RIVER HOLDING CORP - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

o	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 - 333-56135

RIVER HOLDING CORP.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		95-4674065 (I.R.S. Employer Identification No.)

599 Lexington Drive, 18^th Floor New York, New York (Address of Principal Executive Offices)		10022 (Zip Code)

(212) 758-2555 (Registrant’s telephone number, including area code)

Not Applicable (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

Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act).

Yes

The number of shares of Common Stock, $0.01 par value, outstanding (the only class of common stock of the Company outstanding) was 9,144,293 on November 14, 2002.

RIVER HOLDING CORP. AND SUBSIDIARIES

QUARTER ENDED SEPTEMBER 30, 2002

TABLE OF CONTENTS

			Page

PART I	FINANCIAL INFORMATION

	Item 1.	River Holding Corp. Unaudited Condensed Consolidated Financial Statements:

		Unaudited Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001	1

		Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2002 and September 30, 2001	3

		Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and September 30, 2001	4

		Notes to Unaudited Condensed Consolidated Financial Statements	6

		Hudson Respiratory Care Inc. Unaudited Condensed Consolidated Financial Statements:

		Unaudited Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001	15

		Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2002 and September 30, 2001	17

		Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and September 30, 2001	18

		Notes to Unaudited Condensed Consolidated Financial Statements	20

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

	Item 3.	Quantitative and Qualitative Disclosures About Market Risks	38

	Item 4.	Controls and Procedures	39

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	40

	Item 2.	Changes in Securities	40

	Item 3.	Defaults Upon Senior Securities	40

	Item 4.	Submission of Matters to a Vote of Security Holders	40

	Item 5.	Other Information	40

	Item 6.	Exhibits and Reports on Form 8-K	40

SIGNATURE			41

CERTIFICATIONS			42

RIVER HOLDING CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

(amounts in thousands)

					September 30, 2002		December 31, 2001


CURRENT ASSETS:
	Cash				$	5,023	$	7,085
	Accounts receivable, less allowance for doubtful accounts of $1,567 and $1,801 at September 30, 2002 and December 31, 2001, respectively					21,575		19,287
	Inventories, net					23,862		25,218
	Other current assets					1,812		1,265

			Total current assets			52,272		52,855
PROPERTY, PLANT AND EQUIPMENT, net						50,267		53,613
OTHER ASSETS:
	Goodwill					32,453		28,498
	Deferred financing and other costs, net					8,207		8,316
	Other assets					1,025		823

		Total other assets				41,685		37,637

				Total assets	$	144,224	$	144,105

See notes to unaudited condensed financial statements

RIVER HOLDING CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES, MANDATORILY-REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS’ DEFICIT

(amounts in thousands, except per share amounts)

					September 30, 2002			December 31, 2001

CURRENT LIABILITIES:
		Notes payable to bank			$	12,809		$	20,680
		Accounts payable				10,297			14,943
		Accrued liabilities				23,235			17,520

		Total current liabilities				46,341			53,143
NOTE PAYABLE TO AFFILIATE						37,217			17,217
NOTES PAYABLE TO BANK, net of current portion						61,603			73,250
SENIOR SUBORDINATED NOTES PAYABLE						115,000			115,000
OTHER NON-CURRENT LIABILITIES						1,559			1,187

			Total liabilities			261,720			259,797
COMMITMENTS AND CONTINGENCIES (Note 4)
MANDATORILY-REDEEMABLE PREFERRED STOCK, $0.01 par value; 1,800 shares authorized; 470 and 445 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively; liquidation preference --$47,031 and $44,474 respectively						46,595			43,847
		Accrued preferred stock dividend, payable in kind				2,479			1,142

						49,074			44,989
STOCKHOLDERS’ EQUITY (DEFICIT):
		Junior preferred stock, $0.01 par value; 6 shares authorized; 3 shares outstanding at September 30, 2002 and December 31, 2001				3,422			3,137
		Common stock, $0.01 par value; 15,000 shares authorized; 9,144 issued and outstanding at September 30, 2002 and December 31, 2001				97,848			97,848
		Additional paid in capital				750			—
		Cumulative translation adjustment				1,780			(234	)
	Accumulated deficit					(270,370	)		(261,432	)

			Total stockholders’ deficit			(166,570	)		(160,681	)

				Total liabilities, mandatorily-redeemable preferred stock and stockholders’ deficit	$	144,224		$	144,105

See notes to unaudited condensed financial statements

RIVER HOLDING CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands)

				Three Months Ended						Nine Months Ended

				September 30, 2002			September 30, 2001			September 30, 2002			September 30, 2001

NET SALES				$	41,923		$	45,095		$	126,385		$	123,701
COST OF SALES					26,392			24,871			76,011			78,992

	Gross Profit				15,531			20,224			50,374			44,709
OPERATING EXPENSES:
	Selling, distribution, general & administrative				11,579			12,118			35,042			39,374
	Amortization of goodwill				—			2,047			—			6,357
	Research and development				587			363			1,999			1,264

					12,166			14,528			37,041			46,995

			Income (loss) from operations		3,365			5,696			13,333			(2,286	)
INTEREST EXPENSE AND OTHER, net					5,736			5,180			15,782			19,022

			(Loss) income before provision for income taxes		(2,371	)		516			(2,449	)		(21,308	)
PROVISION FOR INCOME TAXES					740			398			2,066			926

			Net (loss) income	$	(3,111	)	$	118		$	(4,515	)	$	(22,234	)

OTHER COMPREHENSIVE INCOME:
		Foreign currency translation (loss) gain			(177	)		(1,958	)		2,014			2,602

			Comprehensive loss	$	(3,288	)	$	(1,840	)	$	(2,501	)	$	(19,632	)

See notes to unaudited condensed financial statements

RIVER HOLDING CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amount in thousands)

			Nine Months Ended

			September 30, 2002			September 30, 2001

CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss		$	(4,515	)	$	(22,234	)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities~
		Depreciation and amortization		8,663			14,747
		Amortization of deferred financing costs		1,336			888
		Provision for bad debts		351			—
		Loss on disposal of equipment		(37	)		—
	Change in operating assets and liabilities:
		Accounts receivable		(2,078	)		(2,990	)
		Inventories		2,101

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