MADISON, N.C., Oct. 27 /PRNewswire/ -- Remington Arms Company, Inc.
(the "Company") today reported financial results, including Adjusted EBITDA
and net income, for the quarter and year-to-date periods ended September
30, 2008. Adjusted EBITDA was $17.8 million for the three months ended
September 30, 2008 as compared to Adjusted EBITDA of $21.1 million for the
three months ended September 30, 2007. Adjusted EBITDA was $49.7 million
for the year-to-date period ended September 30, 2008 as compared to
Adjusted EBITDA of $48.5 million for the year-to-date period ended
September 30, 2007. Net income was $2.9 million for the three months ended
September 30, 2008 as compared to a net loss of $5.6 million for the three
months ended September 30, 2007. Net income was $1.3 million for the
year-to-date period ended September 30, 2008 as compared to a net loss of
$0.4 million for the year-to-date period ended September 30, 2007.
Third Quarter Highlights
-- Net sales increased by 10.6% to $174.0 million for the three months
ended September 30, 2008, as compared to net sales of $157.3 million for
the three months ended September 30, 2007. Net sales increased by 15.9%
to $428.0 million for the year-to-date period ended September 30, 2008,
as compared to net sales of $369.4 million for the year-to-date period
ended September 30, 2007.
-- Gross margin increased by 71.4% to $40.8 million for the three months
ended September 30, 2008, as compared to $23.8 million for the three
months ended September 30, 2007. Gross margin increased by 32.5% to
$102.8 million for the year-to-date period ended September 30, 2008, as
compared to $77.6 million for the year-to-date period ended September
30, 2007. The increases in gross margin were primarily driven by 2008
not incurring the cost of rolling out a purchase accounting adjustment
related to inventory of $15.7 million and $21.5 million for the third
quarter and year-to-date periods, respectively.
-- Selling, general and administrative expense increased by 14.8% to $28.7
million for the three months ended September 30, 2008, as compared to
$25.0 million for the three months ended September 30, 2007. Selling,
general and administrative expense increased by 24.1% to $77.8 million
for the year-to-date period ended September 30, 2008, as compared to
$62.7 million for the year-to-date period ended September 30, 2007.
-- The outstanding amount on the revolving credit facility is $116.8
million at September 30, 2008 compared to $39.7 million at September 30,
2007. The increase in the outstanding amount is due to the Company
borrowing approximately $60.0 million of incremental funds as a
cautionary measure in response to the uncertainty that developed in the
financial markets during September 2008. Cash on hand of $77.1 million
is invested in a treasury reserve fund. The Company has not repaid the
amounts as of the date of this press release.
Working Capital and Liquidity
As of September 30, 2008, the Company was in compliance with its
financial covenants and had additional availability of $29.5 million. The
Company manages inventory levels to keep them in line with sales
projections by adjusting production schedules and scheduling unplanned
downtime. The Company generally funds expenditures for operations,
administrative expenses, capital expenditures, debt service obligations,
dividend payments, and potential repurchases of our outstanding notes
(which we intend to make from time to time depending on market conditions),
in addition to satisfying working capital needs, with internally generated
funds from operations and periodically with borrowings under our credit
facility.
Adjusted EBITDA
In addition to disclosing financial results calculated in accordance
with United States (U.S.) generally accepted accounting principles (GAAP),
the Company's earnings release contains the non-GAAP financial measure
"Adjusted EBITDA." Adjusted EBITDA is calculated in accordance with the
definition in Note 22 to the audited financial statements contained in the
Company's most recent Annual Report on Form 10-K for the year ended
December 31, 2007.
Adjusted EBITDA is not a measure of performance defined in accordance
with GAAP. However, management believes that Adjusted EBITDA is useful to
investors in evaluating the Company's performance because it is a commonly
used financial analysis tool for measuring and comparing companies in the
Company's industry in areas of operating performance. Management believes
that the disclosure of Adjusted EBITDA offers an additional view of the
Company's operations that, when coupled with the GAAP results and the
reconciliation to GAAP net income, provides a more complete understanding
of the Company's results of operations and the factors and trends affecting
the Company's business.
Adjusted EBITDA should not be considered as an alternative to net
income as an indicator of the Company's performance or as an alternative to
net cash provided by operating activities as a measure of liquidity. The
primary material limitations associated with the use of Adjusted EBITDA as
compared to GAAP net income is (i) it may not be comparable to similarly
titled measures used by other companies in the Company's industry, and (ii)
it excludes financial information that some may consider important in
evaluating the Company's performance. The Company compensates for these
limitations by providing disclosure of the differences between Adjusted
EBITDA and GAAP net income, including providing a reconciliation of
Adjusted EBITDA to GAAP net income, to enable investors to perform their
own analysis of the Company's operating results.
A complete reconciliation containing adjustments from GAAP Net Income
to Adjusted EBITDA is included as the last page of this press release.
Third Quarter Conference Call
The Company will hold a conference call on Monday, November 17, 2008 at
8:00 a.m. Eastern Standard Time to discuss its results for the third
quarter ended September 30, 2008. Dial in information will be provided to
the public prior to the call.
About Remington Arms Company, Inc.
Remington Arms Company, Inc., headquartered in Madison, N.C., designs,
produces and sells sporting goods products for the hunting and shooting
sports markets, as well as solutions to the military, government and law
enforcement markets. Founded in 1816 in upstate New York, the Company is
one of the nation's oldest continuously operating manufacturers. Remington
is the only U.S. manufacturer of both firearms and ammunition products and
one of the largest domestic producers of shotguns and rifles. The Company
distributes its products throughout the U.S. and in over 56 foreign
countries. More information about the Company can be found at
http://www.remington.com.
This press release contains statements which constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995, including statements relating to trends in the operations and
financial results and the business and the products of the Company, as well
as other statements including words such as "anticipate," "believe,"
"plan," "estimate," "expect," "intend" and other similar expressions.
Forward-looking statements are made based upon management's current
expectations and beliefs concerning future developments and their potential
effects on the Company. Such forward-looking statements are not guarantees
of future performance. The following important factors, and those important
factors described in the Company's filings with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-K for the year
ended December 31, 2007 under Item 1A, "Risk Factors," could affect (and in
some cases have affected) the Company's actual results and could cause such
results to differ materially from estimates or expectations reflected in
such forward-looking statements:
-- General economic and political conditions, such as political
instability, credit market uncertainty, inflationary pressures from
higher energy and fuel costs and the rate of economic growth or decline
in the Company's principal geographic or product markets, each of
which risks may be amplified by the recent disruptions in the U.S. and
global financial markets;
-- The Company's ability to make scheduled payments of principal or
interest on, or to refinance its obligations with respect to its
indebtedness and to comply with the covenants and restrictions contained
in the instruments governing such indebtedness;
-- The degree to which the Company is leveraged, which impacts, among other
things, its ability to obtain additional financing for working capital
and may cause it to be more vulnerable to economic downturns and be
limited in its ability to withstand competitive pressures;
-- The Company's ability to meet its debt service and other
obligations depends in significant part on customers purchasing its
products during the fall hunting season, and if there is a decrease in
demand the Company may be unable to reduce costs or increase its
borrowings sufficiently to adjust to such a reduction in demand;
-- Continued volatility in the price of lead, copper, and steel could have
a material adverse impact on the Company's consolidated financial
position, results of operations, or cash;
-- The Company's ability to meet its product liability obligations;
-- The Company's ability to successfully integrate products and
internal operating systems from acquisitions on a timely basis;
-- The Company's ability to compete effectively with all of its
present competition;
-- If Wal-Mart were to significantly reduce or terminate its purchases of
firearms and/or ammunition from the Company, the Company's
financial condition or results of operations could be adversely
affected;
-- Any disruption in the Company's relationship with its suppliers of
steel, zinc, lead, brass, plastics and wood, as well as manufactured
parts, could increase the cost of operations; and
-- More restrictive federal, state and local governmental regulation, which
could have a material adverse effect on the Company.
Any forward-looking statement speaks only as of the date on which it is
made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date
on which the statement is made or to reflect the occurrence of
unanticipated events. Except as required by law, the Company undertakes no
obligation to publicly revise its forward-looking statements to reflect
events or circumstances that arise after the date of this press release.
Remington Arms Company, Inc.
Consolidated Balance Sheets
(Dollars in Millions, Except Per Share Data)
Unaudited Unaudited
--------- ---------
September 30, December 31, September 30,
2008 2007 2007
---- ---- ----
ASSETS
------
Current Assets
--------------
Cash and Cash Equivalents $77.1 $23.4 $0.3
Accounts Receivable
Trade - net 119.1 72.8 113.8
Inventories - net 142.5 116.9 132.3
Supplies 5.9 6.3 7.4
Prepaid Expenses and
Other Current Assets 15.6 18.2 27.5
Assets Held for Sale 1.9 - -
Deferred Tax Assets 14.2 11.1 5.6
---- ---- ---
Total Current Assets 376.3 248.7 286.9
Property, Plant
and Equipment - net 114.9 102.7 101.7
Goodwill and
Intangibles - net 148.7 132.6 138.5
Debt Issuance Costs - net 3.5 4.7 4.8
Other Noncurrent Assets 15.1 13.4 16.6
---- ---- ----
Total Assets $658.5 $502.1 $548.5
====== ====== ======
LIABILITIES AND
STOCKHOLDER'S EQUITY
---------------------
Current Liabilities
-------------------
Accounts Payable $39.0 $30.4 $35.6
Book Overdraft 0.9 5.3 1.4
Short-Term Debt 0.2 3.5 0.9
Current Portion of
Long-Term Debt 6.6 4.8 0.7
Current Portion of
Product Liability 4.5 3.1 2.9
Income Taxes Payable - 0.1 0.5
Other Accrued Liabilities 57.7 34.9 67.6
---- ---- ----
Total Current
Liabilities 108.9 82.1 109.6
Long-Term Debt, net of
Current Portion 336.5 225.0 244.2
Retiree Benefits, net
of Current Portion 36.1 42.8 32.9
Product Liability, net
of Current Portion 11.4 9.3 9.8
Deferred Tax Liabilities 31.6 28.4 27.1
Other Long-Term Liabilities 11.2 6.5 3.1
---- --- ---
Total Liabilities 535.7 394.1 426.7
----- ----- -----
Commitments and Contingencies
Stockholder's Equity
--------------------
Class A Common Stock, par
value $.01; 1,000 shares
authorized and outstanding
at September 30, 2008,
December 31, 2007 and
September 30, 2007,
respectively - - -
Paid in Capital 142.4 124.2 124.2
Accumulated Other
Comprehensive
Income (Loss) (10.4) (5.7) 7.0
Accumulated Deficit (9.2) (10.5) (9.4)
---- ----- ----
Total Stockholder's
Equity 122.8 108.0 121.8
----- ----- -----
Total Liabilities and
Stockholder's Equity $658.5 $502.1 $548.5
====== ====== ======
Remington Arms Company, Inc.
Consolidated Statements of Operations
(Dollars in Millions)
(Unaudited)
Successor Successor Predecessor
--------- --------- -----------
July 1 - January 1 - June 1 - January 1 -
September 30 September 30 September 30 May 31
2008 2007 2008 2007 2007
---- ---- ---- ---- ----
Net Sales (1) $174.0 $157.3 $428.0 $202.4 $167.0
Cost of
Goods Sold 133.2 133.5 325.2 174.5 117.3
----- ----- ----- ----- -----
Gross Profit 40.8 23.8 102.8 27.9 49.7
Selling,
General and
Administrative
Expenses 28.7 25.0 77.8 32.4 30.3
Research and
Development
Expenses 1.9 1.6 5.2 2.2 2.7
Other Income (0.2) (0.7) (0.1) (1.0) (4.5)
---- ---- ---- ---- ----
Operating
Profit
(Loss) 10.4 (2.1) 19.9 (5.7) 21.2
Interest
Expense 6.5 6.4 18.5 8.7 10.9
--- --- ---- --- ----
Income (Loss)
from
Operations
before Income
Taxes and
Equity in
Losses from
Unconsolidated
Joint Venture 3.9 (8.5) 1.4 (14.4) 10.3
Income Tax
Provision
(Benefit) 1.0 (3.4) 0.1 (5.5) 1.3
Equity in Losses
from
Unconsolidated
Joint Venture - 0.5 - 0.5 -
--- --- --- --- ---
Net Income
(Loss) $2.9 $(5.6) $1.3 $(9.4) $9.0
==== ===== ==== ===== ====
(1) Sales are presented net of federal excise taxes of $14.8 and
$31.8 for the quarter and year-to-date periods ended September 30,
2008, respectively. Sales are presented net of federal excise taxes
of $13.7 and $17.5 for the three and four month periods ended
September 30, 2007, respectively, and $12.1 for the five month
period ended May 31, 2007.
Remington Arms Company, Inc.
Consolidated Statements of Cash Flows
(Dollars in Millions)
(Unaudited)
Successor Predecessor
--------- -----------
January 1 - June 1 - January 1 -
September 30 September 30 May 31
2008 2007 2007
---- ---- ----
Operating Activities
--------------------
Net Income (Loss) $1.3 $(9.4) $9.0
Adjustments to reconcile Net
Income (Loss) to Net Cash
used in Operating Activities:
Depreciation and Amortization 14.2 5.9 4.8
Equity in Losses from
Unconsolidated Joint Venture - 0.5 -
Pension Plan Contributions (13.4) (8.2) (5.9)
Pension Plan (Benefit) Expense (0.3) 1.9 3.7
Provision (Benefit) for
Deferred Income Taxes, net (0.1) (6.0) 0.3
Other Non-cash Charges 1.6 1.4 1.9
Changes in Operating
Assets and Liabilities
net of effects of
purchase of Marlin Firearms:
Accounts Receivable Trade
- net (36.7) (19.8) (1.2)
Inventories (3.8) 48.6 (39.5)
Prepaid Expenses and
Other Current Assets (2.8) (3.3) (5.5)
Other Noncurrent Assets (1.8) - (2.6)
Accounts Payable 5.4 (3.4) 8.2
Income Taxes Payable 0.7 (0.6) (1.4)
Other Liabilities 13.6 22.7 (8.1)
---- ---- ----
Net Cash (used in) provided
by Operating Activities (22.1) 30.3 (36.3)
----- ---- -----
Investing Activities
--------------------
Option Cancellation Payments - (1.1) -
Purchase of Property,
Plant and Equipment (11.2) 3.0 (2.1)
Premiums paid for Company
Owned Life Insurance - (0.2) (0.2)
Cash Received on
Termination of Company
Owned Life Insurance 5.6 - -
Seller Related Expenses
Paid by Remington - - (4.7)
Transaction Costs Related
to the Acquisition - (2.4) (5.1)
Cash Contribution to
Consolidated Joint Venture (0.5) - -
Payment for purchase of
Marlin Firearms, net of
cash acquired (46.6) - -
----- --- ---
Net Cash used in
Investing Activities (52.7) (0.7) (12.1)
----- ---- -----
Financing Activities
--------------------
Proceeds from Revolving Credit
Facility 194.4 43.4 103.1
Payments on Revolving Credit
Facility (77.6) (88.9) (37.3)
Cash Withheld from Sellers
Provided by Freedom Group
(formerly AHA) - - 4.7
Cash Contributions from
Freedom Group (formerly AHA) 18.0 6.1 -
Debt Issuance Costs - - (5.2)
Amount Paid to Holding for
Acquisition Costs - - (3.8)
Payments on Long-Term Debt (3.0) (0.3) (0.1)
Cash Received from RACI
Holding, Inc. 0.2 - -
Change in Book Overdraft (4.4) 1.4 (4.5)
---- --- ----
Net Cash provided by
(used in) Financing
Activities 127.6 (38.3) 56.9
----- ----- ----
Change in Cash and Cash Equivalents 52.8 (8.7) 8.5
Cash and Cash Equivalents at
Beginning of Period 24.3 9.0 0.5
---- --- ---
Cash and Cash Equivalents
at End of Period $77.1 $0.3 $9.0
===== ==== ====
Supplemental Cash Flow
Information:
Cash Paid for:
Interest $12.9 $1.6 $11.8
Income Taxes $2.6 $- $0.1
Previously accrued
Capital Expenditures $0.9 $- $0.6
Noncash Investing and
Financing Activities:
Financing of insurance policies $0.2 $0.9 $1.9
Acquisition of Parent
Company by AHA $- $118.1 $-
Capital Lease
Obligations Incurred $0.5 $- $-
Conversion of Parent
Company Stock
Liability to Equity $- $- $0.1
Remington Arms Company, Inc.
Reconciliation of Net Income to Adjusted EBITDA
(Dollars in Millions)
(Unaudited)
Successor Predecessor
--------- -----------
January 1 - June 1 - January 1 -
September 30 September 30 May 31
2008 2007 2007
---- ---- ----
Net Income (Loss) $1.3 $(9.4) $9.0
Depreciation Expense 11.9 4.9 4.2
Intangibles Amortization 1.9 0.9 -
Interest Expense (1) 18.5 8.7 10.9
Income Tax Expense (Benefit) 0.1 (5.5) 1.3
Equity in Losses for
Unconsolidated Joint Venture - 0.5 -
Other Noncash Charges (Gains)(2) 1.0 (0.1) 1.7
Nonrecurring Charges (Gains)(3) 15.0 25.3 (3.9)
---- ---- ----
Adjusted EBITDA $49.7 $25.3 $23.2
===== ===== =====
(1) Interest expense for the year-to-date period ended September 30, 2008
includes amortization expense of deferred financing costs of $1.2, offset
by $0.8 associated with the premium recorded on the Company's 10 1/2%
Senior Notes due 2011 (the "Notes"). Interest expense includes
amortization expense of deferred financing costs of $0.4, offset by $0.4
of amortization for the four month period ended September 30, 2007
associated with the premium recorded on the Notes. Amortization expense
of deferred financing costs included in the five month period ended May
31, 2007 is $0.6.
(2) Other non-cash charges for the year-to-date period ended September
30, 2008 includes $1.0 for retirement benefit accruals. Other non-cash
charges included a gain of $0.1 on disposal of assets for the four month
period ended September 30, 2007. The year-to-date period ended May 31,
2007 includes $1.5 of other compensation expense associated with the
accelerated vesting and buyout of stock options and the conversion of the
deferred shares to equity in accordance with SFAS 123R and $0.2 of mark-
to-market expense associated with the redeemable shares of common stock.
(3) Nonrecurring items for the year-to-date period ended September 30,
2008 includes $2.2 of fees and expenses incurred in connection with
factory improvement initiatives, $2.8 related to the inventory write-up
from the application of purchase accounting to inventory as a result of
the acquisition of RACI Holding, Inc. by American Heritage Arms (now
Freedom Group) and the Company's acquisition of The Marlin Firearms
Company ("Marlin") and its subsidiary, H&R 1871, LLC ("H&R") being
recognized in cost of sales as the acquired inventory is sold at a higher
basis, $2.9 of adjustments on unsettled metals hedging contracts, $1.1 of
costs associated with the Marlin and H&R Integration, $1.1 of deferred
stock payables, $3.1 for the write-off of the remaining value of the
technology products inventory, $0.8 related to severance for the closing
of the H&R facility, $0.3 related to other project expenses, $0.1 related
to Marlin LIFO, and $0.6 related to other employee costs.
Nonrecurring items for the four month period ended September 30, 2007
included $2.2 of professional fees and expenses incurred by the Company's
Chief Restructuring Officer in connection with factory improvement
initiatives, $0.7 of transaction costs, $21.5 related to the inventory
write-up from the application of purchase accounting to inventory as of
May 31, 2007 being recognized in cost of sales as the acquired inventory
is sold at a higher basis, $1.1 of adjustments on unsettled metals hedging
contracts, $0.2 of other employee expense, $0.1 of other professional
fees, and a ($0.5) gain on the joint venture interest in Remington ELSAG
Law Enforcement Systems, LLC through September 26, 2007, the date the
Company sold its interest.
For the five month period ended May 31, 2007, nonrecurring items include
($4.9) of gain associated with the unsettled metals hedging contracts
from the predecessor company, $0.1 of professional fees related to the
acquisition of Holding by American Heritage Arms (now Freedom Group),
$0.1 of other professional fees, $0.1 of expense associated with certain
employee benefits and $0.7 related to certain predecessor company
insurance policies.
SOURCE Remington Arms Company, Inc.
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Related links:
http://www.remington.com
CONTACT:
Alan Oshiki of Broadgate Consultants,
+1-212-232-2354
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