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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission file number - 333-56097
--------------
RIVER HOLDING CORP.
(Exact name of registrant as specified in its charter)
--------------
Delaware 95-4674065
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
599 Lexington Avenue, 18/th/ Floor 10022
New York, New York (Zip Code)
(Address of Principal Executive Offices)
(212) 758-2555
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report).
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [_] No [X]
The number of shares of Common Stock, $0.01 par value, outstanding (the
only class of common stock of the Company outstanding) was 9,144,293 on November
14, 2001.
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RIVER HOLDING CORP. AND SUBSIDIARIES
QUARTER ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements of River Holding Corp.:
Condensed Consolidated Balance Sheets as of December 31, 2000 and
September 30, 2001 (unaudited).......................................................... 1
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income
(Loss) for the Three and Nine Months Ended September 30, 2000 and 2001.................. 3
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 2001............................................................. 4
Notes to Unaudited Condensed Consolidated Financial Statements.......................... 5
Unaudited Condensed Consolidated Financial Statements of Hudson Respiratory Care Inc.:
Condensed Consolidated Balance Sheets as of December 31, 2000 and
September 30, 2001 (unaudited).......................................................... 7
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income
(Loss) for the Three and Nine Months Ended September 30, 2000 and 2001.................. 9
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 2001............................................................. 10
Notes to Unaudited Condensed Consolidated Financial Statements.......................... 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations... 18
Item 3. Quantitative and Qualitative Disclosures About Market Risks............................. 25
ii
RIVER HOLDING CORP. AND SUBSIDIARIES
QUARTER ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
Page
----
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................................... 26
Item 2. Changes in Securities................................................................... 26
Item 3. Defaults Upon Senior Securities......................................................... 26
Item 4. Submission of Matters to a Vote of Security Holders..................................... 26
Item 5. Other Information....................................................................... 26
Item 6. Exhibits and Reports on Form 8-K........................................................ 26
SIGNATURE.................................................................................................. 27
iii
RIVER HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollar Amounts in Thousands)
September 30,
December 31, 2001
2000 (unaudited)
------------ -------------
CURRENT ASSETS:
Cash................................................................... $ 3,530 $ 2,585
Accounts receivable, less allowance for doubtful accounts of $3,500
and $2,744 at December 31, 2000 and September 30, 2001, respectively.. 28,307 31,297
Inventories............................................................ 44,610 33,310
Other current assets................................................... 2,165 1,800
-------- --------
Total current assets................................................ 78,612 68,992
-------- --------
PROPERTY, PLANT AND EQUIPMENT, net........................................ 59,030 54,488
-------- --------
OTHER ASSETS:
Deferred tax asset..................................................... 11,502 11,504
Deferred financing costs, net.......................................... 9,587 8,777
Goodwill, net.......................................................... 201,116 191,635
Other assets........................................................... 1,189 2,862
-------- --------
Total other assets.................................................. 223,394 214,778
-------- --------
Total assets..................................................... $361,036 $338,258
======== ========
The accompanying notes are an integral part of these condensed consolidated
statements.
1
RIVER HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES, PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
(Dollar Amounts in Thousands)
September 30,
December 31, 2001
2000 (unaudited)
------------ -------------
CURRENT LIABILITIES:
Notes payable to bank, current portion.................................... $ 10,686 $ 12,747
Accounts payable.......................................................... 20,420 11,181
Accrued liabilities....................................................... 12,707 16,570
Note payable to affiliates................................................ 2,000 2,266
Other current liabilities................................................. 3,007 2,231
-------- --------
Total current liabilities.............................................. 48,820 44,995
-------- --------
NOTES PAYABLE TO AFFILIATES.................................................. 8,266 14,951
SENIOR SUBORDINATED NOTES PAYABLE............................................ 115,000 115,000
NOTES PAYABLE TO BANK, net of current portion................................ 85,962 75,847
OTHER NON-CURRENT LIABILITIES................................................ -- 1,007
-------- --------
Total liabilities......................................................... 258,048 251,800
-------- --------
MANDATORILY-REDEEMABLE PREFERRED STOCK, $0.01 par value; authorized-
1,800 shares; issued and outstanding- 421 shares; liquidation
preference: $42,052 at September 30, 2001................................. 39,043 41,329
Accrued redeemable preferred stock dividend, payable in kind.............. 1,018 2,280
-------- --------
40,061 43,609
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, no par value:
Authorized--15,000 shares; issued and outstanding- 10,387 and
10,655 at December 31, 2000 and September 30, 2001, respectively.... 97,748 97,849
Junior preferred stock, $0.01 par value: authorized- 6 shares;
issued and outstanding- 3 shares; liquidation preference: $3,000.... -- 3,000
Accrued junior preferred stock dividend................................... -- 45
Cumulative translation adjustment......................................... (687) 1,915
Accumulated deficit....................................................... (34,134) (59,960)
-------- --------
Total stockholders' equity............................................. 62,927 42,849
-------- --------
Total liabilities, preferred stock and stockholders' deficit........ $361,036 $338,258
======== ========
The accompanying notes are an integral part of these condensed
consolidated statements
2
RIVER HOLDING CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(Dollar Amounts in Thousands)
Three Months Ended Nine Months Ended
-------------------------- --------------------------
Sept. 30, Sept 30, Sept. 30, Sept. 30,
2000 2001 2000 2001
-------- -------- --------- ---------
NET SALES............................................... $41,111 $45,095 $113,729 $123,701
COST OF SALES........................................... 19,587 24,871 56,915 78,992
------- ------- -------- --------
Gross Profit......................................... 21,524 20,224 56,814 44,709
------- ------- -------- --------
OPERATING EXPENSES:
Selling, distribution, general & administrative...... 12,310 12,118 34,584 39,374
Amortization of goodwill............................. 2,036 2,047 4,576 6,357
Research and development............................. 533 363 1,782 1,264
------- ------- -------- --------
14,879 14,528 40,942 46,995
------- ------- -------- --------
Income (loss) from operations..................... 6,645 5,696 15,872 (2,286)
------- ------- -------- --------
INTEREST EXPENSE AND OTHER.............................. 5,812 5,180 16,278 19,022
------- ------- -------- --------
Income (loss) before provision for income
taxes................................................ 833 516 (406) (21,308)
------- ------- -------- --------
PROVISION FOR INCOME TAXES.............................. 271 398 18 926
------- ------- -------- --------
Net income (loss).................................... $ 562 $ 118 $ (424) $(22,234)
======= ======= ======== ========
OTHER COMPREHENSIVE INCOME:
Foreign currency translation (loss) gain............. (2,299) (1,958) (1,992) 2,602
------- ------- -------- --------
Comprehensive (loss) income....................... $(1,737) $(1,840) $ (2,416) $(19,632)
======= ======= ======== ========
The accompanying notes are an integral part of these condensed consolidated
statements.
3
RIVER HOLDING CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
Nine Months Ended
------------------------------------
September 30, September 30,
2000 2001
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................... $ (424) $(22,234)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities-
Depreciation and amortization...................................... 14,905 15,636
Deferred taxes..................................................... (1,819) (1)
Change in operating assets and liabilities:
Accounts receivable................................................ (6,796) (2,990)
Inventories........................................................ (11,096) 11,301
Other current assets............................................... 2,529 365
Other assets....................................................... 145 (1,674)
Accounts payable................................................... 6,111 (9,239)
Accrued liabilities................................................ 4,962 3,864
Other current liabilities.......................................... (99) (776)
Other non-current liabilities...................................... -- 1,007
-------- --------
Net cash provided by (used in) operating activities.............. 8,418 (4,741)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment........................... (8,356) (3,201)
Retirements of intangible assets..................................... 2,648 2,802
-------- --------
Net cash used in investing activities............................ (5,708) (399)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable to bank, net of proceeds.................. (2,331) (8,054)
Proceeds from notes payable to affiliates, net of repayments......... 500 6,951
Addition of deferred financing costs................................. -- (404)
Sale of preferred stock, net of issuance costs....................... -- 3,000
Sale of common stock, net of issuance costs.......................... -- 100
-------- --------
Net cash (used in) provided by financing activities.............. (1,831) 1,593
Effect of exchange rate changes on cash................................ (1,992) 2,602
-------- --------
NET DECREASE IN CASH................................................... (1,113) (945)
CASH, beginning of period.............................................. 2,917 3,530
-------- --------
CASH, end of period.................................................... $ 1,804 $ 2,585
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest........................................................... $ 8,275 $ 11,070
======== ========
NON-CASH FINANCING ACTIVITIES:
Preferred dividends accrued or paid-in-kind.......................... $ 3,223 $ 3,593
======== ========
The accompanying notes are an integral part of these condensed consolidated
statements.
4
RIVER HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
1. Financial Statements. The condensed consolidated financial statements
--------------------
included herein have been prepared by the River Holding Corp. ("Holding") and
Hudson Respiratory Care Inc. ("Hudson" or the "Company"), without audit, and
include all adjustments which are, in the opinion of management, necessary for a
fair presentation of the financial position at September 30, 2001, and the
results of operations and cash flows for the three and nine-month periods ended
September 30, 2000 and September 30, 2001 pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"). All such adjustments are of
a normal recurring nature. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. Although Holding believes that the disclosures in such financial
statements are adequate to make the information presented not misleading, the
accompanying unaudited condensed, consolidated financial statements should be
read in conjunction with Holding's 2000 audited financial statements and the
notes thereto included in its Form 10-K filed with the SEC. The results of
operations for the three and nine-month periods ended September 30, 2001 are not
necessarily indicative of the results to be achieved for a full year. Certain
reclassifications have been made in the 2001 statements to conform previous
periods to the third quarter presentation.
2. Recent Accounting Pronouncements. In June 1998, the Financial Accounting
---------------------------------
Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," ("SFAS 133") as amended by SFAS No. 137 and
SFAS No. 138, effective for fiscal years beginning after June 15, 2000. SFAS No.
133 establishes accounting and reporting standards for derivative instruments.
The statement requires that every derivative instrument be recorded in the
balance sheet as either an asset or liability measured at its fair value, and
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. The impact of adoption was
not material to the financial statements.
In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combinations" ("SFAS 141"). This Statement addresses
financial accounting and reporting for business combinations and supersedes APB
Opinion No. 16, "Business Combinations," and FASB Statement No. 38, "Accounting
for Preacquisition Contingencies of Purchased Enterprises." All business
combinations in the scope of this Statement are to be accounted for using one
method, the purchase method. Holding will apply the provisions of SFAS 141 for
all business combinations initiated after June 30, 2001.
Also in June 2001, the FASB issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS
142 addresses financial accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." This
pronouncement addresses, among other things, how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
financial statements. Goodwill would no longer be amortized but would be
assessed at least annually for impairment using a fair value methodology.
Holding has adopted this statement for all goodwill and other intangible assets
acquired after June 30, 2001 and will adopt this statement for all existing
goodwill and other intangible assets beginning January 1, 2002. Upon adoption
of this standard on January 1, 2002, Holding will cease recording amortization
of goodwill which would increase income before taxes in 2002 by approximately
$8.4 million (assuming current goodwill amounts and currency exchange rates).
Other than ceasing the amortization of goodwill, Holding does not anticipate
that the adoption of SFAS 142 will have a significant effect on Holding's
financial position or the results of Holding's operations as Holding does not
currently anticipate any impairment charges for existing goodwill.
Also in June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). SFAS 143 addresses financial accounting
and reporting obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. SFAS 143 requires
that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated retirement costs are capitalized as part
of the carrying amount of the long-lived asset. SFAS 143 is effective for
financial statements issued for fiscal years beginning after June 15, 2002 (with
earlier application being encouraged). Holding does not expect the adoption of
SFAS 143 to have a material impact on Holding's financial condition and results
of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." ("SFAS 144"). SFAS 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS 144 supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business (as previously
defined in that Opinion). The provisions of SFAS 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001, with early
application encouraged and generally are to be applied prospectively, Holding
does not expect the adoption of SFAS 144 to have a material impact on Holding's
financial condition and results of operations.
5
3. Inventories. Inventories consisted of the following (amounts in
-----------
thousands):
December 31, September 30,
2000 2001
------------ -------------
Raw materials........................ $ 8,134 $ 6,865
Work-in-process...................... 6,591 5,661
Finished goods....................... 29,885 20,784
------- -------
$44,610 $33,310
======= =======
4. Financing Activities. On March 21, 2001, the Company replaced its lending
--------------------
agreement denominated in Swedish Krona with a new loan that allows for
borrowings up to approximately $19.1 million. The principal is amortized over 18
equal quarterly payments commencing June 30, 2001. Interest is based on the
STIBOR rate +0% to +1.65%, based on the outstanding balance of the loan. The
loan is secured by Hudson Euro Sarl, a wholly-owned subsidiary of the Company
and 100% owner of Hudson RCI AB, Hudson RCI U.K. Ltd. and Hudson France S.a.S.
The Company was not in compliance with certain covenants of the
Credit Facility as of June 30, 2001. Subsequently, the Company amended its
Credit Facility covenants so that under the amended terms, all non-compliance
was cured. As part of the amendment, (1) the Company's shareholders invested
an additional $18.1 million, consisting of approximately $10.1 million of new
cash investment and $8.0 million of exchanged indebtedness, and (2) interest
rate margins were increased.
In August 2001, the Company issued for cash unsecured senior subordinated
convertible notes to certain managers and shareholders in the amount of $3.5
million. The notes bear interest at 10% and are due in 2005. The interest may
be paid or deferred to the due date at the option of the Company and the notes
are convertible to common stock at the demand of the holder.
On August 15, 2001, Holding issued to existing shareholders 3,000 shares of
12% Junior Convertible Cumulative Preferred Stock (the "Junior Preferred Stock")
for total cash consideration to Holding of $3,000,000. Each share of the Junior
Preferred Stock may be redeemed from time to time, in whole or in part, at the
option of Holding at the redemption price of 100% of the Liquidation Preference
of the Junior Preferred Stock or $1,000 per share plus accumulated and unpaid
dividends that would be payable on such shares of Junior Preferred Stock.
6
HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollar Amounts in Thousands)
September 30,
December 31, 2001
2000 (unaudited)
------------ -------------
CURRENT ASSETS:
Cash..................................................................... $ 3,530 $ 2,585
Accounts receivable, less allowance for doubtful accounts of $3,500
and $2,829 at December 31, 2000 and September 30, 2001, respectively... 28,307 31,297
Inventories, net......................................................... 44,610 33,310
Other current assets..................................................... 1,832 1,467
-------- --------
Total current assets................................................... 78,279 68,659
-------- --------
PROPERTY, PLANT AND EQUIPMENT, net.......................................... 49,425 46,578
-------- --------
OTHER ASSETS:
Intangible assets, net................................................... 67,573 61,902
Deferred financing costs, net............................................ 9,587 8,777
Deferred tax asset....................................................... 69,105 69,105
Other assets............................................................. 1,265 2,940
-------- --------
Total other assets..................................................... 147,530 142,724
-------- --------
Total assets......................................................... $275,234 $257,961
======== ========
The accompanying notes are an integral part of these condensed consolidated
statements.
7
HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES, PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT
(Dollar Amounts in Thousands)
September 30,
December 31, 2001
2000 (unaudited)
------------ -------------
CURRENT LIABILITIES:
Notes payable to bank, current portion.................................. $ 10,686 $ 12,747
Accounts payable........................................................ 20,320 11,081
Accrued liabilities..................................................... 12,707 16,570
Note payable to affiliates.............................................. 2,000 2,266
Other current liabilities............................................... 3,007 2,231
--------- ---------
Total current liabilities............................................. 48,720 44,895
--------- ---------
NOTE PAYABLE TO AFFILIATES................................................ 8,266 14,951
SENIOR SUBORDINATED NOTES PAYABLE......................................... 115,000 115,000
NOTES PAYABLE TO BANK, net of current portion............................. 85,962 75,847
OTHER NON-CURRENT LIABILITIES............................................. -- 1,007
--------- ---------
Total liabilities....................................................... 257,948 251,700
--------- ---------
MANDATORILY-REDEEMABLE PREFERRED STOCK, $0.01 par value; authorized-
1,800 shares; issued and outstanding- 421 shares; liquidation
preference at September 30, 2001: $42,052............................... 39,043 41,329
Accrued redeemable preferred stock dividend, payable in kind............ 1,018 2,280
--------- ---------
40,061 43,609
--------- ---------
STOCKHOLDERS' DEFICIT:
Common stock, no par value:
Authorized--15,000 shares; issued and outstanding- 10,387 and 10,655
at December 31, 2000 and September 30, 2001, respectively........... 98,158 98,259
Junior preferred stock, $0.01 par value: authorized- 6 shares;
issued and outstanding- 3 shares; liquidation preference: $3,000...... -- 3,000
Accrued junior preferred stock dividends................................ -- 45
Cumulative translation adjustment....................................... (1,151) 1,451
Accumulated deficit..................................................... (119,782) (140,103)
--------- ---------
Total stockholders' deficit........................................... (22,775) (37,348)
--------- ---------
Total liabilities, preferred stock and stockholders' deficit........ $ 275,234 $ 257,961
========= =========
The accompanying notes are an integral part of these condensed
consolidated statements
8
HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Dollar Amounts in Thousands)
Three Months Ended Nine Months Ended
-------------------------- --------------------------
Sept. 30, Sept 30, Sept. 30, Sept. 30,
2000 2001 2000 2001
--------- -------- --------- ---------
NET SALES.................................................. $41,111 $45,095 $113,729 $123,701
COST OF SALES.............................................. 19,587 24,306 56,915 77,297
------- ------- -------- --------
Gross Profit............................................. 21,524 20,789 56,814 46,404
------- ------- -------- --------
OPERATING EXPENSES:
Selling, distribution, general & administrative.......... 11,745 12,118 31,270 39,374
Amortization of goodwill................................. 767 777 2,387 2,547
Research and development................................. 533 363 1,782 1,264
------- ------- -------- --------
13,045 13,258 35,439 43,185
------- ------- -------- --------
Income from operations................................. 8,479 7,531 21,375 3,219
------- ------- -------- --------
INTEREST EXPENSE AND OTHER................................. 5,812 5,180 16,279 19,022
------- ------- -------- --------
Income (loss) before provision for income taxes.......... 2,667 2,351 5,096 (15,803)
------- ------- -------- --------
PROVISION FOR INCOME TAXES................................. 1,005 398 2,220 926
------- ------- -------- --------
Net income (loss)........................................ $ 1,662 $ 1,953 $ 2,876 $(16,729)
======= ======= ======== ========
OTHER COMPREHENSIVE INCOME:
Foreign currency translation (loss) gain................. (2,299) (1,958) (1,992) 2,602
------- ------- -------- --------
Comprehensive (loss) income............................ $ (637) $ (5) $ 884 $(14,127)
======= ======= ======== ========
The accompanying notes are an integral part of these condensed consolidated
statements.
9
HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
Nine Months Ended
------------------------------------
September 30, September 30,
2000 2001
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................... $ 2,876 $(16,729)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities-
Depreciation and amortization..................................... 8,780 9,243
Amortization of deferred financing costs.......................... 620 888
Deferred taxes.................................................... 383 (1)
Change in operating assets and liabilities:
Accounts receivable............................................... (6,796) (2,990)
Inventories....................................................... (11,096) 11,301
Other current assets.............................................. 2,529 365
Other assets...................................................... 145 (1,674)
Accounts payable.................................................. 6,111 (9,239)
Accrued liabilities............................................... 4,965 3,864
Other current liabilities......................................... (99) (776)
Other non-current liabilities..................................... -- 1,007
-------- --------
Net cash provided by (used in) operating activities............. 8,418 (4,741)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment.......................... (8,356) (3,200)
Retirements of intangible assets.................................... 2,648 2,801
-------- --------
Net cash used in investing activities........................... (5,708) (399)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable to bank, net of proceeds................. (1,831) (8,054)
Proceeds from notes payable to affiliates, net of repayments........ -- 6,951
Addition of deferred financing costs................................ -- (404)
Sale of preferred stock, net of issuance costs...................... -- 3,000
Sale of common stock, net of issuance costs......................... -- 100
-------- --------
Net cash (used in) provided by financing activities............. (1,831) 1,593
Effect of exchange rate changes on cash............................... (1,992) 2,602
-------- --------
NET DECREASE IN CASH.................................................. (1,113) (945)
CASH, beginning of period............................................. 2,917 3,530
-------- --------
CASH, end of period................................................... $ 1,804 $ 2,585
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.......................................................... $ 8,275 $ 11,070
======== ========
NON-CASH FINANCING ACTIVITIES:
Preferred dividends accrued or paid-in-kind......................... $ 3,223 $ 3,593
======== ========
The accompanying notes are an integral part of these condensed consolidated
statements.
10
HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
1. Financial Statements. The condensed consolidated financial statements
--------------------
included herein have been prepared by the Company, without audit, and include
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial position at September 30, 2001, and the results of
operations and cash flows for the three and nine-month periods ended September
30, 2000 and September 30, 2001 pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). All such adjustments are of a
normal recurring nature. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. Although the Company believes that the disclosures in such
financial statements are adequate to make the information presented not
misleading, the accompanying unaudited condensed, consolidated financial
statements should be read in conjunction with the Company's 2000 audited
financial statements and the notes thereto included in its Form 10-K filed with
the SEC. The results of operations for the three and nine-month periods ended
September 30, 2001 are not necessarily indicative of the results to be achieved
for a full year. Certain reclassifications have been made in the 2001statements
to conform previous periods to the third quarter presentation.
2. Recent Accounting Pronouncements. In June 1998, the Financial Accounting
---------------------------------
Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," ("SFAS 133") as amended by SFAS No. 137 and
SFAS No. 138, effective for fiscal years beginning after June 15, 2000. SFAS No.
133 establishes accounting and reporting standards for derivative instruments.
The statement requires that every derivative instrument be recorded in the
balance sheet as either an asset or liability measured at its fair value, and
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. The impact of adoption was
not material to the financial statements.
In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combinations" ("SFAS 141"). This Statement addresses
financial accounting and reporting for business combinations and supersedes APB
Opinion No. 16, "Business Combinations," and FASB Statement No. 38, "Accounting
for Preacquisition Contingencies of Purchased Enterprises." All business
combinations in the scope of this Statement are to be accounted for using one
method, the purchase method. The Company will apply the provisions of SFAS 141
for all business combinations initiated after June 30, 2001.
Also in June 2001, the FASB issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS
142 addresses financial accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." This
pronouncement addresses, among other things, how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
financial statements. Goodwill would no longer be amortized but would be
assessed at least annually for impairment using a fair value methodology. The
Company has adopted this statement for all goodwill and other intangible assets
acquired after June 30, 2001 and will adopt this statement for all existing
goodwill and other intangible assets beginning January 1, 2002. Upon adoption
of this standard on January 1, 2002, the Company will cease recording
amortization of goodwill which would increase income before taxes in 2002 by
approximately $3.3 million (assuming current goodwill amounts and currency
exchange rates). Other than ceasing the amortization of goodwill, the Company
does not anticipate that the adoption of SFAS 142 will have a significant effect
on the Company's financial position or the results of the Company's operations
as the Company does not currently anticipate any impairment charges for existing
goodwill.
Also in June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). SFAS 143 addresses financial accounting
and reporting obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. SFAS 143 requires
that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated retirement costs are capitalized as part
of the carrying amount of the long-lived asset. SFAS 143 is effective for
financial statements issued for fiscal years beginning after June 15, 2002 (with
earlier application being encouraged). The Company does not expect the adoption
of SFAS 143 to have a material impact on the Company's financial condition and
results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." ("SFAS 144") SFAS 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS 144 supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business (as previously
defined in that Opinion). The provisions of SFAS 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001, with early
application encouraged and generally are to applied prospectively. The Company
does not expect the adoption of SFAS 144 to have a material impact on The
Company's financial condition and results of operations.
11
3. Inventories. Inventories consisted of the following (amounts in
-----------
thousands):
December 31, September 30,
2000 2001
------------ -------------
Raw materials................................ $ 8,134 $ 6,865
Work-in-process.............................. 6,591 5,661
Finished goods............................... 29,885 20,784
------- -------
$44,610 $33,310
======= =======
4. Financing Activities. On March 21, 2001, the Company replaced its lending
--------------------
agreement denominated in Swedish Krona with a new loan that allows for
borrowings up to approximately $19.1 million. The principal is amortized over 18
equal quarterly payments commencing June 30, 2001. Interest is based on the
STIBOR rate +0% to +1.65%, based on the outstanding balance of the loan. The
loan is secured by Hudson Euro Sarl, a wholly-owned subsidiary of the Company
and 100% owner of Hudson RCI AB, Hudson RCI U.K. Ltd. and Hudson France S.a.S.
The Company was not in compliance with certain restrictive covenants of the
Credit Facility as of June 30, 2001. Subsequently, the Company amended its
Credit Facility covenants so that under the amended terms, all defaults were
cured. As part of the amendment, (1) the Company's shareholders invested an
additional $18.1 million, consisting of approximately $10.1 million of new cash
investment and $8.0 million of exchanged indebtedness, and (2) interest rate
margins were increased.
On August 15, 2001, the Company issued for cash unsecured senior
subordinated convertible notes to certain managers and shareholders in the
amount of $3.5 million. The notes bear interest at 10% and are due in 2005. The
interest may be paid or deferred to the due date at the option of the Company
and the notes are convertible to common stock at the demand of the holder.
Also on August 15, 2001, the Company issued 3,000 shares of 12% Junior
Convertible Cumulative Preferred Stock (the "Junior Preferred Stock") to
Holding, it's parent, for total cash consideration to the Company of $3,000,000.
Each share of the Junior Preferred Stock may be redeemed from time to time, in
whole or in part, at the option of the Company at the redemption price of 100%
of the Liquidation Preference of the Junior Preferred Stock or $1,000 per share
plus accumulated and unpaid dividends that would be payable on such shares of
Junior Preferred Stock.
5. Subsidiaries Guaranteeing Debt and Segment Data. The Company is the 100%
-----------------------------------------------
owner of certain subsidiaries that do not guarantee the Company's senior
subordinated notes and certain bank debt. The following tables disclose required
consolidating financial information for guarantor, including the Company, and
non-guarantor subsidiaries (amounts in thousands):
12
HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES
GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
As of September 30, 2001
-----------------------------------------------------------
Guarantor Non-guarantor Adjustments Total
--------- ------------- ----------- --------
CURRENT ASSETS:
Cash............................................ $ 212 $ 2,373 $ -- $ 2,585
Accounts receivable............................. 39,886 5,420 (14,009) 31,297
Inventories..................................... 27,254 7,785 (1,729) 33,310
Other current assets............................ 4,842 78,269 (81,644) 1,467
-------- -------- --------- --------
Total current assets.......................... 72,194 93,847 (97,382) 68,659
-------- -------- --------- --------
PROPERTY, PLANT AND EQUIPMENT, NET................ 45,413 1,165 -- 46,578
OTHER ASSETS:
Intangible assets, net.......................... 26,615 35,287 -- 61,902
Deferred financing costs, net.................. 8,777 -- -- 8,777
Deferred tax asset.............................. 68,881 224 -- 69,105
Investment in non-guarantor subsidiaries........ 29,245 -- (29,245) --
Other........................................... 333 2,607 -- 2,940
-------- -------- --------- --------
Total other assets............................ 133,851 38,118 (29,245) 142,724
-------- -------- --------- --------
$251,458 $133,130 $(126,627) $257,961
======== ======== ========= ========
CURRENT LIABILITIES:
Notes payable to bank........................... $ 9,000 $ 3,747 $ -- $ 12,747
Accounts payable................................ 17,413 1,406 (7,738) 11,081
Accrued liabilities............................. 14,173 2,424 (27) 16,570
Notes payable to affiliate...................... -- 2,266 -- 2,266
Other current liabilities....................... 946 24,218 (22,933) 2,231
-------- -------- --------- --------
Total current liabilities..................... 41,532 34,061 (30,698) 44,895
-------- -------- --------- --------
OTHER LIABILITIES:
Note payable to affiliate....................... 14,951 -- -- 14,951
Notes payable to bank, net of current portion... 62,000 13,847 -- 75,847
Senior subordinated notes....................... 115,000 -- -- 115,000
Other non-current liabilities................... -- 1,007 -- 1,007
-------- -------- --------- --------
Total liabilities............................. 232,782 48,915 (30,698) 250,999
-------- -------- --------- --------
Mandatorily-redeemable preferred stock............ 43,609 -- -- 43,609
-------- -------- --------- --------
STOCKHOLDERS' EQUITY (DEFICIT).................... (25,634) 84,215 (95,929) (37,348)
-------- -------- --------- --------
$251,458 $133,130 $(126,627) $257,961
======== ======== ========= ========
13
HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES
GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2000
------------------------------------------------------------------
Guarantor Non-guarantor Adjustments Total
--------- ------------- ----------- --------
CURRENT ASSETS:
Cash............................................ $ 437 $ 3,093 $ -- $ 3,530
Accounts receivable............................. 32,665 4,395 (8,753) 28,307
Inventories..................................... 38,703 7,973 (2,066) 44,610
Other current assets............................ 6,350 52,467 (56,985) 1,832
-------- -------- -------- --------
Total current assets.......................... 78,155 67,928 (67,804) 78,279
-------- -------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, NET................ 48,260 1,165 -- 49,425
OTHER ASSETS:
Intangible assets, net.......................... 27,719 39,854 -- 67,573
Deferred financing costs, net.................. 9,587 -- -- 9,587
Deferred tax asset.............................. 68,881 224 -- 69,105
Investment in non-guarantor subsidiaries........ 29,245 -- (29,245) --
Other........................................... 294 971 -- 1,265
-------- -------- -------- --------
Total other assets............................ 135,726 41,049 (29,245) 147,530
-------- -------- -------- --------
$262,141 $110,142 $(97,049) $275,234
======== ======== ======== ========
CURRENT LIABILITIES:
Notes payable to bank........................... $ 7,500 $ 3,186 $ -- $ 10,686
Accounts payable................................ 24,758 4,711 (9,149) 20,320
Accrued liabilities............................. 9,420 3,287 -- 12,707
Notes payable to affiliate...................... 2,000 -- -- 2,000
Other current liabilities....................... 1,242 22,764 (20,999) 3,007
-------- -------- -------- --------
Total current liabilities..................... 44,920 33,948 (30,148) 48,720
-------- -------- -------- --------
OTHER LIABILITIES:
Note payable to affiliate....................... -- 8,266 -- 8,266
Notes payable to bank, net of current portion... 75,000 10,962 -- 85,962
Senior subordinated notes....................... 115,000 -- -- 115,000
Other non-current liabilities................... -- 1,095 (1,095) --
-------- -------- -------- --------
Total liabilities............................. 234,920 54,271 (31,243) 257,948
-------- -------- -------- --------
Preferred stock................................... 40,061 -- -- 40,061
-------- -------- -------- --------
STOCKHOLDERS' EQUITY (DEFICIT).................... (12,840) 55,871 (65,806) (22,775)
-------- -------- -------- --------
$262,141 $110,142 $(97,049) $275,234
======== ======== ======== ========
14
HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES
GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended September 30, 2001
------------------------------------------------------
Non-
Guarantor Guarantor Adjustments Total
--------- --------- ----------- -------
NET SALES............................................... $41,642 $8,412 $(4,959) $45,095
COST OF SALES........................................... 25,705 4,009 (5,408) 24,306
------- ------ ------- -------
Gross Profit.......................................... 15,937 4,403 449 20,789
------- ------ ------- -------
OPERATING EXPENSES:
Selling, distribution, general and administrative..... 9,825 2,293 -- 12,118
Goodwill amortization................................. 394 383 -- 777
Research and development.............................. 140 223 -- 363
------- ------ ------- -------
10,359 2,899 -- 13,258
------- ------ ------- -------
Income from operations................................ 5,578 1,504 449 7,531
------- ------ ------- -------
INTEREST AND OTHER EXPENSE............................ 4,971 (169) 378 5,180
------- ------ ------- -------
Income before provision for income taxes.............. 607 1,673 71 2,351
------- ------ ------- -------
PROVISION FOR INCOME TAXES.............................. -- 398 -- 398
------- ------ ------- -------
Net Income.............................................. $ 607 $1,275 $ 71 $ 1,953
======= ====== ======= =======
Three Months Ended September 30, 2000
------------------------------------------------------
Non-
Guarantor Guarantor Adjustments Total
--------- --------- ----------- -------
NET SALES............................................... $37,533 $7,584 $(4,006) $41,111
COST OF SALES........................................... 21,203 2,390 (4,006) 19,587
------- ------ ------- -------
Gross Profit.......................................... 16,330 5,194 -- 21,524
------- ------ ------- -------
OPERATING EXPENSES:
Selling, distribution, general and administrative..... 9,867 1,878 -- 11,745
Amortization of goodwill.............................. 279 488 -- 767
Research and development.............................. 217 316 -- 533
------- ------ ------- -------
10,363 2,682 -- 13,045
------- ------ ------- -------
Income from operations................................ 5,967 2,512 -- 8,479
------- ------ ------- -------
INTEREST AND OTHER EXPENSE............................ 4,804 1,008 -- 5,812
Income before provision for income taxes.............. 1,163 1,504 -- 2,667
------- ------ ------- -------
PROVISION FOR INCOME TAXES.............................. 453 552 -- 1,005
------- ------ ------- -------
Net Income.............................................. $ 710 $ 952 $ -- $ 1,662
======= ====== ======= =======
15
HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES
GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2001
------------------------------------------------------
Non-
Guarantor Guarantor Adjustments Total
--------- --------- ----------- --------
NET SALES............................................... $113,861 $21,420 $(11,580) $123,701
COST OF SALES........................................... 77,829 10,944 (11,476) 77,297
-------- ------- -------- --------
Gross Profit.......................................... 36,032 10,476 (104) 46,404
-------- ------- -------- --------
OPERATING EXPENSES:
Selling, distribution, general and administrative..... 32,444 6,930 -- 39,374
Amortization of goodwill.............................. 1,164 1,383 -- 2,547
Research and development.............................. 534 730 -- 1,264
-------- ------- -------- --------
34,142 9,043 -- 43,185
-------- ------- -------- --------
Income from operations................................ 1,890 1,433 (104) 3,219
-------- ------- -------- --------
INTEREST AND OTHER EXPENSE............................ 14,556 2,006 2,460 19,022
-------- ------- -------- --------
Loss before provision for income taxes................ (12,666) (573) (2,564) (15,803)
-------- ------- -------- --------
PROVISION FOR INCOME TAXES.............................. -- 926 -- 926
-------- ------- -------- --------
Net loss................................................ $(12,666) $(1,499) $ (2,564) $(16,729)
======== ======= ======== ========
Nine Months Ended September 30, 2000
------------------------------------------------------
Non-
Guarantor Guarantor Adjustments Total
--------- --------- ----------- --------
NET SALES............................................... $101,551 $21,256 $ (9,078) $113,729
COST OF SALES........................................... 57,166 8,627 (8,878) 56,915
-------- ------- -------- --------
Gross Profit.......................................... 44,385 12,629 (200) 56,814
-------- ------- -------- --------
OPERATING EXPENSES:
Selling, distribution, general and administrative..... 25,949 5,321 -- 31,270
Amortization of goodwill.............................. 877 1,510 -- 2,387
Research and development.............................. 729 1,053 -- 1,782
-------- ------- -------- --------
27,555 7,884 -- 35,439
-------- ------- -------- --------
Income from operations................................ 16,830 4,745 (200) 21,375
-------- ------- -------- --------
INTEREST AND OTHER EXPENSE............................ 13,954 2,325 -- 16,279
-------- ------- -------- --------
Income before provision for income taxes.............. 2,876 2,420 (200) 5,096
-------- ------- -------- --------
PROVISION FOR INCOME TAXES............................. 1,152 1,068 -- 2,220
-------- ------- -------- --------
Net Income.............................................. $ 1,724 $ 1,352 $ (200) $ 2,876
======== ======= ======== ========
16
HUDSON RESPIRATORY CARE INC. AND SUBSIDIARIES
GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 2001
----------------------------------------------------
Non-
Guarantor Guarantor Total
--------- --------- --------
Net cash used in operating activities.................... $ (337) $(4,404) $(4,741)
Net cash (used in) provided by investing activities...... (3,234) 2,835 (399)
Net cash provided by (used in) financing activities...... 3,346 (1,753) 1,593
Effect of exchange rate changes on cash.................. -- 2,602 2,602
------- ------- -------
NET DECREASE IN CASH..................................... (225) (720) (945)
CASH, beginning of period................................ 437 3,093 3,530
------- ------- -------
CASH, end of period...................................... $ 212 $ 2,373 $ 2,585
======= ======= =======
Nine Months Ended September 30, 2000
----------------------------------------------------
Non-
Guarantor Guarantor Total
--------- --------- --------
Net cash provided by operating activities................ $ 1,413 $ 7,005 $ 8,418
Net cash used in investing activities.................... (2,843) (2,865) (5,708)
Net cash provided by (used in) financing activities...... 1,400 (3,231) (1,831)
Effect of exchange rate changes on cash.................. (117) (1,875) (1,992)
------- ------- -------
NET DECREASE IN CASH..................................... (147) (966) (1,113)
CASH, beginning of period................................ 184 2,733 2,917
------- ------- -------
CASH, end of period...................................... $ 37 $ 1,767 $ 1,804
======= ======= =======
The Company operates in two segments: North American operations (guarantor)
and international operations (non-guarantor). The financial data of these two
segments closely approximates the guarantor/non-guarantor information set forth
above and, accordingly, separate segment data is not provided.
17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
As River Holding Corp. ("Holding") is a holding company with no operations,
the following discussion relates to Hudson Respiratory Care Inc. (the "Company"
or "Hudson RCI"). The following discussion or the Company's consolidated
historical results of operations and financial condition should be read in
conjunction with the consolidated financial statements of the Company and the
notes thereto included elsewhere in this Form 10-Q.
Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain "forward-looking statements" as defined
in the Private Securities Litigation Reform Act of 1995. Such statements
relating to future events and financial performance are forward-looking
statements involving risks and uncertainties that are detailed from time to time
in the Company's Securities and Exchange Commission filings.
General
The Company has increased its net sales and improved its position within
the disposable health care products market in recent years by increasing its
respiratory care product offering, introducing disposable products for the
anesthesia health care market, expanding its presence in international markets
and establishing a position in the growing alternate site market.
The Company's results of operations may fluctuate significantly from
quarter to quarter as a result of a number of factors, including, among others,
the buying patterns of the Company's distributors, group purchasing
organizations ("GPOs") and other purchasers of the Company's products, forecasts
regarding the severity of the annual cold and flu season, announcements of new
product introductions by the Company or its competitors, changes in the
Company's pricing of its products and the prices offered by the Company's
competitors, rate of overhead absorption due to variability in production levels
and variability in the number of shipping days in a given quarter.
Recent Developments
Beginning in April 2000, the Company experienced disruption to its
operations resulting from difficulties in the implementation of a new management
information system. Consequently, the Company's financial results for the
quarter ended September 30, 2001 reflect increased freight, distribution, and
general and administrative expenses related to the system implementation. The
Company also experienced liquidity pressures beginning in the fourth quarter of
2000 due to such expense increases, delays in the collection of due receivables
and unplanned increases in inventory related to difficulties in implementation
and a lack of familiarity with the new management information system. Management
has implemented a series of initiatives in 2001 designed to improve the
Company's proficiency with the new management information system, decrease the
Company's operating expenses, improve receivables collections and reduce
inventory levels. Despite the disruption related to the system implementation,
management believes it has generally maintained strong customer service levels
and relationships.
The Company was not in compliance with certain restrictive covenants of the
Credit Facility as of June 30, 2001. Subsequently, the Company amended its
Credit Facility covenants so that under the amended terms, all non-compliance
was cured. As part of the amendment, (1) the Company's shareholders invested an
additional $18.1 million, consisting of approximately $10.1 million of new cash
investment and $8.0 million of exchanged indebtedness, and (2) interest rate
margins were increased.
18
Results of Operations
The following tables set forth, for the periods indicated, certain income
and expense items expressed in dollars and as a percentage of the Company's net
sales.
Three Month Period Ended Nine Month Period Ended
(unaudited) (unaudited)
-------------------------- -------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2000 2001 2000 2001
--------- --------- --------- ---------
(in thousands) (in thousands)
Net sales........................................... $41,111 $45,095 $113,729 $123,701
Cost of sales....................................... 19,587 24,306 56,915 77,297
------- ------- -------- --------
Gross profit...................................... 21,524 20,789 56,814 46,404
------- ------- -------- --------
Selling expenses.................................... 4,098 4,626 11,813 15,197
Distribution expenses............................... 3,102 2,661 6,565 7,658
General and administrative expenses................. 4,545 4,831 12,892 16,519
Amortization of goodwill............................ 767 777 2,387 2,547
Research and development expenses................... 533 363 1,782 1,264
------- ------- -------- --------
Total operating expenses............................ 13,045 13,258 35,439 43,185
------- ------- -------- --------
Operating income.................................... $ 8,479 $ 7,531 $ 21,375 $ 3,219
======= ======= ======== ========
Three Month Period Ended Nine Month Period Ended
(unaudited) (unaudited)
-------------------------- -------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2000 2001 2000 2001
--------- --------- --------- ---------
(in thousands) (in thousands)
Net sales........................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales....................................... 47.6 53.9 50.0 62.5
----- ----- ----- -----
Gross profit...................................... 52.4 46.1 50.0 37.5
----- ----- ----- -----
Selling expenses.................................... 10.0 10.3 10.4 12.3
Distribution expenses............................... 7.5 5.9 5.8 6.2
General and administrative expenses................. 11.1 10.7 11.3 13.4
Amortization of goodwill............................ 1.9 1.7 2.1 2.1
Research and development expenses................... 1.3 .8 1.6 1.0
----- ----- ----- -----
Total operating expenses............................ 31.7 29.4 31.2 34.9
----- ----- ----- -----
Operating income.................................... 20.6% 16.7% 18.8% 2.6%
===== ===== ===== =====
Three Months Ended September 30, 2001 Compared to Three Months Ended
September 30, 2000
Net sales, reported net of accrued rebates, were $45.1 million in the third
quarter of 2001 as compared to $41.1 million in the third quarter of 2000, an
increase of $4.0 million or 9.7%. Domestic hospital sales increased by $3.9
million or 16.6% principally the result of sales in the third quarter of 2001 of
the SHERIDAN/(R)/ product line, acquired in the fourth quarter of 2000.
Alternate site sales increased by $0.5 million or 8.6%. International sales
decreased approximately $0.1 million in the third quarter of 2001 as compared to
the third quarter of 2000. OEM sales decreased by $0.3 million due to changes in
purchasing patterns from some of its OEM customers.
The Company's gross profit for the third quarter of 2001 was $20.8 million,
a decrease of $0.7 million or 3.4% from the third quarter of 2000. As a
percentage of sales, gross profit was 46.1% and 52.4% for the third quarter of
2001 and 2000, respectively. This decrease was primarily due to the sale of
inventory revalued as a result of the Tyco SHERIDAN/(R) /acquisition, increased
shipping costs as a result of shipping difficulties caused by problems
associated with the new management information system and an unfavorable mix
variance caused by higher sales of products with lower gross margins.
Selling expenses were $4.6 million for the third quarter of 2001, a $0.5
million increase over the third quarter of 2000. This increase was due
primarily to increases in staffing levels required to support additional product
lines and costs
19
associated with the France and U.K. sales offices established in fiscal 2000. As
a percentage of net sales, selling expenses were 10.3% in the third quarter of
2001 as compared to 10.0% in the third quarter of 2000.
Distribution expenses were $2.7 million for the third quarter of 2001, a
decrease of $0.4 million or 14.2% from the third quarter of 2000. As a
percentage of sales, distribution expenses decreased to 5.9% in the third
quarter of 2001 as compared to 7.5% in the third quarter of 2000. The decrease
is primarily the result of the increased costs in the third quarter of 2000
related to difficulties with the implementation and lack of experience with the
new management information system. This decrease was partially offset by costs
associated with the closure of the Atlanta distribution facility in 2001.
General and administrative expenses were $4.8 million in the third quarter
of 2001, an increase of $0.3 million or 6.3% over the third quarter of 2000.
This increase resulted primarily from increased staffing levels required to
maintain acceptable customer service levels and operate the business with the
new management information system. As a percentage of net sales, general and
administrative expenses were 10.7% in the third quarter of 2001 as compared to
11.1% in the third quarter of 2000.
Research and development expenses were $0.4 million for the third quarter
of 2001, a decrease of $0.2 million from the third quarter of 2000.
Amortization of goodwill was $0.8 million in the third quarter of 2001,
unchanged from the third quarter of 2000.
Interest expense and other was $5.2 million for the third quarter of 2001,
as compared to $5.8 million in the third quarter of 2000. The decease was due
to lower debt levels as a result of principal repayments and lower interest
rates.
Nine Months Ended September 30, 2001 Compared to Nine Months Ended
September 30, 2000
Net sales, reported net of accrued rebates, were $123.7 million in the
first nine months of 2001 as compared to $113.7 million in the first nine months
of 2000, representing an increase of $10.0 million or 8.8%. Domestic hospital
sales increased by $8.0 million or 11.3% from the first nine months of 2001 as
compared to the first nine months of 2000. This increase was primarily driven by
shipping difficulties in the second quarter of 2000, and sales in 2001 of the
SHERIDAN/(R)/ product line (acquired in the fourth quarter of 2000), offset by a
weak influenza season in early 2001. Alternate site sales increased by $1.7
million or 10.1%, the result of shipping difficulties in the second quarter of
2000 relating to the implementation of the management information system.
International sales increased by $0.5 million or 2.1%, the result of 2001 sales
of SHERIDAN/(R)/ products as well as the shipping difficulties seen in the
second quarter of 2000. OEM sales decreased by $0.2 million in the first nine
months of 2001.
The Company's gross profit for the first nine months of 2001 was $46.4
million, a decrease of $10.4 million or 18.3% from the first nine months of
2000. As a percentage of sales, the gross profit was 37.5% and 50.0% for the
first nine months of 2001 and 2000, respectively. This decrease was primarily
due to the sale of inventory revalued as a result of the Tyco SHERIDAN/(R)
/acquisition, increased shipping costs as a result of shipping difficulties
caused by problems associated with the new management information system,
underabsorption of manufacturing overhead as a result of an aggressive plan to
reduce inventories by slowing production in early 2001, and an unfavorable mix
variance caused by higher sales of products with lower gross margins.
Selling expenses were $15.1 million for the first nine months of 2001, a
$3.4 million increase over the first nine months of 2000. This increase was due
primarily to increases in staffing levels required to support additional product
lines and costs associated with the France and U.K. sales offices established in
fiscal 2000. As a percentage of net sales, selling expenses were 12.3% in the
first nine months of 2001 as compared to 10.4% in the first nine months of 2000.
Distribution expenses were $7.7 million for the first nine months of 2001,
an increase of $1.1 million or 16.6% over the first nine months of 2000. As a
percentage of sales, distribution expenses increased to 6.2% in the first nine
months of 2001 as compared to 5.8% in the first nine months of 2000. The
increase is primarily the result of the increased cost of freight between the
Company's distribution facilities, increased headcount to operate the new
management information system and additional expenses related to the
establishment of an expanded Temecula distribution facility.
General and administrative expenses were $16.5 million in the first nine
months of 2001, an increase of $3.6 million or 28.1% over the first nine months
of 2000. This increase resulted primarily from increased staffing levels
required to maintain acceptable customer service levels and operate the business
with the new management information system. As
20
a percentage of net sales, general and administrative expenses were 13.4% in the
first nine months of 2001 as compared to 11.3% in the first nine months of 2000.
Research and development expenses were $1.3 million for the first nine
months of 2001, a decrease of $0.5 million from the first nine months 2000. The
decrease is the result of lower staffing levels during 2001.
Amortization of goodwill was $2.5 million in the first nine months of 2001,
relatively unchanged from the first nine months of 2000.
Interest expense and other was $18.9 million for the first nine months of
2001, as compared to $16.3 million in the first nine months of 2000. The
increase was due to higher debt levels as a result of the Tyco SHERIDAN/(R)
/acquisition and increased borrowings for working capital. This is somewhat
offset by lower interest rates in 2001.
Liquidity and Capital Resources
The Company's primary sources of liquidity are cash flow from operations,
borrowings under its working capital bank facility and historically, investments
from shareholders. Cash provided by (used in) operations totaled $8.4 million
and $(4.7) million in the first nine months of 2000 and 2001, respectively. The
decrease from 2000 to 2001 is primarily attributable to decreased operating
income, increased interest expense due to higher debt levels and a decline in
accounts payable. For the nine months ended September 30, 2001, the Company
reduced trade payables by approximately $9.2 million. This was partially offset
by a $11.3 million reduction in inventories. The Company had operating working
capital, excluding cash and short-term debt, of $38.7 million and $36.2 million
as of December 31, 2000 and September 30, 2001, respectively. Inventories were
$44.6 million and $33.3 million as of December 31, 2000 and September 30, 2001,
respectively. In order to meet the needs of its customers, the Company must
maintain inventories sufficient to permit same-day or next-day filling of most
orders. Such inventories are higher than those that would be required for
delayed filling of orders, thus adversely impacting liquidity. Over time, the
Company expects its level of inventories to increase as the Company's sales in
the international market increase. Accounts receivable, net of allowances, were
$28.3 million and $31.3 million at December 31, 2000 and September 30, 2001,
respectively. The Company typically offers 30 day credit terms to its U.S.
hospital distributors. Alternate site and international customers typically
receive 60 to 90 day terms and, as a result, as the Company's alternate site and
international sales have increased, the amount and aging of its accounts
receivable have increased. The Company anticipates that the amount and aging of
its accounts receivable will continue to increase as the alternate site and
international markets become a larger percentage of the Company's overall sales.
During the nine months ended September 30, 2001, net cash used in investing
activities was $0.4 million, reflecting purchases of manufacturing equipment and
new heater placements, offset by the impact of exchange losses from foreign
affiliates on certain assets. The Company currently estimates that capital
expenditures will be approximately $8.0 million in each of 2001 and 2002,
consisting primarily of additional and replacement manufacturing equipment and
new heater placements.
During the nine months ended September 30, 2001, net cash provided by
financing was $1.6 million, reflecting principally additions of notes payable to
affiliates and issuance of Junior Preferred Stock. This was somewhat offset by
repayment of certain notes payable to affiliates and repayment of borrowings
under the bank facility.
On March 21, 2001, the Company replaced its existing lending agreement
denominated in Swedish krona with a new loan that allows for borrowings up to
$19.1 million. The principal is amortized over 18 equal quarterly payments
commencing June 30, 2001. Interest is based on the STIBOR rate + 0% to 1.65%,
based on the outstanding balance of the loan. The loan is secured by Hudson
Euro SarL, a wholly-owned subsidiary of the company and 100% owner of Hudson RCI
AB, Hudson RCI UK Ltd. and Hudson France S.A.S.
As of September 30, 2001, The Company had outstanding $220.8 million of
indebtedness, consisting of $115.0 million of Subordinated Notes, borrowings of
$71.0 million under the Company's Credit Facility, $17.2 million in notes
payable to affiliates and $17.6 million in outstanding borrowings under the bank
facility of Hudson RCI AB.
The Credit Facility currently consists of a $40.0 million Term Loan
Facility and a $55.0 million Revolving Loan Facility of which up to $40.0
million (all of which has been borrowed and is outstanding) may be used for
permitted acquisitions and up to $15 million (the "Working Capital Portion") may
be used for general corporate purposes (other than acquisitions). The Revolving
Loan Facility has a letter of credit sublimit of $7.5 million. As of September
30, 2001 the
21
Company had $8.0 million available under the Working Capital Portion of the
Revolving Loan Facility. The Term Loan Facility matures on June 30, 2003 and,
commencing June 30, 1999, requires quarterly principal installments totaling
$3.0 million in 1999, $5.5 million in 2000, $7.5 million in 2001, $9.5 million
in 2002 and $14.5 million in 2003. The Revolving Loan Facility matures on June
30, 2003. The interest rate under the Credit Facility is based, at the option of
the Company, upon either a Eurodollar rate or a base rate (as defined) plus a
margin during the period and for the applicable type of loan as follows:
Margin
-----------------------------
Period and Loan Type Base Rate Eurodollar
--------------------- ------------- --------------
Through June, 2002
Term and Working Capital................ 3.00% 4.00%
Acquisition............................. 3.25% 4.25%
July, 2002 through March, 2003
Term and Working Capital................ 3.50% 4.50%
Acquisition............................. 3.75% 4.75%
Thereafter
Term and Working Capital................ 4.00% 5.00%
Acquisition............................. 4.25% 5.25%
For periods after June, 2002, the margins set forth above are subject to
pricing reductions depending on the Company's then existing leverage ratio.
Borrowings under the Credit Facility are required to be prepaid, subject to
certain exceptions, with (i) 75% (or 50% for years when the Company's ratio of
Debt to EBITDA (as defined) is less than 5:1) of Excess Cash Flow (as defined),
(ii) 50% of the net cash proceeds of an equity issuance by Holding or the
Company in connection with an initial public offering or 100% of the net cash
proceeds of an equity issuance by Holding or the Company other than in
connection with an initial public offering (subject in each case to certain
exceptions), (iii) 100% of the net cash proceeds of the sale or other
disposition of any properties or assets of Holding and its subsidiaries (subject
to certain exceptions), (iv) 100% of the net proceeds of certain issuances of
debt obligations of the Company and its subsidiaries and (v) 100% of the net
proceeds from insurance recoveries and condemnations. The Revolving Loan
Facility must be repaid upon payment in full of the Term Loan Facility.
The Credit Facility is guaranteed by Holding and certain of the Company's
subsidiaries. The Credit Facility is secured by a first priority lien in
substantially all of the properties and assets of the Company and the guarantors
now owned or acquired later, including a pledge of all of the capital stock of
the Company owned by Holding and all of the shares held by the Company of its
existing and future subsidiaries; provided, that such pledge is limited to 65%
of the shares of any foreign subsidiary to the extent a pledge of a greater
percentage would result in adverse tax consequences to the Company.
The Credit Facility contains covenants restricting the ability of Holding,
the Company and the Company's subsidiaries to, among others, (i) incur
additional debt, (ii) declare dividends or redeem or repurchase capital stock,
(iii) prepay, redeem or purchase debt, (iv) incur liens, (v) make loans and
investments, (vi) make capital expenditures, (vii) engage in mergers,
acquisitions and asset sales, and (viii) engage in transactions with affiliates.
Hudson RCI is also required to comply with financial covenants with respect to
(a) limits on annual aggregate capital expenditures (as defined), (b) a fixed
charge coverage ratio, (c) a maximum leverage ratio, (d) a minimum EBITDA test
and (e) an interest coverage ratio. As of September 30, 2001 the Company was in
compliance with the financial covenants set forth the Credit Facility.
The Subordinated Notes bear interest at the rate of 9-1/8%, payable
semiannually on each April 15 and October 15, and will require no principal
repayments until maturity. The Subordinated Notes are general unsecured
obligations of the Company. The Subordinated Notes contain covenants that place
limitations on, among other things, (i) the ability of the Company, any
subsidiary guarantors and other restricted subsidiaries to incur additional
debt, (ii) the making of certain restricted payments including investments,
(iii) the creation of certain liens, (iv) the issuance and sale of capital stock
of restricted subsidiaries, (v) asset sales, (vi) payment restrictions affecting
restricted subsidiaries, (vii) transactions with
22
affiliates and (viii) the ability of the Company and any subsidiary guarantor to
incur layered debt, (ix) the ability of Holding to engage in any business or
activity other than those relating to ownership of capital stock of the Company
and (x) certain mergers, consolidations and transfers of assets by or involving
the Company.
As of September 30, 2001, the Company had $17.2 million outstanding
pursuant to unsecured promissory notes payable to affiliates of Freeman Spogli,
the Company's majority shareholder. The notes bear interest at 12.0% per annum
to 14.0% per annum and mature in August 2006. Of these notes, $2.0 million
require semiannual interest payments.
The Company, through Hudson RCI AB, has incurred bank debt in Sweden (the
"HRCI AB Facility") that totaled $17.6 million as of September 30, 2001. The
HRCI AB Facility, which is denominated in Swedish krona, bears interest at
three-month STIBOR plus 0.75% to 1.75% (4.645% to 5.645% at September 30, 2001),
matures in December 2003, and is guaranteed by Steamer Holding AB, Hudson RCI
AB's parent, and is secured by the common stock of Hudson RCI AB.
The Company has issued to Holding 300,000 shares of its 11-1/2% Senior
Exchangeable PIK Preferred Stock due 2010 with an initial aggregate liquidation
preference of $30.0 million, which has terms and provisions materially similar
to those of the 11 1/2% Senior Exchangeable PIK Preferred Stock due 2010 issued
by Holding. At the election of the Company, dividends may be paid in kind until
April 15, 2003 and thereafter must be paid in cash.
As the result of a number of factors affecting the Company in fiscal 2000,
management has taken numerous actions during 2001 including elimination of a
distribution warehouse, elimination of non-essential management personnel,
reduction in inventory levels, aggressive collection efforts of accounts
receivable and other cost reduction measures as management deemed necessary to
fund the operations of the Company, meet anticipated capital expenditures and
make required payments of principal and interest on its debt, including payments
due on the Subordinated Notes and obligations under the Credit Facility.
Management does not believe the restructuring charges referred to above will be
material to the Company. In addition, existing shareholders and key management
personnel contributed approximately $15.1 million in the form of convertible
subordinated debt and equity in April, May and August of 2001 and contributed an
additional $3.0 million in redeemable preferred stock of Holding (which Holding
invested in preferred stock of the Company) in August of 2001, in order to
improve the Company's liquidity position. Based on these actions, as well as
anticipated improved operating performance, management believes it will have
sufficient sources of liquidity to meet its obligations for a period of at least
18 months.
23
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS
133") as amended by SFAS No. 137 and SFAS No. 138, effective for fiscal years
beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments. The statement requires that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value, and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. The impact of adoption was not material to the financial
statements.
In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combinations" ("SFAS 141"). This Statement addresses
financial accounting and reporting for business combinations and supersedes APB
Opinion No. 16, "Business Combinations," and FASB Statement No. 38, "Accounting
for Preacquisition Contingencies of Purchased Enterprises." All business
combinations in the scope of this Statement are to be accounted for using one
method, the purchase method. The Company adopted SFAS 141 for all business
combinations initiated after June 30, 2001.
Also in June 2001, the FASB issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS
142 addresses financial accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." This
pronouncement addresses, among other things, how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
financial statements. Goodwill would no longer be amortized but would be
assessed at least annually for impairment using a fair value methodology. The
Company has adopted this statement for all goodwill and other intangible assets
acquired after June 30, 2001 and will adopt this statement for all existing
goodwill and other intangible assets beginning January 1, 2002. Upon adoption
of this standard on January 1, 2002, the Company will cease recording
amortization of goodwill which would increase income before taxes in 2002 by
approximately $3.3 million (assuming current goodwill amounts and currency
exchange rates). Other than ceasing the amortization of goodwill, the Company
does not anticipate that the adoption of SFAS 142 will have a significant effect
on the Company's financial position or the results of the Company's operations
as the Company does not currently anticipate any impairment charges for existing
goodwill.
Also in June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). SFAS 143 addresses financial accounting
and reporting obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. SFAS 143 requires
that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated retirement costs are capitalized as part
of the carrying amount of the long-lived asset. SFAS 143 is effective for
financial statements issued for fiscal years beginning after June 15, 2002 (with
earlier application being encouraged). The Company does not expect the adoption
of SFAS 143 to have a material impact on the Company's financial condition and
results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." ("SFAS 144") SFAS 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS 144 supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business (as previously
defined in that Opinion). The provisions of SFAS 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001, with early
application encouraged and generally are to be applied prospectively. The
Company does not expect the adoption of SFAS 144 to have a material impact on
The Company's financial condition and results of operations.
24
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
There have been no material changes in Holding's market risk exposure from
that reported in Holding's 10-K for the fiscal year ended December 31, 2000.
25
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
On August 15, 2001, Holding issued 3,000 shares of 12% Junior Convertible
Cumulative Preferred Stock (the "Junior Preferred Stock") to existing
shareholders for total cash consideration to Holding of $3,000,000. Each share
of the Junior Preferred Stock may be redeemed from time to time, in whole or in
part, at the option of Holding at the redemption price of 100% of the
Liquidation Preference of the Junior Preferred Stock or $1,000 per share plus
accumulated and unpaid dividends that would be payable on such shares of Junior
Preferred Stock.
The sale and issuance of the Junior Preferred Stock was exempt from
registration under Rule 506 of Regulation D of the Securities Act of 1933, as
amended, as a sale of securities to no more than thirty-five purchasers, each of
whom was an "Accredited Investor", as that term is defined in Rule 501 of
Regulation D.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.3 (1) Form of Senior Subordinated Convertible Promissory Note Due
2005.
4.4 (1) Certificate of Determination of Preferences of 12% Junior
Convertible Cumulative Preferred Stock of the Company.
10.19 (1) Subordination Agreement dated as of April 17, 2001 among
the Company, FS Equity partners IV, L.P., Bankers Trust
Company and the Subordinated Creditors party thereto.
10.20 (1) Amendment No. 5 to and Limited Waiver of Certain Provisions
of the Credit Agreement dated as of July 30, 2001 among the
Company, Holding and the lenders party thereto.
(b) Reports on Form 8-K
None.
---------------------
(1) Incorporated by reference to the exhibit designated by the
same number in the form 10-Q/A filed by the Company for the
quarter ended June 30, 2001 (File No.: 333-56097).
26
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
RIVER HOLDING CORP.,
a Delaware corporation
November 14, 2001 By: /s/ Patrick G. Yount
----------------------------------------------------
Patrick G. Yount
Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
27