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, 2002.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 333-07429
333-07429-01
Remington Products Company, L.L.C.
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Remington Capital Corp.
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(Exact name of registrant as specified in its charter)
06-1451076
Delaware 06-1451079
- -------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Nos.)
60 Main Street, Bridgeport, Connecticut 06604
- --------------------------------------- -----------
(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
- -------------------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of
the Act:
None
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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
----- -----
REMINGTON PRODUCTS COMPANY, L.L.C.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2002
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
Item I. Financial Statements (unaudited):
Consolidated Balance Sheets -
June 30, 2002 and December 31, 2001 3
Consolidated Statements of Operations -
For the three and six months ended June 30, 2002 and 2001 4
Consolidated Statements of Cash Flows -
For the six months ended June 30, 2002 and 2001 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
2
Remington Products Company, L.L.C.
Consolidated Balance Sheets
(unaudited, in thousands)
June 30, December 31,
2002 2001
--------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,724 $ 4,087
Accounts receivable, less allowance for doubtful accounts
of $1,936 in 2002 and $1,674 in 2001 46,382 78,849
Inventories 67,188 75,216
Prepaid and other current assets 4,584 3,451
--------- ---------
Total current assets 121,878 161,603
Property, plant and equipment, net 12,809 13,006
Goodwill, net 27,720 27,720
Intangibles, net 24,630 24,866
Other assets 13,894 14,541
--------- ---------
Total assets $200,931 $241,736
========= =========
LIABILITIES AND MEMBERS' DEFICIT
Current Liabilities:
Accounts payable $ 16,188 $30,006
Short-term borrowings 2,512 4,075
Current portion of long-term debt 295 322
Accrued liabilities 27,723 39,754
--------- ---------
Total current liabilities 46,718 74,157
Long-term debt 200,303 208,645
Other liabilities 852 1,302
Members'deficit:
Members' deficit (40,490) (36,186)
Accumulated other comprehensive income (6,452) (6,182)
--------- ---------
Total members'deficit (46,942) (42,368)
--------- ---------
Total liabilities and members' deficit $200,931 $241,736
========= =========
See notes to unaudited consolidated financial statements.
3
Remington Products Company, L.L.C.
Consolidated Statements of Operations
(unaudited, in thousands)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Net sales $ 70,000 $ 58,619 $123,805 $110,365
Cost of sales 41,742 41,568 74,089 72,065
--------- --------- --------- ---------
Gross profit 28,258 17,051 49,716 38,300
Selling, general and
administrative expenses 23,254 27,901 42,904 47,838
Amortization of intangibles 119 490 236 975
--------- --------- --------- ---------
Operating income (loss) 4,885 (11,340) 6,576 (10,513)
Interest expense 5,862 6,526 11,935 12,253
Other expense (income) (600) 321 (710) 991
--------- --------- --------- ---------
Income (loss) before income taxes (377) (18,187) (4,649) (23,757)
Benefit for income taxes (139) (4,268) (345) (4,897)
--------- --------- --------- ---------
Net Income (loss) $ (238) $(13,919) $ (4,304) $(18,860)
========= ========= ========= =========
Net loss applicable to common units $ (3,954) $(17,220) $(11,627) $(25,366)
========= ========= ========== =========
See notes to unaudited consolidated financial statements.
4
Remington Products Company, L.L.C.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
Six Months Ended June 30,
-------------------------
2002 2001
--------- --------
Cash flows from operating activities:
Net loss $(4,304) $(18,860)
Adjustment to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation 1,365 1,535
Amortization of intangibles 236 975
Amortization of deferred financing fees 1,028 1,151
Deferred income taxes (936) (4,266)
Foreign currency forward(gain)loss, net (299) 134
-------- --------
(2,910) (19,331)
Changes in assets and liabilities:
Accounts receivable 34,141 36,500
Inventories 9,700 (29,260)
Accounts payable (14,050) (6,373)
Accrued liabilities (12,355) (15,727)
Other, net (2,762) (2,553)
-------- --------
Cash provided by (used in) operating activities 11,764 (36,744)
-------- --------
Cash flows used in investing activities:
Capital expenditures (1,062) (2,932)
-------- --------
Cash flows from financing activities:
Proceeds from sale of Senior Subordinated Notes - 50,000
Repayments under term loan facilities - (18,869)
Repayments under credit facilities (23,099) (33,890)
Borrowings under credit facilities 12,037 41,651
Debt issuance costs and other, net (223) (5,214)
-------- --------
Cash provided by (used in) financing activities (11,285) 33,678
-------- --------
Effect of exchange rate changes on cash 220 (399)
-------- --------
Decrease in cash (363) (6,397)
Cash, beginning of period 4,087 10,342
-------- --------
Cash, end of period $ 3,724 $ 3,945
======== ========
Supplemental cash flow information:
Interest paid $11,076 $10,255
Income taxes paid, net $ 251 $ 191
See notes to unaudited consolidated financial statements.
5
Remington Products Company, L.L.C.
Notes to Unaudited Consolidated Financial Statements
1. Basis of Presentation
The accompanying financial 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. Results of interim periods may not be
indicative of results to be expected for the entire year. These financial
statements do not include all disclosures associated with annual financial
statements and, accordingly, should be read in conjunction with the notes
contained in the Company's audited consolidated financial statements for the
year ended December 31, 2001. Certain prior year amounts have been reclassified
to conform with the current year presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results will differ from those
estimates. Estimates are used for, but not limited to the establishment of the
allowance for doubtful accounts, reserves for sales returns and allowances,
reserves for obsolete inventories, product warranty costs, taxes and
contingencies.
Remington Capital Corp. is a wholly-owned subsidiary of Remington Products
Company, L.L.C. and has no significant operations of its own.
2. Recent Accounting Pronouncement
The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets,
effective January 1, 2002. In accordance with SFAS No. 142, beginning on January
1, 2002, the Company's goodwill and tradenames, which have been deemed to have
indefinite lives, are no longer being amortized and are subject to annual
impairment tests. Other intangible assets will continue to be amortized over
their useful lives. Application by the Company of the nonamortization provision
of SFAS No. 142 resulted in an increase in net earnings of approximately $0.4
million in the second quarter of 2002 and $0.8 million for the first six months
of 2002. The full year impact is expected to result in an increase in net
earnings of approximately $1.5 million. Had the Company applied SFAS No. 142 on
January 1, 2001, net earnings would have increased by approximately $0.4 million
in the second quarter of 2001 and $0.8 million for the first six months of 2001.
The Company's reporting units are also its reportable segments and all of the
Company's goodwill at June 30, 2002 was associated with the North American
segment. As of June 30, 2002 the Company performed the first of the required
annual impairments tests of goodwill and tradenames and no transitional
impairment was present.
The Company is also required to perform an assessment, at least annually,
of the carrying value of goodwill and tradenames. If the carrying value exceeds
the fair value, an impairment loss shall be recognized and reflected within
operating income. There can be no assurance that future impairment tests will
not result in a charge to earnings.
6
In August 2001, SFAS No. 143, Accounting for Asset Retirement Obligations,
was issued. This Statement establishes accounting standards for recognition and
measurement of a liability for an asset retirement obligation and the associated
asset retirement cost. In October 2001, SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, was issued. SFAS No. 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. SFAS No. 144 is effective
for fiscal years beginning after December 15, 2001 and SFAS No. 143 is effective
for fiscal years beginning after June 15, 2002. The adoption of SFAS No. 144 has
had no impact on the Company's financial position and results of operations and
it is the Company's preliminary assessment that the impact, if any, of the
adoption of SFAS No. 143 will not have a material impact on its financial
position and results of operations.
In November 2001, the Emerging Issues Task Force reached consensus on Issue
No. 01-9, Accounting for Consideration Given by a Vendor to a Customer or a
Reseller of the Vendor's Products (EITF 01-9). The Company adopted this
consensus on January 1, 2002. In accordance with the consensus the Company has
reclassified, for all periods presented, certain payments to its customers as a
reduction of sales; primarily the cost of cooperative advertising with its trade
customers. Prior to the adoption of this consensus the Company classified these
payments as selling, general and administrative expenses in its Consolidated
Statement of Operations. Because adoption of EITF 01-9 resulted solely in
reclassification within the Consolidated Statement of Operations, there has been
no impact on the Company's financial condition, operating income or net earnings
for any of the periods presented.
In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and
64, Amendment of FASB Statement No. 13, and Technical Corrections" was issued.
This statement provides guidance on the classification of gains and losses from
the extinguishment of debt and on the accounting for certain specified lease
transactions. In June 2002, SFAS No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" was issued. This statement provides guidance on the
recognition and measurement of liabilities associated with disposal activities.
The adoption of these statements will not have a material impact on the
Company's consolidated financial position, results of operations or cash flows.
3. Inventories
Inventories were comprised of the following (in thousands):
June 30, December 31,
2001 2002
-------- ------------
Finished goods $63,485 $71,308
Work in process and raw materials 3,703 3,908
------- -------
$67,188 $75,216
======= =======
7
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.
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, would not have a
material adverse effect on the Company's consolidated financial position or
results of operations.
On June 18, 2002, the Court of Justice of the European Communities (the
"ECJ" rendered its decision in Koninklijke Philips Electronics v Remington
Consumer Products Ltd. The case had been referred to the ECJ by the U.K. Court
of Appeal following a provisional judgment by that court in favor of Remington
in May 1999. In its decision, which will govern the trademark laws of each of
the fifteen member countries of the European Union, the ECJ ruled in conformity
with the arguments that had been advanced by the Company to the effect that a
shape consisting exclusively of the shape of a product is unregistrable as a
trademark (or is subject to being declared invalid if it had been registered as
a trademark)if it is established that the essential functional features of that
shape are attributable only to the technical result. The ECJ further ruled that
the inability to register such a shape as a trademark (or the trademark being
subject to being declared invalid) cannot be overcome by establishing that there
are other shapes which allow the same technical result to be obtained.
Management of the Company believes that the decision of the ECJ will result in
the affirmation by the U.K. Court of Appeal of its provisional decision,
although no assurance can be given in this regard.
6. Comprehensive Income
Comprehensive income consists of the following (in thousands):
Three Months Ended June 30, Six Months ended June 30,
--------------------------- -------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Net income (loss) $ (238) $(13,919) $(4,304) $(18,860)
Other comprehensive income:
Foreign currency translation adjustments 916 274 907 (1,943)
Net unrealized hedging gain (loss) (1,448) 16 (1,177) 1,695
------- --------- -------- ---------
Comprehensive income (loss) $ (770) $(13,629) $(4,574) $(19,108)
======= ========= ======== =========
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The Company is a leading consumer products company focusing on the
development and marketing of personal care products. The Company designs and
distributes electric shavers and accessories, grooming products, hair care
appliances, wellness products and other small electrical consumer products. The
Company distributes its products through three operating segments which are
comprised of 1) the North America 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 to
similar customers through an international network of subsidiaries and
distributors, and 3) the U.S. Service Stores segment consisting of Company-owned
and operated service stores located throughout the United States.
8
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 approximately 45% of its annual net sales in the
fourth quarter of each year while the first quarter of each year is generally
the Company's weakest quarter. As a result of this seasonality, the Company's
inventory and working capital needs fluctuate substantially during the year.
Results of Operations
The following table sets forth the Company's unaudited consolidated
statements of operations, including net sales and operating income by its North
American, International and U.S. Service Stores operating segments for the three
and six months ended June 30, 2002 and 2001. In accordance with new accounting
profession guidelines, net sales for both periods reflect reductions for certain
costs which have been reclassified, primarily the cost of cooperative
advertising with trade customers which were previously included in selling,
general and administrative expenses.
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------ -----------------------------------
2002 2001 2002 2001
-------------- ---------------- --------------- ---------------
$ % $ % $ % $ %
--- --- --- --- --- --- --- ---
Net Sales:
North America $46.0 65.7 $39.8 67.9 $76.6 61.9 $67.8 61.4
International 16.7 23.9 10.8 18.4 33.5 27.0 27.6 25.0
U.S. Service Stores 7.3 10.4 8.0 13.7 13.7 11.1 15.0 13.6
------ ------ ------- ------ ------ ------ ------ ------
70.0 100.0 58.6 100.0 123.8 100.0 110.4 100.0
Cost of sales 41.7 59.6 41.5 70.8 74.1 59.9 72.1 65.3
------ ------ ------- ------ ------ ------ ------ ------
Gross profit 28.3 40.4 17.1 29.2 49.7 40.1 38.3 34.7
Selling, general and
administrative expenses 23.3 33.3 27.9 47.6 42.9 34.7 47.8 43.3
Amortization of intangibles 0.1 0.1 0.5 0.9 0.2 0.1 1.0 0.9
------ ------ ------- ------ ------ ------ ------ ------
Operating income (loss):
North America 6.3 9.0 4.0 6.8 9.5 7.7 6.3 5.7
International (0.5) (0.7) (13.7) (23.4) (0.8) (0.6) (13.8) (12.5)
U.S. Service Stores (0.1) (0.1) (0.3) (0.5) (0.5) (0.4) (0.5) (0.5)
Depreciation and amortization (0.8) (1.2) (1.3) (2.2) (1.6) (1.4) (2.5) ( 2.2)
------ ------ ------- ------ ------ ------ ------ ------
Total operating income (loss) 4.9 7.0 (11.3) (19.3) 6.6 5.3 (10.5) (9.5)
Interest expense 5.9 8.4 6.5 11.1 11.9 9.6 12.3 11.1
Other expense (0.6) (0.9) 0.4 0.7 (0.7) (0.6) 1.0 0.9
------ ------ ------- ------ ------ ------- ------- ------
Income (loss) before income
taxes (0.4) (0.5) (18.2) (31.1) (4.6) (3.7) (23.8) (21.5)
Benefit for income taxes (0.2) (0.3) (4.3) (7.3) (0.3) (0.2) (4.9) (4.4)
------ ------ ------- ------ ------ ------ ------- ------
Net income (loss) $(0.2) (0.2) $(13.9) (23.8) $(4.3) (3.5) $(18.9) (17.1)
====== ====== ======= ====== ====== ====== ======= ======
Second Quarter Ended June 30, 2002 Versus June 30, 2001
Net Sales. Net sales for the quarter ended June 30, 2002 were $70.0
million, an increase of 19% compared to $58.6 million for the quarter ended June
30, 2001. Higher net sales in the North American and International segments were
partially offset by decreases in the Company's U.S. Service Stores segment.
Excluding the positive currency impact on the International segment, net sales
on a worldwide basis increased 18% in the second quarter of 2002 compared to the
second quarter of 2001.
9
Net sales in North America were $46.0 million in the second quarter of
2002, an increase of 16% compared to $39.8 million in the second quarter of
2001. The increase was the result of sales growth of the shaver, grooming and
haircare products resulting from a combination of new product introductions
occurring within the last year and increased distribution, primarily at existing
customers.
International net sales increased $5.9 million to $16.7 million in the
second quarter of 2002 compared with $10.8 million in the second quarter of
2001. Excluding the positive impact of currencies versus the prior year, second
quarter net sales in the International segment increased $4.9 million. This
increase was the result of higher sales in the U.K. as certain logistics and
other issues that negatively impacted the second quarter of 2001 did not reoccur
in 2002.
Net sales through the Company's U.S. Service Stores decreased 9% to $7.3
million in the second quarter of 2002 from $8.0 million in the second quarter of
2001. The decrease was primarily due to 11 fewer stores on average operating
during the comparable periods. In addition, same store sales decreased 1.6%
versus the same period a year ago.
Gross Profit. Gross profit was $28.3 million, or 40.4% of net sales in the
second quarter of 2002 compared to $17.1 million, or 29.2% of net sales in the
second quarter of 2001. The increase in percentage over the prior year was due
to the recognition of $10.7 million of unexpected costs primarily in the U.K.
during the second quarter of 2001. In addition, during the second quarter of
2002, the negative impact of the sale of certain discontinued wellness and
haircare products was offset by the positive impact of increased sales of higher
margin shaver and grooming products.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $23.3 million or 33.3% of net sales in the second
quarter of 2002, compared to $27.9 million or 47.6% of net sales in 2001. The
decrease in expenses in the second quarter of 2002 was impacted by $2.3 million
of unexpected costs recognized in the second quarter of 2001 which did not
reoccur in 2002. Also contributing to the decrease in selling, general and
administrative expenses were lower distribution costs in 2002 resulting from
process improvement initiatives, and lower expenditures for advertising in the
Company's haircare and wellness category and lower administrative expenses, both
the result of timing.
Interest Expense. Interest expense decreased to $5.9 million for the second
quarter of 2002 compared to interest expense of $6.5 million in the second
quarter of 2001. Lower average borrowings during the quarter was the primary
reason for the decline in interest expense in the second quarter of 2002.
Income Tax Benefit. The net benefit for income taxes was $0.2 million for
the second quarter of 2002 compared to a $4.3 million net benefit in the second
quarter of 2001. The decrease in the benefit was the result of smaller pretax
losses in the International segment for the second quarter of 2002.
Six Months Ended June 30, 2002 Versus June 30, 2001
Net Sales. Net sales for the six months ended June 30, 2002 were $123.8
million, an increase of 12% compared to $110.4 million for the six months ended
June 30, 2001. The increase in sales was generated from the North American and
International segments and was partially offset by a decrease in sales in the
U.S. Service Stores segment. A small positive impact of foreign currency
translation had no significant impact on the Company's net sales for the first
six months of 2002.
Net sales in North America were $76.6 million for the first six months of
2002, an increase of 13% compared to $67.8 million for the first six months of
2001. The increase in sales was the result of new product introductions within
the last year and increased distribution, primarily at existing customers.
Higher sales in the shaver and grooming category were partially offset by a
decrease in the haircare and wellness category as increased haircare sales were
offset by significantly lower wellness sales.
10
International net sales were $33.5 million for the first six months of
2002, an increase of $5.9 million compared to $27.6 million for the first six
months of 2001. The increase in net sales in the first six months of 2002
compared to the first six months of 2001 was due almost entirely to certain
logistics and other issues that negatively impacted the U.K. during the second
quarter of 2001.
Net sales in the U.S. Service Stores were $13.7 million for the first six
months of 2002, a 9% decrease compared to $15.0 million for the first six months
of 2001. The decrease was in part the result of 10 fewer stores on average
operating during the first six months of 2002 compared to the first six months
of 2001. Also contributing to the decline was a 1.2% decrease in same store
sales versus the same period a year ago.
Gross Profit. Gross profit was $49.7 million, or 40.1% of net sales for the
first six months of 2002 compared to $38.3 million, or 34.7% of net sales for
the first six months of 2001. The increase in gross profit was due to the impact
on the prior year of $10.7 million of unexpected costs recognized primarily in
the U.K. during the second quarter of 2001. Also impacting gross profit during
the first six months of 2002 was the positive impact of an increase in sales of
higher margin shaver, grooming and haircare products which was partially offset
by the sale of certain discontinued products within the Company's haircare and
wellness category.
Selling General and Administrative Expenses. Selling, general and
administrative expenses were $42.9 million or 34.7% of net sales for the first
six months of 2002, compared to $47.8 million or 43.3% of net sales in 2001. The
decline in operating expenses was due to $2.3 million of unexpected costs
recognized in the prior year's second quarter, lower distribution costs and
lower advertising and administrative costs as a result of timing.
Interest Expense. Interest expense decreased to $11.9 million for the first
six months of 2002 compared to interest expense of $12.3 million for the first
six months of 2001. The decline was the result of lower average borrowings which
were partially offset by higher average interest rates during the six months
ended June 30, 2002 resulting from the sale of $50 million of additional 11%
senior subordinated notes in April 2001, the net proceeds of which were used to
repay existing lower rate term loans and revolving credit borrowings.
Income Tax Benefit. The net benefit for income taxes during the first six
months of 2002 was $0.3 million compared with a $4.9 million benefit in 2001.
The decline in benefit was the result of a lower pre-tax loss in 2002 in the
Company's International segment, primarily in the Company's UK operations.
Liquidity and Capital Resources
Net cash provided by operating activities for the first six months of 2002
was $11.8 million versus a use of cash of $36.7 million during the first six
months of 2001. A lower net loss combined with significantly lower inventories
were the primary reasons for the improvement in cash flows from operations.
The Company's operations are not capital intensive. The Company's capital
expenditures totaled $1.1 million and $2.9 million during the first six months
of 2002 and 2001, respectively. Total capital expenditures for 2002 are
anticipated to be approximately $4 million, in line with prior years.
The Company's primary sources of liquidity are funds generated from
operations and borrowings under its $110.0 million asset based revolving credit
facility (the "Facility"). Borrowings under the Facility are subject to a
borrowing base of 85% of eligible receivables and 60% of eligible inventories.
The Facility matures on March 31, 2006.
11
As of June 30, 2002, the Company was in compliance with all covenants under
the Facility and availability under the Facility was approximately $39 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.
Critical Accounting Policies
As disclosed in Note 1 to the "Notes to the Consolidated Financial
Statements", the preparation of financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Future events and their effects
cannot be determined with absolute certainty. Therefore, the determination of
estimates requires the exercise of judgment. Actual results inevitably will
differ from those estimates, and such differences may be material to the
Consolidated Financial Statements. The following accounting policies, which were
disclosed in the Company's report on Form 10-K and for which there has been no
change in their application as of June 30, 2002, affect the Company's more
significant estimates used in the preparation of its consolidated financial
statements:
Accruals for sales returns, warranty reserves, bad debts and other
allowances are estimated at the time of sale based upon the Company's past
experience and other known factors. If future actual results differ from past
experience additional accruals may be required.
The Company's inventory is valued at the lower of cost or estimated market
value. The Company regularly reviews inventory quantities on hand and
writes-down inventory determined to be slow moving or obsolete based upon
expected future demand. If demand does not meet management's expectations,
additional inventory write-downs may be required.
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, 2001.
12
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amendment No. 3, dated as of July 1, 2002 to the Credit and Guarantee
Agreement by and among Remington Products Company, L.L.C., Fleet
Securities, Congress Financial Corporation and Fleet Capital
Corporation.
99.1 Certification of the Chairman, Chief Executive Officer and President
and the Executive Vice President, Chief Financial and Administrative
Officer.
(b) Reports on Form 8-K
During the quarter ended June 30, 2002, the Registrant did not file any
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.
REMINGTON PRODUCTS COMPANY, L.L.C.
By: /s/ Kris J. Kelley
---------------------------------------------
Kris J. Kelley, Vice President and Controller
Date: August 13, 2002
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