EX-99.1 4 g86197exv99w1.txt EX-99.1 UNAUDITED CONSOLIDATED FINANCIAL STMTS EXHIBIT 99.1 REMINGTON PRODUCTS COMPANY, L.L.C. CONSOLIDATED BALANCE SHEETS (unaudited, in thousands)
JUNE 30, DECEMBER 31, JUNE 30, 2003 2002 2002 --------- ------------ --------- (AS RESTATED, SEE NOTE 9) ASSETS Current assets: Cash and cash equivalents ...................................................... $ 24,748 $ 32,846 $ 3,724 Accounts receivable, less allowance for doubtful accounts of $4,556 at June 2003, $4,552 at December 2002 and $4,550 at June 2002 .......................... 41,170 73,205 46,382 Inventories .................................................................... 52,150 49,122 67,188 Prepaid and other current assets ............................................... 6,044 3,484 4,584 --------- --------- --------- Total current assets .................................................... 124,112 158,657 121,878 Property, plant and equipment, net ............................................... 12,148 12,314 12,809 Goodwill ......................................................................... 27,720 27,720 27,720 Intangibles, net ................................................................. 24,165 24,399 24,630 Other assets ..................................................................... 10,280 11,867 13,894 --------- --------- --------- Total assets ............................................................ $ 198,425 $ 234,957 $ 200,931 ========= ========= ========= LIABILITIES AND MEMBERS' DEFICIT Current liabilities: Accounts payable ............................................................... $ 19,363 $ 24,218 $ 16,188 Short-term borrowings .......................................................... -- 1,613 2,512 Current portion of long-term debt .............................................. 241 314 295 Accrued liabilities ............................................................ 23,884 49,960 27,723 --------- --------- --------- Total current liabilities ............................................... 43,488 76,105 46,718 Long-term debt ................................................................... 180,228 185,163 200,303 Other liabilities ................................................................ 3,448 3,443 852 Members'deficit: Members' deficit ............................................................... (20,338) (19,413) (40,490) Accumulated other comprehensive loss ........................................... (8,401) (10,341) (6,452) --------- --------- --------- Total members' deficit .................................................. (28,739) (29,754) (46,942) --------- --------- --------- Total liabilities and members' deficit .................................. $ 198,425 $ 234,957 $ 200,931 ========= ========= =========
See notes to unaudited consolidated financial statements. REMINGTON PRODUCTS COMPANY, L.L.C. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------- -------- 2003 2002 2003 2002 --------- --------- --------- --------- Net sales ........................................ $ 71,267 $ 70,000 $ 119,003 $ 123,805 Cost of sales .................................... 39,804 41,742 66,198 74,089 --------- --------- --------- --------- Gross profit ..................................... 31,463 28,258 52,805 49,716 Selling, general and administrative expenses ..... 22,680 23,254 42,614 42,904 Amortization of intangibles ...................... 117 119 234 236 --------- --------- --------- --------- Operating income ................................. 8,666 4,885 9,957 6,576 Interest expense, net ............................ 5,649 5,840 11,154 11,896 Other income ..................................... (428) (578) (966) (671) --------- --------- --------- --------- Income (loss) before income taxes ................ 3,445 (377) (231) (4,649) Provision (benefit) for income taxes ............. 526 (139) 694 (345) --------- --------- --------- --------- Net income (loss) ................................ $ 2,919 $ (238) $ (925) $ (4,304) ========= ========= ========= ========= Net loss applicable to common units .............. $ (1,263) $ (3,954) $ (9,167) $ (11,627) ========= ========= ========= =========
See notes to unaudited consolidated financial statements. REMINGTON PRODUCTS COMPANY, L.L.C. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)
SIX MONTHS ENDED JUNE 30, 2003 2002 -------- -------- Cash flows from operating activities: Net loss .................................................................................... $ (925) $ (4,304) Adjustment to reconcile net loss to net cash provided by (used in) operating activities: Depreciation ......................................................................... 1,490 1,365 Amortization of intangibles .......................................................... 234 236 Amortization of deferred financing fees .............................................. 1,253 1,028 Other ................................................................................ 746 (1,235) -------- -------- 2,798 (2,910) Changes in assets and liabilities: Accounts receivable .................................................................. 34,786 34,141 Inventories .......................................................................... (2,270) 9,700 Accounts payable ..................................................................... (5,084) (14,050) Accrued liabilities .................................................................. (27,086) (12,355) Other, net ........................................................................... (3,834) (2,762) -------- -------- Net cash provided by (used in) operating activities ................................ (690) 11,764 -------- -------- Cash flows from investing activities: Capital expenditures ........................................................................ (1,131) (1,062) -------- -------- Cash flows from financing activities: Repayments under credit facilities .......................................................... (7,301) (23,099) Borrowings under credit facilities .......................................................... 351 12,037 Other ....................................................................................... -- (223) -------- -------- Net cash used in financing activities .............................................. (6,950) (11,285) -------- -------- Effect of exchange rate changes on cash ............................................ 673 220 -------- -------- Decrease in cash .............................................................................. (8,098) (363) Cash, beginning of period ..................................................................... 32,846 4,087 -------- -------- Cash, end of period ................................................................ $ 24,748 $ 3,724 ======== ======== Supplemental cash flow information: Interest paid ........................................................................ $ 10,367 $ 11,076 Income taxes paid, net ............................................................... $ 97 $ 251
See notes to unaudited consolidated financial statements. REMINGTON PRODUCTS COMPANY, L.L.C. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The accompanying financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and according to accounting principles generally accepted in the United States of America, and reflect all adjustments, consisting only of normal recurring accruals, which in the opinion of management are necessary for a fair statement of the results of the interim periods presented. Results of interim periods may not be indicative of results to be expected for the entire year. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the notes contained in the Company's audited consolidated financial statements included in its Form 10-K/A for the year ended December 31, 2002. Certain prior period amounts have been reclassified to conform with the current presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results will differ from those estimates. Estimates are used for, but not limited to the establishment of the allowance for doubtful accounts, reserves for sales returns and allowances, reserves for obsolete inventories, product warranty costs, taxes and contingencies. Remington Capital Corp. is a wholly-owned subsidiary of Remington Products Company, L.L.C. and has no significant operations of its own. (2) RECENT ACCOUNTING PRONOUNCEMENTS In August 2001, SFAS No. 143, Accounting for Asset Retirement Obligations, was issued. This statement establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. SFAS No. 143 was adopted by the Company on January 1, 2003. In June 2002, SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities was issued. This statement provides guidance on the recognition and measurement of liabilities associated with disposal activities. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. In November 2002, FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN No. 45) was issued. FIN No. 45 elaborates on required disclosures by a guarantor in its financial statements about obligations under certain guarantees that it has issued and clarifies the need for a guarantor to recognize, at the inception of certain guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure provisions of FIN No. 45 were effective for the Company at December 31, 2002, and its initial measurement and recognition provisions effective for guarantees entered into or modified after that date. In January 2003, FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN No. 46) was issued. FIN No. 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, and applies immediately to any variable interest entities created after January 31, 2003 and to variable interest entities in which an interest is obtained after that date, and to all other interests in variable interest entities effective July 1, 2003. In April 2003, SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities was issued. SFAS No. 149 clarifies the definition of derivatives, expands the nature of exemptions from Statement 133, clarifies the application of hedge accounting when using certain instruments and modifies the cash flow presentation of derivative instruments that contain financing elements. This Statement is effective for all derivative transactions and hedging relationships entered into or modified after June 30, 2003. In May 2003, SFAS No. 150 Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity was issued. This statement established standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that issuers classify as liabilities a financial instrument that is within its scope as a liability because that financial instrument embodies an obligation of the issuer. The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. The adoption of the statements and interpretations listed above has not had, individually or collectively, a material impact on the Company's consolidated financial position, results of operations or cash flows. (3) INVENTORIES Inventories were comprised of the following (in thousands):
JUNE 30, DECEMBER 31, JUNE 30, 2003 2002 2002 ------- ------- ------- Finished goods .............................. $47,994 $46,552 $63,485 Work in process and raw materials ........... 4,156 2,570 3,703 ------- ------- ------- $52,150 $49,122 $67,188 ======= ======= =======
(4) GOODWILL AND OTHER INTANGIBLES The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002. In accordance with SFAS No. 142, beginning on January 1, 2002, the Company's goodwill and its tradenames, which have been deemed to have indefinite lives, are no longer being amortized and are subject to annual impairment tests. As of January 1, 2002 the Company performed the required transitional impairment tests of goodwill and tradenames and no transitional impairment was present. As of June 30, 2002 and 2003 the Company performed the required annual impairment tests of goodwill and tradenames and no impairment was present. Goodwill and other intangible assets were comprised of the following (in thousands):
JUNE 30, DECEMBER 31, JUNE 30, 2003 2002 2002 ------- ------------ ------- Amortized Intangible Assets: Patents carrying amount ........................ $ 4,670 $ 4,670 $ 4,670 Patents accumulated amortization ................. 3,324 3,090 2,859 ------- ------- ------- Patents, net ................................... $ 1,346 $ 1,580 $ 1,811 ======= ======= ======= Unamortized Intangible Assets: Goodwill ....................................... $27,720 $27,720 $27,720 Tradenames ..................................... 22,819 22,819 22,819 ------- ------- ------- $50,539 $50,539 $50,539 ======= ======= =======
Estimated amortization expense is $467 thousand for each of the three years in the period ending December 31, 2005, $179 thousand for the year ending December 31, 2006 and zero for each year thereafter. (5) INCOME TAXES Federal income taxes on net earnings of the Company are payable directly by the members pursuant to the Internal Revenue Code. Accordingly, no provision has been made for Federal income taxes for the Company. The Company provides tax for certain state and local jurisdictions where it is required to do so. Furthermore, earnings of certain foreign operations are taxable under local statutes. In these foreign jurisdictions, deferred taxes on income are provided, if necessary, for temporary differences reflecting differences between the financial and tax basis of assets and liabilities. The Company also records valuation allowances against deferred tax assets where, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. (6) COMMITMENTS AND CONTINGENCIES Pursuant to agreements with certain former executives of the Company, such former executives' phantom stock awards were cancelled. However, the value of the vested portion of these awards as of the beginning of 2003, as determined by the Management Committee of the Company, will be paid to the former executives at the time an "event" occurs which would otherwise require generally payments under the Company's phantom equity program. The aggregate amount of such contingent payments is approximately $2.0 million. The Company is involved in legal and administrative proceedings and claims of various types. While any litigation contains an element of uncertainty, management believes that the outcome of each such proceeding or claim which is pending or known to be threatened, or all of them combined, would not have a material adverse effect on the Company's consolidated financial position or results of operations. (7) COMPREHENSIVE INCOME Comprehensive income consists of the following (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------- ---------------------- 2003 2002 2003 2002 ------- ------- ------- ------- Net income (loss) .................................... $ 2,919 $ (238) $ (925) $(4,304) Other comprehensive income: Foreign currency translation adjustments ........ 1,613 916 2,095 907 Net unrealized hedging loss ..................... (1,342) (1,448) (155) (1,177) ------- ------- ------- ------- Comprehensive income (loss) ................. $ 3,190 $ (770) $ 1,015 $(4,574) ======= ======= ======= =======
(8) BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION The Company distributes its products through its three operating segments, which are comprised of 1) the North America segment, which sells product primarily through mass-merchant retailers, department stores and drug store chains throughout the United States and Canada, 2) the International segment, which sells product to similar customers through an international network of subsidiaries and distributors and 3) the U.S. Service Stores segment, consisting of Company-owned and operated service stores located throughout the United States. Information by segment and geographical location is as follows (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, JUNE 30, --------- -------- 2003 2002 2003 2002 --------- --------- --------- --------- Net Sales: North America ........................ $ 44,715 $ 46,042 $ 69,301 $ 76,642 International ........................ 20,753 16,705 38,842 33,484 U.S. Service Stores .................. 5,799 7,253 10,860 13,679 --------- --------- --------- --------- Total .................................. $ 71,267 $ 70,000 $ 119,003 $ 123,805 ========= ========= ========= ========= Operating income North America ........................ $ 7,810 $ 6,358 $ 9,509 $ 9,461 International ........................ 1,942 (518) 3,017 (797) U.S. Service Stores .................. (193) (145) (845) (487) Depreciation and amortization ........ (893) (810) (1,724) (1,601) --------- --------- --------- --------- Total .................................. $ 8,666 $ 4,885 $ 9,957 $ 6,576 ========= ========= ========= ========= JUNE 30, DECEMBER 31, JUNE 30, 2003 2002 2002 -------- -------- -------- Segment Assets: North America......................................................... $122,408 $137,112 $140,731 International......................................................... 44,827 57,891 48,948 U.S. Service Stores................................................... 6,442 7,108 7,528 Cash and cash equivalents............................................. 24,748 32,846 3,724 -------- -------- -------- Total................................................................... $198,425 $234,957 $200,931 ======== ======== ========
9. RESTATEMENT Subsequent to the issuance of its consolidated financial statements for the quarter ended June 30, 2003, the Company determined that an additional minimum liability should have been recorded at December 31, 2002 for the unfunded accumulated benefit obligation related to the Company's defined benefit pension plan in the United Kingdom as determined by an actuarial study performed as of December 31, 2002. Statement of Financial Accounting Standards No. 87, Employers' Accounting for Pensions, which defines an unfunded accumulated benefit obligation as the excess of a plan's accumulated benefit obligation over the fair value of its assets, requires recognition of an additional minimum liability if an unfunded accumulated benefit obligation exists and an asset has been recognized as prepaid pension cost. As a result, the Company's consolidated balance sheets at June 30, 2003 and December 31, 2002 have been restated from the amounts previously reported to recognize an additional minimum pension liability at June 30, 2003 and December 31, 2002. The following table summarizes the effect of the restatement at June 30, 2003 and December 31, 2002:
AS PREVIOUSLY REPORTED AS RESTATED ------------- ----------- At December 31, 2002: Other assets................................................................ $12,026 $11,867 Total assets................................................................ 235,116 234,957 Other liabilities........................................................... 839 3,443 Accumulated other comprehensive loss........................................ (7,578) (10,341) Total members' deficit...................................................... (26,991) (29,754) Total liabilities and members' deficit...................................... 235,116 234,957 At June 30, 2003: Other assets................................................................ $10,439 $10,280 Total assets................................................................ 198,584 198,425 Other liabilities........................................................... 844 3,448 Accumulated other comprehensive loss........................................ (5,638) (8,401) Total members' deficit...................................................... (25,976) (28,739) Total liabilities and members' deficit...................................... 198,584 198,425
The restated amounts in the table above reflect the recognition at June 30, 2003 and December 31, 2002 of a minimum pension liability of $3,251 thousand, and a deferred tax asset of $488 thousand (net of a valuation allowance of $487 thousand) related to the benefits associated with such losses.