<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the quarter ended September 30, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 333-07429
Remington Products Company, L.L.C.
(Exact name of registrant as specified in its charter)
Delaware 06-1451076
- ------------------------------ -----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
60 Main Street, Bridgeport, Connecticut 06604
- ---------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 367-4400
-----------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Each class Name of each exchange on which registered
None None
------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
-----------------------------------------------------------
11% Series B Senior Subordinated Notes due 2006
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x/ No _____
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations -
For the three and nine months ended September 30, 1997
and September 28, 1996 4
Consolidated Statements of Cash Flows -
For the nine months ended September 30, 1997 and
September 28, 1996 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signature 11
</TABLE>
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<PAGE>
Remington Products Company, L.L.C.
Consolidated Balance Sheets
(unaudited in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,293 $ 7,199
Accounts receivable, less allowance for doubtful accounts
of $626 in 1997 and $1,340 in 1996 43,046 54,262
Inventories 78,335 63,785
Prepaid and other current assets 2,149 4,212
-------- -------
Total current assets 124,823 129,458
Property, plant and equipment, net 16,071 13,982
Intangibles, net 61,046 62,520
Other assets 8,378 8,863
Total assets $210,318 $214,823
======== ========
LIABILITIES AND MEMBERS' DEFICIT
Current Liabilities:
Accounts payable $ 19,354 $ 16,414
Short-term borrowings 1,969 1,153
Current portion of long-term debt 1,069 1,067
Accrued liabilities 22,693 32,964
------ ------
Total curret liabilities 45,085 51,598
Long-term debt 180,290 169,411
Other liabilities 1,622 1,521
Members' deficit:
Members' deficit (15,476) (7,351)
Cumulative translation adjustment (1,203) (356)
-------- --------
Total members' deficit (16,679) (7,707)
-------- --------
Total liabilities and members' deficit $210,318 $214,823
========= ========
</TABLE>
See notes to unaudited consolidated financial statements.
-3-
<PAGE>
Remington Products Company, L.L.C.
Consolidated Statements of Operations
(unaudited in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 28, 1996
Three Months Three Months Nine Months --------------------------------------
Ended Ended Ended 18 Weeks Ended 21 Weeks Ended
September 30, September 28, September 30, September 28, May 23,
1997 1996 1997 1996 1996
--------------- ------------- ------------ ----------------- ---------------
(Successor) (Predecessor)
<S> <C> <C> <C> <C> <C>
Net sales $ 59,577 $ 60,369 $140,876 $ 83,524 $ 56,713
Cost of sales 34,179 37,549 81,256 51,579 35,102
-------- -------- -------- -------- --------
Gross profit 25,398 22,820 59,620 31,945 21,611
Selling, general and
administrative 19,294 17,608 51,742 24,833 37,912
Amortization of intangibles 485 698 1,452 848 650
-------- ------- -------- -------- --------
Operating income (loss) 5,619 4,514 6,426 6,264 (16,951)
Interest expense 4,813 4,794 14,006 6,725 2,228
Other expense (income) (133) (6) (409) (249) (115)
--------- -------- --------- --------- ---------
Income (loss) before
income taxes 939 (274) (7,171) (212) (19,064)
Provision (benefit) for
income taxes 681 627 334 952 (873)
--------- -------- ---------- ---------- ---------
Net income (loss) $ 258 $ (901) $ (7,505) $ (1,164) $(18,191)
========= ========= =========== =========== =========
Net loss applicable to
common units $ (1,861) $ (2,756) $(13,679) $ (3,773) $ -
========= ========= =========== ========== ==========
</TABLE>
See notes to unaudited consolidated financial statements.
-4-
<PAGE>
Remington Products Company, L.L.C.
Consolidated Statements of Cash Flows
(unaudited in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 28, 1996
Nine Months -------------------------------------
Ended 18 Weeks Ended 21 Weeks Ended
September 30, September 28, May 23,
1997 1996 1996
-------------- ---------------- ---------------
(Successor) (Predecessor)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(7,505) $ (1,164) $(18,191)
Adjustment to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation 1,812 715 1,355
Amortization of intangibles 1,452 848 650
Amortization of deferred financing fees 805 382 262
Deferred income taxes (37) 458 (561)
Foreign currency forward gain (940) - -
Changes in assets and liabilities:
Accounts receivable 11,216 (19,300) 41,043
Inventories (14,550) (15,435) (8,339)
Accounts payable 2,940 7,683 1,187
Accrued liabilities (9,230) 10,418 (933)
Other, net (2,371) (2,403) (372)
-------- ---------- ---------
Cash provided by (used in) operating activities (16,408) (17,798) 16,101
-------- ---------- ---------
Cash flows from investing activities:
Capital expenditures (3,725) (998) (1,310)
Proceeds from working capital adjustment 2,500 - -
Payment for purchase of Company, net - (142,032) -
-------- --------- ---------
Cash used in investing activities (1,225) (143,030) (1,310)
-------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of Senior Subordinated Notes - 129,026 -
Net repayments under term loan facilities (757) (2,472) (3,600)
Net borrowings/(repayments) under credit facilities 13,355 2,926 (12,353)
Equity investments (repurchases) (620) 34,302 -
Debt issuance costs - (8,471) -
Other, net (251) 200 -
------- -------- ---------
Cash provided by (used in) financing activities 11,727 155,511 (15,953)
Decrease in cash and cash equivalents (5,906) (5,317) (1,162)
Cash and cash equivalents, beginning of period 7,199 5,642 6,804
--------- ----------- ------------
Cash and cash equivalents, end of period $ 1,293 $ 325 $ 5,642
========= ============ ============
Supplemental cash flow information:
Interest paid $ 10,092 $ 3,237 $ 1,874
Income taxes paid $ 1,715 $ 579 $ 440
</TABLE>
See notes to unaudited consolidated financial statements.
-5-
<PAGE>
Remington Products Company, L.L.C.
Notes to Unaudited Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Remington Products Company, L.L.C., a Delaware limited liability company,
(the "Company") was formed to acquire the operations of Remington Products
Company and its subsidiaries ("RPC"). The acquisition, which was effective on
May 23, 1996 (the "Closing Date"), was accounted for as a purchase transaction
in accordance with Accounting Principles Board Opinion No. 16, Business
Combinations, and EITF Issue No. 88-16, Basis in Leveraged Buyout Transactions.
The consolidated balance sheets as of September 30, 1997 and December 31, 1996
and the consolidated results of operations and cash flows for the nine months
ended September 30, 1997 include the accounts of Remington Products Company,
L.L.C., the "Successor" company, and its wholly-owned subsidiaries following the
Closing Date. The statements also include results of operations and cash flows
of RPC, the "Predecessor" company, prior to the Closing Date.
The statements have been prepared by the Company without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission and
according to generally accepted accounting principles, and reflect all
adjustments consisting of normal recurring accruals which, in the opinion of
management, are necessary for a fair statement of the results of the interim
periods presented. These financial statements do not include all disclosures
associated with annual financial statements and, accordingly, should be read in
conjunction with the notes contained in the Company's audited consolidated
financial statements for the year ended December 31, 1996.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year presentation.
2. INVENTORIES
Inventories were comprised of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
Finished goods $72,394 $59,205
Work in process 5,914 4,556
Raw materials 27 24
======= =======
$78,335 $63,785
</TABLE>
3. INCOME TAXES
Federal income taxes on net earnings of the Company are payable directly by
the members pursuant to the Internal Revenue Code. Accordingly, no provision has
been made for Federal income taxes for the Company. However, certain state and
local jurisdictions do not recognize L.L.C. status for taxing purposes and
require taxes to be paid on net earnings. Furthermore, earnings of certain
foreign operations are taxable under local statutes. In jurisdictions where
L.L.C. status is not recognized or foreign corporate subsidiaries exist,
deferred taxes on income are provided for as temporary differences between the
financial and tax basis of assets and liabilities.
-6-
<PAGE>
4. COMMITMENTS AND CONTINGENCIES
The Company is involved in legal and administrative proceedings and claims
of various types. While any litigation contains an element of uncertainty,
management believes that the outcome of each such proceeding or claim which is
pending or known to be threatened, or all of them combined, will not have a
material adverse effect on the Company's consolidated financial position or
results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Company manufactures and markets men's and women's electrical personal
care appliances. The Company distributes on a worldwide basis men's and women's
electric shavers and accessories, women's personal care appliances including
hairsetters, curling irons and hair dryers, men's electric grooming products,
travel products and other small electric consumer appliances. In addition to its
U.S. merchandising and manufacturing operations, the Company has merchandising
subsidiaries in the United Kingdom, Canada, Germany, Australia and New Zealand
and branch offices in France and South Africa. The Company markets products
throughout Europe, the Middle East, Africa, Asia and a portion of South America
through its subsidiary in the United Kingdom and distributes products to Japan,
Central America and the remainder of South America from its U.S. headquarters.
Sales of the Company's products are highly seasonal, with a large
percentage of net sales occurring during the Christmas selling season. The
Company typically derives more than 40% of its annual net sales in the fourth
quarter of each year while incurring losses in the first quarter of each year.
As a result of this seasonality, the Company's inventory and working capital
needs fluctuate substantially during the year. To facilitate comparison of the
operating results of the periods set forth below, results of operations for the
nine months ended September 28, 1996 were obtained by combining, without
adjustment, the results of operations of the predecessor company for the
twenty-one weeks ended May 23, 1996 with those of the Company for the eighteen
weeks ended September 28, 1996.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------------- --------------------------------------------
September 30, 1997 September 28, 1996 September 30, 1997 September 28, 1996
$ % $ % $ % $ %
------ ----- ------ ----- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales:
U.S. $ 24.0 40.3 $28.5 47.2 $58.9 41.8 $66.6 47.5
U.S. service stores 8.4 14.1 7.1 11.8 22.5 16.0 19.5 13.9
International 27.2 45.6 24.8 41.0 59.5 42.2 54.1 38.6
----- ----- ----- ----- ----- ----- ------ ------
59.6 100.0 60.4 100.0 140.9 100.0 140.2 100.0
Cost of sales 34.2 57.4 37.6 62.3 81.3 57.7 86.7 61.8
------ ----- ------ ------
Gross profit 25.4 42.6 22.8 37.7 59.6 42.3 53.5 38.2
Selling, general and
administrative 19.3 32.4 17.6 29.1 51.7 36.7 62.7 44.7
Amortization of
intangibles 0.5 0.8 0.7 1.2 1.5 1.0 1.5 1.1
------ ----- ------ ------- ----- ----- ------ -----
Operating income
(loss) 5.6 9.4 4.5 7.4 6.4 4.6 (10.7) (7.6)
Interest expense 4.8 8.1 4.8 7.9 14.0 9.9 9.0 6.4
Other expense
(income ) (0.2) (0.2) - - (0.4) (0.3) (0.4) (0.3)
------ ------ ------ ------- ------- ------ ------ ------
Income (loss) before
income taxes 1.0 1.6 (0.3) (0.5) (7.2) (5.1) (19.3) (13.7)
Provision for
income taxes 0.7 1.1 0.6 1.0 0.3 0.2 0.1 0. 1
------ ------ ------ ------- ------ ------- ------- -------
Net income (loss) $ 0.3 0.4 $(0.9) (1.5) $(7.5) (5.3) $(19.4) (13.8)
======= ====== ====== ======= ======= ====== ======== ========
</TABLE>
-7-
<PAGE>
RESULTS OF OPERATIONS
Third Quarter Ended September 1997 Versus September 1996
Net Sales. Net sales for the quarter ended September 30, 1997 were $59.6
million compared to $60.4 million for the quarter ended September 28, 1996, a
decrease of 1.3%. The slight sales decline is attributable to the decline in the
domestic business which was mostly offset by increased international net sales
due to investments in additional sales and distribution programs. Domestic
Service Stores also experienced a sales increase.
Net sales in the United States decreased to $24.0 million in the third
quarter of 1997 from $28.5 million in the third quarter of 1996. This decrease
was due primarily to lower shaver and accessory sales due to the anticipated
effects of transitioning from the current to the updated line of dual
MicroScreen(R) shavers, which were introduced in the latter part of the third
quarter of 1997, competitive actions in rotary shavers and the overall decline
in the market for women's shavers. Domestic sales of personal care products were
also down, due primarily to competitive actions in hairsetters. Inventory
reductions by certain customers also contributed to the overall sales decline in
the United States.
Net sales through the Company's U.S. service stores increased to $8.4
million in the third quarter of 1997 from $7.1 million in the third quarter of
1996. The increase is due to incremental sales from new store openings as
compared to the third quarter of 1996. Same store sales remained relatively flat
compared to the third quarter of 1996.
International net sales increased to $27.2 million in the third quarter of
1997 from $24.8 million in the third quarter of 1996, primarily on the strength
of the United Kingdom and Australian operations. Net sales in the United Kingdom
increased 23.9% in the third quarter of 1997 as a result of strong personal care
product sales, while net sales in Australia increased 12.5% due to incremental
sales from the acquisition of a small chain of service stores in 1996. These
increases were somewhat offset by lower Canadian net sales for the quarter due
to the timing of certain orders and lower German net sales due to a continuing
weak economy.
Gross Profit. Gross profit increased to $25.4 million, or 42.6% of net
sales in the third quarter of 1997, from $22.8 million, or 37.7% of net sales in
the third quarter of 1996. The significant increase in the gross margin
percentage is primarily attributable to the effect of a $1.4 million
non-recurring charge related to a write up of inventory required by accounting
rules applicable to the Company's recapitalization in May 1996. After
restatement for this non-recurring charge, margins were approximately one
percentage point higher in the 1997 quarter than in the comparable quarter in
1996, due primarily to a positive sales mix impact within international
business.
-8-
<PAGE>
Selling, General and Administrative. Selling, general and administrative
expenses increased to $19.3 million, or 32.4% of net sales in the third quarter
of 1997, as compared to $17.6 million or 29.1% of net sales in 1996. The
increase was primarily due to increased expenses related to the investments in
additional sales and distribution programs.
Operating Income. Operating income in the third quarter of 1997 was $5.6
million compared to $4.5 million in the third quarter of 1996. The increase is
primarily the result of the increase in gross profit somewhat offset by the
increase in selling, general and administrative expenses.
Interest Expense. Interest expense of $4.8 million for the third quarter of
1997 remained fairly constant with the third quarter of 1996. Higher average
outstanding borrowings on the Company's Senior Credit Agreement in the third
quarter of 1997 were offset by slightly lower interest rates and fees.
Provision for Income Taxes. Income tax expense was $0.7 million for the
third quarter of 1997 compared to $0.6 million for the third quarter of 1996,
and is generated primarily by the Company's United Kingdom operations.
Nine Months ended september 1997 versus september 1996
Net Sales. Net sales for the nine months ended September 30, 1997 were
$140.9 million compared to $140.2 million for the nine months ended September
28, 1996. The slight increase was a result of strong international and service
store sales.
Net sales in the United States decreased to $58.9 million in the first nine
months of 1997 from $66.6 million in the first nine months of 1996. This
decrease was principally due to lower sales of certain men's and women's
shavers. Men's shaver sales were impacted by the effect of transitioning from
the current to the updated line of dual MicroScreen(R) shavers introduced in the
third quarter, competitive actions in rotary shavers, as well as the decision
not to repeat certain promotional programs offered in the prior year. Women's
shaver sales decreased due to the overall decline in the market for women's
shavers. In addition, domestic sales of personal care products decreased due
primarily to competitive actions in hairsetters. Inventory reductions by certain
customers also contributed to the overall sales decline in the United States.
Net sales through the Company's U.S. service stores increased to $22.5
million in the first nine months of 1997 from $19.5 million in the first nine
months of 1996. The increase is due to a 3% increase in same store sales and
incremental sales from the addition of 13 new stores as compared to the end of
the third quarter of 1996.
International net sales increased to $59.5 million in the first nine months
of 1997 from $54.1 million in the first nine months of 1996, primarily on the
strength of the United Kingdom and Australian operations. Net sales in the
United Kingdom increased 16.4% in the first nine months of 1997 as a result of
strong personal care product sales, while Australia increased 14.8% due to the
acquisition of a small chain of service stores in 1996 and new product sales.
German net sales lagged behind the prior year nine months due to a continued
weak economy and negative currency impacts, while Canadian net sales for the
first nine months of 1997 were essentially in line with their 1996 levels.
Gross Profit. Gross profit increased to $59.6 million, or 42.3% of net
sales in the first nine months of 1997, from $53.5 million, or 38.2% of net
sales in the first nine months of 1996. The increase in the gross margin
percentage is primarily attributable to the effect of certain non-recurring
charges related to the Company's recapitalization in May 1996. After restatement
for the non-cash or non-recurring charges, margins were approximately one
percentage point higher in the first nine months of 1997 versus the 1996 period.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $51.7 million, or 36.7% of sales, in 1997 as compared to
$62.7 million, or 44.7% of sales, in 1996. The decline is primarily due to
-9-
<PAGE>
various non-cash or non-recurring charges in the second quarter of 1996, the
most significant of which were $10.9 million of costs and obligations paid out
in conjunction with the Company's recapitalization in May 1996, and a charge of
$1.3 million related to the bankruptcy of the Company's largest customer in
Canada.
Operating Income. Operating income in the first nine months of 1997 was
$6.4 million compared to an operating loss of $10.7 million in the first nine
months of 1996, primarily due to the non-cash or non- recurring charges in the
prior year.
Interest Expense. Interest expense increased to $14.0 million in the first
nine months of 1997 from $9.0 million in the first nine months of 1996. The
increase was due to $5.8 million in additional interest on the Senior
Subordinated Notes issued in May 1996 which was somewhat offset by lower rates
on the refinanced term and revolving credit borrowings.
Provision for Income Taxes. Income tax expense was $0.3 million for the
first nine months of 1997 compared to $0.1 million for the first nine months of
1996, and relates primarily to the Company's Australian and Canadian operations.
Liquidity and Capital Resources.
Net cash used in operating activities for the first nine months of 1997 was
$16.4 million versus $1.7 million during the first nine months of 1996. The
primary reason for the year-to-year difference were lower net receivable
collections during the period as a result of the lower year end 1996 net sales
and resulting receivable balance versus year end 1995.
The Company's operations are not capital intensive. During the first nine
months of 1997 and 1996, the Company's capital expenditures totaled $3.7 million
and $2.3 million, respectively, with the increase primarily due to spending on
tooling and other capital equipment for the new men's premier shaver line to be
introduced in 1998. In the first quarter of 1997, the Company finalized the
working capital adjustment with certain owners of the Predecessor company which
resulted in cash proceeds of $2.5 million.
The Company made scheduled principal payments on term loans of $0.8 million
during the first nine months of 1997 and increased borrowings by $13.4 million
under various revolving credit agreements. The Company also repurchased $0.6
million in Common Units from former officers of the Company during the second
quarter of 1997. The higher interest payments arose because of the semi-annual
interest payments on the Senior Subordinated Notes issued in conjunction with
the reorganization of the Company in May 1996.
The Company's primary sources of liquidity are funds generated from
operations and borrowings available pursuant to the Senior Credit Agreement. The
Senior Credit Agreement provides for $70 million in Revolving Credit Facilities
and $10 million in Term Loans. The Term Loans are repayable quarterly over six
years. The Revolving Credit Facilities are subject to a borrowing base of 85% of
eligible accounts receivable and 60% of eligible inventory and expire on June
30, 2002. As of September 30, 1997, availability on the Revolving Credit
Facilities was approximately $17.3 million. The Company believes that cash
generated from operations and borrowing resources will be adequate to permit the
Company to meet both its debt service requirements and capital requirements for
the next twelve months, although no assurance can be given in this regard.
-10-
<PAGE>
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule.
(b) Reports on Form 8-K
During the quarter ended September 30, 1997, the Registrant did not file
any reports on Form 8-K.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REMINGTON PRODUCTS COMPANY, L.L.C.
By: /s/ Kris J. Kelley
Kris J. Kelley, Vice President and Controller
Date: November 9, 1997
-11-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,293
<SECURITIES> 0
<RECEIVABLES> 43,046
<ALLOWANCES> 626
<INVENTORY> 78,335
<CURRENT-ASSETS> 124,823
<PP&E> 16,071
<DEPRECIATION> 1,812
<TOTAL-ASSETS> 210,318
<CURRENT-LIABILITIES> 45,085
<BONDS> 180,290
0
0
<COMMON> 0
<OTHER-SE> (16,679)
<TOTAL-LIABILITY-AND-EQUITY> 210,318
<SALES> 140,876
<TOTAL-REVENUES> 140,876
<CGS> 81,256
<TOTAL-COSTS> 81,256
<OTHER-EXPENSES> 53,194
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,006
<INCOME-PRETAX> (7,171)
<INCOME-TAX> 334
<INCOME-CONTINUING> (7,505)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,505)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
