SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the fiscal year ended December 31, 1996.
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.
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(Exact name of registrant as specified in its charter)
Delaware 06-1451076
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
60 Main Street, Bridgeport, Connecticut 06604
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 367-4400
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each class Name of each exchange on which registered
None None
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Securities registered pursuant to Section 12(g) of the Act:
11% Series B Senior Subordinated Notes due 2006
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(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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x/]
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PART I
ITEM 1. BUSINESS
General
Remington Products Company, L.L.C. (the "Company" or "Remington") is a major
manufacturer and marketer of 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 hairdryers, men's electric grooming products,
travel products and other small electric consumer appliances.
The Company is a Delaware limited liability company that will continue in
existence until December 31, 2016 or dissolution prior thereto as determined
under the Company's LLC Agreement.
Prior to May 23, 1996, the Company operated as Remington Products Company
("RPC"), a Delaware general partnership, of which RPI Corp. (formerly known as
Remington Products, Inc.) ("RPI"), a company controlled by Mr. Victor K. Kiam,
II and Remsen Partners ("Remsen"), an entity controlled by Mr. Isaac Perlmutter,
were each 50% partners. On May 23, 1996 (the "Closing Date"), there was a
reorganization of the Company (the "Reorganization"), pursuant to which: (i) RPC
made a cash distribution in an amount of $56.9 million to Remsen (less estimated
excluded obligations of $6.6 million) and $48.0 million to RPI (less estimated
excluded obligations of $7.1 million and net of a $10.9 million reduction
pursuant to the preliminary working capital adjustment); (ii) Vestar Shaver
Corp. ("Vestar Corp. I") and Vestar Razor Corp. ("Vestar Corp. II" and, together
with Vestar Corp. I, the "Vestar Members"), corporations controlled by Vestar
Equity Partners, L.P. ("Vestar"), purchased Remsen's interest in the Company for
$33.4 million (the "Vestar Investment"); (iii) certain members of senior
management of the Company (the "Management Investors") acquired an equity
interest of $1.1 million (including a cash purchase of $0.86 million and
assuming exercise of certain management options with an aggregate exercise price
of $0.26 million) in the Company; (iv) the Company paid estimated excluded
obligations of approximately $10.7 million; (v) RPI retained an equity
investment in the Company with an implied value of $35.4 million (the "Kiam
Investment and, collectively with the Vestar Investment and the Management
Investment, the "Equity Investment"); and (vi) RPC was merged with and into the
Company.
In addition, as part of the Reorganization, $41.3 million of existing
indebtedness of RPC was refinanced. The funds required to consummate the
Reorganization were provided by an initial offering by the Company and its
wholly owned subsidiary, Remington Capital Corp. ("Capital"), of $130 million of
11% Senior Subordinated Notes due 2006 to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933, as amended, borrowings
under a Senior Credit Agreement and the cash proceeds of the Equity Investments.
On November 4, 1996, pursuant to a Registration Statement on Form S-4 under
the Securities Act of 1933, the Company completed an offer to exchange its 11%
Series B Senior Subordinated Notes due 2006 for all of the outstanding 11%
Senior Subordinated Notes due 2006 issued in connection with the reorganization.
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Description of Business
Products
Electric Shavers. The Company is a leading distributor of men's and women's
electric shavers. The Company's primary men's electric shaver lines are the
Triple Foil(TM), Dual Foil/XLR(TM) , each with the Micro-Screen(R) cutting
system, and rotary shavers while the primary women's electric shaver lines are
the Ladies' wet/dry, the WER (Women's Electric Razor) and rotary shavers. The
Company also manufactures and distributes electric shaver accessories consisting
of shaver replacement parts (primarily foils and cutters), preshave products and
cleaning agents. Electric shavers accounted for 44%, 44% and 47% of the
Company's total net sales for the years ended December 31, 1996, 1995 and 1994
respectively.
Women's Personal Care Appliances. Remington entered the women's personal
care appliance market in the United States and expanded its presence overseas
through the acquisition in December 1993 of the Clairol personal care appliance
business from Bristol-Myers Squibb Company. These products consist primarily of
hairsetters, hairdryers, make-up mirrors, curling irons and curling brushes. The
Company's hairsetter products include flocked rollers (both dry and mist) and
Remington Express Set(R) hairsetter, which heats in 90 seconds, the Smart
Setter(R) hairsetter, which incorporates a new proprietary technology that
indicates to users when optimum heat levels have been reached by changing the
color of the rollers. Women's personal care appliances accounted for 28%, 30%
and 27% of the Company's total net sales for the years ended December 31, 1996,
1995 and 1994, respectively.
Men's Grooming Products. Men's grooming products consist of beard and
mustache trimmers, nose hair and ear hair trimmers and home haircut kits.
Other Products. Remington's travel appliances consist of products that
provide personal grooming and other general household functions for domestic and
international travel. These items include travel hairdryers, steamers, irons,
voltage converter/adapter plugs and shavers. In the home health appliance
product category, Remington sells foot spas and back massagers outside the
United States.
Distribution
The Company's products are sold in the United States and internationally in
over 85 countries through mass merchandisers, catalog showrooms, drug store
chains and department stores in addition to the Company's 96 service stores.
In the United States, the Company sells products through mass-merchant
retailers such as Wal- Mart, K-Mart and Target, department stores such as Sears,
catalog showrooms such as Service Merchandise, drug store chains including
Walgreens, Eckerd and Revco, and Remington's own service stores. Throughout the
United States, the Company's products are sold in excess of 10,000 retail
outlets. Wal-Mart accounted for 17%, 16% and 16% of the Company's net sales
during the years ended December 31, 1996, 1995 and 1994. No other customer has
accounted for more than 10% of the Company's net sales during the years ended
December 31, 1996, 1995, and 1994.
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Service Stores
Remington opened its first service store in 1981. As of March 15, 1997, the
Company owned and operated a chain of 96 service stores with 84 in the United
States, nine in the United Kingdom and three in Australia. During 1996, the
Company opened a total of four permanent and 12 seasonal service stores in the
United States, two permanent stores in the United Kingdom and acquired a chain
of three stores in Australia. The stores in the United States are in many of the
major markets with concentrations on the East Coast and in the major cities of
the South and West. The majority of the stores are located in shopping malls,
outlet malls and in prime locations within large metropolitan areas. The stores
sell and service a variety of Remington and non-Remington shavers, knives,
scissors, clocks, personal care appliances and related products. The service
stores also oversee sales of replacement parts to approximately 300 independent
authorized shaver service dealers across the United States. In 1996, the
Company's service stores generated worldwide net sales of $38.6 million, with
$33.7 million in the U.S. and $4.9 million internationally. Remington products
accounted for approximately 50% of these net sales.
Manufacturing Operations
Remington conducts all in-house manufacturing at its Bridgeport,
Connecticut facility. The Company assembles foil shavers and manufactures foil
cutting systems in Bridgeport using proprietary cutting technology and a series
of specially designed machines. Remington's Bridgeport facility can produce in
excess of 30,000 shavers a day, yet is flexible enough to operate economically
at much lower capacities. The electric shaver business is highly seasonal, with
significant production swings during the course of the year. As a result of such
swings, Remington's manufacturing process has been structured to utilize
temporary workers. As a result of these factors, during peak periods
approximately 30% of Remington's work force (excluding that of the service
stores) is composed of temporary workers.
Suppliers
A substantial portion of the Company's finished goods inventories are
manufactured for the Company by suppliers located in China, Japan and Thailand.
In determining whether to manufacture products in-house or source them from
third party suppliers, the Company balances the potential cost savings in labor,
materials and overhead that a foreign manufacturer can provide with the
flexibility, quality control and protection of confidentiality inherent in
in-house production. While Remington sources a large portion of its materials
and products from third-party suppliers, it continues to manufacture its triple
foil and certain other shavers in-house and maintains ownership of tools and
molds used by many of its suppliers. The Company's three most significant
suppliers, Izumi Products, Inc. ("Izumi"), Raymond International and Fourace
Industries, Ltd., accounted for approximately 44% of the Company's overall cost
of sales in 1996. These three suppliers' manufacturing facilities are located in
China and Japan. Since purchases by Remington account for a significant portion
of the overall sales of these suppliers, the Company has generally been able to
negotiate favorable purchase terms. Remington has had a relationship with these
suppliers for many years and management considers its present relationships to
be good.
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Research and Product Development
Research and development efforts at Remington allow the Company to maintain
its unique manufacturing strength in cutting systems for shavers. The Company is
currently concentrating its efforts on a new premium line of shavers including
foil improvements and new cutting and trimmer configurations. The Company also
devotes resources to the development of new technology for women's personal care
products, including hairsetters, hairdryers and curling irons.
Patents and Trademarks
The Company owns approximately 180 patent and patent applications for both
design and utility that are maintained in approximately 40 countries. The
Company's patents cover electric shavers, cutting and trimming mechanisms and
women's personal care products such as hairsetters, hairdryers and curling
irons. In addition, the Company maintains over 300 different trade names in
approximately 100 countries covering a variety of products. These trade names
have resulted in the issuance of over 1,300 registered trademarks.
As a result of the common origins of the Company and Remington Arms, the
Remington mark is owned by each company with respect to its principal products
as well as associated products. Thus, the Company owns the Remington mark for
shavers, shaver accessories, grooming products and health care products, while
Remington Arms owns the mark for firearms, sporting goods and products for
industrial use, including industrial hand tools. The terms of a 1986 agreement
between the Company and Remington Arms provided for their respective rights to
use the Remington trademark on products which are not considered "principal
products of interest" for either company. A separate company, Remington
Licensing Corporation, owns the Remington trademark in the U.S. with respect to
any overlapping uses and the Company and Remington Arms are each licensed to use
the mark in their respective areas of interest. The Company retains the
Remington trademark for nearly all products which it believes can benefit from
the use of the brand name in the Company's distribution channels. The Company
has aggressively enforced its ownership of the Remington brand name.
Competition
The Company believes that the markets for all of its product lines are
highly competitive and that competition for retail sales to consumers is based
on several factors, including brand name recognition, value, quality, price and
availability. Primary competitive factors with respect to selling such products
to retailers are brand reputation, product categories offered, broad coverage
within each product category, support and service in addition to price.
Remington competes with established companies, several of which have
substantially greater resources than those of the Company. There are no
substantial regulatory barriers to entry for new competitors in the electric
personal appliance industry. However, suppliers that are able to maintain, or
increase, the amount of retail shelf space allocated to their respective
products may gain a competitive advantage. The Company believes that the
allocation of space by retailers is influenced by many factors, including brand
name recognition by consumers, product quality and prices, service levels
provided by the supplier and the supplier's ability to support promotions.
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The rotary shaver market is significant outside the United States. The
future expansion of sales of the Company's rotary shavers outside the United
States will be affected by, among other factors, the outcome of ongoing legal
actions against Philips Electronics, N.V. ("Philips"). Philips holds patents and
trademarks outside the United States on certain of its shaver designs that
restrict the Company from entering these markets. The Company is currently
challenging such trademarks and patents in the United Kingdom. During 1996, in
Canada, the Company successfully challenged certain of Philips' trademarks.
Employees
As of December 31, 1996, the Company employed approximately 1,150 people in
the United States and abroad of which approximately 240 were employed part-time.
None of the Company's employees are represented by a union. Remington believes
relations with its employees are good.
Environmental Matters
The Company's manufacturing operations are subject to federal, state and
local environmental laws and regulations. The Company believes it is in
substantial compliance with all such environmental laws which are applicable to
its operations. The Company has reported to the Connecticut Department of
Environmental Protection that it has detected petroleum and solvent compounds in
soil and ground water samples taken from its Bridgeport facility at levels which
may require further investigation or cleanup. In addition to its ongoing program
of environmental compliance, the Company has provided reserves to cover the
anticipated costs of remediation which may be necessary at its Bridgeport
facility. The Company believes that the costs for any remediation activities
which are eventually undertaken would not be material to the Company's financial
position and results of operations.
International Operations and Distribution
Remington's international operations (excluding export sales from the U.S.)
generated approximately 39%, 36% and 33% of the Company's net sales in 1996,
1995 and 1994, respectively. The Company's international network of subsidiaries
and distributors currently extends to over 85 countries worldwide. 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
United States headquarters. The Company distributes its products directly in the
United Kingdom, Australia, Canada, Germany, France, New Zealand and Ireland. In
all other parts of the world the Company distributes its products through
strategic alliances with local distributors. Remington enjoys leading market
positions in many personal grooming products in the United Kingdom and
Australia, while also having a market presence in Canada. As in the United
States market, the primary asset of the Company's international operations is
the Remington brand name.
The Company distributes products internationally through electric product
stores, drug stores, specialized shaver shops, catalog showrooms, department
stores, mail order and television and the Company's service stores. As in the
United States, Remington has established direct relationships with many of the
leading international retailers.
Additional financial information relating to Remington's international
operations is set forth in Note 14 (Geographic Information) of the "Notes to
Consolidated Financial Statements" of the Company appearing elsewhere herein.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REMINGTON PRODUCTS COMPANY, L.L.C.
By: /s/ Kris J. Kelley
Kris J. Kelley, Vice President and Controller
Date: August 12, 1997
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