REMINGTON ARMS CO INC/ - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: March 31, 2005

¨	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: 333-104141

REMINGTON ARMS COMPANY, INC.

(Exact name of registrant as specified in its charter)

Delaware

51-0350935

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

870 Remington Drive

P.O. Box 700

Madison, North Carolina 27025-0700

(Address of principal executive offices)

(Zip Code)

(336) 548-8700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities and Exchange Act of 1934). Yes ¨ No x

At May 10, 2005, the number of shares outstanding of each of the issuer’s classes of common stock is as follows: 1,000 shares of Class A Common Stock, par value $.01 per share.

REMINGTON ARMS COMPANY, INC.

FORM 10-Q

March 31, 2005

INDEX


		Page No.
Part I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Financial Statements	1

	Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	38

Part II. OTHER INFORMATION

Item 1.	Legal Proceedings	40

Item 2.	Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	43

Item 3.	Defaults Upon Senior Securities	43

Item 4.	Submission of Matters to a Vote of Security Holders	43

Item 5.	Other Information	43

Item 6.	Exhibits	43

SIGNATURES		44

Remington Arms Company, Inc.

Consolidated Balance Sheets

(Dollars in Millions, Except per Share Data)


	(Unaudited)

	March 31, 2005	December 31, 2004	March 31, 2004
ASSETS
Current Assets
Cash and Cash Equivalents	$ 0.2	$ 0.4	$ 0.2
Accounts Receivable Trade - net	123.8	81.2	105.4
Inventories - net	110.4	92.6	98.0
Supplies	7.1	7.2	6.3
Prepaid Expenses and Other Current Assets	12.1	9.1	14.2
Deferred Tax Assets	-	-	9.4

Total Current Assets	253.6	190.5	233.5

Property, Plant and Equipment - net	74.0	75.3	73.8
Goodwill and Intangibles - net	59.1	62.7	62.7
Debt Issuance Costs - net	7.8	8.7	10.1
Other Noncurrent Assets	14.7	14.4	14.5
Deferred Tax Assets	-	-	0.7

Total Assets	$ 409.2	$ 351.6	$ 395.3

LIABILITIES & (ACCUMULATED DEFICIT) SHAREHOLDER'S EQUITY
Current Liabilities
Accounts Payable	$ 30.0	$ 24.5	$ 29.3
Book Overdraft	5.3	10.0	4.4
Short-Term Debt	4.0	-	4.8
Current Portion of Long-Term Debt	0.6	0.6	0.5
Current Portion of Product Liability	2.2	2.2	2.4
Income Taxes Payable	0.6	0.8	7.7
Deferred Tax Liabilities	1.0	1.5	-
Other Accrued Liabilities	38.2	34.3	39.3

Total Current Liabilities	81.9	73.9	88.4

Long-Term Debt, net of Current Portion	261.3	202.9	224.4
Retiree Benefits	48.9	47.1	44.8
Product Liability, net of Current Portion	11.8	11.2	12.2
Deferred Tax Liabilities	3.7	4.2	-
Other Long-Term Liabilities	1.8	1.7	1.2

Total Liabilities	409.4	341.0	371.0


Commitments and Contingencies

(Accumulated Deficit) Shareholder's Equity
Total (Accumulated Deficit) Shareholder's Equity	(0.2)	10.6	24.3
Total Liabilities and (Accumulated Deficit) Shareholder's Equity	$ 409.2	$ 351.6	$ 395.3

The accompanying notes are an integral part of these consolidated financial statements

Remington Arms Company, Inc.

Consolidated Statements of Operations

(Dollars in Millions)


	Unaudited
	Year-to-Date March 31,
	2005			2004
Net Sales (1)	$	84.9		$	83.9
Cost of Goods Sold		67.2			64.4

Gross Profit		17.7			19.5
Selling, General and Administrative Expenses		16.9			16.3
Research and Development Expenses		1.4			1.5
Impairment Charges		3.7			-
Other Income		(0.1	)		(0.4	)

Operating (Loss) Profit		(4.2)			2.1

Interest Expense		6.3			6.1

Loss from Continuing Operations before Income Taxes, Equity in Losses from Unconsolidated Joint Venture and Sale of Assets		(10.5	)		(4.0	)
Income Tax Benefit		(0.6	)		(1.5	)
Equity in Loss from Unconsolidated Joint Venture, net of tax of zero for the year-to-date period ended March 31, 2005		0.2			-

Net Loss from Continuing Operations before Discontinued Operations		(10.1	)		(2.5	)
Loss from Discontinued Operations, net of tax benefit of zero and $0.1 for the year-to-date periods ended March 31, 2005 and 2004, respectively		(0.1	)		(0.2	)
Gain on Sale of Assets, net of tax expense of $9.4 for the year-to-date period ended March 31, 2004		-			13.0

Net (Loss) Income	$	(10.2)		$	10.3

(1)	Sales are presented net of Federal Excise taxes of $6.6 and $6.8 for the year-to-date periods ended March 31, 2005 and 2004, respectively.

The accompanying notes are an integral part of these consolidated financial statements

Remington Arms Company, Inc.

Consolidated Statements of Cash Flows

(Dollars in Millions)


	Unaudited
	Year-To-Date March 31,
	2005			2004
Operating Activities
Net Income (Loss)	$	(10.2	)	$	10.3
Adjustments to reconcile Net Income (Loss) to Net Cash used in Operating Activities:
Impairment Charges		3.7			-
Depreciation and Amortization		2.8			2.8
Write-off of Debt Acquisition Costs		0.5			-
Equity in Loss from Unconsolidated Joint Venture, net of tax		0.2			-
Gain on Sale of Assets Held for Sale		-			(22.4	)
Loss on Disposal of Assets		0.1			0.2
Provision for Retiree Benefits		1.8			2.1
Provision (Benefit) for Deferred Income Taxes, net		(1.0	)		2.2
Changes in Operating Assets and Liabilities:
Accounts Receivable Trade - net		(42.6	)		(38.3	)
Inventories		(17.8	)		(12.3	)
Supplies		0.1			0.4
Prepaid Expenses and Other Current Assets		1.0			(2.6	)
Other Noncurrent Assets		(0.2	)		(0.2	)
Accounts Payable		5.5			9.2
Product Liabilities		0.6			(0.6	)
Income Taxes Payable		(0.2	)		5.2
Other Accrued and Long-Term Liabilities		3.1			10.6

Net Cash used in Operating Activities from Continuing Operations		(52.6	)		(33.4	)
Net Cash provided by Discontinued Operations		-			0.1

Net Cash used in Operating Activities		(52.6	)		(33.3	)

Investing Activities
Proceeds from Sale of Assets, net		-			41.5
Purchase of Property, Plant and Equipment		(1.2	)		(0.5	)
Cash Contribution to Unconsolidated Joint Venture		(0.3	)		-

Net Cash (used in) provided by Investing Activities		(1.5	)		41.0

Financing Activities
Proceeds from Revolving Credit Facility		87.5			45.4
Payments on Revolving Credit Facility		(29.0	)		(50.9	)
Principal Payments on Long-Term Debt		(0.1	)		(0.1	)
Capital Contributions from RACI Holding, Inc.		0.2			-
Decrease Book Overdraft		(4.7	)		(2.3	)

Net Cash provided by (used in) Financing Activities		53.9			(7.9	)

Decrease in Cash and Cash Equivalents		(0.2	)		(0.2	)
Cash and Cash Equivalents at Beginning of Period		0.4			0.4

Cash and Cash Equivalents at End of Period	$	0.2		$	0.2

Supplemental Cash Flow Information:
Cash Paid During the Year for:
Interest	$	0.5		$	0.4
Income Taxes	$	-		$	-
Noncash Financing Activities:
Financing of insurance policies	$	4.0		$	4.8

The accompanying notes are an integral part of these consolidated financial statements.

Remington Arms Company, Inc.

Consolidated Statement of Shareholder’s Equity (Accumulated Deficit) and Comprehensive Loss

(Dollars in Millions)

(Unaudited)


	Paid-in Capital		Accumulated Other Comprehensive Income			Earnings Accumulated Deficit			Total Shareholder’s Equity (Accumulated Deficit)
Balance, December 31, 2004	$	89.0	$	0.6		$	(79.0	)	$	10.6

Comprehensive Loss:
Net Loss		—		—			(10.2	)		(10.2	)
Other comprehensive income:
Net derivative gains, net of tax effect of $0.1		—		0.1			—			0.1
Net derivative gains reclassified as earnings, net of tax effect of ($0.5)		—		(0.9	)		—			(0.9	)

Total Comprehensive Loss		—		(0.8	)		(10.2	)		(11.0	)
Contributions from RACI Holding, Inc.		0.2		—			—			0.2

Balance, March 31, 2005	$	89.2	$	(0.2	)	$	(89.2	)	$	(0.2	)

The accompanying notes are an integral part of these consolidated financial statements.

TABLE OF CONTENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Millions, Except Per Share Amounts) — Unaudited

Note 1 — Basis of Presentation

The accompanying unaudited interim consolidated financial statements of Remington Arms Company, Inc. (“Remington”) include the accounts of its wholly owned subsidiaries, RA Brands, L.L.C. (“RA Brands”) and RA Factors, Inc. (collectively referred to as the “Company”), as well as reflecting the impact of the Company’s unconsolidated 50% joint venture interest in Remington ELSAG Law Enforcement Systems, LLC (“RELES”). The accounts of the Company’s parent, RACI Holding, Inc. (“Holding”), which owns 100% of the issued and outstanding common stock of Remington, are not presented herein. Significant transactions between the Company and Holding and the related balances are reflected in the consolidated financial statements and related disclosures.

The accompanying unaudited interim consolidated financial statements of Remington have been prepared by the Company in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and accordingly, do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of items of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2005. The year-end balance sheet information for 2004 was derived from the audited consolidated financial statements but does not include all disclosures required by generally accepted accounting principles.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Remington Arms Company, Inc. and subsidiaries as of and for the year ended December 31, 2004.

A revision to the classification from liabilities to assets of estimated insurance proceeds from product liability and workers compensation was made to financial information from prior periods to conform with the current presentation format. The change in classification did not have a material impact on any previously reported financial condition, results of operations or cash flows of the Company. In addition, as a result of the sale of specified assets of the fishing line business on February 9, 2004, the results of these operations have been included in discontinued operations and results from prior periods have been reclassified accordingly. See Note 3.

Note 2 — Impairment Charges

As of March 31, 2005, the Company performed an elevation for impairment on its goodwill, trademarks, and fixed assets for the Clay Targets reporting unit and recorded associated impairment charges of $3.7 in the accompanying statement of operations, which were composed of goodwill impairment of $2.9, indefinite-lived trademark impairment of $0.7, and fixed asset impairment of $0.1. The Clay Targets reporting unit is included in the All Other reporting segment in Note 15. The evaluation resulted from the Company being notified by its primary supplier of a critical raw material to the Company's Clay Targets business that it would stop supplying the Company beginning in the third quarter of 2005 and for which no alternative supplier has currently been located. Management considers the loss of the supplier a change in the business climate that created a specific "triggering event" necessitating such a review.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Millions, Except Per Share Amounts) — Unaudited

The impairment of trademarks was assessed in accordance with the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). The impairment test required us to estimate the fair value of our trademarks. We tested these trademarks at the reporting unit level. We estimated fair value using a discounted cash flow model. Under this model, we utilized estimated revenue and cash flow forecasts, as well as assumptions of terminal value, together with an applicable discount rate, to determine fair value. We then compared the carrying value of the trademark to its fair value. Since the fair value of the trademark was less than its carrying value, the difference of $0.7 was the impairment charge recorded.

The impairment of long-lived assets was assessed in accordance with the provisions of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"). We operate this reporting unit with two plant locations; therefore, we performed our testing of the asset groups at the plant level, as this is the lowest level for which indentifable cash flows are available. In performing the test, we determined that the total of the expected future undiscounted cash flows directly related to the existing service potential of the asset group for one of the plant