-----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, I0CV4HWH2MFx6xzVgXPT7b0Pcv+/ZB7Y0u882FoRLcUexbxxt6DLlBcvfrZI8/Lu 7n3i5AvUtXeMnFVoizi8eg== 0001017710-03-000022.txt : 20030812 0001017710-03-000022.hdr.sgml : 20030812 20030812135518 ACCESSION NUMBER: 0001017710-03-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030812 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-07429 FILM NUMBER: 03836979 BUSINESS ADDRESS: STREET 1: 60 MAIN STREET CITY: BRIDGEPORT STATE: CT ZIP: 06604 BUSINESS PHONE: 2033674400X492 MAIL ADDRESS: STREET 1: 60 MAIN STREET CITY: BRIDGEPORT STATE: CT ZIP: 06604 10-Q 1 tenqjune2003.txt FOR THE QUARTER ENDED JUNE 30, 2003 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 - For the quarter ended June 30, 2003. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission file number 333-07429 333-07429-01 Remington Products Company, L.L.C. Remington Capital Corp. (Exact name of registrant as specified in its charter) 06-1451076 Delaware 06-1451079 - -------------------------------------- ---------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Nos.) 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: None ----------------------------------------------------------- (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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X --- --- REMINGTON PRODUCTS COMPANY, L.L.C. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003 INDEX ----- PAGE ---- PART I. FINANCIAL INFORMATION Item I. Financial Statements (unaudited): Consolidated Balance Sheets - June 30, 2003, December 31, 2002 and June 30, 2002 3 Consolidated Statements of Operations - For the three and six months ended June 30, 2003 and 2002 4 Consolidated Statements of Cash Flows - For the six months ended June 30, 2003 and 2002 5 Notes to Unaudited Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk 15 Item 4. Controls and Procedures 15 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 15 Signature 16 2 Remington Products Company, L.L.C. Consolidated Balance Sheets (unaudited, in thousands)
June30, December 31, June 30, 2003 2002 2002 -------- ------------ ---------- ASSETS Current assets: Cash and cash equivalents $ 24,748 $ 32,846 $ 3,724 Accounts receivable, less allowance for doubtful accounts of $4,556 at June 2003, $4,552 at December 2002 and $4,550 at June 2002 41,170 73,205 46,382 Inventories 52,150 49,122 67,188 Prepaid and other current assets 6,044 3,484 4,584 --------- --------- --------- Total current assets 124,112 158,657 121,878 Property, plant and equipment, net 12,148 12,314 12,809 Goodwill 27,720 27,720 27,720 Intangibles, net 24,165 24,399 24,630 Other assets 10,439 12,026 13,894 --------- --------- --------- Total assets $198,584 $235,116 $200,931 ========= ========= ========= LIABILITIES AND MEMBERS' DEFICIT Current liabilities: Accounts payable $ 19,363 $ 24,218 $ 16,188 Short-term borrowings - 1,613 2,512 Current portion of long-term debt 241 314 295 Accrued liabilities 23,884 49,960 27,723 --------- --------- --------- Total current liabilities 43,488 76,105 46,718 Long-term debt 180,228 185,163 200,303 Other liabilities 844 839 852 Members'deficit: Members' deficit (20,338) (19,413) (40,490) Accumulated other comprehensive loss (5,638) (7,578) (6,452) --------- --------- --------- Total members'deficit (25,976) (26,991) (46,942) --------- --------- --------- Total liabilities and members' deficit $198,584 $235,116 $200,931 ========= ========= ========= See notes to unaudited consolidated financial statements.
3 Remington Products Company, L.L.C. Consolidated Statements of Operations (unaudited, in thousands)
Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------- 2003 2002 2003 2002 ------------ ----------- -------- --------- Net sales $ 71,267 $ 70,000 $119,003 $123,805 Cost of sales 39,804 41,742 66,198 74,089 --------- --------- --------- --------- Gross profit 31,463 28,258 52,805 49,716 Selling, general and administrative expenses 22,680 23,254 42,614 42,904 Amortization of intangibles 117 119 234 236 --------- --------- --------- --------- Operating income 8,666 4,885 9,957 6,576 Interest expense, net 5,649 5,840 11,154 11,896 Other income (428) (578) (966) (671) --------- --------- --------- --------- Income (loss) before income taxes 3,445 (377) (231) (4,649) Provision (benefit) for income taxes 526 (139) 694 (345) --------- ---------- --------- --------- Net income (loss) $ 2,919 $ (238) $ (925) $ (4,304) ========= ========== ========= ========= Net loss applicable to common units $ (1,263) $ (3,954) $ (9,167) $(11,627) ========= ========== ========== =========
See notes to unaudited consolidated financial statements. 4 Remington Products Company, L.L.C. Consolidated Statements of Cash Flows (unaudited, in thousands)
Six Months Ended June 30, ---------------------------- 2003 2002 ----------- ----------- Cash flows from operating activities: Net loss $ (925) $(4,304) Adjustment to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 1,490 1,365 Amortization of intangibles 234 236 Amortization of deferred financing fees 1,253 1,028 Other 746 (1,235) -------- --------- 2,798 (2,910) Changes in assets and liabilities: Accounts receivable 34,786 34,141 Inventories (2,270) 9,700 Accounts payable (5,084) (14,050) Accrued liabilities (27,086) (12,355) Other, net (3,834) (2,762) -------- --------- Net cash provided by (used in) operating activities (690) 11,764 -------- --------- Cash flows from investing activities: Capital expenditures (1,131) (1,062) -------- --------- Cash flows from financing activities: Repayments under credit facilities (7,301) (23,099) Borrowings under credit facilities 351 12,037 Other - (223) -------- -------- Net cash used in financing activities (6,950) (11,285) -------- -------- Effect of exchange rate changes on cash 673 220 -------- -------- Decrease in cash (8,098) (363) Cash, beginning of period 32,846 4,087 -------- -------- Cash, end of period $ 24,748 $ 3,724 ======== ======== Supplemental cash flow information: Interest paid $ 10,367 $11,076 Income taxes paid, net $ 97 $ 251
See notes to unaudited consolidated financial statements. 5 Remington Products Company, L.L.C. Notes to Unaudited Consolidated Financial Statements 1. Basis of Presentation The accompanying financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and according to accounting principles generally accepted in the United States of America, and reflect all adjustments, consisting only of normal recurring accruals, which in the opinion of management are necessary for a fair statement of the results of the interim periods presented. Results of interim periods may not be indicative of results to be expected for the entire year. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the notes contained in the Company's audited consolidated financial statements included in its Form 10-K for the year ended December 31, 2002. Certain prior period amounts have been reclassified to conform with the current presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results will differ from those estimates. Estimates are used for, but not limited to the establishment of the allowance for doubtful accounts, reserves for sales returns and allowances, reserves for obsolete inventories, product warranty costs, taxes and contingencies. Remington Capital Corp. is a wholly-owned subsidiary of Remington Products Company, L.L.C. and has no significant operations of its own. 2. Recent Accounting Pronouncements In August 2001, SFAS No. 143, Accounting for Asset Retirement Obligations, was issued. This statement establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. SFAS No. 143 was adopted by the Company on January 1, 2003. In June 2002, SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities was issued. This statement provides guidance on the recognition and measurement of liabilities associated with disposal activities. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. In November 2002, FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN No. 45) was issued. FIN No. 45 elaborates on required disclosures by a guarantor in its financial statements about obligations under certain guarantees that it has issued and clarifies the need for a guarantor to recognize, at the inception of certain guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure provisions of FIN No. 45 were effective for the Company at December 31, 2002, and its initial measurement and recognition provisions effective for guarantees entered into or modified after that date. 6 In January 2003, FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN No. 46) was issued. FIN No. 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, and applies immediately to any variable interest entities created after January 31, 2003 and to variable interest entities in which an interest is obtained after that date, and to all other interests in variable interest entities effective July 1, 2003. In April 2003, SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities was issued. SFAS No. 149 clarifies the definition of derivatives, expands the nature of exemptions from Statement 133, clarifies the application of hedge accounting when using certain instruments and modifies the cash flow presentation of derivative instruments that contain financing elements. This Statement is effective for all derivative transactions and hedging relationships entered into or modified after June 30, 2003. In May 2003, SFAS No. 150 Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity was issued. This statement established standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that issuers classify as liabilities a financial instrument that is within its scope as a liability because that financial instrument embodies an obligation of the issuer. The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. The adoption of the statements and interpretations listed above has not had, individually or collectively, a material impact on the Company's consolidated financial position, results of operations or cash flows. 3. Inventories Inventories were comprised of the following (in thousands):
June 30, December 31, June 30, 2003 2002 2002 -------- ------------ -------- Finished goods $47,994 $46,552 $63,485 Work in process and raw materials 4,156 2,570 3,703 ------- ------- ------- $52,150 $49,122 $67,188 ======= ======= =======
4. Goodwill and Other Intangibles The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002. In accordance with SFAS No. 142, beginning on January 1, 2002, the Company's goodwill and its tradenames, which have been deemed to have indefinite lives, are no longer being amortized and are subject to annual impairment tests. As of January 1, 2002 the Company performed the required transitional impairment tests of goodwill and tradenames and no transitional impairment was present. As of June 30, 2002 and 2003 the Company performed the required annual impairment tests of goodwill and tradenames and no impairment was present. Goodwill and other intangible assets were comprised of the following (in thousands): 7
June 30, December 31, June 30, 2003 2002 2002 ---------- ------------- ---------- Amortized Intangible Assets: Patents carrying amount $ 4,670 $4,670 $ 4,670 Patents accumulated amortization 3,324 3,090 2,859 ------- ------ ------- Patents, net $ 1,346 $1,580 $ 1,811 ======= ====== ======= Unamortized Intangible Assets: Goodwill $27,720 $27,720 $27,720 Tradenames 22,819 22,819 22,819 ------- ------- ------- $50,539 $50,539 $50,539 ======= ======= =======
Estimated amortization expense is $467 thousand for each of the three years in the period ending December 31, 2005, $179 thousand for the year ending December 31, 2006 and zero for each year thereafter. 5. Income Taxes Federal income taxes on net earnings of the Company are payable directly by the members pursuant to the Internal Revenue Code. Accordingly, no provision has been made for Federal income taxes for the Company. The Company provides tax for certain state and local jurisdictions where it is required to do so. Furthermore, earnings of certain foreign operations are taxable under local statutes. In these foreign jurisdictions, deferred taxes on income are provided, if necessary, for temporary differences reflecting differences between the financial and tax basis of assets and liabilities. The Company also records valuation allowances against deferred tax assets where, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. 6. Commitments and Contingencies Pursuant to agreements with certain former executives of the Company, such former executives' phantom stock awards were cancelled. However, the value of the vested portion of these awards as of the beginning of 2003, as determined by the Management Committee of the Company, will be paid to the former executives at the time an "event" occurs which would otherwise require generally payments under the Company's phantom equity program. The aggregate amount of such contingent payments is approximately $2.0 million. The Company is involved in legal and administrative proceedings and claims of various types. While any litigation contains an element of uncertainty, management believes that the outcome of each such proceeding or claim which is pending or known to be threatened, or all of them combined, would not have a material adverse effect on the Company's consolidated financial position or results of operations. 7. Comprehensive Income Comprehensive income consists of the following (in thousands): 8
Three Months Ended June 30, Six Months ended June 30, --------------------------- -------------------------- 2003 2002 2003 2002 --------- -------- -------- -------- Net income (loss) $ 2,919 $ (238) $ (925) $(4,304) Other comprehensive income: Foreign currency translation adjustments 1,613 916 2,095 907 Net unrealized hedging loss (1,342) (1,448) (155) (1,177) -------- ------- -------- -------- Comprehensive income (loss) $ 3,190 $ (770) $ 1,015 $(4,574) ======== ======= ======== ========
8. Business Segment and Geographical Information The Company distributes its products through its three operating segments, which are comprised of 1) the North America segment, which sells product primarily through mass-merchant retailers, department stores and drug store chains throughout the United States and Canada, 2) the International segment, which sells product to similar customers through an international network of subsidiaries and distributors and 3) the U.S. Service Stores segment, consisting of Company-owned and operated service stores located throughout the United States. Information by segment and geographical location is as follows (in thousands):
Three Months Ended March 31, Six Months Ended June 30, ---------------------------- ------------------------- 2003 2002 2003 2002 ------------ ------------- ------------ --------- Net Sales: North America $44,715 $46,042 $ 69,301 $ 76,642 International 20,753 16,705 38,842 33,484 U.S. Service Stores 5,799 7,253 10,860 13,679 -------- -------- --------- --------- Total $71,267 $70,000 $119,003 $123,805 ======== ======== ========= ========= Operating income North America $ 7,810 $ 6,358 $ 9,509 $ 9,461 International 1,942 (518) 3,017 (797) U.S. Service Stores (193) (145) (845) (487) Depreciation and amortization (893) (810) (1,724) (1,601) -------- -------- --------- --------- Total $ 8,666 $ 4,885 $ 9,957 $ 6,576 ======== ======== ========= =========
June 30, December 31, June 30, 2003 2002 2002 ---------- ------------ ---------- Segment Assets: North America $122,408 $137,112 $140,731 International 44,986 58,050 48,948 U.S. Service Stores 6,442 7,108 7,528 Cash and cash equivalents 24,748 32,846 3,724 -------- -------- -------- Total $198,584 $235,116 $200,931 ======== ======== ========
9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General The Company is a leading consumer products company focusing on the development and marketing of personal care products. The Company designs and distributes electric shavers and accessories, grooming products, hair care appliances and other small electrical consumer products. The Company distributes its products through three operating segments which are comprised of 1) the North America segment, which sells products through mass-merchant retailers, department stores and drugstore chains throughout the United States and Canada, 2) the International segment, which sells products to similar customers through an international network of subsidiaries and distributors, and 3) the U.S. Service Stores segment consisting of Company-owned and operated service stores located throughout the United States. 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 approximately 45% of its annual net sales in the fourth quarter of each year while the first quarter of each year is generally the Company's weakest quarter. As a result of this seasonality, the Company's inventory and working capital needs fluctuate substantially during the year. Results of Operations The following table sets forth the Company's unaudited consolidated statements of operations, including net sales and operating income, by its North America, International and U.S. Service Stores operating segments for the three and six months ended June 30, 2003 and 2002. 10
Three Months Ended June 30, Six Months Ended June 30, ----------------------------------- ----------------------------------- 2003 2002 2003 2002 -------------- ---------------- --------------- --------------- $ % $ % $ % $ % ----- ----- ----- ----- ----- ----- ----- ----- Net Sales: North America $44.7 62.7 $46.0 65.7 $69.3 58.2 $76.6 61.9 International 20.8 29.2 16.7 23.9 38.8 32.6 33.5 27.0 U.S. Service Stores 5.8 8.1 7.3 10.4 10.9 9.2 13.7 11.1 ------ ------ ------ ------ ------ ------ ------ ------ 71.3 100.0 70.0 100.0 119.0 100.0 123.8 100.0 Cost of sales 39.8 55.8 41.7 59.6 66.2 55.6 74.1 59.9 ------ ------ ------ ------ ------ ------ ------ ------ Gross profit 31.5 44.2 28.3 40.4 52.8 44.4 49.7 40.1 Selling, general and administrative expenses 22.7 31.9 23.3 33.3 42.6 35.8 42.9 34.7 Amortization of intangibles 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.1 ------ ------ ------ ------ ------ ------ ------ ------ Operating income: North America 7.9 11.1 6.3 9.0 9.5 8.0 9.5 7.7 International 1.9 2.7 (0.5) (0.7) 3.0 2.5 (0.8) (0.6) U.S. Service Stores (0.2) (0.3) (0.1) (0.1) (0.8) (0.7) (0.5) (0.4) Depreciation and amortization (0.9) (1.3) (0.8) (1.2) (1.7) (1.4) (1.6) ( 1.4) ------ ------ ------ ------ ------ ------ ------ ------ Total operating income 8.7 12.2 4.9 7.0 10.0 8.4 6.6 5.3 Interest expense, net 5.6 7.9 5.8 8.4 11.2 9.4 11.9 9.6 Other income (0.3) (0.4) (0.5) (0.9) (1.0) (0.8) (0.7) (0.6) ------ ------ ------ ------ ------ ------ ------ ------ Income (loss) before income taxes 3.4 4.8 (0.4) (0.5) (0.2) (0.2) (4.6) (3.7) Provision (benefit) for income taxes 0.5 0.7 (0.2) (0.3) 0.7 0.6 (0.3) (0.2) ------ ------ ------ ------ ------ ------ ------ ------ Net income (loss) $ 2.9 4.1 $(0.2) (0.2) $(0.9) (0.8) $(4.3) (3.5) ====== ====== ====== ====== ====== ====== ====== ======
Second Quarter Ended June 30, 2003 Versus June 30, 2002 Net Sales. Net sales for the quarter ended June 30, 2003 increased 2% to $71.3 million compared to $70.0 million for the quarter ended June 30, 2002. The increase was driven by higher net sales in the International segment principally as a result of the positive impact of foreign currency exchange rates and by strong sales of shaver and grooming products in North America. This increase was partially offset by a decline in sales of haircare and wellness products in North America and lower sales in the Company's U.S. Service Stores segment. Net sales in North America declined 3% to $44.7 million in the second quarter of 2003, compared to $46.0 million in the second quarter of 2002. Sales of shaver and grooming products increased in North America, principally a result of new products and increased distribution at existing customers. This increase was offset by a decline in wellness sales as a result of the decision to de-emphasize the product line and lower haircare sales which benefited in the prior year from new product introductions. International net sales were $20.8 million an increase of 25% over the $16.7 million in the second quarter of 2002. Of the $4.1 million increase $2.9 million resulted from the positive impact of foreign currency exchange rates. Also impacting the increase was higher sales of shaver, grooming and haircare products which was partially offset by lower sales of wellness and other non-core products. 11 Net sales through the Company's U.S. Service Stores decreased 21% to $5.8 million in the second quarter of 2003 from $7.3 million in the second quarter of 2002. The decrease was due to a 13% decline in same store sales and 10 fewer stores on average operating during the comparable periods. Gross Profit. Gross profit was $31.5 million, or 44.2% of net sales in the second quarter of 2003 compared to $28.3 million, or 40.4% of net sales in the second quarter of 2002. The increase in percentage over the prior year was the result of the combination of a better sales mix toward shaver and grooming products and product cost savings, including the positive impact of foreign currency on U.S. dollar denominated inventory purchases in the International segment. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $22.7 million, or 31.9% of net sales, in the second quarter of 2003, compared to $23.3 million or 33.3% of net sales in 2002. Although the negative impact of a weaker dollar had the effect of increasing International expenses by $1.1 million, total expenses decreased by $0.6 million primarily as a result of lower expenses in the U.S. Service Stores segment and lower distribution expenses in North America. Operating Income. Operating income for the second quarter of 2003 was $8.7 million compared to $4.9 million in the second quarter of 2002. The increase was the result of the higher sales, improved gross margin and lower operating expenses. Net Interest Expense. Net interest expense decreased to $5.6 million for the second quarter of 2003 compared to $5.8 million in the second quarter of 2002. The decline was due primarily to lower average borrowings in 2003 compared to 2002. Other Income. Other income was $0.3 million in the second quarter of 2003 compared to $0.5 million in the second quarter of 2002. The decline was primarily the result of lower currency gains on U.S. dollar denominated obligations in the Company's International segment. Provision (Benefit) for Income Taxes. The net provision for income taxes was $0.5 million for the second quarter of 2003 compared to a benefit of $0.2 million in the second quarter of 2002. The current period's provision was the result of pretax earnings generated within the Company's International segment while the prior year's benefit was the result of pretax losses generated within the Company's International segment. Six Months Ended June 30, 2003 Versus June 30, 2002 Net Sales. Net sales for the six months ended June 30, 2003 were $119.0 million, a decrease of 4% compared to $123.8 million for the six months ended June 30, 2002. The decrease in net sales was the result of lower sales in the North America and U.S. Service Stores segments. These declines were partially offset by an increase in the International segment resulting from the positive impact of foreign currency exchange rates. Net sales in North America were $69.3 million for the first six months of 2003, a decrease of 10% compared to $76.6 million for the first six months of 2002. The decline was the result of lower wellness sales resulting from the Company's decision to de-emphasize this product line, coupled with lower haircare sales which benefited in the prior year from new product introductions. Also impacting the decline were lower shaver and grooming sales in the first quarter which resulted from higher year-end shaver inventories at certain retail accounts due to a slow Christmas retail environment and lower returns. International net sales were $38.8 million for the first six months of 2003, an increase of $5.3 million or 16% compared to $33.5 million for the first six months of 2002. The increase in net sales was due to the $5.5 million positive impact of foreign currency exchange rates and an increase in sales of shaver, grooming and haircare products. These increases were partially offset by lower sales of wellness and other non-core products. 12 Net sales in the U.S. Service Stores were $10.9 million for the first six months of 2003, a 20% decrease compared to $13.7 million for the first six months of 2002. The decrease was in part the result of 10 fewer stores on average operating during the first six months of 2003 compared to the first six months of 2002. Also contributing to the decline was a 13% decrease in same store sales versus the same period a year ago. Gross Profit. Gross profit was $52.8 million, or 44.4% of net sales for the first six months of 2003 compared to $49.7 million, or 40.1% of net sales for the first six months of 2002. The increase in percentage over the prior year was primarily the result of a better sales mix toward shaver and grooming products. Also impacting the improved margin were product cost savings, which included the positive impact of foreign currency on U.S. dollar denominated inventory purchases in the International segment. Selling General and Administrative Expenses. Selling, general and administrative expenses were $42.6 million or 35.8% of net sales for the first six months of 2003, compared to $42.9 million or 34.7% of net sales in 2002. An increase in expenses of $2.1 million resulting from the effect of the weaker dollar on the translation of International expenses was offset by lower distribution costs and lower expenses within the U.S. Service Stores segment resulting from fewer stores in operation during the comparable periods. Operating Income. Operating income for the first six months of 2003 was $10.0 million compared to $6.6 million for the first six months of 2002. The increase from period to period was the result of the improved gross margin and lower operating expenses partially offset by the lower net sales. Net Interest Expense. Net interest expense decreased to $11.2 million for the first six months of 2003 compared to $11.9 million for the first six months of 2002. The decline was the result of lower average borrowings during the first six month of 2003 compared to the same period in 2002. Other Income. Other income increased to $1.0 million in the first six months of 2003 compared to $0.7 million in the same period of the prior year. This increase was primarily the result of higher currency gains on U.S. dollar denominated obligations in the Company's International segment. Provision (Benefit) for Income Taxes. The net provision for income taxes was $0.7 million for the first six months of 2003 compared to a benefit of $0.3 million in the same period of 2002. The current period's provision was the result of pretax earnings generated within the Company's International segment while the prior year's benefit was the result of pretax losses generated within the Company's International segment. Liquidity and Capital Resources Net cash used in operating activities for the first six months of 2003 was $0.7 million compared to $11.8 million in cash provided by operating activities in the same period of 2002. The variance from 2002 to 2003 was due primarily to the reduction of excess working capital during the first six months of 2002. The Company's operations are not capital intensive. The Company's capital expenditures totaled $1.1 million during the first six months of 2003 and 2002. As a result of an increase in tooling and machinery for new products, total capital expenditures for 2003 are expected to increase to approximately $4 million, up from $2.1 million in 2002. The Company's primary sources of liquidity are cash and cash equivalents, funds generated from operations and available borrowings under its $110.0 million asset based revolving credit facility (the "Facility"). Borrowings under the Facility are subject to a borrowing base of 85% of eligible receivables and 60% of eligible inventories. The Facility matures on March 31, 2006. The Company, its principal members or their affiliates, may, from time to time, enter the market to purchase or sell the Company's Senior Subordinated Notes, in compliance with any applicable securities laws. As of June 30, 2003, the Company was in compliance with all covenants under the Facility and availability under the Facility was approximately $50 million in addition to the Company's cash and cash equivalents of $24.8 million. The Company believes that its cash and cash equivalents, together with 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. 13 Critical Accounting Policies As disclosed in Note 1 to the "Notes to the Unaudited Consolidated Financial Statements", 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. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the consolidated financial statements. The following accounting policies, which were disclosed in the Company's report on Form 10-K for the year ended December 31, 2002 and for which there has been no change in their application as of June 30, 2003, affect the Company's more significant estimates used in the preparation of its consolidated financial statements: Revenue Recognition: Revenue from product sales is recognized, net of estimated sales returns, and other allowances when goods are shipped and title passes to the customer. The Company recognizes an estimated allowance for sales returns when the sale is recorded. The Company continuously monitors historical return rates from customers. Using this information, the Company estimates the allowance for sales returns and adjusts this estimate for any specific knowledge that would not be reflected in the historical return rates. The Company recognizes allowances for certain promotional incentives to customers, primarily cooperative advertising, when the sale is recorded. The majority of these promotional incentives are covered by contract with the customer. Upon recognition of a sale, the Company estimates and records an allowance for promotional incentives based upon the terms of the contract and any other specific incentives offered to customers. Allowance for Doubtful Accounts: The Company maintains an allowance for doubtful accounts receivable for estimated losses resulting from the inability of customers to make required payments. The allowance is based upon specific knowledge of customers from whom collection is determined to be doubtful and the Company's historical collection experience with such customers. Warranty Reserves: The Company maintains a reserve for its liability under the warranty provided on its products. The reserve is estimated based upon current sales volumes and past experience of warranty claims by the end consumer. In addition the Company considers other known factors including the current level of product quality in relation to historical levels. Inventory Reserves: The Company's inventory is valued at the lower of cost or estimated net realizable value. The Company regularly reviews inventory quantities on hand for slow moving or obsolete items based upon expected future demand. For such items, if it is estimated that the market value is below the original cost, the Company reduces the book value to the net amount expected to be realized upon sale. This reduction in value is charged to cost of sales. If demand does not meet management's expectations, additional inventory write-downs may be required. 14 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 products, 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 3. Quantitative and Qualitative Disclosures about Market Risk There are no material changes to the disclosure on this matter made in the Company's report on Form 10-K for the year ended December 31, 2002. ITEM 4. Controls and Procedures The Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO) evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as of June 30, 2003. Based on that evaluation the CEO and CFO concluded that the Company's disclosure controls and procedures were effective. During the quarter ended June 30, 2003 there was no change in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. PART II OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.12 Executive Severance Agreement dated as of November 25, 1996 between Remington and Alexander R. Castaldi. 31.1 Chief Executive Officer Certification of Periodic Financial Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Chief Financial Officer Certification of Periodic Financial Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K On May 1, 2003 the Company filed a Current Report on Form 8-K, reporting under Item 9 and Item 12 the announcement that the Company issued a press release on its first quarter 2003 results. 15 SIGNATURE Pursuant to the requirements 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: August 12, 2003 16 EX-10 3 exhibit1012.txt EXECUTIVE SEVERANCE AGREEMENT; A. R. CASTALDI EXECUTIVE SEVERANCE AGREEMENT This EXECUTIVE SEVERANCE AGREEMENT (this "Agreement") is made as of November 25, 1996, by and between the entity named on the signature page hereto (the "Company"), Alexander R. Castaldi (the "Executive"). In order to induce Executive to accept employment with the Company and in consideration of the covenants and agreements contained herein, the parties hereto agree as follows: 1. Definitions. "Agreement" shall have the meaning set forth in the preface. "Cause" shall mean a termination of the employment of 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 Company or any of its subsidiaries which results in material financial loss to the Company or any of its subsidiaries), (ii) the commission by Executive of a felony, (iii) the willful misconduct of Executive as an employee of the Company or any of its subsidiaries which is reasonably likely to result in material injury or financial loss to the Company or any of its subsidiaries or (iv) the willful failure of Executive to render services to the Company or any of its subsidiaries in accordance with the terms of Executive's employment which failure amounts to a material neglect of Executive's duties to the Company or any of its subsidiaries. "Change of Control" shall mean a transaction as the result of which any person or entity not controlled by persons currently owning Common Units acquires more than 60% of the outstanding Common Units or of the common stock of a corporation that either controls the Company, directly or indirectly, or is the successor to the Company. "Common Units" shall mean the common units of the Company, together with any securities issued in exchange therefor. "Company" shall have the meaning set forth in the preface. "Confidential Information" shall have the meaning set forth in Section 6 below. "Disability" shall mean the inability of Executive to perform the essential functions of Executive's job, with or without reasonable accommodation, by reason of a physical or mental infirmity, for a continuous period of six months. The period of six months shall be deemed continuous unless Executive returns to work for at least 30 consecutive business days during such period and performs during such period services at the level and competence that were performed prior to the beginning of the six-month period. The date of such Disability (for purposes of determining the Termination Date in the event of such Disability) shall be on the first day of such six-month period. "Good Reason" shall mean (i) the assignment to Executive of duties materially and adversely inconsistent with Executive's position, duties or responsibilities as in effect immediately after the date of execution of this Agreement including, but not limited to, any material reduction in such positions, duties or responsibilities, or a change in Executive's titles or offices, as then in effect, or any removal of Executive from, or any failure to reelect Executive to, any of such positions or (ii) the occurrence of a Change of Control, provided that a resignation prior to the 90th day following such Change of Control shall not be deemed a termination for Good Reason. "Health Benefits" shall have the meaning set forth in Section 3(b) below. "Insured Benefits" shall have the meaning set forth in Section 3(b) below. "Senior Executive" shall mean any employee of the Company with significant managerial responsibility over material areas of the business of the Company, including, without limitation, financial, marketing, sales, distribution or manufacturing. "Severance Term" shall have the meaning set forth in Section 3(a) below. "Termination Date" shall have the meaning set forth in Section 4(a) below. 2. Job Elimination. If, within the period commencing 90 days from the date hereof and for so long as Executive is employed by the Company, there shall occur: (a) any involuntary termination of Executive's employment (other than for Cause or Disability); (b) the resignation of Executive for Good Reason; (c) any reduction in Executive's annual base salary in effect on the date hereof; or (d) any failure by the Company to provide Executive with benefits at least as favorable as those enjoyed by Executive under any of the pension, life insurance, medical, health and accident, disability or other employee plans of the Company on the date hereof, or the taking of any action that would materially reduce any of such benefits in effect on the date hereof (unless this reduction relates to a reduction in benefits applicable to all employees generally); then, at Executive's option, exercisable by Executive within thirty (30) days of the occurrence of each and every of the foregoing events, other than a resignation for Good Reason as a result of a Change of Control, Executive may resign from employment (or, if involuntarily terminated, give notice of intention to collect benefits hereunder) by delivering a notice in writing to the Company, and the provisions of Section 3 of this Agreement shall apply. A notice of resignation for Good Reason as a result of a Change of Control shall be delivered to the Company not earlier than 90 days nor later than 120 days following the Change of Control in order for the provisions of Section 3 of this Agreement to apply. 2 3. Continuing Compensation and Benefits. (a) The Company will continue to pay to Executive his then annual base salary for a period of twelve (12) months after the effective date of the termination of Executive's employment (the "Severance Term"). Subject to Section 7 below, during the Severance Term, Executive will be free to seek, accept and engage in other full-time employment. (b) During the Severance Term, the Company will continue to provide to Executive the medical benefits Executive was entitled to on the date hereof (hereinafter "Health Benefits") and to the extent the Company's insurance plans permit, the long-term disability and life insurance benefits Executive was entitled to on the date hereof (hereinafter "Insured Benefits"), except that the amount of coverage under the Insured Benefits will be based on the rate of pay Executive is receiving from the Company at the time of the event that gives rise to a claim under the Insured Benefits. The continued provision of the Health Benefits and the Insured Benefits will cease (i) when payments to Executive cease under Section 3(a) above or (ii) when Executive becomes employed on a full-time basis, whichever occurs first. (c) On the effective date of termination of Executive's employment, the Company will pay Executive for accrued by unused vacation (at his rate of pay in effect on the date hereof), if any, to the extent provided in the Company's policies on the date hereof, but Executive shall not accrue any vacation during the period referred to in Section 3(a) above. 4. Accrued Bonuses. (a) If the effective date of the termination of Executive's employment (the "Termination Date") is on or before the end of the second quarter of the Company's fiscal year and after December 31, 1997, then the Company shall pay to Executive a bonus in an amount equal to the bonus paid to Executive for the prior fiscal year under the Company's Bonus Plan multiplied by a fraction, the numerator of which is the number of completed fiscal quarters which have elapsed in the Company`s current fiscal year through and including the Termination Date, and the denominator of which is 4. (b) If the Termination Date is after the end of the second quarter of the Company's fiscal year or occurs at any time prior to December 31, 1997, then the Company shall, at the time bonuses for such fiscal year are paid to employees of the Company, pay to Executive a bonus in an amount equal to the bonus for the such fiscal year to which Executive would have been entitled had he not been terminated multiplied by a fraction, the numerator of which is the number of completed days which have elapsed in the Company's current fiscal year through and including the Termination Date, and the denominator of which is 365. (c) If the Termination Date occurs within 12 months of a Change of Control, then the Company shall, within five business days of the Termination Date, pay to Executive 100% of the greater of (i) the targeted bonus that Executive would have received in respect of such fiscal year had he not been terminated and (ii) the bonus paid to Executive in respect of the prior fiscal year. 3 (d) The provisions of this Section 3 will be effective beginning 90 days after the date hereof. 5. Termination for Cause. If Executive's employment is terminated for Cause, all of Executive's rights under paragraphs 2 and 3 shall cease as of the effective date of the Termination Date, except that Executive (i) shall be entitled to received accrued salary through the Termination Date and (ii) shall be entitled to receive the payments and benefits to which Executive was then entitled under the employee benefit plans of the Company or any affiliate thereof as of the Termination Date. 6. Confidentiality. Executive acknowledges that the information, observations and data obtained by him while employed by the Company concerning the business or affairs of the Company and its subsidiaries that (i) are not available to the public, customers, suppliers and competitors of the Company, (ii) are in the nature of trade secrets, or (iii) 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 (collectively, the "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 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. 7. Notice/Consultation. In consideration of the foregoing, Executive agrees to give the Company no less than 30 days prior written notice if at any time Executive decides to resign from the Company's employ. Since, in certain respects, Executive will be an employee of the Company during any Severance Term, Executive agrees to consult with the Company during such Severance Term. This consultation obligation will not prevent or interfere with Executive seeking, accepting or engaging in full-time employment. 8. Term. This Agreement will be in effect for a period of three years from the date hereof and shall be automatically renewed for successive periods of two years each, unless terminated by Executive upon 30 days notice prior to the expiration of the original or any renewal term. 9. Tax Withholding. All payments to Executive hereunder will be earned and prorated on a daily basis, but shall be payable at the same time and in the same manner as executives of the Company, or its successor, are paid their salaries. The Company shall have the power to withhold, require Executive to remit to the Company in cash or offset against any amounts otherwise payable Executive, an amount sufficient to satisfy all Federal, state, local and foreign withholding tax requirements relating to such payments, and the Company may defer any payments until such requirements are satisfied. 4 10. Executive's Employment by the Company. Nothing contained in this agreement shall be deemed to obligate the Company or any subsidiary of the Company to employ Executive in any capacity whatsoever or to prohibit or restrict the Company (or any such subsidiary) from terminating the employment of Executive at any time or for any reason whatsoever, with or without Case. 11. Binding Effect. The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. 12. Amendment; Waiver. This Agreement may be amended only by a written instrument signed by the parties hereto. No waiver by any party hereto of any of the provisions hereof shall be effective unless set forth in writing executed by the party so waiving. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by either party to exercise any right or privilege hereunder shall be deemed a waiver of such party's rights or privileges hereunder or shall be deemed a waiver of such party's rights to exercise the same at any subsequent time or times hereunder. 13. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without regard to the conflicts of law principles thereof. 14. Jurisdiction. Any suit, action or proceeding with respect to this Agreement, or any judgment entered by any court in respect thereof, shall be brought in any court of competent jurisdiction in the State of New York, and both the Company and Executive hereby submit to the exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding or judgment. Executive and the Company hereby irrevocably waive any objections which either may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of New York, and hereby further irrevocably waive any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum. 15. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when personally delivered, telecopied (with confirmation of receipt), two days after deposit with a reputable overnight delivery service (charges prepaid) and three days after deposit in the U.S. Mail (postage prepaid and return receipt requested) to the address set forth below or such other address as the recipient party has previously delivered notice to the sending party. (i) If to the Company: Remington Products Company, L.L.C. 60 Main Street Bridgeport, CT 06604 Attention: Allen S. Lipson Telecopy: 203-366-7707 5 and Remington Products Company, L.L.C. c/o Vestar Equity Partners, L.P. 245 Park Avenue, 41st Floor New York, NY 10167 Attention: Robert L. Rosner Telecopy: 212-808-4922 with a copy to: Kirkland & Ellis 655 Fifteenth Street, N.W. Washington, D.C. 20005-5793 Attention: Jack M. Feder Telecopy: 202-879-5200 (ii) If to Executive: Alexander R. Castaldi 1101 Bullet Hill Road Southbury, CT 06488 16. Integration. This Agreement and the documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to the subject matter hereof and thereof. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 17. Counterparts. This Agreement may be executed in separate counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 18. Rights Cumulative. The rights and remedies of Executive and the Company under this Agreement shall be cumulative and not exclusive of any rights or remedies which either would otherwise have hereunder or at law or in equity or by statute, and no failure or delay by either party in exercising any right or remedy shall impair any such right or remedy or operate as a waiver of such right or remedy, nor shall any single or partial exercise of any power or right preclude such party's other or further exercise or the exercise of any other power or right. * * * * * [END OF PAGE] [SIGNATURE PAGE FOLLOWS] 6 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. REMINGTON PRODUCTS COMPANY, L.L.C. By: ___________________________________ Name: Title: ___________________________________ ALEXANDER R. CASTALDI 7 EX-31 4 exhibit311.txt NEIL P. DEFEO EXHIBIT 31.1 I, Neil P. DeFeo, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Remington Products Company, L.L.C.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 12, 2003 /s/ Neil P. DeFeo - ------------------------------------------------------ Neil P. DeFeo, Chairman, Chief Executive Officer and President EX-31 5 exhibit312.txt ALEXANDER R. CASTALDI EXHIBIT 31.2 I, Alexander R. Castaldi, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Remington Products Company, L.L.C.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 12, 2003 /s/ Alexander R. Castaldi - ------------------------------------------ Alexander R. Castaldi, Executive Vice President, Chief Financial and Administrative Officer -----END PRIVACY-ENHANCED MESSAGE-----