
Guarantor or any Material Subsidiary bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect
of Playtex, any Guarantor or any Material Subsidiary under any applicable
federal or state law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of Playtex, any
Guarantor or any Material Subsidiary or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and
any such decree or order for relief shall continue to be in effect, or
any such other decree or order shall be unstayed and in effect, for a
period of 60 consecutive days; or
(8) (a) Playtex, any Guarantor or any Material Subsidiary commences a
voluntary case or proceeding under any applicable Bankruptcy Law or
any other case or proceeding to be adjudicated bankrupt or
insolvent;
(b) Playtex, any Guarantor or any Material Subsidiary consents to the
entry of a decree or order for relief in respect of Playtex, such
Guarantor or such Material Subsidiary in an involuntary case or
proceeding under any applicable Bankruptcy Law or to the
commencement of any bankruptcy or insolvency case or proceeding
against it;
(c) Playtex, any Guarantor or any Material Subsidiary files a petition
or answer or consent seeking reorganization or relief under any
applicable federal or state law;
(d) Playtex, any Guarantor or any Material Subsidiary (1) consents to
the filing of such petition or the appointment of, or taking
possession by, a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of Playtex, any Guarantor or such
Material Subsidiary or of any substantial part of its property,
(2) makes an assignment for the benefit of creditors or (3) admits
in writing its inability to pay its debts generally as they become
due; or
(e) Playtex, any Guarantor or any Material Subsidiary takes any
corporate action in furtherance of any such actions in this
clause (8).
If an Event of Default (other than as specified in clause (7) and (8) of the
prior paragraph with respect to Playtex) shall occur and be continuing, the
trustee or the Holders of not less than 25% in aggregate principal amount of the
notes then outstanding may declare the notes due and payable immediately at
their principal amount together with accrued and unpaid interest, if any, to the
date the notes shall have become due and payable by a notice in writing to
Playtex (and to the trustee if given by the Holders of the notes) and, if the
Credit Agreement is in effect, to the agent under the Credit Agreement, and upon
any such declaration such amount shall become immediately due and payable,
except if the Credit Agreement is in effect, any such acceleration shall not be
effective until the first to occur of:
(1) an acceleration under the Credit Agreement; or
(2) the fifth business day after receipt by Playtex and by such agent under
the Credit Agreement of such written notice given under the indenture,
and thereupon the trustee may, at its discretion, proceed to protect and
enforce the rights of the Holders of notes by appropriate judicial
proceeding.
If an Event of Default specified in clause (7) or (8) of the first paragraph
under the caption "--Events of Default and Remedies" occurs with respect to
Playtex and is continuing, then all the notes shall ipso facto become and be
immediately due and payable, in an amount equal to the principal
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amount of the notes, together with accrued and unpaid interest, if any, to the
date the notes become due and payable, without any declaration or other act on
the part of the trustee or any Holder.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the trustee, the Holders of a
majority in aggregate principal amount of notes outstanding, by written notice
to Playtex and the trustee, may rescind and annul such declaration and its
consequences if:
(1) Playtex has paid or deposited with the trustee a sum sufficient to pay:
(a) all sums paid or advanced by the trustee under the indenture and the
reasonable compensation, expenses, disbursements and advances of the
trustee, its agents and counsel;
(b) all overdue interest, and Liquidated Damages, if any, on all notes;
(c) the principal of and premium, if any, on any notes which have become
due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the notes; and
(d) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate borne by the notes; and
(2) all Events of Default, other than the non-payment of principal of the
notes which have become due solely by such declaration of acceleration,
have been cured or waived.
The Holders of not less than a majority in aggregate principal amount of the
notes outstanding may on behalf of the Holders of all the notes waive any past
defaults under the indenture and its consequences, except a default in the
payment of the principal, interest, premium, if any, and Liquidated Damages, if
any, or interest on any Note, or in respect of a covenant or provision which
under the indenture cannot be modified or amended without the consent of the
Holder of each Note outstanding.
Playtex is also required to notify the trustee within five business days of
the occurrence of any Default.
The Trust Indenture Act of 1939 contains limitations on the rights of the
trustee, should it become a creditor of Playtex or any Guarantor, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The trustee is
permitted to engage in other transactions, PROVIDED that if it acquires any
conflicting interest it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Playtex or
any Guarantor, as such, will have any liability for any obligations of Playtex
or the Guarantors under the notes, the indenture, or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
notes by accepting a note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the notes. The waiver may
not be effective to waive liabilities under the federal securities laws.
DEFEASANCE AND COVENANT DEFEASANCE
Playtex may, at its option and at any time (PROVIDED that Playtex obtains
all legal opinions and complies with all other requirements under the
indenture), elect to have the obligations of Playtex and any Guarantor
discharged with respect to the outstanding notes ("DEFEASANCE"). Such defeasance
means
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that Playtex and any Guarantor shall be deemed to have paid and discharged the
entire indebtedness represented by the outstanding notes, except for:
(1) the rights of Holders of outstanding notes to receive payments in
respect of the principal, interest, premium, if any, and Liquidated
Damages, if any, on such notes when such payments are due;
(2) Playtex's obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes, and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee; and
(4) the defeasance provisions of the indenture.
In addition, Playtex may, at its option and at any time, elect to have the
obligations of Playtex and any Guarantor released with respect to certain
covenants (provided that Playtex's obligations to pay principal, interest,
premium, if any, and Liquidated Damages, if any, on the notes under the
indenture shall remain in full force and effect as long as the notes are
outstanding), that are described in the indenture ("COVENANT DEFEASANCE") and
any omission to comply with such obligations shall not constitute a Default or
an Event of Default with respect to the notes. In the event covenant defeasance
occurs, certain events (not including non-payment, enforceability of any
Guarantee, bankruptcy and insolvency events) described under "--Events of
Default and Remedies" will no longer constitute an Event of Default with respect
to the notes.
In order to exercise either defeasance or covenant defeasance:
(1) Playtex must irrevocably deposit with the trustee, in trust, for the
benefit of the Holders of the notes, cash in United States dollars, U.S.
Government Obligations (as defined in the indenture), or a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay and
discharge the principal, interest, premium and Liquidated Damages, if
any, on the outstanding notes on the Stated Maturity of such principal or
installment of principal (or on any date on or after June 1, 2006 (such
date being referred to as the "DEFEASANCE REDEMPTION DATE"), if when
exercising either defeasance or covenant defeasance, Playtex has
delivered to the trustee an irrevocable notice to redeem all of the
outstanding notes on the Defeasance Redemption Date);
(2) in the case of defeasance, Playtex shall have delivered to the trustee
an opinion of independent counsel in the United States stating that:
(a) Playtex has received from, or there has been published by, the
Internal Revenue Service a ruling; or
(b) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that
the Holders of the outstanding notes will not recognize income, gain
or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred;
(3) in the case of covenant defeasance, Playtex shall have delivered to the
trustee an opinion of independent counsel in the United States to the
effect that the Holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred;
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(4) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit;
(5) such defeasance or covenant defeasance shall not cause the trustee for
the notes to have a conflicting interest with respect to any securities
of Playtex or any Guarantor;
(6) such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a Default under, the indenture or a breach or
violation of any provision of any agreement relating to any Senior
Indebtedness;
(7) Playtex shall have delivered to the trustee an officers' certificate
stating that the deposit was not made by Playtex with the intent of
preferring the Holders of the notes or any Guarantee over the other
creditors of Playtex or any Guarantor with the intent of defeating,
hindering, delaying or defrauding creditors of Playtex, any Guarantor or
others;
(8) no event or condition shall exist that would prevent Playtex from making
payments of the principal of, premium, if any, and interest on the notes
on the date of such deposit; and
(9) Playtex shall have delivered to the trustee an officers' certificate and
an opinion of independent counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the notes, as expressly
provided for in the indenture) as to all outstanding notes when:
(1) either:
(a) all the notes theretofore authenticated and delivered (except lost,
stolen or destroyed notes which have been replaced or paid and notes
for whose payment funds have been deposited in trust by Playtex and
thereafter repaid to Playtex or discharged from such trust) have been
delivered to the trustee for cancellation; or
(b) all notes not theretofore delivered to the trustee for cancellation
(1) have become due and payable, (2) will become due and payable at
their Stated Maturity within one year or (3) are to be called for
redemption within one year under arrangements reasonably satisfactory
to the trustee for the giving of notice of redemption by the trustee
in the name, and at the reasonable expense, of Playtex, and either
Playtex or any Guarantor has irrevocably deposited or caused to be
deposited with the trustee as trust funds in trust an amount
sufficient to pay and discharge the entire indebtedness on the notes
not theretofore delivered to the trustee for cancellation, including
principal of, premium, if any, and accrued interest on such notes, at
such Maturity, Stated Maturity or redemption date;
(2) Playtex and the Guarantors have paid or caused to be paid all other sums
payable under the indenture by Playtex and the Guarantors; and
(3) Playtex has delivered to the trustee an officers' certificate and an
opinion of counsel in the United States each stating that all conditions
precedent under the indenture relating to the satisfaction and discharge
of the indenture under this section have been complied with, and that
such satisfaction and discharge will not result in a breach or violation
of, or constitute a Default under, the indenture or a breach or violation
of any provision of any agreement relating to any Senior Indebtedness.
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MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the indenture may be made by Playtex, any
Guarantor, if any, and the trustee with the consent of the Holders of greater
than 50% of the aggregate outstanding principal amount of the notes; PROVIDED,
HOWEVER, that no such modification or amendment may, without the consent of the
Holder of each outstanding note affected thereby:
(1) change the Stated Maturity of the principal of, or any installment of
interest on, any note or waive a default in the payment of the principal
or interest on any note or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or any Liquidated Damages payable thereon, or change the coin or
currency in which any note or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment after the Stated Maturity thereof;
(2) reduce the percentage in principal amount of outstanding notes, the
consent of whose Holders is required for any such supplemental indenture,
or the consent of whose Holders is required for any waiver;
(3) modify any of the provisions relating to supplemental indentures
requiring the consent of Holders or relating to the waiver of past
defaults or relating to the waiver of certain covenants, except to
increase the percentage of outstanding notes required for such actions or
to provide that certain other provisions of the indenture cannot be
modified or waived without the consent of the Holder of each note
affected thereby; or
(4) amend or modify any of the provisions of the indenture relating to the
subordination of the notes or any Guarantee in any manner adverse to the
Holders of the notes or any Guarantee.
No amendment or modification of the indenture shall adversely affect the
rights of any holders of Senior Indebtedness under the subordination provisions
of the indenture unless the requisite holders of each issue of Senior
Indebtedness affected thereby shall have consented to such amendment or
modification.
The Holders of greater than 50% in aggregate principal amount of the notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the indenture.
CONCERNING THE TRUSTEE
If the trustee becomes a creditor of Playtex or any Guarantor, the indenture
limits its right to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or otherwise.
The trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
occurs and is continuing, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
Holder of notes, unless such Holder has offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense.
The trustee under the notes is the trustee under our 9% Senior Subordinated
Notes due 2003.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person:
(1) existing at the time such Person becomes a Restricted Subsidiary; or
(2) assumed in connection with the acquisition of assets from such Person,
in each case, other than Indebtedness incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary upon such
acquisition. Acquired Indebtedness shall be deemed to be incurred on the date of
the related acquisition of assets from any Person or the date the acquired
Person becomes a Restricted Subsidiary.
"AFFILIATE" of any specified Persons means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of more than 10% or more of the Voting Stock of a Person
shall be deemed to be control. For purposes of this definition, the terms
"controlling," "controlled by" and "under common control with" shall have
correlative meanings.
Notwithstanding the foregoing, no Person (other than Playtex or any
Restricted Subsidiary of Playtex) in whom a Securitization Entity makes an
Investment in connection with a Qualified Securitization Transaction shall be
deemed to be an Affiliate of Playtex or any of its Restricted Subsidiaries
solely by reason of such Investment.
"ASSET SALE" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction but not the grant of a pledge or security
interest) (collectively, a "transfer"), directly or indirectly, in one or a
series of related transactions, of:
(1) any Capital Stock of any Subsidiary held by Playtex or any Restricted
Subsidiary;
(2) all or substantially all of the properties and assets of any division or
line of business of Playtex or any of its Restricted Subsidiaries; or
(3) any other properties or assets (other than cash) of Playtex or any
Restricted Subsidiary, other than in the ordinary course of business.
For the purposes of this definition, the term "Asset Sale" shall not
include:
(1) any transfer of properties or assets that is governed by the provisions
described above under the caption "--Consolidation, Merger, Sale of
Assets,"
(2) any transfer of properties or assets from any Restricted Subsidiary to
Playtex in accordance with the terms of the indenture,
(3) any transfer of properties or assets having a market value of less than
$2,000,000 (it being understood that if the market value of the
properties or assets being transferred exceeds $2,000,000, the entire
value and not just the portion in excess of $2,000,000, shall be deemed
to have been the subject of an Asset Sale),
(4) any transfer of properties or assets to any Restricted Subsidiary,
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(5) any transfer of properties or assets which are obsolete to Playtex's and
its Restricted Subsidiaries' businesses,
(6) any transfer of properties or assets from any Restricted Subsidiary to
any other Restricted Subsidiary;
(7) any transfer or sale of accounts receivable, equipment or related assets
(including contract rights) of the type specified in the definition of
"Qualified Securitization Transaction" to a Securitization Entity for the
fair market value thereof as determined in accordance with GAAP. For the
purposes of this clause (7), Purchase Money Notes shall be deemed to be
cash; or
(8) any Restricted Payment or Permitted Investment permitted by the terms of
the indenture.
"AVERAGE LIFE TO STATED MATURITY" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (1) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by
(2) the sum of all such principal payments.
"BANKRUPTCY LAW" means Title 11 of the United States Code, as amended, or
any similar United States federal or state law relating to bankruptcy,
insolvency, receivership, winding-up, liquidation, reorganization or relief of
debtors or any amendment to, succession to or change in any such law.
"BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person," such "person" will be deemed to have
beneficial ownership of all securities that such "person" has the right to
acquire by conversion or exercise of other securities, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition. The terms "Beneficially Owns" and "Beneficially Owned" have a
corresponding meaning.
"CAPITAL LEASE OBLIGATION" of any Person means any obligations of such
Person and its Restricted Subsidiaries on a consolidated basis under any capital
lease of real or personal property which, in accordance with GAAP, has been
recorded as a capitalized lease obligation.
"CAPITAL STOCK" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock.
"Cash Equivalents" means:
(1) any evidence of Indebtedness with a maturity of 180 days or less issued
or directly and fully guaranteed or insured by the United States of
America of any agency or instrumentality thereof (provided that the full
faith and credit of the United States of America is pledged in support
thereof);
(2) certificates of deposit or acceptances with a maturity of 190 days or
less of any financial institution that is a member of the Federal Reserve
System having combined capital and surplus and undivided profits of not
less than $500,000,000;
(3) commercial paper with a maturity of 180 days or less issued by a
corporation that is not an Affiliate of Playtex organized under the laws
of any state of the United States or the District of Columbia and rated
A-1 (or higher) according to S&P or P-1 (or higher) according to Moody's
or at least an equivalent rating category of another nationally
recognized securities rating agency;
(4) any money market deposit accounts issued or offered by a domestic
commercial bank having capital and surplus in excess of $500,000,000; and
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(5) repurchase agreements and reverse repurchase agreements relating to
marketable direct obligations issued or unconditionally guaranteed by the
government of the United States of America or issued by any agency
thereof and backed by the full faith and credit of the United States of
America, in each case maturing within 180 days from the date of
acquisition.
"CHANGE OF CONTROL" means the occurrence of any of the following events:
(1) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than Permitted Holders or any of their
Related Parties or a Permitted Group, is or becomes the Beneficial Owner,
directly or indirectly, of more than 50% of the voting power of all
classes of Voting Stock of Playtex;
(2) Playtex consolidates with or merges with or into any Person or conveys,
transfers or leases all or substantially all of its assets to any Person,
or any corporation consolidates with or merges with or into Playtex, in
any such event pursuant to a transaction in which the outstanding Voting
Stock of Playtex is changed into or exchanged for cash, securities or
other property, other than any such transaction:
(a) where the outstanding Voting Stock of Playtex is not changed or
exchanged at all (except to the extent necessary to reflect a change
in the jurisdiction of incorporation of Playtex); or
(b) where no "person" or "group" other than Permitted Holders or any of
their Related Parties or a Permitted Group Beneficially Owns
immediately after such transaction, directly or indirectly, more than
50% of the total outstanding Voting Stock of the surviving
corporation; or
(3) Playtex is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with the
provisions described under "--Consolidation, Merger, Sale of Assets."
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of the indenture such Commission is not existing and performing the
duties now assigned to it under the Trust indenture Act, then the body
performing such duties at such time.
"COMMON STOCK" means the common stock, par value $.01 per share, of Playtex.
"CONSOLIDATED ASSETS" means with respect to Playtex, the total assets shown
on the balance sheet of Playtex and its Restricted Subsidiaries, as determined
on a consolidated basis in accordance with GAAP, as of the end of Playtex's
latest full fiscal quarter.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, for any Person for any
period, the ratio of:
(1) the sum of Consolidated Net Income, Consolidated Interest Expense,
Consolidated Income Tax Expense and Consolidated Non-Cash Charges
deducted in computing Consolidated Net Income (Loss), in each case, for
such period, of such Person and its Restricted Subsidiaries on a
consolidated basis, all determined in accordance with GAAP, to
(2) the sum of Consolidated Interest Expense for such period and cash
dividends paid on any Preferred Stock of such Person and non-cash
dividends paid on Redeemable Capital Stock of such Person (other than
dividends paid in Qualified Capital Stock) during such period, PROVIDED
that:
(a) in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness and (1) bearing a
floating interest rate shall be computed as if the rate
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in effect on the date of computation had been the applicable rate for
the entire period and (2) which was not outstanding during the period
for which the computation is being made but which bears, at the
option of such Person, a fixed or floating rate of interest, shall be
computed by applying, at the option of such Person, either the fixed
or floating rate; and
(b) in making such computation, the Consolidated Interest Expense of such
Person attributable to interest on any Indebtedness under a revolving
credit facility shall be computed based upon the average daily
balance of such Indebtedness during the applicable period.
"CONSOLIDATED INCOME TAX EXPENSE" means, for any period, as applied to any
Person, the provision for federal, state, local and foreign income taxes of such
Person and its Restricted Subsidiaries for such period as determined in
accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" of any Person means, without duplication,
for any period, as applied to any Person, the sum of:
(1) the interest expense of such Person and its Restricted Subsidiaries for
such period, on a consolidated basis, including, without limitation:
(a) amortization of debt discount and other deferred financing costs (but
excluding the write off and amortization of deferred financing costs
that will occur in connection with the Refinancing Transactions);
(b) the net cost under interest rate contracts (including amortization of
discounts);
(c) the interest portion of any deferred payment obligation; and
(d) accrued interest, plus
(2) (a) the interest component of Capital Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by such Person during such period;
and
(b) all capitalized interest of such Person and its Restricted
Subsidiaries,
in each case as determined in accordance with GAAP; PROVIDED that interest
expense on the 15 1/2% Junior Subordinated Notes due 2003 shall be included in
Consolidated Interest Expense only to the extent that such interest expense
exceeds the amount of interest income that Playtex earns on the 15% Debentures
due 2003 of Playtex Apparel Partners, L.P.
"CONSOLIDATED NET INCOME (LOSS)" of any Person means, for any period, the
consolidated net income (or loss) of such Person and its Restricted Subsidiaries
for such period as determined on a consolidated basis in accordance with GAAP,
adjusted, to the extent included in calculating such consolidated net income (or
loss), by excluding, without duplication:
(1) all extraordinary gains and losses and all charges associated with the
Refinancing Transactions;
(2) the portion of consolidated net income (or loss) of such Person and its
Restricted Subsidiaries allocable to interests in Persons that are not
Restricted Subsidiaries to the extent that cash dividends or
distributions have not actually been received by such Person or one of
its Restricted Subsidiaries;
(3) net income (or loss) of any Person combined with such Person or any of
its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination;
(4) aggregate net gains or losses (less all fees and expenses relating
thereto) in respect of dispositions of assets other than in the ordinary
course of business;
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(5) the net income of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Restricted Subsidiary or its stockholders;
(6) all interest income earned by Playtex on the 15% Debentures due 2003 of
Playtex Apparel Partners, L.P. unless such interest income (a) exceeds
the interest expense owed by Playtex to Playtex Apparel Partners, L.P.
pursuant to the 15 1/2% Junior Subordinated Notes due 2003 and (b) is
actually paid to Playtex in cash;
(7) all interest expense owed by Playtex to Playtex Apparel Partners, L.P.
on the 15 1/2% Junior Subordinated Notes due 2003 to the extent that such
interest expense is offset by interest income on the 15% Debentures due
2003 of Playtex Apparel Partners, L.P.
(8) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of income accrued at
any time following the date of the indenture; or
(9) any gain arising from the acquisition of any securities, or the
extinguishment, under GAAP, of any Indebtedness of such Person.
"CONSOLIDATED NON-CASH CHARGES" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its Restricted Subsidiaries for such period, as determined in accordance
with GAAP (excluding any non-cash charge which requires an accrual or reserve
for cash charges for any future period).
"CREDIT AGREEMENT" means the Credit Agreement, to be entered into as part of
the Refinancing Transactions, between Playtex, the lenders thereto and Credit
Suisse First Boston as administrative agent for the lenders, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"CREDIT FACILITIES" means, one or more debt facilities (including, without
limitation, the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"DEFAULT" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"DISINTERESTED DIRECTOR" means, with respect to any transaction or series of
related transactions, a member of the Board of Directors who does not have any
material direct or indirect financial interest in or with respect to such
transaction or series of related transactions.
"DOMESTIC SUBSIDIARY" means any Restricted Subsidiary of Playtex that was
formed under the laws of the United States or any state of the United States or
the District of Columbia or that guarantees or otherwise provides direct credit
support for any Indebtedness of Playtex.
"EQUITY OFFERING" means any sale of Qualified Capital Stock of a Person
(a) to the public pursuant to an effective registration statement under the
Securities Act or (b) in a private placement pursuant to an exemption from the
registration requirements of the Securities Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
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"EXCLUDED ASSETS" means the assets and other property held by Playtex
(including shares of Capital Stock) relating to the Jhirmack Business.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, which
are in effect on the date of the indenture.
"GUARANTEE" means the guarantee by any Guarantor of the Indenture
Obligations.
"GUARANTEED DEBT" of any Person means, without duplication, all Indebtedness
of any other Person referred to in the definition of Indebtedness that has been
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement:
(1) to pay or purchase such Indebtedness or to advance or supply funds for
the payment or purchase of such Indebtedness;
(2) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such Indebtedness or to assure the holder of
such Indebtedness against loss;
(3) to supply funds to, or in any other manner invest in, the debtor
(including any agreement to pay for property or services without
requiring that such property be received or such services be rendered);
(4) to maintain working capital or equity capital of the debtor, or
otherwise to maintain the net worth, solvency or other financial
condition of the debtor; or
(5) otherwise to assure a creditor against loss: PROVIDED that the term
"guarantee" shall not include endorsements for collection or deposit, in
either case in the ordinary course of business.
Notwithstanding the foregoing, Guaranteed Debt shall not include any
Indebtedness of a Securitization Entity solely by reason of the Standard
Securitization Undertakings.
"GUARANTOR" means any guarantor of the notes.
"INDEBTEDNESS" means, with respect to any Person, without duplication:
(1) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and
other accrued current liabilities arising in the ordinary course of
business, but including, without limitation, all obligations, contingent
or otherwise, of such Person in connection with any letters of credit
issued under letter of credit facilities, acceptance facilities or other
similar facilities, now or hereafter outstanding;
(2) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments;
(3) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such
Person (even if the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or
sale of such property), but excluding trade payables arising in the
ordinary course of business;
(4) all obligations under Interest Rate Agreements of such Person;
(5) all Capital Lease Obligations of such Person;
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(6) all Indebtedness referred to in clauses (1) through (5) of the
definition of "Indebtedness" of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien, upon or with respect to property (including,
without limitation, accounts and contract rights) owned by such Person,
even though such Person has not assumed or become liable for the payment
of such Indebtedness;
(7) all Guaranteed Debt of such Person;
(8) all Redeemable Capital Stock valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued and unpaid
dividends; and
(9) any amendment, supplement, modification, deferral, renewal, extension,
refunding or refinancing of any Indebtedness of the types referred to in
clauses (1) through (8) of this definition of "Indebtedness."
Notwithstanding the foregoing, Indebtedness of Playtex and its Restricted
Subsidiaries shall not include any Indebtedness of a Securitization Entity
solely by reason of the Standard Securitization Undertakings.
For the purposes hereof, the maximum fixed repurchase price of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the indenture, and if such price
is based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value to be determined in good faith by the Board of
Directors of such Person.
"INDENTURE OBLIGATIONS" means the obligations of Playtex under the indenture
or under the, notes to pay principal of, premium, if any, and interest when due
and payable, and all other amounts due or to become due under or in connection
with the indenture, the notes and the performance of all other obligations to
the trustee and the Holders under the indenture and the notes, according to the
terms thereof. If any Indebtedness has been satisfied or discharged or defeased
(either by defeasance or covenant defeasance), then such Indebtedness shall not
be deemed to be outstanding for the purposes of the indenture.
"INTEREST RATE AGREEMENTS" means one or more of the following agreements
which shall be entered into by one or more financial institutions, interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.
"INVESTMENT" means, with respect to any Person, directly or indirectly, any
advance, loan (including guarantees), or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase, acquisition or ownership by such Person of any Capital Stock, bonds,
notes, debentures, limited liability company interests or other securities
issued or owned by, any other Person and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"JHIRMACK BUSINESS" means the assets and liabilities of Playtex and its
Subsidiaries relating to Jhirmack hair care products, including the Capital
Stock of any Subsidiary, substantially all of the assets and liabilities of
which relate to Jhirmack hair care products.
"LIEN" means any mortgage, charge, pledge, lien (statutory or otherwise),
security interest, hypothecation or other encumbrance upon or with respect to
any property of any kind, real or personal, movable or immovable, now owned or
hereafter acquired.
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"MARKETING CORPORATION" means Playtex Marketing Corporation, a Delaware
corporation.
"MATERIAL SUBSIDIARY" means each Restricted Subsidiary of Playtex which:
(1) for the most recent fiscal year of Playtex accounted for more than 10%
of the consolidated revenues of Playtex and its Restricted Subsidiaries;
or
(2) at the end of such fiscal year, was the owner (beneficial or otherwise)
of more than 10% of the Consolidated Assets of Playtex and its Restricted
Subsidiaries, all as shown on Playtex's consolidated financial statements
for such fiscal year. In addition, Marketing Corporation shall be deemed
to be a "Material Subsidiary."
"NET CASH PROCEEDS" means:
(1) with respect to any Asset Sale by any Person, the proceeds thereof in
the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of, or stock, or
other assets when disposed of for, cash or Cash Equivalents (except to
the extent that such obligations are financed or sold with recourse to
Playtex or any Restricted Subsidiary) net of:
(a) brokerage commissions and other reasonable fees and expenses
(including fees and expenses of counsel and investment bankers)
related to such Asset Sale;
(b) provisions for all taxes payable as a result of such Asset Sale;
(c) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject of
such Asset Sale;
(d) amounts required to be paid to any Person (other than Playtex or any
Restricted Subsidiary) owning a beneficial interest in the assets
subject to the Asset Sale; and
(e) appropriate amounts to be provided by Playtex or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and
retained by Playtex or any Restricted Subsidiary, as the case may be,
after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an
officers' certificate delivered to the trustee; and
(2) with respect to any issuance or sale of Capital Stock or options,
warrants or rights to purchase Capital Stock, or debt securities or
Capital Stock that have been converted into or exchanged for Capital
Stock, as referred to under the caption "--Certain Covenants--Limitation
on Restricted Payments," the proceeds of such issuance or sale in the
form of cash or Cash Equivalents, including payments in respect of
deferred payment obligations when received in the form of, or stock or
other assets when disposed of for, cash or cash equivalents (except to
the extent that such obligations are financed or sold with recourse to
Playtex or any Restricted Subsidiary), net of attorney's fees,
accountant's fees and brokerage, consultation, underwriting and other
fees and expenses actually incurred in connection with such issuance or
sale and net of taxes paid or payable as a result thereof.
"PARI PASSU INDEBTEDNESS" means any Indebtedness of Playtex that is PARI
PASSU in right of payment to the notes.
"PERMITTED GROUP" means any group of investors that is deemed to be a
"person" (as that term is used in Section 13(d)(3) of the Exchange Act) and that
includes any of the Permitted Holders described in clause (i) of the definition
of "Permitted Holders;" PROVIDED that no single Person (other
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than the Permitted Holders and their Related Parties) Beneficially Owns more
than 50% of the outstanding Voting Stock of Playtex.
"PERMITTED HOLDERS" means (i) HWH Capital Partners, L.P., HWH Valentine
Partners, L.P., HWH Surplus Valentine Partners, L.P. or Haas Wheat & Partners
Incorporated and any of their respective Affiliates; (ii) any officer or other
member of management employed by Playtex or any Subsidiary as of the date of the
indenture; (iii) BLUM Capital Partners, Richard C. Blum & Associates, Inc., and
RCBA GP, L.L.C.; (iv) Stinson Capital Partners, L.P., Stinson Capital Partners
II, L.P., Stinson Capital Partners III, BK Capital Partners IV, L.P.,
RCBA-Playtex, L.P. and RCBA Strategic Partners, L.P., in each case, for so long
as BLUM Capital Partners serves as the general partner of such partnership;
(v) The Carpenters Pension Trust for Southern California, The Common Fund for
its Multi-Strategy and Value Opportunity Funds, The United Brotherhood of
Carpenters Pension Plan, and Stinson Capital Fund (Cayman), Ltd., in each case,
for so long as BLUM Capital Partners has voting and investment discretion over
such investment advisory account; (vi) Robert B. Haas, Douglas D. Wheat and
Richard C. Blum; (vii) family members or relatives of the persons described in
clauses (i), (ii), (iii), (iv) and (vi); (viii) any trusts created for the
benefit of the persons described in clauses (i), (ii), (iii), (iv), (vi) and
(vii); (ix) in the event of the death or incompetence of an individual described
in clauses (i), (ii), (iii), (iv), (vi) or (vii), such person's estate,
executor, administrator, committee or other personal representatives or
beneficiaries; and (x) upon a distribution by a partnership described in
clause (i), (iii) or (iv) of all or any of the stock of Playtex, the limited
partners of such partnership.
"PERMITTED INDEBTEDNESS" means the following:
(1) Indebtedness of Playtex under one or more Credit Facilities in an
aggregate principal amount under this clause (1) at any one time
outstanding not to exceed $725,000,000 LESS the amount applied to repay
term loans under Credit Facilities since the date of the indenture with
the Net Cash Proceeds of Asset Sales and LESS any commitment reductions
with respect to revolving loans under Credit Facilities since the date of
the indenture as a result of repayments with the Net Cash Proceeds of
Asset Sales and LESS the amount of all outstanding commitments under the
Receivables Facility or any similar facility entered into in connection
with a Qualified Securitization Transaction (whether or not any amounts
are actually outstanding thereunder);
(2) Guarantees of any Indebtedness of Playtex by any of the Guarantors or
guarantees of any Indebtedness of any Subsidiary by Playtex or any
Guarantor;
(3) Indebtedness of Playtex pursuant to the notes to be issued on the date
of the indenture and the Exchange Notes to be issued pursuant to the
registration rights agreement and Indebtedness of any Guarantor pursuant
to a Guarantee of any such notes;
(4) Indebtedness of Playtex or any Restricted Subsidiary outstanding on the
date of the indenture;
(5) Indebtedness:
(a) of Playtex owing to a Restricted Subsidiary; or
(b) of a Restricted Subsidiary owing to Playtex or another Restricted
Subsidiary;
PROVIDED that any such Indebtedness of Playtex owing to a Restricted Subsidiary,
is subordinated in right of payment from and after such time as the notes shall
become due and payable (whether at Stated Maturity, acceleration or otherwise)
to the payment and performance of Playtex's obligations under the notes.
Notwithstanding the foregoing, any disposition, pledge or transfer of any such
Indebtedness to a Person (other than Playtex or a Restricted Subsidiary) shall
be deemed to be an incurrence of such Indebtedness by the obligor not permitted
by this clause (5) and any transaction pursuant to which any Restricted
Subsidiary, which has Indebtedness owing to Playtex or any other
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Restricted Subsidiary, ceases to be a Restricted Subsidiary shall be deemed to
be the incurrence of Indebtedness by Playtex or such other Restricted Subsidiary
that is not permitted by this clause (5);
(6) obligations of Playtex or any Restricted Subsidiary pursuant to Interest
Rate Agreements designed to protect Playtex or any Restricted Subsidiary
against fluctuations in interest rates in respect of Indebtedness of
Playtex or any of its Restricted Subsidiaries, which obligations do not
exceed the aggregate principal amount of such Indebtedness;
(7) trade and standby letters of credit issued for the account of Playtex or
any Restricted Subsidiary of Playtex in the ordinary course of its
business (excluding letters of credit described in clauses (8) and
(9) below);
(8) letters of credit of up to $15,000,000 in the aggregate at any time
outstanding issued for the account of Playtex or any Restricted
Subsidiary of Playtex for any purpose other than in the ordinary course
of business;
(9) letters of credit issued for the account of Playtex or any of its
Restricted Subsidiaries in support of self-insurance obligations and in
support of Indebtedness under industrial revenue bonds, to the extent
that such obligations or such Indebtedness are recorded on the balance
sheet of Playtex or any of its Restricted Subsidiaries;
(10) Capital Lease Obligations, industrial revenue bonds and Purchase Money
Obligations of Playtex or any Restricted Subsidiary, not to exceed
$25,000,000 in the aggregate at any time outstanding (and any
refinancings thereof);
(11) Indebtedness of Playtex or any Restricted Subsidiary that is not a
Domestic Subsidiary incurred to fund the working capital requirements of
that Subsidiary in an amount not to exceed $25,000,000 in the aggregate
at any time outstanding;
(12) any renewals, extensions, substitutions, refundings, refinancing or
replacements (collectively, a "refinancing") of any Indebtedness incurred
pursuant to the Consolidated Fixed Charge Coverage Ratio test in the
covenant described under the caption "--Incurrence of Indebtedness" or
pursuant to clauses (3) or (4) of this definition of "Permitted Indebtedness,"
including any successive refinancings so long as
(a) such refinancing does not increase the aggregate principal amount of
Indebtedness represented thereby plus:
(1) the amount of any premium required to be paid in connection with
such refinancing pursuant to the terms of the Indebtedness
refinanced or the amount of any premium reasonably determined by
Playtex as necessary to accomplish such refinancing, and
(2) the amount of the expenses of Playtex reasonably estimated to be
incurred in connection with such refinancing, and
(b) in the case of Pari Passu Indebtedness or Subordinated Indebtedness,
such refinancing does not reduce the Average Life to Stated Maturity
or the Stated Maturity of such Indebtedness; and
(13) the incurrence by a Securitization Entity of Indebtedness in a
Qualified Securitization Transaction that is non-recourse to Playtex or
any Restricted Subsidiary of Playtex (except for Standard Securitization
Undertakings) in an aggregate amount not to exceed $725,000,000 LESS the
amount outstanding under clause (1) of this definition of Permitted
Indebtedness;
(14) Indebtedness of Playtex or any Restricted Subsidiary in addition to
that described in clauses (1) through (13) of this definition of
"Permitted Indebtedness" in an aggregate principal
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amount outstanding at any given time not to exceed $50,000,000, which
amount, notwithstanding the provisions of clause (1) hereof, may be
incurred under the Credit Agreement.
In the event that an item of proposed Indebtedness meets the criteria of
more than one of the categories of Permitted Indebtedness described in clauses
(1) through (14) above, or would be permitted to be incurred pursuant to the
Consolidated Fixed Charge Coverage Ratio test set forth in the covenant
described above under the caption "--Limitation on Indebtedness," Playtex will
be permitted to classify such item of Indebtedness, or later reclassify all or a
portion of such item of Indebtedness, in any manner that complies with this
definition and the covenant described under the caption "--Limitation on
Indebtedness." Indebtedness under the Credit Agreement outstanding on the date
on which notes are first issued and authenticated under the indenture will be
deemed to have been incurred on such date in reliance on the exception provided
by clause (1) of this definition.
"PERMITTED INVESTMENT" means:
(1) Investments in Playtex or in any Restricted Subsidiary or Investments by
Playtex or any Restricted Subsidiary in a Person, if as a result of such
Investment:
(a) such Person becomes a Restricted Subsidiary; or
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, Playtex or any Restricted Subsidiary,
(2) Investments in the notes;
(3) Indebtedness owing to Playtex or a Restricted Subsidiary described under
clause (5) of the definition of "Permitted Indebtedness;"
(4) Temporary Cash Investments;
(5) Investments acquired by Playtex or any Restricted Subsidiary in
connection with an Asset Sale permitted under the covenant described
under the caption "--Certain Covenants--Limitation on Sale of Assets" to
the extent such Investments are non-cash consideration as permitted under
such covenant;
(6) any Investment by Playtex or a Restricted Subsidiary in a Securitization
Entity or any Investment by a Securitization Entity in any other Person
in connection with a Qualified Securitization Transaction; PROVIDED that
any Investment in a Securitization Entity is in the form of a Purchase
Money Note, equity interest or limited liability company interest;
(7) Investments in existence on the date of the indenture; and
(8) in addition to the Investments described in clauses (1) through (7) of
this definition of "Permitted Investments," Investments in any
Unrestricted Subsidiary or in any joint venture or other entity in an
amount not to exceed $35,000,000 in the aggregate at any one time
outstanding (with each such Investment being valued as of the date made
and without regard to subsequent changes in value).
"PERMITTED JUNIOR SECURITIES" means:
(1) Qualified Capital Stock of Playtex; or
(2) debt securities of Playtex that are subordinated to all Senior
Indebtedness and any debt securities issued in exchange for Senior
Indebtedness to the same extent as, or to a greater extent than, the
notes and the Guarantees are subordinated to Senior Indebtedness pursuant
to the indenture, that have a final maturity date and a weighted average
life to maturity which is at least six months greater than the Senior
Indebtedness or the debt securities issued in
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exchange for such Senior Indebtedness, as the case may be, and that are
not secured by a Lien on any assets.
"PERSON" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivisions thereof.
"PREFERRED STOCK" means, with respect to any Person, any Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over the
Capital Stock of any other class in such Person.
"PURCHASE MONEY NOTE" means a promissory note of a Securitization Entity
evidencing amounts owed to Playtex or any Restricted Subsidiary in connection
with a Qualified Securitization Transaction to a Securitization Entity, which
note shall be repaid from cash available to the Securitization Entity other than
amounts required to be established as reserves pursuant to agreements, amounts
paid to investors in respect of interest and principal and amounts paid in
connection with the purchase of newly generated receivables or newly acquired
equipment.
"PURCHASE MONEY OBLIGATION" means any Indebtedness secured by a Lien on
assets related to the business of Playtex or its Restricted Subsidiaries, and
any additions and accessions thereto, which are purchased by Playtex or any
Restricted Subsidiary at any time after the notes are issued; PROVIDED that:
(1) the security agreement or conditional sales or other title retention
contract pursuant to which the Lien on such assets is created
(collectively a "Purchase Money Security Agreement") shall be entered
into within 180 days after the purchase or substantial completion of the
construction of such assets and shall at all times be confined solely to
the assets so purchased or acquired, any additions and accessions thereto
and any proceeds therefrom;
(2) at no time shall the aggregate principal amount of the outstanding
Indebtedness secured thereby be increased, except in connection with the
purchase of additions and accessions thereto and except in respect of
fees and other obligations in respect of such Indebtedness; and
(3) (a) the aggregate outstanding principal amount of indebtedness secured
thereby (determined on a per asset basis in the case of any
additions and accessions) shall not at the time such Purchase Money
Security Agreement is entered into exceed 100% of the purchase
price to Playtex or any Restricted Subsidiary of the assets subject
thereto (including expenses); or
(b) the Indebtedness secured thereby shall be with recourse solely to
the assets so purchased or acquired, any additions and accessions
thereto and any proceeds therefrom.
"QUALIFIED CAPITAL STOCK" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"QUALIFIED SECURITIZATION TRANSACTION" means any transaction or series of
transactions that may be entered into by Playtex or any of its Restricted
Subsidiaries pursuant to which Playtex or any of its Restricted Subsidiaries may
sell, convey or otherwise transfer to:
(1) a Securitization Entity (in the case of a transfer by Playtex or any of
its Restricted Subsidiaries); and
(2) any other Person (in the case of a transfer by a Securitization Entity),
or may grant a security interest in any accounts receivable or equipment
(whether now existing or arising or acquired in the future) of Playtex or any of
its Restricted Subsidiaries, and any assets related
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thereto, including, without limitation, all collateral securing such accounts
receivable and equipment, all contracts and contract rights and all guarantees
or other obligations in respect of such accounts receivable and equipment,
proceeds of such accounts receivable and equipment and other assets (including
contract rights) which are customarily transferred or in respect of which
security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable and equipment.
"RECEIVABLES FACILITY" means an off-balance sheet receivables purchase
facility entered into through a Securitization Entity.
"REDEEMABLE CAPITAL STOCK" means any Capital Stock that, either by its terms
or by the terms of any security into which it is convertible or exchangeable or
otherwise, is, or upon the happening of an event or passage of time would be,
required to be redeemed prior to any Stated Maturity of the principal of the
notes or is redeemable at the option of the holder thereof at any time prior to
any such Stated Maturity, or is convertible into or exchangeable for debt
securities at any time prior to any such Stated Maturity at the option of the
holder thereof; PROVIDED, HOWEVER, that any Capital Stock that would not
constitute Redeemable Capital Stock but for the provisions thereof giving the
holders the right to require such Person to redeem or repurchase such Capital
Stock upon the occurrence of an Asset Sale or Change of Control shall not be
deemed to be Redeemable Capital Stock.
"REFINANCING TRANSACTIONS" means:
(1) entering into the Credit Agreement;
(2) entering into the Receivables Facility;
(3) the repayment of all amounts outstanding under all existing credit
agreements;
(4) the redemption, within 60 days after the closing of the offering of the
initial notes, of all the outstanding 8 7/8% Senior Notes due 2004 of
Playtex and the related satisfaction and discharge of such Notes; and
(5) the redemption, within 60 days after the closing of the offering of the
initial notes, of all the outstanding 9% Senior Subordinated Notes due
2003 of Playtex and the related satisfaction and discharge of such Notes.
"RELATED PARTY" means:
(1) any controlling stockholder, 50% (or more) owned Subsidiary, or
immediate family member (in the case of an individual) of any Permitted
Holder; or
(2) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding a 50% or
more controlling interest of which consist of any one or more Permitted
Holders and/or such other Persons referred to in the immediately
preceding clause (1); or
(3) any corporation or other entity owned by the former stockholders of
Playtex that is created solely for the purpose of creating a holding
company whose only significant asset is 100% of the Capital Stock of
Playtex.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIZATION ENTITY" means any Person in which Playtex or any Restricted
Subsidiary of Playtex makes an Investment and to which Playtex or any Restricted
Subsidiary of Playtex transfers accounts receivable or equipment (and related
assets, including contract rights) which engages in no activities
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other than in connection with the financing of accounts receivable or equipment
or related assets (including contract rights) and which is designated by the
Board of Directors as a Securitization Entity.
"STANDARD SECURITIZATION UNDERTAKINGS" means representations, warranties,
covenants and indemnities entered into by Playtex or any Restricted Subsidiary
of Playtex which are reasonably customary in an accounts receivable or equipment
transaction.
"STATED MATURITY" when used with respect to any Indebtedness or any
installment of interest thereon, means the dates specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of interest, as the case may be, is due and payable.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of Playtex subordinated in
right of payment to the notes.
"SUBSIDIARY" means any Person a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by Playtex
or by one or more other Subsidiaries, or by Playtex and one or more other
Subsidiaries.
"TEMPORARY CASH INVESTMENTS" means:
(1) any evidence of Indebtedness, maturing not more than one year after the
date of acquisition, issued by the United States of America, or an
instrumentality or agency thereof, and guaranteed fully as to principal,
premium, if any, and interest by the United States of America;
(2) any certificate of deposit, maturing not more than one year after the
date of acquisition, issued by, or time deposit of, the trustee or a
commercial banking institution that is a member of the Federal Reserve
System and that has combined capital and surplus and undivided profits of
not less than $500,000,000, whose debt has a rating, at the time as of
which any investment therein is made, of "P-l" (or higher) according to
Moody's Investors Service Inc. ("Moody's") or any successor rating agency
or "A-l" (or higher) according to Standard & Poor's Ratings Group ("S&P")
or any successor rating agency;
(3) commercial paper, maturing not more than one year after the date of
acquisition, issued by a corporation organized and existing under the
laws of the United States of America with a rating, at the time as of
which any investment therein is made, of "P-1" (or higher) according to
Moody's or "A-l" (or higher) according to S&P; and
(4) any money market deposit accounts issued or offered by the trustee or a
domestic commercial bank having capital and surplus in excess of
$500,000,000.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary that would but for this
definition of "Unrestricted Subsidiary" be a Restricted Subsidiary as to which
all of the following conditions apply:
(1) neither Playtex nor any of its other Restricted Subsidiaries provides
credit support for any Indebtedness of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) other
than Permitted Investments and Standard Securitization Undertakings;
(2) such Subsidiary is not liable, directly or indirectly, with respect to
any Indebtedness other than Unrestricted Subsidiary Indebtedness;
(3) neither Playtex nor any of its Restricted Subsidiaries has made an
Investment in such Subsidiary unless such Investment was permitted by the
provisions described under "--Certain Covenants--Limitation on Restricted
Payments;" and
105
(4) the Board of Directors of Playtex, as provided below, shall have
designated such Subsidiary (including any newly formed or acquired
Subsidiary) to be an Unrestricted Subsidiary; PROVIDED that after giving
effect to such designation, such Unrestricted Subsidiary does not own,
directly or indirectly, any Capital Stock of any other Restricted
Subsidiary. Any such designation by the Board of Directors of Playtex
shall be evidenced to the trustee by filing with the trustee a board
resolution giving effect to such designation and an officers' certificate
certifying that such designation complies with the foregoing conditions.
The Board of Directors of Playtex may designate any Unrestricted Subsidiary
as a Restricted Subsidiary; PROVIDED that:
(1) immediately after giving pro forma effect to such designation, Playtex
could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the restrictions under "--Certain
Covenants--Limitation on Indebtedness;"
(2) all Indebtedness of such Unrestricted Subsidiary shall be deemed to be
incurred on the date such Unrestricted Subsidiary becomes a Restricted
Subsidiary; and
(3) the redesignation would not cause an Event of Default.
Any Subsidiary of an Unrestricted Subsidiary shall be an Unrestricted Subsidiary
for purposes of the indenture.
"UNRESTRICTED SUBSIDIARY INDEBTEDNESS" of any Unrestricted Subsidiary means
Indebtedness of such Unrestricted Subsidiary:
(1) as to which neither Playtex nor any Restricted Subsidiary is directly or
indirectly liable (by virtue of Playtex or any such Restricted Subsidiary
being the primary obligor on, guarantor of, or otherwise liable in any
respect to such Indebtedness) except to the extent of the Standard
Securitization Undertakings and any Permitted Investment;
(2) which, upon the occurrence of a default with respect thereto, does not
result in, or permit any holder of any Indebtedness of Playtex or any
Restricted Subsidiary to declare, a default on such Indebtedness of
Playtex or any Restricted Subsidiary or cause the payment thereof to be
accelerated or payable prior to its Stated Maturity other than under the
terms of any Indebtedness existing on the date of the indenture; and
(3) as to which lenders have been notified in writing that they will not
have any recourse to the assets of Playtex or the stock or assets of any
of its Restricted Subsidiaries, except to the extent of the Standard
Securitization Undertakings and any Permitted Investment.
"VOTING STOCK" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation or other entity (irrespective of whether or not at the time stock of
any other class or classes shall have or might have voting power by reason of
the happening of any contingency).
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BOOK-ENTRY, DELIVERY AND FORM
Except as described below, we will initially issue the exchange notes in the
form of one or more registered exchange notes in global form without coupons. We
will deposit each global note on the date of the closing of this exchange offer
with, or on behalf of, The Depository Trust Company in New York, New York, and
register the exchange notes in the name of The Depository Trust Company or its
nominee, or will leave these notes in the custody of the trustee.
DEPOSITORY PROCEDURES
For your convenience, we are providing you with a description of the
operations and procedures of The Depository Trust Company, the Euroclear System
and Clearstream Banking, S.A. These operations and procedures are solely within
the control of the respective settlement systems and are subject to changes by
them. We are not responsible for these operations and procedures and urge you to
contact the system or its participants directly to discuss these matters.
The Depository Trust Company has advised us that it is a limited-purpose
trust company created to hold securities for its participating organizations and
to facilitate the clearance and settlement of transactions in those securities
between its participants through electronic book entry changes in the accounts
of these participants. These direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and other organizations.
Access to The Depository Trust Company's system is also indirectly available to
other entities that clear through or maintain a direct or indirect, custodial
relationship with a direct participant. The Depository Trust Company may hold
securities beneficially owned by other persons only through its participants and
the ownership interests and transfers of ownership interests of these other
persons will be recorded only on the records of the participants and not on the
records of The Depository Trust Company.
The Depository Trust Company has also advised us that, in accordance with
its procedures,
(1) upon deposit of the global notes, it will credit the accounts of the
direct participants with an interest in the global notes, and
(2) it will maintain records of the ownership interests of these direct
participants in the global notes and the transfer of ownership interests by and
between direct participants. The Depository Trust Company will not maintain
records of the ownership interests of, or the transfer of ownership interests by
and between, indirect participants or other owners of beneficial interests in
the global notes. Both direct and indirect participants must maintain their own
records of ownership interests of, and the transfer of ownership interests by
and between, indirect participants and other owners of beneficial interests in
the global notes.
Investors in the global notes may hold their interests in the notes directly
through The Depository Trust Company if they are direct participants in The
Depository Trust Company or indirectly through organizations that are direct
participants in The Depository Trust Company. Investors in the global notes may
also hold their interests in the notes through Euroclear and Clearstream if they
are direct participants in those systems or indirectly through organizations
that are participants in those systems. Euroclear and Clearstream will hold
omnibus positions in the global notes on behalf of the Euroclear participants
and the Clearstream participants, respectively, through customers' securities
accounts in Euroclear's and Clearstream's names on the books of their respective
depositories, which are Morgan Guaranty Trust Company of New York, Brussels
office, as operator of Euroclear, and Citibank, N.A. and The Chase Manhattan
Bank, N.A., as operators of Clearstream. These depositories, in turn, will hold
these positions in their names on the books of DTC. All interests in a global
note, including those held through Euroclear or Clearstream, may be subject to
the procedures and requirements of The Depository Trust Company. Those interests
held through Euroclear or Clearstream may also be subject to the procedures and
requirements of those systems.
107
The laws of some states require that some persons take physical delivery in
definitive certificated form of the securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a global note to these
persons. Because The Depository Trust Company can act only on behalf of direct
participants, which in turn act on behalf of indirect participants and others,
the ability of a person having a beneficial interest in a global note to pledge
its interest to persons or entities that are not direct participants in The
Depository Trust Company or to otherwise take actions in respect of its
interest, may be affected by the lack of physical certificates evidencing the
interests.
Except as described below, owners of interests in the global notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders of these notes under the indenture for any purpose.
Payments in respect of the principal of and interest on any notes
represented by a global note registered in the name of The Depository Trust
Company or its nominee on the applicable record date will be payable by the
trustee to or at the direction of The Depository Trust Company or its nominee in
its capacity as the registered holder of the global note representing these
notes under the indenture. Under the terms of the indenture, we and the trustee
will treat the person in whose names the notes are registered, including notes
represented by global notes, as the owners of the notes for the purpose of
receiving payments and for any and all other purposes whatsoever. Payments in
respect of the principal and interest on global notes registered in the name of
The Depository Trust Company or its nominee will be payable by the trustee to
The Depository Trust Company or its nominee as the registered holder under the
indenture. Consequently, none of Playtex, the trustee or any of our agents, or
the trustee's agents has or will have any responsibility or liability for
(1) any aspect of The Depository Trust Company's records or any direct or
indirect participant's records relating to, or payments made on account of,
beneficial ownership interests in the global notes or for maintaining,
supervising or reviewing any of The Depository Trust Company's records or any
direct or indirect participant's records relating to the beneficial ownership
interests in any global note or
(2) any other matter relating to the actions and practices of The Depository
Trust Company or any of its direct or indirect participants.
The Depository Trust Company has advised us that its current practice, upon
receipt of any payment in respect of securities such as the notes, including
principal and interest, is to credit the accounts of the relevant participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in the principal amount of beneficial interest in the
security as shown on its records, unless it has reasons to believe that it will
not receive payment on the payment date. Payments by the direct and indirect
participants to the beneficial owners of interests in the global note will be
governed by standing instructions and customary practice and will be the
responsibility of the direct or indirect participants and will not be the
responsibility of The Depository Trust Company, the trustee or us.
Neither we nor the trustee will be liable for any delay by The Depository
Trust Company or any direct or indirect participant in identifying the
beneficial owners of the notes and Playtex and the trustee may conclusively rely
on, and will be protected in relying on, instructions from The Depository Trust
Company or its nominee for all purposes, including with respect to the
registration and delivery, and the respective principal amounts, of the notes.
Transfers between participants in The Depository Trust Company will be
effected in accordance with The Depository Trust Company's procedures, and will
be settled in same day funds. Transfers between participants in Euroclear and
Clearstream will be effected in accordance with their respective rules and
operating procedures.
108
Cross-market transfers between the participants in The Depository Trust
Company, on the one hand, and Euroclear or Clearstream participants, on the
other hand, will be effected through The Depository Trust Company in accordance
with The Depository Trust Company's rules on behalf of Euroclear or Clearstream,
as the case may be, by its respective depositary; however, such cross-market
transactions will require delivery of instructions to Euroclear or Clearstream,
as the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Clearstream, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant global note in The Depository
Trust Company, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to The Depository Trust
Company. Euroclear participants and Clearstream participants may not deliver
instructions directly to the depositories for Euroclear or Clearstream.
The Depository Trust Company has advised us that it will take any action
permitted to be taken by a holder of notes only at the direction of one or more
participants to whose account The Depository Trust Company has credited the
interests in the global notes and only in respect of the portion of the
aggregate principal amount of the notes as to which the participant or
participants has or have given that direction. However, if there is an event of
default with respect to the notes, The Depository Trust Company reserves the
right to exchange the global notes for legended notes in certificated form and
to distribute them to its participants.
Although The Depository Trust Company, Euroclear and Clearstream have agreed
to these procedures to facilitate transfers of interests in the global notes
among participants in The Depository Trust Company, Euroclear and Clearstream,
they are under no obligation to perform or to continue to perform these
procedures and may discontinue them at any time. None of Playtex, the trustee or
any of our or the trustee's respective agents will have any responsibility for
the performance by The Depository Trust Company or their direct or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A global note will be exchangeable for definitive notes in registered
certificated form if:
(1) The Depository Trust Company notifies us that it is unwilling or unable
to continue as depository for the global notes and we fail to appoint a
successor depository within 90 days,
(2) The Depository Trust Company ceases to be a clearing agency registered
under the Exchange Act and we fail to appoint a successor depository
within 90 days,
(3) we elect to cause the issuance of the certificated notes upon a notice
of the trustee, or
(4) a default or event of default under the indenture for the notes has
occurred and is continuing.
In all cases, certificated notes delivered in exchange for any global note
or beneficial interests in a global note will be registered in the name, and
issued in any approved denominations, requested by or on behalf of The
Depository Trust Company, in accordance with its customary procedures.
EXCHANGE OF CERTIFICATED NOTES FOR BOOK-ENTRY NOTES
Initial notes issued in certificated form may be exchanged for beneficial
interests in the global note.
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SAME DAY SETTLEMENT
We expect that the interests in the global notes will be eligible to trade
in The Depository Trust Company's Same-Day Funds Settlement System. As a result,
secondary market trading activity in these interests will settle in immediately
available funds, subject in all cases to the rules and procedures of The
Depository Trust Company and its participants. We expect that secondary trading
in any certificated notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a global note from a
participant in The Depository Trust Company will be credited, and any such
crediting will be reported to the relevant Euroclear or Clearstream participant,
during the securities settlement processing day (which must be a business day
for Euroclear and Clearstream) immediately following the settlement date of The
Depository Trust Company. The Depository Trust Company has advised us that cash
received in Euroclear or Clearstream as a result of sales of interests in a
global note by or through a Euroclear or Clearstream participant to a
participant in The Depository Trust Company will be received with value on the
settlement date of The Depository Trust Company but will be available in the
relevant Euroclear or Clearstream cash account only as of the business day for
Euroclear or Clearstream following The Depository Trust Company's settlement
date.
PAYMENT
The indenture requires that payments in respect of the notes represented by
global notes, including principal and interest, be made by wire transfer of
immediately available funds to the accounts specified by the holder of the
global notes. With respect to notes in certificated form, we will make all
payments of principal and interest on the notes at our office or agency
maintained for that purpose within the city and state of New York. This office
will initially be the office of the Paying Agent maintained for that purpose. At
our option however, we may make these installments of interest by (1) check
mailed to the holders of notes at their respective addresses provided in the
register of holder of notes or (2) transfer to an account maintained by the
payee.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following discussion is a summary of certain U.S. federal income tax
consequences to the exchange of initial notes in accordance with the exchange
offer, and the ownership and disposition of the exchange notes, by a holder of
the exchange notes who is a Non-U.S. Holder (as defined below). In the opinion
of Paul, Weiss, Rifkind, Wharton & Garrison, our special U.S. tax counsel,
subject to the exceptions, assumptions and qualifications set forth below, the
discussion accurately reflects the material U.S. federal income tax consequences
to Non-U.S. Holders of the consummation of the exchange offer and the ownership
and disposition of the exchange notes. This summary does not purport to be a
complete analysis of all of the potential U.S. federal income tax consequences
of the ownership and disposition of the exchange notes to a holder of the
exchange notes who is a Non-U.S. Holder, and does not address any other taxes
that might be applicable to a Non-U.S. Holder of the exchange notes. The U.S.
Internal Revenue Service may not take a similar view of these consequences. This
discussion is based on the Internal Revenue Code of 1986, as currently amended,
administrative pronouncements, judicial decisions and existing and proposed
Treasury Regulations, and interpretations of the above, changes to any of which
after the date of this prospectus may affect the tax consequences described
below, possibly with retroactive effect.
The following discusses only exchange notes held as capital assets within
the meaning of Section 1221 of the Internal Revenue Code. It does not discuss
all of the tax consequences that may be relevant to a Non-U.S. Holder in light
of that holder's particular circumstances or to holders subject to special
rules, such as certain financial institutions, insurance companies, tax-exempt
entities, dealers in securities or currencies, persons holding exchange notes in
connection with a hedging transaction, "straddle," conversion transaction or
other integrated transaction, persons engaged in a trade or business in the
United States or persons who have ceased to be United States citizens or to be
taxed as resident aliens. Prospective investors should consult their tax
advisors with regard to the application of U.S. federal tax laws to their
particular situations, as well as any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction.
As used herein, the term "Non-U.S. Holder" means a beneficial owner of an
exchange note that is, for U.S. federal income tax purposes:
- a nonresident alien individual;
- a foreign corporation;
- a nonresident alien fiduciary of a foreign estate or trust; or
- a foreign partnership.
EXCHANGE OFFER
The exchange of the initial notes for the exchange notes pursuant to this
exchange offer will not be treated as a taxable event to Non-U.S. Holders.
Consequently:
- no gain or loss will be realized by a Non-U.S. Holder upon receipt of an
exchange note;
- the holding period of the exchange note will include the holding period of
the initial note exchanged for that exchange note; and
- the adjusted tax basis of the exchange note will be the same as the
adjusted tax basis, immediately before the exchange, of the initial note
exchanged for the exchange note.
111
PAYMENT OF INTEREST
Subject to the discussion below concerning backup withholding, payments of
interest on the exchange notes by us or any paying agent thereof to any Non-U.S.
Holder will not be subject to U.S. federal withholding tax, provided that:
- the interest is not effectively connected with the conduct by that holder
of a trade or business in the United States;
- that holder does not own, actually or constructively, 10% or more of the
total combined voting power of all classes of our stock entitled to vote,
is not a controlled foreign corporation (for U.S. federal income tax
purposes) related, directly or indirectly, to us through stock ownership,
and is not a bank receiving interest described in Section 881(c)(3)(A) of
the Internal Revenue Code; and
- the certification requirement, as described below, has been fulfilled with
respect to the beneficial owner.
The certification requirement referred to above will be fulfilled if the
beneficial owner of an exchange note certifies on Internal Revenue Service
Form W-8BEN, or a suitable substitute form, under penalties of perjury, that it
is not a United States person and provides its name and address, and (i) such
beneficial owner files such Form W-8BEN with the withholding agent or (ii) in
the case of exchange notes held on behalf of the beneficial owner by a
securities clearing organization, bank or other financial institution holding
customers' securities in the ordinary course of its trade or business, such
financial institution files with the withholding agent a statement that it has
received the Form W-8BEN, or a suitable substitute form, from the Non-U.S.
Holder or from another financial institution acting on behalf of that Non-U.S.
Holder, furnishes the withholding agent with a copy thereof and otherwise
complies with the applicable IRS requirements. In the case of exchange notes
held by a foreign partnership, the certification described above normally is
provided by the partners and the partnership provides other specified
information. Other methods might be available to satisfy the certification
requirements described above, depending upon the circumstances applicable to the
Non-U.S. Holder. Prospective investors, including foreign partnerships and their
partners, should consult their tax advisors regarding possible reporting
requirements.
The gross amount of payments of interest that do not qualify for the
exception from withholding described above and that are not effectively
connected with the conduct by that holder of a trade or business in the United
States will be subject to U.S. withholding tax at a rate of 30% unless a treaty
applies to reduce or eliminate withholding and the Non-U.S. Holder properly
certifies to its entitlement to the benefits of that treaty.
SALE, EXCHANGE OR DISPOSITION OF THE NOTES
Subject to the discussion below concerning backup withholding, a Non-U.S.
Holder of an exchange note will not be subject to U.S. federal income tax on
gain realized on the sale, exchange or other disposition of that exchange note,
unless:
- the holder is an individual who is present in the United States for
183 days or more in the taxable year of disposition, and certain other
conditions are met; or
- the gain realized on the sale, exchange or other disposition of that
exchange note is effectively connected with the conduct by the holder of a
trade or business in the United States; or
- the holder is subject to the special rules applicable to certain former
citizens and residents of the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding and information reporting generally will not apply to
payments made by us or our paying agent on an exchange note to a Non-U.S. Holder
if the certifications described above under
112
"--Payment of Interest" are received or the Non-U.S. Holder otherwise
establishes an exemption, and the payor does not have actual knowledge that the
holder is a U.S. person or that the conditions of any other exemption are not,
in fact, satisfied. Payments on the sale, exchange or other disposition of an
exchange note made to or through a foreign office of a foreign broker generally
will not be subject to backup withholding or information reporting. However, if
the broker is, for U.S. federal income tax purposes, a U.S. person, a controlled
foreign corporation (for U.S. federal income tax purposes), a foreign person 50%
or more of whose gross income is effectively connected with a U.S. trade or
business for a specified three-year period or a foreign partnership with certain
connections to the United States, then information reporting will be required
unless the broker has in its records documentary evidence that the beneficial
owner is not a U.S. person and other specified conditions are met or the
beneficial owner otherwise establishes an exemption. Backup withholding may
apply to any payment that the broker is required to report if that broker has
actual knowledge that the payee is a U.S. person. Payments to or through the
U.S. office of a broker will be subject to backup withholding and information
reporting unless the holder certifies, under penalties of perjury, that it is
not a U.S. person and other conditions are met or the holder otherwise
establishes an exemption, provided that the broker does not have actual
knowledge that the holder is a U.S. person or that the conditions of any other
exemption are not, in fact, satisfied.
Non-U.S. Holders of exchange notes should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and the
procedure for obtaining such an exemption, if available. Any amounts withheld
from a payment to a Non-U.S. Holder under the backup withholding rules will be
allowed as a credit against that holder's U.S. federal income tax liability and
may entitle that holder to a refund, provided that the required information is
furnished to the IRS.
113
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer in exchange for initial notes acquired by such
broker-dealer as a result of market making or other trading activities may be
deemed to be an "underwriter" within the meaning of the Securities Act and,
therefore, must deliver a prospectus meeting the requirements of the Securities
Act in connection with any resales, offers to resell or other transfers of the
exchange notes received by it in connection with the exchange offer.
Accordingly, each such broker-dealer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such exchange notes. The letter of transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for initial notes where such
initial notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of 180 days after the
expiration of this exchange offer, we will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of exchange notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration of this exchange offer we will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all of our expenses incident
to this exchange offer (including the reasonable expenses, not to exceed
$10,000, of one counsel for the holders of the notes) other than commissions or
concessions of any brokers or dealers and will indemnify the holders of the
notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York, has passed
upon the validity of the exchange notes and the related guarantees.
EXPERTS
Our consolidated financial statements as of December 25, 1999 and
December 30, 2000 and for the twelve months ended December 26, 1998,
December 25, 1999 and December 30, 2000 which are included in this prospectus,
have been audited by KPMG LLP, independent certified public accountants, to the
extent and for the periods indicated in their report thereon. Such financial
statements have been included in reliance upon the report of KPMG LLP.
114
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and file reports, proxy statements and other
information with the Commission. We have also filed with the Commission a
registration statement on Form S-4 to register the exchange notes. This
prospectus, which forms part of the registration statement, does not contain all
of the information included in that registration statement. For further
information about us and the exchange notes offered in this prospectus, you
should refer to the registration statement and its exhibits. You may read and
copy any document we file with the Commission at the Commission's Public
Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices in New York (7 World Trade Center, 13th Floor, New
York, New York 10048) and Chicago (Citicorp Center, 14th Floor, 500 West Madison
Street, Chicago, Illinois 60661). Copies of these reports, proxy statements and
information may be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the Commission at 1-800-SEC-0330 for further information on the
operation of the Public Reference Room. In addition, the Commission maintains a
web site that contains reports, proxy statements and other information regarding
registrants, such as us, that file electronically with the Commission. The
address of this web site is http://www.sec.gov.
Anyone who receives a copy of this prospectus may obtain a copy of the
indenture without charge by writing to Playtex Products, Inc., 300 Nyala Farms
Road, Westport, Connecticut 06880, Attention: Chief Financial Officer
115
INDEX TO FINANCIAL STATEMENTS
PAGE
----
I. PLAYTEX PRODUCTS, INC. ANNUAL FINANCIAL STATEMENTS:
Independent Accountants' Report of KPMG LLP................. F-2
Consolidated Statements of Earnings for the twelve months
ended December 30, 2000, December 25, 1999 and December
26, 1998.................................................. F-3
Consolidated Balance Sheets as of December 30, 2000 and
December 25, 1999......................................... F-4
Consolidated Statements of Changes in Stockholders' Equity
and Accumulated Other Comprehensive Earnings for the
twelve months ended December 30, 2000, December 25, 1999
and December 26, 1998..................................... F-5
Consolidated Statements of Cash Flows for the twelve months
ended December 30, 2000, December 25, 1999 and
December 26, 1998......................................... F-6
Notes to Consolidated Financial Statements.................. F-7
II. PLAYTEX PRODUCTS, INC. INTERIM FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets as of March 31, 2001
(Unaudited) and December 30, 2000......................... F-43
Consolidated Statements of Earnings for the three months
ended March 31, 2001 and April 1, 2000 (Unaudited)........ F-44
Consolidated Statements of Changes in Stockholders' Equity
and Accumulated Other Comprehensive Earnings for the three
months ended March 31, 2001 (Unaudited)................... F-45
Consolidated Statements of Cash Flows for the three months
ended March 31, 2001 and April 1, 2000 (Unaudited)........ F-46
Notes to Condensed Consolidated Financial Statements........ F-47
F-1
PLAYTEX PRODUCTS, INC.
INDEPENDENT ACCOUNTANTS' REPORT
The Board of Directors and Stockholders
Playtex Products, Inc.:
We have audited the accompanying consolidated balance sheets of Playtex
Products, Inc. and subsidiaries as of December 30, 2000 and December 25, 1999,
and the related consolidated statements of earnings, changes in stockholders'
equity and accumulated other comprehensive earnings and cash flows for the
twelve months ended December 30, 2000, December 25, 1999 and December 26, 1998
included herein on pages F-3 through F-42. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Playtex Products, Inc. and subsidiaries as of December 30, 2000 and
December 25, 1999 and the results of their operations and their cash flows for
the twelve months ended December 30, 2000, December 25, 1999 and December 26,
1998, in conformity with accounting principles generally accepted in the United
States of America.
/s/ KPMG LLP
January 26, 2001
New York, New York
F-2
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000 1999 1998
------------- ------------- -------------
Net sales............................................... $831,343 $787,711 $669,613
Cost of sales........................................... 352,174 331,242 277,555
-------- -------- --------
Gross profit........................................ 479,169 456,469 392,058
-------- -------- --------
Operating expenses:
Advertising and sales promotion..................... 186,596 168,878 145,379
Selling, distribution and research.................. 92,420 83,915 73,266
Administrative...................................... 29,866 27,383 24,643
Amortization of intangibles......................... 22,350 21,064 17,336
-------- -------- --------
Total operating expenses.......................... 331,232 301,240 260,624
-------- -------- --------
Operating earnings.............................. 147,937 155,229 131,434
Interest expense including related party interest
expense of $12,150, net of related party interest
income of $12,003 for all periods presented........... 84,884 78,961 71,518
-------- -------- --------
Earnings before income taxes.................... 63,053 76,268 59,916
Income taxes............................................ 27,509 32,197 25,686
-------- -------- --------
Net earnings.................................... $ 35,544 $ 44,071 $ 34,230
======== ======== ========
Earnings per share:
Basic............................................... $ .58 $ .73 $ .58
Diluted............................................. $ .58 $ .72 $ .57
Weighted average common shares and equivalent common
shares outstanding:
Basic............................................... 60,824 60,481 59,486
Diluted............................................. 62,585 62,553 60,411
See the accompanying notes to consolidated financial statements.
F-3
PLAYTEX PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 30, DECEMBER 25,
2000 1999
ASSETS ------------- -------------
Current assets:
Cash.................................................... $ 10,282 $ 7,526
Receivables, less allowance for doubtful accounts....... 130,970 130,256
Inventories............................................. 85,326 85,496
Deferred income taxes, net.............................. 13,321 14,937
Other current assets.................................... 5,416 5,639
---------- ----------
Total current assets................................ 245,315 243,854
Net property, plant and equipment........................... 118,155 107,193
Intangible assets, net:
Goodwill................................................ 510,995 527,683
Trademarks, patents and other........................... 164,268 169,531
Deferred financing costs.................................... 12,334 15,530
Due from related party...................................... 80,017 80,017
Other noncurrent assets..................................... 8,300 4,844
---------- ----------
Total assets........................................ $1,139,384 $1,148,652
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 51,535 $ 45,107
Accrued expenses........................................ 69,800 73,994
Income taxes payable.................................... 4,622 8,934
Current maturities of long-term debt.................... 45,125 23,813
---------- ----------
Total current liabilities........................... 171,082 151,848
Long-term debt.............................................. 886,438 964,063
Due to related party........................................ 78,386 78,386
Other noncurrent liabilities................................ 12,814 12,267
Deferred income taxes, net.................................. 46,727 36,956
---------- ----------
Total liabilities................................... 1,195,447 1,243,520
---------- ----------
Stockholders' equity:
Common stock, $0.01 par value, authorized 100,000,000
shares, issued and outstanding 60,970,899 shares at
December 30, 2000 and 60,562,327 shares at
December 25, 1999..................................... 609 605
Additional paid-in capital.............................. 523,706 519,811
Retained earnings (deficit)............................. (577,220) (612,764)
Accumulated other comprehensive earnings................ (3,158) (2,520)
---------- ----------
Total stockholders' equity.......................... (56,063) (94,868)
---------- ----------
Total liabilities and stockholders' equity.......... $1,139,384 $1,148,652
========== ==========
See the accompanying notes to consolidated financial statements.
F-4
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND ACCUMULATED OTHER COMPREHENSIVE EARNINGS
(IN THOUSANDS)
ACCUMULATED
COMMON ADDITIONAL RETAINED OTHER
SHARES COMMON PAID-IN EARNINGS COMPREHENSIVE
OUTSTANDING STOCK CAPITAL (DEFICIT) EARNINGS TOTAL
----------- -------- ---------- --------- ------------- ---------
Balance, December 27, 1997......... 50,942 $509 $424,706 $(691,065) $(2,213) $(268,063)
Net earnings....................... -- -- -- 34,230 -- 34,230
Other comprehensive earnings..... -- -- -- -- (710) (710)
---------
Comprehensive earnings......... 33,520
Stock issued to employees
exercising stock options......... 203 2 2,149 -- -- 2,151
Stock issued in conjunction with
business acquisition............. 9,257 93 91,324 -- -- 91,417
------ ---- -------- --------- ------- ---------
Balance, December 26, 1998..... 60,402 604 518,179 (656,835) (2,923) (140,975)
Net earnings....................... -- -- -- 44,071 -- 44,071
Other comprehensive earnings..... -- -- -- -- 403 403
---------
Comprehensive earnings......... 44,474
Stock issued to employees
exercising stock options......... 160 1 1,632 -- -- 1,633
------ ---- -------- --------- ------- ---------
Balance, December 25, 1999..... 60,562 605 519,811 (612,764) (2,520) (94,868)
Net earnings....................... -- -- -- 35,544 -- 35,544
Other comprehensive earnings..... -- -- -- -- (638) (638)
---------
Comprehensive earnings......... 34,906
Stock issued to employees
exercising stock options......... 409 4 3,895 -- -- 3,899
------ ---- -------- --------- ------- ---------
Balance, December 30, 2000..... 60,971 $609 $523,706 $(577,220) $(3,158) $ (56,063)
====== ==== ======== ========= ======= =========
See the accompanying notes to consolidated financial statements.
F-5
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
TWELVE MONTHS ENDED
------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000 1999 1998
------------ ------------ ------------
Cash flows from operations:
Net earnings.............................................. $ 35,544 $ 44,071 $ 34,230
Non-cash items included in earnings:
Amortization of intangibles............................. 22,350 21,064 17,336
Amortization of deferred financing costs................ 3,750 3,398 2,995
Depreciation............................................ 11,547 9,847 9,690
Deferred income taxes................................... 11,383 9,070 6,244
Other, net.............................................. (3,214) (113) 36
Changes in working capital items, net of effects of
business acquisitions and divestitures:
Increase in receivables................................. (714) (20,220) (24,003)
Decrease (increase) in inventories...................... 170 (23,568) 254
Decrease (increase) in other current assets............. 223 207 (696)
Increase in accounts payable............................ 6,428 4,365 7,064
(Decrease) increase in accrued expenses and other
noncurrent liabilities................................ (4,985) 5,539 (4,687)
(Decrease) increase in income taxes payable............. (3,911) 602 4,323
Increase in accrued interest............................ 155 2,025 431
-------- --------- ---------
Net cash flows from operations........................ 78,726 56,287 53,217
Cash flows used for investing activities:
Purchases of property, plant and equipment................ (22,724) (20,802) (16,405)
Businesses and intangible assets acquired, net............ (279) (210,109) (106,581)
-------- --------- ---------
Net cash flows used for investing activities.......... (23,003) (230,911) (122,986)
Cash flows (used for) provided by financing activities:
Net (repayments) borrowings under working
capital credit facilities............................... (32,500) 32,500 (23,550)
Long-term debt borrowings................................. -- 150,000 100,000
Long-term debt repayments................................. (23,813) (6,374) (2,500)
Payment of financing costs................................ (553) (2,480) (2,692)
Issuance of shares of common stock........................ 3,899 1,633 2,151
-------- --------- ---------
Net cash flows (used for) provided by financing
activities.......................................... (52,967) 175,279 73,409
Increase in cash............................................ 2,756 655 3,640
Cash at beginning of period................................. 7,526 6,871 3,231
-------- --------- ---------
Cash at end of period....................................... $ 10,282 $ 7,526 $ 6,871
======== ========= =========
Supplemental disclosures of cash flow information
Cash paid during the periods for:
Interest.................................................. $ 80,979 $ 73,538 $ 68,092
Income taxes, net of refunds.............................. $ 20,039 $ 22,316 $ 14,753
In connection with the acquisition of Personal Care Holdings, Inc. in 1998,
we issued 9,257,345 shares of our common stock with a value of $9.875 per share,
totaling $91,417.
See the accompanying notes to consolidated financial statements.
F-6
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--Our consolidated financial statements include
the accounts of Playtex Products, Inc. and all of our subsidiaries ("Playtex
Products, Inc."). All significant intercompany balances have been eliminated.
REVENUE RECOGNITION--Revenues are recognized when we ship our products to
customers. Sun Care product sales are highly seasonal, with 80 to 90 percent of
our sales to retailers occurring from December through June. This seasonality
requires increased inventory from December to June to support the selling
season. Additionally, extended credit terms on Sun Care product sales, which are
common in the industry, cause us to experience higher receivables from February
to September.
Also common to the industry, customers have the right to return unused Sun
Care products after the summer season. We generally receive returns of our Sun
Care products from September through March following the summer season. We
reduce our Sun Care sales and increase accrued liabilities for these returns
throughout the year based on our estimate of returns as a percent of Sun Care
products sold. This is based upon historical trends and other information
available to us for the sun care season including, the impact of weather and
category growth. Our sales without return estimates would have been $880,618,
$830,963, and $710,724 in fiscal 2000, 1999, and 1998, respectively.
ADVERTISING AND SALES PROMOTION COSTS--Costs incurred for producing and
communicating advertising, coupon and cooperative advertising programs are
expensed when incurred.
SHIPPING AND HANDLING COSTS--Shipping and handling expenses are included in
cost of goods sold in the Consolidated Statements of Earnings.
INVENTORIES--Inventories are stated at the lower of cost (first-in,
first-out basis) or market. Inventory costs include material, labor and
manufacturing overhead.
NET PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated
at cost and depreciated on the straight-line method over the estimated useful
life of the asset. Our estimated useful life for significant fixed asset classes
is as follows:
- land improvements range from
15 to 40 years,
- building and improvements range from
20 to 40 years,
- machinery and equipment range from
4 to 15 years, and
- furniture and fixtures range from
5 to 10 years.
INTANGIBLE AND LONG-LIVED ASSETS--Long-lived assets including fixed assets,
goodwill, trademarks and patents are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable, we estimate the undiscounted future
cash flows to result from the use of the asset and its ultimate disposition. If
the sum of the undiscounted cash flows is less than the carrying value, we
recognize an impairment loss, measured as the amount by which the carrying value
exceeds the fair value of the asset.
DEFERRED FINANCING COST--Expenses incurred to issue long-term debt have been
capitalized and are being amortized primarily on a straight line basis which
approximates the effective yield method over the life of the related debt
agreements and are included as a component of interest expense in the
Consolidated Statements of Earnings. These costs, net of accumulated
amortization, amounted to $12.3 million and $15.5 million at December 30, 2000
and December 25, 1999, respectively.
F-7
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES--Deferred tax assets and liabilities are provided using the
asset and liability method for temporary differences between financial and tax
reporting bases using the enacted tax rates in effect for the period in which
the differences are expected to reverse. Valuation allowances are established,
when necessary, to reduce deferred tax assets to amounts that we expect to use.
FOREIGN CURRENCY TRANSLATION--Assets and liabilities of our foreign
subsidiaries have been translated into U.S. dollars at year-end exchange rates.
Revenues and expenses have been translated at average exchange rates for the
year. Net foreign translation gains or losses are accumulated in a separate
section of stockholders' equity titled "Accumulated Other Comprehensive
Earnings."
INTEREST RATE PROTECTION AGREEMENTS--We selectively enter into interest rate
protection agreements to reduce our financial risk associated with changing
interest rates. Two types of interest rate protection agreements we have used in
the past include:
- Swaps, which are derivative financial instruments that involve trading of
variable rate for fixed rate interest payments, and
- Caps, which are derivative financial contracts that limit interest expense
in the event interest rates rise above a predetermined rate.
We do not utilize derivative financial instruments for trading or other
speculative purposes. We are currently a party to two swap agreements which
expire within one year, one of which may be extended at the counterparties
option. The counterparties to the swap agreements are major financial
institutions. The risk of loss to us in the event of non-performance by one or
more of these counterparties is not significant. The swaps change the
variable-rate cash flow exposure on our variable debt obligations to fixed-rate
cash flows. Under the swaps, we receive variable interest rate payments and make
fixed interest rate payments, thereby creating fixed rate long-term debt.
The interest rate protection agreements we enter into are classified as a
hedge for accounting purposes when they are designated as, and are effective as,
a hedge of future anticipated interest payments. We consider an interest rate
protection agreement to be effective when it reduces the market rate risk on our
anticipated interest payments. If an agreement does not meet the criteria to
qualify as a hedge, it is considered to be speculative. For interest rate
protection agreements, which we do consider to qualify as a hedge, any gain or
loss on the instrument is included in interest expense in the Consolidated
Statement of Earnings when the anticipated interest payment is made. For
interest rate protection agreements, which we consider to be speculative, gains
and losses are recognized in the current period and are included in other
expense in the Consolidated Statement of Earnings. If an interest rate
protection agreement previously considered as a hedge is terminated before the
transaction date of the anticipated payment, or if the anticipated payment which
is being hedged no longer is probable, gains and losses are recognized at that
point and are included in other expense in the Consolidated Statement of
Earnings. We do not utilize derivative financial instruments for trading or
speculative purposes.
Total (gains) and losses related to the interest rate protection agreements
of ($0.5 million), $0.3 million, and $0.0 million are included in interest
expense in the Consolidated Statements of Earnings for fiscal 2000, 1999, and
1998.
FISCAL YEAR--Our fiscal year end is on the last Saturday nearest to
December 31 and, as a result, a fifty-third week is added every 6 or 7 years.
Fiscal 2000 was a fifty-three week year. References to fiscal years 1999 and
1998, are for a fifty-two week period.
F-8
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES--The preparation of financial statements in accordance with
generally accepted accounting principles requires us to make estimates and
assumptions. These estimates and assumptions affect:
- the reported amounts of revenue and expenses,
- the reported amounts of assets and liabilities, and
- the disclosure of contingent liabilities.
Actual results could vary from our estimates and assumptions.
RECLASSIFICATIONS--For comparative purposes we reclassified our prior year
business segment disclosure to conform to the current year presentation.
2. ACQUISITIONS AND DIVESTITURE
1999 ACQUISITIONS
On January 29, 1999, we acquired the DIAPER GENIE business, the leading
diaper disposal system in the U.S., for $72.0 million in cash and the issuance
of $50.0 million of Convertible Notes. We borrowed the cash portion of the
purchase price from our revolving credit facility (see Note 7). The Convertible
Notes have an interest rate of 6% and are convertible, at the holders' option,
into approximately 2.6 million shares of our common stock. The conversion price
is approximately $19.15 per share. The notes will mature in 2004 and are
callable by us after January 29, 2002.
On June 30, 1999, we acquired the BABY MAGIC brand of infant-related
toiletries for $90.0 million in cash. We borrowed $100.0 million in cash from
our Term A Loan at variable rates of interest to pay for the acquisition and
related fees.
The acquisitions of BABY MAGIC and DIAPER GENIE were accounted for as
purchases, and our consolidated results of operations included the operating
results of these businesses from the dates of acquisition. In addition, these
acquisitions added $113.7 million to goodwill and $75.1 million to trademarks in
1999.
1998 ACQUISITIONS
On January 28, 1998, we acquired Personal Care Holdings, Inc. ("PCH") for
approximately $91.0 million in cash and 9,257,345 shares of our common stock. We
borrowed money from our revolving credit facility for the cash portion of the
deal (see Note 7). On January 6, 1998, we acquired Carewell Industries, Inc.
("Carewell") for approximately $9.2 million in cash. On January 26, 1998, we
acquired the BINKY pacifier business ("Binky") for approximately $1.2 million in
cash and $0.5 million in notes, which were later repaid in 1998. The
acquisitions of PCH, Carewell, and BINKY were accounted for as purchases.
In connection with the 1999 and 1998 acquisitions, we reserved amounts on
our balance sheet for certain direct costs likely to be incurred as a result of
the acquisitions. These costs include at December 30, 2000 (in thousands):
RESERVED AMOUNT BALANCE
AMOUNT SPENT REMAINING
-------- -------- ---------
Exit costs.................................................. $3,653 $2,888 $ 765
Involuntary terminations.................................... 3,116 2,807 309
Relocation costs............................................ 135 135 --
------ ------ ------
Total..................................................... $6,904 $5,830 $1,074
====== ====== ======
F-9
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS AND DIVESTITURE (CONTINUED)
The remaining balance is primarily for building lease commitments and severance
costs. The amount reserved for involuntary terminations include 32 sales and
marketing personnel, 15 accounting and finance personnel, 8 manufacturing and
distribution personnel, 7 information technology personnel, 3 executives, and 1
research and development person.
The following unaudited pro forma results of operations assume the 1999
acquisitions had occurred on December 28, 1997. We did not adjust for any
consolidation savings or other changes in revenues or expenses that occurred as
a result of our acquiring these businesses. As a result, the following pro forma
financial information may not represent our operating results or future
operating results if we had acquired these businesses on December 28, 1997.
TWELVE MONTHS ENDED
-----------------------------
DECEMBER 25, DECEMBER 26,
1999 1998
(Unaudited, in thousands, except per share data) ------------- -------------
Net sales................................................... $817,310 $760,418
Net earnings................................................ $ 45,985 $ 36,026
Earnings per share:
Basic..................................................... $ .76 $ .61
Diluted................................................... $ .75 $ .60
Weighted average common shares and equivalent common shares
outstanding:
Basic................................................... 60,481 59,486
Diluted................................................. 62,553 60,411
Our results for fiscal 2000 include the operating results of the DIAPER GENIE
and BABY MAGIC acquisitions.
1999 DIVESTITURE
On May 12, 1999, we sold, on a break-even basis, for cash and future
guaranteed minimum royalty payments, our U.S. and International JHIRMACK hair
care business. We retained the Canadian JHIRMACK business.
3. COMPREHENSIVE EARNINGS
Foreign currency translation adjustment is the only reconciling item between
net earnings and comprehensive earnings. For all of the periods presented, there
were no material differences between net earnings and comprehensive earnings.
Our comprehensive earnings for the last three fiscal years were (in thousands):
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000 1999 1998
------------- ------------- -------------
Net earnings............................................ $35,544 $44,071 $34,230
Foreign currency translation adjustment................. (638) 403 (710)
------- ------- -------
Comprehensive earnings................................ $34,906 $44,474 $33,520
======= ======= =======
F-10
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION
BUSINESS SEGMENTS
We are organized in three divisions, which are categorized as business
segments in accordance with generally accepted accounting principles.
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:
___________________________PRIOR TO 1998 ACQUISITIONS___________________________
PLAYTEX:
- disposable nurser system
- cups and mealtime products
- reusable hard bottles and pacifiers
_____________________________1998 ACQUIRED BRANDS_____________________________
- BINKY pacifiers
- MR. BUBBLE children's bubble bath
- CHUBS/BABY MAGIC baby wipes
- DIAPARENE infant care products, and
- WET ONES hand and face towelettes
_____________________________1999 ACQUIRED BRANDS_____________________________
- DIAPER GENIE diaper disposal system
- BABY MAGIC infant toiletries
The Feminine Care product category includes a wide range of plastic and
cardboard applicator tampons marketed under such brand names as PLAYTEX: GENTLE
GLIDE, SILK GLIDE and SLIMFITS.
Our CONSUMER PRODUCTS DIVISION includes Sun Care, Household Products, and
Personal Grooming products sold in the United States primarily to mass
merchandisers, grocery and drug classes of trade.
SUN CARE HOUSEHOLD PRODUCTS
------------------------------------ ------------------------------------
- BANANA BOAT - PLAYTEX Gloves
- WOOLITE rug and upholstery
cleaning products
Our Personal Grooming business includes:
PRIOR TO 1998 ACQUISITIONS 1998 ACQUIRED BRANDS
------------------------------------ ------------------------------------
- JHIRMACK hair care products - BETTER OFF depilatories
- TEK toothbrushes - BINACA breath freshener products
- DENTAX oral care products
- DOROTHY GRAY skin care products
- OGILVIE home permanent products,
and
- TUSSY deodorants
In May 1999, we sold our U.S. JHIRMACK business.
Our INTERNATIONAL/CORPORATE SALES DIVISION includes:
- Sales to specialty classes of trade in
the United States including: warehouse
clubs, military, convenience stores,
specialty stores, and telemarketing
- export sales
- sales in Puerto Rico
- results from our Canadian and Australian subsidiaries
- sales of private label tampons
F-11
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
The International/Corporate Sales Division sells the same products as available
to our U.S. customers. In May 1999, we sold our International JHIRMACK business,
excluding the Canadian business.
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. Although
allocated to the divisions, depreciation is not a measurement used by us to
evaluate their performance.
TWELVE MONTHS ENDED
-----------------------------------------------------------------------------
DECEMBER 30, 2000 DECEMBER 25, 1999(1) DECEMBER 26, 1998(1)
----------------------- ------------------------ ------------------------
NET PRODUCT NET PRODUCT NET PRODUCT
SALES CONTRIBUTION SALES CONTRIBUTION SALES CONTRIBUTION
-------- ------------ --------- ------------ --------- ------------
Personal Products........... $486,524 $183,790 $456,920 $181,647 $365,958 $150,302
Consumer Products........... 205,599 57,111 195,494 60,698 184,310 56,889
International/Corporate
Sales..................... 139,220 55,146 135,297 53,418 119,345 46,478
Unallocated charges(2)...... -- (3,474) -- (8,172) -- (6,990)
-------- -------- -------- -------- -------- --------
Total consolidated........ $831,343 292,573 $787,711 287,591 $669,613 246,679
======== ======== ========
RECONCILIATION TO
OPERATING EARNINGS:
Selling, distribution
and research.............. 92,420 83,915 73,266
Administrative.............. 29,866 27,383 24,643
Amortization of
intangibles............... 22,350 21,064 17,336
-------- -------- --------
Operating earnings........ $147,937 $155,229 $131,434
======== ======== ========
------------------------
(1) In fiscal 2000, our divisional structures were reorganized. The
International/Corporate Sales Division now includes the U.S specialty
classes of trade including: warehouse clubs, convenience stores,
telemarketing, e-commerce, military and other specialty classes of trade.
The net sales and product contribution from the specialty classes of trade
were previously reported in the Personal and Consumer Products divisions. We
reclassified our prior year business segment disclosures to conform to the
current year presentation. The net sales of the specialty classes of trade
represented approximately 8% of consolidated net sales for fiscal 2000, 1999
and 1998.
(2) Certain unallocated corporate charges such as business license taxes,
pension expense and product liability insurance are included in consolidated
gross margin, but not included in the evaluation of division performance. We
recorded pension income of $4.3 million in fiscal 2000 and $0.7 in 1999 and
pension expense of less than $0.1 million in 1998 (see Note 13).
F-12
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
The amount of depreciation allocated to the divisions is as follows (dollars
in thousands):
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000 1999 1998
------------- ------------- -------------
Personal Products....................................... $ 6,332 $5,459 $5,416
Consumer Products....................................... 1,369 1,193 1,466
International/Corporate Sales........................... 834 732 1,176
------- ------ ------
Depreciation included in product contribution......... 8,535 7,384 8,058
Depreciation not allocated to divisions................. 3,012 2,463 1,632
------- ------ ------
Consolidated depreciation............................. $11,547 $9,847 $9,690
======= ====== ======
GEOGRAPHIC AREA INFORMATION
Net sales and product contribution represents sales to unaffiliated
customers only. Intergeographic sales and transfers between geographic areas are
minimal and are not disclosed separately. Net sales and product contribution
within the United States includes all 50 states and its territories. Corporate
charges that are not allocated to divisions (see preceding table) are included
in product contribution for the United States. International net sales and
product contribution represents business activity outside of the United States
and its territories.
TWELVE MONTHS ENDED
---------------------------------------------------------------------------
DECEMBER 30, 2000 DECEMBER 25, 1999 DECEMBER 26, 1998
----------------------- ----------------------- -----------------------
NET PRODUCT NET PRODUCT NET PRODUCT
SALES CONTRIBUTION SALES CONTRIBUTION SALES CONTRIBUTION
-------- ------------ -------- ------------ -------- ------------
United States............... $765,779 $271,238 $721,061 $265,988 $609,866 $227,359
International............... 65,564 21,335 66,650 21,603 59,747 19,320
-------- -------- -------- -------- -------- --------
Total..................... $831,343 $292,573 $787,711 $287,591 $669,613 $246,679
======== ======== ======== ======== ======== ========
Identifiable assets by geographic area represent those assets that are used
in our operations in each area.
DECEMBER 30, DECEMBER 25,
IDENTIFIABLE ASSETS 2000 1999
------------------- ------------- -------------
United States............................................... $1,121,592 $1,130,970
International............................................... 17,792 17,682
---------- ----------
Total..................................................... $1,139,384 $1,148,652
========== ==========
F-13
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are as follows (in
thousands):
DECEMBER 30, DECEMBER 25,
2000 1999
------------- -------------
Receivables................................................. $ 133,207 $ 132,548
Less allowance for doubtful accounts........................ (2,237) (2,292)
--------- ---------
Net..................................................... $ 130,970 $ 130,256
========= =========
Inventories:
Raw materials............................................. $ 25,140 $ 27,974
Work in process........................................... 1,747 532
Finished goods............................................ 58,439 56,990
--------- ---------
Total................................................... $ 85,326 $ 85,496
========= =========
Net property, plant and equipment:
Land...................................................... $ 2,376 $ 2,376
Buildings................................................. 38,601 37,165
Machinery and equipment................................... 173,226 154,848
--------- ---------
214,203 194,389
Less accumulated depreciation............................. (96,048) (87,196)
--------- ---------
Net..................................................... $ 118,155 $ 107,193
========= =========
Goodwill.................................................... $ 667,031 $ 666,912
Less accumulated amortization............................... (156,036) (139,229)
--------- ---------
Net..................................................... $ 510,995 $ 527,683
========= =========
Trademarks, patents, and other.............................. $ 182,214 $ 183,934
Less accumulated amortization............................... (17,946) (14,403)
--------- ---------
Net..................................................... $ 164,268 $ 169,531
========= =========
Deferred financing costs.................................... $ 26,076 $ 25,522
Less accumulated amortization............................... (13,742) (9,992)
--------- ---------
Net..................................................... $ 12,334 $ 15,530
========= =========
Accrued expenses:
Advertising and sales promotion........................... $ 23,519 $ 29,011
Employee compensation and benefits........................ 13,912 13,894
Interest.................................................. 11,233 11,078
Insurance................................................. 3,200 3,189
Other..................................................... 17,936 16,822
--------- ---------
Total................................................... $ 69,800 $ 73,994
========= =========
F-14
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. DUE FROM RELATED PARTY
Our business is unrelated to the business of Playtex Apparel, Inc.
("Apparel"), which was spun-off from us in 1988 in a reorganization of the
Company. Two of our former directors and senior executive officers are general
partners of the investor group (the "Apparel Partnership") which controlled
Apparel until they were later sold. Playtex Investment Corp., one of our
wholly-owned subsidiaries, is the holder of 15% debentures issued by the Apparel
Partnership due December 15, 2003. Interest on the debentures is payable
annually in cash or additional debentures. The Apparel Partnership decided to
make their debenture payments in additional debentures through their December
15, 1993 payment and have paid in cash since then. The obligations of the
Apparel Partnership are nonrecourse to the partners of the Apparel Partnership.
The unaudited assets of the Apparel Partnership are Sara Lee Corporation common
stock with a market value at December 30, 2000 and December 25, 1999 of
approximately $6.5 million and $5.9 million, cash of approximately $0.8 million
and $0.5 million and our 15 1/2% subordinated notes held by them (see Note 8).
We believe our debentures represent their only material liability.
7. LONG-TERM DEBT
Long-term debt, excluding amounts due to related party, consists of the
following (in thousands):
DECEMBER 30, DECEMBER 25,
2000 1999
------------- -------------
1997 Credit Agreement:
Term A Loan............................................... $129,813 $151,126
Revolving Credit Facility................................. -- 32,500
Term Loan................................................. 241,750 244,250
6% Convertible Subordinated Notes due 2004.................. 50,000 50,000
8 7/8% Senior Notes due 2004................................ 150,000 150,000
9% Senior Subordinated Notes due 2003....................... 360,000 360,000
-------- --------
931,563 987,876
Less current maturities................................... (45,125) (23,813)
-------- --------
Total long-term debt.................................... $886,438 $964,063
======== ========
On February 2, 1994, we issued $360.0 million aggregate principal of 9%
senior subordinated notes due December 15, 2003 (the "9% Notes"). The interest
on the 9% Notes is payable in cash semi-annually on each June 15 and
December 15 with the final principal payment due on December 15, 2003.
On July 21, 1997, we completed a refinancing of our senior indebtedness,
which included:
- the issuance of $150.0 million principal amount of 8 7/8% senior notes due
July 15, 2004 (the "8 7/8% Senior Notes"),
- a $150.0 million senior secured term loan due September 15, 2003 (the
"Term Loan"), and
- senior secured credit facilities of $170.0 million comprised of:
- $115.0 million revolving credit facility (the "Revolving Credit
Facility") and
- $55.0 million term loan facility (the "Term A Loan").
F-15
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT (CONTINUED)
In connection with the 1998 acquisitions (see Note 2), we increased our
indebtedness by:
- $100.0 million under the Term Loan for the PCH acquisition,
- $10.4 million under the Revolving Credit Facility for the acquisitions of
Carewell and BINKY, and
- $0.5 million by issuing a note for the acquisition of BINKY. This was
repaid in 1998.
In connection with the 1999 acquisitions (see Note 2), we increased our
indebtedness by:
- $100.0 million under the Term A Loan for the BABY MAGIC acquisition,
- $72.0 million under the Revolving Credit Facility, and
- $50.0 million by issuing the Convertible Notes for the DIAPER GENIE
acquisition.
The Term Loan provides for quarterly repayment of principal of $625,000
through June 15, 2003. The final payment of $235.5 million is due on September
15, 2003.
Principal repayments on the Term A Loan are $42.6 million in fiscal 2001,
$56.2 million in fiscal 2002, and $31.0 million in fiscal 2003.
The Revolving Credit Facility matures on June 15, 2003. On December 15,
2000, our Revolving Credit Facility commitments were automatically and
permanently reduced by $5.0 million. Additional reductions in our Revolving
Credit Facility commitments are as follows:
- $5.0 million on June 15, 2001,
- $7.0 million on December 15, 2001 and June 15, 2002, and
- $8.0 million on December 15, 2002 and June 15, 2003.
At December 30, 2000, we had $107.8 million of unused borrowings available to us
under the Revolving Credit Facility. We also pay a quarterly commitment fee of
three-eighths of one percent on the portion of our Revolving Credit Facility
that we are not using and an administrative fee of $0.1 million per year.
Fees and expenses we have incurred to issue and amend long-term debt have
been capitalized and are being amortized over the life of the related debt
agreements. These deferred financing costs, net of accumulated amortization, at
December 30, 2000 include $5.5 million for the 1997 Credit Agreement, $4.3
million for the 9% Notes, and $2.6 million for the 8 7/8% Senior Notes.
We periodically use financial instruments, such as derivatives, to manage
the impact of interest rate changes on our variable rate debt. We do not enter
into financial instruments for trading or speculative purposes. Derivative
instruments we were a party to include:
- In July 1998, we entered into an interest rate swap agreement, which
effectively fixed the LIBOR rate on $100.0 million of our variable rate
debt at 5.455%. Effective July 23, 2000, this swap agreement was
terminated by the counter party as allowed under the terms of the
instrument.
- In November 2000, we entered into an interest rate swap agreement, which
effectively fixed the LIBOR rate on $150.0 million of our variable rate
debt at 6.3475% until the termination date of August 30, 2001. The counter
party may at its discretion extend the swap agreement an additional nine
months.
F-16
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT (CONTINUED)
- In November 2000, we entered into another interest rate swap agreement,
which effectively fixed the LIBOR rate on $150.0 million of our variable
rate debt at 6.3825% until December 4, 2001, when the agreement is
scheduled to terminate.
At December 30, 2000, our total indebtedness consisted of $560.0 million in
fixed rate debt and $371.6 million in variable rate debt. The two swap
agreements, entered into in November 2000, fixed $300.0 million of our variable
rate debt for the duration of the swaps. Based on our interest rate exposure at
December 30, 2000, a 1% increase in interest rates would result in an estimated
$0.7 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.
- Our weighted average variable interest rate for fiscal 2000, 1999, and
1998 was: 7.76%, 6.75% and 7.09%.
- At December 30, 2000, our variable interest rate was 8.16% compared to
7.18% at December 25, 1999.
The provisions of the 1997 Credit Agreement require us to meet certain
financial covenants and ratios and include limitations and restrictions,
including:
- indebtedness and liens, - disposition of assets,
- major acquisitions or mergers, - certain dividends and other distributions,
and
- capital expenditures, - prepayment and modification of all
indebtedness or equity capitalization.
In December 2000, we amended certain of our financial covenants and ratios. As a
result of the amendment to the 1997 Credit Agreement we had to pay an amendment
fee and the interest rate spreads over LIBOR that we pay on the Revolving Credit
Facility and Term A Loan were increased.
The 9% Notes and the 8 7/8% Senior 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 9% Notes and the 8 7/8% Senior Notes (see
Note 17).
Our required principal repayments are (excluding balances outstanding under
the Revolving Credit Facility and due to related party):
- $45.1 million in fiscal 2001, - $627.8 million in fiscal 2003, and
- $58.7 million in fiscal 2002, - $200.0 million in fiscal 2004.
We have no debt obligations due after June 15, 2004.
8. DUE TO RELATED PARTY
Due to related party consists of 15 1/2% subordinated notes issued by us and
held by the Apparel Partnership. The subordinated notes are due on December 15,
2003 and interest on them is payable annually in cash or additional 15 1/2%
subordinated notes. We decided to make our interest payments on the subordinated
notes in additional subordinated notes through our December 15, 1993 payment and
have paid in cash since then (see Note 6).
F-17
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES
The provision for income taxes is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities. Deferred income tax assets and liabilities are calculated for
differences between the financial statement and tax bases of assets and
liabilities. These differences will result in taxable or deductible amounts in
the future. Valuation allowances are established, when necessary, to reduce
deferred tax assets to amounts we expect to use.
Earnings before income taxes and extraordinary loss are as follows (in
thousands):
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000 1999 1998
------------- ------------- -------------
U.S..................................................... $59,519 $74,135 $58,682
Foreign................................................. 3,534 2,133 1,234
------- ------- -------
Total............................................... $63,053 $76,268 $59,916
======= ======= =======
Our provision for income taxes for the twelve months ended December 30,
2000, December 25, 1999, and December 26, 1998 is as follows (in thousands):
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000 1999 1998
------------- ------------- -------------
Current:
Federal............................................... $13,580 $20,647 $17,568
State and local....................................... 982 1,415 1,242
Foreign............................................... 1,564 1,065 632
------- ------- -------
16,126 23,127 19,442
Deferred:
Federal............................................... 10,292 8,595 6,177
State and local....................................... 1,091 544 34
Foreign............................................... -- (69) 33
------- ------- -------
11,383 9,070 6,244
------- ------- -------
Total............................................... $27,509 $32,197 $25,686
======= ======= =======
F-18
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
Taxable and deductible temporary differences and tax credit carryforwards
which give rise to our deferred tax assets and liabilities at December 30, 2000
and December 25, 1999 are as follows (in thousands):
DECEMBER 30, DECEMBER 25,
2000 1999
------------- -------------
Deferred tax assets:
Allowances and reserves not currently deductible.......... $13,539 $14,925
Postretirement benefits reserve........................... 4,315 3,878
Net operating loss carryforwards.......................... 3,429 4,377
Other..................................................... 1,406 1,131
------- -------
Total................................................... $22,689 $24,311
======= =======
Deferred tax liabilities:
Property, plant and equipment............................. $20,516 $15,523
Trademarks................................................ 18,421 13,654
Deferred gain on sale of business......................... 14,298 14,298
Undistributed earnings of foreign subsidiary.............. 2,515 2,515
Other..................................................... 345 340
------- -------
Total................................................... $56,095 $46,330
======= =======
Undistributed earnings of our Canadian and Australian subsidiaries for which
U.S. income taxes have not been provided were approximately $7.3 million at
December 30, 2000. Such undistributed earnings are expected to be permanently
reinvested in the Canadian and Australian subsidiaries.
We have available net operating loss carryforwards ("NOLs") of $9.5 million
at December 30, 2000 that expire in years 2009 through 2012. These NOLs relate
primarily to operations of Banana Boat Holdings and Carewell prior to our
acquisition of them. We can utilize these NOLs, with certain limitations, on our
federal, state and local tax returns. We expect to utilize these NOLs prior to
their expiration. The current benefit realized from these NOLs was $1.0 million,
$3.0 million, and $3.0 million for fiscal 2000, 1999, and 1998, respectively.
Our tax provision differed from the amount computed using the federal
statutory rate of 35% as follows (in thousands):
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000 1999 1998
------------- ------------- -------------
Expected federal income tax at statutory rates.......... $22,069 $26,694 $20,971
Amortization of intangible assets....................... 4,496 4,487 4,414
State and local income taxes............................ 1,347 1,273 829
Other, net.............................................. (403) (257) (528)
------- ------- -------
Total tax provision................................. $27,509 $32,197 $25,686
======= ======= =======
F-19
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK-BASED COMPENSATION
During 1994, we established a long-term incentive plan under which awards of
stock options are granted. Options granted under the plan must:
- have an exercise price equal to or greater than the price of the stock on
the date of grant and
- have an expiration date no more than ten years from the grant date.
Except for formula grants to certain non-employee directors, options vest over a
period determined by the Compensation and Stock Option Committee. We have
7,047,785 shares reserved for issuance under the plan at December 30, 2000.
We account for stock-based compensation in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation". As permitted by SFAS No. 123, we follow Accounting Principles
Board Opinion No. 25 for determining compensation expense related to the
issuance of stock options. If we determined compensation expense under the
alternate fair value approach permitted by SFAS No. 123, our earnings and
earnings per share would have been reduced to the pro forma amounts listed below
(in thousands, except per share data):
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000 1999 1998
------------- ------------- -------------
Net earnings:
As reported........................................... $35,544 $44,071 $34,230
Pro forma............................................. $32,024 $39,414 $31,168
Earnings per share:
As reported
Basic............................................... $ .58 $ .73 $ .58
Diluted............................................. $ .58 $ .72 $ .57
Pro forma
Basic............................................... $ .53 $ .65 $ .52
Diluted............................................. $ .53 $ .65 $ .52
Weighted average common shares and common equivalent
shares outstanding:
Basic................................................. 60,824 60,481 59,486
Diluted............................................... 62,585 62,553 60,411
The fair value of each stock option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
- weighted average risk-free interest rates of 6.51%, 5.68%, and 5.28% for
fiscal 2000, 1999, and 1998;
- no dividend yield;
- expected option life of 7 years before exercise or cancellation; and
- volatility of 35%.
F-20
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK-BASED COMPENSATION (CONTINUED)
The following table summarizes our stock option activity over the past three
fiscal years:
2000 1999 1998
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
Outstanding at beginning of
year............................ 4,581,326 $11.86 4,093,260 $11.11 2,816,598 $ 9.27
Granted........................... 1,732,500 10.85 788,000 15.50 1,568,000 14.09
Exercised......................... (436,572) 8.79 (160,505) 8.83 (202,673) 8.78
Forfeited......................... (686,125) 13.35 (139,429) 13.70 (88,665) 10.96
--------- --------- ---------
Outstanding at end of year........ 5,191,129 11.59 4,581,326 11.86 4,093,260 11.11
========= ========= =========
Options exercisable at year-end... 2,832,780 11.12 2,669,878 10.18 1,912,834 9.21
Weighted-average fair value of
options granted during the
year............................ $ 5.43 $ 7.48 $ 6.67
The following table summarizes information about our stock options
outstanding at December 30, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- ------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED
AT REMAINING AVERAGE AT AVERAGE
DECEMBER 30, CONTRACTUAL EXERCISE DECEMBER 30, EXERCISE
RANGE OF EXERCISE PRICES 2000 LIFE PRICES 2000 PRICES
------------------------ ------------- ----------- -------- ------------- --------
$7.00 to 8.00.......................... 412,133 4.64 7.8750 412,133 7.8750
$8.00 to 9.00.......................... 62,500 5.41 8.0850 62,500 8.0850
$9.00 to 10.00......................... 1,335,498 5.50 9.6799 1,234,398 9.7236
$10.00 to 11.00........................ 1,551,665 9.05 10.7133 148,000 10.0473
$11.00 to 13.00........................ 72,500 9.37 12.2888 2,500 11.6250
$13.00 to 14.00........................ 162,500 5.43 13.2077 104,502 13.0000
$14.00 to 15.00........................ 548,333 7.40 14.3039 364,042 14.3036
$15.00 to 16.00........................ 1,046,000 8.19 15.2763 504,705 15.1909
--------- ---------
$7.00 to 16.00......................... 5,191,129 7.28 11.5893 2,832,780 11.1206
========= =========
F-21
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EARNINGS PER SHARE
The following table explains how our basic and diluted Earnings Per Share
("EPS") were calculated for the last three fiscal years (in thousands, except
per share data):
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000 1999 1998
------------- ------------- -------------
Numerator:
Net earnings--Basic................................. $35,544 $44,071 $34,230
Adjustment for interest on Convertible
Notes, net of tax................................. 946 788 --
------- ------- -------
Net earnings--Diluted............................... $36,490 $44,859 $34,230
======= ======= =======
Denominator:
Weighted average common shares outstanding--Basic... 60,824 60,481 59,486
Adjustment for dilutive effect of
employee stock options............................ 456 1,003 925
Adjustment for dilutive effect of
Convertible Notes, net of tax..................... 1,305 1,069 --
------- ------- -------
Weighted average common shares
outstanding--Diluted.............................. 62,585 62,553 60,411
======= ======= =======
Earnings Per Share:
Basic............................................... $ 0.58 $ 0.73 $ 0.58
Diluted............................................. $ 0.58 $ 0.72 $ 0.57
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 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 (has the affect of
increasing EPS), the impact of the dilutive securities is not included in the
computation.
12. LEASES
Our leases are primarily for buildings, manufacturing equipment, company
cars and information technology equipment. Future minimum payments under
non-cancelable operating leases for fiscal years ending after December 30, 2000
are as follows: $10.7 million in 2001, $8.6 million in 2002, $7.0 million in
2003, $6.2 million in 2004, $3.0 million in 2005 and $6.7 million in later
years.
Rent expense for operating leases amounted to $10.8 million, $9.5 million,
and $8.0 million for fiscal 2000, 1999 and 1998.
13. PENSION AND OTHER POSTRETIREMENT BENEFITS
Defined Benefit Pension Plans--Substantially all of our U.S. hourly and most
of our Canadian employees participate in pension plans. At December 30, 2000,
approximately 1,295 participants were covered by these plans and approximately
290 of them were receiving benefits.
F-22
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
Changes in pension benefits, which are retroactive to previous service of
employees, and gains and losses on pension assets, that occur because actual
experience differs from assumptions, is amortized over the estimated average
future service period of employees. Actuarial assumptions for the plans include:
- expected long-term rate of return on plan assets of 9.75% at December 30,
2000
and December 25, 1999,
- discount rate of 7.50% at December 30, 2000 and 7.75% at December 25, 1999
used in calculating the projected benefit obligation, and
- the rate of average future increases in compensation levels was 3.25% at
December 30, 2000
and December 25, 1999.
The pension plans assets are invested primarily in equity and fixed income
mutual funds, marketable equity securities, insurance contracts, and cash and
cash equivalents.
Net pension (benefit) expense for fiscal 2000, 1999 and 1998 is included in
cost of goods sold in the Consolidated Statements of Earnings and includes the
following components (in thousands):
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
NET PENSION EXPENSE 2000 1999 1998
------------------- ------------- ------------- -------------
Service cost--benefits earned during the period......... $ 1,068 $ 1,094 $ 928
Interest cost on projected benefit obligation........... 2,535 2,334 2,166
Expected return on plan assets.......................... (6,020) (3,958) (3,052)
Amortization of prior service cost...................... 95 84 88
Amortization of unrecognized net gain................... (1,958) (234) (79)
Amortization of transition gain......................... (40) (41) (39)
------- ------- -------
Net pension (benefit) expense....................... $(4,320) $ (721) $ 12
======= ======= =======
Reconciliations of the change in benefit obligation, change in plan assets,
and the funded status of the plans for fiscal 2000 and 1999 are as follows (in
thousands):
DECEMBER 30, DECEMBER 25,
CHANGE IN BENEFIT OBLIGATION 2000 1999
---------------------------- ------------- -------------
Benefit obligation at beginning of year..................... $32,645 $33,155
Service cost................................................ 1,068 1,094
Interest cost............................................... 2,535 2,334
Actuarial loss (gain)....................................... 1,883 (2,741)
Expected benefits paid...................................... (1,471) (1,348)
Foreign currency exchange rate changes...................... (59) 151
------- -------
Benefit obligation at end of year....................... $36,601 $32,645
======= =======
F-23
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
DECEMBER 30, DECEMBER 25,
CHANGE IN PLAN ASSETS 2000 1999
--------------------- ------------- -------------
Fair value of plan assets at beginning of year.............. $ 62,785 $ 41,317
Actual return on plan assets................................ (6,111) 22,577
Employee contributions...................................... -- 4
Employer contributions...................................... -- 8
Expected benefits paid...................................... (1,471) (1,348)
Foreign currency exchange rate changes...................... (86) 227
-------- --------
Fair value of plan assets at end of year................ $ 55,117 $ 62,785
======== ========
RECONCILIATION OF THE FUNDED STATUS
------------------------------------------------------------
Funded status............................................... $ 18,516 $ 30,140
Unrecognized transition asset............................... (200) (245)
Unrecognized prior service cost............................. 527 355
Unrecognized actuarial gain................................. (11,638) (27,346)
-------- --------
Prepaid benefit cost.................................... $ 7,205 $ 2,904
======== ========
Postretirement Benefits Other than Pensions--We provide postretirement
health care and life insurance benefits to certain U.S. retirees. These plans
require employees to share in the costs. Approximately 89% of all U.S. personnel
would become eligible for these postretirement health care and life insurance
benefits if they were to retire from the Company.
The components of the postretirement net periodic expense, which is included
in cost of goods sold in the Consolidated Statements of Earnings for fiscal
2000, 1999, and 1998, are as follows (in thousands):
TWELVE MONTHS ENDED
---------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
NET PERIODIC POSTRETIREMENT EXPENSE 2000 1999 1998
----------------------------------- ------------- ------------- -------------
Service cost--benefits earned during the period......... $ 504 $ 424 $ 347
Interest cost on accumulated benefit obligation......... 1,013 858 813
Amortization of prior service cost...................... 217 217 217
Recognized actuarial loss............................... 73 69 54
------ ------ ------
Net periodic postretirement expense................. $1,807 $1,568 $1,431
====== ====== ======
F-24
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
Reconciliations of the change in benefit obligation, change in plan assets,
and the funded status of the plan for fiscal 2000 and 1999 are as follows (in
thousands):
DECEMBER 30, DECEMBER 25,
CHANGE IN BENEFIT OBLIGATION 2000 1999
---------------------------- ------------- -------------
Benefit obligation at beginning of year..................... $ 11,992 $ 12,599
Service cost................................................ 504 424
Interest cost............................................... 1,013 858
Employee contributions...................................... 168 184
Plan amendments............................................. -- 21
Actuarial loss (gain)....................................... 1,880 (1,197)
Benefits paid............................................... (802) (897)
-------- --------
Benefit obligation at end of year....................... $ 14,755 $ 11,992
======== ========
CHANGE IN PLAN ASSETS
------------------------------------------------------------
Fair value of plan assets at beginning of year.............. $ -- $ --
Employer contributions...................................... 634 713
Employee contributions...................................... 168 184
Expected benefits paid...................................... (802) (897)
-------- --------
Fair value of plan assets at end of year................ $ -- $ --
======== ========
RECONCILIATION OF THE FUNDED STATUS
------------------------------------------------------------
Funded status............................................... $(14,755) $(11,992)
Unrecognized prior service cost............................. 1,034 1,252
Unrecognized actuarial loss................................. 2,847 1,038
-------- --------
Net amount accrued at year-end.......................... $(10,874) $ (9,702)
======== ========
The assumed health care cost trend rate and discount rate was 7.5% and 7.75%
in 2000 compared to 8.0% and 7.0% in 1999. The assumed health care cost trend
rate is anticipated to trend down until the final trend rate of 5.25% is reached
in 2006. A one percentage point increase in the assumed health care costs trend
rate increases the sum of the service and interest costs components of the
fiscal 2000 net periodic postretirement benefit expense by 18%, and the
accumulated postretirement benefit obligation as of December 30, 2000 by 15%. A
one percentage point decrease in the assumed health care costs trend rate
decreases the sum of the service and interest costs components of the fiscal
2000 net periodic postretirement benefit expense by 14% and the accumulated
postretirement benefit obligation by 12%.
Defined Contribution Benefit Plans--We also provide three defined
contribution plans covering various employee groups, two of which have
non-contributory features. The amounts charged to earnings for the defined
contribution plans totaled $5.9 million, $4.9 million and $4.8 million for our
last three fiscal years ended 2000, 1999, and 1998.
14. BUSINESS AND CREDIT CONCENTRATIONS
Most of our customers are dispersed throughout the United States and Canada.
No single customer accounted for more than 10% of our consolidated net sales in
fiscal 2000, 1999, or 1998 with
F-25
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. BUSINESS AND CREDIT CONCENTRATIONS (CONTINUED)
the exception of our largest customer (approximately 23% in 2000, 21% in 1999,
and 23% in 1998). Sales to this customer were made primarily from our two
largest business segments. At December 30, 2000 and December 25, 1999, no
account receivable from any customer was significant, except for our largest
customer (approximately $29.8 million in 2000 and $32.7 million in 1999).
Aggregate receivables from high risk customers are not considered significant
and we estimate, based upon past experience, that we have sufficient reserves to
cover any losses arising from those accounts.
15. DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
CASH, RECEIVABLES, ACCOUNTS PAYABLE, INCOME TAXES AND ACCRUED EXPENSES--The
carrying amounts approximate fair value because of the short-term maturity of
these instruments.
VARIABLE RATE DEBT--The carrying amounts approximate fair value because the
rate of interest on borrowings under the credit agreement is, at our option, a
function of various alternative short-term borrowing rates.
LONG-TERM DEBT, INTEREST RATE DERIVATIVES, and OTHER FINANCIAL
INSTRUMENTS--The fair value of the following financial instruments was estimated
at December 30, 2000 and December 25, 1999 as follows (in thousands):
DECEMBER 30, 2000 DECEMBER 25, 1999
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
9% Senior Subordinated Notes(a)..................... $360,000 $347,400 $360,000 $358,200
8 7/8% Senior Notes(a).............................. 150,000 142,500 150,000 150,563
6% Convertible Subordinated Notes due 2004(b)....... 50,000 47,284 50,000 48,542
15% Notes due from Playtex
Apparel Partners, L.P.(c)......................... 80,017 80,017 80,017 80,017
15 1/2% Subordinated Notes due to Playtex
Apparel Partners, L.P.(c)......................... 78,386 78,386 78,386 78,386
Other noncurrent assets(d).......................... 8,300 8,265 4,844 4,786
Noncurrent liabilities(d)........................... 12,814 12,756 12,267 12,190
Interest Rate Swap terminated July 23, 2000(e)...... -- -- -- 402
Interest Rate Swap termination date of
August 30, 2001(e)................................ -- (1,063) -- --
Interest Rate Swap termination date of
December 4, 2001(e)............................... -- (625) -- --
------------------------
(a) The estimated fair values were based on the average range of bid/ask quotes
provided by independent securities dealers.
(b) The estimated fair value was based on the net present value of the interest
and principal payments.
(c) The estimated fair values were based on the amount of future cash flows
associated with these instruments, discounted using an appropriate interest
rate.
(d) The estimated fair values were based on a combination of actual cost
associated with recent purchases or the amount of future cash flows
discounted using our borrowing rate for similar instruments.
(e) The estimated fair value was based upon quoted market price (mark to
market).
F-26
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. QUARTERLY DATA (UNAUDITED)
The following is a summary of our quarterly results of operations and market
price data for our common stock for our fiscal 2000 and 1999 (in thousands,
except per share data):
FIRST SECOND THIRD FOURTH
FISCAL 2000 QUARTER QUARTER QUARTER QUARTER
----------- -------- -------- -------- ---------
Net sales.......................................... $223,507 $229,589 $188,143 $ 190,104
Gross profit....................................... 129,702 131,622 109,346 108,499
Operating earnings................................. 48,232 45,266 30,038 24,401
Net earnings....................................... 15,269 14,040 4,460 1,775
Earnings per share(a):
Net earnings--basic and diluted................ $ .25 $ .23 $ .07 $ .03
Market price--high................................. $ 15 1/2 $ 14 $ 12 7/8 $ 11 15/16
--low................................... $ 10 1/4 $ 10 1/8 $ 10 3/8 $ 8 5/8
FIRST SECOND THIRD FOURTH
FISCAL 2000 QUARTER QUARTER QUARTER QUARTER
----------- -------- -------- -------- ---------
Net sales.......................................... $190,452 $209,195 $187,926 $ 200,138
Gross profit....................................... 109,545 121,664 109,597 115,663
Operating earnings................................. 42,379 39,079 34,406 39,365
Net earnings....................................... 13,571 11,665 8,029 10,806
Earnings per share(a):
Net earnings--basic and diluted................ $ .22 $ .19 $ .13 $ .18
Market price--high................................. $ 17 1/8 $ 17 $ 16 5/8 $ 15 1/8
--low................................... $ 13 1/2 $ 14 $ 13 1/16 $ 11 1/2
------------------------
(a) Earnings per share data are computed independently for each of the periods
presented; therefore, the sum of the earnings per share amounts for the
quarters may not equal the total for the year.
F-27
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
8 7/8% SENIOR NOTES DUE 2004
The 8 7/8% Senior Notes are guaranteed by the following wholly-owned
subsidiaries:
- Playtex Sales & Services, Inc. ("PSSI"). PSSI provides sales
solicitation, management and administrative services to us and our
U.S. affiliates.
- Playtex Manufacturing, Inc. ("PMI"). PMI is a contract manufacturer and
contract research and development services provider for us and our
U.S. affiliates.
- Playtex Beauty Care, Inc. ("PBCI"). PBCI is a manufacturer and
distributor of JHIRMACK hair care products (through May 12, 1999).
- Playtex Investment Corp. ("PIC"). PIC is an investment holding company
which holds the Apparel Debentures (see Note 6).
- Playtex International Corp. ("PINTL"). PINTL is the sole shareholder of
Playtex Limited, a manufacturer and distributor of Playtex products in
Canada.
- TH Marketing Corp. ("THMC"). THMC is the sole shareholder of Playtex
Foreign Sales Corporation.
- SmileTote, Inc. ("STI"). STI owns certain intangible assets associated
with our infant feeding business.
- Sun Pharmaceuticals Corp. ("Sun"). Sun owns the BANANA BOAT trade name
and certain other intangible assets associated with the BANANA BOAT
business. Sun distributes its products outside the U.S. and Puerto Rico
and to certain U.S. distributors excluding the Company.
- Personal Care Group, Inc. ("PCG"). PCG is the owner of various personal
care related intangible assets.
- Personal Care Holdings, Inc. ("PCH"). PCH is the sole shareholder of PCG.
- Carewell Industries, Inc. ("Carewell"). Carewell is the owner of certain
dental care related intangible assets.
The guarantors are joint and several guarantors of the 8 7/8% Senior Notes.
Such guarantees are irrevocable, full and unconditional. The guarantees are
senior subordinated obligations and are subordinated to all senior obligations
including guarantees of our obligations under the credit agreement.
The following wholly-owned subsidiaries are non-guarantors of the 8 7/8%
Senior Notes:
- Playtex Limited. Playtex Limited is our Canadian subsidiary.
- Playtex Foreign Sales Corporation ("PFSC"). PFSC is a foreign sales
corporation as defined by Internal Revenue Code Section 922, and
- Playtex Products Australia PTY LTD ("PPI Aust"). PPI Aust is a
distributor of personal care products in Australia and New Zealand.
F-28
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
The information which follows presents our condensed financial position as
of December 30, 2000 and December 25, 1999 and our condensed statements of
earnings and cash flows for each of our last three fiscal years 2000, 1999, and
1998. The presentation is made based on:
- the Company on a consolidated basis,
- the parent company only,
- the combined guarantors, and
- the combined non-guarantors.
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 30, 2000
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ---------- ----------
ASSETS
Current assets....................... $ 245,315 $ 8 $ 140,083 $ 89,636 $15,588
Investment in subsidiaries........... -- (461,661) 449,125 12,536 --
Intercompany receivable.............. -- (104,047) 22,958 80,050 1,039
Net property, plant and equipment.... 118,155 -- 119 117,110 926
Intangible assets.................... 687,597 -- 468,379 219,218 --
Other noncurrent assets.............. 88,317 (504) 8,304 80,517 --
---------- --------- ---------- -------- -------
Total assets..................... $1,139,384 $(566,204) $1,088,968 $599,067 $17,553
========== ========= ========== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities.................. $ 171,082 $ 10 $ 160,553 $ 6,443 $ 4,076
Intercompany payable................. -- (104,047) -- 102,703 1,344
Long-term debt....................... 964,824 (506) 965,330 -- --
Other noncurrent liabilities......... 59,541 -- 19,148 40,796 (403)
---------- --------- ---------- -------- -------
Total liabilities................ 1,195,447 (104,543) 1,145,031 149,942 5,017
Stockholders' equity................. (56,063) (461,661) (56,063) 449,125 12,536
---------- --------- ---------- -------- -------
Total liabilities and
stockholders' equity........... $1,139,384 $(566,204) $1,088,968 $599,067 $17,553
========== ========= ========== ======== =======
F-29
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 25, 1999
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ---------- ----------
ASSETS
Current assets....................... $ 243,854 $ 8 $ 141,526 $ 86,737 $15,583
Investment in subsidiaries........... -- (442,503) 431,493 11,010 --
Intercompany receivable.............. -- (111,397) 42,387 67,974 1,036
Net property, plant and equipment.... 107,193 -- 135 106,091 967
Intangible assets.................... 712,744 -- 486,725 226,019 --
Other noncurrent assets.............. 84,861 (500) 4,844 80,517 --
---------- --------- ---------- -------- -------
Total assets..................... $1,148,652 $(554,392) $1,107,110 $578,348 $17,586
========== ========= ========== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities.................. $ 151,848 $ (252) $ 142,621 $ 5,112 $ 4,367
Intercompany payable................. -- (111,397) -- 108,781 2,616
Long-term debt....................... 1,042,449 (506) 1,042,955 -- --
Other noncurrent liabilities......... 49,223 -- 16,402 33,227 (406)
---------- --------- ---------- -------- -------
Total liabilities................ 1,243,520 (112,155) 1,201,978 147,120 6,577
Stockholders' equity................. (94,868) (442,237) (94,868) 431,228 11,009
---------- --------- ---------- -------- -------
Total liabilities and
stockholders' equity........... $1,148,652 $(554,392) $1,107,110 $578,348 $17,586
========== ========= ========== ======== =======
F-30
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 2000
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ -------- ---------- ----------
Net revenues.......................... $831,343 $(432,931) $787,896 $430,795 $45,583
Cost of sales......................... 352,174 (315,110) 339,700 303,503 24,081
-------- --------- -------- -------- -------
Gross profit...................... 479,169 (117,821) 448,196 127,292 21,502
-------- --------- -------- -------- -------
Operating expenses:
Advertising, selling and
administrative...................... 308,882 (117,821) 316,167 93,483 17,053
Amortization of intangibles........... 22,350 -- 15,430 6,920 --
-------- --------- -------- -------- -------
Total operating expenses.......... 331,232 (117,821) 331,597 100,403 17,053
-------- --------- -------- -------- -------
Operating earnings................ 147,937 -- 116,599 26,889 4,449
Interest expense, net................. 84,884 -- 97,213 (12,003) (326)
Equity in net earnings of
subsidiaries........................ -- 29,255 (26,129) (3,126) --
-------- --------- -------- -------- -------
Earnings before income taxes...... 63,053 (29,255) 45,515 42,018 4,775
Income taxes.......................... 27,509 -- 9,971 15,889 1,649
-------- --------- -------- -------- -------
Net earnings...................... $ 35,544 $ (29,255) $ 35,544 $ 26,129 $ 3,126
======== ========= ======== ======== =======
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 25, 1999
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ -------- ---------- ----------
Net revenues.......................... $787,711 $(399,075) $741,983 $398,280 $46,523
Cost of sales......................... 331,242 (294,977) 321,882 280,166 24,171
-------- --------- -------- -------- -------
Gross profit...................... 456,469 (104,098) 420,101 118,114 22,352
-------- --------- -------- -------- -------
Operating expenses:
Advertising, selling and
administrative...................... 280,176 (104,098) 281,579 84,135 18,560
Amortization of intangibles........... 21,064 -- 14,060 7,004 --
-------- --------- -------- -------- -------
Total operating expenses.......... 301,240 (104,098) 295,639 91,139 18,560
-------- --------- -------- -------- -------
Operating earnings................ 155,229 -- 124,462 26,975 3,792
Interest expense, net................. 78,961 -- 91,070 (12,003) (106)
Equity in net earnings of
subsidiaries........................ -- 28,724 (25,935) (2,789) --
-------- --------- -------- -------- -------
Earnings before income taxes...... 76,268 (28,724) 59,327 41,767 3,898
Income taxes.......................... 32,197 -- 15,256 15,832 1,109
-------- --------- -------- -------- -------
Net earnings...................... $ 44,071 $ (28,724) $ 44,071 $ 25,935 $ 2,789
======== ========= ======== ======== =======
F-31
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ -------- ---------- ----------
Net revenues.......................... $669,613 $(307,484) $595,947 $341,183 $39,967
Cost of sales......................... 277,555 (218,942) 244,496 233,988 18,013
-------- --------- -------- -------- -------
Gross profit...................... 392,058 (88,542) 351,451 107,195 21,954
-------- --------- -------- -------- -------
Operating expenses:
Advertising, selling and
administrative...................... 243,288 (88,542) 235,355 77,159 19,316
Amortization of intangibles........... 17,336 -- 10,656 6,680 --
-------- --------- -------- -------- -------
Total operating expenses.......... 260,624 (88,542) 246,011 83,839 19,316
-------- --------- -------- -------- -------
Operating earnings................ 131,434 -- 105,440 23,356 2,638
Interest expense, net................. 71,518 -- 83,621 (12,004) (99)
Equity in net earnings of
subsidiaries........................ -- 25,234 (23,269) (1,965) --
-------- --------- -------- -------- -------
Earnings before income taxes...... 59,916 (25,234) 45,088 37,325 2,737
Income taxes.......................... 25,686 -- 10,858 14,055 773
-------- --------- -------- -------- -------
Net earnings...................... $ 34,230 $ (25,234) $ 34,230 $ 23,270 $ 1,964
======== ========= ======== ======== =======
F-32
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 2000
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ -------- ---------- ----------
Net earnings.......................... $ 35,544 $(29,255) $ 35,544 $ 26,129 $ 3,126
Non-cash items included in earnings:
Amortization of intangibles....... 22,350 -- 15,430 6,920 --
Amortization of deferred financing
costs........................... 3,750 -- 3,750 -- --
Depreciation...................... 11,547 -- 63 11,177 307
Deferred taxes.................... 11,383 -- 3,930 7,453 --
Other, net........................ (3,214) 29,255 (28,992) (2,968) (509)
Increase in net working capital..... (2,634) -- (1,011) (1,545) (78)
Increase (decrease) in amounts due
to Parent......................... -- -- 18,600 (17,325) (1,275)
-------- -------- -------- -------- -------
Net cash flows from
operations.................... 78,726 -- 47,314 29,841 1,571
Cash flows used for investing
activities:
Purchase of property, plant and
equipment......................... (22,724) -- (243) (22,196) (285)
Businesses acquired, net............ (279) -- (279) -- --
-------- -------- -------- -------- -------
Net cash flows used for
investing activities.......... (23,003) -- (522) (22,196) (285)
Cash flows used for financing
activities:
Net payments under working capital
facilities and long-term debt
obligations....................... (56,313) -- (56,313) -- --
Payment of financing costs.......... (553) -- (553) -- --
Issuance of shares of common stock,
net............................... 3,899 -- 3,899 -- --
Receipt (payment) of dividends...... -- -- 8,713 (7,645) (1,068)
-------- -------- -------- -------- -------
Net cash flows used for
financing activities.......... (52,967) -- (44,254) (7,645) (1,068)
Increase in cash...................... 2,756 -- 2,538 -- 218
Cash at beginning of period........... 7,526 8 1,852 1 5,665
-------- -------- -------- -------- -------
Cash at end of period................. $ 10,282 $ 8 $ 4,390 $ 1 $ 5,883
======== ======== ======== ======== =======
F-33
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 25, 1999
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ --------- ---------- ----------
Net earnings......................... $ 44,071 $(28,724) $ 44,071 $ 25,935 $ 2,789
Non-cash items included in
earnings:
Amortization of intangibles...... 21,064 -- 14,060 7,004 --
Amortization of deferred
financing costs................ 3,398 -- 3,398 -- --
Depreciation..................... 9,847 -- 59 9,504 284
Deferred taxes................... 9,070 -- 2,244 6,895 (69)
Other, net....................... (113) 28,724 (31,385) 1,797 751
Increase in net working capital.... (31,050) -- (2,229) (27,647) (1,174)
Increase (decrease) in amounts due
to Parent........................ -- -- (24,139) 22,658 1,481
--------- -------- --------- -------- -------
Net cash flows from
operations................... 56,287 -- 6,079 46,146 4,062
Cash flows used for investing
activities:
Purchase of property, plant and
equipment........................ (20,802) -- 18,186 (38,968) (20)
Businesses acquired, net........... (210,109) -- (210,109) -- --
--------- -------- --------- -------- -------
Net cash flows used for
investing activities......... (230,911) -- (191,923) (38,968) (20)
Cash flows used for financing
activities:
Net borrowings under working
capital facilities and long-term
debt obligations................. 176,126 -- 176,126 -- --
Payment of financing costs......... (2,480) -- (2,480) -- --
Issuance of shares of common stock,
net.............................. 1,633 -- 1,633 -- --
Receipt (payment) of dividends..... -- -- 8,955 (7,645) (1,310)
--------- -------- --------- -------- -------
Net cash flows provided by
(used for) financing
activities................... 175,279 -- 184,234 (7,645) (1,310)
Increase in cash..................... 655 -- (1,610) (467) 2,732
Cash at beginning of period.......... 6,871 8 3,462 468 2,933
--------- -------- --------- -------- -------
Cash at end of period................ $ 7,526 $ 8 $ 1,852 $ 1 $ 5,665
========= ======== ========= ======== =======
F-34
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ --------- ---------- ----------
Net earnings......................... $ 34,230 $(25,234) $ 34,230 $ 23,270 $ 1,964
Non-cash items included in
earnings:
Amortization of intangibles...... 17,336 -- 10,656 6,680 --
Amortization of deferred
financing costs................ 2,995 -- 2,995 -- --
Depreciation..................... 9,690 -- 72 9,376 242
Deferred taxes................... 6,244 -- 8,318 (2,107) 33
Other, net....................... 36 25,242 (50,682) 26,117 (641)
Increase in net working capital.... (17,314) -- 4,330 (21,027) (617)
Increase (decrease) in amounts due
to Parent........................ -- -- 18,938 (19,775) 837
--------- -------- --------- -------- -------
Net cash flows from
operations................... 53,217 8 28,857 22,534 1,818
Cash flows used for investing
activities:
Purchase of property, plant and
equipment........................ (16,405) -- (1,701) (14,421) (283)
Businesses acquired, net........... (106,581) -- (106,581) -- --
--------- -------- --------- -------- -------
Net cash flows used for
investing activities......... (122,986) -- (108,282) (14,421) (283)
Cash flows used for financing
activities:
Net borrowings under working
capital facilities and long-term
debt obligations................. 73,950 -- 73,950 -- --
Payment of financing costs......... (2,692) -- (2,692) -- --
Issuance of shares of common stock,
net.............................. 2,151 -- 2,151 -- --
Receipt (payment) of dividends..... -- -- 8,810 (7,645) (1,165)
--------- -------- --------- -------- -------
Net cash flows provided by
(used for) financing
activities................... 73,409 -- 82,219 (7,645) (1,165)
Increase in cash..................... 3,640 8 2,794 468 370
Cash at beginning of period.......... 3,231 -- 668 -- 2,563
--------- -------- --------- -------- -------
Cash at end of period................ $ 6,871 $ 8 $ 3,462 $ 468 $ 2,933
========= ======== ========= ======== =======
F-35
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
9% SENIOR SUBORDINATED NOTES DUE 2003
The 9% Notes are guaranteed by the following wholly-owned subsidiaries:
- PSSI,
- PMI,
- THMC,
- STI,
- Sun,
- PCG,
- PCH, and
- Carewell.
The guarantors are joint and several guarantors of the 9% Notes. Such
guarantees are irrevocable, full and unconditional. The guarantees are senior
subordinated obligations and are subordinated to all senior obligations
including guarantees of our obligations under the credit agreement.
The following wholly-owned subsidiaries are non-guarantors of the 9% Notes:
- PBCI,
- PIC,
- PINTL,
- Playtex Limited,
- PFSC, and
- PPI Aust.
The information which follows presents our condensed financial position as
of December 30, 2000 and December 25, 1999 and our condensed statements of
earnings and cash flows for each of our last three fiscal years 2000, 1999, and
1998. The presentation is made based on:
- the Company on a consolidated basis,
- the parent company only,
- the combined guarantors, and
- the combined non-guarantors.
F-36
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 30, 2000
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ---------- ----------
ASSETS
Current assets............................. $ 245,315 $ 8 $ 140,083 $ 89,635 $15,589
Investment in subsidiaries................. -- (451,678) 449,125 1,411 1,142
Intercompany receivable.................... -- (104,047) 22,958 79,304 1,785
Net property, plant and equipment.......... 118,155 -- 119 117,110 926
Intangible assets.......................... 687,597 -- 468,379 219,218 --
Other noncurrent assets.................... 88,317 (504) 8,304 -- 80,517
---------- --------- ---------- -------- -------
Total assets............................. $1,139,384 $(556,221) $1,088,968 $506,678 $99,959
========== ========= ========== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities........................ $ 171,082 $ 10 $ 160,553 $ 6,443 $ 4,076
Intercompany payable....................... -- (104,047) -- 101,831 2,216
Long-term debt............................. 964,824 (506) 965,330 -- --
Other noncurrent liabilities............... 59,541 -- 19,148 23,983 16,410
---------- --------- ---------- -------- -------
Total liabilities........................ 1,195,447 (104,543) 1,145,031 132,257 22,702
Stockholders' equity....................... (56,063) (451,678) (56,063) 374,421 77,257
---------- --------- ---------- -------- -------
Total liabilities and stockholders'
equity................................. $1,139,384 $(556,221) $1,088,968 $506,678 $99,959
========== ========= ========== ======== =======
CONDENSED CONSOLIDATING BALANCE SHEET DATA
AS OF DECEMBER 25, 1999
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ---------- ----------
ASSETS
Current assets............................. $ 243,854 $ 8 $ 141,526 $ 86,736 $15,584
Investment in subsidiaries................. -- (434,044) 431,493 1,411 1,140
Intercompany receivable.................... -- (111,397) 42,387 67,409 1,601
Net property, plant and equipment.......... 107,193 -- 135 106,091 967
Intangible assets.......................... 712,744 -- 486,725 226,019 --
Other noncurrent assets.................... 84,861 (500) 4,844 -- 80,517
---------- --------- ---------- -------- -------
Total assets............................. $1,148,652 $(545,933) $1,107,110 $487,666 $99,809
========== ========= ========== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities........................ $ 151,848 $ (252) $ 142,621 $ 5,112 $ 4,367
Intercompany payable....................... -- (111,397) -- 107,396 4,001
Long-term debt............................. 1,042,449 (506) 1,042,955 -- --
Other noncurrent liabilities............... 49,223 -- 16,402 16,414 16,407
---------- --------- ---------- -------- -------
Total liabilities........................ 1,243,520 (112,155) 1,201,978 128,922 24,775
Stockholders' equity....................... (94,868) (433,778) (94,868) 358,744 75,034
---------- --------- ---------- -------- -------
Total liabilities and stockholders'
equity................................. $1,148,652 $(545,933) $1,107,110 $487,666 $99,809
========== ========= ========== ======== =======
F-37
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 2000
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ -------- ---------- ----------
Net revenues.......................... $831,343 $(432,959) $787,896 $430,823 $ 45,583
Cost of sales......................... 352,174 (315,110) 339,700 303,503 24,081
-------- --------- -------- -------- --------
Gross profit........................ 479,169 (117,849) 448,196 127,320 21,502
-------- --------- -------- -------- --------
Operating expenses:
Advertising, selling and
administrative...................... 308,882 (117,849) 316,167 93,501 17,063
Amortization of intangibles........... 22,350 -- 15,430 6,920 --
-------- --------- -------- -------- --------
Total operating expenses............ 331,232 (117,849) 331,597 100,421 17,063
-------- --------- -------- -------- --------
Operating earnings.................. 147,937 -- 116,599 26,899 4,439
Interest expense, net................. 84,884 -- 97,213 -- (12,329)
Equity in net earnings of
subsidiaries........................ -- 32,038 (26,129) (1,414) (4,495)
-------- --------- -------- -------- --------
Earnings before income taxes........ 63,053 (32,038) 45,515 28,313 21,263
Income taxes.......................... 27,509 -- 9,971 11,567 5,971
-------- --------- -------- -------- --------
Net earnings........................ $ 35,544 $ (32,038) $ 35,544 $ 16,746 $ 15,292
======== ========= ======== ======== ========
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 25, 1999
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ -------- ---------- ----------
Net revenues.......................... $787,711 $(399,103) $741,983 $395,950 $ 48,881
Cost of sales......................... 331,242 (294,977) 321,882 278,428 25,909
-------- --------- -------- -------- --------
Gross profit........................ 456,469 (104,126) 420,101 117,522 22,972
-------- --------- -------- -------- --------
Operating expenses:
Advertising, selling and
administrative...................... 280,176 (104,126) 281,579 83,118 19,605
Amortization of intangibles........... 21,064 -- 14,060 6,976 28
-------- --------- -------- -------- --------
Total operating expenses............ 301,240 (104,126) 295,639 90,094 19,633
-------- --------- -------- -------- --------
Operating earnings.................. 155,229 -- 124,462 27,428 3,339
Interest expense, net................. 78,961 -- 91,070 -- (12,109)
Equity in net earnings of
subsidiaries........................ -- 31,060 (25,935) (1,586) (3,539)
-------- --------- -------- -------- --------
Earnings before income taxes........ 76,268 (31,060) 59,327 29,014 18,987
Income taxes.......................... 32,197 -- 15,256 11,581 5,360
-------- --------- -------- -------- --------
Net earnings........................ $ 44,071 $ (31,060) $ 44,071 $ 17,433 $ 13,627
======== ========= ======== ======== ========
F-38
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ -------- ---------- ----------
Net revenues.......................... $669,613 $(309,131) $595,947 $333,196 $ 49,601
Cost of sales......................... 277,555 (219,148) 244,496 228,690 23,517
-------- --------- -------- -------- --------
Gross profit........................ 392,058 (89,983) 351,451 104,506 26,084
-------- --------- -------- -------- --------
Operating expenses:
Advertising, selling and
administrative...................... 243,288 (89,983) 235,355 72,767 25,149
Amortization of intangibles........... 17,336 -- 10,656 6,612 68
-------- --------- -------- -------- --------
Total operating expenses............ 260,624 (89,983) 246,011 79,379 25,217
-------- --------- -------- -------- --------
Operating earnings.................. 131,434 -- 105,440 25,127 867
Interest expense, net................. 71,518 -- 83,621 (1) (12,102)
Equity in net earnings of
subsidiaries........................ -- 27,186 (23,269) (1,317) (2,600)
-------- --------- -------- -------- --------
Earnings before income taxes........ 59,916 (27,186) 45,088 26,445 15,569
Income taxes.......................... 25,686 -- 10,858 10,311 4,517
-------- --------- -------- -------- --------
Net earnings........................ $ 34,230 $ (27,186) $ 34,230 $ 16,134 $ 11,052
======== ========= ======== ======== ========
F-39
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 2000
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ -------- ---------- ----------
Net earnings.......................... $ 35,544 $(32,038) $ 35,544 $ 16,746 $15,292
Non-cash items included in earnings:
Amortization of intangibles....... 22,350 -- 15,430 6,920 --
Amortization of deferred financing
costs........................... 3,750 -- 3,750 -- --
Depreciation...................... 11,547 -- 63 11,177 307
Deferred taxes.................... 11,383 -- 3,930 7,453 --
Other, net........................ (3,214) 32,038 (28,992) (1,095) (5,165)
(Increase) in net working capital... (2,634) -- (1,011) (1,545) (78)
Increase (decrease) in amount due to
Parent............................ -- -- 18,600 (17,460) (1,140)
-------- -------- -------- -------- -------
Net cash flows from
operations.................... 78,726 -- 47,314 22,196 9,216
Cash flows used for investing
activities:
Purchase of property, plant and
equipment......................... (22,724) -- (243) (22,196) (285)
Businesses acquired, net............ (279) -- (279) -- --
-------- -------- -------- -------- -------
Net cash flows used for
investing activities.......... (23,003) -- (522) (22,196) (285)
Cash flows used for financing
activities:
Net payments under working capital
facilities and long-term debt
obligations....................... (56,313) -- (56,313) -- --
Payment of financing costs.......... (553) -- (553) -- --
Issuance of shares of common
stock............................. 3,899 -- 3,899 -- --
Receipt (payment) of dividends...... -- -- 8,713 -- (8,713)
-------- -------- -------- -------- -------
Net cash flows used for
financing activities.......... (52,967) -- (44,254) -- (8,713)
Increase in cash...................... 2,756 -- 2,538 -- 218
Cash at beginning of period........... 7,526 8 1,852 -- 5,666
-------- -------- -------- -------- -------
Cash at end of period................. $ 10,282 $ 8 $ 4,390 $ -- $ 5,884
======== ======== ======== ======== =======
F-40
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 25, 1999
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ --------- ---------- ----------
Net earnings......................... $ 44,071 $(31,060) $ 44,071 $ 17,433 $13,627
Non-cash items included in
earnings:
Amortization of intangibles...... 21,064 -- 14,060 6,976 28
Amortization of deferred
financing costs................ 3,398 -- 3,398 -- --
Depreciation..................... 9,847 -- 59 9,469 319
Deferred taxes................... 9,070 -- 2,244 6,995 (169)
Other, net....................... (113) 31,060 (31,385) 1,088 (876)
(Increase) decrease in net working
capital.......................... (31,050) -- (2,229) (29,633) 812
Increase (decrease) in amounts due
to Parent........................ -- -- (24,139) 26,531 (2,392)
--------- -------- --------- -------- -------
Net cash flows from
operations................... 56,287 -- 6,079 38,859 11,349
Cash flows used for investing
activities:
Purchase of property, plant and
equipment........................ (20,802) -- 18,186 (39,326) 338
Businesses acquired, net........... (210,109) -- (210,109) -- --
--------- -------- --------- -------- -------
Net cash flows used for
investing activities......... (230,911) -- (191,923) (39,326) 338
Cash flows used for financing
activities:
Net borrowings under working
capital facilities and long-term
debt obligations................. 176,126 -- 176,126 -- --
Payment of financing costs......... (2,480) -- (2,480) -- --
Issuance of shares of common
stock............................ 1,633 -- 1,633 -- --
Receipt (payment) of dividends..... -- -- 8,955 -- (8,955)
--------- -------- --------- -------- -------
Net cash flows used for
financing activities......... 175,279 -- 184,234 -- (8,955)
Increase in cash..................... 655 -- (1,610) (467) 2,732
Cash at beginning of period.......... 6,871 8 3,462 467 2,934
--------- -------- --------- -------- -------
Cash at end of period................ $ 7,526 $ 8 $ 1,852 $ -- $ 5,666
========= ======== ========= ======== =======
F-41
PLAYTEX PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA
FOR THE TWELVE MONTHS ENDED DECEMBER 26, 1998
(In thousands)
PARENT NON-
CONSOLIDATED ELIMINATIONS COMPANY GUARANTORS GUARANTORS
------------ ------------ ---------- ---------- ----------
Net earnings......................... $ 34,230 $ (27,186) $ 34,230 $ 16,134 $11,052
Non-cash items included in
earnings:
Amortization of intangibles...... 17,336 -- 10,656 6,612 68
Amortization of deferred
financing costs................ 2,995 -- 2,995 -- --
Depreciation..................... 9,690 -- 72 9,261 357
Deferred taxes................... 6,244 -- 8,318 (1,558) (516)
Other, net....................... 36 27,194 (50,682) 25,860 (2,336)
(Increase) decrease in net working
capital.......................... (17,314) -- 4,330 (21,935) 291
Increase (decrease) in amounts due
to Parent........................ -- -- 18,938 (19,486) 548
---------- --------- ---------- --------- -------
Net cash flows from
operations................... 53,217 8 28,857 14,888 9,464
Cash flows used for investing
activities:
Purchase of property, plant and
equipment........................ (16,405) -- (1,701) (14,421) (283)
Businesses acquired, net........... (106,581) -- (106,581) -- --
---------- --------- ---------- --------- -------
Net cash flows used for
investing activities......... (122,986) -- (108,282) (14,421) (283)
Cash flows used for financing
activities:
Net borrowings under working
capital facilities and long-term
debt obligations................. 73,950 -- 73,950 -- --
Payment of financing costs......... (2,692) -- (2,692) -- --
Issuance of shares of common
stock............................ 2,151 -- 2,151 -- --
Receipt (payment) of dividends..... -- -- 8,810 -- (8,810)
---------- --------- ---------- --------- -------
Net cash flows used for
financing activities......... 73,409 -- 82,219 -- (8,810)
Increase in cash..................... 3,640 8 2,794 467 371
Cash at beginning of period.......... 3,231 -- 668 -- 2,563
---------- --------- ---------- --------- -------
Cash at end of period................ $ 6,871 $ 8 $ 3,462 $ 467 $ 2,934
========== ========= ========== ========= =======
F-42
PLAYTEX PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
MARCH 31, DECEMBER 30,
2001 2000
----------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash...................................................... $ 8,266 $ 10,282
Receivables, less allowance for doubtful accounts......... 162,184 130,970
Inventories............................................... 88,257 85,326
Deferred income taxes..................................... 12,999 13,321
Other current assets...................................... 3,412 5,416
---------- ----------
Total current assets.................................. 275,118 245,315
Net property, plant and equipment........................... 120,152 118,155
Intangible assets, net...................................... 670,248 675,263
Deferred financing costs.................................... 11,327 12,334
Due from related party...................................... 80,017 80,017
Other noncurrent assets..................................... 8,599 8,300
---------- ----------
Total assets.......................................... $1,165,461 $1,139,384
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 48,119 $ 51,535
Accrued expenses.......................................... 68,414 69,800
Income taxes payable...................................... 11,049 4,622
Current maturities of long-term debt...................... 49,000 45,125
---------- ----------
Total current liabilities............................. 176,582 171,082
Long-term debt.............................................. 895,019 886,438
Due to related party........................................ 78,386 78,386
Other noncurrent liabilities................................ 13,512 12,814
Deferred income taxes....................................... 50,615 46,727
---------- ----------
Total liabilities..................................... 1,214,114 1,195,447
---------- ----------
Stockholders' equity:
Common stock, $0.01 par value, authorized 100,000,000
shares,
issued 60,970,899 shares at March 31, 2001 and
at December 30, 2000.................................... 609 609
Additional paid-in capital................................ 523,706 523,706
Retained earnings (deficit)............................... (564,376) (577,220)
Accumulated other comprehensive earnings.................. (8,592) (3,158)
---------- ----------
Total stockholders' equity............................ (48,653) (56,063)
---------- ----------
Total liabilities and stockholders' equity............ $1,165,461 $1,139,384
========== ==========
See the accompanying notes to condensed consolidated financial statements.
F-43
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, in thousands, except per share data)
THREE MONTHS ENDED
--------------------
MARCH 31, APRIL 1,
2001 2000
--------- --------
Net sales................................................... $220,776 $223,507
Cost of sales............................................... 94,709 93,805
-------- --------
Gross profit.............................................. 126,067 129,702
Operating expenses:
Advertising and sales promotion........................... 46,199 45,694
Selling, distribution and research........................ 23,004 22,693
Administrative............................................ 7,965 7,491
Amortization of intangibles............................... 5,515 5,592
-------- --------
Total operating expenses................................ 82,683 81,470
Operating earnings.................................... 43,384 48,232
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...... 21,103 22,042
-------- --------
Earnings before income taxes.......................... 22,281 26,190
Income taxes................................................ 9,437 10,921
-------- --------
Net earnings.......................................... $ 12,844 $ 15,269
======== ========
Earnings per share:
Basic..................................................... $ 0.21 $ 0.25
======== ========
Diluted................................................... $ 0.21 $ 0.25
======== ========
Weighted average shares outstanding:
Basic..................................................... 60,971 60,684
======== ========
Diluted................................................... 63,663 64,007
======== ========
See the accompanying notes to condensed consolidated financial statements.
F-44
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND ACCUMULATED OTHER COMPREHENSIVE EARNINGS
(Unaudited, in thousands)
ACCUMULATED
COMMON ADDITIONAL RETAINED OTHER
SHARES COMMON PAID-IN EARNINGS COMPREHENSIVE
OUTSTANDING STOCK CAPITAL (DEFICIT) EARNINGS TOTAL
----------- -------- ---------- --------- ------------- --------
Balance, December 30, 2000... 60,971 $609 $523,706 $(577,220) $(3,158) $(56,063)
Net earnings................. -- -- -- 12,844 -- 12,844
Unrealized loss on hedging
instruments................ -- -- -- -- (4,872) (4,872)
Foreign currency translation
adjustment................. -- -- -- -- (562) (562)
--------
Comprehensive earnings... 7,410
------ ---- -------- --------- ------- --------
Balance, March 31,
2001................... 60,971 $609 $523,706 $(564,376) $(8,592) $(48,653)
====== ==== ======== ========= ======= ========
See the accompanying notes to condensed consolidated financial statements.
F-45
PLAYTEX PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
THREE MONTHS ENDED
--------------------
MARCH 31, APRIL 1,
2001 2000
--------- --------
Cash flows from operations:
Net earnings.............................................. $ 12,844 $ 15,269
Non-cash items included in earnings:
Amortization of intangibles............................. 5,515 5,592
Amortization of deferred financing costs................ 1,016 937
Depreciation............................................ 3,111 2,708
Deferred income taxes................................... 4,193 5,319
Other, net.............................................. (410) 228
Net increase in working capital accounts.................. (35,090) (37,668)
-------- --------
Net cash flows (used for) operations.................. (8,821) (7,615)
Cash flows used for investing activities:
Purchases of property, plant and equipment................ (5,151) (7,075)
Purchase of patent rights................................. (500) --
-------- --------
Net cash flows used for investing activities.......... (5,651) (7,075)
Cash flows provided by (used for) financing activities:
Net borrowings under credit facilities.................... 21,800 17,500
Long-term debt repayments................................. (9,344) (2,563)
Issuance of shares of common stock........................ -- 1,694
-------- --------
Net cash flows provided by (used for) financing
activities.......................................... 12,456 16,631
(Decrease) increase in cash................................. (2,016) 1,941
Cash at beginning of period................................. 10,282 7,526
-------- --------
Cash at end of period....................................... $ 8,266 $ 9,467
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the periods for:
Interest................................................ $ 16,116 $ 16,150
Income taxes, net of refunds............................ $ 1,184 $ 865
See the accompanying notes to condensed consolidated financial statements.
F-46
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 the three month
period ended March 31, 2001 are not necessarily indicative of the results that
you may expect for the full year.
Our results for the first quarter of 2001 are for the 13-week period ended
March 31, 2000 and our results for the first quarter of 2000 are for the 14-week
period ended April 1, 2000. Our fiscal year end is on the last Saturday nearest
to December 31 and, as a result, a fifty-third week is added every 6 or
7 years. Our fiscal year ending December 30, 2000 included the extra week, or 53
weeks.
We presume you have access to the audited financial statements contained in
our Annual Report on Form 10-K for the year ended December 30, 2000. As a
result, we have not included footnote disclosures that would substantially
duplicate the disclosures contained in the Form 10-K. If you do not have a copy
of our Annual Report on Form 10-K you can obtain one by contacting our Director
of Investor Relations at (203) 341-4000 or view it on-line at the SEC's web site
WWW.SEC.GOV.
2. ADOPTION OF NEW ACCOUNTING POLICY
On December 31, 2000, we adopted Statement of Financial Accounting Standard
No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities," as amended. SFAS 133 requires us to recognize all derivative
instruments on our balance sheet at fair value. We use derivatives as a means to
hedge against interest rate risk on our variable rate indebtedness. As of
adoption date and during the quarter, we were parties to two interest rate
swaps, (the "Swaps"). These Swaps are designated as cash flow hedges.
Upon adoption of SFAS 133, we recorded the fair value of our Swaps on our
Balance Sheet. On an ongoing basis, we will adjust our Balance Sheet to reflect
the current fair value of our Swaps. The related unrealized gains or losses on
these Swaps are deferred in Shareholders' Equity (as a component comprehensive
income). These unrealized gains or losses are recognized in earnings as a
component of interest expense over the term of the Swaps. However, to the extent
that change in the value of our Swaps does not perfectly offset the change in
the interest expense payments being hedged, that ineffective portion is
immediately recognized in earnings.
At the adoption date of SFAS 133, we recorded a reduction to comprehensive
earnings of approximately $1.7 million and an offsetting current liability
attributed to the fair value of the interest rate swaps at the adoption date.
The impact on earnings for the quarter ended March 31, 2001 was immaterial. At
March 31, 2001, the change in the fair value of the Swaps, due to changes in the
interest rate market place, resulted in an additional reduction to comprehensive
earnings of approximately $3.2 million and an offsetting increase to current
liability.
3. COMPREHENSIVE EARNINGS
For the three months ended March 31, 2001, foreign currency translation
adjustment and the unrealized loss on our interest rate hedging instruments were
the only reconciling items between net earnings and comprehensive earnings. For
the three months ended April 1, 2000, foreign currency
F-47
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. COMPREHENSIVE EARNINGS (CONTINUED)
translation adjustment was the only reconciling item between net earnings and
comprehensive earnings. Our comprehensive earnings were (unaudited, in
thousands):
THREE MONTHS ENDED
-----------------------
MARCH 31, APRIL 1,
2001 2000
---------- ----------
Net earnings......................................... $ 12,844 $ 15,269
Unrealized loss on hedging instruments............... (4,872) --
Foreign currency translation adjustment.............. (562) 14
-------- --------
Comprehensive earnings............................. $ 7,410 $ 15,283
======== ========
4. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are as follows (in
thousands):
MARCH 31, DECEMBER 30,
2001 2000
----------- -------------
(UNAUDITED)
Receivables.......................................... $164,117 $133,207
Less allowance for doubtful accounts................. (1,933) (2,237)
-------- --------
Net.............................................. $162,184 $130,970
======== ========
Inventories:
Raw materials...................................... $ 21,937 $ 25,140
Work in process.................................... 1,570 1,747
Finished goods..................................... 64,750 58,439
-------- --------
Total............................................ $ 88,257 $ 85,326
======== ========
Net property, plant and equipment:
Land............................................... $ 2,376 $ 2,376
Buildings.......................................... 39,447 38,601
Machinery and equipment............................ 177,267 173,226
-------- --------
219,090 214,203
Less accumulated depreciation...................... (98,938) (96,048)
-------- --------
Net.............................................. $120,152 $118,155
======== ========
Accrued expenses:
Advertising and sales promotion.................... $ 13,388 $ 23,519
Employee compensation and benefits................. 10,645 13,912
Interest........................................... 15,204 11,233
Insurance.......................................... 3,300 3,200
Other.............................................. 25,877 17,936
-------- --------
Total............................................ $ 68,414 $ 69,800
======== ========
F-48
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
MARCH 31, DECEMBER 30,
2001 2000
----------- -------------
(UNAUDITED)
Variable Rate Indebtedness:
Term A Loan........................................ $121,094 $129,813
Revolving Credit Facility.......................... 21,800 --
Term Loan.......................................... 241,125 241,750
Fixed Rate Indebtedness:
6% Convertible Subordinated Notes due 2004......... 50,000 50,000
8 7/8% Senior Notes due 2004....................... 150,000 150,000
9% Senior Subordinated Notes due 2003.............. 360,000 360,000
-------- --------
944,019 931,563
Less current maturities............................ (49,000) (45,125)
-------- --------
Total long-term debt............................. $895,019 $886,438
======== ========
Our long-term debt consists of the following:
Variable rate indebtedness:
- senior secured credit facilities, as amended (the "Senior Credit
Facilities") comprised of:
-- $155.0 million term loan facility (the "Term A Loan") and
-- $115.0 million revolving credit facility (the "Revolving Credit
Facility").
- $250.0 million senior secured term loan due September 15, 2003 (the "Term
Loan") as amended.
The Term A Loan matures on June 15, 2003. Scheduled principal repayments on
the Term A Loan are made quarterly, and remaining amounts include:
$33.9 million in fiscal 2001, $56.2 million in fiscal 2002, and $31.0 million in
fiscal 2003. Principal repayments we make on the Term A Loan cannot be
re-borrowed by us.
The Revolving Credit Facility matures on June 15, 2003. On December 15,
2000, our Revolving Credit Facility commitments were automatically and
permanently reduced by $5.0 million. Additional reductions in our Revolving
Credit Facility commitments are as follows:
- $5.0 million on June 15, 2001, - $8.0 million on December 15, 2002, and
- $7.0 million on December 15, 2001, - $8.0 million on June 15, 2003
- $7.0 million on June 15, 2002,
At March 31, 2001, we had $86.0 million of unused borrowings available to us
under the Revolving Credit Facility.
The Term Loan matures on September 15, 2003. Scheduled principal repayments
on the Term Loan are made quarterly, and remaining amounts include:
$1.9 million in fiscal 2001, $2.5 million in fiscal 2002, and $236.7 million in
fiscal 2003. Our quarterly principal repayment obligations are fixed at
F-49
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
$0.6 million through June 15, 2003. The final principal payment of
$235.5 million is due on September 15, 2003. Principal repayments we make on the
Term Loan cannot be re-borrowed by us.
Fixed rate Indebtedness:
- $50.0 million principal amount of 6% convertible subordinated notes due
January 31, 2004 (the "Convertible Notes"),
- $150.0 million principal amount of 8 7/8% senior notes due July 15, 2004
(the "8 7/8% Notes"), and
- $360.0 million principal amount of 9% senior subordinated notes due
December 15, 2003 (the "9% Notes").
The Convertible Notes are convertible into approximately 2.6 million shares
of our common stock. The conversion price is approximately $19.15 per common
share. The Convertible Notes will mature in 2004 and are callable by us after
January 29, 2002. Interest on the notes is paid semi-annually on each
January 31 and July 31.
Interest on the 8 7/8% Notes is paid semi-annually on each January 15 and
July 15. The 8 7/8% Notes are redeemable by us commencing July 15, 2001.
Redemption prices, expressed as a percentage of the principal amount are as
follows:
- 104.438% if redeemed between July 15, 2001 and July 14, 2002,
- 102.219% if redeemed between July 15, 2002 and July 14, 2003, and
- 100.000% if redeemed after July 15, 2003.
Interest on the 9% Notes is paid semi-annually on each June 15 and
December 15. The 9% Notes are currently redeemable by us at 101.5%, expressed as
a percentage of the principal amount. The 9% Notes can be redeemed by us after
December 15, 2001 at par, 100.0% expressed as a percentage of the principal
amount.
We periodically use financial instruments, such as derivatives, to manage
the impact of interest rate changes on our variable rate debt. We do not enter
into financial instruments for trading or speculative purposes. Derivative
instruments we are a party to include:
- An interest rate swap agreement that we entered into in November 2000 and
which effectively fixed the LIBOR rate on $150.0 million of our variable
rate debt at 6.3475% until the termination date of August 30, 2001. The
counter party may at its discretion extend the swap agreement for an
additional nine months, and
- Another interest rate swap agreement, which we entered into in
November 2000 and which effectively fixed the LIBOR rate on
$150.0 million of our variable rate debt at 6.3825% until December 4,
2001, when the agreement is scheduled to terminate.
We entered into the swap agreements for no other purpose than to hedge against
interest rate volatility on $300 million of our variable rate indebtedness under
the Term A Loan and Term Loan. At March 31, 2001, our total indebtedness
consisted of $560.0 million in fixed rate debt and $384.0 million in variable
rate debt. Based on our interest rate exposure at March 31, 2001, a 1% increase
in interest rates would result in an estimated $0.8 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. At March 31, 2001 and April 1, 2000, the weighted average
F-50
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
interest rate on our variable rate debt, excluding the hedging effect of the
swaps, was 7.32% and 7.39%, respectively. The weighted average interest rate on
our variable rate debt, excluding the hedging effect of the swaps, for the three
months ended March 31, 2001 and April 1, 2000 was 7.89% and 7.36%, respectively.
We also pay fees equal to three-eighths of 1% on the unused portion of the
Revolving Credit Facility.
6. 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, - BABY MAGIC infant toiletries
cups and reusable hard bottles - MR. BUBBLE children's bubble bath
- WET ONES hand and face towelettes - BABY MAGIC/CHUBS 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 marketed under such brand names as PLAYTEX: GENTLE
GLIDE, SILK GLIDE and SLIMFITS. In addition, the Feminine Care product category
includes a personal cleansing wipe for use in feminine hygiene. This product was
introduced in the first quarter of 2001.
Our CONSUMER PRODUCTS DIVISION includes Sun Care, Household Products, and
Personal Grooming products sold in the United States primarily to mass
merchandisers, grocery and drug classes of trade.
SUN CARE HOUSEHOLD PRODUCTS
-------- ------------------
- BANANA BOAT - PLAYTEX Gloves
- WOOLITE rug and upholstery cleaning
products
PERSONAL GROOMING
------------------------------------------
- BINACA breath spray and drops - TEK toothbrushes
- OGILVIE at-home permanents - BETTER OFF depilatories, and
- TUSSY deodorant - DOROTHY GRAY skin care products
- DENTAX oral care products
Our INTERNATIONAL/CORPORATE SALES DIVISION includes:
- Sales to specialty classes of trade in - export sales
the - sales in Puerto Rico
United States including: warehouse - results from our Canadian and
clubs, Australian subsidiaries
military, convenience stores, - sales of private label tampons
specialty
stores, and telemarketing
The International/Corporate Sales Division sells the same products as are
available to our U.S. customers.
F-51
PLAYTEX PRODUCTS, INC.
PART I--FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. BUSINESS SEGMENTS (CONTINUED)
We evaluate division performance based on product contribution before
allocating any general corporate overhead costs. Product contribution is defined
as gross profit less advertising and sales promotion expenses. All other
operating expenses are managed at the corporate level and are not used by our
management to evaluate the results of the divisions. We do not consider assets,
amortization, capital expenditures, or interest income and interest expense in
assessing division performance. The results of our divisions for the three
months ended March 31, 2001 and April 1, 2000 are as follows (unaudited, dollars
in thousands):
THREE MONTHS ENDED
-----------------------------------------
MARCH 31, 2001 APRIL 1, 2000
------------------- -------------------
NET PRODUCT NET PRODUCT
SALES CONTRIB. SALES CONTRIB.
-------- -------- -------- --------
Personal Products..................................... $114,947 $41,697 $121,298 $50,686
Consumer Products..................................... 69,674 25,706 68,353 21,866
International and Other............................... 36,155 14,535 33,856 12,814
Unallocated Charges(1)................................ -- (2,070) -- (1,358)
-------- ------- -------- -------
Total Consolidated.................................. $220,776 79,868 $223,507 84,008
======== ========
RECONCILIATION TO OPERATING EARNINGS:
Selling, distribution and research.................... 23,004 22,693
Administrative........................................ 7,965 7,491
Amortization of intangibles........................... 5,515 5,592
------- -------
Operating earnings.................................. $43,384 $48,232
======= =======
------------------------
(1) Certain unallocated corporate charges such as business license taxes,
pension expense and product liability insurance are included in consolidated
gross margin, but not included in the evaluation of division performance.
F-52
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PLAYTEX PRODUCTS, INC.
EXCHANGE OFFER FOR ITS $350,000,000
9 3/8% SENIOR DISCOUNT NOTES DUE 2011
------------------
PROSPECTUS
, 2001
------------------
No person has been authorized to give any information or to make any
representation other than those contained in this prospectus, and, if given or
made, any information or representations must not be relied upon as having been
authorized. This prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates or an offer to sell or the solicitation of an offer to buy
these securities in any circumstances in which this offer or solicitation is
unlawful. Neither the delivery of this prospectus nor any sale made under this
prospectus shall, under any circumstances, create any implication that there has
been no change in the affairs of Playtex Products, Inc. since the date of this
prospectus or that the information contained in this prospectus is correct as of
any time subsequent to its date.
Broker-dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the broker-dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") grants a
Delaware corporation the power to indemnify any director, officer, employee or
agent against reasonable expenses (including attorneys' fees) incurred by him in
connection with any proceeding brought by or on behalf of the corporation and
against judgments, fines, settlements and reasonable expenses (including
attorneys' fees) incurred by him in connection with any other proceeding, if
(a) he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and (b) in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Except as ordered by a court, however, no indemnification is to be
made in connection with any proceeding brought by or in the right of the
corporation where the person involved is adjudged to be liable to the
corporation.
Section 8 of our restated certificate of incorporation and Section 13.1 of
our by-laws provide that we shall indemnify and hold harmless, to the fullest
extent permitted by applicable law as it presently exists or may hereafter be
amended, any person who was or is made or is threatened to be made a party or is
otherwise involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding") by reason of the fact that he,
or a person for whom he is the legal representative, or was a director or
officer of the corporation or is or was serving at the written request of the
corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust, enterprise or nonprofit entity,
including service with respect to employee benefit plans, against all liability
and loss suffered and expenses (including attorney's fees) reasonably incurred
by such person; provided, however, that we shall be required to indemnify a
person in connection with a proceeding (or part thereof) initiated by such
person only if the proceeding (or part thereof) was authorized by our board of
directors.
Section 102 of the DGCL permits the limitation of directors' personal
liability to the corporation or its stockholders for monetary damages for breach
of fiduciary duties as a director except for (i) any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of the law, (iii) breaches under section 174 of the DGCL, which relate to
unlawful payments of dividends or unlawful stock repurchase or redemptions, and
(iv) any transaction from which the director derived an improper personal
benefit.
Section 7 of our restated certificate of incorporation limits the personal
liability of our directors to the fullest extent permitted by paragraph (7) of
subsection (b) of section 102 of the DGCL.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
We maintain directors' and officers' liability insurance for our officers
and directors.
The charter or similar documents of the subsidiary guarantors listed as
registrants under this registration statement contain similar provisions.
II-1
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
4.1 Indenture, dated May 22, 2001, among Playtex Products, Inc.,
the guarantors named therein and The Bank of New York, as
Trustee, including as an exhibit thereto the form of the
note.*
4.2 Registration Rights Agreement, dated May 22, 2001, among
Playtex Products, Inc., the guarantors named therein, Credit
Suisse First Boston Corporation and Wells Fargo Brokerage
Services, LLC.*
5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
validity of the Exchange Notes and the related guarantees.**
8.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
certain tax matters.**
10.1 Credit Agreement, dated as of May 22, 2001, among Playtex
Products, Inc., Credit Suisse First Boston and the lenders
from time to time parties to the Credit Agreement.*
10.2 Receivables Purchase Agreement, dated as of May 22, 2001,
among Playtex Products, Inc., Credit Suisse First Boston,
New York Branch, Playtex A/R LLC and Gramercy Capital
Corporation.*
10.3 Purchase and Contribution Agreement, dated as of May 22,
2001, between Playtex Products, Inc. and Playtex A/R LLC.*
12 Statement of Computation of Ratios of Earnings to Fixed
Charges.*
23.1 Consent of KPMG LLP.**
23.2 Consent of Paul, Weiss, Rifkind, Wharton & Garrison
(included in Exhibits 5.1 and 8.1 to this Registration
Statement).**
24 Powers of Attorney (included on signature pages of this
Part II).*
25 Form T-1 Statement of Eligibility of The Bank of New York to
act as trustee under the Indenture.*
99.1 Form of Letter of Transmittal.**
99.2 Form of Notice of Guaranteed Delivery.**
------------------------
* Previously filed.
** Filed herewith.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act of 1934 (and where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within
II-2
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrants
pursuant to the foregoing provisions, or otherwise, the registrants have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of expenses incurred
or paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Westport,
State of Connecticut, on July 19, 2001.
PLAYTEX PRODUCTS, INC.
By: /s/ MICHAEL R. GALLAGHER
-----------------------------------------
Name: Michael R. Gallagher
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
------------------------------------------- Chairman of the Board and July 19, 2001
Robert B. Haas Director
* Chief Executive Officer
------------------------------------------- (Principal Executive July 19, 2001
Michael R. Gallagher Officer) and Director
Executive Vice President
* and Chief Financial
------------------------------------------- Officer (Principal July 19, 2001
Glenn A. Forbes Financial and Accounting
Officer) and Director
*
------------------------------------------- Director July 19, 2001
Richard C. Blum
*
------------------------------------------- Director July 19, 2001
Kenneth F. Yontz
*
------------------------------------------- Director July 19, 2001
Timothy O. Fisher
*
------------------------------------------- Director July 19, 2001
Douglas D. Wheat
*
------------------------------------------- Director July 19, 2001
Wyche H. Walton
------------------------------------------- Director July 19, 2001
John C. Walker
II-4
SIGNATURE TITLE DATE
--------- ----- ----
*
------------------------------------------- Director July 19, 2001
Michael R. Eisenson
*
------------------------------------------- Director July 19, 2001
C. Ann Merrifield
*By: /s/ GLENN A. FORBES
--------------------------------------
Name: Glenn A. Forbes
Title: ATTORNEY-IN-FACT
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Westport,
State of Connecticut, on July 19, 2001.
SUN PHARMACEUTICALS CORP.
By: /s/ MICHAEL R. GALLAGHER
-----------------------------------------
Name: Michael R. Gallagher
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Chief Executive Officer
------------------------------------------- (Principal Executive July 19, 2001
Michael R. Gallagher Officer) and Director
Executive Vice President
* and Chief Financial
------------------------------------------- Officer (Principal July 19, 2001
Glenn A. Forbes Financial and Accounting
Officer) and Director
*
------------------------------------------- Director July 19, 2001
Kevin M. Dunn
*
------------------------------------------- Director July 19, 2001
Douglas D. Wheat
*By: /s/ GLENN A. FORBES
--------------------------------------
Name: Glenn A. Forbes
Title: ATTORNEY-IN-FACT
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Westport,
State of Connecticut, on July 19, 2001.
PLAYTEX MANUFACTURING, INC.
PLAYTEX SALES & SERVICES, INC.
By: /s/ MICHAEL R. GALLAGHER
-----------------------------------------
Name: Michael R. Gallagher
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Chief Executive Officer
------------------------------------------- (Principal Executive July 19, 2001
Michael R. Gallagher Officer) and Director
Executive Vice President
* and Chief Financial
------------------------------------------- Officer (Principal July 19, 2001
Glenn A. Forbes Financial and Accounting
Officer) and Director
*
------------------------------------------- Director July 19, 2001
Douglas D. Wheat
*By: /s/ GLENN A. FORBES
--------------------------------------
Name: Glenn A. Forbes
Title: ATTORNEY-IN-FACT
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Westport,
State of Connecticut, on July 19, 2001.
CAREWELL INDUSTRIES, INC.
PERSONAL CARE GROUP, INC.
PERSONAL CARE HOLDINGS, INC.
SMILE-TOTE, INC.
TH MARKETING CORP.
By: /s/ MICHAEL R. GALLAGHER
-----------------------------------------
Name: Michael R. Gallagher
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Chief Executive Officer
------------------------------------------- (Principal Executive July 19, 2001
Michael R. Gallagher Officer) and Director
Executive Vice President
* and Chief Financial
------------------------------------------- Officer (Principal July 19, 2001
Glenn A. Forbes Financial and Accounting
Officer) and Director
*
------------------------------------------- Director July 19, 2001
Robert B. Haas
*
------------------------------------------- Director July 19, 2001
Douglas D. Wheat
*By: /s/ GLENN A. FORBES
--------------------------------------
Name: Glenn A. Forbes
Title: ATTORNEY-IN-FACT
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Westport,
State of Connecticut, on July 19, 2001.
PLAYTEX INVESTMENT CORP.
PLAYTEX INTERNATIONAL CORP.
By: /s/ MICHAEL R. GALLAGHER
-----------------------------------------
Name: Michael R. Gallagher
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Chief Executive Officer
------------------------------------------- (Principal Executive July 19, 2001
Michael R. Gallagher Officer) and Director
Executive Vice President
* and Chief Financial
------------------------------------------- Officer (Principal July 19, 2001
Glenn A. Forbes Financial and Accounting
Officer) and Director
*
------------------------------------------- Director July 19, 2001
Robert B. Haas
*
------------------------------------------- Director July 19, 2001
James S. Cook
*
------------------------------------------- Director July 19, 2001
Douglas D. Wheat
*By: /s/ GLENN A. FORBES
--------------------------------------
Name: Glenn A. Forbes
Title: ATTORNEY-IN-FACT
II-9
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
4.1 Indenture, dated May 22, 2001, among Playtex Products, Inc.,
the guarantors named therein and The Bank of New York, as
Trustee, including as an exhibit thereto the form of the
note.*
4.2 Registration Rights Agreement, dated May 22, 2001, among
Playtex Products, Inc., the guarantors named therein, Credit
Suisse First Boston Corporation and Wells Fargo Brokerage
Services, LLC.*
5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
validity of the Exchange Notes and the related guarantees.**
8.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
certain tax matters.**
10.1 Credit Agreement, dated as of May 22, 2001, among Playtex
Products, Inc., Credit Suisse First Boston and the lenders
from time to time parties to the Credit Agreement.*
10.2 Receivables Purchase Agreement, dated as of May 22, 2001,
among Playtex Products, Inc., Credit Suisse First Boston,
New York Branch, Playtex A/R LLC and Gramercy Capital
Corporation.*
10.3 Purchase and Contribution Agreement, dated as of May 22,
2001, between Playtex Products, Inc. and Playtex A/R LLC.*
12 Statement of Computation of Ratios of Earnings to Fixed
Charges.*
23.1 Consent of KPMG LLP.**
23.2 Consent of Paul, Weiss, Rifkind, Wharton & Garrison
(included in Exhibits 5.1 and 8.1 to this Registration
Statement).**
24 Powers of Attorney (included on signature pages of this Part
II).*
25 Form T-1 Statement of Eligibility of The Bank of New York to
act as trustee under the Indenture.*
99.1 Form of Letter of Transmittal.**
99.2 Form of Notice of Guaranteed Delivery.**
------------------------
* Previously filed.
** Filed herewith.