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 March 31, 1998.
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
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None None
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 _____
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
INDEX
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<S> <C> <C>
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 3
Consolidated Statements of Operations -
For the three months ended March 31, 1998 and
March 29, 1997 4
Consolidated Statements of Cash Flows -
For the three months ended March 31, 1998 and
March 29, 1997 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 10
Signature 11
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<PAGE>
Remington Products Company, L.L.C.
Consolidated Balance Sheets
(unaudited in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,264 $ 5,408
Accounts receivable, less allowance for doubtful accounts of
$669 in 1998 and $734 in 1997 24,959 53,052
Inventories 59,976 60,507
Prepaid and other current assets 2,234 1,525
----------- -----------
Total current assets 90,433 120,492
Property, plant and equipment, net 15,828 16,033
Intangibles, net 60,058 60,538
Other assets 7,962 8,182
---------- ----------
Total assets $174,281 $205,245
========== ==========
LIABILITIES AND MEMBERS' DEFICIT Current Liabilities:
Accounts payable $ 6,716 $ 13,359
Short-term borrowings - 1,300
Current portion of long-term debt 1,584 1,417
Accrued liabilities 19,676 28,055
---------- ----------
Total current liabilities 27,976 44,131
Long-term debt 168,129 178,114
Other liabilities 1,569 1,278
Members' deficit:
Members' deficit (21,476) (15,894)
Cumulative translation adjustment (1,917) (2,384)
---------- ----------
Total members' deficit (23,393) (18,278)
---------- ----------
Total liabilities and members' deficit $ 174,281 $ 205,245
========== ==========
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE>
Remington Products Company, L.L.C.
Consolidated Statements of Operations
(unaudited in thousands)
<TABLE>
<CAPTION>
Three Months Ended
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March 31, March 29,
1998 1997
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<S> <C> <C>
Net sales $ 38,904 $ 36,437
Cost of sales 21,926 21,280
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Gross profit 16,978 15,157
Selling, general and administrative 17,160 14,962
Amortization of intangibles 484 484
-------- ---------
Operating loss (666) (289)
Interest expense 4,882 4,665
Other expense (income) 235 (655)
-------- ---------
Loss before income taxes (5,783) (4,299)
Provision (benefit) for income taxes (443) (289)
-------- ---------
Net loss $(5,340) $ (4,010)
======== =========
Net loss applicable to common units $(7,588) $ (6,008)
======== =========
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE>
Remington Products Company, L.L.C.
Consolidated Statements of Cash Flows
(unaudited in thousands)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
March 31, March 29,
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (5,340) $(4,010)
Adjustment to reconcile net loss to net cash provided by operating activities:
Depreciation 794 480
Amortization of intangibles 484 484
Amortization of deferred financing fees 268 275
Deferred income taxes 145 (339)
Foreign currency forward (gain) loss 358 (1,459)
Changes in assets and liabilities:
Accounts receivable 28,093 32,785
Inventories 531 987
Accounts payable (6,643) (9,590)
Accrued liabilities (8,446) (8,630)
Other, net (154) (1,826)
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Cash provided by operating activities 10,090 9,157
--------- ---------
Cash flows from investing activities:
Capital expenditures (609) (1,137)
Proceeds from working capital adjustment 2,500
---------- --------
Cash provided by (used in) investing activities (609) 1,363
--------- ---------
Cash flows from financing activities:
Repayments under term loan facilities (318) (189)
Net repayments under credit facilities (11,274) (15,466)
Equity repurchases (242) -
Other, net 258 (100)
--------- ---------
Cash used in financing activities (11,576) (15,755)
Effect of exchange rate changes on cash (49) 211
Decrease in cash and cash equivalents (2,144) (5,024)
Cash and cash equivalents, beginning of period 5,408 7,199
--------- ---------
Cash and cash equivalents, end of period $ 3,264 $ 2,175
========= =========
Supplemental cash flow information:
Interest paid $ 1,058 $ 710
Income taxes paid $ 249 $ 589
</TABLE>
See notes to unaudited consolidated financial statements.
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<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. The acquisition, which was effective on May 23,
1996, 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 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, 1997.
2. Inventories
Inventories were comprised of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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<S> <C> <C>
Finished goods $54,210 $55,099
Work in process 5,753 5,392
Raw materials 13 16
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$59,976 $60,507
======== ==========
</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.
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<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.
5. Adoption of SFAS 130
The Company adopted Statement of Financial Accounting Standards No. 130,
(SFAS 130), "Reporting Comprehensive Income" during the first quarter of 1998,
as required. Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. Presently, the only component of other
comprehensive income for the Company is the change in accumulated foreign
currency translation adjustments.
Comprehensive income consists of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31, March 29,
1998 1997
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<S> <C> <C>
Net loss per financial statements $(5,340) $(4,010)
Other comprehensive income (loss) 467 (468)
----------- ----------
Comprehensive income (loss) (4,873) (4,478)
========= ==========
</TABLE>
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, New Zealand,
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.
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<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
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March 31, 1998 March 29, 1997
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<S> <C> <C> <C> <C>
$ % $ %
Net Sales:
U.S. $ 16.7 42.9 $ 16.0 44.0
U.S. service stores 7.2 18.5 6.4 17.6
International 15.0 38.6 14.0 38.4
------- ------- ------- -------
38.9 100.0 36.4 100.0
Cost of sales 21.9 56.3 21.2 58.5
------- ------- ------- -------
Gross profit 17.0 43.7 15.2 41.5
Selling, general and administrative 17.2 44.2 15.0 40.9
Amortization of intangibles 0.5 1.3 0.5 1.4
------- ------- ------- -------
Operating loss (0.7) (1.8) (0.3) (0.8)
Interest expense 4.9 12.6 4.7 12.9
Other expense (income) 0.2 0.5 (0.7) (1.9)
------- ------- ------- -------
Loss before income taxes (5.8) (14.9) (4.3) (11.8)
Provision (benefit) for income taxes (0.5) (1.3) (0.3) (0.8)
------- ------- ------- -------
Net loss $ (5.3) (13.6) $ (4.0) (11.0)
======= ======= ======= =======
</TABLE>
Results of Operations
First Quarter Ended March 1998 Versus March 1997
Net Sales. Net sales for the quarter ended March 31, 1998 were $38.9
million, an increase of 6.8% when compared to $36.4 million for the quarter
ended March 29, 1997. The increase is attributable to essentially all of the
Company's businesses.
Net sales in the United States increased to $16.7 million in the first
quarter of 1998 from $16.0 million in the first quarter of 1997. This increase
was due primarily to increased demand for the updated line of MicroScreen(R)2
dual foil shavers introduced in the third quarter of 1997, as well as sales of
shaver accessories and spare parts. This increase was partially offset by
decreases in sales of personal care products, due primarily to competitive
actions.
Net sales through the Company's U.S. service stores increased to $7.2
million in the first quarter of 1998 from $6.4 million in the first quarter of
1997. The increase is due to incremental sales from the opening of 10 additional
stores since first quarter 1997, as well as a 5.2% increase in same store sales
over the prior year.
International net sales increased 6.8% to $15.0 million in the first
quarter of 1998 from $14.0 million in the first quarter of 1997. The increase
includes the effects of conforming the U.K.'s interim period recognition of
sales returns to the U.S. methodology, as well as negative currency impacts.
Excluding these effects, international net sales increased 3.3% for the quarter.
Net sales in Australia increased by 20% in local currency, buy only 5% in U.S.
dollars, due to the strengthening of such currency. The Australian sales
increase was primarily due to incremental sales from the opening of additional
service stores during 1997. Net sales in the U.K. increased by approximately
$1.0 million in the quarter due to the aforementioned conforming of sales
returns recognition. This conformity will not impact the full year's results.
-8-
<PAGE>
Gross Profit. Gross profit increased to $17.0 million, or 43.7% of net sales
in the first quarter of 1998, from $15.2 million, or 41.5% of net sales in the
first quarter of 1997. The increase in the gross margin percentage is
attributable to a positive change in product mix as well as lower product
returns compared to first quarter 1997.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $17.2 million, or 44.2% of net sales in the first quarter
of 1998, as compared to $15.0 million or 40.9% of net sales in 1997 due to
spending on new product development and packaging as well as investments in
additional sales and distribution programs.
Operating Loss. The operating loss in the first quarter of 1998 was $(0.7)
million compared to $(0.3) million in the first quarter of 1997. The increase is
primarily the result of the increase in selling, general and administrative
expenses somewhat offset by higher gross margins.
Interest Expense. Interest expense increased to $4.9 million for the first
quarter of 1998 compared to $4.7 million in the first quarter of 1997 due to
higher average outstanding borrowings and slightly higher interest rates on the
Company's Senior Credit Agreement in the first quarter of 1998.
Provision for Income Taxes. The benefit for income taxes was $0.5 million
for the first quarter of 1998 compared to a benefit of $0.3 million for the
first quarter of 1997, and is generated primarily by the Company's United
Kingdom operations.
Liquidity and Capital Resources
Net cash provided by operating activities for the first three months of 1998
was $10.1 million versus $9.2 million during the first three months of 1997. The
increase was attributable to lower disbursements from accounts payable and
accruals in the first quarter 1998, which were mostly offset by lower cash
receipts on collections of receivables in the first quarter 1998 compared to
1997.
The Company's operations are not capital intensive. During the first three
months of 1998 and 1997, the Company's capital expenditures totaled $0.6 million
and $1.1 million, respectively. Capital expenditures for 1998 are anticipated to
be approximately $4.7 million.
The Company made scheduled principal payments of $0.3 million on term loans
and $11.3 million on various revolving credit agreements during the first three
months of 1998. The Company repurchased $0.2 million in Common Units from the
remaining Management Investors of the Company in January 1998 through the
issuance of promissory notes, cancelled all outstanding Management Options and
adopted a new Phantom Equity Program.
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 and expire on June 30, 2002. The Revolving Credit
Facilities are subject to a borrowing base of 85% of eligible accounts
receivable and 60% of eligible inventory. In March 1998, the Company amended the
Senior Credit Agreement. As a result of this amendment, the Revolving Credit
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<PAGE>
Facilities' borrowing base can be increased as needed by $10 million over the
applicable percentage of eligible receivables and inventories (still limited to
the $70 million total facilities), and financial covenants were amended through
December 31, 1998. In addition, the interest rate on borrowings under the
Revolving Credit Facilities will be increased by one quarter percent during any
period that any of the additional $10 million in borrowing base is utilized. As
of April 1, 1998, availability under the Revolving Credit Facilities, including
the additional $10.0 million, was approximately $17.2 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.
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 March 31, 1998, the Registrant did not file any
reports on Form 8-K.
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<PAGE>
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: May 11, 1998
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<PAGE>
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<ARTICLE> 5
<LEGEND>
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,264
<SECURITIES> 0
<RECEIVABLES> 24,959
<ALLOWANCES> 669
<INVENTORY> 59,976
<CURRENT-ASSETS> 90,433
<PP&E> 15,828
<DEPRECIATION> (4,534)
<TOTAL-ASSETS> 174,281
<CURRENT-LIABILITIES> 27,976
<BONDS> 168,129
0
0
<COMMON> 0
<OTHER-SE> (23,393)
<TOTAL-LIABILITY-AND-EQUITY> 174,281
<SALES> 38,904
<TOTAL-REVENUES> 38,904
<CGS> 21,926
<TOTAL-COSTS> 21,926
<OTHER-EXPENSES> 17,644
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,882
<INCOME-PRETAX> (5,783)
<INCOME-TAX> (443)
<INCOME-CONTINUING> (5,340)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,340)
<EPS-PRIMARY> 0
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</TABLE>
