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 September 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
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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
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REMINGTON PRODUCTS COMPANY, L.L.C.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
INDEX
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PAGE
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PART I. FINANCIAL INFORMATION
Item I. Financial Statements (unaudited):
Consolidated Balance Sheets -
September 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations -
For the three and nine months ended September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows -
For the nine months ended September 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 12
Signature 13
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Remington Products Company, L.L.C.
Consolidated Balance Sheets
(unaudited in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,944 $ 9,866
Accounts receivable, less allowance for doubtful accounts
of $2,104 in 2000 and $2,335 in 1999 70,133 78,503
Inventories 89,063 55,456
Prepaid and other current assets 8,692 4,051
-------- --------
Total current assets 172,832 147,876
Property, plant and equipment, net 11,919 12,718
Intangibles, net 54,996 56,641
Other assets 6,516 6,755
-------- --------
Total assets $246,263 $223,990
======== ========
LIABILITIES AND MEMBERS' DEFICIT
Current Liabilities:
Accounts payable $ 29,464 $ 23,643
Short-term borrowings 4,585 5,790
Current portion of long-term debt 2,965 2,323
Accrued liabilities 14,907 31,067
-------- --------
Total current liabilities 51,921 62,823
Long-term debt 219,326 187,728
Other liabilities 1,075 1,222
Members' deficit:
Members' deficit (24,653) (25,438)
Accumulated other comprehensive income (1,406) (2,345)
-------- --------
Total members' deficit (26,059) (27,783)
-------- --------
Total liabilities and members' deficit $246,263 $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 September 30, Nine Months Ended September 30,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $83,973 $ 73,050 $201,846 $176,073
Cost of sales 46,576 40,993 112,317 99,105
------- ------- -------- ---------
Gross profit 37,397 32,057 89,529 76,968
Selling, general and administrative 26,035 23,017 70,326 65,072
Amortization of intangibles 497 504 1,472 1,494
------- ------- -------- ---------
Operating income 10,865 8,536 17,731 10,402
Interest expense 6,168 5,460 17,369 15,531
Other expense 23 193 574 126
------- ------- -------- ---------
Income (loss) before income taxes 4,674 2,883 (212) (5,255)
Provision (benefit) for income taxes 191 30 (997) (322)
------- ------- -------- ---------
Net income (loss) $4,483 $2,853 $ 785 $ (4,933)
======= ======= ======== =========
Net income (loss) applicable to
common units $1,462 $ 169 $ (8,017) $(12,753)
======= ======= ======== =========
</TABLE>
See notes to unaudited consolidated financial statements.
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Remington Products Company, L.L.C.
Consolidated Statements of Cash Flows
(unaudited in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
2000 1999
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 785 $( 4,933)
Adjustment to reconcile net income (loss) to net cash used in operating
activities:
Depreciation 2,525 2,536
Amortization of intangibles 1,472 1,494
Amortization of deferred financing fees 1,279 995
Deferred income taxes (396) (32)
Foreign currency forward loss 221 105
------- --------
5,886 165
Changes in assets and liabilities:
Accounts receivable 4,012 2,033
Inventories (37,388) (31,908)
Accounts payable 6,245 6,447
Accrued liabilities (15,092) (4,276)
Other, net 1,045 (1,485)
-------- --------
Cash used in operating activities (35,292) (29,024)
-------- --------
Cash flows used in investing activities:
Capital expenditures (2,452) (2,312)
-------- --------
Cash flows from financing activities:
Repayments under term loan facilities (1,247) (1,261)
Borrowings under term loan facilities - 15,000
Repayments under credit facilities (15,797) (18,477)
Borrowings under credit facilities 51,629 37,061
Debt issuance costs and other, net (1,027) (923)
-------- --------
Cash provided by financing activities 33,558 31,400
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Effect of exchange rate changes on cash (736) (45)
Increase (decrease) in cash and cash equivalents (4,922) 19
Cash and cash equivalents, beginning of period 9,866 4,249
-------- --------
Cash and cash equivalents, end of period $ 4,944 $ 4,268
======== ========
Supplemental cash flow information:
Interest paid $11,206 $ 10,632
Income taxes paid (refunded), net $ 312 $ (17)
</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):
September 30, December 31,
2000 1999
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Finished goods $85,996 $53,351
Work in process and raw materials 3,067 2,105
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$89,063 $55,456
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4. Debt
On August 18, 2000, the Company amended its Senior Credit Agreement
primarily to increase the total Revolving Credit Facilities from $70 million to
$95 million. The incremental facility of $25 million matures on January 31, 2001
and will be drawn upon as needed to fund increased seasonal working capital
requirements.
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5. 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.
6. 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.
7. Comprehensive Income
Comprehensive income consists of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) per consolidated
financial statements $4,483 $2,853 $ 785 $(4,933)
Other comprehensive income:
Foreign currency translation adjustments (518) 99 (2,341) (114)
Net unrealized hedging gain (loss) 212 (787) 3,280 (584)
------ ------ ------ --------
Comprehensive income (loss) $4,177 $2,165 $1,724 $(5,631)
====== ====== ====== ========
</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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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 nine months ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
------ ------ ------ ------
$ % $ % $ % $ %
--- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales:
North America $47.5 56.5 $34.4 47.1 $109.1 54.1 $83.1 47.2
International 27.4 32.7 29.3 40.0 67.4 33.4 65.9 37.4
U.S. Service Stores 9.1 10.8 9.4 12.9 25.3 12.5 27.1 15.4
----- ----- ----- ----- ----- ----- ------ -----
84.0 100.0 73.1 100.0 201.8 100.0 176.1 100.0
Cost of sales 46.6 55.5 41.0 56.1 112.3 55.6 99.1 56.3
----- ----- ----- ----- ----- ----- ----- -----
Gross profit 37.4 44.5 32.1 43.9 89.5 44.4 77.0 43.7
Selling, general and
administrative 26.0 30.9 23.1 31.5 70.3 34.9 65.1 37.0
Amortization of intangibles 0.5 0.6 0.5 0.7 1.5 0.7 1.5 0.9
----- ----- ----- ----- ----- ----- ----- -----
Operating income (loss):
North America 10.0 11.9 6.8 9.3 17.7 8.8 9.8 5.5
International 1.9 2.3 2.6 3.6 3.5 1.8 4.0 2.3
U.S. Service Stores 0.4 0.5 0.5 0.7 0.5 0.2 0.6 0.3
Depreciation and amortization (1.4) (1.7) (1.4) (1.9) (4.0) (2.0) (4.0) (2.3)
----- ----- ----- ----- ----- ----- ----- ------
Total operating income 10.9 13.0 8.5 11.7 17.7 8.8 10.4 5.8
Interest expense 6.2 7.4 5.4 7.5 17.4 8.7 15.5 8.8
Other expense - - 0.2 0.3 0.5 0.2 0.1 -
----- ----- ----- ----- ----- ----- ----- ------
Income (loss) before
income taxes 4.7 5.6 2.9 3.9 (0.2) (0.1) (5.2) (3.0)
Provision (benefit) for
income taxes 0.2 0.2 - - (1.0) (0.5) (0.3) (0.2)
----- ----- ----- ----- ----- ----- ----- ------
Net income (loss) $4.5 5.4 $ 2.9 3.9 $0.8 0.4 $(4.9) (2.8)
===== ===== ===== ===== ===== ===== ====== ======
</TABLE>
Third Quarter Ended September 2000 Versus September 1999
Net Sales. Net sales for the quarter ended September 30, 2000 were $84.0
million, an increase of 14.9% compared to $73.1 million for the quarter ended
September 30, 1999. The increase is attributable to growth in the Company's
North American operations. Sales in the International business decreased over
the prior year's quarter due entirely to negative currency impacts, while sales
in the U.S. Service Stores were down due to a fewer number of stores. Excluding
the negative impact of foreign currencies, consolidated net sales increased 19%
over the prior year's quarter.
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Net sales in North America were $47.5 million in the third quarter of 2000,
an increase of 38.1% compared to $34.4 million in the third quarter of 1999. The
increase reflects strong growth from new product introductions in the shaver,
grooming and personal care and wellness categories, as well as increased
distribution at new and existing customers across all major product categories.
International net sales were $27.4 million for the quarter ended September
30, 2000, a decrease of 6.4% compared to $29.3 million for the quarter ended
September 30, 1999. Excluding the negative impact of foreign currency, net sales
in the International business actually increased 3.6% over the third quarter of
1999, primarily as a result of growth in the Company's European markets,
particularly the U.K.
Net sales through the Company's U.S. Service Stores decreased 3.2% to $9.1
million in the third quarter of 2000. This decrease was due to an average of six
fewer stores open during the third quarter of 2000, due primarily to the
closings associated with the Fedco retail chain closing in August 1999. This
decrease is partially offset by a 2.5% increase in same store sales.
Gross Profit. Gross profit was $37.4 million, or 44.5% of net sales for the
quarter ended September 30, 2000 compared to $32.1 million, or 43.9% for the
quarter ended September 30, 1999. The increase as a percentage of sales is due
to a favorable product mix, primarily from increased shaver sales.
Selling General and Administrative. Selling, general and administrative
expenses were $26.0 million or 31.0% of net sales in the third quarter of 2000
compared with $23.1 or 31.5% of net sales in the third quarter of 1999. The
increase in expenses is primarily due to increased investments in advertising
and incremental promotion and distribution expenses associated with higher sales
volume in North America. These increases were partially offset by the impact of
foreign currency on the international expenses and the impact of fewer stores in
the U.S. Service Stores' operations.
Operating Income. Operating income in the third quarter of 2000 was $10.9
million compared to $8.5 million in the third quarter of 1999. Increased sales
and a higher gross profit percentage in North America partially offset by an
increase in selling, general and administrative expenses were the key factors
for the increase in operating income.
Interest Expense. Interest expense was $6.2 million for the third quarter
of 2000 compared to $5.4 million in the third quarter of 1999. The increase in
interest expense is due primarily to higher average borrowings to support the
growth of the business and higher interest rates.
Income Tax (Benefit) Expense. The net expense for income taxes was $0.2
million for the third quarter of 2000 compared to a minimal net expense in the
third quarter of 1999 as a result of higher pretax income in certain foreign
jurisdictions.
Nine Months Ended September 2000 Versus September 1999
Net Sales. Net sales for the nine months ended September 30, 2000 increased
14.6% to $201.8 million compared with $176.1 million for the nine months ended
September 30, 1999. Excluding the $4.9 million negative impact of foreign
currencies, sales increased 17.4% over the prior year period.
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Net sales in North America were $109.1 million for the first nine months of
2000, an increase of 31.3% compared to $83.1 million for the first nine months
of 1999. Sales increased in all major product categories as a result of new
product introductions and increased distribution.
International net sales were $67.4 million for the first nine months of
2000, an increase of 2.3% compared to $65.9 million for the first nine months of
1999. Excluding the negative impact of currency, net sales increased 9.7% over
the first nine months of 1999 as sales were strong across most of the Company's
European businesses.
Net sales through the Company's U.S. Service Stores decreased 6.6% to $25.3
million for the first nine months of 2000 from $27.1 million for the first nine
months of 1999. The decrease is due to a reduction in the number of stores in
2000 partially offset by a 2.9% increase in same store sales over the nine
months ended September 30, 1999.
Gross Profit. Gross profit for the first nine months of 2000 was $89.5
million, or 44.4% of net sales, compared with $77.0 million, or 43.7% of net
sales for the first nine months of 1999. A favorable product mix, primarily from
increased shaver sales, was the primary reason for the increase in the gross
profit percentage.
Selling General and Administrative. Selling, general and administrative
expenses increased to $70.3 million or 34.9% of net sales compared with $65.1
million or 37.0% of net sales for the first nine months of 1999 primarily as a
result of increased investments in advertising and promotion. These increases
were partially offset by the impact of fewer stores in the U.S. Service Stores'
operations and the impact of foreign currency on the international expenses.
Total operating expenses decreased as a percentage of sales as a result of
higher sales volume.
Operating Income. The operating income for the first nine months of 2000
was $17.7 million compared to operating income of $10.4 million for the first
nine months of 1999. The increase in operating income is due to higher sales and
margins partially offset by an increase in selling, general and administrative
expenses.
Interest Expense. Interest expense increased to $17.4 million for the first
nine months of 2000 compared to interest expense of $15.5 million for the first
nine 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 nine months of 2000 increased to $1.0 million from $0.3 million in 1999.
The benefit is due to the recognition of certain prior year tax refunds as well
as seasonal losses generated in certain international jurisdictions.
Liquidity and Capital Resources
Net cash used in operating activities for the first nine months of 2000 was
$35.3 million versus $29.0 million during the first nine months of 1999. Cash
generated from higher net income was offset by cash used to fund increased
working capital requirements.
The Company's operations are not capital intensive. During the first nine
months of 2000 and 1999, the Company's capital expenditures totaled $2.5 million
and $2.3 million, respectively. Capital expenditures for 2000 are anticipated to
be approximately $3.2 million.
The Company borrowed a net of $35.8 million on various revolving credit
agreements and made $1.3 million in scheduled loan payments during the first
nine months of 2000.
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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 was amended on August 18, 2000 to provide an incremental
facility of $25 million, thereby increasing the Revolving Credit Facilities from
$70 million to $95 million. The Senior Credit Agreement continues to provide for
$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 mature on June 30, 2001. Borrowings under the incremental
Revolving Credit Facility of $25 million and the original facility of $70
million are due on January 31, 2001 and June 30, 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 September 30, 2000, the Company was in compliance with all covenants
under the Senior Credit Agreement and availability under the Revolving Credit
Facilities was approximately $21.0 million. The Company believes that cash
generated from operations and borrowing resources, coupled with its ability to
refinance certain debt, 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.
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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
(i) On August 24, 2000, the Company filed a Current Report on Form 8-K,
reporting under Item 2 the Seventh Amendment dated as of August 18, 2000, to the
Credit and Guarantee Agreement, dated as of May 23, 1996, among Remington
Products Company, L.L.C., certain of its subsidiaries and various lending
institutions.
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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
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Kris J. Kelley, Vice President and Controller
Date: November 13, 2000
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