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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 PERIOD ENDED SEPTEMBER 30, 2002
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 333-66221
-------------------------
R.A.B. HOLDINGS, INC. R.A.B. ENTERPRISES, INC.
- ------------------------------------------------------------- -----------------------------------------------------------
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
DELAWARE DELAWARE
- ------------------------------------------------------------- ------------------------------------------------------------
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
13-3893246 13-3988873
- ------------------------------------------------------------- ------------------------------------------------------------
(I.R.S. Employer identification No.) (I.R.S. Employer identification No.)
444 Madison Avenue, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 688-4500
---------------
N/A
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(Former name, former address and former fiscal year, if
changed since last report)
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
--- ---
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
--------------------------------------
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
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TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30, 2002 (Unaudited)
and March 31, 2002 1
Condensed Consolidated Statements of Operations - Three months ended
September 30, 2002 and 2001 (Unaudited) 2
Condensed Consolidated Statements of Operations - Six months ended
September 30, 2002 and 2001 (Unaudited) 3
Condensed Consolidated Statements of Cash Flows - Six months ended
September 30, 2002 and 2001 (Unaudited) 4
Notes to Condensed Consolidated Financial Statements (Unaudited) 5-10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11-16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Item 4. Controls and Procedures 17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19-22
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except for share and per share data)
- --------------------------------------------------------------------------------
September 30, 2002 March 31, 2002
----------------------- -----------------------
Holdings Enterprises Holdings Enterprises
-------- ----------- -------- -----------
ASSETS (Unaudited)
Current assets:
Cash $ 2,282 $ 2,264 $ 4,526 $ 4,456
Accounts receivable, net 27,291 27,291 38,058 38,058
Inventories 61,244 61,244 58,353 58,353
Other current assets 9,906 14,911 11,649 15,889
--------- --------- --------- ---------
Total current assets 100,723 105,710 112,586 116,756
--------- --------- --------- ---------
Noncurrent assets:
Other assets 4,785 3,572 5,134 3,433
Property, plant and equipment, net 27,291 27,291 29,486 29,486
Intangibles, net 89,972 89,972 114,245 114,245
--------- --------- --------- ---------
Total assets $ 222,771 $ 226,545 $ 261,451 $ 263,920
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,179 $ 1,179 $ 2,767 $ 2,767
Accounts payable 37,880 37,880 40,768 40,768
Other current liabilities 21,895 22,358 22,945 22,809
--------- --------- --------- ---------
Total current liabilities 60,954 61,417 66,480 66,344
--------- --------- --------- ---------
Noncurrent liabilities:
Long-term debt 166,577 142,461 165,825 140,825
Deferred income taxes 9,434 9,434 7,640 7,640
Other liabilities 16,195 16,195 16,253 16,253
--------- --------- --------- ---------
Total noncurrent liabilities 192,206 168,090 189,718 164,718
--------- --------- --------- ---------
Stockholders' (deficit) equity:
Preferred stock, $500 par value, 100,000 shares authorized,
24,875 shares of Series A issued and outstanding 12,344 -- 12,344 --
1,000 shares of Series B issued and outstanding 500 -- 500 --
Common stock, $.01 and $1.00 par value, 1,000,000 shares
and 200 shares authorized, issued 105,100 shares and
200 shares 1 -- 1 --
Notes receivable from stock sales (112) -- (195) --
Additional paid-in capital 2,635 39,482 373 39,482
Retained earnings (deficit) (44,178) (40,870) (6,197) (5,052)
Accumulated other comprehensive loss (1,574) (1,574) (1,572) (1,572)
--------- --------- --------- ---------
(30,384) (2,962) 5,254 32,858
Less common stock in treasury - 5,100 shares and
600 shares 5 -- 1 --
--------- --------- --------- ---------
Total stockholders' (deficit) equity (30,389) (2,962) 5,253 32,858
--------- --------- --------- ---------
Total liabilities and stockholders' (deficit) equity $ 222,771 $ 226,545 $ 261,451 $ 263,920
========= ========= ========= =========
See notes to Condensed Consolidated Financial Statements
-1-
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
- --------------------------------------------------------------------------------
Three Months Ended Three Months Ended
September 30, 2002 September 30, 2001
----------------------- -----------------------
Holdings Enterprises Holdings Enterprises
-------- ----------- -------- -----------
(Unaudited) (Unaudited)
Revenues $ 119,304 $ 119,304 $ 133,450 $ 133,450
Costs and expenses:
Cost of sales 93,083 93,083 100,286 100,286
Selling 10,077 10,077 12,740 12,740
Distribution and warehousing 11,386 11,386 13,291 13,291
General and administrative 6,052 6,039 7,140 7,129
Amortization of intangibles -- -- 1,051 1,051
--------- --------- --------- ---------
Total costs and expenses 120,598 120,585 134,508 134,497
--------- --------- --------- ---------
Operating loss (1,294) (1,281) (1,058) (1,047)
Interest expense, net 4,264 3,720 4,858 4,045
--------- --------- --------- ---------
Loss before benefit for income taxes (5,558) (5,001) (5,916) (5,092)
Benefit for income taxes -- -- (2,288) (1,963)
--------- --------- --------- ---------
Net loss $ (5,558) $ (5,001) $ (3,628) $ (3,129)
========= ========= ========= =========
See notes to Condensed Consolidated Financial Statements
-2-
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
- --------------------------------------------------------------------------------
Six Months Ended Six Months Ended
September 30, 2002 September 30, 2001
----------------------- -----------------------
Holdings Enterprises Holdings Enterprises
-------- ----------- -------- -----------
(Unaudited) (Unaudited)
Revenues $ 250,526 $ 250,526 $ 272,755 $ 272,755
Costs and expenses:
Cost of sales 195,407 195,407 203,590 203,590
Selling 20,135 20,135 27,261 27,261
Distribution and warehousing 23,085 23,085 27,605 27,605
General and administrative 12,573 12,553 13,795 13,781
Amortization of intangibles 43 43 2,110 2,110
--------- --------- --------- ---------
Total costs and expenses 251,243 251,223 274,361 274,347
--------- --------- --------- ---------
Operating loss (717) (697) (1,606) (1,592)
Interest expense, net 8,436 7,260 9,828 8,155
--------- --------- --------- ---------
Loss before provision (benefit) for income taxes (9,153) (7,957) (11,434) (9,747)
Provision (benefit) for income taxes 4,098 3,631 (4,265) (3,598)
--------- --------- --------- ---------
Loss before extraordinary item and cumulative
effect of change in accounting principle (13,251) (11,588) (7,169) (6,149)
Extraordinary loss on modification of debt (500) -- -- --
--------- --------- --------- ---------
Loss before cumulative effect of change in
accounting principle (13,751) (11,588) (7,169) (6,149)
Cumulative effect of change in accounting principle (24,230) (24,230) -- --
--------- --------- --------- ---------
Net loss $ 37,981 $ (35,818) $ (7,169) $ (6,149)
========= ========= ========= =========
See notes to Condensed Consolidated Financial Statements
-3-
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- --------------------------------------------------------------------------------
Six Months Ended Six Months Ended
September 30, 2002 September 30, 2001
----------------------- -----------------------
Holdings Enterprises Holdings Enterprises
-------- ----------- -------- -----------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $ (37,981) $ (35,818) $ (7,169) $ (6,149)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Extraordinary loss on modification of debt 500 -- -- --
Cumulative effect of change in accounting principle 24,230 24,230 -- --
Depreciation and amortization 3,145 2,958 5,252 5,203
Deferred income taxes 4,098 3,631 -- --
Changes in assets and liabilities:
Accounts receivable 10,767 10,767 14,192 14,192
Inventories (2,891) (2,891) 1,716 1,716
Accounts payable (2,888) (2,888) 4,445 4,445
Other assets and liabilities (380) (1,906) 2,274 2,880
--------- --------- --------- ---------
Net cash (used in) provided by operating activities (1,400) (1,917) 20,710 22,287
--------- --------- --------- ---------
Cash flows from investing activities:
Acquisitions of plant and equipment (323) (323) (1,688) (1,688)
--------- --------- --------- ---------
Net cash used in investing activities (323) (323) (1,688) (1,688)
--------- --------- --------- ---------
Cash flows from financing activities:
Payment of debt modification costs (557) -- -- --
Payments from Interest Escrow Account -- -- 1,625 --
Borrowings (repayments) under Credit Agreement 48 48 (27,359) (27,359)
Proceeds from issuance and
(repurchase of) common stock (12) -- (40) --
--------- --------- --------- ---------
Net cash (used in) provided by financing activities (521) 48 (25,774) (27,359)
--------- --------- --------- ---------
Net decrease in cash (2,244) (2,192) (6,752) (6,760)
Cash, beginning of period 4,526 4,456 9,522 9,520
--------- --------- --------- ---------
Cash, end of period $ 2,282 $ 2,264 $ 2,770 $ 2,760
========= ========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 6,566 $ 6,435 $ 9,155 $ 7,530
Income taxes $ 28 $ 28 $ 107 $ 107
Non-cash financing activities:
Additional indebtedness due to deferred interest
payment in connection with debt modification $ 1,495 $ -- $ -- $ --
See notes to Condensed Consolidated Financial Statements
-4-
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE A - Basis of Presentation
The condensed consolidated financial statements include the accounts of R.A.B.
Holdings, Inc. ("Holdings") and its wholly-owned subsidiary, R.A.B. Enterprises,
Inc. ("Enterprises") and its wholly-owned subsidiaries (collectively, the
"Company"). Holdings is a holding company with no substantial assets or
operations other than its investment in Enterprises. Enterprises is a holding
company with no substantial assets or operations other than its investments in
Millbrook Distribution Services Inc. ("Millbrook") and The B. Manischewitz
Company, LLC ("Manischewitz").
These condensed consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements as of March 31, 2002 and
2001 contained in the Company's Form 10-K filed with the Securities and Exchange
Commission. The information related to March 31, 2002 contained herein has been
derived from the Company's audited consolidated financial statements. Certain
reclassifications have been made in the prior year financial statements to
conform with the current year presentation.
All significant intercompany transactions and balances are eliminated in
consolidation. The results of operations for any interim period are not
necessarily indicative of the results to be expected for the full fiscal year.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company as of September 30, 2002, and the results of
operations and cash flows for the periods ended September 30, 2002 and 2001.
NOTE B - Inventories
Inventories are valued at the lower of cost or market. Cost is determined by the
last-in, first-out ("LIFO") method. Inventories consisted of the following (in
thousands):
September 30, March 31,
2002 2002
----------------- -----------------
Raw materials $ 2,238 $ 1,821
Finished goods 59,006 56,532
----------------- -----------------
$ 61,244 $ 58,353
================= =================
NOTE C - Intangibles
Effective April 1, 2002, the Company adopted SFAS No. 142 "Goodwill and Other
Intangible Assets". Under this standard, goodwill and intangibles with
indefinite useful lives, including trademarks and tradenames are no longer
systematically amortized. Instead, they are reviewed for impairment and written
down and charged to results of operations when their carrying amount exceeds
their estimated fair values. Amortization expense for the six month period ended
September 30, 2002 was approximately $43,000 representing the amortization of
the remaining net book value of identified intangibles still required to be
amortized under SFAS No. 142.
-5-
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
- --------------------------------------------------------------------------------
NOTE C - Intangibles (Continued)
With the assistance of an independent professional appraisal firm, the Company
performed impairment tests on the excess of cost over net assets acquired
("goodwill") and intangibles. The previous method for determining impairment
prescribed by SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," utilized an undiscounted cash flow
approach for the impairment assessment, while SFAS No. 142 utilizes a fair value
approach. The Company has two reporting units (Millbrook and Manischewitz) with
goodwill and intangibles, which also represent the Company's reporting segments.
Goodwill and intangibles were reviewed for impairment at the level of each
reporting unit. This review indicated that the goodwill recorded at the
Company's Manischewitz subsidiary was impaired as the carrying value of the
subsidiary was in excess of its estimated fair value. In determining the amount
of the goodwill writedown, SFAS No. 142 requires an allocation of the estimated
fair value to Manischewitz' net assets. This allocation resulted in a
significant increase in the value of the subsidiary's trademarks and tradenames,
which under the provisions of SFAS No. 142 may not be written up from their
historical carrying value. Since the allocation process utilizes the increased
value of the trademarks and tradenames in arriving at the remaining amount of
goodwill to be compared to the historical carrying value of goodwill, the amount
of the goodwill writedown is increased. As a result, the Company recorded a
$24.2 million non-cash charge as a cumulative effect of a change in accounting
principle for the writedown of goodwill to its estimated fair value during the
six month period ended September 30, 2002. The goodwill writedown was not
deductible for income taxes and, as a result, no income tax benefit was recorded
in relation to the charge.
The cumulative impact of adopting this change in accounting principle is
reflected in the accompanying statement of operations, but does not affect the
Company's operations and has no impact on its cash flows. The provisions of SFAS
No. 142 requires an annual assessment of goodwill and intangibles, which the
Company will perform to determine any possible future impairment.
The effect of adopting SFAS No. 142 on net loss for the six month periods ended
September 30, 2002 and 2001 are as follows (in thousands):
2002 2001
----------------------- -----------------------
Holdings Enterprises Holdings Enterprises
-------- ----------- -------- -----------
Net Loss $ (37,981) $ (35,818) $ (7,169) $ (6,149)
Add: cumulative effect of change in
accounting principle 24,230 24,230 -- --
--------- --------- --------- ---------
Net Loss, excluding cumulative effect of
change in accounting principle (13,751) (11,588) (7,169) (6,149)
Add: amortization of indefinite-lived
intangible assets, net of tax -- -- 1,196 1,196
Add: valuation allowances recorded as a
result of adoption of SFAS No. 142 7,899 6,843 -- --
--------- --------- --------- ---------
Net Loss, excluding cumulative effect of
change in accounting principle and
valuation allowances in 2002 and
amortization of indefinite-lived
intangible assets in 2001 $ (5,852) $ (4,745) $ (5,973) $ (4,953)
========= ========= ========= =========
-6-
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
- --------------------------------------------------------------------------------
NOTE C - Intangibles (Continued)
The changes in the carrying amount of goodwill and intangible assets during the
six month period ended September 30, 2002, including the effect of adopting SFAS
No. 142 are as follows (in thousands):
Millbrook Manischewitz
--------- ----------------------
Intangible
Goodwill Goodwill Assets Total
--------- --------- ---------- ---------
Balance at March 31, 2002, net of
accumulated amortization $ 15,103 $ 59,137 $ 40,005 $ 114,245
Less: goodwill writedown recognized as a
cumulative effect of change in
accounting principle -- 24,230 -- 24,230
Less: intangible amortization -- -- 43 43
--------- --------- --------- ---------
Balance at September 30, 2002, net of
accumulated amortization $ 15,103 $ 34,907 $ 39,962 $ 89,972
========= ========= ========= =========
At September 30, 2002, Manischewitz' intangible assets were comprised of
trademarks and tradenames.
NOTE D - Related Party Transactions
For each of the six month periods ended September 30, 2002 and 2001, the Company
paid $1,020,000 and $1,005,000, respectively to P&E Properties, Inc., an
affiliated entity of which the Company's Chairman and Chief Executive Officer is
the sole shareholder, for management fees, services provided and expenses
incurred on its behalf.
NOTE E - Income Taxes
The provision (benefit) for income taxes consisted of the following (in
thousands):
2002 2001
----------------------- -----------------------
Holdings Enterprises Holdings Enterprises
-------- ----------- -------- -----------
Income Tax Benefit for the six months
ended September 30, 2002 $ (3,801) $ (3,212) $ (4,265) $ (3,598)
Valuation Allowances established pursuant
to the adoption of SFAS No. 142:
Valuation Allowance related to continuing
operations for the six months ended
September 30, 2002 3,801 3,212 -- --
Additional Valuation Allowance resulting
from deferred tax assets in excess
of deferred tax liabilities, excluding
identified intangibles 4,098 3,631 -- --
--------- --------- --------- ---------
Provision (benefit) for income taxes $ 4,098 $ 3,631 $ (4,265) $ (3,598)
========= ========= ========= =========
-7-
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
- --------------------------------------------------------------------------------
NOTE E - Income Taxes (Continued)
SFAS No. 109, "Accounting for Income Taxes", requires that deferred tax assets
be reduced by a valuation allowance, if based on available evidence, it is more
likely than not that the deferred tax assets will not be realized. Under
generally accepted accounting principles, available evidence includes the
reversal of existing taxable temporary differences. As of March 31, 2002,
Holdings and Enterprises had net deferred tax liabilities of approximately $5.3
million and $5.8 million, respectively; each including a deferred tax liability
for taxable temporary differences caused by different amortization periods for
identified intangibles of approximately $9.4 million.
With the adoption of SFAS No. 142 in the first quarter of fiscal 2003 (See Note
C), the Company can no longer amortize tax deductible goodwill and
indefinite-lived intangible assets for financial reporting purposes. Therefore,
the deferred tax liability related to the taxable temporary differences caused
by different amortization periods for identified intangibles will not reverse
unless the underlying assets are sold or an impairment is recognized for tax
purposes. Without this deferred tax liability, Holdings and Enterprises had net
deferred tax assets of approximately $4.1 million and $3.6 million, respectively
as of March 31, 2002. As the Company is currently in a net operating loss
position, Holdings and Enterprises recorded valuation allowances to offset their
respective first and second quarter income tax benefits from operations as well
as the amount by which their deferred tax assets exceeded their deferred tax
liabilities, excluding the deferred tax liability related to identified
intangibles as of March 31, 2002. Further, since SFAS No. 142 does not provide
for the valuation allowances that resulted from its adoption to be recorded as a
component of the cumulative effect of a change in accounting principle, they are
reflected as a non-cash provision for income taxes in Holdings' and Enterprises'
loss from continuing operations.
NOTE F - Comprehensive Loss
For the three and six month periods ended September 30, 2002 the comprehensive
loss was ($5,563,000) and ($37,983,000) for Holdings and ($5,006,000) and
($35,820,000) for Enterprises as compared to ($3,598,000) and ($7,114,000) for
Holdings and ($3,099,000) and ($6,094,000) for Enterprises for the three and six
month periods ended September 30, 2001.
-8-
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
- --------------------------------------------------------------------------------
NOTE G - Segment Reporting
The following information is presented in accordance with SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", which
established standards for reporting information about operating segments in the
Company's interim financial statements.
For the three month
period ended September 30, 2002 2001
(in thousands) ----------------------- -----------------------
Holdings Enterprises Holdings Enterprises
-------- ----------- -------- -----------
Revenues
Millbrook ............................................. $ 110,859 $ 110,859 $ 125,074 $ 125,074
Manischewitz .......................................... 10,184 10,184 10,095 10,095
--------- --------- --------- ---------
Total segment revenues ............................... 121,043 121,043 135,169 135,169
Corporate items, principally
the elimination of
intercompany sales ................................... (1,739) (1,739) (1,719) (1,719)
--------- --------- --------- ---------
$ 119,304 $ 119,304 $ 133,450 $ 133,450
========= ========= ========= =========
Operating income
Millbrook ............................................. $ 473 $ 473 $ 1,153 $ 1,153
Manischewitz .......................................... (222) (222) 1,077 1,077
--------- --------- --------- ---------
Total segment operating
income .............................................. 251 251 2,230 2,230
Corporate items and
eliminations ........................................ (1,545) (1,532) (3,288) (3,277)
--------- --------- --------- ---------
$ (1,294) $ (1,281) $ (1,058) $ (1,047)
========= ========= ========= =========
For the six month
period ended September 30, 2002 2001
(in thousands) ----------------------- -----------------------
Holdings Enterprises Holdings Enterprises
-------- ----------- -------- -----------
Revenues
Millbrook ............................................. $ 235,648 $ 235,648 $ 258,315 $ 258,315
Manischewitz .......................................... 17,757 17,757 17,492 17,492
--------- --------- --------- ---------
Total segment revenues ............................... 253,405 253,405 275,807 275,807
Corporate items, principally
the elimination of
intercompany sales ................................... (2,879) (2,879) (3,052) (3,052)
--------- --------- --------- ---------
$ 250,526 $ 250,526 $ 272,755 $ 272,755
========= ========= ========= =========
Operating income
Millbrook ............................................. $ 2,625 $ 2,625 $ 2,813 $ 2,813
Manischewitz .......................................... 57 57 1,852 1,852
--------- --------- --------- ---------
Total segment operating
income .............................................. 2,682 2,682 4,665 4,665
Corporate items and
eliminations ......................................... (3,399) (3,379) (6,271) (6,257)
--------- --------- --------- ---------
$ (717) $ (697) $ (1,606) $ (1,592)
========= ========= ========= =========
-9-
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
(Unaudited)
- --------------------------------------------------------------------------------
NOTE H - Modification of Debt
Effective May 1, 2002, Holdings amended the Indenture underlying 92% ($23.0
million) of its 13% Notes outstanding. The amendment (i) reduced the interest
rate to 6% per annum, (ii) extended their maturity date from May 1, 2008 to May
1, 2010 and (iii) increased the aggregate outstanding principal by approximately
$1.5 million, representing the deferred May 2002 interest payment. Holders of
the amended Notes received warrants granting them the right to purchase up to
approximately 5% of the Company's common stock. The Company, at its option, may
defer the payment of cash interest on the 6% Notes for ten semi-annual interest
payment dates through May 1, 2007. The changes contained in the amendment
constitute a material modification of the Indenture requiring the historical
deferred debt issuance costs to be written off. Accordingly, debt issuance costs
of $0.5 million were written off and reported as an extraordinary item in the
accompanying statement of operations during the six month period ended September
30, 2002. The income tax benefit of $0.2 million related to the extraordinary
item was offset by a valuation allowance required by the adoption of SFAS No.
142, as described in Note E - Income Taxes. On November 1, 2002, the Company
elected to defer the cash payment of interest on its 6% Notes.
NOTE I - New Accounting Pronouncements
SFAS No. 143 "Accounting for Asset Retirement Obligations" was issued in August
2001 and is effective for fiscal years beginning after June 15, 2001. SFAS No.
143 establishes accounting standards for recognition and measurement of a
liability for an asset retirement obligation and the associated asset retirement
cost. SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived
Assets" was issued in October 2001 and is effective for fiscal years beginning
after December 15, 2001. SFAS No. 144 addresses financial accounting and
reporting for the impairment of long-lived assets. The Company adopted SFAS No.
143 and 144 effective April 1, 2002. The adoption of SFAS No. 143 and 144 did
not have a material impact on the Company's financial position or overall trends
in results of operations.
SFAS No. 145 "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections" was issued in April 2002 and is
effective for fiscal years beginning after May 15, 2002. SFAS No. 145 eliminates
the requirement to classify gains and losses from the extinguishment of debt as
extraordinary, requires certain lease modifications to be treated the same as a
sale-leaseback transaction and makes other non-substantive technical corrections
to existing pronouncements. The Company will adopt SFAS No. 145 when it becomes
effective.
SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities"
was issued in June 2002 and is effective prospectively for exit or disposal
activities initiated after December 31, 2002, with earlier adoption encouraged.
SFAS No. 146 requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. Examples of costs covered by the
standard include lease termination costs and certain employee severance costs
that are associated with a restructuring, discontinued operations, plant
closing, or other exit or disposal activities. As the provisions of SFAS No. 146
are required to be applied prospectively after the adoption date, management
cannot determine the potential effects that adoption of SFAS No. 146 will have
on the Company's financial statements.
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Revenues. Revenues for the three month period ended September 30, 2002 decreased
$14.1 million or 10.6% to $119.3 million as compared to $133.4 million for the
three month period ended September 30, 2001. Revenues for the six month period
ended September 30, 2002 decreased $22.2 million or 8.1% to $250.5 million as
compared to $272.7 million for the six month period ended September 30, 2001.
Revenues include:
(i) Millbrook's revenues of $110.9 million and $235.6 million for
the three and six month periods ended September 30, 2002 as
compared to $125.1 million and $258.3 million for the three
and six month periods ended September 30, 2001;
(ii) Manischewitz' revenues of $10.2 million and $17.8 million for
the three and six month periods ended September 30, 2002 as
compared to $10.1 million and $17.5 million for the three and
six month periods ended September 30, 2001; and
(iii) intersegment sales, which are eliminated in consolidation, of
($1.8) million and ($2.9) million for the three and six month
periods ended September 30, 2002 as compared to ($1.8) million
and ($3.1) million for the three and six month periods ended
September 30, 2001.
Millbrook's revenues decreased $14.2 million and $22.7 million or 11.4% and 8.8%
for the three and six month periods ended September 30, 2002 as compared to the
comparable periods of the prior year. The decrease in revenues for the three and
six month periods is principally due to decreased sales to certain customers as
a result of several factors, including a decision made by a prior customer to
move to self-distribution; customer financial difficulties and bankruptcies
during fiscal 2002; customer losses; and an overall decline in specialty food
revenues resulting from lower than expected retail sales at a number of
Millbrook's customers, the aggregate of which exceeded the growth of sales to
certain other customers. The customer financial difficulties include Ames
Department Stores, one of Millbrook's significant customers, announcing its
decision to liquidate under Chapter 7 of the Bankruptcy Code in August, 2002.
Manischewitz' revenues increased $0.1 million and $0.3 million or 0.9% and 1.5%
for the three and six month periods ended September 30, 2002 as compared to the
comparable periods of the prior year. The increase in revenues for the three and
six month periods is principally due to increased sales of Manischewitz and
Guiltless Gourmet brand products, partially offset by decreased sales of Season
brand products.
Gross Profit. Gross profit for the three and six month periods ended September
30, 2002 were $26.2 million and $55.1 million as compared to $33.2 million and
$69.2 million for the three and six month periods ended September 30, 2001, a
decrease of $7.0 million and $14.1 million or 20.9% and 20.3%. As a percentage
of revenues, the gross profit margin was 22.0% for the three and six month
periods ended September 30, 2002 as compared to 24.9% and 25.4% for the three
and six month periods ended September 30, 2001.
The decrease in gross profit dollars and its impact on gross profit margin for
the three and six month periods is principally due to the following:
(i) decreased gross profit dollars associated with Millbrook's
lower revenues ($6.2 million and $13.2 million, respectively)
and decreased gross profit margin (2.2% and 3.0%,
respectively) resulting from the shift in Millbrook's customer
base from serviced to non-serviced customers and a shift in
product mix from higher margin specialty food products to
lower margin health and beauty care products; and
(ii) decreased gross profit margin (0.7% and 0.4%, respectively) at
Manischewitz resulting from increased promotional allowances,
including those associated with the launch of several new
Guiltless Gourmet products and the shift in the sales mix from
manufactured to co-packed products resulting in the
underabsorption of manufacturing overhead.
-11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Operating Expenses. Distribution and warehousing expenses for the three and six
month periods ended September 30, 2002 were $11.4 million and $23.1 million as
compared to $13.3 million and $27.6 million for the three and six month periods
ended September 30, 2001. As a percentage of revenues, distribution and
warehousing expenses decreased to 9.5% and 9.2% for the three and six month
periods ended September 30, 2002 as compared to 10.0% and 10.1% in the
comparable periods of the prior year. Distribution and warehousing costs for the
three and six month periods were impacted by the following:
(i) lower transportation costs realized from cost reduction
programs implemented by Millbrook's management to achieve more
efficient routing and enhanced utilization of its fleet; and
(ii) lower warehousing headcount due to reductions made during the
second half of fiscal 2002 and during the three month period
ended September 30, 2002 directly related to customer losses
and additional headcount reductions realized from a cost
reduction program implemented by Millbrook's management to
more efficiently deploy warehouse personnel.
Selling, general and administrative expenses for the three and six month periods
ended September 30, 2002 were $16.1 million and $32.7 million, as compared to
$19.9 million and $41.1 million for the three and six month periods ended
September 30, 2001. As a percentage of revenues, selling, general and
administrative expenses decreased to 13.5% and 13.1% for the three and six month
periods ended September 30, 2002 as compared to 14.9% and 15.1% for the
comparable periods of the prior year. The decrease in selling, general and
administrative costs for the three and six month periods are principally due to
the following:
(i) lower headcount in Millbrook's salesforce due to reductions
made during the second half of fiscal 2002 directly related to
customer losses and the shift in Millbrook's customer base
from serviced to non-serviced customers;
(ii) lower headcount in Millbrook's selling, general and
administrative functions realized from a cost reduction
program implemented by Millbrook's management to streamline
its workforce; partially offset by
(iii) increased trade materials and promotion costs associated with
the launch of several new Guiltless Gourmet products and new
radio advertising campaigns for Manischewitz and Season brand
products.
Amortization of intangibles was approximately $43,000 for the six month period
ended September 30, 2002, as compared to $1.1 million and $2.1 million for the
three and six month periods ended September 30, 2001. There was no amortization
of intangibles during the three months ended September 30, 2002, as the Company
did not have any remaining intangible assets with definite lives. This decline
resulted from the adoption of SFAS No. 142, which provides that only intangible
assets with definite lives continue to be amortized.
Interest Expense. Interest expense for the three and six month periods ended
September 30, 2002 was $4.3 million (consisting of $0.6 million for Holdings and
$3.7 million for Enterprises, respectively) and $8.4 million (consisting of $1.1
million for Holdings and $7.3 million for Enterprises, respectively) as compared
to $4.9 million (consisting of $0.9 million for Holdings and $4.0 million for
Enterprises, respectively) and $9.8 million (consisting of $1.6 million for
Holdings and $8.2 million for Enterprises, respectively) for the three and six
month periods ended September 30, 2001. The decrease in interest expense is
primarily attributable to lower interest rates on lower levels of debt
outstanding under the Company's Credit Agreement and the amendment by Holdings
of the Indenture underlying 92% ($23.0 million) of its 13% Notes outstanding.
The amendment, among other things, reduced the interest rate to 6% per annum and
increased the aggregate outstanding principal by approximately $1.5 million,
representing the deferred May 2002 interest payment.
-12-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Taxes. The provision for income taxes for the six month period ended September
30, 2002 was $4.1 million for Holdings and $3.6 million for Enterprises as
compared to an income tax benefit of $2.3 million and $4.3 million for Holdings
and $2.0 million and $3.6 million for Enterprises for the three and six month
periods ended September 30, 2001. As a result of the adoption of SFAS No. 142,
Holdings and Enterprises recorded valuation allowances to offset their
respective first and second quarter income tax benefits from operations as well
as the amount by which their deferred tax assets exceeded their deferred tax
liabilities, excluding the deferred tax liability related to identified
intangibles as of March 31, 2002. Further, since SFAS No. 142 does not provide
for the valuation allowances that resulted from its adoption to be recorded as a
component of the cumulative effect of a change in accounting principle, they are
reflected as a non-cash provision for income taxes in Holdings' and Enterprises'
loss from continuing operations. For the three and six month periods ended
September 30, 2001, the income tax benefits principally related to the results
of operations.
Cumulative Effect of Change in Accounting Principle. Effective April 1, 2002,
the Company adopted SFAS No. 142 "Goodwill and Other Intangible Assets". Under
this standard, goodwill and intangibles with indefinite useful lives, including
trademarks and tradenames are no longer systematically amortized. Instead, they
are reviewed for impairment and written down and charged to results of
operations when their carrying amount exceeds their estimated fair values. With
the assistance of an independent professional appraisal firm, the Company
performed impairment tests on the excess of cost over net assets acquired
("goodwill") and intangibles. The previous method for determining impairment
prescribed by SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," utilized an undiscounted cash flow
approach for the impairment assessment, while SFAS No. 142 utilizes a fair value
approach. The Company has two reporting units (Millbrook and Manischewitz) with
goodwill and intangibles, which also represent the Company's reporting segments.
Goodwill and intangibles were reviewed for impairment at the level of each
reporting unit. This review indicated that the goodwill recorded at the
Company's Manischewitz subsidiary was impaired as the carrying value of the
subsidiary was in excess of its estimated fair value. In determining the amount
of the goodwill writedown, SFAS No. 142 requires an allocation of the estimated
fair value to Manischewitz' net assets. This allocation resulted in a
significant increase in the value of the subsidiary's trademarks and tradenames,
which under the provisions of SFAS No. 142 may not be written up from their
historical carrying value. Since the allocation process utilizes the increased
value of the trademarks and tradenames in arriving at the remaining amount of
goodwill to be compared to the historical carrying value of goodwill, the amount
of goodwill writedown is increased. As a result, the Company recorded a $24.2
million non-cash charge as a cumulative effect of a change in accounting
principle for the writedown of goodwill to its estimated fair value during the
six month period ended September 30, 2002. The goodwill writedown was not
deductible for income taxes and, as a result, no income tax benefit was recorded
in relation to the charge.
Extraordinary Item - Modification of Debt. Effective May 1, 2002, Holdings
amended the Indenture underlying 92% ($23.0 million) of its 13% Notes
outstanding. The amendment (i) reduced the interest rate to 6% per annum, (ii)
extended their maturity date from May 1, 2008 to May 1, 2010 and (iii) increased
the aggregate outstanding principal by approximately $1.5 million, representing
the deferred May 2002 interest payment. Holders of the amended Notes received
warrants granting them the right to purchase up to approximately 5% of the
Company's common stock. The Company, at its option, may defer the payment of
cash interest on the 6% Notes for ten semi-annual interest payment dates through
May 1, 2007. The changes contained in the amendment constitute a material
modification of the Indenture requiring the historical deferred debt issuance
costs to be written off. Accordingly, debt issuance costs of $0.5 million were
written off and reported as an extraordinary item in the accompanying statement
of operations during the six month period ended September 30, 2002. The income
tax benefit of $0.2 million related to the extraordinary item was offset by a
valuation allowance required by the adoption of SFAS No. 142.
-13-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Net Loss. As a result of the foregoing, the net loss for the three and six month
periods ended September 30, 2002 was $5.6 million and $38.0 million for Holdings
and $5.0 million and $35.8 million for Enterprises as compared to $3.6 million
and $7.2 million for Holdings and $3.1 million and $6.1 million for Enterprises
for the three and six month periods ended September 30, 2001.
Impact of New Accounting Pronouncements. SFAS No. 143 "Accounting for Asset
Retirement Obligations" was issued in August 2001 and is effective for fiscal
years beginning after June 15, 2001. SFAS No. 143 established accounting
standards for recognition and measurement of a liability for an asset retirement
obligation and the associated asset retirement cost. SFAS No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets" was issued in October 2001
and is effective for fiscal years beginning after December 15, 2001. SFAS No.
144 addresses financial accounting and reporting for the impairment of
long-lived assets. The Company adopted SFAS No. 142, 143 and 144 effective April
1, 2002. The adoption of SFAS No. 143 and 144 did not have a material impact on
the Company's financial position or overall trends in results of operations.
SFAS No. 145 "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections" was issued in April 2002 and is
effective for fiscal years beginning after May 15, 2002. SFAS No. 145 eliminates
the requirement to classify gains and losses from the extinguishment of debt as
extraordinary, requires certain lease modifications to be treated the same as a
sale-leaseback transaction and makes other non-substantive technical corrections
to existing pronouncements. The Company will adopt SFAS No. 145 when it becomes
effective.
SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities"
was issued in June 2002 and is effective prospectively for exit or disposal
activities initiated after December 31, 2002, with earlier adoption encouraged.
SFAS No. 146 requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. Examples of costs covered by the
standard include lease termination costs and certain employee severance costs
that are associated with a restructuring, discontinued operations, plant
closing, or other exit or disposal activities. As the provisions of SFAS No. 146
are required to be applied prospectively after the adoption date, management
cannot determine the potential effects that adoption of SFAS No. 146 will have
on the Company's financial statements.
Financial Condition, Liquidity and Capital Resources
Operations for the six months ended September 30, 2002, excluding non-cash
charges for the loss on modification of debt at Holdings, the cumulative effect
of a change in accounting principle, depreciation and amortization and deferred
income taxes, utilized cash of $6.0 million for Holdings and $5.0 million for
Enterprises. Operations for the six months ended September 30, 2001, excluding
non-cash charges for depreciation and amortization, utilized cash of $1.9
million for Holdings and $0.9 million for Enterprises. During the six month
period ended September 30, 2002, other changes in assets and liabilities
resulting from operating activities provided cash of $4.6 million for Holdings
and $3.1 million for Enterprises as compared to providing $22.6 million for
Holdings and $23.2 million for Enterprises for the six month period ended
September 30, 2001, resulting in net cash utilized by operating activities of
$1.4 million for Holdings and $1.9 million for Enterprises and $20.7 million for
Holdings and $22.3 million for Enterprises, respectively.
Investing activities, which principally consisted of the acquisitions of
property and equipment resulted in a use of cash of $0.3 million and $1.7
million for the six month periods ended September 30, 2002 and 2001 for each of
Holdings and Enterprises, respectively.
-14-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
During the six month period ended September 30, 2002, financing activities,
which principally consisted of borrowings under the Credit Agreement and the
payment of deferred debt modification costs by Holdings, utilized cash of $0.5
million for Holdings and $0.1 million for Enterprises. During the six month
period ended September 30, 2001, financing activities, which principally
consisted of the repayment of $27.4 million under the Credit Agreement offset by
$1.6 million of payments from the Interest Escrow Account by Holdings, utilized
cash of $25.8 million for Holdings and $27.4 million for Enterprises.
At September 30, 2002, the Company's balance sheets include a $9.4 million
deferred income tax liability related to the taxable temporary differences
caused by different amortization periods for identified intangibles. With the
adoption of SFAS No. 142, the Company's tax deductible goodwill and
indefinite-lived intangible assets are no longer amortized for financial
reporting purposes. Therefore, this deferred income tax liability will not
reverse and be payable unless the underlying assets are sold or an impairment is
recognized for tax purposes.
The primary sources of liquidity for Holdings and Enterprises are the cash flows
from the operations of Millbrook and Manischewitz and borrowings under the
Company's Credit Agreement. At September 30, 2002, Millbrook and Manischewitz
had approximately $2.3 million of cash and approximately $9.3 million of
available borrowing capacity under the Credit Agreement. The Company is
currently in compliance with the covenants contained in the Credit Agreement and
the indentures relating to its senior notes. On November 1, 2002, the Company
elected to defer the cash payment of interest on its 6% Notes.
From a distribution perspective, Millbrook's business continues to be impacted
by industry consolidation of retail customers, a decision made by a prior
customer to move to self-distribution, customer financial difficulties and
bankruptcies. The customer financial difficulties include Ames Department
Stores, one of Millbrook's significant customers, announcing its decision to
liquidate under Chapter 7 of the Bankruptcy Code in August 2002. The Company
expects some further revenue decline during fiscal 2003, absent new customer
growth or expanded distribution to existing customers, as a result of the
aforementioned factors. Millbrook continues to focus its strategy on expanding
the specialty food category while taking advantage of market opportunities in
its health and beauty care and general merchandise categories. Millbrook's
operating results for the six months ended September 30, 2002 are, on the one
hand, out of step from a strategy execution perspective as specialty food
revenues declined. However, on the other hand, the growth in health and beauty
care revenues reflects Millbrook's success in taking advantage of market
opportunities as they arise. Management continues to believe in its overall
strategy. Further, Millbrook's management has instituted a number of cost
reduction programs designed to streamline its organization to reduce its
operating costs and better meet the demands of its changing markets. From a
branded food products perspective, Manischewitz' operations are impacted by the
amount of retail space devoted to its products and the consumer acceptance of
those products. Although there can be no assurance, Holdings and Enterprises
believe that its operating cash flows and borrowings under its Credit Agreement
will be sufficient to meet its obligations and remain in compliance with its
covenants. The ability of Holdings and Enterprises to meet those obligations and
maintain compliance will depend on a number of factors, including those
discussed above, general economic conditions and other factors beyond Holdings'
and Enterprises' control.
-15-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Concluded)
Critical Accounting Policies
The condensed consolidated financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires the use of estimates,
judgments, and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the periods presented. Actual results may differ
significantly from the estimates previously applied by the Company which were
based on different assumptions and conditions. The significant accounting
principles which we believe are the most important to aid in fully understanding
the financial results are the following:
Concentration of Credit Risk - Trade accounts receivable potentially subject the
Company to credit risk. The Company extends credit to its customers, principally
in the U.S. supermarket industry, based upon an evaluation of the customer's
financial condition and credit history and generally does not require
collateral. The Company's allowances for doubtful accounts are based upon the
expected collectability of trade accounts receivable.
Inventories - Inventories are stated at the lower of cost or market. Cost is
determined by the last-in, first-out ("LIFO") method.
Revenue Recognition - Revenue is recognized when products are shipped or
services are provided to customers. Provisions for returns and allowances and
bad debts are based upon historical experience and known events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to Item 7a of the Company's Form 10-K for the year ended March
31, 2002 filed with the Securities and Exchange Commission.
----------
The foregoing discussion in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains "forward-looking" statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Additionally,
written materials issued and oral statements made from time to time by Holdings
and Enterprises may contain forward-looking statements. Forward-looking
statements can be identified by the fact that they do not relate strictly to
historical or current facts and by their use of words such as "goals",
"expects", "plans", "believes", "estimates", "forecasts", "projects", "intends"
and other words of similar meaning. Execution of business and acquisition
strategies, expansion of product lines and increase of distribution networks or
product sales are areas, among others, whose future success may be difficult to
predict. They are based on management's then-current information, assumptions,
plans, expectations, estimates and projections regarding the food and wholesale
distribution industries. However, such statements are not guarantees of future
performance, and actual results and outcomes may differ materially from what is
expressed depending on a variety of factors, many of which are outside of
Holdings' and Enterprises' control. Given these uncertainties, current and
prospective investors are cautioned not to place undue reliance on such
forward-looking statements. We undertake no obligation to update or revise any
forward-looking statements or to publicly announce the result of any revisions
to any of the forward-looking statements herein to reflect future events or
developments.
Among the factors that could cause actual outcomes or results to differ
materially from what is expressed in these forward-looking statements are
changes in the demand for, supply of, and market prices of Holdings' and
Enterprises' products, the actions of current and potential new competitors,
changes in technology and economic conditions.
-16-
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to
ensure (1) that information required to be disclosed in the reports filed or
submitted under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is recorded, processed, summarized, and reported within the time periods
specified in the Securities and Exchange Commission's ("SEC") rules and
regulations, and (2) that this information is accumulated and communicated to
management, including the Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure. In
November 2002, under the supervision and review of the Chief Executive Officer
and Chief Financial Officer, an evaluation of the effectiveness of the Company's
disclosure controls and procedures was conducted. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that
disclosure controls and procedures are effective in alerting them in a timely
manner to material information regarding the Company (including its consolidated
subsidiaries) that is required to be included in periodic reports to the SEC. In
addition, there have been no significant changes in the Company's internal
controls or in other factors that could significantly affect those controls
since the November 2002 evaluation. However, there can be no assurance that the
system of disclosure controls and procedures will always achieve its stated
goals under all future conditions, no matter how remote.
-17-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
a. Exhibits
None
b. No reports were filed on Form 8-K during the quarter
for which this report is filed.
-18-
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
R.A.B. HOLDINGS, INC.
November 13, 2002 /s/ Richard A. Bernstein
------------------------
Richard A. Bernstein
Chief Executive Officer
November 13, 2002 /s/ Steven M. Grossman
----------------------
Steven M. Grossman
Chief Financial Officer
R.A.B. ENTERPRISES, INC.
November 13, 2002 /s/ Richard A. Bernstein
------------------------
Richard A. Bernstein
Chief Executive Officer
November 13, 2002 /s/ Steven M. Grossman
----------------------
Steven M. Grossman
Chief Financial Officer
-19-
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Quarterly Report on Form 10-Q for the
quarter ended September 30, 2002 (the "Report") by R.A.B. Holdings, Inc., a
Delaware corporation ("Holdings"), and R.A.B. Enterprises, Inc., a Delaware
corporation ("Enterprises" and, together with Holdings, the "Registrant"), each
of the undersigned hereby certifies, to his knowledge, that:
1. The Report fully complies with the requirements of Sections
13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
2. The information contained in the Report fairly presents, in
all material respects, the financial condition, results of
operations and cash flows of the Registrant for the quarter
ended September 30, 2002.
R.A.B. HOLDINGS, INC.
November 13, 2002 /s/ Richard A. Bernstein
------------------------
Richard A. Bernstein
Chief Executive Officer
November 13, 2002 /s/ Steven M. Grossman
----------------------
Steven M. Grossman
Chief Financial Officer
R.A.B. ENTERPRISES, INC.
November 13, 2002 /s/ Richard A. Bernstein
------------------------
Richard A. Bernstein
Chief Executive Officer
November 13, 2002 /s/ Steven M. Grossman
----------------------
Steven M. Grossman
Chief Financial Officer
-20-
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard A. Bernstein, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter
ended September 30, 2002 by R.A.B. Holdings, Inc., a Delaware
corporation ("Holdings"), and R.A.B. Enterprises, Inc., a Delaware
corporation ("Enterprises" and, together with Holdings, the
"Registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's Board of Directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
November 13, 2002 /s/ Richard A. Bernstein
---------------------------
Richard A. Bernstein
Chief Executive Officer
-21-
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Steven M. Grossman, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter
ended September 30, 2002 by R.A.B. Holdings, Inc., a Delaware
corporation ("Holdings"), and R.A.B. Enterprises, Inc., a Delaware
corporation ("Enterprises" and, together with Holdings, the
"Registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's Board of Directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
November 13, 2002 /s/ Steven M. Grossman
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Steven M. Grossman
Chief Financial Officer
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