UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number—333-56097
RIVER HOLDING CORP.
(Exact name of registrant as specified in its charter)
| Delaware | 95-4674065 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 599 Lexington Drive, 18th Floor New York, New York |
10022 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(212) 758-2555
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report).
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ Not Applicable x
Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares of Common Stock, $0.01 par value, outstanding (the only class of common stock of the Company outstanding) was 9,069,293 on May 7, 2004.
RIVER HOLDING CORP. AND SUBSIDIARIES
QUARTER ENDED MARCH 31, 2004
TABLE OF CONTENTS
i
RIVER HOLDING CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(amounts in thousands)
| March 31, 2004 |
December 31, 2003 | |||||
| CURRENT ASSETS: |
||||||
| Cash |
$ | 6,299 | $ | 6,682 | ||
| Accounts receivable, less allowance for doubtful accounts of $1,217 and $1,156 at March 31, 2004 and December 31, 2003, respectively |
27,319 | 25,107 | ||||
| Inventories, net |
24,074 | 23,829 | ||||
| Other current assets |
2,455 | 2,505 | ||||
| Total current assets |
60,147 | 58,123 | ||||
| PROPERTY, PLANT AND EQUIPMENT, net |
41,048 | 41,154 | ||||
| GOODWILL |
39,822 | 41,410 | ||||
| DEFERRED FINANCING AND OTHER COSTS, net of accumulated amortization of $5,457 and $5,188 at March 31, 2004 and December 31, 2003, respectively |
6,169 | 6,457 | ||||
| OTHER ASSETS |
581 | 536 | ||||
| Total other assets |
46,572 | 48,403 | ||||
| Total assets |
$ | 147,767 | $ | 147,680 | ||
See notes to condensed consolidated statements
1
RIVER HOLDING CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS’ DEFICIT
(amounts in thousands, except per share amounts)
| March 31, 2004 |
December 31, 2003 |
|||||||
| CURRENT LIABILITIES: |
||||||||
| Current portion of bank notes payable |
$ | 8,968 | $ | 9,178 | ||||
| Accounts payable |
10,652 | 9,175 | ||||||
| Accrued liabilities |
17,714 | 16,973 | ||||||
| Total current liabilities |
37,334 | 35,326 | ||||||
| INTEREST PAYABLE TO AFFILIATES |
11,161 | 9,760 | ||||||
| NOTES PAYABLE TO AFFILIATES |
39,317 | 39,317 | ||||||
| BANK NOTES PAYABLE, net of current portion |
50,176 | 54,377 | ||||||
| SENIOR SUBORDINATED NOTES PAYABLE |
115,000 | 115,000 | ||||||
| MANDATORILY REDEEMABLE PREFERRED STOCK, $0.01 par value; 2,990 shares authorized; 556 shares issued and outstanding at March 31, 2004 and December 31, 2003; liquidation preference, $58,550 |
55,166 | 55,147 | ||||||
| Accrued preferred stock dividend, payable in kind |
2,932 | 1,333 | ||||||
| 58,098 | 56,480 | |||||||
| OTHER NON-CURRENT LIABILITIES |
2,237 | 2,316 | ||||||
| Total liabilities |
313,323 | 312,576 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 4) |
||||||||
| STOCKHOLDERS’ DEFICIT: |
||||||||
| Junior preferred stock, $0.01 par value; 10 shares authorized; 3 shares outstanding at March 31, 2004 and December 31, 2003 |
4,076 | 3,960 | ||||||
| Common stock, $0.01 par value; 42,000 shares authorized; 9,144 issued and 9,069 outstanding at March 31, 2004 and December 31, 2003 |
97,848 | 97,848 | ||||||
| Additional paid in capital |
881 | 881 | ||||||
| Treasury stock, at cost, 75 shares at March 31, 2004 and December 31, 2003 |
(75 | ) | (75 | ) | ||||
| Cumulative translation adjustment |
5,973 | 7,312 | ||||||
| Accumulated deficit |
(274,259 | ) | (274,822 | ) | ||||
| Total stockholders’ deficit |
(165,556 | ) | (164,896 | ) | ||||
| Total liabilities and stockholders’ deficit |
$ | 147,767 | $ | 144,710 | ||||
See notes to condensed consolidated statements
2
RIVER HOLDING CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands)
| Three Months Ended |
||||||||
| March 31, 2004 |
March 31, 2003 |
|||||||
| NET SALES |
$ | 50,183 | $ | 45,879 | ||||
| COST OF SALES |
26,786 | 26,586 | ||||||
| Gross Profit |
23,397 | 19,293 | ||||||
| OPERATING EXPENSES: |
||||||||
| Distribution, selling, general & administrative |
14,106 | 12,757 | ||||||
| Research and development |
859 | 640 | ||||||
| 14,965 | 13,397 | |||||||
| Income from operations |
8,432 | 5,896 | ||||||
| INTEREST EXPENSE AND OTHER, net |
7,080 | 5,261 | ||||||
| Net income before provision for income taxes |
1,352 | 635 | ||||||
| PROVISION FOR INCOME TAXES |
674 | 681 | ||||||
| Net income (loss) |
$ | 678 | $ | (46 | ) | |||
| OTHER COMPREHENSIVE (LOSS) INCOME: |
||||||||
| Foreign currency translation (loss) gain |
(1,339 | ) | 721 | |||||
| Comprehensive (loss) income |
$ | (661 | ) | $ | 675 | |||
See notes to condensed consolidated statements
3
RIVER HOLDING CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
| Three Months Ended |
||||||||
| March 31, 2004 |
March 31, 2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income (loss) |
$ | 678 | $ | (46 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities- |
||||||||
| Depreciation and amortization |
3,037 | 2,961 | ||||||
| Amortization of deferred financing costs |
269 | 464 | ||||||
| Accrued mandatorily redeemable preferred stock dividends, payable in-kind |
1,618 | — | ||||||
| Interest payable to affiliates |
1,402 | 1,064 | ||||||
| Provision for bad debts |
88 | 197 | ||||||
| Loss (gain) on disposal of property, plant and equipment |
11 | (6 | ) | |||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(2,618 | ) | 342 | |||||
| Inventories |
(422 | ) | 1,413 | |||||
| Other current assets |
13 | (799 | ) | |||||
| Other assets |
(46 | ) | (19 | ) | ||||
| Accounts payable |
1,543 | (625 | ) | |||||
| Accrued liabilities |
885 | 2,047 | ||||||
| Other non-current liabilities |
18 | 12 | ||||||
| Net cash provided by operating activities |
6,476 | 7,005 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchases of property, plant and equipment |
(3,024 | ) | (1,723 | ) | ||||
| Proceeds from sales of property, plant and equipment |
2 | 17 | ||||||
| Net cash used in investing activities |
(3,022 | ) | (1,706 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Repayment of bank notes payable |
(4,317 | ) | (7,734 | ) | ||||
| Proceeds from bank borrowings |
408 | 1,582 | ||||||
| Payment of capital lease obligations |
(14 | ) | (13 | ) | ||||
| Net cash used in financing activities |
(3,923 | ) | (6,165 | ) | ||||
| Effect of exchange rate changes on cash |
86 | (292 | ) | |||||
| NET DECREASE IN CASH |
(383 | ) | (1,158 | ) | ||||
| CASH, beginning of period |
6,682 | 6,425 | ||||||
| CASH, end of period |
$ | 6,299 | $ | 5,267 | ||||
See notes to condensed consolidated statements
4
| Three Months Ended | ||||||
| March 31, 2004 |
March 31, 2003 | |||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||
| Cash paid during the period for: |
||||||
| Interest |
$ | 932 | $ | 1,076 | ||
| Income taxes (primarily foreign) |
$ | 365 | $ | 1,138 | ||
| NON-CASH FINANCING ACTIVITIES: |
||||||
| Preferred dividends accrued or paid-in-kind |
$ | 116 | $ | 1,533 | ||
See notes to condensed consolidated statements
5
RIVER HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statements. River Holding Corp. (“Holding”) is a holding company with no other operations than those of its majority owned subsidiary, Hudson Respiratory Care Inc. (“Hudson” or the “Company”). The condensed consolidated financial statements included herein have been prepared by Holding and Hudson, without audit, and include all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position at March 31, 2004, the results of operations for the three month period ended March 31, 2004 and March 31, 2003 and statements of cash flows for the three month period ended March 31, 2004 and March 31, 2003 pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Although Holding believes that the disclosures in such financial statements are adequate to make the information presented not misleading, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with Holding’s 2003 audited financial statements and the notes thereto included in its Form 10-K filed with the SEC. The results of operations for the three month period ended March 31, 2004 are not necessarily indicative of the results to be achieved for a full year.
Significant Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The significant estimates made in the preparation of the Company’s consolidated financial statements relate to allowance for bad debts, rebate reserve, and inventory reserve.
Stock Based Compensation
Holding accounts for its stock-based compensation plans under the recognition and measurement principles of Accounting Principles Board Opinion (“APB”) 25, “Accounting for Stock Issued to Employees,” and related interpretations. Holding has adopted the disclosure provisions of Statement Financial Accounting Standards (“SFAS “) 123, “Accounting for Stock-Based Compensation,” as amended by SFAS 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123.” No stock-based employee compensation expense is recognized in net income for any of the periods presented. Had compensation expense for Holding’s stock-based compensation awards been recognized based on the fair value recognition provisions of SFAS 123, Holding’s net income would have been adjusted to the pro forma amounts indicated below (amounts in thousands):
| Three Months March 31, |
|||||||
| 2004 |
2003 |
||||||
| Net income (loss), as reported |
$ | 678 | $ | (46 | |||