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, 2000.
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>
-9-
REMINGTON PRODUCTS COMPANY, L.L.C.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
-----
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999 3
Consolidated Statements of Operations -
For the three months ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows -
For the three months ended March 31, 2000 and 1999 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
-2-
<PAGE>
Remington Products Company, L.L.C.
Consolidated Balance Sheets
(unaudited in thousands)
March 31, December 31,
2000 1999
---------- ------------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 4,853 $ 9,866
Accounts receivable, less allowance for doubtful
accounts of $2,304 in 2000 and $2,335 in 1999 41,188 78,503
Inventories 64,556 55,456
Prepaid and other current assets 4,105 4,051
-------- --------
Total current assets 114,702 147,876
Property, plant and equipment, net 12,437 12,718
Intangibles, net 56,139 56,641
Other assets 6,352 6,755
-------- --------
Total assets $189,630 $223,990
======== ========
LIABILITIES AND MEMBERS' DEFICIT
- --------------------------------
Current Liabilities:
Accounts payable $ 16,292 $23,643
Short-term borrowings 3,035 5,790
Current portion of long-term debt 2,302 2,323
Accrued liabilities 14,075 31,067
-------- --------
Total current liabilities 35,704 62,823
Long-term debt 185,953 187,728
Other liabilities 953 1,222
Members' deficit:
Members' deficit (30,735) (25,438)
Accumulated other comprehensive income (2,245) (2,345)
-------- --------
Total members' deficit (32,980) (27,783)
-------- --------
Total liabilities and members' deficit $189,630 $223,990
======== ========
See notes to unaudited consolidated financial statements.
-3-
<PAGE>
Remington Products Company, L.L.C.
Consolidated Statements of Operations
(unaudited in thousands)
Three Months Ended March 31,
----------------------------
2000 1999
----------- -------
Net sales $48,639 $43,586
Cost of sales 27,232 24,533
-------- ------
Gross profit 21,407 19,053
Selling, general and administrative 20,590 18,298
Amortization of intangibles 487 485
------- -------
Operating income 330 270
Interest expense 5,546 4,897
Other expense (income) 339 (170)
------- --------
Income (loss) before income taxes (5,555) (4,457)
Provision (benefit) for income taxes (258) (326)
-------- -------
Net income (loss) $(5,297) $(4,131)
======== ========
Net loss applicable to common units $(8,145) $(6,661)
======== ========
See notes to unaudited consolidated financial statements.
-4-
<PAGE>
<TABLE>
Remington Products Company, L.L.C.
Consolidated Statements of Cash Flows
(unaudited in thousands)
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (5,297) $ (4,131)
Adjustment to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation 816 814
Amortization of intangibles 487 485
Amortization of deferred financing fees 393 282
Deferred income taxes 4 (70)
Foreign currency forward (gains) losses 207 (6)
-------- --------
(3,390) (2,626)
Changes in assets and liabilities:
Accounts receivable 37,310 27,435
Inventories (9,102) (6,317)
Accounts payable (7,358) (4,654)
Accrued liabilities (16,993) (7,992)
Other, net (859) (1,054)
-------- --------
Cash provided by (used in) operating activities (392) 4,792
-------- --------
Cash flows used in investing activities:
Capital expenditures (642) (777)
-------- --------
Cash flows from financing activities:
Repayments under term loan facilities (383) (390)
Repayments under credit facilities (10,537) (14,130)
Borrowings under credit facilities 7,196 9,866
-------- --------
Cash used in financing activities (3,724) (4,654)
Effect of exchange rate changes on cash (255) (58)
-------- --------
Decrease in cash and cash equivalents (5,013) (697)
Cash and cash equivalents, beginning of period 9,866 4,249
-------- --------
Cash and cash equivalents, end of period $ 4,853 $ 3,552
======== ========
Supplemental cash flow information:
Interest paid $ 1,168 $ 1,252
Income taxes paid, net $ 343 $ 97
See notes to unaudited consolidated financial statements.
</TABLE>
-5-
<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 only 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, 1999.
2. Inventories
Inventories were comprised of the following (in thousands):
March 31, December 31,
2000 1999
-------- ------------
Finished goods $61,473 $53,351
Work in process and raw materials 3,083 2,105
-------- --------
$64,556 $55,456
======= =======
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.
-6-
<PAGE>
5. Comprehensive Income
Comprehensive income consists of the following (in thousands):
Three Months Ended March 31,
2000 1999
----------- ---------
Net income (loss) $(5,297) $(4,131)
Other comprehensive income:
Foreign currency translation adjustments (1,368) 28
Net unrealized hedging gain 1,468 274
-------- --------
Comprehensive income (loss) $(5,197) $(3,829)
======== ========
ITEM2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The Company is a leading developer and marketer of electrical personal care
appliances. The Company designs and distributes electric shavers, personal care
and wellness appliances, electrical grooming products and other small electrical
consumer appliances. The Company distributes electrical personal care appliances
through its three operating segments which consist of 1) the North America
segment, which sells product through mass-merchant retailers, department stores
and drugstore chains throughout the United States and Canada, 2) the
International segment, which sells product through an international network of
subsidiaries and distributors, and 3) the U.S. Service Stores segment consisting
of Company-owned and operated service stores throughout the United States.
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 North
American, 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, 2000 and 1999.
-7-
<PAGE>
Three Months Ended March 31,
2000 1999
--------- --------
$ % $ %
------ ----- ------ -----
Net Sales:
North America $ 22.5 46.3 $ 18.4 42.2
International 18.6 38.3 17.3 39.7
U.S. Service Stores 7.5 15.4 7.9 18.1
------ ----- ------ -----
48.6 100.0 43.6 100.0
Cost of sales 27.2 56.0 24.5 56.2
------ ----- ------ -----
Gross profit 21.4 44.0 19.1 43.8
Selling, general and administrative 20.6 42.4 18.3 42.0
Amortization of intangibles 0.5 1.0 0.5 1.1
------ ----- ------ -----
Operating income (loss):
North America 1.4 2.9 1.6 3.7
International 0.3 0.6 0.2 0.4
U.S. Service Stores (0.1) (0.2) (0.2) (0.4)
Depreciation and amortization (1.3) (2.7) (1.3) (3.0)
------ ----- ------ -----
Total operating income 0.3 0.6 0.3 0.7
Interest expense
5.5 11.3 4.9 11.2
Other expense (income) 0.4 0.8 (0.2) (0.4)
------ ----- ------ -----
Income (loss) before income taxes (5.6) (11.5) (4.4) (10.1)
Provision (benefit) for income taxes (0.3) (0.6) (0.3) (0.7)
------ ----- ------ -----
Net income (loss) $ (5.3) (10.9) $ (4.1) (9.4)
======= ===== ======= ======
First Quarter Ended March 2000 Versus March 1999
Net Sales. Net sales for the quarter ended March 31, 2000 were $48.6
million, an increase of 11.5% compared to $43.6 million for the quarter ended
March 31, 1999, as sales were strong in most of the Company's major businesses.
Sales increased across all major product categories primarily driven by new
product introductions as well as some increased distribution.
Net sales in North America were $22.5 million in the first quarter of 2000,
an increase of 22.3% compared to $18.4 million in the first quarter of 1999.
Sales increased across all major product lines, driven by new product
introductions.
International net sales were $18.6 million in the first quarter of 2000, an
increase of 7.5% compared to $17.3 million in the first quarter of 1999. The
sales increase is primarily attributable to growth in Australia and the UK
Export markets. Strong shaver and accessory sales were the main reasons for the
increased sales.
-8-
<PAGE>
Net sales through the Company's U.S. Service Stores decreased 5% to $7.5
million in the first quarter of 2000 from $7.9 million in the first quarter of
1999. The decrease was due to fewer stores, offset partially by a 4% increase in
same store sales over the comparable period in 1999. There were nine less stores
open during the first three months of 2000 compared to the first three months of
1999, primarily the result of store closings associated with the Fedco retail
chain closing in the third quarter of 1999.
Gross Profit. Gross profit was $21.4 million, or 44.0% of net sales in the
first quarter of 2000 compared to $19.1 million, or 43.8% of net sales in the
first quarter of 1999. The increase in gross profit percentage is primarily
attributable to positive product mix.
Selling General and Administrative. Selling general and administrative
expenses increased to $20.6 million or 42.4% of net sales in the first quarter
of 2000, compared to $18.3 million or 42.0% of net sales in 1999 due primarily
to increased advertising and promotional spending during the period.
Operating Income. The operating income in the first quarter of 2000 of $0.3
million was only slightly ahead of first quarter of 1999, as the increase in
sales and gross margin were largely offset by the increased investments in
advertising.
Interest Expense. Interest expense was $5.5 million for the first quarter
of 2000 compared to $4.9 million in the first quarter of 1999 due to higher
average borrowings and higher interest rates.
Income Tax Provision (Benefit). The benefit for income taxes was $0.3
million for the three months ended March 31, 2000 and 1999. In 2000, income tax
benefits generated in the U.K. and Australia were offset somewhat by increased
tax expense in Canada.
Liquidity and Capital Resources
Net cash used in operating activities for the first quarter of 2000 was
$0.4 million versus cash provided by operating activities of $4.8 million during
the first quarter of 1999. The decrease in cash flow can be attributed to higher
disbursements for inventory and operating expense accruals. This has been
somewhat offset by increased receivable collections in 2000 due to the higher
sales in the fourth quarter of 1999.
The Company's operations are not capital intensive. During the first quarter
of 2000 and 1999, the Company's capital expenditures totaled $0.6 million and
$0.8 million, respectively. Capital expenditures for 2000 are anticipated to be
approximately $3.8 million.
The Company repaid a net of approximately $3.3 million on various revolving
credit agreements and made $0.4 million in scheduled term loan payments during
the first quarter of 2000.
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,
$10 million in Term Loans and $15 million in Supplemental Loans. The Term Loans
are repayable quarterly through March 31, 2002. Borrowings under the
Supplemental Loans and the Revolving Credit Facilities mature on June 30, 2001
and 2002, respectively. The Revolving Credit Facilities are subject to a
borrowing base of 85% of eligible accounts receivable and 60% of eligible
inventory. In addition, the 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) from March 16 through
December 15 of 2000 and March 16 through June 29 of 2001. As of March 31, 2000,
the Company was in compliance with all covenants
-9-
<PAGE>
under the Senior Credit Agreement and availability under the Revolving Credit
Facilities was approximately $17.8 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.
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 products, changes in economic
conditions, foreign exchange risk, outcome of litigation, 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, 1999.
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, 2000, the Registrant did not file any
reports on Form 8- K.
-10-
<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 12, 2000
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements of the Company for the three months ended March
31, 2000, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,853
<SECURITIES> 0
<RECEIVABLES> 41,188
<ALLOWANCES> 2,304
<INVENTORY> 64,556
<CURRENT-ASSETS> 114,702
<PP&E> 23,290
<DEPRECIATION> (10,853)
<TOTAL-ASSETS> 189,630
<CURRENT-LIABILITIES> 35,704
<BONDS> 185,953
0
0
<COMMON> 0
<OTHER-SE> (32,980)
<TOTAL-LIABILITY-AND-EQUITY> 189,630
<SALES> 48,639
<TOTAL-REVENUES> 48,639
<CGS> 27,232
<TOTAL-COSTS> 27,232
<OTHER-EXPENSES> 21,077
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,546
<INCOME-PRETAX> (5,555)
<INCOME-TAX> (258)
<INCOME-CONTINUING> (5,297)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,297)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
