-1-
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 June 30, 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.
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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
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
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08/08/00 REMINGTON PRODUCTS COMPANY, L.L.C.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
PART I. FINANCIAL INFORMATION
Item I. Financial Statements (unaudited):
Consolidated Balance Sheets -
June 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations -
For the three and six months ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flows -
For the six months ended June 30, 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 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
2
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Remington Products Company, L.L.C.
Consolidated Balance Sheets
(unaudited in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,295 $ 9,866
Accounts receivable, less allowance for doubtful accounts
of $2,446 in 2000 and $2,335 in 1999 44,517 78,503
Inventories 75,032 55,456
Prepaid and other current assets 11,074 4,051
------ ------
Total current assets 136,918 147,876
Property, plant and equipment, net 12,309 12,718
Intangibles, net 55,649 56,641
Other assets 5,971 6,755
------ ------
Total assets $210,847 $223,990
======== ========
LIABILITIES AND MEMBERS' DEFICIT
Current Liabilities:
Accounts payable $ 27,368 $23,643
Short-term borrowings 4,163 5,790
Current portion of long-term debt 2,323 2,323
Accrued liabilities 11,950 31,067
------ ------
Total current liabilities 45,804 62,823
Long-term debt 194,273 187,728
Other liabilities 1,006 1,222
Members' deficit:
Members' deficit (29,136) (25,438)
Accumulated other comprehensive income (1,100) (2,345)
------- -------
Total members' deficit (30,236) (27,783)
-------- --------
Total liabilities and members' deficit $210,847 $223,990
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
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Remington Products Company, L.L.C.
Consolidated Statements of Operations
(unaudited in thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $69,234 $59,437 $117,873 $103,023
Cost of sales 38,509 33,579 65,741 58,112
------ ------- ------ ------
Gross profit 30,725 25,858 52,132 44,911
Selling, general and administrative 23,701 23,757 44,291 42,055
Amortization of intangibles 488 505 975 990
------- ------- -------- ------
Operating income 6,536 1,596 6,866 1,866
Interest expense 5,655 5,174 11,201 10,071
Other expense (income) 212 102 551 (67)
------ -------- ------- -------
Income (loss) before income taxes 669 (3,680) (4,886) (8,138)
Provision (benefit) for income taxes (930) (27) (1,188) (352)
------- -------- ------- -------
Net income (loss) $ 1,599 $(3,653) $ (3,698) $ (7,786)
======= ======== ========= =========
Net loss applicable to common units $(1,334) $(6,259) $ (9,479) $(12,922)
======== ======== ========= =========
</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>
Six Months Ended June 30,
---------------------------
2000 1999
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,698) $(7,786)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation 1,618 1,669
Amortization of intangibles 975 990
Amortization of deferred financing fees 787 602
Deferred income taxes (721) (326)
Foreign currency forward (gain) loss, net 280 (53)
-------- --------
(759) (4,904)
Changes in assets and liabilities:
Accounts receivable 33,986 19,578
Inventories (19,576) (13,681)
Accounts payable 3,725 (5,488)
Accrued liabilities (19,117) (8,791)
Other, net (6,756) (1,653)
------- -------
Cash used in operating activities (8,497) (14,939)
------- --------
Cash flows used in investing activities:
Capital expenditures (1,373) (1,395)
------- -------
Cash flows from financing activities:
Repayments under term loan facilities (1,010) (544)
Borrowings under term loan facilities - 15,000
Repayments under credit facilities (16,698) (17,390)
Borrowings under credit facilities 24,515 18,294
Debt issuance costs and other, net - (897)
------- -----
Cash provided by financing activities 6,807 14,463
----- ------
Effect of exchange rate changes on cash 508 58
--- --
Decrease in cash and cash equivalents (3,571) (1,813)
Cash and cash equivalents, beginning of period 9,866 4,249
----- -----
Cash and cash equivalents, end of period $6,295 $ 2,436
====== =======
Supplemental cash flow information:
Interest paid $9,998 $9,522
Income taxes paid (refunded), net $ (213) $ 187
</TABLE>
See notes to unaudited consolidated financial statements.
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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 audited 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. Recent Accounting Pronouncement
In December 1999 the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"). SAB 101 summarizes the staff's views regarding the application of
generally accepted accounting principles to selected revenue recognition issues.
The Company is required to adopt SAB 101 in the fourth quarter of 2000. The
Company does not expect the adoption of SAB 101 to have a material effect on its
financial position or results of operations.
3. Inventories
Inventories were comprised of the following (in thousands):
June 30, December 31,
2000 1999
-------- -----------
Finished goods $71,883 $53,351
Work in process and raw materials 3,149 2,105
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$75,032 $55,456
======== =======
4. 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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5. 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. Comprehensive Income
Comprehensive income consists of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months ended June 30,
--------------------------- -------------------------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net income (loss) per consolidated
financial statements $1,599 $(3,653) $(3,698) $(7,786)
Other comprehensive income:
Foreign currency translation adjustments (455) (241) (1,823) (213)
Net unrealized hedging gain (loss) 1,600 (71) 3,068 203
----- ----- -------- --------
Comprehensive income (loss) $2,744 $(3,965) $(2,453) $(7,796)
====== ======== ======== ========
</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 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 its products through its three
operating segments which consist of 1) the North American segment, which sells
products through mass-merchant retailers, department stores and drugstore chains
throughout the United States and Canada, 2) the International segment, which
sells products 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.
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<PAGE>
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 and six months ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ---------------------------
2000 1999 2000 1999
-------- ------- ------- -------
$ % $ % $ % $ %
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales:
North America $38.9 56.2 $30.3 51.0 $61.6 52.3 $48.7 47.3
International 21.5 31.1 19.3 32.5 40.0 33.9 36.6 35.5
U.S. Service Stores 8.8 12.7 9.8 16.5 16.3 13.8 17.7 17.2
----- ----- ----- ----- ---- ---- ---- ----
69.2 100.0 59.4 100.0 117.9 100.0 103.0 100.0
Cost of sales 38.5 55.6 33.5 56.4 65.8 55.8 58.1 56.4
---- ---- ---- ---- ---- ---- ---- ----
Gross profit 30.7 44.4 25.9 43.6 52.1 44.2 44.9 43.6
Selling, general and
administrative 23.7 34.3 23.8 40.1 44.2 37.5 42.1 40.9
Amortization of intangibles 0.5 0.7 0.5 0.8 1.0 0.8 1.0 1.0
--- --- --- --- --- --- --- ---
Operating income (loss):
North America 6.4 9.3 1.6 2.7 7.8 6.6 3.1 3.0
International 1.2 1.7 1.2 2.0 1.6 1.4 1.3 1.2
U.S. Service Stores 0.2 0.3 0.2 0.4 0.1 0.1 0.1 0.1
Depreciation and amortization (1.3) (1.9) (1.4) (2.4) (2.6) (2.2) (2.7) (2.6)
----- ----- ----- ----- - ----- - ----- -- ----- -- -----
Total operating income 6.5 9.4 1.6 2.7 6.9 5.9 1.8 1.7
Interest expense 5.7 8.2 5.2 8.7 11.2 9.5 10.1 9.8
Other expense (income) 0.1 0.2 0.1 0.2 0.6 0.6 (0.2) (0.2)
----- ----- --- --- --- --- ------ ------
Income (loss) before 0.7 1.0 (3.7) (6.2) (4.9) (4.2) (8.1) (7.9)
income taxes
Provision (benefit)for
income taxes (0.9) (1.3) - - (1.2) (1.1) (0.3) (0.3)
------ ---- ---- ----- ----- ----- ----- -----
Net income (loss) $1.6 2.3 $(3.7) (6.2) $(3.7) (3.1) $(7.8) (7.6)
==== ==== ===== ===== ====== ===== ====== =====
</TABLE>
8
<PAGE>
Second Quarter Ended June 2000 Versus June 1999
Net Sales. Net sales for the quarter ended June 30, 2000 were $69.2
million, an increase of 16.5% compared to $59.4 million for the quarter ended
June 30, 1999. The increase in net sales is the result of steady growth in the
North American and International business segments, due primarily to new product
introductions as well as increased distribution at new and existing customers.
Net sales in North America were $38.9 million in the second quarter of
2000, an increase of 28.4% compared to $30.3 million in the second quarter of
1999. The personal care and wellness category, along with the shaver and the
grooming categories, experienced continued strong growth.
International net sales were $21.5 million in the second quarter of 2000,
an increase of 11.4% compared to $19.3 million in the second quarter of 1999.
Excluding the negative impact of foreign currency, net sales in the
International business increased 19% over the comparable quarter in the prior
year. The sales increase reflects strong growth in the shaver category
throughout the Company's European markets, particularly in the U.K.
Net sales through the Company's U.S. service stores decreased 10.2% to $8.8
million in the second quarter of 2000 from $9.8 million in the second quarter of
1999. This decrease was due to a reduction in the number of stores offset
partially by a 2% increase in same store sales over the second quarter of 1999.
There were on average ten fewer stores open during the second quarter of 2000
compared with the second quarter of 1999, primarily as the result of store
closings associated with the Fedco retail chain closing in August 1999.
Gross Profit. Gross profit was $30.7 million, or 44.4% of net sales in the
second quarter of 2000 compared to $25.9 million, or 43.6% of net sales in the
second quarter of 1999. The increase in gross profit percentage is attributable
to favorable product mix from increased shaver and grooming sales.
Selling, General and Administrative. Selling, general and administrative
expenses were $23.7 million or 34.3% of net sales in the second quarter of 2000,
compared to $23.8 million or 40.1% of net sales in 1999. Selling, general and
administrative expenses benefited from lower operating expenses in U.S. Service
Stores due to the reduction in the number of stores and from the impact of
foreign exchange rates on expenses in the International business. This reduction
in selling, general and administrative expenses was largely offset by higher
advertising and promotion expenses in North America.
Operating Income. The operating income in the second quarter of 2000 was
$6.5 million compared to operating income of $1.6 million in the second quarter
of 1999. This increase resulted primarily from the increase in sales and a
higher gross profit percentage.
Interest Expense. Interest expense increased to $5.7 million for the second
quarter of 2000 compared to interest expense of $5.2 million in the second
quarter of 1999. The $0.5 million increase is due to higher average borrowings
to support the growth of the business and higher interest rates.
Income Tax (Benefit) Expense. The net benefit for income taxes was $0.9
million for the second quarter of 2000 compared to a minimal net benefit in the
second quarter of 1999. The benefit is due to the recognition of certain prior
year tax refunds as well as from seasonal losses generated in certain
international jurisdictions.
9
<PAGE>
Six Months Ended June 2000 Versus June 1999
Net Sales. Net sales for the six months ended June 30, 2000 were $117.9
million, an increase of 14.5% compared to $103.0 million for the six months
ended June 30, 1999 as sales were strong in the Company's North American and
International businesses.
Net sales in North America were $61.6 million for the first six months of
2000, an increase of 26.5% compared to $48.7 million for the first six months of
1999. Sales increased in all major product categories as a result of new product
introductions and new distribution.
International net sales were $40.0 million for the first six months of
2000, an increase of 9.3% compared to $36.6 million for the first six months of
1999. Excluding the effect of negative currency impacts, net sales increased
15.6% over the first six months of 1999. Sales were strong across most of the
International businesses.
Net sales through the Company's U.S. service stores decreased 7.9% to $16.3
million for the first six months of 2000 from $17.7 million for the first six
months of 1999. The decrease in the first six months of 2000 is due to the
reduction in the number of stores in 2000 partially offset by a 3% increase in
same store sales over the first six months of 1999.
Gross Profit. Gross profit was $52.1 million, or 44.2% of net sales for the
first six months of 2000 compared to $44.9 million, or 43.6% of net sales for
the first six months of 1999 due to a favorable product mix.
Selling General and Administrative. Selling general and administrative
expenses were $44.2 million or 37.5% of net sales for the first six months of
2000, compared to $42.1 million or 40.9% of net sales in 1999. All operating
expenses decreased as a percentage of sales except for advertising and promotion
costs and product development costs as the Company continues to invest in these
areas.
Operating Income. The operating income for the first six months of 2000 was
$6.9 million compared to operating income of $1.8 million for the first six
months of 1999. The increase in operating income is due to higher sales and
higher margins.
Interest Expense. Interest expense increased to $11.2 million for the
first six months of 2000 compared to interest expense of $10.1 million for the
first six months of 1999 due to higher average borrowings and higher interest
rates.
Income Tax (Benefit) Expense. The net benefit for income taxes during the
first six months of 2000 increased to $1.2 million from $0.3 million in 1999
primarily as the result of income tax benefits generated from the U.K. and
Canadian operations.
Liquidity and Capital Resources
Net cash used in operating activities for the first six months of 2000 was
$8.5 million versus $14.9 million during the first six months of 1999. The
decrease in cash used is attributable to higher accounts receivable collections
partially offset by an increased investment in inventory and higher prepaid
advertising related expenses.
The Company's operations are not capital intensive. The Company's capital
expenditures totaled $1.4 million during the first six months of 2000 and 1999.
Capital expenditures for 2000 are anticipated to be approximately $3.8 million.
The Company borrowed a net of $7.8 million on various revolving credit
agreements and made $1.0 million in scheduled loan payments during the first six
months of 2000.
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<PAGE>
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
from March 16 through December 15 of 2000 and March 16 through June 29 of 2001
(still limited by the total amount of the facilities).
As of June 30, 2000, the Company was in compliance with all covenants under
the Senior Credit Agreement and availability under the Revolving Credit
Facilities was approximately $18.9 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
10.1 Employment Agreement dated January 1, 2000 between the Company and
Neil P. DeFeo.
27 Financial Data Schedule.
(b) Reports on Form 8-K
During the quarter ended June 30, 2000, the Registrant did not file any
reports on Form 8-K.
11
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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: August 14, 2000
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