Playtex Annual Report 2003
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ANNUAL REPORT 2003 PUTTING THE PIECES IN PLACE FOR LONG-TERM GROWTH NEW PRODUCTS Beyond Sparklin’ Disposables One Step Redesigned Tampons Sipster Premium Breast Milk Sipster Cup Cup Designer Storage Kit with new Nurser character art Continuous product innovation. It’s a Playtex hallmark. A constant stream of new products invigorates consumer demand and stimulates growth in sales. In late 2003 and early 2004, we rolled out another impressive lineup of new products, many of which are taking a bow on these pages. One of our stars is our new Beyond tampon. Beyond tampons deliver the convenience of a flushable applicator with the comfort of a plastic applicator. Stepping into the competitive infant feeding category are two promising new entrants—the VentAire NaturalShape Baby Bottle and the Disposables Premium Designer Nurser with new NaturaLatch nipples. Already getting rave reviews from consumers and retailers alike, our newest infant feeding nipple is clinically proven to be the most natural complement to breast feeding. All of the new products shown here are poised and ready to take leading share positions in their categories . and to drive the growth of Playtex. Disposables VentAire Banana Banana Banana Banana Baby Magic Premium NaturalShape Boat Boat Boat Boat Calming Milk Nurser with Baby Bottle Suntanicals Suntanicals Kids Surf Shampoo NaturaLatch Aftersun SPF 30 SPF 50 SPF 30 Nipple Lotion TO OUR STOCKHOLDERS: EVERY NOW AND THEN, A COMPANY FACES A YEAR LIKE NONE OTHER—A YEAR THAT TRULY TESTS ITS METTLE AND THAT OF ITS PEOPLE. 2003 WAS JUST SUCH A YEAR FOR PLAYTEX. YES, OUR FINANCIAL RESULTS FOR THE YEAR WERE VERY DISAPPOINTING. THERE IS NO ESCAPING THAT CONCLUSION—HOWEVER, FROM ADVERSITY OFTEN COMES DETERMINATION. THIS DETERMINATION WAS TO ENTER 2004 WITH THE PIECES IN PLACE TO REESTABLISH A CONSISTENT, LONG-TERM GROWTH PICTURE FOR PLAYTEX. Often during challenging years, companies are tempted to ■ We improved the profitability profile of our Sun Care busi- forsake long-term growth strategies and adopt reactive ness through a comprehensive returns initiative program measures. Those measures may prop up earnings temporarily, ■ We embarked on an operational restructuring effort to but often at the expense of the company’s ability to deliver improve our effectiveness and reduce costs consistent growth for the future. Not so at Playtex. In the ■ We initiated a refinancing plan to enhance our financial face of stiff competition, poor weather and a difficult flexibility economy, we continued in 2003 to pursue the strategies that have made, and will continue to make, Playtex a premier I’m particularly proud of our company-wide effort to bolster consumer products company with exceptional brand fran- the long-term vitality of our Feminine Care business. We chises, leading market positions in attractive categories and successfully defended our Gentle Glide plastic applicator aggressive product innovation. tampon franchise in the face of a significant competitive launch with unprecedented levels of spending in this category. This consistency of strategy, purpose and action enabled us We stabilized our market share—keeping nine of every ten to overcome difficult competitive challenges and proceed Gentle Glide users loyal to our brand. We achieved this by positively and purposefully in 2003. Bolstered by the strength delivering product improvements and by continuing the of our vision and the dedication, resilience and teamwork of aggressive promotional tactics we initiated in 2002. Our our business leaders and employees, we were able to achieve team also moved decisively to ready the launch of our a very significant array of accomplishments: innovative new tampon, Beyond, introduced in January 2004. ■ We defended our Gentle Glide tampon franchise against an unprecedented competitive launch Beyond represents a real leap forward for women who desire ■ We launched many strategically important and innovative a more comfortable tampon with a flushable, biodegradable new products that will benefit our business in 2004 applicator. The flushable applicator segment remains a significant portion of the tampon market, and we’re very opti- Our Sun Care business was affected by an unseasonably mistic that Beyond will drive up our share of that segment . and wet summer, which caused the entire category to decline the tampon market as a whole. That optimism is supported and hampered our ability to grow sales in 2003. Despite by the exceptional results of our consumer research and the the category trend, we were able to maintain our market overwhelmingly positive reaction by retailers. We will continue share, and had good success with new products, such as to support both Gentle Glide and Beyond with growth-oriented Baby Magic by Banana Boat. For the 2004 season, we’ve spending plans—consistent with our vision for the future. launched Surf, an eight-hour waterproof brand targeted to water sports enthusiasts. We are also extending our As it has in the past few years, our Infant Care business successful Suntanicals line, introduced in 2003, by adding faced heavy competition in 2003. Throughout the year, we a product with a higher sun protection factor (SPF) and continued to systematically fight each competitive battle in launching a new aftersun product. that business. The result has been to make each of our key Infant Care segments stronger through product innovations, In mid-2002, we initiated a major program to reduce the cost improvement of existing products and strong growth of end-of-season Sun Care product returns. In 2003, this development strategies. program was extremely effective and enabled us to reduce our returns exposure and related costs. A clear example of how We have always been a leading innovator in the Infant Care we put Playtex business management techniques to work in category. Consistent with that heritage, we have launched nearly every area of our business. several great new products in 2004. Our NaturaLatch nipple, designed for use with our Disposables Nurser system, and In our Household Products and Personal Grooming our VentAire NaturalShape feeding system are both geared to segment, we continued to have excellent success with our help us make important inroads in a key, but underserved, Woolite Oxy Deep Carpet Cleaner. Not only was Oxy Deep the market—breast feeding moms. The NaturaLatch nipple is first pre-mixed spray oxygenated cleaner available in this clinically proven to more closely resemble breast feeding than category—another testament to our strength in consumer- competing products. With the renewed popularity of breast focused product innovation—but the product helped us feeding—as many as 70% of new mothers are choosing this reach a market share of 28% in 2003, our highest market method—we are positioning these new infant feeding prod- share ever in this category. ucts as the best, most natural complement to nature. 12% 2003 Net Sales Household Products By Product Category & Personal Grooming 15% Sun Care 40% Infant Care $657.7 million 33% Feminine Care All in all, in 2003, we continued to demonstrate our ability will yield $12-to-$14 million in annualized savings for Playtex to build and extend our brands to leadership positions in by 2005. In addition, we expect to reduce working capital their respective categories. Approximately 97% of our net during the same time by approximately $9 million. sales are in categories where we are the #1 or #2 brand. We also recently completed a significant refinancing of our In 2003, we initiated aggressive responses to competitive debt—a strategic initiative designed to improve our liquidity threats, continued investment in product innovation, and and financial flexibility to help achieve our corporate objec- remained focused on maintaining leading market positions tives. This action replaces our previous variable indebtedness in attractive product categories. These are the hallmarks with a new debt package primarily consisting of fixed of a company that is willing to forgo short-term financial rate debt. By doing so, we have reduced the uncertainty fixes for long-term strength and stability. We’ve always main- associated with changes in market interest rates. tained a consistent and unyielding commitment to building our business for sustainable, long-term growth. We have not Playtex is a strong, focused company that is moving forward wavered from that commitment. with confidence in its future. My thanks to our stockholders, customers and consumers for their belief in our products, Consistent with that commitment, we moved aggressively in our strategies and our exciting prospects for the months and 2003 to further enhance operational efficiencies and reduce years ahead. I especially wish to thank my fellow Playtex our costs, optimize our financial flexibility, and secure our employees, who stood firm in the most difficult of years and long-term financial stability. focused on creating a successful, growth-oriented future for our company. We initiated a number of programs to improve the effective- ness and efficiency of our manufacturing operations. In 2004, we will kick off a program designed to enhance our supply chain processes, enabling us to improve supply and demand forecasting, further enhance our ability to deliver products on time to our customers, and reduce our overall Michael R. Gallagher inventory requirements. All of which are key to our long-term Chief Executive Officer competitiveness. We expect that all these efforts combined Form 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) ፤ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 27, 2003 or អ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File No. 1-12620 PLAYTEX PRODUCTS, INC.