-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RCGFpuP31qoNY5SdLwoaIZ6RuTbV16siACcIIrO3Snwu/xhe5iIa5Fr1Ewtnpz12 0BY4DSkAacUgsNZsQw2uvg== 0000891554-00-000879.txt : 20000331 0000891554-00-000879.hdr.sgml : 20000331 ACCESSION NUMBER: 0000891554-00-000879 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REMINGTON PRODUCTS CO LLC CENTRAL INDEX KEY: 0001017710 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC HOUSEWARES & FANS [3634] IRS NUMBER: 061451076 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-07429 FILM NUMBER: 587416 BUSINESS ADDRESS: STREET 1: 60 MAIN STREET STREET 2: 60 MAIN STREET CITY: BRIDGEPORT STATE: CT ZIP: 06604 BUSINESS PHONE: 2033674400 10-K 1 ANNUAL REPORT 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, 1999. 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 leading developer and marketer of electrical personal care appliances. The Company designs and distributes electric shavers, personal care and wellness appliances, electrical grooming products, and other small electrical 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 Amended and Restated Limited Liability Company Agreement (the "LLC Agreement"). The Company was formed by Vestar Shaver Corp. and RPI Corp. ("RPI") to acquire the operations of Remington Products Company and its subsidiaries in May of 1996. Vestar Razor Corp. was formed in May of 1996 to hold an interest in the Company. Vestar Shaver Corp. and Vestar Razor Corp. (together, the "Vestar Members") are wholly owned by Vestar Equity Partners, L.P. ("Vestar"), an institutional equity capital fund and affiliate of Vestar Capital Partners ("Vestar Capital"). Description of Business The Company distributes electrical personal care appliances through its three operating segments which are comprised of 1) the North America segment, which sells product through mass-merchant retailers, department stores and drug store chains throughout the United States and Canada, 2) the International segment, which sells product through an international network of subsidiaries and distributors, and 3) the U.S. Service Stores segment consisting of Company-owned and operated service stores throughout the United States. Products The Company's principal products consist of the following: Electric Shavers. The Company's primary men's electric shaver line consists of the MicroScreen(R) line of single, dual and triple foil shavers and the MicroFlex((TM)) line of rotary shavers. In addition, the Company also has the Intercept(R) line of premium shavers and certain specialty shavers such as the "Wet/Dry Sport" shaver. The women's electric shaver category primarily includes the women's Smooth & Silky(R) wet/dry shavers and the women's wet/dry battery operated shaver. The Company 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 37%, 39% and 36% of the Company's net sales for the years ended December 31, 1999, 1998 and 1997, respectively. Personal Care and Wellness Appliances. Personal care and wellness appliances primarily consist of haircare products and Remington's Spa Therapy Collection(TM). The hair care products consist of hair dryers, hairsetters, curling irons, hot air brushes and lighted mirrors. The hair dryer category includes the Company's Vortex(TM) hair dryers with a patented airflow system, and a line of Pro Air(TM) chrome dryers. The Company's hairsetter products include the Remington Express Set(R) hairsetter, the Smart Setter(R) hairsetter, which incorporates proprietary technologies of color change and wax core, and the Style Setter(R). The Spa Therapy Collection(TM) includes paraffin wax hand spas, foot spas, massaging bath pillows, facial steamers and manicure kits. Personal care and wellness appliances accounted for approximately 30%, 28% and 33% of the Company's net sales for the years ended December 31, 1999, 1998 and 1997, respectively. Grooming Products. Grooming products consist of the Precision (TM) line, including beard and mustache trimmers, nose hair and ear hair trimmers, and the new personal groomers, which offer a selection of grooming accessories. In addition, the Company sells a line of home haircut kits. Total grooming products accounted for approximately 11%, 10% and 9% of the Company's net sales for the years ended December 31, 1999, 1998 and 1997, respectively. Other Products. Remington sells a variety of Remington and non-Remington brand electrical personal care appliances through the Company's service stores, and also distributes 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 118 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, drug store chains including Walgreens, Rite Aid and Eckerd, and Remington's own service stores. Throughout the United States, the Company's products are sold in excess of 10,000 retail outlets. In addition, the Company markets and distributes its products through television direct to consumer retailing with QVC and the Home Shopping Network and internet retailers such as drugstore.com as well as the Company's own website, remington-products.com. On a worldwide basis, Wal-Mart accounted for approximately 19%, 19% and 15% of the Company's net sales during the years ended December 31, 1999, 1998 and 1997, respectively. No other customer accounted for more than 10% of the Company's net sales in the three year period ended December 31, 1999. U.S. Service Stores As of December 31, 1999, the Company owned and operated a chain of 94 service stores in the United States. During 1999, the Company opened eight new service stores and closed a total of 18 -3- stores of which ten were shaver shops located within the California based Fedco chain which went out of business in August 1999. The stores are in many of the major markets with the majority of the stores located in shopping malls and outlet malls. The stores sell and service a variety of Remington and non-Remington shavers, personal care 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 1999, 1998 and 1997 the Company's U.S. service stores segment generated approximately 14%, 16% and 16%, respectively, of the Company's net sales. Suppliers All of the Company's finished goods inventories are manufactured for the Company by third party suppliers primarily located in China, Japan and Austria. The Company 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 Industrial Ltd. ("Raymond"), accounted for approximately 40% of the Company's overall cost of sales in 1999. Remington has had a relationship with these suppliers for many years and management considers its present relationships to be good. During 1998, the Company ceased the assembly of foil shavers in Bridgeport, Connecticut and moved the operation to Raymond. The shutdown of the assembly operation resulted in the elimination of approximately 220 positions in the Bridgeport facility. Remington continues to manufacture foil cutting systems in Bridgeport using proprietary cutting technology and a series of specially designed machines. 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 personal care, grooming and wellness products. During 1999, 1998 and 1997, research and development expenditures by the Company amounted to approximately $4.0, $4.3 and $3.4 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 primarily cover electric shavers, cutting and trimming mechanisms and personal care appliances. In addition, the Company maintains over 1,300 different trademarks around the world, which are utilized in connection with a variety of products. -4- As a result of the common origins of the Company and Remington Arms Company, Inc. ("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 personal 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 provides 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 trademarks owned by Remington Licensing Corporation 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 and will continue to do so in the future. Competition The markets for all of its product lines are highly competitive. Competition for retail sales to consumers is based 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, such as Philips Electronics, N.V. ("Philips"), 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 between the Company and Philips with respect to trademarks and designs registered by Philips outside the United States. See Item 3. Legal Proceedings. -5- Employees As of March 1, 2000, the Company employed approximately 850 people worldwide of which approximately 125 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 in Bridgeport, Connecticut 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 (the "CTDEP") that it has detected petroleum and solvent compounds in soil and ground water samples taken from its Bridgeport facility. The general remedial strategies have been selected and those strategies, which require CTDEP approval, have been submitted for approval. All other strategies do not require approval for implementation. In addition to its ongoing program of environmental compliance, the Company has provided reserves to cover the anticipated costs of the remediation required at its Bridgeport facility to be incurred over the next three to five years. The Company believes that any required change to the reserves due to the inherent uncertainties as to the ultimate costs for the 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 segment generated approximately 36%, 36% and 39% of the Company's net sales in 1999, 1998 and 1997, respectively. The Company's international network of subsidiaries and distributors currently extends to over 85 countries worldwide. The Company distributes its products through direct sales forces located in the United Kingdom, Australia, Germany, France, New Zealand, South Africa, Sweden, Ireland and Italy. In all other parts of the world the Company distributes its products through strategic alliances with local distributors. The Company distributes products internationally through department stores, catalog showrooms, mass merchandisers, drug stores, specialized shaver shops and mail order distributors as well as the Company's 12 service stores in the United Kingdom and 12 service stores in Australia. Additional financial information relating to Remington's international operations is set forth in Note 14 (Business Segment and Geographic Information) of the "Notes to Consolidated Financial Statements" of the Company appearing elsewhere herein. -6- ITEM 2. Properties The following table sets forth information as of March 1, 2000 concerning the principal facilities of the Company. Facility Function Square Feet Bridgeport, CT Headquarters (Owned) 40,000 Bridgeport, CT Manufacturing (Owned) 167,000 In addition to these properties, Remington leases offices and warehouse space in the United States, Canada, United Kingdom, Germany, France, Italy, Australia, New Zealand, South Africa, Ireland, Sweden and Hong Kong, and 118 service stores, of which 94 are in the United States, 12 are in the United Kingdom and 12 are in Australia. Leases for service stores generally extend up to five years and typically include renewal options. The majority of the leases contain escalation clauses, which provide for increases to recover future increases in certain operating costs. Certain leases require additional payments based on sales volume. ITEM 3. Legal Proceedings On December 5, 1995, Philips filed suit in the High Court of Justice in the United Kingdom against Remington in a suit captioned Philips Electronic NV and Remington Consumer Products Limited. The suit alleged infringement by the Company in connection with the sale in the United Kingdom of its RR 55 rotary shaver of: (a) Philips U.K. Registered Design 1,058,245 (the "Registered Design"); (b) Philips U.K. Registered Trademark No. 1,254,208 (the "Registered Trademark"); and (c) Philips "well-known" Trademark under Article 6 of the Paris Convention. In the litigation, Philips sought injunctive relief, delivery up or destruction of the allegedly infringing articles, damages or lost profits, and other relief. The Company counterclaimed for revocation of each of the Registered Design and the Registered Trademark. On December 17, 1997, the High Court held that: (a) the Registered Design was not infringed; (b) the Registered Trademark was not infringed and was invalid, with the court ordering that the registration of the Registered Trademark be revoked; and (c) the three-headed shape of the Philips shaver did not constitute a "famous mark" within the terms of the Paris Convention. Philips appealed the decision of the High Court with respect to the Trademark and "famous mark" issues to the Court of Appeal of the United Kingdom. On May 5, 1999, the Court of Appeal, in a "provisional view," upheld the decision of the High Court that there was no infringement by Remington of the Registered Trademark and that the Registered Trademark was invalid. The Court of Appeal held that the issue between the parties raised difficult questions of construction of the Trademark Directive of the European Community (the "Directive") and referred seven questions relating to the construction of the Directive to the European Court of Justice for its opinion. The opinion of the European Court of Justice is expected in the fourth quarter of 2000 or early 2001. This opinion will be forwarded to the Court of Appeal of the U.K., which will in turn bring its provisional judgment of May 5, 1999 into line with that opinion. The -7- Company has been advised by counsel that the European Court of Justice is likely to follow the provisional view of the Court of Appeal, however no assurance can be given in this regard. On February 15, 2000, Philips commenced a second action against Remington in the High Court of Justice of the United Kingdom in a suit captioned) Koninklijke Philips Electronics NV and Remington Consumer Products Limited. The second suit alleges that the Remington Microflex R850 shaver infringes Philips' U.K. Registered Trademark No. 1,533,452 in Class 8. Philips seeks injunctive relief, delivery up or destruction of the allegedly infringing articles, damages, and other relief. This second case differs from the first action described above only in that it involves a registered trademark which differs from the Registered Trademark at issue in the prior action in a very minor way. The Company believes that the issues are the same in both actions and the outcome of the second action will ultimately be determined based on the outcome of the first action. The Company intends to file an answer and counterclaim in the second action. On August 15, 1997, Philips filed suit in the Australian Federal Court, New South Wales District Registry, in a suit captioned Philips Electronics N.V. et al. and Remington Products Australia PTY Limited. The suit alleged that, in selling its RR 55 rotary shaver in Australia, the Company: (a) infringed Philips trademark; (b) infringed registered designs of Philips; (c) engaged in misleading and deceptive conduct; and (d) committed the tort of "passing off." The Company counterclaimed and sought a declaration from the Court that Philips' pending trademark application was not registerable and an Order directing that the pending trademark application be removed from the appropriate Register and that the two registered designs in issue be removed from the appropriate Register. On June 18, 1999, the Australian Federal Court held that: (a) there was no trademark infringement; (b) there was no obvious or fraudulent imitation of either of Philips registered designs; (c) there was no misleading or deceptive conduct by Remington; and (d) Remington had not engaged in "passing off." In response to Remington's cross-claim, the Court declined to declare that the Philips pending trademark registration was invalid or to require that Philips registered design or pending trademark registration be removed from the appropriate Registers. Philips appealed all of the findings of the Australian Federal Court, which appeal was heard on February 28 and 29, and March 1, 2000. Judgment is expected in the third quarter of 2000. The costs of pursuing the litigation in the U.K. and Australia are, in most circumstances, shared with Izumi, the Company's supplier of rotary shavers. Izumi is also pursuing an action in Sweden against Philips over similar issues to those being litigated in the U.K. and Australian actions. The Company has commenced opposition proceedings with respect to Philips' efforts to register the shape of the head assembly of its triple-head rotary shaver in the United Kingdom and Ireland. The determination of the U.K. opposition proceeding has been stayed pending the finalization of the provisional judgment of the U.K. Court of Appeal. If the foregoing litigations in the U.K., Australia and Sweden are ultimately determined adversely to the Company and Izumi, respectively, the Company's ability to sell its rotary shaver products in those countries could be limited or prohibited. In 1999, the Company's sales of rotary -8- shavers in the U.K. and Australia were not material. The Company is a party to other lawsuits and administrative proceedings, which arise in the ordinary course of business. Although the final results of 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 and results of operations. ITEM 4. Submission of Matters to a Vote of Securities Holders No matters were submitted to a vote of securities holders during the fourth quarter of 1999. PART II ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters (a) Market Information The Company's capital structure consists of common units (the "Common Units"), which represent the common equity of the Company, and preferred members' equity (the "Preferred Equity", together, the "Equity"). There is no established public trading market for the Equity. (b) Holders As of March 1, 2000, there were two beneficial owners of the Equity. (c) Dividends No cash distributions have been paid with respect to the Equity since its inception in May 1996. In addition, the Company's long-term debt arrangements, which are discussed in Note 6 of the "Notes to Consolidated Financial Statements", significantly restrict the payment of dividends. (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): -9-
Successor Predecessor(1) ------------------------------------------------------------- ------------------------- Year Year Year 31 Weeks 21 Weeks Year Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, May 23, December 31, 1999 1998 1997 1996 1996 1995 ------------ ------------ ------------ ------------ ------- ------------ Statement of Operations Data: Net sales $ 318,766 $ 268,357 $ 241,572 $ 185,286 $ 56,713 $ 255,323 Operating income (loss) 29,120 6,016(2) 14,146 12,508 (16,951) 26,516 Interest expense 21,723 20,499 19,318 12,164 2,228 7,604 Net income (loss) (4) 6,035 (15,337) (7,923) (3,172) (18,191) 17,240 Depreciation and amortization 5,555 5,169 4,767 2,379 2,005 4,938 Balance Sheet Data (at period end): Working capital $ 85,053 $ 68,294 $ 76,361 $ 77,860 N/A $ 47,223 Total assets 223,990 195,727 205,245 214,823 N/A 170,922 Total debt 195,841 187,668 181,240 171,631 N/A 56,990 Cumulative Preferred Dividend (3) 32,921 22,336 12,932 4,576
- ---------- (1) Represents financial data of RPC, the "predecessor" company, prior to May 23, 1996. (2) Includes non-recurring charges related to restructuring and reorganization activities of $9.6 million. (3) Dividend payments are subject to restrictions by the terms of the Company's debt agreements. See Note 6 of the "Notes to Consolidated Financial Statements." (4) Due to the fact that the Company is a limited liability company ("L.L.C.") 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. However, certain state and local jurisdictions do not recognize L.L.C. status for taxing purposes and require taxes to be paid on net earnings. Furthermore, earnings of certain foreign operations are taxable under local statutes. 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 consolidated statements of operations, including net sales by its North American, U.S. service stores, and International operating segments, as well as the Company's consolidated results of operations expressed as a percentage of net sales for the years ended December 31, 1999, 1998 and 1997. The discussion should be read in connection with the Consolidated Financial Statements and accompanying notes thereto appearing elsewhere herein. -10-
1999 1998 1997 -------------------- ------------------------ --------------------- Net Sales: $ % $ % $ % ------ ------ ------ ------ ------ ------ North America $158.3 49.7 $130.4 48.6 $107.8 44.6 International 116.1 36.4 95.6 35.6 95.2 39.4 U.S. service stores 44.4 13.9 42.4 15.8 38.6 16.0 ------ ------ ------ ------ ------ ------ 318.8 100.0 268.4 100.0 241.6 100.0 Cost of sales 176.3 55.3 159.2(1) 59.3 141.3 58.5 ------ ------ ------ ------ ------ ------ Gross profit 142.5 44.7 109.2 40.7 100.3 41.5 Selling, general and administrative 111.4 34.9 94.4 35.2 84.3 34.9 Restructuring and reorganization charge -- -- 6.8 2.5 -- -- Intangible amortization 2.0 0.6 2.0 0.7 1.9 0.8 ------ ------ ------ ------ ------ ------ Operating income 29.1 9.2 6.0 2.3 14.1 5.8 Interest expense 21.7 6.8 20.5 7.6 19.3 8.0 Other expense 0.2 0.1 0.4 0.2 0.5 0.2 ------ ------ ------ ------ ------ ------ Income (loss) before income taxes 7.2 2.3 (14.9) (5.5) (5.7) (2.4) Provision for income taxes 1.2 0.4 0.4 0.2 2.2 0.9 ------ ------ ------ ------ ------ ------ Net income (loss) $ 6.0 1.9% $(15.3) (5.7)% $ (7.9) (3.3)% ====== ====== ====== ====== ====== ======
(1) Includes a $2.8 million charge for inventory write-downs related to restructuring and reorganization activities. Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998 Net Sales. Net sales for the year ended December 31, 1999 increased 19% to $318.8 million compared to $268.4 million for the year ended December 31, 1998. Each operating segment experienced sales increases with sales growth occurring throughout the major product lines. Increases in shavers and accessories was largely due to the introduction of new products. The grooming category increased due to new product introductions in 1998 of the men's Precision(TM) line of beard and mustache trimmers as well as the introduction of the personal groomer in 1999. Personal care sales increased on the strength of new hair dryers, and sales of wellness products increased on new product introductions, such as the paraffin wax hand spa. Net sales in North America were $158.3 million for the year ended December 31, 1999, an increase of 21% over the prior year. This increase is due to the introduction of new products in the United States and Canada. Net sales for the international business increased 21% to $116.1 million in 1999 compared to $95.6 million in 1998. Increases were noted in all major countries, particularly the United Kingdom, Australia and Germany. Net sales in 1999 were negatively impacted by unfavorable exchange rates compared to 1998 by approximately $2.4 million, primarily in the U.K. and Germany Net sales by the Company's U.S. service stores were $44.4 million for the year ended December 31, 1999 compared to $42.4 million in 1998, despite a decrease in the number of stores. During 1999, the Company closed a net of ten stores, bringing the total number of U.S. stores to 94 at December 31, 1999. Among the stores closed were ten service stores located within the California based Fedco chain -11- which were closed in August 1999 in conjunction with the sale of the Fedco chain. Same store sales increased 4% from 1998 to 1999. Same store sales are defined as all stores operating for twelve months in 1999 and in 1998 except the ten Fedco stores which includes the first eight months of 1999 and the comparable eight months of 1998. Gross Profit. Gross profit increased to $142.5 million, or 44.7% of net sales for the year ended 1999, from $109.2 million, or 40.7% of net sales for the year ended 1998. Included in 1998 cost of sales is a $2.8 million non-recurring charge related to the restructuring of the Company's Connecticut shaver assembly operations. Excluding this charge, 1998 gross profit percentage would have been 41.7%. The percentage increase over 1998 is due to cost savings from the 1998 move of the subassembly operations from Bridgeport, CT to a third party supplier located in China. In addition, changes in product mix to higher margin products also contributed to the increase. Selling, General and Administrative. Selling, general and administrative expenses increased to $111.4 million for the year ended December 31, 1999, compared to $94.4 million for the year ended December 31, 1998, as investments in advertising, promotion and product development continued and as distribution increased primarily as a result of higher volume. Selling, general and administrative expenses, as a percentage of net sales, decreased to 34.9% in 1999 compared to 35.2% in 1998. Operating Income. Operating income for the year ended December 31, 1999 increased to $29.1 million compared to $15.6 million (excluding $9.6 million of non-recurring charges related to the 1998 restructure) for the year ended December 31, 1998. The increased sales in 1999 over 1998 of $50.4 million coupled with the increased gross profit percentage achieved were the primary reasons for the increase. Interest Expense. Interest expense increased to $21.7 million in 1999 compared to $20.5 million in 1998 as a result of higher average borrowings in 1999. Provision for Income Taxes. The provision for income taxes was $1.2 million in 1999 compared to $0.4 million in 1998 and relates to the Company's foreign operations. The increase is due to the increased profitability over the prior year. Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997 Net Sales. Net sales for the year ended December 31, 1998 were $268.4 million compared to $241.6 million for the previous year, an increase of 11.1% primarily as a result of strong sales in the United States. Net sales in North America increased 21.0% from $107.8 million for the year ended December 31, 1997 to $130.4 million in 1998. This increase was primarily related to increased sales of men's and women's shavers. Demand increased for men's shavers as a result of the introductions of the updated line of the Microscreen(R)3 shaver and the Intercept(R) shaver line in the first quarter of 1998 and the MicroFlex((TM)) rotary line in the fourth quarter. Sales of women's shavers increased as a result of demand for the wet/dry Dual Foil shaver, although this was not a new product. Additionally, sales of hair dryers and grooming products were positively impacted by the introduction of new hair dryers and the new Precision((TM)) line of beard & mustache trimmers in 1998. -12- Net sales for the international businesses on a combined basis remained flat from 1997 to 1998. Increased sales in the United Kingdom were offset by decreases in Australia and the international export business due to slowing economies, particularly in Asia and negative currency impacts. Net sales by the Company's U.S. service stores increased 9.8% to $42.4 million in 1998 from $38.6 million in 1997. This increase was primarily attributable to the opening of a net of 10 additional stores and one temporary store for a total of 104 stores open during the holiday shopping season. Additionally, same store sales increased 2.3% from 1997 to 1998. Gross Profit. Gross profit of $109.2 million in 1998, or 40.7% of net sales, decreased as a percentage of sales from 41.5% in 1997. Excluding the $2.8 million non-recurring charge to 1998 cost of sales related to the restructuring of the Company's Connecticut shaver assembly operations, the gross profit percentage actually increased slightly to 41.7% of net sales. The gross profit percentages in the United States increased by more than two percentage points in 1998, excluding the non-recurring charge. The increase was primarily due to a combination of lower costs and improved product mix, as well as lower product returns. The gross profit percentage for the international businesses declined by almost three percentage points in 1998. The decline was primarily attributable to decreases in Australia and the international export markets, due to weak economies and negative currency impacts on cost of sales as inventory purchases are made in U.S. dollars. Selling, General and Administrative. Selling, general and administrative expenses increased to $94.4 million, or 35.2% of net sales for calendar year 1998 compared to $84.3 million, or 34.9% of net sales in 1997 as a result of several factors. In 1998, the Company increased its investment in advertising and promotion and continued to invest in marketing and new product development. The Company continued to invest in its retail service stores and opened a net total of 14 stores worldwide. Distribution expenses in 1998 increased as the Company transitioned from its Connecticut warehouse to a third party warehouse in California. Additionally, the Company increased its provision for bad debt, due to the financial difficulties of one of the large U.S. mass merchandisers. Restructuring and Reorganization Charge. In the second quarter of 1998, the Company announced a plan to restructure its Connecticut shaver assembly and warehousing operations ("the Plan"). The Plan consisted of relocating the shaver assembly operations to an existing Remington third party supplier located in China and relocating the warehousing function to a third party provider in California. Savings of approximately $6.0 million annually will accrue from these changes of which $3.0 million was realized in 1998, with an additional $2.0 million anticipated for 1999 and the full benefit being realized by the year 2000. The Plan resulted in affecting the employment of approximately 235 employees located at the Company's two Connecticut facilities, the majority of which were factory employees. During 1998, the Company recorded total non-recurring charges of $9.6 million related to the Plan, of which $2.8 million was charged to cost of sales for inventory write-downs associated with the Plan and $6.8 million was charged to restructuring and reorganization. Included in the restructuring charge are items such as severance and other employee costs, lease obligations and write-offs of certain equipment and tooling. -13- Operating Income. Operating income decreased to $6.0 million, or 2.3% of net sales in 1998 compared to $14.1 million or 5.8% in 1997. This decrease was the direct result of the $9.6 million of non-recurring charges recorded in 1998 related to the restructuring and reorganization. Excluding the non-recurring charges, operating income was $15.6 million, or 5.8% of net sales. Interest Expense. Interest expense increased to $20.5 million in 1998 compared to $19.3 million in 1997 as a result of higher average borrowings in 1998. Provision for Income Taxes. The provision for income taxes was $0.4 million in 1998 compared to $2.2 million in 1997 and relates to the Company's foreign operations. Liquidity and Capital Resources For the year ended December 31, 1999, the Company provided approximately $2.0 million in cash from operating activities, compared to cash used of $3.1 million in 1998. The increase in cash flow in 1999 is the result of increased profitability and the timing of cash disbursements, which was partially offset by the higher receivable and inventory levels necessary as a result of the Company's growth. The Company's operations are not capital intensive. During 1999 and 1998, the Company's capital expenditures, including tooling for new products, amounted to $3.5 million and $3.9 million, respectively. Capital expenditures for 2000 are anticipated to be approximately $3.8 million. During 1999, the Company's total borrowings increased by $8.0 million. Cash increased by $5.6 million over 1998, thereby increasing net borrowings by $2.4 million, excluding currency impacts. 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, $10 million in Term Loans and $15 million in Supplemental Loans. The Term Loans are repayable quarterly through March 31, 2002. Borrowings under the Supplemental Loans and the Revolving Credit Facilities mature on June 30, 2001 and 2002, respectively. 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. Market Risk Disclosure The Company is exposed to market risks, which include changes in interest rates as well as changes in currency exchange rates as measured against the U.S. dollar. The Company attempts to reduce the currency exchange risks by utilizing financial instruments, primarily foreign currency forward contracts. The Company uses derivative financial instruments only for risk management purposes and does not use them for speculation or for trading. The Company has elected to disclose its interest rate risk and foreign currency risk, as outlined below, utilizing a sensitivity analysis approach based on -14- hypothetical changes in foreign exchange rates and interest rates. Certain items such as lease contracts and obligations for pension were not included in the analysis. Interest Rate Risk. The Company's debt portfolio is comprised of fixed rate debt primarily consisting of $130 million of Senior Subordinated Notes and approximately $66 million of variable rate debt primarily borrowings under the Senior Credit Agreement. For further details, refer to Note 6, of the "Notes to Consolidated Financial Statements" of the Company appearing elsewhere herein. The Company is exposed to interest rate risk as a result of its fixed rate notes and its variable rate debt and any cash holdings. Interest rate changes would result in gains or losses in the market value of the Company's fixed rate debt due to differences between the current market interest rates and the rates governing these instruments. With respect to the Company's financial instruments referred to above, a ten percent change in interest rates would have no material effect on fair values, cash flows or earnings of the Company in either 1999 or 1998. Foreign Currency Risk. Foreign currency risk is managed by the use of foreign currency forward contracts. The use of these contracts allows the Company to manage its exposure to exchange rate fluctuations because the gains or losses incurred on the derivative instruments will offset in whole, or in part, losses or gains on the underlying foreign currency exposure. The Company's principal currency exposures are in British pounds, Australian and Canadian dollars and German marks. Foreign currency contracts are sensitive to changes in foreign exchange rates. Due primarily to the relatively short maturities of these contracts, a ten percent change in the foreign currency exchange rates against the U.S. dollar, with all other variables held constant, would have no material effect on the fair value of these foreign currency financial instruments in either 1999 or 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 Year 2000 date problem 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 were reviewed in 1999, and the majority of the systems did not require modifications. All required modifications have been completed and the costs incurred were not material. In addition, the Company contacted its major customers and financial institutions and received assurances of Year 2000 compliance from a number of those contacted. -15- As of March 1, 2000, the Company, its suppliers and customers have not experienced any significant business disruption as a result of the Year 2000 problem. Although Year 2000 problems may not become evident until long after January 1, 2000, based on the Company's Year 2000 readiness process and experience to date, the Company does not expect any significant Year 2000 related business disruptions in the future. EURO Conversion On January 1, 1999, eleven of fifteen member countries of the European Union entered a three year transition phase during which one common legal currency (the "euro") was introduced. Beginning in January 2002, new euro-denominated bills and coins will be issued, and local currencies will be removed from circulation. Although the Company's international businesses affected by the euro conversion comprise approximately 6% of the Company's net sales for the year ended December 31, 1999, the Company has addressed the issues raised by the euro currency conversion. These issues include, among others, the need to adapt computer and financial systems and business processes to accommodate euro-denominated transactions and the impact of one common currency on pricing. Management believes the introduction of the euro has had no significant impact to date on financial position, results of operations and cash flows and is not expected to have a significant impact in the future. Management will continue to monitor this impact. Forward Looking Statements This Management's Discussion and Analysis may contain forward-looking statements which include assumptions about future market conditions, operations and results. These statements are based on current expectations and are subject to risks and uncertainties. They are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Among the many factors that could cause actual results to differ materially from any forward-looking statements are the success of new product introductions and promotions, changes in the competitive environment for the Company's product, changes in economic conditions, foreign exchange risk, outcome of litigation, and other factors discussed in prior Securities and Exchange Commission filings by the Company. The Company assumes no obligation to update these forward-looking statements or advise of changes in the assumptions on which they were based. 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. -16- 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 as of March 1, 2000 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 53 Chief Executive Officer, President and Director Joel K. Bedol 48 Vice President, General Counsel and Secretary Wilan van den Berg 38 Executive Vice President International Ann T. Buivid 47 President, U.S. Personal Care and Wellness Division Alexander R. Castaldi 49 Executive Vice President, Chief Financial and Administrative Officer Lawrence D. Handler 54 President, Remington Service Stores Lester C. Lee 40 President, U.S. Shaver and Grooming Division Timothy G. Simmone 34 Vice President, Chief Technical Officer Victor K. Kiam, II 73 Chairman and Director Norman W. Alpert 41 Director William B. Connell 59 Director Victor K. Kiam, III 40 Director Kevin A. Mundt 46 Director Arthur J. Nagle 61 Director Daniel S. O'Connell 45 Director Robert L. Rosner 40 Director
Neil P. DeFeo has been Chief Executive Officer, President 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. Mr. DeFeo is a director of Cluett American Investment Corporation, a Company in which Vestar or its affiliates has a significant equity interest and Driscoll's Strawberry Association, Inc. Joel K. Bedol was appointed Vice President, General Counsel and Secretary of Remington in January 2000. From 1993 to 1999, Mr. Bedol was Executive Vice President, General Counsel and Secretary for Nine West Group, Inc. -17- Wilan van den Berg has been Executive Vice President International since September 1998. From 1995 to 1998 he was President and Chief Executive Officer of Payer Electric Shaver and from 1987 until 1995, he was with the Philips International Domestic Appliances and Personal Care division of Philips Electronics N.V. in various sales and marketing positions, including Sales and Marketing Director for Philips France. Ann T. Buivid was appointed to President, U.S. Personal Care and Wellness Division in January 2000. Ms. Buivid previously held the position of Vice President Worldwide Marketing and New Business Development since September 1998. From 1995 to 1998, Ms. Buivid was Vice President, North American Marketing and New Business Development, for the Household Products Group of Black & Decker Inc. and from 1993 to 1995, she was Vice President of Marketing for the Beverages Category of Campbell Soup Company. Alexander R. Castaldi was appointed to Executive Vice President, Chief Financial and Administrative Officer of the Company in January 2000. Previously, Mr. Castaldi held the title Executive Vice President and Chief Financial Officer 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. Lester C. Lee was appointed to President, U.S. Shavers and Grooming Division in January 2000. Previously, Mr. Lee held the position of 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. Timothy G. Simmone has been Vice President, Chief Technical Officer of the Company since 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 Corp., Chairman of the Board of Ronson P.L.C. and a director of CT Holdings, Inc. Norman W. Alpert has been a Director of Remington since May 1996. Mr. Alpert is a Managing Director of Vestar Capital and was a founding partner at its inception in 1988. Mr. Alpert is Chairman of the Board of Directors of Aearo Corporation and Advanced Organics Holdings, Inc., and a director of Russell-Stanley Holdings, Inc., Cluett American Investment Corporation and Siegelgale Holdings, Inc., all companies in which Vestar or its affiliates have a significant equity interest. -18- 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 Dolphin Software, Inc., and Digital Discoveries, Inc. Victor K. Kiam, III has been a Director of Remington since 1992. Mr Kiam has been President of RPI Corp. since 1999 and previously served as Executive Vice President of RPI Corp. since 1996. He 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 1997. 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 Holdings, Inc. and Advanced Organics Holdings, Inc., companies in which Vestar or its affiliates have a significant equity interest and in Telephone and Data Systems, Inc. Arthur J. Nagle has been a Director of Remington since May 1996. Mr. Nagle is a Managing Director of Vestar Capital and was a founding partner at its inception in 1988. Mr. Nagle is a director of Advanced Organics Holdings, Inc., Aearo Corporation, Russell-Stanley Holdings, Inc., and Gleason Corporation, companies 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. Mr. O'Connell is a director of Aearo Corporation, Cluett American Investment Corporation, Insight Communications Company, L.P., Russell-Stanley Holdings, Inc., Sheridan Healthcare Inc., Siegelgale Holdings, Inc. and St. John Knits, Inc., 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 and was a founding partner at its inception in 1988. Mr. Rosner serves as Chairman of the Board of Directors of Russell-Stanley Holdings, Inc., and is a director of Sheridan Healthcare, Inc., companies in which Vestar or its affiliates have a significant equity interest. ITEM 11. Executive Compensation Compensation of Executive Officers The following Summary Compensation Table includes individual compensation information during each of the three years ended December 31, 1999 for Company's Chief Executive Officer 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 1999 (collectively, the "Named Executive Officers") for services rendered in all capacities to the Company. The officers respective titles are those in effect -19- as of December 31, 1999.
Annual Compensation (1) ------------------------------- All Other Name and Principal Position Year Salary ($)(2) Bonus ($)(3) Compensation ($)(4) - --------------------------- ---- ------------- ------------ ------------------- Neil P. DeFeo, CEO, President, and 1999 $431,635 $652,500 $ 2,767 Director 1998 400,000 300,000 2,569 1997 392,000 200,000 214,048(5) Alexander R. Castaldi, Executive VP 1999 283,077 370,500 3,868 and CFO 1998 265,000 172,250 3,348 1997 265,000 132,000 3,189 Wilan van den Berg, Executive VP 1999 250,000 162,296 152,642(6) International 1998 68,750 35,000 30,800(7) Lester C. Lee, Sr. VP Sales and 1999 218,557 168,399 4,753 Integrated Logistics 1998 205,000 104,612 3,265 1997 96,981 79,229 71,621(7) Ann T. Buivid, VP Worldwide Marketing 1999 200,000 157,500 4,598 1998 64,615 34,162 308
- ---------- (1) Does not include value of perquisites and other personal benefits for any named executive officer since the aggregate amount of such compensation is the lesser of $50,000 or 10% of the total of annual salary and bonus reported for the named executive. (2) Includes compensation earned during the year but deferred pursuant to the Company's Deferred Compensation Plan. (3) 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. (4) The amounts shown consist of Company matching contributions to the Company's 401(k) Plan unless otherwise noted. (5) Includes relocation expenses in the amount of $211,635 and Company matching contributions under the 401(k) Plan in the amount of $2,413. (6) The amount consists of relocation expenses, housing allowance and car allowance in the amounts of $111,642, $25,000 and $16,000, respectively. (7) The amounts shown are relocation expenses. 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 is an officer of or is employed by the Company. Other Arrangements The Company has an employment agreement with Mr. DeFeo which provides for his continued employment as President and Chief Executive Officer through January 2000, which agreement by its -20- terms has automatically renewed for a period of two years, unless earlier terminated. The agreement provides for a base salary of not less than $300,000, plus a deferral of an additional $100,000, 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 also required to provide Mr. DeFeo with term life insurance in the amount of not less than $500,000. The Company has entered into an Executive Severance Agreement with Mr. Castaldi, which provides for the payment of severance benefits to Mr. Castaldi in the event of: (i) the termination of his employment by the Company without cause (or by reason of disability); (ii) Mr. Castaldi's resignation for Good Reason; (iii) any reduction in Mr. Castaldi's base salary; or (iv) any failure by the Company to provide Mr. Castaldi with benefits in which he participated at the inception of the agreement. For purposes of the agreement, "Good Reason" is defined as the assignment to Mr. Castaldi of duties materially and adversely inconsistent with those in effect at the inception of the agreement or the occurrence of a "Change of Control" of the Company (defined as the acquisition by non-affiliated persons of greater than 60% of the Common Units of the Company or the common stock of a corporation controlling, or serving as successor to, the Company. In any such event, Mr. Castaldi is entitled to receive his base salary for a period of 12 months (the "Severance Term") following the termination of his employment, continuing medical benefits during the Severance Term and, to the extent permissible under the terms of applicable plans, continuing life insurance and long-term disability benefits. All medical and insurance benefits will cease in the event that Mr. Castaldi becomes employed on a full-time basis prior to the expiration of the Severance Term. Mr. Castaldi is also entitled to receive bonus payments in certain circumstances in connection with the termination of his employment and in the event of a termination of employment following a Change of Control. The Company has entered into an employment agreement with Mr. van den Berg, which provides for his continued employment as Executive Vice President - International of the Company through September 20, 2000, unless earlier terminated. The agreement provides for a base salary of $250,000 and a bonus to be determined in accordance with the bonus plan of Remington Consumer Products Ltd., a wholly-owned subsidiary of the Company. The agreement also provides for Mr. van den Berg to receive a housing allowance of $50,000 per year. In the event of the termination of Mr. van den Berg's employment without cause, he is entitled to receive salary continuation based upon his then current base salary for a period of 12 months from the date of termination. The Company has entered into agreements with Mr. Lee and Ms. Buivid whereby such employees would be entitled to salary continuation for 6 months if their employment was involuntarily terminated other than for "cause" during the term of the agreement. Deferred Compensation Plan The Company has a Deferred Compensation Plan pursuant to which eligible executive employees -21- (including the Named Executive Officers, except for Mr. van den Berg) 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 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 240 employees in the United States and 125 employees in the international operations will participate in the Bonus Plan in the year 2000. Under the Bonus Plan, each participating employee is assigned a target bonus award, representing up to 85% 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 The Company has a Phantom Equity Program under which a maximum of 21% of the value of the Company's Equity can be awarded to selected officers and other key employees of the Company and its affiliates. 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 of the Company, 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. -22- 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 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. As of December 31, 1999, the Company achieved the specified performance targets required for full vesting of the performance based awards, subject to maintenance of a minimum performance target for the next twelve months. Any 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 Equity. During 1999 no phantom awards were issued to and no phantom awards were exercised by the Named Executive Officers. The following table contains information with respect to outstanding phantom awards for each of the Named Executive Officers as of December 31, 1999: Number of Securities Value of Name Underlying Awards (1) Unexercised Awards (2) ---- --------------------- ---------------------- Neil P. DeFeo 4.00 (3) N/A 2.00 (4) N/A Alexander R. Castaldi 1.30 (3) N/A 0.50 (4) N/A 0.22 (5) N/A Wilan van den Berg 0.50(3) N/A 0.40(4) N/A 0.10(5) N/A Lester C. Lee 0.90 (3) N/A 0.35 (4) N/A 0.16 (5) N/A Ann T. Buivid 0.35 (3) N/A 0.20 (4) N/A 0.10 (5) N/A - ---------- (1) Indicates the applicable percentage of the Company's Equity underlying the awards. (2) The Company's Equity is not registered under the Securities Act of 1933 and is therefore not publicly 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 an IPO. See above for a complete description of the Phantom Equity Program and the determination of payouts. (3) Time based awards, which expire on December 31, 2009. (4) Performance based awards, which expire on December 31, 2002 (5) Super performance based awards, which expire on December 31, 2002. -23- 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 elects to participate in the Savings Plan and makes a contribution thereto, the Company makes a matching contribution of 50% of the first 5% of annual compensation contributed. Effective early 2000, the Company amended its matching contribution to 50% of the first 6% 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 1, 2000.
Preferred Equity Common Units --------------------------- ---------------------------- Name Capital (1) % Number % ---- ----------- ------ ------ ---- Vestar Equity Partners L.P. (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% 555 Madison Avenue, 23rd Floor New York, New York 10022 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 Directors 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. -24- 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. Ownership of Remington equity 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, 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 the Vestar Members own less than 25% of the number of the Company's Common Units owned by the Vestar Members on May 23, 1996, and provided further that Vestar Capital may terminate the Management Agreement at any time. 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 annual 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, 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). Pursuant to a Non-Competition Agreement (the "Non-Competition Agreement") dated May 23, 1996, between the Company, the Vestar Members 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 grooming products, and (ii) three years, with respect to 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. Pursuant to a reimbursement and indemnification agreement (the "Indemnification Agreement") -25- between the Company, Vestar and the Kiams entered into in June 1999 in connection with the Guarantee of the unsecured supplemental loans to the Company under the Senior Credit Agreement (the "Guarantee"), Vestar and Victor Kiam, II, each receive an annual guarantee fee of $100,000 from the Company. The Indemnification Agreement will be in effect until the date the unsecured supplemental loans and all other amounts guaranteed by the Guarantee are paid in full. 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 herein by reference to Exhibit 3.1 in Registration Statement on Form 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). 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 Sterns & 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 -26- of its subsidiaries, various 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. Incorporated by reference to Exhibit 10.5 in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 10.6 Fifth Amendment, dated as of March 11, 1999 to the Credit and Guarantee Agreement. Incorporated by reference to Exhibit 10.6 in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 10.7 Sixth Amendment dated as of June 9, 1999 to the Credit and Guarantee Agreement. Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K dated June 11, 1999. 10.8 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). 10.9 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). 10.10 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). 10.11 Conditional Assignment of and Security Interest in Patent Rights (United Kingdom) -27- 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). 10.12 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). 10.13 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). 10.14 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). 10.15 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). 10.16 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). 10.17 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). 10.18 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). 10.19 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). 10.20 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). 10.21 Management Agreement dated as of May 23, 1996 between Remington and Vestar -28- Capital Partners. Incorporated by reference to Exhibit 10.15 in Registration Statement on Form S-4(File Number 333-07429). 10.22 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). 10.23 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. 10.24 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. 10.25 Letter Agreement dated June 6, 1997 between the Company and Lester Lee. Incorporated by reference to Exhibit 10.25 in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 10.26 Employment Agreement made as of September 21, 1998 between the Company and Wilan van den Berg. 10.27 Letter Agreement dated June 17, 1997 between the Company and Tim Simmone. 10.28 Letter Agreement dated August 7, 1998 between the Company and Ann T. Buivid. 10.29 Letter Agreement dated January 3, 2000 between the Company and Joel K. Bedol. 10.30 Form of Severance Agreement. Incorporated by reference to Exhibit 10.24 in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 10.31 Form of Time Based Phantom Equity Agreement with participants in the Phantom Equity Program. Incorporated by reference to Exhibit 10.25 in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 10.32 Form of Performance Based Phantom Equity Agreement with participants in the Phantom Equity Program. Incorporated by reference to Exhibit 10.26 in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 10.33 Form of Super Performance Based Phantom Equity Agreement with participants in the Phantom Equity Program. Incorporated by reference to Exhibit 10.27 in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 10.34 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 -29- on Form S-4 (File Number 333-07429). 10.35 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). 10.36 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). 10.37 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). 21 Subsidiaries of Remington. 24 Powers of Attorney. 27 Financial Data Schedule. -30- 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 30, 2000 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 30, 2000. * * - --------------------------------------- ------------------------------------- Neil F. DeFeo, Chief Executive Officer, Alexander R. Castaldi, Executive Vice President and Director President, Chief Financial and Administrative Officer /s/ Kris J. Kelley * - --------------------------------------- ------------------------------------- Kris J. Kelley, Vice President and Victor K. Kiam II, Chairman and Controller Director * * - --------------------------------------- ------------------------------------- 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/ by Joel K. Bedol ------------------------------------ Joel K. Bedol, as Attorney-in-Fact -31- INDEX TO FINANCIAL STATEMENTS
Pages ----- Financial Statements Independent Auditors' Report F-2 Consolidated Balance Sheets as of December 31, 1999 and 1998 F-3 Consolidated Statements of Operations for each of the years in the three-year period ended December 31, 1999 F-4 Consolidated Statements of Members' Deficit for each of the years in the three- year period ended December 31, 1999 F-5 Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31,1999 F-6 Notes to Consolidated Financial Statements F-7 Financial Statement Schedule Schedule II - Valuation and Qualifying Accounts for each of the years in the three-year period ended December 31,1999 S-1
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, 1999 and 1998, and the related consolidated statements of operations, members' deficit, and cash flows for each of the three years in the period ended December 31, 1999. Our audits also included the consolidated financial statement schedule listed in the index to the consolidated financial statements. The 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, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles. Also, in our opinion, the 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 February 16, 2000 F-2 Remington Products Company, L.L.C. Consolidated Balance Sheets (in thousands)
December 31, ------------------------- 1999 1998 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 9,866 $ 4,249 Accounts receivable, less allowance for doubtful accounts of $2,335 in 1999 and $2,749 in 1998 78,503 59,998 Inventories 55,456 50,163 Prepaid and other assets 4,051 1,879 --------- --------- Total current assets 147,876 116,289 Property, plant and equipment, net 12,718 13,135 Intangibles, net 56,641 58,573 Other assets 6,755 7,730 --------- --------- Total assets $ 223,990 $ 195,727 ========= ========= LIABILITIES AND MEMBERS' DEFICIT Current liabilities: Accounts payable $ 23,643 $ 15,981 Short-term borrowings 5,790 5,192 Current portion of long-term debt 2,323 1,842 Accrued liabilities 31,067 24,980 --------- --------- Total current liabilities 62,823 47,995 Long-term debt 187,728 180,634 Other liabilities 1,222 1,839 Commitments and contingencies Members' deficit: Members' deficit (25,438) (31,473) Accumulated other comprehensive income (2,345) (3,268) --------- --------- Total members' deficit (27,783) (34,741) --------- --------- Total liabilities and members' deficit $ 223,990 $ 195,727 ========= =========
See notes to consolidated financial statements. F-3 Remington Products Company, L.L.C. Consolidated Statements of Operations (in thousands)
Year Ended December 31, ----------------------------------------- 1999 1998 1997 --------- --------- --------- Net sales $ 318,766 $ 268,357 $ 241,572 Cost of sales 176,269 159,175 141,296 --------- --------- --------- Gross profit 142,497 109,182 100,276 Selling, general and administrative 111,434 94,415 84,194 Restructuring and reorganization charge -- 6,806 -- Amortization of intangibles 1,943 1,945 1,936 --------- --------- --------- Operating income 29,120 6,016 14,146 Interest expense 21,723 20,499 19,318 Other expense 127 472 526 --------- --------- --------- Income (loss) before income taxes 7,270 (14,955) (5,698) Provision for income taxes 1,235 382 2,225 --------- --------- --------- Net income (loss) $ 6,035 $ (15,337) $ (7,923) ========= ========= ========= Net loss applicable to common units $ (4,550) $ (24,741) $ (16,279) ========= ========= =========
See notes to consolidated financial statements. F-4 Remington Products Company, L.L.C. Consolidated Statements of Members' Deficit (in thousands)
Accumulated Other Total Preferred Common Other Accumulated Comprehensive Members' Equity Units Capital Deficit Income Deficit --------- -------- -------- ----------- ------------- --------- Balance, January 1, 1997 $ 66,576 $ 7,742 $(73,921) $ (7,748) $ (356) $ (7,707) Repurchase of common units (620) (620) Preferred dividend 8,356 (8,356) -- Comprehensive income (loss): Net loss (7,923) Foreign currency translation (2,028) Total comprehensive income (loss) (9,951) -------- -------- -------- -------- -------- -------- Balance, December 31, 1997 74,932 7,122 (73,921) (24,027) (2,384) (18,278) Preferred Dividend 9,404 (9,404) -- Repurchase of common units (242) (242) Comprehensive income (loss): Net loss (15,337) Foreign currency translation (708) Cumulative effect of adoption of SFAS 133 (105) Unrealized hedging loss (71) Total comprehensive income (loss) (16,221) -------- -------- -------- -------- -------- -------- Balance, December 31, 1998 84,336 6,880 (73,921) (48,768) (3,268) (34,741) Preferred Dividend 10,585 (10,585) -- Comprehensve income: Net income 6,035 Foreign currency translation 864 Unrealized hedging gain 59 Total comprehensive income 6,958 -------- -------- -------- -------- -------- -------- Balance, December 31, 1999 $ 94,921 $ 6,880 $(73,921) $(53,318) $ (2,345) $(27,783) ======== ======== ======== ======== ======== ========
See notes to consolidated financial statements. F-5 Remington Products Company, L.L.C. Consolidated Statements of Cash Flows (in thousands)
Year Ended December 31, -------------------------------------- 1999 1998 1997 -------- -------- -------- Cash flows from operating activities: Net income (loss) $ 6,035 $(15,337) $ (7,923) Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 3,612 3,224 2,831 Amortization of intangibles 1,943 1,945 1,936 Amortization of deferred financing fees 1,388 1,110 1,072 Restructuring and reorganization charge -- 6,806 -- Inventory write-down -- 2,760 -- Deferred income taxes (144) (26) (44) Foreign currency forward (gains) losses 174 (35) 115 -------- -------- -------- 13,008 447 (2,013) Changes in assets and liabilities: Accounts receivable (18,505) (6,946) 1,210 Inventories (5,293) 7,584 3,278 Accounts payable 7,662 2,622 (3,055) Accrued liabilities 5,355 (5,518) (5,267) Other, net (238) (1,295) (2,133) -------- -------- -------- Cash provided by (used in) operating activities 1,989 (3,106) (7,980) -------- -------- -------- Cash flows from investing activities: Capital expenditures (3,518) (3,879) (5,078) Proceeds from working capital adjustment -- -- 2,500 Other -- -- 204 -------- -------- -------- Cash used in investing activities (3,518) (3,879) (2,374) -------- -------- -------- Cash flows from financing activities: Net borrowings (repayments) under term loan facilities 13,689 (1,426) (965) Net borrowings (repayments) under credit facilities (5,674) 7,632 10,938 Equity repurchases -- (242) (620) Debt issuance costs and other, net (842) (221) (251) -------- -------- -------- Cash provided by financing activities 7,173 5,743 9,102 Effect of exchange rate changes on cash (27) 83 (539) -------- -------- -------- Increase (decrease) in cash and cash equivalents 5,617 (1,159) (1,791) Cash and cash equivalents, beginning of year 4,249 5,408 7,199 -------- -------- -------- Cash and cash equivalents, end of year $ 9,866 $ 4,249 $ 5,408 ======== ======== ======== Supplemental cash flow information: Interest paid $ 20,302 $ 19,144 $ 18,756 Income taxes paid, net $ 248 $ 2,331 $ 2,493
See notes to consolidated financial statements. F-6 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Remington Products Company, L.L.C. and its wholly owned subsidiaries, (the "Company") develop and market electrical personal care appliances. The Company distributes on a worldwide basis electrical shavers and accessories, personal care appliances, including hair dryers and hairsetters, electrical grooming products, wellness products such as paraffin hand spas and foot spas, and other small electrical consumer appliances. The Company's products are sold worldwide primarily through mass merchandisers, catalog showrooms, drug store 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. and RPI Corp. ("RPI") to acquire the operations of Remington Products Company and its subsidiaries in May of 1996. Vestar Razor Corp. was formed in May of 1996 to hold an interest in the Company. Vestar Shaver Corp. and Vestar Razor Corp. (together, the "Vestar Members") are wholly owned by Vestar Equity Partners, L.P ("Vestar"), an institutional equity capital fund and affiliate of Vestar Capital Partners ("Vestar Capital"). Basis of Presentation: The consolidated financial statements include the accounts of Remington Products Company, L.L.C. and subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. Certain prior year amounts have been reclassified to conform with the current year presentation. Use of Estimates: 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 could 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, product warranty costs, taxes and contingencies. 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 majority of the Company's inventories are valued at the lower of cost or market utilizing the first-in, first-out (FIFO) method. Domestic manufactured inventories, which represent approximately 8% of the consolidated inventories as of December 31, 1999 and 16% at December 31, 1998, are stated at cost determined by the last-in, first-out (LIFO) method. As of December 31, 1999 and 1998, the excess of current replacement cost over LIFO cost of inventories was not significant. During 1998, the Company recorded non-recurring charges of $2.8 million for certain inventory write-downs associated with the Company's restructuring and reorganization plan. Property, Plant and Equipment: Property, plant and equipment is recorded primarily at cost. Depreciation is provided for principally on a straight-line basis over the estimated useful lives of the assets, which range from 3 to 20 years. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the improvements. During 1998, the Company recorded non-recurring charges of $3.5 million for write-downs on certain equipment and tooling associated with the Company's restructuring and reorganization plan. Intangibles: Patents are being amortized on a straight-line basis over a period of ten years. All other intangibles are amortized on a straight-line basis over 40 years. Costs associated with obtaining financing arrangements are included in other assets and are being amortized over the term of the related borrowings. F-7 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) Long Lived Assets: Impaired losses are recorded on long lived assets when indicators of impairment are present and the anticipated undiscounted operating cash flows generated by those assets are less than the assets' carrying value. Research and Development: Research and development costs related to both present and future products are expensed as incurred. Such costs totaled $4.0 million, $4.3 million and $3.4 million for the years ended December 31, 1999, 1998 and 1997, respectively. Income Taxes: U.S. Federal income taxes on net earnings of the Company are payable directly by the members. In jurisdictions where partnership status is not recognized or foreign corporate subsidiaries exist, the Company provides for income taxes currently payable as well as for those deferred because of temporary differences between the financial and tax basis of assets and liabilities. Hedging Activity: Effective July 1, 1998, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 requires the Company to recognize all derivatives at fair value. Depending on the nature of the underlying exposure being hedged, changes in the fair value of derivatives are recognized either in the statement of operations or other comprehensive income ("OCI"). The ineffective portion of the change in fair value of the derivative is recognized in earnings. In accordance with the Company's foreign exchange risk management policy, the Company's foreign subsidiaries hedge the forecasted purchases of inventory denominated in currencies different then the subsidiary's functional currency. The derivative contracts related to these hedges primarily consist of forward foreign exchange contracts, which are designated as cash flow hedges. These forward contracts generally have maturities not exceeding twelve months. For cash flow hedges, the fair value changes of the derivative instruments related to the effective portion of the hedges are initially recorded as a component of OCI. Unrealized gains and losses on cash flow hedges accumulate in OCI and are reclassified into earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. For forecasted purchases of inventory, amounts are reclassified when the hedged inventory is reflected in cost of goods sold. As of December 31, 1999, other than forward foreign exchange contracts, the Company was not party to any other derivatives as defined by SFAS No. 133. At December 31, 1999, the Company had unrealized losses of $117 thousand, net of tax, classified in OCI for its outstanding hedge contracts related to forecasted inventory purchases. A significant portion of this amount is expected to be reclassified to cost of goods sold in the first six months of 2000. As of December 31, 1999, the losses classified in other income (expense) related to the ineffective portion of the Company's outstanding hedge contracts were immaterial. The cumulative effect of a change in accounting principle due to adoption of SFAS No. 133 as of July 1, 1998 had an immaterial impact on earnings and a $105 thousand impact to OCI. Prior to the adoption of SFAS No. 133, the Company accounted for its forward foreign exchange contracts at mark to market through earnings, unless the contracts were effectively hedging firm commitments, for which unrealized gains and losses were deferred and recognized as an adjustment of the hedged item. Translation of Foreign Currencies: Assets and liabilities of the Company's foreign subsidiaries are translated at the exchange rate in effect at each balance sheet date. Statement of operations accounts are translated at the average exchange rate for the period. Translation adjustments arising from the use of differing exchange rates from period to period are included in the cumulative translation adjustment account in OCI. Foreign currency transaction gains and losses, including gains and losses on forward contracts, are recognized in earnings and totaled net losses of $0.5 million, $0.7 million and $0.7 million for the years ended December 31, 1999, 1998 and 1997, respectively. 2. Inventories Inventories were comprised of the following as of December 31, 1999 and 1998 (in thousands): F-8 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) 1999 1998 ------- ------- Finished goods $53,351 $46,454 Work in process and raw materials 2,105 3,709 ------- ------- $55,456 $50,163 ======= ======= 3. Property, Plant and Equipment Property, plant and equipment as of December 31, 1999 and 1998 consisted of (in thousands): 1999 1998 -------- -------- Land and buildings $ 2,517 $ 2,517 Leasehold improvements 4,615 4,058 Machinery, equipment and tooling 9,705 8,234 Furniture, fixtures and other 4,872 4,523 -------- -------- 21,709 19,332 Less accumulated depreciation (8,991) (6,197) -------- -------- $ 12,718 $ 13,135 ======== ======== 4. Intangibles Intangibles were comprised of the following (net of accumulated amortization of $7,020 and $5,074 thousand) as of December 31, 1999 and 1998, respectively (in thousands): 1999 1998 ------- ------- Goodwill $29,509 $30,309 Tradenames 24,145 24,809 Patents 2,987 3,455 ------- ------- $56,641 $58,573 ======= ======= 5. Accrued Liabilities Accrued liabilities were comprised of the following as of December 31, 1999 and 1998 (in thousands): 1999 1998 ------- ------- Advertising and promotion expenses $ 8,263 $ 7,229 Compensation and benefits 7,391 4,900 Income and other taxes payable 4,377 2,377 Interest 2,089 2,056 Restructure and reorganization -- 2,196 Distribution expense 3,295 399 Other 5,652 5,823 ------- ------- $31,067 $24,980 ======= ======= 6. Debt Long-term debt at December 31, 1999 and 1998 consisted of (in thousands): F-9 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) 1999 1998 --------- --------- Senior Subordinated Notes $ 130,000 $ 130,000 Revolving Credit Facilities 37,718 43,895 Term and Supplemental Loans 21,207 7,611 Capital Leases and Other 1,126 970 --------- --------- 190,051 182,476 Less current portion (2,323) (1,842) --------- --------- $ 187,728 $ 180,634 ========= ========= 11% Senior Subordinated Notes: The 11% Series B Senior Subordinated Notes due 2006 (the "Senior Subordinated Notes") are general unsecured obligations of the Company which mature on May 15, 2006. Interest accrues at the rate of 11% per annum and is payable semi-annually in arrears. The Senior Subordinated Notes are redeemable, in whole or in part, at the option of the Company at any time on or after May 15, 2001 at a redemption price ranging from 105.5% to 100.0% of the principal amount then outstanding plus accrued and unpaid interest, depending when redeemed, and any applicable damages. Senior Credit Agreement: The Senior Credit Agreement, which expires on June 30, 2002, provides for a term loan of $5.0 million to the Company and $5.0 million to the Company's U.K. subsidiary (the "Term Loans") and a revolving credit facility of $50.0 million to the Company and $20.0 million to the Company's U.K. subsidiary (the "Revolving Credit Facilities"). In June 1999, the Company amended the Senior Credit Agreement to allow for supplemental term loan borrowings totalling $15.0 million (the "Supplemental Loans"). These loans are comprised of $7.5 million in second secured loans (the "Secured Supplemental Loans") and $7.5 million in unsecured loans which are guaranteed by the Company's controlling shareholder (the "Unsecured Supplemental Loans"). This additional financing was used to reduce the Company's outstanding borrowings under the Revolving Credit Facility. The Revolving Credit Facilities are subject to a borrowing base of 85% of eligible accounts receivable and 60% of eligible inventory for the applicable borrower. In addition, the borrowing base can be increased as needed by $10 million over the applicable percentage of eligible receivables and inventories, (still limited to the $70 million total facilities) from March 16 through December 15 of 2000 and March 16 through June 29 of 2001. As of December 31, 1999, availability under the Revolving Credit Facilities was approximately $18.5 million. The availability has been reduced by approximately $0.8 million in short-term commercial and stand-by letters of credit outstanding as of December 31, 1999. The Term Loans under the Senior Credit Agreement are payable in quarterly installments. Aggregate scheduled installments remaining over the next three years ending December 31, 2002 are $1.9, $3.2 and $1.1 million, respectively. The Supplemental Loans are payable on June 30, 2001. The obligations under the Senior Credit Agreement, excluding the Unsecured Supplemental Loans, are guaranteed by each of the Company's domestic subsidiaries and secured by their assets and properties and pledge of the common equity interests. Interest rates per annum applicable to the loans under the Senior Credit Agreement, excluding the Supplemental Loans, are based, at the Company's option, upon (a) in the case of the Company, a Eurodollar rate ("LIBOR") plus 2.75% or the greater of (i) prime rate plus 1.5% and (ii) the federal funds rate plus 2% and (b) in the case of loans to the Company's U.K. subsidiary, a EuroSterling Rate plus 2.75% or the Sterling Base Rate plus 2.75%; provided, however, the interest rates are subject to reduction if certain requirements of financial performance are met. Interest on the Secured Supplemental Loans is based, at the Company's option, on LIBOR plus 6% or the greater of (i) the prime rate plus 4.75% and (ii) the federal funds rate plus 5.25%. Interest on the Unsecured Supplemental Loans is based, at the Company's option, on LIBOR plus 1% or the greater of (i) the prime rate and (ii) the federal funds rate plus 0.5%. Interest is payable quarterly in arrears, including a commitment fee of 0.5% on the average daily unused portion of the Revolving Credit Facilities. F-10 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) Debt Covenants: The Senior Credit Agreement requires the Company to meet certain financial tests, the more restrictive of which require the Company to maintain certain interest coverage and leverage ratios, as defined. The Senior Subordinated Note indenture and the Senior Credit Agreement also contain a number of operating covenants which limit the discretion of Management with respect to certain business matters, including the amount and terms under which the Company can obtain additional financing in the future. In addition, these agreements limit the amount of dividends that the Company is permitted to pay. As of December 31, 1999, the Company was in compliance with its debt covenants. Short Term Borrowings: Short Term Borrowings consist of local revolving credit lines at some of the Company's foreign subsidiaries and totaled approximately $5.8 million and $5.2 million as of December 31, 1999 and 1998, respectively. These facilities are collateralized by assets of the subsidiaries or are guaranteed by the Company. The weighted average interest rate under these facilities was approximately 5.9% in 1999 and 5.7% in 1998. 7. Membership Equity The Vestar Members and RPI (collectively the "Members") have entered into an Amended and Restated Limited Liability Company Agreement (the "LLC Agreement"), which governs the relative rights and duties of the Members. The ownership interests of the Members in the Company consist of preferred members' equity (the "Preferred Equity") and common units (the "Common Units", together , the "Equity"). The Common Units represent the common equity of the Company. As of December 31, 1999, the Company's Common Units were owned 50% by the Vestar Members and 50% by RPI, however, in accordance with the LLC Agreement, Vestar effectively controls the Management Committee and the affairs and policies of the Company. The Preferred Equity is entitled to a preferred dividend of 12% per annum, compounded quarterly, and to an aggregate liquidation preference of $62 million (net of any prior repayments of Preferred Equity) plus any accrued but unpaid preferred dividends. As of December 31, 1999 the aggregate unpaid Preferred Equity, including accrued dividends of $32.9 million, totaled $94.9 million of which the Vestar Members own 48.4% and RPI owns 51.6%. In January 1998, the Company repurchased any remaining outstanding common units owned by certain officers of the Company, cancelled all outstanding related options and adopted a new Phantom Equity Program. Under this program a maximum of 21% of the value of the Company's Equity can be awarded to selected officers and other key employees of the Company. 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, whichever comes first. 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. As of December 31, 1999, the Company achieved the specified performance target required for full vesting of the performance based awards, subject to maintenance of a minimum performance target for the next twelve months. Payment of the performance based 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. Any 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 Equity. 8. Restructure and Reorganization Charge In the second quarter of 1998, the Company announced a plan to restructure its Connecticut shaver assembly and warehousing operations ("the Plan"). The Plan consisted of relocating the shaver assembly operations to an existing Remington third party supplier located in China and relocating the warehousing function to a third party provider in F-11 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) California. The Plan resulted in affecting the employment of approximately 235 employees located at the Company's two Connecticut facilities, the majority of which were factory employees. During 1998, the Company recorded total non-recurring charges of $9.6 million related to the Plan, of which $6.8 million was charged to restructuring and reorganization and $2.8 million was charged to cost of sales related to inventory write-downs associated with the Plan. The Company substantially completed the relocation of the Connecticut shaver assembly to Asia, and the relocation of the Connecticut warehousing facility to a third party in California in the fourth quarter of 1998. In December 1998, the Company terminated substantially all of the affected employees, and approximately $0.5 million of severance and other benefit costs were charged against the restructuring reserve. The remaining amounts were paid out in 1999. In the fourth quarter of 1998, the Company terminated its lease obligations with respect to certain equipment and machinery utilized in the factory and warehouse, however, the Company continued to pay non-cancelable lease obligations for its Connecticut warehouse facility until they expired in 1999. As of December 31, 1999, all restructuring costs have been completed and no future liabilities exist. Total cash outlays for restructuring activities in 1999 and 1998 were $2.2 and $1.1 million, respectively. 9. Income Taxes U.S. 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 U.S. Federal income taxes for the Company. However, certain state and local jurisdictions do not recognize partnership status for taxing purposes and require taxes be paid on net earnings. Furthermore, earnings of certain foreign operations are taxable under local statutes. Foreign pretax earnings/(losses) were $4,264, $(1,613), and $6,023 thousand for the years ended December 31, 1999, 1998 and 1997, respectively. The provision for income taxes consists of the following for the years ended December 31 (in thousands): 1999 1998 1997 ------- ------- ------- Current: Foreign $ 1,371 $ 329 $ 2,254 State and local 8 79 15 Deferred Foreign (144) (26) (44) ------- ------- ------- Total $ 1,235 $ 382 $ 2,225 ======= ======= ======= Reconciliation of income taxes computed at the U.S. Federal statutory income tax rate to the income taxes as reported: Income taxes computed at statutory U.S. Federal income tax rate $ 2,545 $(5,234) $(1,994) Partnership status for U.S. federal income tax purposes (1,052) 4,670 4,102 State and local income taxes 8 79 15 Adjustment for foreign income tax rates (266) 867 102 ------- ------- ------- Income taxes as reported $ 1,235 $ 382 $ 2,225 ======= ======= ======= The components of the Company's deferred tax assets included on the balance sheet at December 31 are as follows (in thousands): 1999 1998 1997 ------ ------ ------ Depreciation and other $ 171 $ 171 $ 145 Foreign tax loss carryforwards 1,323 1,853 1,012 ------ ------ ------ 1,494 2,024 1,157 F-12 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) Less valuation allowance (1,179) (1,853) (1,012) ------- ------- ------- Total deferred tax assets, net $ 315 $ 171 $ 145 ======= ======= ======= The valuation allowance relates to the foreign tax loss carryforwards, the majority of which have been fully reserved due to the uncertain nature of their ultimate realization based upon past performance. Approximately $0.6 million of the $2.9 million in foreign tax loss carryforwards expire between 2003 through 2005, while the remaining $2.3 million has no expiration date. 10. Commitments and Contingencies The Company is liable under the terms of noncancelable leases of real estate and equipment for minimum annual rent payments as follows (in thousands): Operating Capital Leases Leases --------- ------- 2000 $ 8,382 $ 507 2001 5,201 292 2002 1,993 262 2003 1,236 100 2004 189 13 2005 and thereafter -- -- ------- ------- Total minimum lease payments $17,001 1,174 ======= Less: amount representing interest 290 ------- Present value of minimum lease payments $ 884 ======= Rent expense was $7,342, $7,077 and $6,014 thousand for the years ended December 31, 1999, 1998 and 1997. The majority of the leases contain escalation clauses which provide for increases to recover future increases in certain operating costs. The future minimum rental payments shown above include base rentals with known escalations. Lease agreements may include renewal options and usually require that the Company pay for utilities, taxes, insurance and maintenance expenses. 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, will not have a material adverse effect on the Company's consolidated financial position or results of operations. 11. Employee Savings Plan UK Pension Plan. The Company's UK subsidiary has a contributory defined benefit pension plan which covers substantially all of the UK subsidiary's employees. Pension benefits are based upon length of service and compensation under a final compensation averaging formula. The Company's funding policy is to make contributions consistent with statutory requirements. The plan's assets are primarily invested in equity instruments. Information regarding the Company's pension plan as of December 31, 1999 and 1998 are as follows (in thousands): F-13 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) Change in Benefit Obligation: 1999 1998 ------- ------- Benefit obligation at beginning of year $ 6,902 $ 6,222 Service cost 468 513 Interest cost 398 461 Amendments (278) 259 Actuarial gain (429) (387) Benefits paid (196) (204) Currency exchange rate effects (187) 38 ------- ------- Benefit obligations at end of year 6,678 6,902 ------- ------- Change in Plan Assets: Fair value of plan assets at beginning of year 6,909 5,996 Actual return on plan assets 1,375 697 Employer contributions 319 287 Participant contributions 110 96 Benefits paid (196) (204) Currency exchange rate effects (190) 37 ------- ------- Fair value of plan assets at end of year 8,327 6,909 ------- ------- Funded Status 1,649 7 Unrecognized net actuarial (gain) loss (1,534) 75 ------- ------- Prepaid benefit cost $ 115 $ 82 ======= ======= Amounts recognized in the balance sheet are comprised of the prepaid benefit costs as noted above. Weighted average assumptions: Discounted rate 6.0% 6.0% Expected return on plan assets 7.0% 7.0% Rate of compensation increase 3.25% 3.5% Health care cost trend rate, current year -- -- Year Ended December 31, 1999 1998 1997 ----- ----- ----- Components of Net Periodic Benefit Cost: Service cost $ 293 $ 359 $ 387 Interest cost 395 461 410 Expected return on plan assets (631) (529) (526) ----- ----- ----- Net periodic benefit cost $ 57 $ 291 $ 271 ===== ===== ===== Employee Savings Plan. The Company has a savings accumulation plan (the "Plan") under Section 401(k) of the Internal Revenue Code covering substantially all regular employees. The Plan is subject to the provisions of ERISA and has been updated for subsequent amendments. The Plan allows for employees to defer up to the lesser of 15% of their annual earnings or within limitations on a pre-tax basis through voluntary contributions to the plan. The Plan provides for contributions in an amount equal to 50% of their employees' contributions up to a maximum of 5% of their total salary. The Company's matching contributions were $276, $267 and $237 thousand for the years ended December 31, 1999, 1998 and 1997, respectively. F-14 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) Effective in early 2000, the Company amended its matching contribution to 50% of the first 6% of total salary contributed. 12. Financial Instruments, Credit Risk and Other Fair Value of Financial Instruments: The carrying amounts for cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable and accrued liabilities approximate fair value due to the short maturities of these instruments. The fair value and book value at December 31, 1999 of long-term fixed rate debt was approximately $100.1 million and $130.0 million, respectively. The fair value and book value at December 31, 1998 of long-term fixed rate debt was approximately $97.5 million and $130.0 million, respectively. Concentration of Credit Risk: Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and accounts receivable. The Company places its cash with high credit quality institutions. At times such amounts may be in excess of the FDIC insurance limits. As of December 31, 1999, the Company had an uncollateralized receivable with one mass-merchant retailer which represented approximately 14 % of the Company's accounts receivable balance. During calendar 1999, sales to this customer represented approximately 19% of the Company's net sales. The Company performs ongoing credit evaluations of its customers' financial condition but does not require collateral to support customer receivables. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. Foreign Currency Exposure Management: The Company is exposed to foreign currency risk primarily to the extent that its foreign subsidiaries purchase inventory in U.S. dollars. The Company has entered into foreign currency forward contracts to mitigate the effect of fluctuating foreign currencies. The Company uses derivative financial instruments only for risk management purposes and does not use them for speculation or trading. At December 31, 1999, forward contracts to sell approximately 6.0 million UK Pounds Sterling and 4.7 million Australian dollars were outstanding, all of which mature in 2000. At December 31, 1998, forward contracts to sell 4.4 million UK Pounds Sterling, 6.3 million Australian dollars and 0.6 million German marks were outstanding and matured at various dates in 1999. The accounting for hedges is discussed separately under Hedging Activity within Footnote 1. Other: The Company's finished goods are manufactured for the Company by certain third-party suppliers located in China, Japan and Austria. Although the Company considers its present relationships with these suppliers to be good, any adverse change in the relationships with these suppliers, the financial condition of such suppliers, the Company's ability to import outsourced products or the suppliers' ability to manufacture and deliver outsourced products on a timely basis would have a material adverse effect on the Company. 13. Related Party Transactions Pursuant to a management agreement (the "Management Agreement") entered into in connection with the reorganization of the Company in 1996, Vestar Capital will receive an annual advisory fee equal to the greater of $500 thousand and 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 financing. 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 the Vestar Members own less than 25% of the number of the Company's Common Units owned by the Vestar Members on May 23, 1996, and provided further that Vestar Capital may terminate the Management Agreement at any time. F-15 Pursuant to a consulting and transitional services agreement (the "Consulting Agreement") entered into by the Company as of the closing Date, RPI will receive an annual fee equal to the greater of $500 thousand 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 panning, 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 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). Pursuant to a reimbursement and indemnification agreement (the "Indemnification Agreement") between the Company, Vestar and the Kiams entered into in June 1999 in connection with the Guarantee of the Unsecured Supplemental Loans to the Company under the Senior Credit Agreement (the "Guarantee"), Vestar and Victor Kiam, II, each receive an annual guarantee fee of $100,000 from the Company. The Indemnification Agreement will be in effect until the date the Unsecured Supplemental Loans and all other amounts guaranteed by the Guarantee are paid in full. 14. Business Segment and Geographical Information The Company distributes electrical personal care appliances 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 through an international network of subsidiaries and distributors and 3) the U.S. Service Store segment, consisting of Company-owned and operated service stores throughout the United States. The Operating segments reported below are the segments of the Company for which separate financial information is available that is evaluated on a regular basis by the Company's senior management in deciding how to allocate resources to an individual segment and in assessing performance of the segment. The segment's performance is evaluated based on segment operating income, which is defined as earnings before interest, taxes, depreciation and amortization and any unusual charges. All corporate related costs and assets, such as intangibles and deferred financing fees, are included in the North America segment and are not allocated to the other segments' operating income or assets, respectively. Segment net sales are evaluated excluding intersegment sales, which are not material. Information by segment and geographical location is as follows (in thousands):
Year Year Year Ended Ended Ended December 31, December 31, December 31, 1999 1998 1997 ------------ ------------ ------------ Net Sales: North America $ 158,333 $ 130,316 $ 107,781 International 116,044 95,611 95,201 U.S. Service Stores 44,389 42,430 38,590 --------- --------- --------- Total $ 318,766 $ 268,357 $ 241,572 ========= ========= ========= Operating Income: North America $ 20,318 $ 11,766 $ 7,603 International 10,888 5,372 7,869 U.S. Service Stores 3,469 3,613 3,441 Depreciation and amortization (5,555) (5,169) (4,767) Restructuring and reorganization charge -- (6,806) -- Inventory write-down -- (2,760) -- --------- --------- --------- Total $ 29,120 $ 6,016 $ 14,146 ========= ========= ========= Segment Assets: North America $ 129,011 $ 122,073 $ 125,016 International 84,906 62,264 69,064 U.S. Service Stores 10,073 11,390 11,165 --------- --------- --------- Total $ 223,990 $ 195,727 $ 205,245 ========= ========= ========= Capital Expenditures: North America $ 1,705 $ 1,743 $ 2,875 International 1,091 969 952 U.S. Service Stores 722 1,167 1,251 --------- --------- --------- Total $ 3,518 $ 3,879 $ 5,078 ========= ========= =========
F-16 Net sales in the United Kingdom represented approximately 19%, 19% and 20% of the Company's net sales during the years ended December 31, 1999, 1998 and 1997, respectively. No other country contributed more than 10% of net sales. The Company's largest customer, Wal-Mart, accounted for approximately 19%, 19% and 15% of the Company's net sales during the years ended December 31, 1999, 1998 and 1997, respectively, and is serviced primarily by the North America segment. No other customer accounted for more than 10% of the Company's net sales during the years ended December 31, 1999, 1998 and 1997. F-17 REMINGTON PRODUCTS COMPANY, L.L.C. Schedule II--Valuation & Qualifying Accounts (in thousands)
Additions Balance at Charged to Balance at Beginning Costs and End of Year Expenses Deductions of Year Year Ended December 31, 1999 Allowance for doubtful accounts $ 2,749 $ 534 $ (948) $ 2,335 Allowance for cash discounts and returns 7,655 22,690 (20,179) 10,166 Year Ended December 31, 1998 Allowance for doubtful accounts $ 734 $ 2,242 $ (227) $ 2,749 Allowance for cash discounts and returns 8,925 15,299 (16,569) 7,655 Year Ended December 31, 1997 Allowance for doubtful accounts $ 1,340 $ 188 $ (794) $ 734 Allowance for cash discounts and returns 9,419 16,007 (16,501) 8,925
S-1 EX-10.26 2 EMPLOYMENT AGREEMENT Exhibit 10.26 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT (this "Agreement"), made as of September 21, 1998, by and between Remington Products Company, L.L.C., a Delaware limited liability (the "Company"), and Wilan van den Berg, residing in Austria ("Executive"). WITNESSETH: WHEREAS, the Company desires to retain Executive to serve it in the capacity of Executive Vice President International and to perform services on its behalf in said position; NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. EMPLOYMENT The Company agrees to cause Remington Consumer Products Ltd ("Remington UK"), its wholly owned UK subsidiary, to employ Executive and Executive agrees to serve Remington UK and the Company on the terms and conditions set forth herein. 2. TERM This Agreement shall be for an initial period of two (2) years and shall be automatically renewed for successive periods of one year each unless Executive gives notice to the Company at least 30 days prior to the expiration of the initial term or any renewal term. 3. POSITION AND DUTIES a. Executive shall serve as Executive Vice President International of the Company and shall perform such duties normally associated with such position, as well as such duties and services as may be reasonably prescribed from time to time by the President of the Company. Executive shall perform such duties to the best of his ability and in a diligent and proper manner. 1. Except during vacations and periods of illness, Executive shall, during the term of this Agreement, devote all his business time and attention to the performance of services for the Company and Remington UK. The Executive shall cooperate reasonably in any sale of the Company, IPO or similar transaction. 4. COMPENSATION AND RELATED MATTERS a. Salary. During the period of Executive's employment hereunder, Remington UK shall pay to Executive an annual base salary in UK pounds equal to US $250,000 as of the date you report to work payable in accordance with the normal payroll practices of Remington UK. -1- b. Welfare and Retirement Benefits. Executive shall be entitled to participate in all of Remington UK's employee pension plans, welfare benefit plans, including medical and group insurance plans, or other welfare or retirement benefits or arrangements in which executive officers of Remington UK are entitled generally to participate on the same basis as other executive employees. Furthermore, you shall be immediately eligible to participate in Remington UK's deferred benefit pension plan. c. Bonus/Incentive Compensation. (i) The Executive shall be included in Remington UK's bonus plan for the fiscal year commencing on January 1, 1999 with a target bonus of 45% of annual base salary. The amount of actual bonus, including when paid, etc., will be in accordance with all of the provisions of the bonus program as announced to all executive employees of Remington UK. If Executive's employment commences prior to October 1, 1998, Executive shall be eligible for a pro-rata bonus for fiscal year 1998, but not less than the equivalent of US $35,000 using the exchange rate as of the date you report to work. Executive is guaranteed a minimum of 50% of target bonus for 1999.. (ii) The Executive shall participate in the Company's Phantom Equity Program by having allocated to him 0.5% pursuant to the terms of the Time Based Phantom Equity Agreement, 0.4% pursuant to the terms of the Performance Based Phantom Equity Agreement and 0.1% pursuant to the terms of the Super Performance Based Phantom Equity Agreement. A copy of each such agreement is attached herebo as Exhibits A, B and C. d. Business Expenses. Executive shall be reimbursed from Remington UK for all reasonable and necessary business related expenses incurred by Executive in performing services hereunder; provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by Remington UK from time to time. e. Automobile. Remington UK shall provide Executive with an automobile of quality in keeping with the position of Executive Vice President. Expenses associated with the automobile will be paid for in line with current policies and practices applicable to all senior executives of Remington UK. 6. Relocation Expenses. Executive shall be reimbursed from Remington UK for all reasonable costs related to relocating Executive and his family to the United Kingdom customarily paid by employers, including, but not limited to, (i) the costs of moving Executive, his family and property to the United Kingdom, (ii) transportation and related costs for reasonably required trips by Executive's wife to the United Kingdom to assist in locating a house, (iii) costs of temporary housing for Executive from the date of commencement of employment until the date he moves into a permanent residence in the United Kingdom and, (iv) an amount equal to one month salary to cover miscellaneous moving expenses and costs after Executive has relocated to the United Kingdom. -2- 7. Housing Allowance Executive shall receive a housing allowance in UK pounds equal to US $50,000 per year ($4,167 per month) as of the date his employment commences, which shall be paid to Executive i monthly installments, commencing upon 30 days following the date Executive and his family has moved into a permanent resident in the United Kingdom. Taxes, if any, on his housing allowance shall be Executive's responsibility. 5. TERMINATION Executive's employment hereunder may be terminated under the following circumstances: a. Death. Executive's employment hereunder shall terminate upon his death. 2. Disability. If Executive is unable to timely and regularly perform its duties hereunder due to physical or mental illness, injury or incapacity, as determined by the President of the Company in good faith, based on medical evidence acceptable to him (a "Disability") and such Disability continues for a period of six consecutive months, then, notwithstanding anything to the contrary contained in this Agreement, the Company may terminate Executive's employment hereunder. A return to work for less than thirty consecutive days during any period of Disability shall not be deemed to interrupt the running of (and shall be included in) the aforementioned six-month period. 3. Cause. Executive's employment hereunder may be terminated at any time for cause. For purposes of this Agreement, "Cause" shall mean a termination of employment of the Executive by the Company or any subsidiary thereof due to (i) the commission by Executive of an act of fraud or embezzlement (including the unauthorized disclosure of confidential or proprietary information of the Employer or any of its subsidiaries which results in financial loss to the Company or any of its subsidiaries), (ii) the commission by Executive of a felony, (iii) Executive's willful misconduct as an employee of the Company or any of its subsidiaries, (iv) Executives willful failure to render services to the Company or any of its subsidiaries in accordance with the Executive's employment which failure amounts to a material neglect of Executive's duties to the Company or any of its subsidiaries, or (v) a willful material breach by Executive of the covenants in Section 3(a), Section 3(b) and Sections 8 and 9 hereof. d. Termination Without Cause. The Company may at any time terminate the Executive for any reason and, except for the amounts payable pursuant to subsection 6 hereof, Executive shall have no claim against the Company under this Agreement or otherwise by reason of such termination. 6. COMPENSATION UPON TERMINATION a. If Executive's employment is terminated by the Company pursuant to Section 5(d), then Executive shall be entitled to receive the Severance Benefit during the Severance Term in lieu of any further salary or other payments to Executive for -3- periods subsequent to the date of termination. Any bonus or other incentive compensation payments to Executive for periods subsequent to the date of termination shall be pursuant to and in accordance with the terms of the applicable bonus or incentive plan; provided, however, that if the termination occurs at any time during 1999, Executive shall receive the guaranteed minimum specified in Section 4(c)(i) or the amount payable in accordance with the terms of the applicable bonus plan, whichever is greater. During the Severance Term, Executive shall be entitled to participate in all Company benefit plans to the extent that Executive participated therein on the date of termination, to the extent the Company's plans permit. b. If Executive's employment terminates for any reason other than pursuant to Section 5(d), Executives compensation and benefits shall cease upon the date of such termination. c. For purposes of this Agreement,"Severance Term" shall mean the twelve (12) month period commencing on the effective date of the termination. "Severance Benefit" shall mean the salary that would have been payable from the effective date of termination through the end of the Severance Term based upon the base salary in effect on the date of termination. d. The Severance Benefit shall be paid during the Severance Term in the same manner and on the same dates that the salary would have been payable had Executive not been terminated.. e. Executive understands and agrees that the Severance Benefit shall be reduced (i) by any sums payable to Executive pursuant to any severance or termination pay program maintained by the Company, Remington UK or required by law and (ii) by an amount equal to 75% of any compensation earned by Executive during the Severance Term. 7 TAXES Remington UK shall deduct from all amounts payable under this Agreement all taxes required by law to be withheld with respect to such payments. 8. CONFIDENTIALITY Executive acknowledges that the information, observations and data obtained by him while employed under the terms of this Agreement, concerning the business or affairs of the Company and its subsidiaries which are not available to the public, customers, suppliers and competitors of the Company which are in the nature of trade secrets, are proprietary or the disclosure of which could reasonably be expected to cause a financial loss to the Company, or otherwise have a material adverse effect on the Company ("Confidential Information") are the property of the Company or such subsidiary. Therefore, Executive agrees that he shall not disclose to any unauthorized person or use for his own account any Confidential Information without the prior written consent of the Board, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Executive's acts or omissions to act. Executive shall deliver to the Company at the termination of employment, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software -4- and other documents and data (and copies thereof) relating to the Confidential Information, work product or the business of the Company or any of its subsidiaries which he may then possess or have under his control. 9. NON-COMPETE. NON-SOLICITATION a. Executive agrees that during the time he is employed by the Company and during the Severance Term, he shall not directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in any business that competes anywhere with the business which competitive with the Business (as defined herein) of the Company or its subsidiaries, or take any action inconsistent with the Executive's fiduciary relationship as an officer or employee of the Company. as businesses exist or are in process on the date of the termination of Executive's employment. "Business" means the sale and distribution of consumer products which constitutes more than 5% of the Company's revenues during the last three fiscal years of Executive's employment or such shorter period, if applicable. Nothing herein shall prohibit Executive from owning not more than 5% of the outstanding stock of any class of a company which is publicly traded, so long as Executive has no active participation in the business of such Company.. b. Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any Senior Executive of the Company or its subsidiaries to leave the employ of the Company or such subsidiary, or in any way interfere with the relationship between the Company or its subsidiaries and any Senior Executive thereof, (ii) hire any person who was a Senior Executive of the Company or its subsidiaries at any time during Executive's employment with the Company until the later of the first anniversary of the termination of Executive's employment, or (iii) for a one year period after the termination of employment, induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or its subsidiaries to cease doing business with the Company or its subsidiaries, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or its subsidiaries. "Senior Executive" shall mean any employee of the Company or any subsidiary with significant managerial responsibility over material areas of the business of the Company or such subsidiary, including, but not limited to, financial, marketing, sales, distribution or manufacturing. c. If, at the time of enforcement of this Section 9, a court or arbitrator shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court or arbitrator shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. d. In the event of the breach or a threatened breach by Executive, of any of the provisions of Section 10 or this Section 9, the Company, in addition and supplementary to other rights and remedies existing in its favor, may apply to any court of law or equity of competent jurisdiction for specific performance or -5- injunctive or other relief in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). 10. SUCCESSORS: BINDING AGREEMENT a. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, any corporation acquiring directly or indirectly all or substantially all of the membership Units, business or assets of the Company, whether by merger, restructuring, reorganization, consolidation, sale or otherwise (and such successor shall thereafter be deemed the "Company" for the purposes of this Agreement). Each of the Company's subsidiaries are hereby acknowledged to be third-party beneficiaries with respect to the provisions of Sections 10 and 11 hereof and shall be entitled to enforce such provisions as if they were parties hereto. b. This Agreement and all rights of Executive hereunder shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amounts would be still payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legates, or other beneficiary or, if there be no such beneficiary, to Executive's estate. 11. NOTICE For the purposes of this Agreement, notices, demands and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when hand delivered or (unless otherwise specified) when mailed by United States certified mail, return receipt requested, postage prepaid, addressed as follows: If to Executive: If to the Company: Remington Products Company, L.L.C. 60 Main Street Bridgeport, Connecticut 06604 Attention: General Counsel or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 12. SURVIVORSHIP The respective rights and obligations of the parties hereunder, including the rights and obligations set forth in Sections 6, 7, 8, 9, 10 and 11 of this Agreement, shall survive any -6- termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. In addition, the terms of this Agreement shall continue in effect as provided in Section 6(g). 13. MISCELLANEOUS a. The parties hereto agree that this Agreement contains the entire understanding and agreement between them, and supersedes all prior understandings and agreements between the parties respecting the employment by the Company of Executive, and that the provisions of this Agreement may not be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the parties hereto. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretations, construction and performance of this Agreement shall be governed by the laws of the State of Connecticut without giving effect to the conflict of laws principles thereof. b. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision or provisions of this Agreement, which shall remain in full force and effect. c. Executive agrees to execute such further agreements and documents, if necessary, which may be required under or pursuant to the laws of the United Kingdom in connection with his employment; provided, however, that such agreements shall under no circumstances reduce any benefit to be provided to Executive hereunder. d. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and the year first above written. REMINGTON PRODUCTS COMPANY, L.L.C. By: - --------------------------------- ----------------------------------- Name: Neil P. DeFeo Wilan van den Berg Title: President and CEO -7- EX-10.27 3 OFFER LETTER SIMMONE Exhibit 10.27 June 10, 1997 Tim Simmone 61 Springbrook Road Old Saybrook, CT 06475 Dear Tim: It is with great pleasure that I offer you the position of Vice President - Chief Technical Officer of Remington Products Company, L.L.C. You will report to me in this position. As we have discussed, this position is of critical importance to the future of the Remington Products' organization, and will provide an excellent venue for your personal success and professional accomplishments. In this position, you will have responsibility for Remington's technical functions. The current Vice President's of engineering/development, quality control, purchasing and logistics will report to you. The terms of the offer are as follows: 1. Base Salary Your annual base salary will be $140,000. A full salary review will be done in January 1998 and, assuming good performance, your base salary will be at least $150,000 effective February 1, 1998. 2. Annual Incentive Award You shall be included in the Company's bonus plan for the fiscal year commencing on January 1, 1997 with a target bonus of 40% of your annual base salary. The amount of your actual bonus, including when paid, etc., will be in accordance with all of the provisions of the bonus program. Furthermore, you are guaranteed a minimum of 50% of your bonus for 1997, pro-rated for the number of months employed during 1997. 3. Equity There are three parts to the equity portion of the offer, all tied to the long term growth of the business as follows: (a) Phantom Equity Plan You will be included in the Company's Phantom Equity Plan which achieves value based upon increases in the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA"). You will receive phantom equity under the Plan equal to 0.75% of the total Common Equity. The actual amount you will receive under the Plan, including timing of payment, etc. will be subject to the terms of the Plan, a copy of which is attached hereto as Exhibit A. (b) Stock Options You will receive an option to purchase up to 0.75% of the total Common Units of the Company at an exercise price of $100 per unit on the terms and conditions contained in the standard form of option agreement. (c) Long Term Options You will be eligible to participate in the Company's Long Term Option Plan when approved by the Management Committee. The plan, which is expected to be approved this month, will provide further stock options to selected executives which will vest based on achievement of agreed to long term targets. 4. Sign-On Bonus You will receive a $60,000 sign-on bonus, subject of course to applicable withholding taxes. 5. Benefit Plans You will be entitled to benefit plans available to all executives of the Company and shall be reimbursed for your reasonable and necessary travel and other expenses incurred in connection with the business of the Company in accordance with the reimbursement policies of the Company. You shall be entitled to four weeks vacation in each calendar year. 6. Retirement Plan You will be immediately eligible to participate in the Company's 401K Plan. 7. Deferred Compensation Plan You will be eligible to participate in the Company's Deferred Compensation Plan which is expected to be approved by the Management Committee this month. Under the Plan, you may defer pre-tax up to 33% of your salary and 100% of any bonus into a self directed account. Details of this plan will be available in early July 1997. 8. Relocation Costs -2- The Company shall reimburse you for reasonable costs related to relocation customarily paid by employers in the event you decide to move within nine (9) months from the date your employment with the Company commences. Such costs shall include costs of moving you, your family and your property and reasonable closing costs associated with the sale of your existing house. 9. Severance If your employment is terminated by the Company, without cause, during your first year, you shall be paid a monthly severance payment of $12,083 per month for twelve (12) months and if such termination occurs on or after one year of employment, the Company will continue to pay you your annual base salary at the rate of pay in effect on the date of termination for a period of six (6) months. It is anticipated that the terms of this letter will be incorporated into an Employment Agreement between the Company and you. I am delighted at the prospect of your joining Remington Products. With your leadership Tim, I am confident we can achieve great things and have some fun in the process. Please feel free to call me with any questions you may have. If this offer is acceptable, please sign on the indicated line below and return a copy to me. Cordially, Neil DeFeo President and CEO Accepted this __day of June, 1997 - --------------------------- Tim Simmone -3- EX-10.28 4 OFFER LETTER BUIVID Exhibit 10.28 August 7, 1998 Ms. Ann T. Buivid 188 Godfrey Road East Weston, CT 06883 Dear Ann: It is with great pleasure that I offer you the position of Vice President Worldwide Marketing and New Business Development for Remington Products Company, L.L.C. As we have discussed, this position is of critical importance to the future of the Remington Products' organization, and will provide an excellent venue for your personal success and professional accomplishments. In this position, you will have responsibility for all of Remington's marketing efforts. You will report directly to me. The terms of the offer are as follows: 1. Base Salary Your annual base salary will be $200,000. 2. Annual Incentive Award You shall be included in the Company's bonus plan for the fiscal year commencing on January 1, 1999 with a target bonus of 45% of your annual base salary. The amount of your actual bonus, including when paid, etc., will be in accordance with all of the provisions of the bonus program. Furthermore, if your employment commences prior to September 1, 1998, you shall be entitled to receive a pro-rata bonus for 1998. 3. Equity You will be included in the Company's Phantom Equity Plan which achieves value based upon increases in the Company's equity. You will receive phantom equity under the Plan equal to 0.65% of the total equity to be divided between Time Based, Performance Based and Super Performance Based. The terms of the Phantom Equity Plan, including how and when paid, will be subject to the terms of the Phantom Equity Agreements. An outline of the Phantom Equity Plan is attached. 4. Benefit Plans You will be entitled to immediately participate in the benefit plans available to all executives of the Company and shall be reimbursed for your reasonable and necessary travel and other expenses incurred in connection with the business of Remington in accordance with the reimbursement policies of the Company. You shall be entitled to four weeks. 5. Severance If your employment is terminated by the Company, without cause, during your first year, you shall be paid a monthly severance payment of $16,666 per month for twelve (12) months and if such termination occurs on or after one year of employment, the Company will continue to pay you your annual base salary at the rate of pay in effect on the date of termination for a period of six (6) months. The severance payments will be reduced by an amount equal to 75% of any compensation you earn during the period you are receiving severance from the Company. It is anticipated that the terms of this letter will be incorporated into an Employment Agreement between the Company and you. I am delighted at the prospect of your joining Remington Products. With your leadership Ann, I am confident we can achieve great things and have some fun in the process. Please feel free to call me with any questions you may have. If this offer is acceptable, please sign on the indicated line below and return a copy to me. Cordially, Neil DeFeo President and CEO Accepted this __day of August, 1998 - --------------------------- Ann T. Buivid -2- EX-10.29 5 OFFER LETTER BEDOL Exhibit 10.29 December 27, 1999 Mr. Joel K. Bedol 10 Lone Pine Lane Westport, CT 06880 Dear Joel: It is with great pleasure that I offer you the position of Vice President - General Counsel for Remington Products Company, L.L.C. As we have discussed, this position is of critical importance to the future of the Remington Products' organization, and provides an excellent match of your capabilities and the Company's needs. In this position you will report to me and be responsible for the Company's overall legal strategy and issues, worldwide. You will also initially be responsible for Human Resources and other functions such as internal security. The terms of the offer are as follows: 1. Base Salary Your annual base salary will be $225,000. 2. Annual Incentive Award You shall be included in the Company's bonus plan for the fiscal year commencing on January 1, 2000 with a target bonus of 60% of your annual base salary. The amount of your actual bonus, including when paid, etc., will be in accordance with all of the provisions of the bonus program. 3. Sign On Bonus Upon acceptance of this offer, you will receive a sign on bonus of $15,000, subject to applicable withholding taxes. 4. Equity You will be included in the Company's Phantom Equity Plan which achieves value based upon increases in the Company's equity. You will receive phantom equity - 2 - under the Plan equal to 0.60% of the total equity to be divided between Time Based, Performance Based and Super Performance Based Equity. The terms of the Phantom Equity Plan, including how and when paid, is subject to the terms of the Phantom Equity Agreements. An outline of the Phantom Equity Plan is attached. 5. Medical/Dental You will be entitled to participate in the Company's medical and dental benefit programs as per the details attached. In addition, you will be part of the Company's executive medical reimbursement plan which entitles you to up to $2,500 per year in reimbursements for medical/dental plan deductibles, out of coverage expenses and/or 50% of health club membership costs. 6. Vacation You will be entitled to four (4) weeks paid vacation per year. 7. General Benefits You will be entitled to all other plans now available to senior executives of the Company and shall be reimbursed for your reasonable and necessary travel and other expenses incurred in connection with the business of the Company. 8. Deferred Compensation Plan You will be eligible to participate in the Company's Deferred Compensation Plan as outlined in the attached plan. This plan allows deferral of up to 33% of base salary and 100% of any bonus payments. 9. Retirement 401K Plan You will be eligible to participate in the Company's 401K Plan. The Company will match 50% of your contributions up to 5% of base pay as per the plan and applicable legal limits. 10. Severance If your employment is terminated by the Company, without cause in the first year of your employment, you shall be paid a monthly severance payment of 1/12 of your base pay at the time, but not less that $18,750 month for one year. After the first year, should you be terminated without cause, you will receive six (6) months severance at the same level, but not less than $18,750 per month, except any change in control in - 3 - which case you will receive one year of severance. The severance payments, except for change in control, will be reduced by an amount equal to 75% of any compensation you earn during the period you are receiving severance from the Company. It is anticipated that the terms of this letter will be incorporated into an Employment Agreement between the Company and you. (Draft attached). This offer is contingent upon the successful completion and results of the pre-employment drug test which needs to be scheduled with Sherry Palumbo, Assistant Human Resources Manager at 203-332-9727. I am delighted at the prospect of your joining Remington Products. With your leadership Joel, I am confident we can achieve great things and have some fun in the process. Please feel free to call me with any questions you may have. Best regards, NDP:dch Attachments Agreed to and accepted this ____ day of December, 1999. - ------------------------------ Joel K. Bedol EX-21 6 REMINGTON PRODUCTS COMPANY, L.L.C. SUBSIDIARIES Exhibit 21 REMINGTON PRODUCTS COMPANY, L.L.C. SUBSIDIARIES Remington Products Australia Pty., Ltd. Remington Products Company 800 Wellington Road, Rowville Unit 5, 22/F, Greenfield Tower Victoria, Australia 3178 Concordia Plaza Tel: 011 613 9751 5522 No. 1 Science Museum Road Fax: 011 613 9751 5523 Tsimsha Tsui East Kowloon, Hong Kong Remington Products New Zealand Pty., Ltd. Tel: 011 852 2620 6633 2 Ngaire Avenue Fax: 011 852 2620 6336 Newmarket, Auckland 1, New Zealand Tel: 011 649 529 0081 Remington Consumer Products Limited Fax: 011 649 529 0082 Unit 244, Holly Road Western Industrial Estate Shaver Shop Pty. Ltd. Dublin 12 Ireland Suite 2 Tel: 011 353 1 456 6799 1A Carrington Road Fax: 011 353 1 456 6613 Box Hill Victoria 3128, Australia Remington Consumer Products Ltd. Tel: 011 613 9898 9994 Largo Novello, 1/F Fax: 011 613 9898 9077 50126 Firenze, Italy Tel: 011 39 055 68 00 506 Remington Products (Canada) Inc. Fax: 011 39 055 68 00 459 455 Cochrane Drive, Unit #24 Unionville, Ontario, Canada L3R 9R4 Remington Consumer Products Limited Tel: 905 470 9400 Office 78, 2nd Floor Fax: 905 470 9405 Parktown Office Suites, Johannesburg Remington Consumer Products Limited Gauteng, South Africa Watermans House, Watermans Court Tel: 011 27 11 484 4170 Kingsbury Crescent, The Causeway Fax: 011 27 11 480 4866 Staines, Middlesex TW18 3BA Tel: 011 44 1784 411411 Remington Consumer Products Ltd. Fax: 011 44 1784 411 412 Ostra Hindbyragen 26 S-213 74 Malmo Remington Consumer Products Limited Sweden Le Colombier Tel: 011 46 40 211 500 Batiment C-3 Eme Etage Fax: 011 46 42 127 129 16, Rue Jules Saulnier 93200 Saint-Denis, France Remington Rand Corporation Tel: 011 33 1 55 876500 Fax: 011 33 1 55 87 6501 Remington Licensing Corporation Remington Products, GmbH Remington Corporation, L.L.C. Niederlassung Deutschland 60 Main Street Siemensstrasse 7 Bridgeport, CT 06604 Riedlingen 88499, Germany Tel: 011 49 7371 93250 3/10/00 Fax: 011 49 7371 932530 Diane\DH1781\RPC
EX-24 7 POWER OF ATTORNEY Exhibit 24 POWER OF ATTORNEY REMINGTON PRODUCTS COMPANY, L.L.C. KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears below constitutes and appoints Alexander R. Castaldi, Joel K. Bedol and Kris J. Kelley and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for and in his name, place and stead, in any and all capacities which such person serves or may serve with respect to Remington Products Company, L.L.C. and Remington Capital Corp., to sign the Annual Report on Form 10-K of Remington Products Company, L.L.C. and Remington Capital Corp. for the fiscal year ended December 31, 1999, and any or all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney has been signed as of the 30 day of March, 2000, by the following persons: /s/ Neil P. DeFeo /s/ Victor K. Kiam, II - ----------------------------------- ------------------------------------ Neil P. DeFeo, Victor K. Kiam, II, Chief Executive Officer, President Chairman and Director and Director /s/ Victor K. Kiam, III /s/ Robert L. Rosner - ----------------------------------- ------------------------------------ Victor K. Kiam, III, Robert L. Rosner, Director Director /s/ Norman W. Alpert /s/ Kevin Mundt - ----------------------------------- ------------------------------------ Norman W. Alpert, Kevin Mundt, Director Director /s/ Arthur J. Nagle /s/ Daniel S. O'Connell - ----------------------------------- ------------------------------------ Arthur J. Nagle, Daniel S. O'Connell, Director Director /s/ William B. Connell /s/ Kris J. Kelley - ----------------------------------- ------------------------------------ William B. Connell, Kris J. Kelley, Director Vice President and Controller /s/ Alexander R. Castaldi - ----------------------------------- Alexander R. Castaldi, Executive Vice President, Chief Financial and Administrative Officer EX-27 8 FDS --
5 This schedule contains summary financial information extracted from the audited financial statements of the Company for the year ended December 31, 1999, and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 9,866 0 78,503 2,335 55,456 147,876 21,709 (8,991) 223,990 62,823 187,728 0 0 0 (27,783) 223,990 318,766 318,766 176,269 176,269 113,377 0 21,723 (7,270) 1,235 (6,035) 0 0 0 (6,035) 0 0
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