Carson Inc.'s Outlook Revised To Negative By S&P Carson Inc.NEW YORK--(BUSINESS WIRE)--S&P's CreditWire 6/25/98--Standard & Poor's today revised its outlook on Carson Inc. to negative from stable. The company's single-'B'-plus corporate credit rating, single-'B'-minus subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". rating, and double-'B'-minus bank loan rating are affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. . About $100 million of debt was outstanding as of March 31, 1998. The outlook revision follows the company's continued soft earnings from its core businesses, coupled with its announcement that it intends to acquire the stock of Johnson Products Co. Inc. for $70 million in cash. The acquisition will be funded from proceeds of a partial equity sale of Carson South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. and the eventual divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of Cutex and is not expected to result in an increase in leverage. Still, the acquisition is a substantial transaction for Carson, increasing integration risks over the near to mid term. The ratings reflect Carson's leadership positions in niche subsegments of the ethnic hair care, cosmetics cosmetics, preparations externally applied to change or enhance the beauty of skin, hair, nails, lips, and eyes. The use of body paint for ornamental and religious purposes has been common among primitive peoples from prehistoric times (see body-marking). , and shaving products categories, offset by aggressive growth strategies and high leverage. With a tight focus on marketing to the specific needs of African-American consumers, Carson has established strong market shares in hair relaxers, hair color, and men's shaving products. These positions have been bolstered bol·ster n. A long narrow pillow or cushion. tr.v. bol·stered, bol·ster·ing, bol·sters 1. To support or prop up with or as if with a long narrow pillow or cushion. 2. with the addition of Johnson Products. The intended divestiture of Cutex provides for an exit from non-ethnic-specific categories and sharpens the company's business focus. While reported sales were up 77% for the quarter ended March 31, 1998, and sales of the company's domestic core business increased 12.5%, the domestic ethnic hair care industry continues to be soft reflecting in part the effects of drug chain consolidation. Core sales are expected to continue soft through second quarter of fiscal 1998. Margins have been adversely impacted due to product mix, production inefficiencies, and higher infrastructure costs incurred to support the company's growth. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. margins fell to 5.7% from 8.9% earned for the year earlier period. Given softer earnings, debt protection measures, which had been expected to be commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. with the rating, will erode Erode (ĕrōd`), city (1991 urban agglomeration pop. 361,755), Tamil Nadu state, S India, on the Kaveri River. The city is located in a cotton-growing region, and its industries include cotton ginning and the manufacture of transport equipment. somewhat. Financial flexibility remains adequate for the rating, based on the market value of the remaining holding in Carson South Africa, the company's $25 million working capital line, and divestiture proceeds in excess of the Johnson acquisition. OUTLOOK: NEGATIVE Carson's strong brand names and solid market positions should be strengthened by the Johnson acquisition and should resume their historical profitability in the second half of fiscal 1998. Standard & Poor's expects no further erosion in the company's credit profile. However, if debt protection measures do not recover to a level commensurate with the rating in the near to mid term, ratings could be lowered, Standard & Poor's said.--CreditWire
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