<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER: 333-4520
RACI HOLDING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0350929
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
870 REMINGTON DRIVE
P.O. BOX 700
MADISON, NORTH CAROLINA 27025-0700
(Address of principal executive offices)
(Zip Code)
(336) 548-8700
(Registrant's telephone number, including area code)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class A Common Stock, par value $.01 per share,
outstanding at August 11, 2000 763,050 shares
Class B Common Stock, par value $.01 per share,
outstanding at August 11, 2000 0 shares
<PAGE> 2
RACI HOLDING, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Millions, Except Per Share Data)
June 30, December 31,
2000 1999
------ ------
(Unaudited)
ASSETS
Current Assets
--------------
Cash and Cash Equivalents $ 1.3 $ 26.3
Accounts Receivable Trade - net 102.2 56.6
Inventories 90.0 70.8
Supplies 10.9 10.6
Prepaid Expenses and Other Current Assets 11.0 7.8
Deferred Income Taxes 10.6 9.1
------ ------
Total Current Assets 226.0 181.2
Property, Plant and Equipment - net 85.3 87.8
Intangibles and Debt Issuance Costs - net 85.6 84.5
Deferred Income Taxes 3.6 4.3
Other Noncurrent Assets 0.9 1.0
------ ------
TOTAL ASSETS $401.4 $358.8
====== ======
LIABILITIES, REDEEMABLE SHARES AND
SHAREHOLDERS' EQUITY
Current Liabilities
-------------------
Accounts Payable $ 27.2 $ 23.7
Book Overdraft 6.5 6.4
Short-Term Debt 1.8 1.0
Current Portion of Long-Term Debt 1.8 29.2
Product and Environmental Liabilities 2.3 2.6
Income Taxes -- 0.4
Other Accrued Liabilities 37.2 26.8
------ ------
Total Current Liabilities 76.8 90.1
Long-Term Debt 189.6 89.3
Retiree Benefits 34.3 36.9
Product and Environmental Liabilities 10.0 9.9
------ ------
Total Liabilities 310.7 226.2
Redeemable Deferred Shares of Class A Common Stock,
par value $.01; 25,718 and 25,869 issued at
June 30, 2000 and December 31, 1999, respectively 5.3 5.4
Redeemable Shares of Class A Common Stock, par
value $.01; 5,082 issued at June 30, 2000 and
December 31, 1999, respectively 1.0 1.0
Commitments and Contingencies
Shareholders' Equity
--------------------
Class A Common Stock, par value $.01; 1,250,000 shares
authorized, 763,050 issued and outstanding at
June 30, 2000 and December 31, 1999, respectively -- --
Class B Common Stock, par value $.01; 1,250,000 shares
authorized, none issued and outstanding -- --
Paid in Capital 76.6 76.6
Due from Shareholders -- (0.5)
Accumulated Other Comprehensive Loss (0.4) (0.4)
Retained Earnings 8.2 50.5
------ ------
Total Shareholders' Equity 84.4 126.2
------ ------
TOTAL LIABILITIES, REDEEMABLE SHARES AND
SHAREHOLDERS' EQUITY $401.4 $358.8
====== ======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 3
RACI HOLDING, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in Millions, Except Per Share Data)
<TABLE>
<CAPTION>
------------------------------------------------
Unaudited
------------------------------------------------
Quarter Ended June 30, Year-to-Date June 30,
---------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales (1) $101.5 $95.9 $198.1 $187.3
Cost of Goods Sold 68.1 65.6 132.4 126.3
------ ----- ------ ------
Gross Profit 33.4 30.3 65.7 61.0
Selling, General and Administrative
Expenses 18.7 15.1 35.9 31.8
Research and Development Expenses 1.6 1.9 3.3 3.8
Other Expense 7.0 4.1 7.7 4.9
Restructuring and Nonrecurring Items -- 0.2 -- --
------ ----- ------ ------
Operating Profit 6.1 9.0 18.8 20.5
Interest Expense 4.4 3.8 7.3 7.8
------ ----- ------ ------
Profit Before Income Taxes 1.7 5.2 11.5 12.7
Provision for Income Taxes 0.7 2.5 4.7 5.5
------ ----- ------ ------
Net Income $ 1.0 $ 2.7 $ 6.8 $ 7.2
====== ===== ====== ======
Per Share Data:
Basic Income Per Share $ 1.26 $3.54 $ 8.59 $ 9.45
====== ===== ====== ======
Diluted Income Per Share $ 1.22 $3.45 $ 8.32 $ 9.22
====== ===== ====== ======
Dividend per Common and Redeemable Share $63.93 $ -- $63.93 $ --
====== ===== ====== ======
</TABLE>
(1) Sales are presented net of Federal Excise Taxes of $8.8 and $7.8 for the
quarter ended and $16.8 and $15.3 for the year-to-date periods ended
June 30, 2000 and 1999, respectively.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
RACI HOLDING, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in Millions)
---------------------
Unaudited
---------------------
Year-To-Date June 30,
---------------------
2000 1999
-------- ---------
Operating Activities
Net Cash used in Operating Activities $(42.2) $ (7.3)
------ ------
Investing Activities
Capital Expenditures (4.6) (4.9)
------ ------
Net Cash used in Investing Activities (4.6) (4.9)
------ ------
Financing Activities
Net Borrowings under Revolving Credit Facility 101.0 27.0
Dividends Paid, Net of Shareholder Loan Repayments (48.6) --
Repurchase of Senior Subordinated Notes -- (5.5)
Proceeds from Issuance Common Stock -- 0.7
Principal Payments on Long-Term Debt (28.1) (12.4)
Book Overdraft 0.1 (0.8)
Net Borrowings on Short-Term Debt 0.8 0.1
Debt Issuance Costs (3.4) --
------ ------
Net Cash provided by Financing Activities 21.8 9.1
------ ------
Decrease in Cash and Cash Equivalents (25.0) (3.1)
Cash and Cash Equivalents at Beginning of Period 26.3 4.9
====== ======
Cash and Cash Equivalents at End of Period $ 1.3 $ 1.8
====== ======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
RACI HOLDING, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of
Shareholders' Equity and Comprehensive Income
(Dollars in Millions)
<TABLE>
<CAPTION>
Accumulated
Other Total
Paid-in Due from Comprehensive Retained Shareholders'
Capital Shareholders Loss Earnings Equity
--------------- -------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1999 $ 76.6 $ (0.5) $ (0.4) $ 50.5 $ 126.2
--------------- -------------- --------------- -------------- -----------------
Comprehensive Net Income:
Net Income - - - 6.8 6.8
Repayment of Loans issued
under the 1999 Stock Incentive Plan - 0.5 - - 0.5
Dividends Paid - - - (49.1) (49.1)
--------------- -------------- --------------- -------------- -----------------
BALANCE, JUNE 30, 2000 (UNAUDITED) $ 76.6 $ - $ (0.4) $ 8.2 $ 84.4
=============== ============== =============== ============== =================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements of RACI Holding, Inc.
("Holding") include the accounts of its subsidiary, Remington Arms Company, Inc.
("Remington") and Remington's wholly owned subsidiaries, Remington
International, Ltd. and RA Brands, L.L.C. (together with Remington and Holding,
the "Company"). Holding has no material assets other than its investment in
Remington. All intercompany accounts and transactions have been eliminated in
consolidation.
The accompanying unaudited interim condensed consolidated financial
statements of Holding have been prepared by the Company in accordance with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of items of a normal recurring
nature) considered necessary for a fair presentation have been included.
Operating results for the six month period ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.
Pursuant to an asset purchase agreement (the "Asset Purchase
Agreement"), on December 1, 1993, the Company acquired certain assets and
assumed certain liabilities (the "Acquisition") of the sporting goods business
formerly operated by E. I. du Pont de Nemours and Company ("DuPont") and one of
DuPont's subsidiaries (together with DuPont, the "Sellers").
These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements of RACI Holding,
Inc. and Subsidiaries as of and for the year ended December 31, 1999.
Certain reclassifications were made to the prior period's financial
information to conform with the current presentation format.
NOTE 2 - INVENTORIES
Inventories consisted of the following at:
June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
Raw Materials $16.3 $14.9
Semi-Finished Products 19.6 18.9
Finished Product 54.1 37.0
----- -----
Total $90.0 $70.8
===== =====
NOTE 3 - LONG-TERM DEBT
Long-term debt consisted of the following at:
June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
Term Loans (Paid in 2000) $ -- $ 27.3
Revolving Credit Facility 101.0 --
9.5% Senior Subordinated Notes due 2003 86.8 86.7
Capital Lease Obligations 3.6 4.2
Other -- 0.3
------ ------
Subtotal $191.4 $118.5
Less: Current Portion 1.8 29.2
------ ------
Total $189.6 $ 89.3
====== ======
6
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
On April 28, 2000 the Company entered into an amended and restated
credit agreement with certain lending institutions (the "Credit Agreement") that
provides for aggregate borrowings of $170.0 million under a revolving credit
facility (the "Revolving Credit Facility"). All borrowings under the Credit
Agreement are guaranteed by Holding, and are collateralized by substantially all
of the assets of the Company. The Company may borrow up to $170.0 million
(including certain letters of credit) under the Revolving Credit Facility
through September 30, 2003. Financing costs paid in connection with the Credit
Agreement of $3.4 million were capitalized and will be amortized over the
remaining term of the Credit Agreement. In connection with the amendment and
restatement, the remaining balance on the Term Loans of $18.3 million was paid
and debt issuance costs of $.3 million were expensed.
Borrowings under the Credit Agreement generally bear interest, at the
Company's option, at a variable rate equal to either (i) the rate that is the
highest of the administrative agent's prime rate, or certain alternative rates,
in each case plus up to 1.25% per annum, or (ii) the rate at which certain
Eurodollar deposits are offered in the interbank Eurodollar market plus up to
2.25% per annum. Upon the Company's delivery to the Credit Agreement's
administrative agent of the Company's quarterly financial statements, the
interest rate on the Company's Credit Agreement borrowings can be reduced by up
to 0.5% per annum from levels in effect at April 28, 2000 if the Company has met
certain financial ratios, based on earnings before interest, taxes, depreciation
and amortization ("EBITDA") and total indebtedness, for the four quarters then
ended. Once reduced, such interest rate can also be increased up to 0.5% per
annum if the Company no longer meets the financial ratios making it eligible for
interest rate reduction. Commitment fees of 0.5% are payable on the average
daily unused portion of the Revolving Credit Facility. Mandatory prepayments of
borrowings may be required under the Credit Agreement upon the occurrence of
certain changes in control.
NOTE 4 - INCOME PER SHARE
The basic and diluted income per share was determined as follows:
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic Income Per Share:
Net Income Available to Common Shareholders $ 1.0 $ 2.7 $ 6.8 $ 7.2
Weighted Average Common Shares 793,850 763,296 792,008 761,666
Basic Income Per Share $1.26 $3.54 $8.59 $9.45
Diluted Income Per Share:
Net Income Available to Common Shareholders $ 1.0 $ 2.7 $ 6.8 $ 7.2
Weighted Average Common Shares 793,850 763,296 792,008 761,666
Effect of Outstanding Options 24,861 18,983 24,952 18,983
Weighted Average Common Shares and Dilutive Potential
Common Stock 818,711 782,279 816,960 780,649
Diluted Income Per Share $1.22 $3.45 $8.32 $9.22
Options Outstanding at June 30 69,553 53,738 69,553 53,738
</TABLE>
7
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
NOTE 5 - REDEEMABLE CLASS A COMMON STOCK
Certain employees and key management of Holding who hold or have the
right to receive (i.e.: deferred shares) Class A common stock may require
Holding to repurchase, under certain conditions, namely, death, disability or
retirement at normal retirement age, all of such shares. This repurchase right
terminates upon the consummation of an initial equity public offering of
Holding's Class A common stock. In connection with the redemption feature
described above, Holding has classified outside of permanent equity an amount
representing the initial fair value of the redeemable shares. These shares have
not been marked to market since the events of redemption are considered remote.
NOTE 6 - DIVIDENDS AND OTHER COMPENSATION
On April 25, 2000, the Company declared a special dividend of $63.933
per share, in an aggregate amount of $49.1 million to all shareholders of record
on that date. The Company also declared a special payment to holders of all
stock options and deferred shares of $63.933 per share, in an aggregate amount
$6.1 million on that date which was recorded as other expense. The special
dividend and special payment were paid on April 28, 2000 with proceeds from the
borrowings under the Credit Agreement. All loans due from shareholders were
repaid with proceeds from the special dividend and special payment.
NOTE 7 - SEGMENT INFORMATION
Information on Segments:
(Unaudited)
----------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
2000 1999 2000 1999
------ ----- ------ ------
Net Sales:
Hunting/Shooting Sports $ 89.9 $81.6 $172.7 $160.3
All Other 11.6 14.3 25.4 27.0
------ ----- ------ ------
Consolidated Net Sales $101.5 $95.9 $198.1 $187.3
====== ===== ====== ======
EBITDA:
Hunting/Shooting Sports $ 14.8 $13.7 $ 28.4 $ 26.6
All Other 1.7 3.3 4.9 6.0
------ ----- ------ ------
Consolidated EBITDA $ 16.5 $17.0 $ 33.3 $ 32.6
====== ===== ====== ======
June 30, December 31,
2000 1999
------ ------
(Unaudited)
Assets:
Hunting/Shooting Sports $253.9 $189.5
All Other 147.5 169.3
------ ------
Consolidated Assets $401.4 $358.8
====== ======
8
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
Reconciliation of Reportable Segments:
(Unaudited)
----------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
2000 1999 2000 1999
------ ----- ------ ------
Consolidated EBITDA $16.5 $17.0 $33.3 $32.6
Less: Interest Expense 4.4 3.8 7.3 7.8
Depreciation and
Amortization (1) 4.0 3.9 8.0 7.8
Other Noncash Charges 0.3 3.9 0.4 4.3
Nonrecurring and Restructuring
Items -- 0.2 -- --
Special Payment 6.1 -- 6.1 --
----- ----- ----- -----
14.8 11.8 21.8 19.9
----- ----- ----- -----
Consolidated Income from
Continuing Operations Before Taxes $ 1.7 $ 5.2 $11.5 $12.7
===== ===== ===== =====
(1) Excludes amortization of deferred financing costs of $0.4 and $0.4 and $0.3
and $0.1 loss on early extinguishment of debt for the quarters ended June 30,
2000 and 1999, respectively, and $0.8 and $0.8 amortization of deferred
financing costs and $0.3 and $0.2 loss on early extinguishment of debt for the
year-to-date periods ended June 30, 2000 and 1999, respectively, which were
included in interest expense.
9
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
NOTE 8 - FINANCIAL POSITION AND RESULTS OF OPERATIONS OF HOLDING AND REMINGTON
The following condensed consolidating financial data provides
information regarding the financial position and results of operations of
Holding and its wholly owned subsidiary, Remington, including Remington's wholly
owned subsidiaries Remington International, Ltd. and RA Brands, L.L.C. Separate
financial statements of Holding are not presented because management has
determined that they would not be material to holders of the Company's public
securities, Remington's 9.5% Senior Subordinated Notes due 2003, Series B (the
"Notes"). Further, the Notes are fully and unconditionally guaranteed by
Holding.
RACI HOLDING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
June 30, 2000
(Unaudited)
RACI
Holding,
Inc. and
ASSETS Holding Remington Eliminations Subsidiaries
------ ------- --------- ------------ ------------
Current Assets $ -- $226.0 $ -- $226.0
Receivable from Remington 7.9 -- 7.9 --
Receivable from RACI Holding, Inc. -- 0.1 0.1 --
Noncurrent Assets 82.9 175.4 82.9 175.4
------ ------ ------ ------
Total Assets $ 90.8 $401.5 $ 90.9 $401.4
====== ====== ====== ======
LIABILITIES, REDEEMABLE SHARES
AND SHAREHOLDERS' EQUITY
------------------------
Current Liabilities $ -- $ 76.8 $ -- $ 76.8
Payable to RACI Holding, Inc. -- 7.9 7.9 --
Payable to Remington 0.1 -- 0.1 --
Noncurrent Liabilities -- 233.9 -- 233.9
Redeemable Shares 6.3 -- -- 6.3
Shareholders' Equity 84.4 82.9 82.9 84.4
------ ------ ------ ------
Total Liabilities,
Redeemable Shares and
Shareholders' Equity $ 90.8 $401.5 $ 90.9 $401.4
====== ====== ====== ======
RACI HOLDING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 1999
RACI
Holding,
Inc. and
ASSETS Holding Remington Eliminations Subsidiaries
------ ------- --------- ------------ ------------
Current Assets $ -- $181.2 $ -- $181.2
Receivable from Remington 7.5 -- 7.5 --
Receivable from RACI Holding, Inc. -- 0.1 0.1 --
Noncurrent Assets 125.2 177.6 125.2 177.6
------ ------ ------ ------
Total Assets $132.7 $358.9 $132.8 $358.8
====== ====== ====== ======
LIABILITIES, REDEEMABLE SHARES
AND SHAREHOLDERS' EQUITY
------------------------
Current Liabilities $ -- $ 90.1 $ -- $ 90.1
Payable to Remington 0.1 -- 0.1 --
Payable to RACI Holding, Inc. -- 7.5 7.5 --
Noncurrent Liabilities -- 136.1 -- 136.1
Redeemable Shares 6.4 -- -- 6.4
Shareholders' Equity 126.2 125.2 125.2 126.2
------ ------ ------ ------
Total Liabilities,
Redeemable Shares and
Shareholders' Equity $132.7 $358.9 $132.8 $358.8
====== ====== ====== ======
10
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
RACI HOLDING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Unaudited)
RACI
Holding,
Inc. and
Holding Remington Eliminations Subsidiaries
------- --------- ------------ ------------
QUARTER ENDED
JUNE 30, 2000
Sales $ -- $101.5 $ -- $101.5
Gross Profit -- 33.4 -- 33.4
Equity in Earnings of Subsidiary 1.0 -- 1.0 --
Net Income 1.0 1.0 1.0 1.0
QUARTER ENDED
JUNE 30, 1999
Sales $ -- $ 95.9 $ -- $ 95.9
Gross Profit -- 30.3 -- 30.3
Equity in Earnings of Subsidiary 2.7 -- 2.7 --
Net Income 2.7 2.7 2.7 2.7
RACI HOLDING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Unaudited)
RACI
Holding,
Inc. and
Holding Remington Eliminations Subsidiaries
------- --------- ------------ ------------
SIX MONTHS ENDED
JUNE 30, 2000
Sales $ -- $198.1 $ -- $198.1
Gross Profit -- 65.7 -- 65.7
Equity in Earnings of Subsidiary 6.8 -- 6.8 --
Net Income 6.8 6.8 6.8 6.8
SIX MONTHS ENDED
JUNE 30, 1999
Sales $ -- $187.3 $ -- $187.3
Gross Profit -- 61.0 -- 61.0
Equity in Earnings of Subsidiary 7.2 -- 7.2 --
Net Income 7.2 7.2 7.2 7.2
11
<PAGE> 12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company is subject to various lawsuits and claims with respect to
product liabilities, governmental regulations and other matters arising in the
normal course of business. Under the Asset Purchase Agreement, the Company
generally bears financial responsibility for all product liability cases and
claims relating to occurrences after the closing of the Acquisition, except for
certain cases and claims relating to certain shotguns, all cases and claims
relating to discontinued products and for limited other costs. Because the
Company's assumption of financial responsibility for certain product liability
cases and claims involving pre-Acquisition occurrences was limited to a fixed
amount, with the Sellers retaining liability in excess of such fixed amount and
indemnifying the Company in respect thereof, and because of the Company's
accruals with respect to such cases and claims, the Company believes that
product liability cases and claims involving occurrences arising prior to the
Acquisition are not likely to have a material adverse effect upon the financial
conditions or results of operations of the Company. Moreover, although it is
difficult to forecast the outcome of litigation, the Company does not believe,
in light of relevant circumstances (including the current availability of
insurance for personal injury and property damage with respect to cases and
claims involving occurrences arising after the Acquisition, its accruals for the
uninsured costs of such cases and claims and the Sellers' agreement to be
responsible for a portion of certain post-Acquisition shotgun-related product
liability costs, as well as the type of firearms products made by the Company),
that the outcome of all pending product liability cases and claims will be
likely to have a material adverse effect upon the financial condition or results
of operations of the Company. Nonetheless, in part because of the uncertainty as
to the nature and extent of manufacturer liability for personal injury due to
alleged product defects, there can be no assurance that the Company's resources
will be adequate to cover future product liability occurrences, cases or claims,
in the aggregate, or that such a material adverse effect will not result
therefrom. Because of the nature of its products, the Company anticipates that
it will continue to be involved in product liability litigation in the future.
NOTE 10 - RECENT ACCOUNTING DEVELOPMENTS
During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires entities to recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at their fair value. In June 1999, the
FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133-an amendment
of FASB Statement No. 133", that revises SFAS No. 133 to become effective in the
first quarter of fiscal 2001. The Company is evaluating the provisions of SFAS
No. 133, but does not anticipate its adoption to have a material impact on the
Company's financial position or results of operation.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the accompanying Condensed Consolidated Financial Statements and related
notes of Holding and its subsidiary, Remington and Remington's wholly owned
subsidiaries, Remington International, Ltd. and RA Brands, L.L.C., and with the
Company's audited consolidated financial statements as of and for the year ended
December 31, 1999, on file with the Securities and Exchange Commission. The
results of operations for the six month period ended June 30, 2000 are not
necessarily indicative of results that may be expected for the year ending
December 31, 2000, in part due to the seasonality of the Company's business.
BUSINESS TRENDS AND INITIATIVES
The markets in which the Company competes are highly competitive.
Product image, quality and innovation are the dominant competitive factors in
firearms products and price is the dominant factor in ammunition products. While
the Company intends to respond to competitive pressures, such responses may
affect quarterly results. The Company believes that the market for firearms and
ammunition is a mature market, which the Company expects will remain flat, at
least in the near term.
Although the Company believes that state, local, and federal regulation
has not had a significant influence on the market for its firearms and
ammunition products for the periods presented herein, there can be no assurance
that the regulation of firearms and ammunition (and consumer concerns about such
regulation) will not become more restrictive in the future and that any such
development would not adversely affect these markets or the Company. See
"-Regulatory Developments" and "Legal Proceedings."
In light of market constraints on sales growth opportunities and its
liquidity and working capital needs, the Company continues to focus on
increasing profitability by increasing brand name awareness, introducing new
products and containing costs. The Company continues to review all aspects of
its operations with a view towards managing costs in response to competitive
pressures.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AS
COMPARED TO THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1999
Sales. Consolidated sales for the quarter ended June 30, 2000 increased
$5.6 million or 5.8% from the quarter ended June 30, 1999 and consolidated sales
for the first six months of the year increased $10.8 million or 5.8% from the
same period in 1999. Although there is an increase in sales from quarter to
quarter and from year to year, the Company cannot be assured that this trend
will continue due to the relatively mature and highly competitive market in
which the Company operates. The following tables compare sales by segment for
each of the periods ended June 30:
Three Months Ended June 30,
-------------------------------------------------
Percent Percent
2000 of Total 1999 of Total
-------------------------------------------------
Net Sales
Hunting/Shooting Sports $ 89.9 89% $81.6 85%
All Other 11.6 11% 14.3 15%
-------------------------------------------------
Consolidated Net Sales $101.5 100% $95.9 100%
=================================================
Six Months Ended June 30,
--------------------------------------------------
Percent Percent
2000 of Total 1999 of Total
--------------------------------------------------
Net Sales
Hunting/Shooting Sports $172.7 87% $160.3 86%
All Other 25.4 13% 27.0 14%
--------------------------------------------------
Consolidated Net Sales $ 198.1 100% $ 187.3 100%
==================================================
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Hunting/Shooting Sports sales increased $8.3 million or 10.2% in the
second quarter of 2000 as compared to the same period in 1999. Hunting/Shooting
Sports sales for the first six months of 2000 increased $12.4 million or 7.7%
from the same period in 1999.
Firearm sales of $51.5 million for the quarter ended June 30, 2000
increased $6.7 million or 15.0% from the quarter ended June 30, 1999, primarily
as a result of higher sales volumes in all firearms categories together with
higher overall pricing of firearms products. Year-to-date firearms sales were
$100.3 million, an increase of $5.3 million, or 5.6%, from the same period in
1999, due to overall higher pricing of firearm products together with an
increase in sales volumes of higher priced shotguns partially offset by lower
sales volumes in most of the firearm products.
Ammunition sales of $38.4 million for the quarter ended June 30, 2000
increased $1.6 million or 4.3% from the same quarter in 1999 and year-to-date
ammunition sales were $72.4 million, an increase of $7.1 million, or 10.9%, from
the same period in 1999. These increases primarily resulted from higher sales
volumes of shotshell and centerfire rifle ammunition combined with higher
overall pricing in ammunition products (offset by lower sales volumes of rimfire
and pistol and revolver ammunition.)
Sales of all other products, including fishline, accessories, targets
and powder metal products decreased in the second quarter 2000 from the same
period 1999 by $2.7 million or 18.9%, primarily attributable to a decrease in
sales in fishing and accessory products. During the second quarter of 2000,
sales in fishing and accessory products decreased $1.9 million, or 18.4%, from
the second quarter of 1999 as a result of lower overall sales volumes of
fishline and accessory products, slightly offset by sales of gun safes
introduced in 2000. Year-to-date sales were $1.6 million, or 5.9% lower than the
comparable 1999 period, primarily as a result of lower demand for certain
fishline products, slightly offset by sales of new product introductions in
fishline and gun safes.
Cost of Goods Sold. Cost of goods sold for the second quarter of 2000
increased $2.5 million, or 3.8%, from the second quarter of 1999. For the first
six months of 2000, cost of goods sold increased $6.1 million, or 4.8%, from the
same period in 1999. The increase in both the quarter and year-to-date periods
was principally due to increased sales volume in the Hunting/Shooting Sports
segment, offset by lower volumes in the All Other segment. As a percentage of
sales, cost of goods sold for the second quarter of 2000 decreased to 67.1% from
68.4% and for the first six months of 2000 cost of goods sold decreased to 66.8%
from 67.4% due mainly to the combination of higher overall pricing in the
Hunting/Shooting Sports segment and increased volumes of higher margin
Hunting/Shooting Sports segment products, partially offset by higher other
manufacturing costs associated with line enhancement projects and retiree
benefit expense.
Operating Expenses. Operating expenses consist of selling, general and
administrative expense, research and development expense, restructuring and
nonrecurring items and other income and expense. Operating expenses for the
second quarter of 2000 were $27.3 million, an increase of $6.0 million, or
28.2%, from the second quarter of 1999. Year-to-date operating expenses for 2000
were $46.9 million, an increase of $6.4 million, or 15.8%, from the same period
of 1999, due primarily to the factors discussed below.
Selling, general and administrative expenses for the second quarter of
2000 were $18.7 million, an increase of $3.6 million, or 23.8%, from the second
quarter of 1999. Year-to-date selling, general and administrative expenses were
$35.9 million, a $4.1 million or 12.9% increase from the same year-to-date
period in 1999. The increase between the two periods for the quarter and
year-to-date was primarily attributable to the Company's contributions in 2000
to The Hunting and Shooting Sports Heritage Fund, higher compensation expense
and an increase in bad debt expense partially offset by planned decreases in
marketing communications expenses.
Restructuring and nonrecurring items include $0.2 million in the second
quarter of 1999 for nonrecurring professional fees related to a transaction that
was not consummated, and a reserve reduction of $0.2 million in the first
quarter of 1999 to eliminate estimated restructuring accruals not realized.
There were no restructuring or nonrecurring items recorded in either the quarter
or year-to-date period ending June 30, 2000.
Other expense for the quarter and year-to-date period ended June 30,
2000 includes a $6.1 million special payment that was declared on April 25, 2000
to holders of all stock options and deferred shares of $63.933 per share. See
Note 6 of the Notes to Condensed Consolidated Financial Statements herein. Other
expense for the quarter and
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year-to-date period ended June 30, 1999 includes $3.1 million for the Company's
portion of expenses incurred in connection with the issuance of stock and the
grant of options under the 1999 Stock Incentive Plan.
Interest Expense. Interest expense for the quarter ended June 30, 2000
was $4.4 million, an increase of $0.6 million, or 15.8%, from the second quarter
of 1999. The increase in expense from quarter to quarter was a direct result of
increasing interest rates combined with an increase in average outstanding debt.
Year-to-date interest expense was $7.3 million, a decrease of $0.5 million, or
6.4% from the same period in 1999. The decrease in interest expense for the
year-to-date period was primarily a result of a reduction in borrowings on the
term loan offset by higher borrowings on the revolver combined with higher
interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows. Net cash used in operating activities was $42.2 million and
$7.3 million for the six month periods ended June 30, 2000 and 1999,
respectively. Compared to the same period in 1999, the increase in cash used in
operating activities resulted primarily from a greater increase in working
capital components partially offset by a decrease in earnings. Accounts
receivable increased $45.6 million from December 31, 1999 to $102.2 million
primarily as a result of approximately $37.4 million of firearms and $16.2
million of ammunition sales on extended terms. Some of these terms provide cash
discount incentives and require payment by October 2000. Inventories increased
$19.2 million from December 31, 1999 to $90.0 million as a result of the
seasonality of the business. See "--Seasonality." Accounts payable increased
$3.5 million from December 31, 1999 to $27.2 million as a result of the
Company's on-going focus on the management of working capital. Net cash used in
investing activities in the first six months of 2000 and 1999 were $4.6 million
and $4.9 million, respectively, consisting of capital expenditures for
maintenance of operations and improvement projects concentrated on enhancing the
efficiency of existing facilities. Net cash provided by financing activities
during the first six months of 2000 and 1999 were $21.8 million and $9.9
million, respectively. The increase in cash used in financing activities
primarily resulted from higher borrowings under the revolving credit facility
used primarily for the dividend to stockholders and the special payment to
holders of options and deferred shares, partly offset by higher principal
payments on outstanding indebtedness.
Working Capital. Working capital increased to $149.2 million at June
30, 2000 from $91.1 million at December 31, 1999, primarily as a result of the
increase in accounts receivable and inventory and a decrease in the current
portion of long-term debt, partially offset by the increases in accounts payable
and other accrued liabilities. See "-Cash Flows." The seasonality of the
Company's business generally causes accounts receivables and inventory to be
higher in the first three quarters of the year. See "-Seasonality." The Company
continues to focus on working capital management, including the collection of
accounts receivable, maintaining inventory levels in line with sales projections
and management of accounts payable.
Capital Expenditures. Capital expenditures for the six months ended
June 30, 2000 were $4.6 million, principally for new equipment related to the
manufacture of firearms and ammunition, as well as replacement equipment and
improvement projects concentrated on enhancing the operating efficiency
throughout existing facilities.
Liquidity. As of June 30, 2000, the Company had outstanding $191.4
million of indebtedness, consisting of approximately $86.8 million ($87.0
million face amount) of the Company's 9.5% Senior Subordinated Notes due 2003
and $101.0 million in revolving credit borrowings under the Credit Agreement (as
defined below) and $3.6 million in capital lease obligations. As of June 30,
2000, the Company also had aggregate letters of credit outstanding of $3.6
million. The Revolving Credit Facility (as defined below) had $65.4 million
available for borrowing as of June 30, 2000.
At present, the principal sources of liquidity for the Company's
business and operating needs are internally generated funds from its operations
and revolving credit borrowings under the Credit Agreement. On April 28, 2000,
the Company entered into an amended and restated credit agreement (the "Credit
Agreement") which provides for a revolving credit facility of $170.0 million
(the "Revolving Credit Facility.") See "--Credit Agreement." In connection with
the transaction, the outstanding balance of $18.3 million on the term loans
under the Company's old credit facility was repaid. The Company also paid a
special dividend of $49.1 million to stockholders and a special payment of $6.1
million to holders of stock options and deferred shares on April 28, 2000. The
Company believes that it will be able to meet its debt service obligations and
fund its operating requirements with cash flow from operations and revolving
credit borrowings prior to the maturity of the Revolving Credit Facility,
although no assurance can be given in this
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<PAGE> 16
regard. In addition, the Company has implemented certain programs and
initiatives in order to improve cash flow from operations. See "--Cash Flows."
Credit Agreement. Effective April 28, 2000, the Company entered into
the Credit Agreement with The Chase Manhattan Bank , Bank of America, N.A.,
Goldman Sachs Credit Partners L.P., and certain other lenders. The Credit
Agreement provides for a Revolving Credit Facility of $170.0 million with a
final maturity of September 30, 2003. Up to $15.0 million of the Revolving
Credit Facility availability may be used for letters of credit.
The obligations under the Credit Agreement are guaranteed by Holding
and are secured by a pledge of the Company's capital stock and by pledges of and
security interests in substantially all the Company's property and assets. The
Credit Agreement contains various default provisions and affirmative and
negative covenants, including a negative pledge with respect to the Company's
unencumbered assets, and certain financial covenants that require the Company to
meet certain financial ratios and tests. As of June 30, 2000, the Company was in
compliance in all material respects with the financial covenants under the
Credit Agreement.
Loans under the Credit Agreement generally bear interest, at the
Company's option, at a variable rate equal to either (i) the rate that is the
highest of the administrative agent's prime rate, or certain alternative rates,
in each case plus up to 1.25% per annum, ("ABR Loans") or (ii) the rate at which
certain Eurodollar deposits are offered in the interbank Eurodollar market plus
up to 2.25% per annum ("Eurodollar Loans"). The Company's interest rate margin
for the first six months under the Credit Agreement is set at 1.0% and 2.0% for
ABR Loans and Eurodollar Loans, respectively. The interest rate on the Company's
Credit Agreement borrowings can be reduced by up to 0.5% and be increased by up
to 0.25% from the levels originally in effect at the end of the six month period
if the Company meets a certain consolidated leverage ratio, based on EBITDA and
total indebtedness, for the four quarters most recently ended. Once reduced,
such interest rate can also be increased up to 1.25% per annum on ABR Loans and
2.25% per annum on Eurodollar Loans if the Company no longer meets the financial
ratio making it eligible for the interest rate reduction.
SEASONALITY
The Company produces and markets a broad range of firearms and
ammunition products used in various shooting sports. Several models of the
Company's shotguns and several types of ammunition are intended for target
shooting that generally occurs in the "off season." The majority of the
Company's firearms and ammunition products, however, are manufactured for
hunting use. As a result, sales of the Company's products are seasonal and
concentrated toward the fall hunting season. The Company follows the industry
practice of selling firearms pursuant to a "dating" plan allowing the customer
to buy the products commencing at the beginning of the Company's dating plan
year and pay for them on extended terms. The Company believes that this dating
plan has partially offset the seasonality of the Company's business by shifting
some firearms sales to the first quarter.
RECENT ACCOUNTING DEVELOPMENTS
During 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 requires all
entities to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. In
June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of FASB Statement No.
133-an amendment of FASB Statement No. 133", that revises SFAS No. 133 to become
effective in the first quarter of fiscal 2001. The Company is evaluating the
provisions of SFAS No. 133, but does not anticipate its adoption to have a
material impact on the Company's financial position or results of operation.
REGULATORY DEVELOPMENTS
The Brady Handgun Violence Prevention Act of 1993 (the "Brady Bill"),
which was extended in 1998 to include shotguns and rifles, mandates a national
system of instant background checks for all firearm purchases from
federally-licensed firearms retail dealers, wherever such sales take place.
Legislation has been proposed to further extend this system to sales made by
non-retail sellers at gun shows.
State and local laws and regulations vary significantly in the level of
restrictions they place on gun manufacture, ownership and transfer. Some states
have recently enacted, and others are considering, legislation
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restricting or prohibiting the ownership, use or sale of certain categories of
firearms and/or ammunition. Although many jurisdictions have mandatory waiting
periods or other restrictions on the purchase of handguns, similar limits on
handgun ammunition are not widespread. The Company's current firearm and
ammunition products generally are not subject to such existing state
restrictions, and generally would not be subject to any known proposed state
legislation relating to regulation of "assault weapons."
The Company believes that recent federal, state, local and foreign
legislation relating to the regulation of firearms or ammunition has not had a
material adverse effect on its sale of these products to date. However, there
can be no assurance that such regulation will not become more restrictive in the
future or that any such development would not have a material adverse effect on
the business of the Company.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this report (other than the
financial statements and other statements of historical fact) are
forward-looking statements, including, without limitation, (i) the statements in
"-Business Trends and Initiatives" concerning (a) the Company's belief that the
market for firearms and ammunition will remain flat, at least in the near term
and (b) the Company's intention to respond to competitive pressure, which may
affect quarterly results; (ii) the statements in "-Liquidity and Capital
Resources - Cash Flows" concerning the Company's belief that it will be able to
meet its debt service obligations and fund its operating requirements with cash
flow from operations and revolving credit borrowings prior to the maturity of
the Revolving Credit Facility; (iii) the statement in "Recent Accounting
Developments" concerning the Company's belief that adoption of SFAS No. 133
would not have a material adverse effect on financial position or results of
operations; (iv) the statements in "Quantitative and Qualitative Disclosures
About Market Risk" concerning the Company's belief that a near-term change in
commodity prices will not materially impact the consolidated financial position,
results of operations, future earnings, fair value or cash flows of the Company;
(v) the statements in "Legal Proceedings" concerning (a) the Company's belief
that the outcome of all pending product liability cases and claims will not be
likely to have a material adverse effect upon the financial condition or results
of operations of the Company and (b) the Company's anticipation that because of
the nature of its products, it will continue to be involved in product liability
cases and claims in the future; and (iv) other statements as to management's or
the Company's expectations and beliefs presented in "Legal Proceedings."
Forward-looking statements are made based upon management's current
expectations and beliefs concerning future developments and their potential
effects upon the Company. There can be no assurance that future developments
will be in accordance with management's expectations or that the effect of
future developments on the Company will be those anticipated by management. The
important factors described in this report (including, without limitation, those
discussed in "-Business Trends and Initiatives", "-Results of Operations for the
Six Month Period Ended June 30, 2000 as Compared to the Six Month Period Ended
June 30, 1999", "-Liquidity and Capital Resources" and "Legal Proceedings"), in
the Company's Annual Report on Form 10-K for the period ended December 31, 1999,
or in other Securities and Exchange Commission filings (which factors are
incorporated herein by reference), could affect (and in some cases have
affected) the Company's actual results and could cause such results to differ
materially from estimates or expectations reflected in such forward-looking
statements.
While the Company periodically reassesses material trends and
uncertainties affecting the operations and financial condition in connection
with its preparation of management's discussion and analysis of financial
condition and results of operations contained in its quarterly and annual
reports, the Company does not intend to review or revise any particular
forward-looking statement referenced in this report in light of future events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Certain of the Company's financial instruments are subject to market
risks, including interest rate risk. The Company uses commodity futures
contracts and options to hedge against the risk of increased prices for lead,
copper and zinc to be used in the manufacture of the Company's products. At June
30, 2000, the market value of the Company's outstanding contracts relating to
firm commitments and options to purchase lead, copper and zinc were ($0.2)
million and $0.2 million, respectively. The outstanding contracts relate to
anticipated purchases up to fifteen months from the respective balance sheet
date. The Company believes that a near-term change in commodity prices will not
materially impact the consolidated financial position, results of operations,
future
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earnings, fair value or cash flows of the Company. The Company was not a party
to any interest rate cap or other protection arrangements with respect to its
variable rate indebtedness as of June 30, 2000. Additionally, the Company
believes it does not have a material exposure to fluctuations in foreign
currencies. The Company does not hold or issue financial instruments for trading
purposes.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Pursuant to the Asset Purchase Agreement, the Sellers retained
liability for, and are required to indemnify the Company against, (1) all
product liability cases and claims (whenever they may arise) involving
discontinued products and (2) all product liability cases and claims involving
products that had not been discontinued as of the Acquisition (the "Closing")
and which relate to occurrences that took place prior to the Closing. Except for
all cases and claims relating to discontinued products and for limited costs in
cases relating to certain shotguns, the Company generally bears financial
responsibility for product liability cases and claims relating to occurrences
after the Closing.
As a result of contractual arrangements, the Company manages the joint
defense of product liability litigation for both Remington and the Sellers. As
of June 30, 2000, 16 individual bodily injury cases were pending, primarily
alleging defective product design or manufacture, or failure to provide adequate
warnings, some of these cases seek punitive as well as compensatory damages. Of
these pending individual cases, approximately one involves either discontinued
products or pre-Closing occurrences, for which the Sellers retained liability
and are required to indemnify the Company. The remaining approximately 15 of the
pending cases involve post-Closing occurrences for which the Company bears
responsibility under the Asset Purchase Agreement; the Sellers have some
responsibility for the costs of 2 of these cases involving certain shotguns, as
described below. The Company has previously disposed of a number of other cases
involving post-Acquisition occurrences by settlement.
In addition, Remington (a manufacturer of shotguns and rifles) is named
in only one of the approximately 30 recent actions brought by certain
municipalities, primarily against manufacturers and sellers of handguns. In City
of Boston et al. v. Smith & Wesson et al., filed in Superior Court, Suffolk
County, Massachusetts, on June 2, 1999 the City of Boston and the Boston Public
Health Commission claim, among other allegations, that industry distribution
practices of the defendants' (including handgun and long gun manufacturers)
permit firearms to enter a secondary market, from which guns may be obtained by
unauthorized users, and that defendants have failed to include adequate safety
devices in their firearms to prevent unauthorized use. Plaintiffs seek
injunctive relief and monetary damages (consisting of the cost of providing
certain city services and lost tax and other revenues.) Defendants' consolidated
motion to dismiss was denied on July 13, 2000 and an interlocutory appeal was
filed on August 9, 2000.
Remington is not named in Chicago v. Beretta U.S.A. Corp., another
such municipal cost recovery case. However, a motion to intervene was filed in
November 1998 seeking to name as additional defendants unidentified "ammunition
manufacturers." A second motion for the same purpose was filed by a different
entity in February 2000. Such intervention has not been permitted by the Cook
County Court, in which the Chicago case is pending.
Remington also is named in NAACP et al. v. A.A. Arms, Inc. et al, a
lawsuit filed in federal court in the Eastern District of New York by the
National Association for the Advancement of Colored People on July 16, 1999,
against more than a hundred defendants involved in the manufacture of firearms.
The complaint, as amended in October 1999 to add the National Spinal Cord Injury
Association as a plaintiff, purports to seek injunctive relief rather than
monetary damages and contains allegations about defendants' manufacturing and
distribution practices similar to those in the Boston complaint described above.
Plaintiffs purport to limit their claims to the manufacture and sale of
handguns. Remington has not made or sold handguns, as that term is
conventionally understood, for over 60 years.
In recognition of and support of certain legal and legislative
initiatives, the firearms industry has established the Hunting and Shooting
Sports Heritage Fund of which the Company is a member. The Company contributes a
percentage of its domestic net revenue from sales of its hunting and shooting
sports-related products to this organization.
Because the Company's assumption of financial responsibility for
certain product liability cases and claims involving pre-Acquisition occurrences
was limited to a fixed amount, with the Sellers retaining liability in excess of
such fixed amount and indemnifying the Company in respect thereof, and because
of the Company's accruals with respect to such cases and claims, the Company
believes that product liability cases and claims involving occurrences arising
prior to the Acquisition are not likely to have a material adverse effect upon
the financial condition or results of operations of the Company. Moreover,
although it is difficult to forecast the outcome of litigation, the Company does
not believe, in light of relevant circumstances (including the current
availability of insurance for personal injury and property damage with respect
to cases and claims involving occurrences arising after the Acquisition, its
accruals for
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the uninsured costs of such cases and claims and the Sellers' agreement to be
responsible for a portion of certain post-Acquisition shotgun-related product
liability costs, as well as the type of firearms products made by the Company),
that the outcome of all pending product liability cases and claims will be
likely to have a material adverse effect upon the financial condition or results
of operations of the Company. Nonetheless, in part because of the uncertainty as
to the nature and extent of manufacturer liability for personal injury due to
alleged product defects, there can be no assurance that the Company's resources
will be adequate to cover future product liability occurrences, cases or claims,
in the aggregate, or that such a material adverse effect will not result
therefrom. Because of the nature of its products, the Company anticipates that
it will continue to be involved in product liability litigation in the future.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 25, 2000, the stockholders of Holding, at their annual
meeting, unanimously re-elected in its entirety the board of directors of
Holding. On that same day, the stockholders of Remington, at its annual meeting,
unanimously re-elected in its entirety the board of directors of Remington. The
stockholders of each company also unanimously appointed PricewaterhouseCoopers
LLP as the independent public accountants of each company for the fiscal year
ending December 31, 2000.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule.
99.1 Reconciliation of Income from Operations to EBITDA.
(b) Reports on Form 8-K
During the quarter ended June 30, 2000, the Company filed no reports on
Form 8-K.
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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.
RACI HOLDING, INC.
/s/ Mark A. Little
-------------------------------------
Mark A. Little
Executive Vice President, Chief Financial
Officer and Chief Administrative Officer
(Principal Financial Officer)
August 11, 2000
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INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
27.1 Financial Data Schedule.
99.1 Reconciliation of Income from Operations to EBITDA.
23