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, 1999.
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 MARCH 31, 1999
INDEX
<TABLE>
<CAPTION>
<S> <C>
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998 3
Consolidated Statements of Operations -
For the three months ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows -
For the three months ended March 31, 1999 and 1998 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
</TABLE>
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<PAGE>
Remington Products Company, L.L.C.
Consolidated Balance Sheets
(unaudited in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,552 $ 4,249
Accounts receivable, less allowance for doubtful accounts of
$2,502 in 1999 and $2,749 in 1998 32,563 59,998
Inventories 56,480 50,163
Prepaid and other current assets 3,339 1,879
--------- ----------
Total current assets 95,934 116,289
Property, plant and equipment, net 13,144 13,135
Intangibles, net 58,094 58,573
Other assets 6,832 7,730
--------- ----------
Total assets $ 174,004 $ 195,727
========= ==========
LIABILITIES AND MEMBERS' DEFICIT Current Liabilities:
Accounts payable $ 11,327 $ 15,981
Short-term borrowings 3,368 5,192
Current portion of long-term debt 1,680 1,842
Accrued liabilities 17,350 24,980
--------- ----------
Total current liabilities 33,725 47,995
Long-term debt 177,652 180,634
Other liabilities 1,197 1,839
Members' deficit:
Members' deficit (35,604) (31,473)
Accumulated other comprehensive income (2,966) (3,268)
--------- ----------
Total members' deficit (38,570) (34,741)
--------- ---------
Total liabilities and members' deficit $ 174,004 $ 195,727
========= ==========
</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 March 31,
1999 1998
--------- --------
<S> <C> <C>
Net sales $ 43,586 $ 38,904
Cost of sales 24,533 21,926
-------- --------
Gross profit 19,053 16,978
Selling, general and administrative 18,298 17,160
Amortization of intangibles 485 484
-------- --------
Operating income (loss) 270 (666)
Interest expense 4,897 4,882
Other expense (income) (170) 235
-------- --------
Income (loss) before income taxes (4,457) (5,783)
Provision (benefit) for income taxes (326) (443)
-------- --------
Net income (loss) $(4,131) $(5,340)
======== ========
Net loss applicable to common units $(6,661) $(7,588)
======== ========
</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,
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (4,131) $ (5,340)
Adjustment to reconcile net loss to net cash provided by operating activities:
Depreciation 814 794
Amortization of intangibles 485 484
Amortization of deferred financing fees 282 268
Deferred income taxes (70) 145
Foreign currency forward (gain) loss (6) 358
--------- ----------
(2,626) (3,291)
Changes in assets and liabilities:
Accounts receivable 27,435 28,093
Inventories (6,317) 531
Accounts payable (4,654) (6,643)
Accrued liabilities (7,992) (8,446)
Other, net (1,054) (154)
--------- ----------
Cash provided by operating activities 4,792 10,090
--------- ----------
Cash flows used in investing activities:
Capital expenditures (777) (609)
--------- ----------
Cash flows from financing activities:
Net repayments under term loan facilities (390) (318)
Net repayments under credit facilities (4,264) (11,274)
Other, net - 16
--------- ----------
Cash used in financing activities (4,654) (11,576)
Effect of exchange rate changes on cash (58) (49)
--------- ----------
Decrease in cash and cash equivalents (697) (2,144)
Cash and cash equivalents, beginning of period 4,249 5,408
--------- ----------
Cash and cash equivalents, end of period $ 3,552 $ 3,264
========= ==========
Supplemental cash flow information:
Interest paid $ 1,252 $ 1,058
Income taxes paid $ 97 $ 249
</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. Basis of Presentation
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, 1998.
2. Inventories
Inventories were comprised of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ----------
<S> <C> <C>
Finished goods $ 52,243 $ 46,454
Work in process and raw materials 4,237 3,709
-------- --------
$ 56,480 $ 50,163
======== ========
</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.
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.
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<PAGE>
5. Restructure and Reorganization
In the second quarter of 1998, the Company announced a plan to restructure
its Connecticut shaver assembly and warehousing operations ("the Plan"). The
Plan consisted of relocating the shaver assembly operations to an existing
Remington partner-vendor located in Asia and relocating the warehousing function
to a third party provider in California. The Plan resulted in affecting the
employment of approximately 235 employees located at the Company's two
Connecticut facilities, the majority of which were factory employees. During
1998, the Company recorded total non-recurring charges of $9.6 million related
to the Plan, of which $6.8 million was charged to restructuring and
reorganization and $2.8 million was charged to cost of sales related to
inventory write-downs associated with the Plan.
In the fourth quarter of 1998, the Company substantially completed the
relocation of the Connecticut shaver assembly to Asia, and the relocation of the
Connecticut warehousing facility to a third party in California. In December
1998, the Company terminated substantially all of the affected employees, and
the remaining severance and other benefit costs will be paid out by the end of
the second quarter of 1999. As of December 31, 1998, the company terminated its
lease obligations with respect to certain equipment and machinery utilized in
the factory and warehouse, however, the Company must continue to pay
non-cancelable lease obligations for its Connecticut warehouse facility through
the end of 1999. Cash outlays in the first quarter of 1999 totalled
approximately $1.0 million and relate to severance and benefit costs and lease
obligations.
The following table summarizes the major components and activity related to
the restructuring and reorganization through March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
Activity Through
March 31, 1999 Balance
1998 ---------------------------- March 31,
Provision Cash Non Cash 1999
--------- -------- ----------- --------------
<S> <C> <C> <C> <C>
Severance and Benefit Costs $ 1,997 $(1,288) - $ 709
Lease Obligations 871 (347) - 524
Equipment and Tooling Write-Down 3,534 - (3,534) -
Other Related Costs 404 (404) - -
-------- -------- --------- -------
Total Restructuring and Reorganization Charge 6,806 (2,039) (3,534) 1,233
Inventory Write-Downs 2,760 - (2,760) -
-------- --------- --------- -------
Total $ 9,566 $(2,039) $ (6,294) $ 1,233
======== ======== ========= =======
</TABLE>
6. Comprehensive Income
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.
Comprehensive income consists of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
-------- --------
<S> <C> <C>
Net income (loss) per consolidated financial statements $(4,131) $(5,340)
Other comprehensive income:
Foreign currency translation adjustments 28 467
Net unrealized hedging gain 274 -
-------- --------
Comprehensive income (loss) $(3,829) $(4,873)
======== ========
</TABLE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The Company is a leading developer and marketer of men's and women's
electrical personal care appliances, including men's and women's electric
shavers and accessories, women's personal care appliances including hairsetters,
hair dryers and curling irons, men's electric grooming products, and other small
electric consumer appliances. The Company distributes its men's and women's
electrical personal care appliances through its three operating segments which
are comprised of 1) the United States segment, which sells product through mass-
merchant retailers, department stores and drug chains, 2) the International
segment, which sells product through an international network of subsidiaries
and distributors, and 3) the U.S. Service Stores segment comprised of more than
100 Company-owned and operated service stores.
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 the first quarter of each year is generally the Company's
weakest quarter. As a result of this seasonality, the Company's inventory and
working capital needs fluctuate substantially during the year.
Results of Operations
The following table sets forth the Company's unaudited consolidated
statements of operations, including net sales and operating income by its U.S.,
International and U.S. Service Stores operating segments, as well as the
Company's consolidated results of operations as a percentage of net sales for
the three months ended March 31, 1999 and 1998.
-7-
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<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
-------------------------- ---------------------------
$ % $ %
------- ------ ------- -------
<S> <C> <C> <C> <C>
Net Sales:
United States $ 17.6 40.4 $ 16.7 42.9
International 18.1 41.5 15.0 38.6
U.S. Service Stores 7.9 18.1 7.2 18.5
------- ------ ------- -------
43.6 100.0 38.9 100.0
Cost of sales 24.5 56.2 21.9 56.3
------- ------ ------- -------
Gross profit 19.1 43.8 17.0 43.7
Selling, general and administrative 18.3 42.0 17.2 44.2
Amortization of intangibles 0.5 1.1 0.5 1.3
------- ------ ------- -------
Operating income (loss):
United States 1.4 3.2 0.9 2.3
International 0.4 0.9 (0.2) (0.5)
U.S. Service Stores (0.2) (0.4) (0.1) (0.2)
Depreciation and amortization (1.3) (3.0) (1.3) (3.4)
------- ------ ------- -------
Total operating income (loss) 0.3 0.7 (0.7) (1.8)
Interest expense 4.9 11.2 4.9 12.6
Other expense (income) (0.2) (0.4) 0.2 0.5
------- ------ ------- -------
Income (loss) before income taxes (4.4) (10.1) (5.8) (14.9)
Provision (benefit) for income taxes (0.3) (0.7) (0.5) (1.3)
------- ------ ------- -------
Net income (loss) $ (4.1) (9.4) $ (5.3) (13.6)
======= ====== ======= =======
</TABLE>
First Quarter Ended March 1999 Versus March 1998
Net Sales. Net sales for the quarter ended March 31, 1999 were $43.6
million, an increase of 12.1% compared to $38.9 million for the quarter ended
March 31, 1998. Strong personal care and grooming sales, which benefited from
new product introductions in the second half of 1998, were the primary reasons
for the sales increase in the quarter. Worldwide shaver sales were essentially
in line with the prior year quarter.
Net sales in the United States were $17.6 million in the first quarter of
1999, an increase of 5.4% compared to $16.7 million in the first quarter of
1998. Sales of personal care products and grooming products were the primary
reasons for the U.S. sales increase in the quarter.
International net sales were $18.1 million in the first quarter of 1999, an
increase of 20.7% compared to $15.0 million in the first quarter of 1998,
despite slightly negative currency impacts. The sales increase reflects good
growth from all of the Company's major international operations, particularly in
the U.K. These increases were slightly offset by the continued weakness in the
Asian export markets.
Net sales through the Company's U.S. service stores increased 9.7% to $7.9
million in the first quarter of 1998 from $7.2 million in the first quarter of
1998. The increase is due to incremental sales from the net addition of 10
stores since the first quarter 1998, as well as same store sales increases of
approximately 3%.
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<PAGE>
Gross Profit. Gross profit was $19.1 million, or 43.8% of net sales in the
first quarter of 1999, compared to $17.0 million, or 43.7% of net sales in the
first quarter of 1998 as a result of the increased sales.
Selling, General and Administrative. Selling, general and administrative
expenses were $18.3 million, or 42.0% of net sales in the first quarter of 1999,
as compared to $17.2 million or 44.2% of net sales in 1998, as lower expenses in
the U.S. as a percentage of sales were somewhat offset by slightly higher
expenses in the U.S. Service Store and international businesses.
Operating Income. The operating income in the first quarter of 1999 was $0.3
million compared to an operating loss of $0.7 million in the first quarter of
1998, as the result of the increase in sales and lower costs as a percentage of
sales.
Interest Expense. Interest expense of $4.9 million for the first quarter of
1999 was consistent with the first quarter of 1998 as higher average outstanding
borrowings were offset by lower foreign interest rates.
Income Tax (Benefit) Expense. The benefit for income taxes was $0.3 million
for the first quarter of 1999 compared to $0.5 million for the first quarter of
1998, due to the smaller pretax loss generated primarily by the Company's U.K.
operations.
Liquidity and Capital Resources
Net cash provided by operating activities for the first quarter of 1999 was
$4.8 million versus $10.1 million during the first quarter of 1998. The decrease
was primarily attributable to the impact in 1998's first quarter of reducing
excess inventory levels.
The Company's operations are not capital intensive. During the first quarter
of 1999 and 1998, the Company's capital expenditures totaled $0.8 million and
$0.6 million, respectively. Capital expenditures for 1999 are anticipated to be
approximately $4.3 million.
The Company repaid approximately $4.3 million on various revolving credit
agreements and repaid $0.4 million under term loans during the first quarter of
1999.
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 that 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. The Revolving Credit 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). As of March 31, 1999, the Company was in compliance
with all covenants under the Senior Credit Agreement and availability under the
Revolving Credit Facilities was approximately $5.7 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.
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<PAGE>
Year 2000 Compliance
The Company continues to assess its exposure related to the impact of the
Year 2000 date issue. The Year 2000 date issue arises from the fact that many
computer programs use only two digits to identify a year in a date field. The
Company's key financial and operational systems have been reviewed, and the
majority of the systems did not require modifications. All required
modifications have been completed, with the exception of one minor communication
program, which will be completed by the end of the second quarter of 1999. Costs
incurred to date are not material and Management does not expect that any
remaining costs to be incurred will have a material adverse impact on the
Company's financial position, results of operations or cash flows. However, the
Company could be adversely impacted by the Year 2000 date issue if suppliers,
customers and other businesses do not address this issue successfully. The
Company has a formalized comprehensive supplier compliance program in place, and
responses from suppliers are currently being reviewed. To date the Company has
contacted its major customers and financial institutions and has received
assurances of Year 2000 compliance from a number of those contacted. Management
continues to assess these risks in order to reduce the impact on the Company.
EURO Conversion
On January 1, 1999, eleven of fifteen member countries of the European Union
entered a three-year transition phase during which one common legal currency
(the "euro") was introduced. Beginning in January 2002, new euro-denominated
bills and coins will be issued, and local currencies will be removed from
circulation. Although the Company's international businesses affected by the
euro-conversion comprise less than 5% of the Company's annual net sales, the
Company has established various plans to address the issues raised by the euro
currency conversion. These issues include, among others, the need to adapt
computer and financial systems and business processes to accommodate
euro-denominated transactions and the impact of one common currency on pricing.
Based on its evaluation to date, Management believes that the introduction of
the euro, including total costs for the conversion, will not have a material
adverse impact on the Company's financial position, results of operations or
cash flows. The Company will continue to evaluate the impact of the euro
introduction.
Forward Looking Statements
This Management's Discussion and Analysis may contain forward-looking
statements which include assumptions about future market conditions, operations
and results. These statements are based on current expectations and are subject
to risks and uncertainties. They are made pursuant to safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Among the many factors
that could cause actual results to differ materially from any forward-looking
statements are the success of new product introductions and promotions, changes
in the competitive environment for the Company's product, changes in economic
conditions, foreign exchange risk and other factors discussed in prior
Securities and Exchange Commission filings by the Company. The Company assumes
no obligation to update these forward-looking statements or advise of changes in
the assumptions on which they were based.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
There are no material changes to the disclosure on this matter made in the
Company's report on Form 10- K for the year ended December 31, 1998.
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<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 March 31, 1999, 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: May 17,1999
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001017710
<NAME> REMINGTON PRODUCTYS COMPANY L.L.C.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,552
<SECURITIES> 0
<RECEIVABLES> 32,563
<ALLOWANCES> 2,502
<INVENTORY> 56,480
<CURRENT-ASSETS> 95,934
<PP&E> 21,161
<DEPRECIATION> (8,017)
<TOTAL-ASSETS> 174,004
<CURRENT-LIABILITIES> 33,725
<BONDS> 177,652
0
0
<COMMON> 0
<OTHER-SE> (38,570)
<TOTAL-LIABILITY-AND-EQUITY> 174,004
<SALES> 43,586
<TOTAL-REVENUES> 43,586
<CGS> 24,533
<TOTAL-COSTS> 24,533
<OTHER-EXPENSES> 18,783
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,897
<INCOME-PRETAX> (4,457)
<INCOME-TAX> (326)
<INCOME-CONTINUING> (4,131)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,131)
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</TABLE>
