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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the fiscal year ended December 31, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 333-07429
Remington Products Company, L.L.C.
------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1451076
- ---------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
60 Main Street, Bridgeport, Connecticut 06604
- --------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 367-4400
--------------
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:
11% Series B Senior Subordinated Notes due 2006
--------------------------------------
(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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x/]
PART I
ITEM 1. Business
General
Remington Products Company, L.L.C. (the "Company" or "Remington") is a major
manufacturer and marketer of men's and women's electrical personal care
appliances. The Company distributes on a worldwide basis men's and women's
electric shavers and accessories, women's personal care appliances, including
hairsetters, curling irons and hair dryers, men's electric grooming products,
travel products and other small electric consumer appliances.
The Company is a Delaware limited liability company that will continue in
existence until December 31, 2016 or dissolution prior thereto as determined
under the Company's LLC Agreement.
Description of Business
Products
Electric Shavers. The Company's primary men's electric shaver line is the
MicroScreen(R) line of single, dual and triple foil shavers, each with the
MicroScreen(R) cutting system. In addition, the Company also has a line of men's
Dual Track(TM), rotary shavers and certain specialty shavers such as the "sport
shaver". The Company has recently introduced its new Intercept(TM) line of
premium shavers, with the intercept shaving system that sandwiches a
trimmer-style cutter between two foil heads. The women's electric shaver lines
primarily include the women's wet/dry Dual Foil shaver, the women's wet/dry
battery operated shaver and the wet/dry Swirl(TM) rotary shavers. The Company
also manufactures and distributes electric shaver accessories consisting of
shaver replacement parts (primarily foils and cutters), preshave products and
cleaning agents. Electric shavers and shaver accessories accounted for
approximately 42%, 44% and 44% of the Company's total net sales for the years
ended December 31, 1997, 1996 and 1995 respectively.
Women's Personal Care Appliances. Women's personal care appliances consist
primarily of hairsetters, hair dryers, curling irons, hot air brushes and
make-up mirrors. The Company's hairsetter products include flocked rollers (both
dry and mist), and Remington Express Set(R) hairsetter, which heats in 90
seconds, the Smart Setter(R) hairsetter, which incorporates a proprietary
technology that indicates to users when optimum heat levels have been reached by
changing the color of the rollers, and the Style Setter(R) hairsetter. Women's
personal care appliances accounted for approximately 25%, 28% and 30% of the
Company's total net sales for the years ended December 31, 1997, 1996 and 1995,
respectively.
Men's Grooming Products. Men's grooming products consist of beard and
mustache trimmers, nose hair and ear hair trimmers and home haircut kits.
Other Products. Remington's travel appliances consist of products that
provide personal grooming and other general household functions for domestic and
international travel. These items include travel hair dryers, steamers, irons,
voltage converter/adapter plugs and shavers. In the home health appliance
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product category, Remington sells foot spas and back massagers currently outside
the United States, as well as other small appliances such as vacuums.
Distribution
The Company's products are sold in the United States and internationally in
over 85 countries through mass merchandisers, catalog showrooms, drug store
chains and department stores in addition to the Company's 112 service stores.
In the United States, the Company sells products through mass-merchant
retailers such as Wal-Mart, K-Mart and Target, department stores such as Sears,
catalog showrooms such as Service Merchandise, drug store chains including
Walgreens, Eckerd and Revco, and Remington's own service stores. Throughout the
United States, the Company's products are sold in excess of 10,000 retail
outlets.
On a worldwide basis, Wal-Mart accounted for 15%, 16% and 16% of the
Company's net sales during the years ended December 31, 1997, 1996 and 1995. No
other customer accounted for more than 10% of the Company's net sales during the
years ended December 31, 1997, 1996, and 1995.
Service Stores
As of December 31, 1997, the Company owned and operated a chain of 112
service stores with 93 in the United States, ten in the United Kingdom and nine
in Australia. During 1997, the Company opened a net of ten service stores in the
United States, one store in the United Kingdom and six stores in Australia. The
stores in the United States are in many of the major markets with concentrations
on the East Coast and in the major cities of the South and West. The majority of
the stores are located in shopping malls and outlet malls within large
metropolitan areas. The stores sell and service a variety of Remington and
non-Remington shavers and accessories, personal care appliances, knives,
scissors, travel appliances and other related products. The service stores also
oversee sales of replacement parts to approximately 300 independent authorized
shaver service dealers across the United States. In 1997, the Company's service
stores generated worldwide net sales of $46.5 million, with $38.6 million in the
U.S. and $7.9 million internationally. Sales of Remington products accounted for
approximately 40% of the service stores net sales.
Manufacturing Operations
Remington conducts all in-house manufacturing at its Bridgeport,
Connecticut facility. The Company assembles foil shavers and manufactures foil
cutting systems in Bridgeport using proprietary cutting technology and a series
of specially designed machines. The electric shaver business is highly seasonal,
with significant production swings during the course of the year. As a result of
such swings, Remington's manufacturing process has been structured to utilize
seasonal workers. As a result of these factors, during peak periods
approximately 30% of Remington's work force (excluding that of the service
stores) is composed of seasonal workers.
Suppliers
The majority of the Company's finished goods inventories are manufactured
for the Company by third party suppliers primarily located in China, Japan and
Thailand. While Remington sources a large portion of its materials and products
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from third-party suppliers, it continues to manufacture its MicroScreen(R) 3 and
certain other shavers in-house and maintains ownership of tools and molds used
by many of its suppliers. The Company's two most significant suppliers, Izumi
Products, Inc. ("Izumi") and Raymond International, accounted for approximately
35% of the Company's overall cost of sales in 1997. These two suppliers'
manufacturing facilities are located in China and Japan. Remington has had a
relationship with these suppliers for many years and management considers its
present relationships to be good.
Research and Product Development
The Company believes that research and development activities are an
important part of the Company's business and are essential to its long-term
prospects. Research and development efforts at Remington allow the Company to
maintain its unique manufacturing strength in cutting systems for shavers. The
Company is continuously pursuing new innovations for its line of shavers
including foil improvements and new cutting and trimmer configurations. The
Company also devotes resources to the development of new technology for other
products such as women's personal care products, including hairsetters, hair
dryers and curling irons, as well as for men's grooming products.
The Company has continued to increase its investment in research and
development activities in recent years. During 1997, 1996 and 1995, research and
development expenditures for the Company amounted to approximately $2.8. $2.1
and $1.9 million, respectively.
Patents and Trademarks
The Company owns approximately 180 patent and patent applications for both
design and utility that are maintained in approximately 40 countries. The
Company's patents cover electric shavers, cutting and trimming mechanisms and
women's personal care products such as hairsetters, hair dryers and curling
irons. In addition, the Company maintains over 300 different trade names in
approximately 100 countries covering a variety of products. These trade names
have resulted in the issuance of over 1,300 registered trademarks.
As a result of the common origins of the Company and Remington Arms, the
Remington mark is owned by each company with respect to its principal products
as well as associated products. Thus, the Company owns the Remington mark for
shavers, shaver accessories, grooming products and health care products, while
Remington Arms owns the mark for firearms, sporting goods and products for
industrial use, including industrial hand tools. The terms of a 1986 agreement
between the Company and Remington Arms provided for their respective rights to
use the Remington trademark on products which are not considered "principal
products of interest" for either company. A separate company, Remington
Licensing Corporation, owns the Remington trademark in the U.S. with respect to
any overlapping uses and the Company and Remington Arms are each licensed to use
the mark in their respective areas of interest. The Company retains the
Remington trademark for nearly all products which it believes can benefit from
the use of the brand name in the Company's distribution channels. The Company
has aggressively enforced its ownership of the Remington brand name.
Competition
The Company believes that the markets for all of its product lines are
highly competitive and that competition for retail sales to consumers is based
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on several factors, including brand name recognition, value, quality, price and
availability. Primary competitive factors with respect to selling such products
to retailers are brand reputation, product categories offered, broad coverage
within each product category, support and service in addition to price.
Remington competes with established companies, several of which have
substantially greater resources than those of the Company. There are no
substantial regulatory barriers to entry for new competitors in the electric
personal appliance industry. However, suppliers that are able to maintain, or
increase, the amount of retail shelf space allocated to their respective
products may gain a competitive advantage. The Company believes that the
allocation of space by retailers is influenced by many factors, including brand
name recognition by consumers, product quality and prices, service levels
provided by the supplier and the supplier's ability to support promotions.
The rotary shaver market is significant outside the United States. The
future expansion of sales of the Company's rotary shavers outside the United
States will be affected by, among other factors, the outcome of ongoing legal
actions against Philips Electronics, N.V. ("Philips"). Philips holds patents and
trademarks outside the United States on certain of its shaver designs that
restrict the Company from entering these markets. The Company is currently
challenging such trademarks and patents in the United Kingdom and Australia.
Employees
As of December 31, 1997, the Company employed approximately 1,145 people in
the United States and abroad of which approximately 200 were seasonal
manufacturing workers and 250 were employed part-time in the Company's service
stores. None of the Company's employees are represented by a union. Remington
believes relations with its employees are good.
Environmental Matters
The Company's manufacturing operations are subject to federal, state and
local environmental laws and regulations. The Company believes it is in
substantial compliance with all such environmental laws which are applicable to
its operations. The Company has reported to the Connecticut Department of
Environmental Protection that it has detected petroleum and solvent compounds in
soil and ground water samples taken from its Bridgeport facility at levels which
may require further investigation or cleanup. In addition to its ongoing program
of environmental compliance, the Company has provided reserves to cover the
anticipated costs of remediation which may be necessary at its Bridgeport
facility. The Company believes that the costs for any remediation activities
which are eventually undertaken would not be material to the Company's financial
position and results of operations.
International Operations and Distribution
Remington's international operations (excluding export sales from the U.S.)
generated approximately 43%, 39% and 36% of the Company's net sales in 1997,
1996 and 1995, respectively. The Company's international network of subsidiaries
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and distributors currently extends to over 85 countries worldwide. The Company
markets products throughout Europe, the Middle East, Africa, and a portion of
South America through its subsidiary in the United Kingdom, throughout Asia
through its subsidiary in Australia and distributes products to Japan, Central
America and the remainder of South America from its United States headquarters.
The Company distributes its products directly in the United Kingdom, Australia,
Canada, Germany, France, New Zealand and South Africa. In all other parts of the
world the Company distributes its products through strategic alliances with
local distributors. As in the United States market, the primary asset of the
Company's international operations is the Remington brand name.
The Company distributes products internationally through electric product
stores, drug stores, specialized shaver shops, catalog showrooms, department
stores, mail order and television and the Company's service stores. As in the
United States, Remington has established direct relationships with many of the
leading international retailers.
Additional financial information relating to Remington's international
operations is set forth in Note 14 (Geographic Information) of the "Notes to
Consolidated Financial Statements" of the Company appearing elsewhere herein.
ITEM 2. Properties
The Company's executive offices and sole manufacturing facility are located
at 60 Main Street, Bridgeport, Connecticut, 06604. The following is additional
information concerning the principal facilities of the Company.
Facility Function Square Feet
Bridgeport, CT Headquarters (Owned) 40,000
Bridgeport, CT Manufacturing (Owned) 167,000
Milford, CT Warehouse (Leased) 100,000
In addition to these properties, Remington leases offices and warehouse
space in Canada, United Kingdom, Germany, France, Australia, New Zealand, South
Africa, Ireland, Sweden and Hong Kong, and 112 service stores, of which 93 are
in the United States, ten are in the United Kingdom and nine are in Australia.
ITEM 3. Legal Proceedings
The Company and Philips are engaged in litigation in the United Kingdom and
Australia relating to certain trademarks and designs issued to Philips relating
to Philips' triple head rotary shaver. In these proceedings, Philips alleged
infringement of its trademarks and designs by the Company and the Company
counter-claimed that Philips' trademark and design registrations are invalid.
The U.K. trial court found in favor of the Company and Philips has appealed that
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decision. The trial in the Australian action is scheduled for mid-1998. The
costs of defending the U.K. and Australian litigation are, in certain
circumstances, shared with Izumi, the Company's supplier of rotary shavers.
Izumi is also pursuing actions against Philips in Sweden to contest the validity
of certain of Philips' trademarks. If such litigation is ultimately determined
adversely to the Company or Izumi, the Company's ability to sell rotary shavers
in such countries could be limited or prohibited. In 1997, the Company's net
sales of rotary shavers in Europe were not material.
In December 1997, the Company settled all litigation with Dickson Industries
Co., Ltd. and Charles W. Howard which was pending in the U.S. District Court for
the Eastern District of California. The litigation, which was commenced against
Remington in December 1996 alleged that Remington infringed a patent owned by
Mr. Howard, which was licensed to Dickson, relating to certain curling irons
sold by the Company. The Company agreed to cease distribution of the product and
the settlement had no material effect on the Company's 1997 financial position
or results of operations.
The Company is a party to other lawsuits and administrative proceedings that
arose in the ordinary course of business. Although the final results in such
suits and proceedings cannot be predicted, the Company presently believes that
any liability that may ultimately result will not have a material adverse effect
on the Company's financial position or results of operations.
ITEM 4. Submission of Matters to a Vote of Securities Holders
No matters were submitted to a vote of securities holders.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters
(a) Market Information
All of the Company's outstanding equity securities are privately held.
(b) Holders
As of March 15, 1998, there were two holders of the common equity securities
of the Company.
(c) Dividends
No cash distributions have been paid on the common and preferred equity of
the Company since the Closing Date. Prior to the reorganization of the Company
in May 1996, as discussed in Note 2 of the "Notes to the Financial Statements",
the Company operated as a general partnership and cash distributions were made
to the partners. In addition, the Company's long-term debt arrangements, which
are discussed in note 7 of the "Notes to Consolidated Financial Statements" of
the Company appearing elsewhere herein, significantly restrict the payment of
dividends.
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(d) Recent Sales of Unregistered Securities
None.
ITEM 6. Selected Financial Data
The following table summarizes selected financial information and should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and
accompanying notes thereto appearing elsewhere herein (in thousands):
Successor Predecessor
-------------------------------------- -----------------------------------------------------------------
Year 31 Weeks 21 Weeks 3 Months Year
Ended Ended Ended Year Ended Ended Ended
December 31, December 31, May 23, December 31, December 31, Sept. 30
---------------------------
1997 1996 1996 1995 1994 1993 1993
--------------- ----------------- ----------- --------------- ---------- ------------- ---------
Statement of
Operations Data:
Net sales $241,572 $185,286 $ 56,713 $255,323 $261,446 $71,152 $156,665
Operating income
(loss) 14,146 12,508 (16,951) 26,516 21,228 5,459 7,681
Interest expense 19,318 12,164 2,228 7,604 6,414 1,248 4,066
Net income (loss) (7,923) (3,172) (18,191) 17,240 14,725 4,024 3,021
Balance Sheet Data
(at period end):
Working capital 76,361 $ 77,860 N/A $ 47,223 $ 62,862 $ 70,164 N/A
Total assets 205,245 214,823 N/A 170,922 160,543 175,567 N/A
Total debt 180,831 171,631 N/A 56,990 55,093 71,931 N/A
Cumulative Preferred
Dividend (1) 12,932 4,576
- ----------------------------
(1) Dividend payments are subject to restrictions by the terms of the Company's
debt agreements.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The following table sets forth the Company's statement of operations,
including its net sales by its U. S. operations (including export sales from the
U.S.), U.S. service stores, and international operations (including service
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stores in the United Kingdom and Australia) and the Company's results of
operations as a percentage of net sales for the years ended December 31, 1997,
1996 and 1995. To facilitate comparison of the operating results of the periods
set forth below, results of operations for the year ended December 31, 1996 were
obtained by combining, without adjustment, the results of operations of the
predecessor company from January 1, 1996 to May 23, 1996 (the "Predecessor
Period") with those of the Company for the period from May 24, 1996 to December
31, 1996 (the "Successor Period"). The discussion should be read in connection
with the Consolidated Financial Statements and accompanying notes thereto
appearing elsewhere herein.
Successor Successor and Predecessor Predecessor
--------------------- ------------------------- --------------------------
Year Ended Combined Year Ended Year Ended
December 31, 1997 December 31, 1996 December 31, 1995
-------------------- ------------------------ -----------------------
$ % $ % $ %
------ ---- ------- ---- ------ -----
Net Sales:
U.S. $ 99.6 41.2 $113.2 46.7 $131.2 51.4
U.S. service stores 38.6 16.0 33.7 13.9 32.9 12.9
International 103.4 42.8 95.1 39.4 91.2 35.7
------ ------ ---- ----- ------ -----
241.6 100.0 242.0 100.0 255.3 100.0
Cost of sales 141.3 58.5 152.7 63.1 143.2 56.1
------ ------ -- ----- ----- -----
Gross profit 100.3 41.5 89.3 36.9 112.1 43.9
Selling, general and
administrative 84.3 34.9 91.9 37.9 83.9 32.9
Intangible amortization 1.9 0.8 1.9 0.8 1.7 0.6
-------- ------- ------ ------ ------- ------
Operating income (loss) 14.1 5.8 (4.5) (1.8) 26.5 10.4
Interest expense 19.3 8.0 14.4 5.9 7.6 3.0
Other expense (income) 0.5 0.2 0.3 0.1 0.4 0.2
-------- ------- ------ ------ ------- ----
Income (loss) before income
taxes (5.7) (2.4) (19.2) (7.9) 18.5 7.2
Provision for income
taxes 2.2 0.9 2.2 0.9 1.3 0.5
-------- ------- ------ ----- ------- -----
Net income (loss) $(7.9) (3.3) $(21.4) (8.8) $17.2 6.7
====== ====== ======= ====== ===== =====
Year Ended December 31, 1997 compared to the year ended December 31, 1996
Net Sales. Net sales for the year ended December 31, 1997 were $241.6
million compared to $242.0 million for the previous year. International net
sales and U.S. service store sales demonstrated strong results for 1997 with
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increases of 8.7% and 14.5%, respectively over the prior year. These results
were more than offset by a decline in net sales in the United States.
Net sales in the United States decreased 12.0% from $113.2 million for the
year ended December 31, 1996 to $99.6 million in 1997. This decrease was
primarily related to lower sales of certain men's and women's shavers. Men's
shaver sales were impacted by the effect of transitioning to the updated line of
MicroScreen(R) shavers, competitive actions in rotary shavers as well as the
decision not to repeat certain promotional programs offered during 1996. The
introduction of the new line of MicroScreen(R) 2 shavers in the third quarter of
1997 helped sales of the mid-priced and largest line of Remington shavers come
in on line with the prior year, while the impact of the announced 1998
introduction of the new MicroScreen(R) 3 shavers resulted in lower transitional
sales of the older Triple Foil(TM) line of shavers in 1997. Women's shaver sales
were impacted by an overall decline in the market for women's shavers.
Additionally, domestic sales of women's personal care appliances were negatively
impacted by competitive actions in hairsetters and the cancellation of a new
line of curling irons.
Net sales through the Company's U.S. service stores increased 14.5% to $38.6
million in 1997 from $33.7 million in 1996. This increase is primarily
attributable to the opening of a net of 10 additional stores for a total of 93
stores open during the holiday shopping season. Additionally, same store sales
increased 4.3% from 1996 to 1997 as a result of a strong holiday selling season.
International net sales increased to $103.4 million in 1997 from $95.1
million in 1996 as a result of the United Kingdom and Australian operations. Net
sales in the United Kingdom increased 14.0% in 1997 as a result of strong
demand, particularly in the personal care product sales. Despite a negative
currency impact, net sales in Australia increased 11.0% in 1997 due to strong
demand for new personal care products and growth in retail service stores from
three stores in 1996 to nine stores at December 31, 1997. These results were
somewhat offset by lower net sales in Germany in 1997 due to lower demand and a
negative currency impact, while Canadian net sales remained flat year to year.
Gross Profit. Gross profit increased to $100.3 million, or 41.5% of net
sales, in 1997 from $89.3 million or 36.9% of net sales in 1996. Approximately
2.0% of the gross profit margin percentage increase was due to inventory
valuation adjustments recorded in 1996, while the remaining increase was due to
slightly lower costs and improved mix.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $84.3 million in 1997, or 34.9% of net sales, from $91.9
million, or 37.9% of net sales in 1996. The 1996 expenses included $10.9 million
in non-recurring charges related to the reorganization and a $1.3 million charge
related to the bankruptcy of the Company's largest customer in Canada. After
considering the effect of these charges in 1996, expenses in 1997 increased over
1996, as a result of a 25% increase in advertising expenses and investments the
Company has made in marketing and new product development.
Operating Income (Loss). Operating income increased to $14.1 million in
1997, or 5.8% of net sales, from an operating loss of $(4.5) million in 1996, or
(1.8)% of net sales.
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Interest Expense. Interest expense increased to $19.3 million in 1997 from
$14.4 million in 1996. This increase is primarily attributable to a full year of
interest charged on senior subordinated notes in 1997 in connection with the May
1996 reorganization, as well as increased average borrowings on revolving credit
facilities.
Provision for Income Taxes. The provision for income taxes was $2.2 million
in 1997 and in 1996 and relates to the Company's foreign operations.
Year Ended December 31, 1996 compared to the year ended December 31, 1995
Net Sales. Net sales for the year ended December 31, 1996 were $242.0
million compared to $255.3 million for the previous year, a decrease of 5.0%.
The decrease in net sales in 1996 was due to a decline in net sales in the
United States to $113.2 million in 1996 from $131.2 million in 1995 and was
partially offset by a 4.0% increase in international net sales to $95.1 million
in 1996 from $91.2 million in 1995.
Net sales in the United States were down 14% primarily as a result of a
decline in hair dryer sales due to competitive pricing and the late arrival of
certain new curling irons which delayed introduction past the key fall season
which were subsequently cancelled. In addition, lower average pricing of shaver
products and inventory reduction programs instituted by certain major retailing
customers also negatively impacted sales in 1996.
Net sales through the Company's U.S. service stores increased 2.0% to $33.7
million in 1996 from $32.9 million in 1995. Same store sales declined 1.2% from
1995 to 1996. The decrease in same store net sales was due to a decision to
eliminate certain knife product offerings and the impact of five fewer shopping
days in the Thanksgiving to Christmas holiday selling season. Sales increased
overall due to the opening of 4 permanent stores and 12 seasonal stores for a
total of 88 stores open through the 1996 holiday shopping season. The seasonal
stores were operated on a temporary basis with no future lease commitment and 8
were closed before December 31, 1996.
International net sales increased 4.0% to $95.1 million in 1996 from $91.2
million in 1995. Most of this increase occurred in Australia which increased
22.4% in 1996 as a result of volume increases across most product lines and the
acquisition of a chain of 3 service stores in July 1996. Net sales in the United
Kingdom increased 5.1% in 1996 due to strong sales of personal care products
which more than offset a modest decline in shaver and accessory sales. These
results were somewhat offset by lower net sales in Germany and Canada due to
continued weakness in the German economy and the bankruptcy of Canada's largest
customer in July 1996.
Gross Profit. Gross profit decreased to $89.3 million, or 36.9% of net
sales, in 1996 from $112.1 million or 43.9% of net sales in 1995. The largest
factor contributing to the decline in margin was the lack of new shaver product
offerings in the U.S., which resulted in reduced selling prices on certain
shaver lines and higher costs associated with promotional gifts. Margins were
down slightly in the United Kingdom, Germany and Canada, but were offset by
strength in Australia. In addition, approximately 2.0% of the gross profit
margin percentage decline is due to inventory valuation adjustments.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $91.9 million in 1996, or 37.9% of net sales, from $83.9
million, or 32.9% of net sales in 1995. The increase was primarily due to the
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$10.9 million in non-recurring expenditures related to the reorganization in May
1996. In addition, advertising expenses decreased due to the year to year
difference in new product introductions and selling and marketing expenses
increased slightly due to costs associated with new service stores.
Operating Income (Loss). Operating income decreased to a loss of $(4.5)
million, or (1.8)% of net sales, in 1996 from income of $26.5 million, or 10.4%
of net sales, in 1995.
Interest Expense. Interest expense increased to $14.4 million in 1996 from
$7.6 million in 1995. Approximately $8.7 million of this increase is due to the
new senior subordinated notes issued May 23, 1996. This increase was partially
offset by lower rates on the refinanced term and revolving credit borrowings.
Provision for Income Taxes. The provision for income taxes was $2.2 million
in 1996 as compared to $1.3 million in 1995. The 1996 provision for foreign
income taxes increased by $0.8 million primarily due to the benefit in 1995 from
the utilization of foreign net operating loss carryforwards and the reversal of
valuation allowances on foreign deferred tax asset balances.
Liquidity and Capital Resources
For the year ended December 31, 1997, the Company used approximately $8.0
million in cash for operating activities, compared to providing cash of $5.8
million in 1996. The primary reasons for the lower cash flow in 1997 were lower
receivable collections resulting from lower fourth quarter sales in 1996 versus
1995 and increased interest payments as a result of the new Senior Subordinated
Notes issued May 23, 1996.
The Company's operations are not capital intensive. During 1997 and 1996,
the Company purchased property, plant and equipment of $5.1 million and $3.7
million, respectively. The Company's 1998 capital expenditure budget is $4.7
million, of which approximately $1.7 million will be used for purchases of tools
and molds for new products.
During 1997, the Company repaid aggregate scheduled principal amounts on
term loans of $1.0 million, and increased its net borrowings under revolving
credit agreements by $10.9 million.
The Company's primary sources of liquidity are funds generated from
operations and borrowings available pursuant to the Senior Credit Agreement. The
Senior Credit Agreement provides for $70 million in Revolving Credit Facilities
and $10 million in Term Loans. The Term Loans are repayable quarterly through
March 31, 2002. Borrowings under the Revolving Credit Facilities mature on June
30, 2002. 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.
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Effects of Changes in Exchange Rates
The Company's results of operations are affected by changes in exchange
rates as the Company prices its products in certain foreign markets such as
Europe, Canada and Australia in local currency. While many of the Company's
foreign selling and distribution costs are also denominated in these currencies,
a large portion of the product costs are U.S. dollar denominated. As a result, a
decline in the value of the U.S. dollar relative to these other currencies can
have a favorable effect on the profitability of the Company and, conversely, an
increase in the value of the U.S. dollar relative to these other currencies can
have a negative effect on the profitability of the Company. The Company takes
precautions against these fluctuations by entering into foreign exchange forward
contracts, which, in effect, lock in the cost for products the Company's foreign
subsidiaries purchase. As of December 31, 1997, forward contracts to sell $15.3
million U.K. Pounds Sterling were outstanding, all of which mature in 1998.
Seasonality
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 more than 40% of its annual net sales in the fourth quarter of
each year. As a result of this seasonality, the Company's inventory and working
capital needs fluctuate substantially during the year. In addition, Christmas
orders from retailers are often made late in the year, making forecasting of
production schedules and inventory purchases difficult. Any adverse change in
the Company's results of operations in the fourth quarter would have a material
adverse effect on the Company's financial condition and results of operations.
Inflation
In recent years, inflation has not had a material impact upon the results of
the Company's operations.
Year 2000 Compliance
The Company continues to assess its exposure related to the impact of the
Year 2000 date issue. The Year 2000 date issue arises from the fact that many
computer programs use only two digits to identify a year in a date field. The
Company's key financial and operational systems have been reviewed and it has
been determined that the majority of the systems do not require modification.
Accordingly, management does not expect that any costs to be incurred will have
a material adverse impact on the Company's financial position, results of
operations or cash flows. However, the Company could be adversely impacted by
the Year 2000 date issue if suppliers, customers and other businesses do not
address this issue successfully. Management continues to assess these risks in
order to reduce the impact on the Company.
-13-
ITEM 8. Financial Statements and Supplementary Data
The Company's financial statements and supplementary data are included
elsewhere herein as outlined on page F-1.
ITEM 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None
PART III
ITEM 10. Directors and Executive Officers.
The following table sets forth certain information (ages as of March
15, 1998) with respect to each executive officer of the Company and individuals
who are directors on the Remington Management Committee.
Name Age Positions and Offices
- --------------------- ------ -------------------------------
Neil P. DeFeo 51 Chief Executive Officer,President
and Director
Alexander R. Castaldi 47 Executive Vice President and
Chief Financial Officer
Lawrence D. Handler 52 President, Remington Service
Stores
Geoffrey L. Hoddinott 54 Vice President, Remington Europe,
Africa and Middle East
H. Graham Kimpton 62 Vice President, Remington
Australia and Asia
Lester C. Lee 37 Senior Vice President Sales and
Integrated Logistics
Michael A. Linton 41 Vice President, Marketing
Allen S. Lipson 55 Vice President, Administration,
General Counseland Secretary
Timothy G. Simmone 32 Vice President, Chief Technical
Officer
Victor K. Kiam, II 71 Chairman and Director
Norman W. Alpert 39 Director
William B. Connell 57 Director
Victor K. Kiam, III 38 Director
Kevin A. Mundt 44 Director
Arthur J. Nagle 59 Director
Daniel S. O'Connell 43 Director
Robert L. Rosner 38 Director
-14-
Neil P. DeFeo has served as President, Chief Executive Officer and a
Director of the Company since January 1997. From 1993 to 1996, Mr. DeFeo was
Group Vice President, U.S. Operations for The Clorox Company. For 25 years prior
to 1993, Mr. DeFeo worked for Procter & Gamble in various executive positions,
including Vice President and Managing Director, Worldwide Strategic Planning,
Laundry and Cleaning Products.
Alexander R. Castaldi has been the Executive Vice President and Chief
Financial Officer of the Company since November 1996. From 1995 to 1996, Mr
Castaldi was Vice President and Chief Financial Officer of Uniroyal Chemical and
from 1990 to 1995, he was Senior Vice President and Chief Financial Officer of
Kendall International, Inc.
Lawrence D. Handler has been President, Remington Service Stores, since
June 1996 and was Vice President and Chief Financial Officer of the Service
Stores from January 1995 when he joined the Company until June 1996. From
January 1994 until December 1994, Mr. Handler was a private financial
consultant, specializing in retail operations and from May 1993 until December
1993 he was Vice President and Chief Financial Officer of Terrific Promotions,
Inc. From March 1992 until May 1993, he was Vice President and Controller of
Value Merchants, Inc.
Geoffrey L. Hoddinott is Vice President, Remington Europe, Africa and
Middle East. Mr. Hoddinott has been managing director of the United Kingdom
operation since he joined the Company in November 1981.
H. Graham Kimpton is Vice President, Remington Australia and Asia. Mr.
Kimpton joined the Company in April 1988 and has been managing the
Australian/New Zealand operation since that time.
Lester C. Lee has been Senior Vice President Sales and Integrated Logistics
of the Company since July 1997. From 1995 until 1997, he was with Pacific Bell
Mobile Services, a Division of Pacific Telesis, most recently as Vice President
of Sales, and from 1989 until 1995, he was with Norelco Consumer Products
Company in various sales positions, including Director of Sales, Western
Division.
Michael A. Linton, was appointed Vice President Marketing in March 1997.
Prior to joining the Company, he was with James River Corporation since 1993 as
Marketing Director and most recently as Vice President, General Manager, Towel
and Tissue Category. From 1987 to 1993, Mr. Linton held various positions with
Progressive Insurance Company, including Division General Manager and Assistant
Vice President.
Allen S. Lipson is Vice President, Administration, General Counsel and
Secretary of Remington since May 1996. Mr. Lipson has been the General Counsel
of the Company since October 1988.
Timothy G. Simmone was appointed Vice President, Chief Technical Officer of
the Company in June 1997. From 1988 until 1997, he was with The Stanley Works
Corporation in various engineering position, most recently as Vice President,
Product Development of the Stanley Fastening Systems Division.
Victor K. Kiam, II has served as Chairman since 1979 and served as Chief
Executive Officer of the Company from 1979 to 1996. Mr. Kiam is the Chairman of
RPI Inc., and a director of Citadel Technology and News Communication.
-15-
Norman W. Alpert has been a Director of Remington since May 1996. Mr.
Alpert is a Managing Director of Vestar Capital Partners and was a founding
partner of Vestar at its inception in 1988. Mr. Alpert is Chairman of the Board
of Directors of International AirParts Corporation, Aearo Corporation and
Advanced Organics, Inc., and a director of Clark-Schwebel, Inc. and Russell
Stanley Corporation, all companies in which Vestar or its affiliates have a
significant equity interest.
William B. Connell has been a Director of Remington since 1990. Mr. Connell
is currently Chairman of EBD Holdings, Inc., a private venture capital group.
Mr. Connell previously served as Vice Chairman of Whittle Communications, L.P.
from 1992 to 1994 and served as its President and Chief Operating Officer from
1990 to 1992. In addition to Remington, Mr. Connell is currently a director of
Baldwin Piano & Organ Company, Dolphin Software, Inc., EDB Holdings, Inc., New
Day Schools, Inc. and Retail Optical Holdings.
Victor K. Kiam, III has been a Director of Remington since 1992. Mr Kiam has
been Executive Vice President of RPI Corporation since 1996 and was with the
Company from 1986 until 1996 in a variety of positions in manufacturing, sales
and marketing, including Vice President Corporate Development. He is the son of
Victor K. Kiam, II.
Kevin A. Mundt has been a Director of Remington since July 1996. Mr. Mundt
is Vice President, Group Business Head of Mercer Management Consulting since
1997 and was co-founder and Managing Director of Corporate Decisions, Inc. since
its inception in 1983 until its merger with Mercer Management Consulting in
1997. Mr. Mundt is a director of Russell Stanley Corporation, Advanced Organics,
Inc. and Reid Plastics, companies in which Vestar or its affiliates have a
significant equity interest and in Telephone Data Systems, Inc.
Arthur J. Nagle has been a Director of Remington since May 1996. Mr. Nagle
is a Managing Director of Vestar Capital Partners and was a founding partner of
Vestar at its inception in 1988. Mr. Nagle is a director of Aearo Corporation,
Chart House Enterprises, Inc., Clark-Schwebel, Inc. and La Petite Holdings
Corporation, all companies (other than Chart House Enterprises, Inc.) in which
Vestar or its affiliates have a significant equity interest.
Daniel S. O'Connell has been a Director of Remington since May 1996. Mr.
O'Connell is founder and the Chief Executive Officer of Vestar Capital Partners.
Mr. O'Connell is a director of Advanced Organics, Inc., Aearo Corporation,
Clark-Schwebel, Inc., Pinnacle Automation, Inc., Reid Plastics Holdings, Inc.,
Sun Apparel, Inc. and Russell-Stanley Corporation, all companies in which Vestar
or its affiliates have a significant equity interest.
Robert L. Rosner has been a Director of Remington since May 1996. Mr.
Rosner is a Managing Director of Vestar Capital Partners and was a founding
partner of Vestar at its inception in 1988. Mr. Rosner serves as Chairman of the
Board of Directors of Russell-Stanley Corporation, a company in which Vestar or
its affiliates have a significant equity interest.
-16-
ITEM 11. Executive Compensation
Compensation of Executive Officers
The following Summary Compensation Table includes individual compensation
information during each of the years ended December 31, 1996 and 1997 for each
individual who served in the position of the Company's Chief Executive Officer
("CEO") during 1997 and each of the next four most highly compensated executive
officers of the Company who were serving as executive officers of the Company at
the end of 1997 (collectively, the "Named Executive Officers") for services
rendered in all capacities to the Company.
Annual Compensation All Other
Name and Principal Position Year Salary ($)(1) Bonus ($)(2) Compensation ($)
- --------------------------- ----- ------------- ------------ ---------------
Neil P. DeFeo, President, CEO and 1997 $392,000 $200,000 $ 214,048(4)
Director (3)
Alexander R. Castaldi, Executive VP 1997 265,000 132,000 3,189(6)
and CFO (5) 1996 25,500 --
Allen S. Lipson, VP, Administration 1997 195,400 78,400 4,413(7)
General Counsel & Secretary 1996 188,900 452,123(8) 5,521(7)
Lawrence D. Handler, President, 1997 154,100 65,500 2,745(6)
Remington Service Stores 1996 133,200 76,065(9) 1,394(6)
Michael A. Linton, VP Marketing (10) 1997 129,500 61,868 1,637(6)
F. Peter Cuneo, former President 1997 32,308 -- 151,483(12)
and CEO(11) 1996 418,200 -- 6,156(12)
- -----------------------
(1) Includes compensation earned during the year but deferred pursuant to the
Company's Deferred Compensation Plan.
(2) Bonus amounts shown are those accrued for and paid in or after the end of
the year and include amounts deferred pursuant to the Company's Deferred
Compensation Plan.
(3) Mr. DeFeo became President and CEO in January 1997.
(4) The amounts shown include Company matching contributions to the Company's
401(k) Plan of $ 2,415 and $211,633 of relocation and travel expenses.
(5) Mr. Castaldi became Executive Vice President and CFO in November 1996.
(6) Company matching contribution to the Company's 401(k) Plan.
(7) The amounts shown include Company matching contributions to the Company's
401 (k) Plan of $ 2,631 and $3,738 for 1997 and 1996 and disability
insurance premium payments of $1,782 for 1997 and 1996.
(8) A special bonus paid in connection with the reorganization of the Company
which occurred in May 1996.
(9) Includes a special bonus of $39,315 paid in connection with the
reorganization of the Company which occurred in May 1996.
(10) Mr. Linton became Vice President Marketing in March 1997.
(11) Mr. Cuneo ceased to be employed by the Company in January 1997.
(12) The amounts shown include payments upon termination pursuant to a
termination agreement totaling $150,512, Company matching contributions to
the Company's 401 (k) Employee Savings Plan of $646 and $2,250 in 1997 and
1996 and disability insurance premium payments of $325 and $3,906 in 1997
and 1996.
-17-
Compensation of Directors
Messrs. William B. Connell and Kevin A. Mundt, Directors of the Company,
each receive annual compensation of $20,000 payable quarterly for services in
such capacity. No other Director of the Company receives any compensation for
services in such capacity. Each of the Directors of Remington are reimbursed for
out-of-pocket expenses incurred in connection with attending meetings.
Compensation Committee Interlocks and Insider Participation
The compensation committee of the Management Committee of Remington is
comprised of Messrs. Arthur J. Nagle, Robert L. Rosner and Victor K. Kiam, III.
None of these individuals, other than Mr. Kiam, was an officer of or employed by
the Company. Mr. Kiam was employed by the Company prior to the Reorganization.
Other Arrangements
The Company has an employment agreement with Mr. DeFeo which provides for
his continued employment as President and Chief Executive Officer through the
year 2000, unless earlier terminated. The agreement provides for a base salary
of not less than $400,000, of which $100,000 is deferred, and an annual bonus
not less than $200,000 in the event the Company achieves 100% of the criteria
established by the Management Committee for such year. The agreement provides
for Mr. DeFeo to receive 18 months of salary continuation plus the annual bonus
he would have been entitled to if his employment is involuntarily terminated
other than for "cause" or if he resigns for "good reason ", or 12 months of
salary continuation plus annual bonus in the event the agreement is not renewed
by the Company. The Company is required to provide Mr. DeFeo with a letter of
credit equal to the severance benefit payable to Mr. DeFeo until such time as
the Company's earnings (before interest, taxes, depreciation and amortization)
exceeds $26 million. The Company is also required to provide Mr. DeFeo with term
life insurance in the amount of not less than $500,000.
The Company has entered into agreements with Messrs. Castaldi, Lipson,
Linton and Handler whereby such employees would be entitled to salary
continuation for a specified period if their employment was involuntarily
terminated other than for "cause" during the term of the agreement and, for Mr.
Castaldi, if he resigns for "good reason". Messrs. Castaldi and Lipson are each
entitled to 12 months of salary continuation and Messrs. Linton and Handler are
each entitled to 6 months of salary continuation.
Deferred Compensation Plan
During 1997, the Company established a Deferred Compensation Plan pursuant
to which eligible executive employees (including the Named Executive Officers)
may elect to defer all or a portion of the bonus otherwise payable under the
Company's Bonus Plan and up to 33% of their annual salary, and such amounts are
placed into a deferral account. The participants may select various mutual funds
in which all or a part of their deferral accounts shall be deemed to be
invested. Distributions from a participant's deferral accounts will be paid in a
lump sum or in equal annual installments over a period of up to 15 years
-18-
beginning upon their termination of employment, death or retirement. All amounts
deferred by the participants in the Plan are paid to a Deferred Compensation
Plan Trust to be held in order to fund the Company's obligations under the
Deferred Compensation Plan. The assets of the trust, however, are subject to the
claims of the creditors of the Company in the event the Company is Insolvent, as
such term is defined in the trust agreement.
Bonus Plan
The Company has an annual bonus plan (the "Bonus Plan") which is designed
to motivate each employee participant. Approximately 125 employees in the United
States and 125 employees in the international operations participate in the
Bonus Plan. Under the Bonus Plan, each participating employee is assigned a
target bonus award, representing up to 75% of his or her annual base salary that
will be paid if predetermined performance goals are achieved. Performance goals
for the various areas of the Company are established annually by the
Compensation Committee of the Company.
Phantom Equity Program
In January 1998, the Company replaced its Management Option Program and
adopted a Phantom Equity Program under which a maximum of 21% of the value of
the Company's Common Units and Preferred Equity (together, the "Equity") can be
awarded to selected officers and other key employees of the Company and its
affiliates. Awards under the Phantom Equity Program replaced all of the
Management options previously issued to management and also resulted in the
Company repurchasing from management all Common Units originally purchased in
connection with the reorganization of the Company in May 1996. See Item 13,
Certain Relationships and Related Transactions. The Phantom Equity Program is
comprised of time based (consisting of 12 1/2% of the Equity), performance based
(6 1/2%) and super performance (2%) based awards. All awards grant to the
recipient a specified percentage of the Equity (the "applicable percentage").
A time based award vests in five equal annual installments, upon the sale of
the Company or upon an initial public offering of the Company's stock ("IPO"),
whichever comes first. If the individual's employment with the Company is
terminated for any reason other than death or disability within three years of
the date of grant of the award, the award is automatically terminated. The
amount received under the award and how it is paid is based upon the event which
gave rise to the payment. If the payment is due to a Company sale, the
individual will receive the applicable percentage of the net amount available
for distribution for the outstanding Equity payable, at the Company's option, in
a lump sum upon the closing of the sale or in the same manner as the selling
shareholders. If the payment is due to an IPO, the payment is an amount equal to
the applicable percentage of the Equity implied in the public offering payable,
at the option of the Company, either entirely in cash or 40% in cash and the
remainder in Company stock. If the payment is due to termination of employment,
the participant receives the applicable percentage of the fair market value of
the Equity, determined by the Management Committee payable, at the Company's
option, in up to five equal annual installments or upon an IPO or Company sale.
The performance and super performance based awards are similar to the time
based awards except that performance based award vests in stages as the Company
achieves specified performance targets while the super performance based award
vests entirely upon the achievement of a single target. Payment of the awards
does not occur until and is dependent upon the achievement of both a performance
criteria and an event criteria. The event criteria is a Company sale or when
Vestar's ownership falls below 10% of the Common Units. The performance criteria
-19-
for the performance based award vests in segments as the Company achieves
specified performance targets while there is only one target for the super
performance based award. Any performance or super performance based award which
is not fully vested by December 31, 2002 is automatically terminated.
The Phantom Equity Program and all awards are subject to readjustment in the
event of a reorganization of the Company required in connection with a
refinancing, and the applicable percentages are subject to readjustment to take
into consideration new issuances of Common Units or Preferred Capital.
The following table contains information with respect to grants of phantom
awards to each of the Named Executive Officers in January, 1998:
Assumed Annual
Rated of Stock
Individual Grants Appreciation for Award Term(4)
--------------------------------------------------------------------------------------------------
Number of Securities Exercise or
Underlying % of Total Base Price Expiration
Name Award's Granted(1) SARs Granted(2) ($/Sh)(3) Date 5%($) 10%($)
- ------------------ ------------------ --------------- --------- ----------- ------ -------
Neil P. DeFeo 4.00(5) 32.9 N/A 12/31/2009 N/A N/A
2.00(6) 34.2 N/A 12/31/2002 N/A N/A
Alexander R. Castaldi 1.30(5) 10.7 N/A 12/31/2009 N/A N/A
0.50(6) 8.5 N/A 12/31/2002 N/A N/A
0.22(7) 13.0 N/A 12/31/2002 N/A N/A
Allen S. Lipson 0.90(5) 7.4 N/A 12/31/2009 N/A N/A
0.35(6) 6.0 N/A 12/31/2002 N/A N/A
0.16(7) 9.5 N/A 12/31/2002 N/A N/A
Lawrence D. Handler 0.35(5) 2.9 N/A 12/31/2009 N/A N/A
0.20(6) 3.4 N/A 12/31/2002 N/A N/A
0.09(7) 5.3 N/A 12/31/2002 N/A N/A
Michael A. Linton 0.60(5) 4.9 N/A 12/31/2009 N/A N/A
0.30(6) 5.1 N/A 12/31/2002 N/A N/A
0.13(7) 7.7 N/A 12/31/2002 N/A N/A
- ---------------------
(1) Indicates the applicable percentage of the Company's Equity underlying
each award granted.
(2) Indicates the % of total time, performance and super performance based
award granted.
(3) There is no exercise price and as of the time of the grant, there was
no market price for the Company's Equity.
(4) The Company's Equity is not registered under the Securities Act of
1933 and is therefore not publically traded. Accordingly, there is no
market price for the Company's Equity. Payments to holders of phantom
equity awards are dependent upon the realized value of the Equity upon
a sale of the Company or and IPO. See above for a complete description
of the Phantom Equity Program and the determination of payouts.
(5) Grant of Time Based award.
(6) Performance Based award.
(7) Super Performance Based award.
401(k) Plan
The Company maintains a savings plan (the "Savings Plan") qualified under
Sections 401 (a) and 401(k) of the Internal Revenue Code. Generally, all
employees of the Company in the United States who have completed three months of
service are eligible to participate in the Savings Plan. For each employee who
-20-
elects to participate in the Savings Plan and makes a contribution thereto, the
Company makes a matching contribution of 40% of the first 5% of annual
compensation contributed. The maximum contribution for any participant for any
year is 15% of such participant's eligible compensation.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Set forth below is certain information regarding the ownership of the
Preferred Equity and Common Units of Remington by each person known by Remington
to beneficially own 5.0% or more of the outstanding interests of either the
Preferred Equity or Common Units, each Director and Named Executive Officer and
all Directors and executive officers as a group as of March 15, 1998. Except as
indicated below, the address for each of the persons listed below is c/o
Remington Products Company, L.L.C., 60 Main Street, Bridgeport, Connecticut,
06604.
Preferred Equity Common Units
Name Capital (1) % Number %
- --------------------- ----------- ---- ------ ----
Vestar Equity Partners (2)(3) $30,000,000 48.4% 34,400 50%
245 Park Avenue, 41st Floor
New York, New York 10167
RPI Corp. (3) 32,000,000 51.6% 34,400 50%
350 Fifth Avenue, Suite 5408
New York, New York 10118
Victor K. Kiam, II (3)(4) 32,000,000 51.6% 34,400 50%
Norman W. Alpert(5) 30,000,000 48.4% 34,400 50%
Arthur J. Nagle (5) 30,000,000 48.4% 34,400 50%
Daniel S. O'Connell (5) 30,000,000 48.4% 34,400 50%
Robert L. Rosner (5) 30,000,000 48.4% 34,400 50%
Directors and executive officers as a group
(5 persons) $62,000,000 100.0% 68,800 100%
- -----------------------
(1) Amounts, in dollars, represent the capital contribution to the Preferred
Equity beneficially owned by each person and entity set forth below. The
Preferred Equity has not been denominated in units or other shares.
(2) Vestar's interest in the Company is owned by the Vestar Members, which are
controlled by Vestar. The Vestar Members have assigned a portion of their
interests in the Company to certain coinvestors, although such co-investors
will not directly hold any Common Units. The general partner of Vestar is
Vestar Associates L.P., a limited partnership whose general partner is
Vestar Associates Corporation ("VAC"). In such capacity, VAC exercises sole
voting and investment power with respect to all of the equity interests
held of record by the Vestar Members. Messrs. Alpert, Nagle, O'Connell, and
Rosner, who are Directors of Remington, are affiliated with Vestar in the
capacities described under Item 10 Directiors and Executive Officers, and
are stockholders of VAC. Individually, no stockholder, director or officer
of VAC is deemed to have or share such voting or investment power within
the meaning of Rule 13d-3 under the Exchange Act. Accordingly, no part of
the Preferred Equity or Common Units is beneficially owned by Messrs.
Alpert, Nagle, O'Connell or Rosner or any other stockholder, director or
officer of VAC.
(3) The Vestar Members and RPI have entered into the LLC Agreement which gives
Vestar effective control over the management of the Company.
(4) Mr. Kiam's interest in the Company is owned by RPI. The shareholders of RPI
are Mr. Kiam and two Kiam family trusts. Mr. Kiam is a trustee of each of
these trusts. Mr. Kiam disclaims beneficial ownership of the shares of
Remington owned by RPI. The address of Mr. Kiam is 11097 Isle Brook Court,
West Palm Beach, Florida, 33414.
(5) Messrs. Alpert, Nagle, O'Connell and Rosner are affiliated with Vestar in
the capacities described in Item 10 Directors and Executive Officers.
-21-
Ownership of Remingtonequity interests for these individuals includes the
$30,000,000 of Preferred Equity and 34,440 Common Units included in the above
table beneficially owned by Vestar through the Vestar Members, of which such
persons disclaim beneficial ownership. Each such person's business address is
c/o Vestar Equity Partners, L.P., 245 Park Avenue, 41st Floor, New York, New
York 10167.
ITEM 13. Certain Relationships and Related Transactions
Pursuant to a management agreement (the "Management Agreement") entered
into in connection with the reorganization of the Company in 1996, Vestar
Capital Partners ("Vestar Capital") receives an annual advisory fee equal to the
greater of $500,000 or 1.5% of EBITDA (as defined in such agreement) of the
Company on a consolidated basis for rendering advisory and consulting services
in relation to strategic financial planning and other affairs of the Company.
Vestar Capital will also be paid reasonable and customary investment banking
fees in connection with an initial public offering, sale of the Company and
other financings. The Management Agreement will be in effect until May 23, 2006,
provided that the Management Agreement will terminate on the earlier to occur
of: (i) a qualified public offering or (ii) the first date that Vestar Capital
owns less than 25% of the number of the Company's Common Units owned by Vestar
Capital on May 23, 1996, and provided further that Vestar Capital may terminate
the Management Agreement at any time. Vestar Capital owns, indirectly through
Vestar Corp., 50% of the Common Units of the Company and possesses the right to
designate five of the nine individuals who comprise the Management Committee of
the Company.
Pursuant to a consulting and transitional services agreement (the
"Consulting Agreement") entered into in connection with the reorganization of
the Company in 1996, RPI receives an aggregate annual fee equal to the sum of:
(i) the greater of $500,000 or 1.5% of EBITDA (as defined in such agreement) of
the Company on a consolidated basis and (ii) $250,000 in 1997 and 1998 if the
Company's net revenues or EBITDA (as defined in such agreement) exceed certain
targets in such years, for rendering advisory and consulting services in
relation to strategic financial planning, product development and evaluation of
mergers, acquisitions and divestitures. The Consulting Agreement will be in
effect until May 23, 2006, provided that the Consulting Agreement will terminate
on the earlier to occur of: (i) a qualified public offering or (ii) the first
date that RPI owns less than 25% of the number of the Company's Common Units
owned by RPI on the May 23, 1996, and provided further that Vestar Capital may
terminate the Consulting Agreement at any time (but only to the extent that
Vestar Capital also terminates similar provisions of the Management Agreement).
RPI, an entity controlled by the Kiams, owns 50% of the Common Units of the
Company and possesses the right to designate two of the nine individuals who
comprise the Management Committee of the Company.
Pursuant to a Non-Competition Agreement (the "Non-Competition Agreement")
dated May 23, 1996, between the Company, Vestar Corp. and Victor K. Kiam, II and
Victor K. Kiam, III (the "Kiams"), the Kiams may not compete with, solicit any
customers of, own, manage or operate any business in competition with or perform
any action substantially detrimental to the Company's businesses. The provisions
of the Non-Competition Agreement will apply during the period the Kiams have a
Significant Interest (as defined in the Non-Competition Agreement) in the
Company and thereafter for: (i) five years, with respect to electric shavers,
shaver accessories and men's grooming products, and (ii) three years, with
respect
-22-
to women's personal care appliances, home health appliances, travel appliances,
environmental products, dental products and small kitchen appliances. The
Non-Competition Agreement allows the Kiams to continue to market certain
competing travel appliance products developed by an affiliate of the Kiams.
In connection with the adoption of the Phantom Equity Program and the
issuance of Phantom Equity Agreements in January 1998, the Company repurchased
from Messrs. Lipson, Hoddinott and Kimpton all shares of Common Units they had
purchased from the Company in May 1996 in connection with the reorganization of
the Company at the same price they had originally paid for such units. The
Company paid for the repurchased Common Units by issuing promissory notes for
the full purchase price, payable within 60 days following the termination of
employment for reasons other than cause (as defined in the promissory note) or
upon the payment of any phantom equity award to such individuals. The phantom
equity agreements with each of these individuals provided that any payment under
the promissory note would reduce, dollar for dollar, the applicable phantom
equity payment. The promissory note issued to Mr. Lipson was for $150,000,
together with interest of 6 1/2% and the non-interest bearing notes issued to
Messrs. Hoddinott and Kimpton were each for $46,000.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
2. Financial Statement Schedule
3. Exhibits
3.1 Amended and Restated Limited Liability Company Agreement dated
as of May 16, 1996, by and among Vestar Shaver Corp.
(formerly Vestar/Remington Corp.) ("Vestar Corp. I"),
Vestar Razor Corp.("Vestar Corp. II" and, together with
Vestar Corp. I, the "Vestar Members"), RPI Corp. (formerly
known as Remington Products,Inc.)("RPI"), and certain
members of senior management of the Company. Incorporated by
reference to Exhibit 3.1 in Registration Statement onForm S-4
(File Number 333-07429).
3.2 Certificate of Formation of Remington Products Company,
L.L.C.("Remington"). Incorporated by reference to Exhibit 3.2 in
Registration Statement on Form S-4(File Number 333-07429).
4.1 Indenture dated as of May 23, 1996 between Remington, Remington
Capital Corp. ("Capital") and The Bank of New York, as trustee.
Incorporated by reference to Exhibit 4.1 in Registration
Statement on Form S-4(File Number 333-07429).
4.2 Form of 11% Series B Senior Subordinated Notes. Incorporated by
reference to Exhibit 4.2 in Registration Statement on Form
S-4(File Number 333-07429).
-23-
4.3 Purchase Agreement dated May 16, 1996 between Remington, Capital
and Bear, Sterns & Co. Inc. Incorporated by reference to Exhibit
4.3 in Registration Statement on Form S-4(File Number 333-07429).
4.4 Registration Rights Agreement dated as of May 23, 1996 between
Remington, Capital and Bear Stearns & Co. Inc. Incorporated by
reference to Exhibit 4.4 in Registration Statement on Form
S-4(File Number 333-07429).
10.1 Credit and Guarantee Agreement dated as of May 23, 1996
among Remington, certain of its subsidiaries, varius lending
institutions,Fleet National Bank and Banque Nationale de Paris,
as co-documentation agents, and Chemical Bank,as administrative
agent (the "Credit and Guarantee Agreement"). Incorporated by
reference to Exhibit 10.1 in Registration Statement on Form S-4
(File Number 333- 07429).
10.2 First Amendment and Waiver Number 1,dated as of December 27,1996,
to the Credit and Guarantee Agreement. Incorporated by reference
to Exhibit 10.1 in the Company's Current Report on Form 8-K dated
December 24, 1996.
10.3 Second Amendment, dated as of March 30, 1997 to the Credit and
Guarantee Agreement. Incorporated by reference to Exhibit 10.1 in
the Company's Quarterly Report on Form 10-Q for the quarter ended
March 29, 1997.
10.4 Third Amendment, dated as of May 16, 1997 to the Credit and
Guarantee Agreement. Incorporated by reference to Exhibit 10.1 in
the Company's Quarterly Report on Form 10-Q for the quarter ended
June 28, 1997.
10.5 Fourth Amendment, dated as of March 20, 1998 to the Credit and
Guarantee Agreement.
10.6 Company Security Agreement dated as of May 23, 1996 made by
Remington in favor of the Agent. Incorporated by reference to
Exhibit 10.2 in Registration Statement on Form S-4(File Number
333-07429).
10.7 Form of Subsidiaries Security Agreement dated as of May 23, 1996
made by each of Capital, Remington Corporation, L.L.C. ("IP
Subsidiary")and Remington Rand Corporation ("Rand") in favor of
the Agent. Incorporated by reference to Exhibit 10.3 in
Registration Statement on Form S-4(File Number 333-07429).
10.8 Conditional Assignment of and Security Interest in Patent
Rights(United States) dated as of May 23, 1996 made by IP
Subsidiary in favor of the Agent. Incorporated by reference to
Exhibit 10.4 in Registration Statement on Form S-4(File Number
333-07429).
-24-
10.9 Conditional Assignment of and Security Interest in Patent
Rights(United Kingdom) dated as of May 23, 1996 made by IP
Subsidiary in favor of the Agent. Incorporated by reference to
Exhibit 10.5 in Registration Statement on Form S-4(File Number
333-07429).
10.10 Conditional Assignment of and Security Interest in Trademark
Rights(United States) dated as of May 23, 1996 made by IP
Subsidiary in favor of the Agent. Incorporated by reference to
Exhibit 10.6 in Registration Statement on Form S- 4(File Number
333-07429).
10.11 Conditional Assignment of and Security Interest in Trademark
Rights(United Kingdom) dated as of May 23, 1996 made by IP
Subsidiary in favor of the Agent. Incorporated by reference to
Exhibit 10.7 in Registration Statement on Form S- 4(File Number
333-07429).
10.12 Members Limited Recourse Pledge Agreement dated as of May 23,
1996 made by Remington in favor of the Agent. Incorporated by
reference to Exhibit 10.8 in Registration Statement on Form
S-4(File Number 333-07429).
10.13 Company Pledge Agreement dated as of May 23, 1996 made by
Remington in favor of the Agent. Incorporated by reference to
Exhibit 10.9 in Registration Statement on Form S-4(File Number
333-07429).
10.14 Subsidiaries Pledge Agreement dated as of May 23, 1996 made by
Rand in favor of the Agent. Incorporated by reference to Exhibit
10.10 in Registration Statement on Form S-4(File Number
333-07429).
10.15 Subsidiaries Guarantee dated as of May 23, 1996 made by Capital,
IP subsidiary and Rand in favor of the Agent. .Incorporated by
reference to Exhibit 10.11 in Registration Statement on Form
S-4(File Number 333-07429).
10.16 Purchase Agreement dated as of May 1, 1996 by and among Vestar
Corp I., Remington, Remsen, Isaac Perlmutter, RPI and Victor K.
Kiam, II. Incorporated by reference to Exhibit 10.12 in
Registration Statement on Form S-4(File Number 333- 07429).
10.17 Agreement and Plan of Merger dated as of May 23, 1996 between
Remington Products Company and Remington. Incorporated by
reference to Exhibit 10.13 in Registration Statement on Form
S-4(File Number 333-07429).
10.18 Securityholders Agreement dated as of May 16, 1996 among the
Vestar Members, Vestar Equity Partners, L.P. ("Vestar"), RPI,
Victor K. Kiam,II and the other parties signatory thereto.
Incorporated by reference to Exhibit 10.14 in Registration
Statement on Form S-4(File Number 333-07429).
-25-
10.19 Management Agreement dated as of May 23, 1996 between Remington
and Vestar Capital Partners. Incorporated by reference to Exhibit
10.15 in Registration Statement on Form S-4(File Number
333-07429).
10.20 Consulting and Transitional Services Agreement dated as of May
23,1996 between Remington and RPI. Incorporated by reference to
Exhibit 10.16 in Registration Statement on Form S-4(File Number
333-07429).
10.21 Employment Agreement made as of January 8, 1997 between the
Company and Neil P. DeFeo. Incorporated by reference to Exhibit
10.2 in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 29, 1997.
10.22 Form of Executive Severance Agreement dated as of May 23, 1996 by
and between Remington and Allen S.Lipson is incorporated herein
by reference to Registration Statement on Form S-4(File Number
333-07429).
10.23 Executive Severance Agreement dated as of November 25, 1996
between Remington and Alexander R. Castaldi. Incorporated by
reference to Exhibit 10.20 in the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
10.24 Form of Severance Agreement
10.25 Form of Time Based Phantom Equity Agreement with participants in
the Phantom Equity Program.
10.26 Form of Performance Based Phantom Equity Agreement with
participants in the Phantom Equity Program.
10.27 Form of Super Performance Based Phantom Equity Agreement with
participants in the Phantom Equity Program.
10.28 Promissory Note dated January 14, 1998 from Remington to Allen S.
Lipson for $150,000.
10.29 License Agreement made May 23, 1996 by and between IP Subsidiary
and Act II Jewelry, Inc. Incorporated by reference to Exhibit
10.23 in Registration Statement on Form S-4 (File Number
333-07429).
10.30 License Agreement made May 23, 1996 by and between IP Subsidiary
and VKK Equities Corporation. Incorporated by reference to
Exhibit 10.24 in Registration Statement on
Form S-4 (File Number 333-07429).
10.31 Tradename Agreement made May 23, 1996 by and between IP
Subsidiary and Remington Apparel Company, Inc.. Incorporated by
reference to Exhibit 10.25 in Registration Statement on Form S-4
(File Number 333-07429).
-26-
10.32 License Agreement dated as of May 23, 1996 by and between
Remington and IP Subsidiary. Incorporated by reference to Exhibit
10.26 in Registration Statement on Form S-4 (File Number
333-07429).
10.33 1998 Remington Bonus Plan.
21 Subsidiaries of Remington.
24. Powers of Attorney.
27 Financial Data Schedule.
-27-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on March 27, 1998.
* *
- -------------------------------------- ----------------------------------
Neil F. DeFeo, Chief Executive Officer, Alexander R. Castaldi, Executive Vice
President and Director President and Chief Financial Officer
/s/ Kris J. Kelley
- ------------------------------------- ----------------------------------
Kris J. Kelley, Vice President and Victor K. Kiam II, Chairman and Director
Controller
* *
- ------------------------------------- ----------------------------------
Victor K. Kiam III, Director Norman W. Alpert, Director
* *
- ------------------------------------- ----------------------------------
Arthur J. Nagle, Director Daniel S. O'Connell, Director
* *
- ------------------------------------- -----------------------------------
Robert L. Rosner, Director William B. Connell, Director
*
- ------------------------------------
Kevin A. Mundt, Director
*By /s/ Allen S. Lipson
- ------------------------------------
Allen S. Lipson, as Attorney-in-Fact
-28-
INDEX TO FINANCIAL STATEMENTS
Pages
-------
Financial Statements
- --------------------
Independent Auditors' Report F-2
Report of Independent Accountants F-3
Consolidated Balance Sheets as of
December 31, 1997 and December 31, 1996 F-4
Consolidated Statements of Operations for each of the years in the three-year
period ended December 31, 1997 F-5
Consolidated Statements of Members' Deficit/Partners' Capital for each of the
years in the three-year period ended December 31, 1997 F-6
Consolidated Statements of Cash Flows for each of the years in the three-year
period ended December 31,1997 F-7
Notes to Consolidated Financial Statements F-8
Financial Statement Schedule
- ----------------------------
Report of Independent Accountants on Supplemental Schedule S-1
Schedule II - Valuation and Qualifying Accounts for each of the years in the
three year period ended December 31,1997 S-2
Certain schedules are omitted because they are not applicable or the
required information is provided in the Financial Statements or related notes
thereto.
F-1
Independent Auditors' Report
To the Management Committee of
REMINGTON PRODUCTS COMPANY, L.L.C.:
We have audited the accompanying consolidated balance sheets of Remington
Products Company, L.L.C. and subsidiaries (the "Company") as of December 31,
1997 and 1996, and the related consolidated statements of operations, members'
deficit/partners' capital, and cash flows for the year ended December 31, 1997
and for the thirty-one week period ended December 31, 1996 and for Remington
Products Company and subsidiaries (the "Predecessor") for the twenty-one week
period ended May 23, 1996. Our audits also included the consolidated financial
statement schedule for 1997 and 1996 listed in the index to the consolidated
financial statements. The 1997 and 1996 consolidated financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1997 and 1996, and the results of their operations and their
cash flows for the year ended December 31, 1997 and the thirty-one week period
ended December 31, 1996 and of the Predecessor for the twenty-one week period
ended May 23, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, such 1997 and 1996 consolidated financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects, the
information set forth therein.
DELOITTE & TOUCHE L.L.P.
Stamford, Connecticut
March 20, 1998
F-2
Report of Independent Accountants
To the Management Committee of
REMINGTON PRODUCTS COMPANY:
We have audited the accompanying consolidated statements of operations,
total partners' capital and cash flows of Remington Products Company and
Subsidiaries (the "Company") for the year ended December 31, 1995. These
financial statements are the responsibility of management of the Company. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of Remington Products Company and Subsidiaries for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
March 4, 1996.
F-3
Remington Products Company, L.L.C.
Consolidated Balance Sheets
(in thousands)
December 31, December 31,
1997 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,408 $ 7,199
Accounts receivable, less allowance for doubtful accounts
of $734 in 1997 and $1,340 in 1996 53,052 54,262
Inventories 60,507 63,785
Prepaid and other assets 1,525 4,212
----------- ----------
Total current assets 120,492 129,458
Property, plant and equipment, net 16,033 13,982
Intangibles, net 60,538 62,520
Other assets 8,182 8,863
----------- ----------
Total assets $205,245 $214,823
======== ========
LIABILITIES AND MEMBERS' DEFICIT
Current liabilities:
Accounts payable $ 13,359 $ 16,414
Short-term borrowings 1,300 1,153
Current portion of long-term debt 1,417 1,067
Accrued liabilities 28,055 32,964
---------- --------
Total current liabilities 44,131 51,598
Long-term debt 178,114 169,411
Other liabilities 1,278 1,521
Commitments and contingencies
Members' deficit:
Members' deficit (15,894) (7,351)
Cumulative translation adjustment (2,384) (356)
---------- -----------
Total members' deficit (18,278) (7,707)
--------- ----------
Total liabilities and members' deficit $205,245 $214,823
======== ========
See notes to consolidated financial statements.
F-4
Remington Products Company, L.L.C.
Consolidated Statements of Operations
(in thousands)
Year Ended December 31, 1996
Year ------------------------------------- Year
Ended 31 Weeks 21 Weeks Ended
December 31, Ended Ended December 31,
1997 December 31 May 23 1995
-------------- ------------- ------------ ------------
(Successor) (Successor) (Predecessor) (Predecessor)
Net sales $241,572 $185,286 $ 56,713 $255,323
Cost of sales 141,296 117,723 35,102 143,203
---------- -------- --------- --------
Gross profit 100,276 67,563 21,611 112,120
Selling, general and administrative 84,194 53,860 37,912 83,949
Amortization of intangibles 1,936 1,195 650 1,655
---------- -------- --------- --------
Operating income (loss) 14,146 12,508 (16,951) 26,516
Interest expense 19,318 12,164 2,228 7,604
Other expense (income) 526 498 (115) 408
---------- -------- --------- ---------
Income (loss) before income taxes (5,698) (154) (19,064) 18,504
Provision (benefit) for income taxes 2,225 3,018 (873) 1,264
---------- -------- --------- --------
Net income (loss) $ (7,923) $(3,172) $(18,191) $ 17,240
========== ======== ========= ========
Net loss applicable to common units $(16,279) $(7,748)
========== ========
See notes to consolidated financial statements.
F-5
Remington Products Company, L.L.C.
Consolidated Statements of Members' Deficit/Partners' Capital
(in thousands)
Total
Partners'
Cumulative Capital/
Preferred Common Other Accumulated Translation Members'
Equity Units Capital Deficit Adjustments Deficit
----------- -------- --------- ---------- ------------ ----------
REDECESSOR
Balance, December 31, 1994 $ 59,496 $ 468 $ 59,964
Net income 17,240 17,240
Foreign currency translation (1,259) (1,259)
---------- ---------- --------
Balance, December 31, 1995 76,736 (791) 75,945
Net loss (18,191) (18,191)
Foreign currency translation (217) (217)
Effects of recapitalization:
Issuance of equity units $62,000 $7,742 69,742
Excess of fair value over
predecessor basis (73,921) (73,921)
Cancellation of
predecessor partners'
capital (58,545) (58,545)
Elimination of cumulative
translation 1,008 1,008
-------- ------- ---------- ---------- ----------
Balance, May 23, 1996 $62,000 $7,742 $(73,921) $ - $ (4,179)
======= ====== ========= ========== =========
SUCCESSOR
Balance, May 24, 1996 $62,000 $7,742 $(73,921) $ (4,179)
Net loss $(3,172) (3,172)
Preferred dividend 4,576 (4,576) -
Foreign currency translation $ (356) (356)
-------- ------- ---------- -------- --------- ---------
Balance, December 31, 1996 66,576 7,742 (73,921) (7,748) (356) (7,707)
Net loss (7,923) (7,923)
Preferred dividend 8,356 (8,356) -
Repurchase of common units (620) (620)
Foreign currency translation (2,028) (2,028)
-------- ------- ---------- -------- --------- ---------
Balance, December 31, 1997 $74,932 $7,122 $(73,921) $(24,027) $ (2,384) $(18,278)
======= ====== ========= ======== ========= ==========
See notes to consolidated financial statements.
F-6
Remington Products Company, L.L.C.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31, 1996
Year -------------------------------- Year
Ended 31 Weeks 21 Weeks Ended
December 31, Ended Ended December 31,
1997 December 31 May 23 1995
------------ ------------ ------------ -----------
(Successor) (Successor) (Predecessor) (Predecessor)
Cash flows from operating activities:
Net income (loss) $ (7,923) $(3,172) $(18,191) $17,240
Adjustment to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation 2,831 1,184 1,355 3,283
Amortization of intangibles 1,936 1,195 650 1,655
Amortization of deferred financing fees 1,072 1,260 262 690
Deferred income taxes (44) 1,251 (561) (735)
Foreign currency forward losses 115 1,501 - -
Changes in assets and liabilities:
Accounts receivable 1,210 (27,291) 41,043 (13,955)
Inventories 3,278 (2,546) (8,339) 299
Accounts payable (3,055) 5,392 1,187 (11,605)
Accrued liabilities (5,267) 10,731 (933) 3,579
Other, net (2,133) ( 70) (158) 202
-------- -------- --------- --------
Cash provided by (used in) operating activities (7,980) (10,565) 16,315 653
-------- -------- -------- -------
Cash flows from investing activities:
Capital expenditures (5,078) (2,399) (1,310) (3,291)
Payment for purchase of Company, net - (139,750) - -
Proceeds from working capital adjustment 2,500 - - -
Other 204 (181) - -
-------- --------- --------- ---------
Cash used in investing activities (2,374) (142,330) (1,310) (3,291)
-------- --------- -------- --------
Cash flows from financing activities:
Proceeds from sale of senior subordinated notes - 129,026 - -
Net repayments under term loan facilities (965) (3,463) (3,600) (13,550)
Net borrowings (repayments) under credit facilities 10,938 1,564 (12,353) 14,965
Equity investments (repurchases) (620) 34,302 - -
Debt issuance costs - (9,075) - -
Other, net (251) 1,595 - 354
-------- --------- ---------- --------
Cash provided by (used in) financing activities 9,102 153,949 (15,953) 1,769
Effect of exchange rate changes on cash (539) 503 (214) 51
-------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents (1,791) 1,557 (1,162) (818)
Cash and cash equivalents, beginning of period 7,199 5,642 6,804 7,622
-------- --------- --------- --------
Cash and cash equivalents, end of period $ 5,408 $ 7,199 $ 5,642 $ 6,804
======== ========= ========= ========
Supplemental cash flow information:
Interest paid $18,756 $ 9,121 $ 1,874 $ 6,936
Income taxes paid $ 2,493 $ 1,563 $ 440 $ 1,073
See notes to consolidated financial statements.
Remington Products Company, L.L.C.
F-7
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Remington Products Company, L.L.C. and its wholly owned subsidiaries, (the
"Company") manufacture and market electrical personal care appliances. The
Company distributes on a worldwide basis men's and women's electrical shavers
and accessories, women's personal care appliances, including hairsetters,
curling irons and hair dryers, men's electrical grooming products, travel
products and other small electrical consumer appliances. The Company's products
are sold worldwide through mass merchandisers, catalog showrooms, drugstore
chains and department stores in addition to the Company's own service stores.
Organization:
Remington Products Company, L.L.C., a Delaware limited liability company,
was formed by Vestar Shaver Corp. ("Vestar Corp. I") and RPI Corp. ("RPI") to
acquire (the "Reorganization") the operations of Remington Products Company and
its subsidiaries ("RPC"). In May 1996, Vestar Razor Corp. ("Vestar Corp. II")
was formed to hold an interest in the Company, Vestar Corp. I and Vestar Corp.
II (together, the "Vestar Members") are wholly owned by Vestar Equity Partners,
L.P.
Basis of Presentation:
The consolidated balance sheets as of December 31, 1997 and 1996 include
the accounts of Remington Products Company, L.L.C. and Subsidiaries, the
"Successor" company following the change in ownership on May 23, 1996 (the
"Closing Date") (see Note 2) and the consolidated results of operations and cash
flows include the accounts for the successor company for the year ended December
31, 1997 and for the period from May 24, 1996 to December 31, 1996. The
statements also include the results of operations and cash flows of RPC, the
"Predecessor" company, prior to the Closing Date. All significant intercompany
accounts and transactions are eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Actual results could differ from those estimates.
Cash and Cash Equivalents:
All highly liquid debt instruments purchased with a maturity of three
months from their date of acquisition or less are considered cash equivalents.
Inventories:
The inventories of foreign subsidiaries and purchased product for resale by
the merchandising and service store operations are valued at the lower of cost
or market utilizing the first-in, first-out (FIFO) method. Domestic manufactured
inventories, which represent approximately 15% of the consolidated inventories
as of December 31, 1997 and 28% at 1996, are stated at the lower of cost or