SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
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 333-23451
REV HOLDINGS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3933701
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
35 EAST 62nd STREET, NEW YORK, NEW YORK 10021
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-572-8600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
The number of shares outstanding of the registrant's common stock was 1,000
shares as of September 30, 2001, all of which were held by an affiliate of
Mafco Holdings Inc.
Total Pages - 24
REV HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, DECEMBER 31,
ASSETS 2001 2000
-------------- -------------
(Unaudited)
Current assets:
Cash and cash equivalents .......................... $ 37.2 $ 56.3
Trade receivables, less allowances of $14.9
and $16.1, respectively ...................... 203.5 220.5
Inventories ........................................ 186.3 184.8
Prepaid expenses and other ......................... 41.7 66.1
-------------- -------------
Total current assets ......................... 468.7 527.7
Property, plant and equipment, net ....................... 151.2 221.7
Other assets ............................................. 145.9 147.2
Intangible assets, net ................................... 200.4 206.1
-------------- -------------
Total assets ................................. $ 966.2 $ 1,102.7
============== =============
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
Current liabilities:
Short-term borrowings - third parties .............. $ 30.3 $ 30.7
Current portion of long-term debt - third parties .. 373.4 753.6
Accounts payable ................................... 99.6 86.3
Accrued expenses and other ......................... 279.3 310.7
-------------- -------------
Total current liabilities .................... 782.6 1,181.3
Long-term debt - third parties ........................... 1,230.0 1,539.0
Long-term debt - affiliates .............................. 24.1 24.1
Other long-term liabilities .............................. 226.2 222.2
Stockholder's deficiency:
Common Stock, par value $1.00 per share; 1,000
shares authorized, issued and outstanding .... -- --
Additional paid-in-capital (capital deficiency) .... 306.7 (391.8)
Accumulated deficit since June 24, 1992 ............ (1,590.8) (1,442.3)
Accumulated other comprehensive loss ............... (12.6) (29.8)
-------------- -------------
Total stockholder's deficiency .................. (1,296.7) (1,863.9)
-------------- -------------
Total liabilities and stockholder's deficiency .. $ 966.2 $ 1,102.7
=============== =============
See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.
2
REV HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(dollars in millions)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
2001 2000 2001 2000
------ ------ ------ ------
Net sales ......................................... $ 327.2 $ 344.8 $ 989.0 $ 1,134.2
Cost of sales ..................................... 129.8 128.0 404.4 433.2
------- ------- ------- --------
Gross profit ................................. 197.4 216.8 584.6 701.0
Selling, general and administrative expenses ...... 169.9 193.0 555.4 634.1
Restructuring costs ............................... 3.0 13.7 25.5 28.3
------- ------- ------- --------
Operating income ............................. 24.5 10.1 3.7 38.6
------- ------- ------- --------
Other expenses (income):
Interest expense ............................. 36.5 54.4 126.5 164.2
Interest income .............................. (0.5) (0.6) (2.0) (1.4)
Amortization of debt issuance costs .......... 1.6 1.9 5.5 7.2
Foreign currency losses (gains), net ......... 2.7 (1.1) 2.5 1.0
Loss (gain) on sale of product line, brand
and facilities, net ........................ 7.9 -- 15.0 (3.0)
Gain on sale of subsidiary stock ............. -- -- -- (1.1)
Miscellaneous, net ........................... 0.6 (0.9) 1.4 --
------- ------- ------ --------
Other expenses, net ..................... 48.8 53.7 148.9 166.9
------- ------- ------ --------
Loss before income taxes .......................... (24.3) (43.6) (145.2) (128.3)
Provision for income taxes ........................ 1.5 2.2 3.3 7.0
------- -------- ------ --------
Net loss .......................................... $ (25.8) $ (45.8) $(148.5) $ (135.3)
======= ======= ====== ========
See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.
3
REV HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDER'S DEFICIENCY
AND COMPREHENSIVE LOSS
(DOLLARS IN MILLIONS)
ADDITIONAL ACCUMULATED
PAID-IN-CAPITAL OTHER TOTAL
(CAPITAL ACCUMULATED COMPREHENSIVE STOCKHOLDER'S
DEFICIENCY) DEFICIT LOSS (a) DEFICIENCY
--------------- ------------ --------------- -------------
Balance, January 1, 2000 ............................. $ (390.3) $ (1,232.5) $ (68.1) $ (1,690.9)
Net distribution from affiliate ................. (0.9)(c) (0.9)
Comprehensive loss:
Net loss ................................ (135.3) (135.3)
Currency translation adjustment ......... 33.3 (b) 33.3
--------------
Total comprehensive loss ........................ (102.0)
---------------- ------------ --------------- --------------
Balance, September 30, 2000 .......................... $ (391.2) $ (1,367.8) $ (34.8) $ (1,793.8)
================ ============ =============== ==============
Balance, January 1, 2001 ............................. $ (391.8) $ (1,442.3) $ (29.8) $ (1,863.9)
Capital contribution from indirect parent ....... 699.5 (d) 699.5
Net distribution from affiliate ................. (1.0)(c) (1.0)
Comprehensive loss:
Net loss ................................ (148.5) (148.5)
Currency translation adjustment ......... 16.8 (b) 16.8
Revaluation of forward currency contracts 0.4 0.4
--------------
Total comprehensive loss ........................ (131.3)
---------------- ------------ --------------- --------------
Balance, September 30, 2001 .......................... $ 306.7 $ (1,590.8) $ (12.6) $ (1,296.7)
================ ============ =============== ==============
- --------------------
(a) Accumulated other comprehensive loss includes unrealized gains on
revaluations of forward currency contracts of $0.4 as of September 30,
2001, unrealized losses on marketable securities of $3.8 as of September
30, 2000, cumulative net translation losses of $9.4 and $26.1 as of
September 30, 2001 and 2000, respectively, and adjustments for the
minimum pension liability of $3.6 and $4.9 as of September 30, 2001 and
2000, respectively.
(b) The currency translation adjustment as of September 30, 2001 and
September 30, 2000 includes a reclassification adjustment of $7.1 and
$48.3, respectively, for realized losses on foreign currency adjustments
associated primarily with the sale of the Colorama brand in Brazil and
the Company's worldwide professional products line.
(c) Represents net distributions in capital from the Charles of the Ritz
business (See Note 6).
(d) Represents primarily capital contributions from indirect parent to cancel
REV Holdings Senior Secured Discount Notes due 2001 (the "Old REV
Holdings Notes").
See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.
4
REV HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
2001 2000
------- ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................... $ (148.5) $ (135.3)
Adjustments to reconcile net loss to net cash
(used for) provided by operating activities:
Depreciation and amortization ......................................... 87.8 92.4
Amortization of debt discount ......................................... 15.7 55.3
Loss (gain) on sale of product line, brand and facilities, net ........ 15.0 (3.0)
Gain on sale of subsidiary stock ...................................... -- (1.1)
Change in assets and liabilities, net of acquisitions and dispositions:
Decrease in trade receivables .................................... 7.1 25.6
(Increase) decrease in inventories ............................... (15.0) 15.7
(Increase) decrease in prepaid expenses and
other current assets ................................ (6.2) 9.7
Increase (decrease) in accounts payable .......................... 14.9 (22.3)
Decrease in accrued expenses and other
current liabilities ................................. (31.4) (121.7)
Purchase of permanent displays ................................... (35.6) (40.3)
Other, net ....................................................... 1.7 (6.7)
-------- --------
Net cash used for operating activities ..................................... (94.5) (131.7)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ....................................................... (10.4) (11.4)
Acquisition of technology rights ........................................... -- (3.0)
Net proceeds from the sale of product line, brand and facilities ........... 97.5 339.5
-------- --------
Net cash provided by investing activities .................................. 87.1 325.1
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings - third parties ........... 0.5 (7.1)
Proceeds from the issuance of long-term debt - third parties ............... 196.1 289.6
Repayment of long-term debt - third parties ................................ (230.8) (475.7)
Capital contribution from indirect parent .................................. 22.0 --
Advances under the Keepwell Agreement ...................................... 4.5 --
Payment of debt issuance costs ............................................. (2.4) --
-------- --------
Net cash used for financing activities ..................................... (10.1) (193.2)
-------- --------
Effect of exchange rate changes on cash and cash equivalents ............... (1.6) (1.6)
-------- --------
Net decrease in cash and cash equivalents ............................. (19.1) (1.4)
Cash and cash equivalents at beginning of period ...................... 56.3 25.4
-------- --------
Cash and cash equivalents at end of period ............................ $ 37.2 $ 24.0
======== ========
Supplemental schedule of cash flow information:
Cash paid (received) during the period for:
Interest ......................................................... $ 113.4 $ 121.3
Income taxes, net of refunds ..................................... 2.4 3.1
Supplemental schedule of noncash financing activities:
Noncash capital contributions from indirect parent to cancel the
Old REV Holdings Notes and pursuant to the amended tax sharing $ 677.5 $ --
agreement ....................................................
See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.
5
REV HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
(1) BASIS OF PRESENTATION
REV Holdings Inc. (together with its subsidiaries, "REV Holdings" or the
"Company") is a holding company, formed in 1997, that conducts its business
exclusively through its indirect subsidiary, Revlon Consumer Products
Corporation and its subsidiaries (together, "Products Corporation"). Products
Corporation was formed in April 1992 and, on June 24, 1992, succeeded to the
assets and liabilities of the cosmetic and skin care, fragrances and personal
care products business of its then parent company, whose name was changed from
Revlon, Inc. to Revlon Holdings Inc. ("Holdings"). REV Holdings has had no
business operations of its own and its only material asset is its ownership of
approximately 83% of the outstanding shares of capital stock of Revlon, Inc.
(which represents approximately 97.3% of the voting power of those outstanding
shares), which, in turn, owns all of the capital stock of Products
Corporation. The Company is an indirect wholly owned subsidiary of Holdings
and an indirect wholly owned subsidiary of MacAndrews & Forbes Holdings Inc.
("MacAndrews Holdings"), a corporation wholly owned indirectly through Mafco
Holdings Inc. ("Mafco Holdings" and, together with MacAndrews Holdings,
"MacAndrews & Forbes") by Ronald O. Perelman.
The accompanying Consolidated Condensed Financial Statements are
unaudited. In management's opinion, all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation have been made.
The Unaudited Consolidated Condensed Financial Statements include the
accounts of the Company after elimination of all material intercompany
balances and transactions. The Company has made a number of estimates and
assumptions relating to the assets and liabilities, the disclosure of
contingent assets and liabilities and the reporting of revenues and expenses
to prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates. The
Unaudited Consolidated Condensed Financial Statements should be read in
conjunction with the consolidated financial statements and related notes
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000.
The results of operations and financial position, including working
capital, for interim periods are not necessarily indicative of those to be
expected for a full year.
Prior to January 1, 2001, advertising and promotion expenses estimated
for a full year were charged to earnings for interim reporting purposes in
proportion to the relationship that net sales for such period bore to
estimated full year net sales. As a result, for the nine months ended
September 30, 2000, disbursements and commitments for advertising and
promotion exceeded advertising and promotion expenses by $23.1 and such amount
was deferred. Effective January 1, 2001, the Company recognizes advertising
and promotional expenses during the quarter in which they are incurred.
In May 2000, the FASB Emerging Issues Task Force (the "EITF") reached a
consensus EITF 00-14 entitled, "Accounting for Certain Sales Incentives" (the
"Guidelines"), which addresses when sales incentives and discounts should be
recognized, as well as where the related revenues and expenses should be
classified in the financial statements. The Company has adopted these new
Guidelines effective January 1, 2001, and accordingly the accompanying
Unaudited Consolidated Condensed Financial Statements reflect the
implementation of the EITF Guidelines for all periods presented.
On January 1, 2001, the Company adopted SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended. The standard
requires the recognition of all derivative instruments on the balance sheet as
either assets or liabilities measured at fair value. Changes in fair value are
recognized immediately in earnings unless the derivatives qualify as hedges of
future cash flows. For derivatives qualifying as hedges of future cash flows,
the effective portion of changes in fair value is recorded as a
6
REV HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
component of Other Comprehensive Income and recognized in earnings when the
hedged transaction is recognized in earnings. Any ineffective portion
(representing the extent that the change in fair value of the hedges does not
completely offset the change in the anticipated net payments being hedged) is
recognized in earnings as it occurs. There was no cumulative effect recognized
for adopting this accounting change.
The Company formally designates and documents each financial instrument
as a hedge of a specific underlying exposure as well as the risk management
objectives and strategies for entering into the hedge transaction upon
inception. The Company also formally assesses upon inception and quarterly
thereafter whether the financial instruments used in hedging transactions are
effective in offsetting changes in the fair value or cash flows of the hedged
items.
The Company uses derivative financial instruments, primarily forward
foreign exchange contracts, to reduce the exposure of adverse effects of
fluctuating foreign currency exchange rates. These contracts, which have been
designated as cash flow hedges, were entered into primarily to hedge
anticipated inventory purchases and certain intercompany payments denominated
in foreign currencies, which have maturities of less than one year. The
unrecognized income (loss) on the revaluation of forward currency contracts
will be recognized in earnings by December 31, 2001. The Company has entered
into these contracts with a counterparty that is a major financial
institution, and accordingly the Company believes that the risk of
counterparty nonperformance is remote.
In accordance with the provisions of the statement, the Company recorded
an asset of $0.4 on the balance sheet and a credit of $0.4 in Other
Comprehensive Loss for the fair value effects of the foreign currency forward
exchange contracts outstanding at September 30, 2001. The amount of the
hedges' ineffectiveness as of September 30, 2001 recorded in the Unaudited
Consolidated Condensed Statements of Operations was not significant.
Certain amounts in the prior year financial statements have been
reclassified to conform to the current year's presentation.
(2) INVENTORIES
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------ ------------
Raw materials and supplies ........................ $ 61.2 $ 56.2
Work-in-process ................................... 8.6 9.4
Finished goods .................................... 116.5 119.2
----------- -----------
$ 186.3 $ 184.8
=========== ===========
(3) RESTRUCTURING AND OTHER COSTS, NET
In the fourth quarter of 1999, the Company continued to restructure its
organization and began a new program in line with its original restructuring
plan developed in late 1998, principally for additional employee severance and
other personnel benefits and to restructure certain operations outside the
United States, including certain operations in Japan. In the first quarter of
2000, the Company recorded a charge of $9.5 relating to the 1999 restructuring
program that began in the fourth quarter of 1999. The Company continued to
implement the 1999 restructuring program during the second quarter of 2000
during which it recorded a charge of $5.1.
7
REV HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
During the third quarter of 2000, the Company continued to re-evaluate
its organizational structure. As part of this re-evaluation, the Company
initiated a new restructuring program in line with the original restructuring
plan developed in late 1998, designed to improve profitability by reducing
personnel and consolidating manufacturing facilities. The Company recorded a
charge of $13.7 in the third quarter of 2000 for programs begun in such
quarter as well as for programs previously commenced. The 2000 restructuring
program focused on the Company's plans to close its manufacturing operations
in Phoenix, Arizona and Mississauga, Canada and to consolidate its cosmetics
production into its plant in Oxford, North Carolina. The 2000 restructuring
program also includes the remaining obligation for excess leased real estate
in the Company's headquarters, consolidation costs associated with the Company
closing its facility in New Zealand, and the elimination of several domestic
and international executive and operational positions, both of which were
effected to reduce and streamline corporate overhead costs. In the first
quarter of 2001, the Company recorded a charge of $14.6 related to previous
restructuring programs, as well as the 2000 restructuring program, principally
for additional employee severance and other personnel benefits, relocation and
to consolidate worldwide operations. Additionally, in the second quarter of
2001, the Company continued to implement the 2000 restructuring program and
recorded a charge of $7.9, principally for additional employee severance and
other personnel benefits, relocation and other costs related to the
consolidation of worldwide operations. The Company continued to implement the
2000 restructuring program in the third quarter of 2001 and recorded a charge
of $3.0, principally for additional employee severance and other personnel
benefits and relocation.
In connection with the 1999 restructuring program and the 2000
restructuring program, termination benefits for 403 employees and 2,147
employees, respectively, were included in the Company's restructuring charges
of which 403 and 1,915 employees have been terminated as of September 30,
2001. The remaining employees from the 2000 restructuring program are expected
to be terminated within one year from the date of their notification.
Details of the activity described above during the nine month period
ended September 30, 2001, are as follows:
BALANCE UTILIZED, NET BALANCE
AS OF ------------------ AS OF
1/1/01 EXPENSES, NET CASH NONCASH 9/30/01
------- ------------- ---- -------- ---------
Employee severance and other
personnel benefits ........ $ 28.6 $ 19.4 $ (32.4) $ -- $ 15.6
Relocation ..................... -- 2.6 (2.6) -- --
Leases and equipment write-offs 5.9 3.1 (3.0) -- 6.0
Other obligations .............. 1.5 0.4 (1.9) -- --
------- ------------ ------- -------- --------
$ 36.0 $ 25.5 $ (39.9) $ -- $ 21.6
======= ============ ======= ======== ========
In connection with the 2000 restructuring program, in the beginning of
the fourth quarter of 2000, the Company decided to consolidate its
manufacturing facility in Phoenix, Arizona into its manufacturing facility in
Oxford, North Carolina. The plan was to relocate substantially all of the
Phoenix equipment to the Oxford facility and commence production there over a
period of approximately nine months which would allow the Company to fully
staff the Oxford facility and to produce enough inventory through a
combination of production in the Phoenix and Oxford facilities to meet supply
chain demand as the Phoenix facility production lines were dismantled, moved
across the country, and placed into service at the Oxford facility.
Substantially all production at the Phoenix facility ceased by June 30, 2001,
and the facility was sold. The useful life of the facility and production
assets which would not be relocated to the Oxford facility was shortened at
the time the decision was made to the nine-month period in which the Phoenix
facility would continue production. The Company began depreciating the net
book value of the Phoenix facility and
8
REV HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
production equipment in excess of its estimated salvage value over the
estimated nine-month useful life. This resulted in the recognition of
increased depreciation through June 30, 2001 of $6.1, which is included in
cost of sales. Due to the sale of the Phoenix facility in the second quarter
of 2001, there was no additional increased depreciation charged for the
quarter ended September 30, 2001.
(4) GEOGRAPHIC INFORMATION
The Company manages its business on the basis of one reportable operating
segment. The Company is exposed to the risk of changes in social, political
and economic conditions inherent in foreign operations and the Company's
results of operations and the value of its foreign assets and liabilities are
affected by fluctuations in foreign currency exchange rates. The Company's
operations in Brazil have accounted for approximately 1.8% and 5.1% of the
Company's net sales for the third quarter of 2001 and 2000, respectively, and
for approximately 3.4% and 4.7% of the Company's net sales for the nine months
ended September 30, 2001 and 2000, respectively. While the Company's
operations in Brazil have historically been significant, as a result of the
sale of the Company's Colorama brand in Brazil in July 2001, the Company's
ongoing operations in Brazil are no longer significant to the Company's
consolidated ongoing operations. (See Note 5).
During the first quarter of 2001, to reflect the integration of
management reporting responsibilities, the Company reclassified Canada's
results from its international operations to its United States operations. The
geographic information reflects this change for both the 2001 and 2000
periods.
9
REV HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED NINE MONTHS ENDED
GEOGRAPHIC AREAS: SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- ---------------------------------
2001 2000 2001 2000
-------------- ------------- -------------- -------------
Net sales:
United States ................................. $ 220.1 $ 210.5 $ 644.9 $ 668.1
Canada ........................................ 12.6 13.5 35.3 39.3
-------------- ------------- ------------- -------------
United States and Canada ...................... 232.7 224.0 680.2 707.4
International ................................. 94.5 120.8 308.8 426.8
-------------- ------------ ------------- -------------
$ 327.2 $ 344.8 $ 989.0 $ 1,134.2
============== ============ ============== =============
September 30, December 31,
2001 2000
------------- -------------
Long-lived assets:
United States ................................................. $ 365.7 $ 399.7
Canada ........................................................ 6.6 8.1
------------- --------------
United States and Canada ...................................... 372.3 407.8
International ................................................. 125.2 167.2
------------- --------------
$ 497.5 $ 575.0
============= ==============
CLASSES OF SIMILAR PRODUCTS:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
2001 2000 2001 2000
-------------- ------------- -------------- -------------
Net sales:
Cosmetics, skin care and fragrances ................. $ 214.0 $ 224.6 $ 637.3 $ 705.5
Personal care and professional ...................... 113.2 120.2 351.7 428.7
-------------- ------------- ------------- ------------
$ 327.2 $ 344.8 $ 989.0 $ 1,134.2
============== ============= ============= ============
(5) DISPOSITIONS
In April 2001, Products Corporation sold land in Minami Aoyama near
Tokyo, Japan and related rights for the construction of a building on such
land (the "Aoyama Property") for approximately $28. In connection with such
disposition the Company recognized a pre-tax and after-tax loss of $0.8 during
the second quarter of 2001.
In May 2001, Products Corporation sold its Phoenix facility for
approximately $7 and leased it back for a certain period of time. After
recognition of increased depreciation in the first quarter of 2001, the
Company recorded a loss on the sale of $3.7 in the second quarter of 2001,
which is included in SG&A expenses.
In July 2001, Products Corporation completed the disposition of the
Colorama brand of cosmetics and hair care products as well as Products
Corporation's manufacturing facility located in Sao Paulo, Brazil for
approximately $57. Products Corporation used $22 of the net proceeds after
transaction costs and retained liabilities to permanently reduce commitments
under the Credit Agreement (as hereinafter defined). In connection with such
disposition the Company recognized a pre-tax and after-tax loss of $6.5, $6.3
of which was recorded during the second quarter of 2001.
10
REV HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
In July 2001, Products Corporation completed the disposition of its
subsidiary that owned and operated its manufacturing facility in Maesteg,
Wales, UK, including all production equipment. The purchase price was
approximately $20.0, $10.0 of which was received on the closing date and $10.0
is to be received over a six-year period, a portion of which is contingent
upon certain future events. The Company recognized a pre-tax and after-tax
loss of $7.7 during the third quarter of 2001.
(6) ACQUISITION OF CHARLES OF THE RITZ BRAND
In September 2001, Revlon, Inc. acquired from Revlon Holdings Inc., an
affiliate and indirect wholly owned subsidiary of Mafco Holdings, all the
assets and liabilities of the Charles of the Ritz business in consideration of
the issuance of 400,000 newly issued shares of Revlon, Inc.'s Class A Common
Stock and the issuance of 4,333 shares of newly issued voting (with 433,300
votes in the aggregate) Series B Preferred Stock which are convertible into
433,300 shares in the aggregate of Revlon, Inc.'s Class A Common Stock, with
any such conversion subject to approval by the stockholders of Revlon, Inc. at
the 2002 Annual Meeting of Stockholders. As Revlon Holdings Inc. and REV
Holdings are under common control, the transaction has been accounted for
at historical cost in a manner similar to that of a pooling of interests and,
accordingly, all prior period financial statements presented have been
restated as if the acquisition took place at the beginning of such periods. An
investment banking firm rendered its written opinion that the terms of the
transaction were fair from a financial standpoint to Revlon, Inc. Upon
acquiring the Charles of the Ritz business, Revlon, Inc. contributed such
business to Products Corporation in the form of a capital contribution. The
effect of the acquisition was to increase both operating income and net income
by $1.8 and $0.4 for the nine months ended September 30, 2001 and 2000,
respectively. The net equity (deficit) of the Charles of the Ritz business of
$0.2 and $(0.6) is included in total stockholder's deficiency at September 30,
2001 and December 31, 2000, respectively.
(7) LONG-TERM DEBT
On February 12, 2001, REV Holdings issued $80.5 principal amount of its
12% Senior Secured Notes due 2004 (the "New REV Holding Notes"), which were
issued in exchange for a like principal amount of the Old REV Holdings Notes.
The New REV Holdings Notes bear interest at 12% per year, payable
semi-annually, and mature on February 1, 2004. On March 15, 2001, an affiliate
contributed $667.5 principal amount of Old REV Holdings Notes to REV Holdings,
which were delivered to the trustee for cancellation and contributed $22.0 in
cash to REV Holdings to retire the remaining Old REV Holdings Notes at
maturity. Upon cancellation, the indenture governing the Old REV Holdings
Notes was discharged.
On August 1, 2001, GSB Investments Corp. made a non-interest bearing
advance of $4.5 to REV Holdings under the Keepwell Agreement (as hereinafter
defined), which was used to make the August 1, 2001 interest payment on the
New REV Holdings Notes.
11
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
OVERVIEW
The Company operates in a single segment and manufactures, markets and
sells an extensive array of cosmetics and skin care, fragrances and personal
care products. In addition, the Company has a licensing group.
On March 30, 2000, May 8, 2000, and July 16, 2001 Products Corporation
completed the dispositions of its worldwide professional products line,
Plusbelle brand in Argentina and Colorama brand in Brazil, respectively.
Accordingly, the Unaudited Consolidated Condensed Financial Statements include
the results of operations of the professional products line, Plusbelle and
Colorama brands through the dates of their respective dispositions.
During the first quarter of 2001, to reflect the integration of
management reporting responsibilities, the Company reclassified Canada's
results from its international operations to its United States operations.
Management's discussion and analysis data reflects this change for both the
2001 and 2000 periods.
RESULTS OF OPERATIONS
Net sales
Net sales were $327.2 and $344.8 for the third quarters of 2001 and 2000,
respectively, a decrease of $17.6, or 5.1% on a reported basis (a decrease of
2.8% on a constant U.S. dollar basis), and were $989.0 and $1,134.2 for the
nine months ended September 30, 2001 and 2000, respectively, a decrease of
$145.2, or 12.8% on a reported basis (a decrease of 10.1% on a constant U.S.
dollar basis). The decline in consolidated net sales for the third quarter and
nine months ended September 30, 2001 as compared with the third quarter and
nine months ended September 30, 2000 is primarily due to the sale of the
worldwide professional products line and the Plusbelle brand in Argentina in
the first and third quarters of 2000, respectively, and the Colorama brand in
Brazil in July of 2001.
Net sales, excluding the worldwide professional products line, the
Plusbelle brand in Argentina, and the Colorama brand in Brazil, were $326.9
and $333.7 for the third quarter of 2001 and 2000, respectively, a decrease of
$6.8, or 2.0% on a reported basis (an increase of 0.2% on a constant U.S.
dollar basis), and were $972.6 and $1,003.3 for the nine months ended
September 30, 2001 and 2000, respectively, a decrease of $30.7, or 3.1% on a
reported basis (a decrease of 0.6% on a constant U.S. dollar basis).
United States and Canada. Net sales in the United States and Canada were
$232.7 for the third quarter of 2001 compared with $224.0 for the third
quarter of 2000, an increase of $8.7, or 3.9%, and were $680.2 and $707.4 for
the nine months ended September 30, 2001 and 2000, respectively, a decrease of
$27.2, or 3.8%. Net sales in the United States and Canada, excluding the
United States and Canada portion of the worldwide professional products
business, were $232.7 for the third quarter of 2001, compared with $224.0 for
the third quarter of 2000, an increase of $8.7, or 3.9%, and were $680.2 and
$671.7 for the nine months ended September 30, 2001 and 2000, respectively, an
increase of $8.5, or 1.3%. The increase in the third quarter 2001 of 3.9%, as
compared to the third quarter 2000, is mainly due to lower sales returns of
$19.7 resulting primarily from the Company's new trade terms, partially offset
by higher sales incentives and allowances of $10.4. The increase in the nine
months ended September 30, 2001 of 1.3%, as compared to the nine months ended
September 30, 2000, is due to lower sales returns of $47.0 resulting primarily
from the Company's new trade terms, substantially offset by higher sales
incentives and allowances of $8.0 and lower sales volume of $29.6 as a result
of competitive activities.
12
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
International. Net sales in the Company's international operations were
$94.5 for the third quarter of 2001, compared with $120.8 for the third
quarter of 2000, a decrease of $26.3, or 21.8% on a reported basis (a decrease
of 16.3% on a constant U.S. dollar basis), and were $308.8 for the nine months
ended September 30, 2001, compared with $426.8 for the nine months ended
September 30, 2000, a decrease of $118.0, or 27.6% on a reported basis (a
decrease of 21.4% on a constant U.S. dollar basis).
Net sales of the Company's international operations, excluding the
worldwide professional products line, the Plusbelle brand in Argentina and the
Colorama brand in Brazil ("Ongoing International Operations"), were $94.2 and
$109.7 for the third quarter of 2001 and 2000, respectively, a decrease of
$15.5, or 14.1%, on a reported basis (a decrease of 8.2% on a constant U.S.
dollar basis), and were $292.4 and $331.6 for the nine months ended September
30, 2001 and 2000, respectively, a decrease of $39.2, or 11.8%, on a reported
basis (a decrease of 5.2% on a constant U.S. dollar basis).
Ongoing International Operations sales are divided by the Company into
three geographic regions. In Europe and Africa, which comprises Europe, the
Middle East and Africa, net sales decreased by 9.8% on a reported basis to
$37.7 for the third quarter of 2001, as compared with the third quarter of
2000 (a decrease of 4.7% on a constant U.S. dollar basis), and decreased by
11.4% on a reported basis to $117.6 for the nine months ended September 30,
2001, as compared with the nine months ended September 30, 2000 (a decrease of
4.0% on a constant U.S. dollar basis). In Latin America, which comprises
Mexico, Central America, South America and Puerto Rico, net sales decreased by
21.9% on a reported basis to $28.6 for the third quarter of 2001, as compared
with the third quarter of 2000 (a decrease of 15.1% on a constant U.S. dollar
basis), and decreased by 8.6% on a reported basis to $95.0 for the nine months
ended September 30, 2001, as compared with the nine months ended September 30,
2000 (a decrease of 3.7% on a constant U.S. dollar basis). In the Far East,
net sales decreased by 10.9% on a reported basis to $27.9 for the third
quarter of 2001, as compared with the third quarter of 2000 (a decrease of
4.7% on a constant U.S. dollar basis), and decreased by 16.0% on a reported
basis to $79.8 for the nine months ended September 30, 2001, as compared with
the nine months ended September 30, 2000 (a decrease of 8.7% on a constant
U.S. dollar basis). Net sales in the Company's international operations may be
adversely affected by weak economic conditions, political and economic
uncertainties, adverse currency fluctuations, and competitive activities.
The decrease in net sales for the third quarter of 2001, as compared to the
third quarter of 2000 for Ongoing International Operations on a comparable
currency basis, was primarily due to increased competitive activity in Mexico
and Australia (which factor the Company estimates contributed to an
approximately 2.4% reduction in net sales), a reduction in sales volume in
certain tourist related markets in Latin America (which factor the Company
estimates contributed to an approximately 2.6% reduction in net sales), the
conversion of an operation to a distributor in 2001 (which factor the Company
estimates contributed to an approximately 1.7% reduction in net sales) and
difficult conditions in Argentina (which factor the Company estimates
contributed to an approximately 1.5% reduction in net sales).
The decrease in net sales in the nine months ended September 30, 2001, as
compared to the nine months ended September 30, 2000 for Ongoing International
Operations on a comparable currency basis, was primarily due to the increased
competitive activity in Japan, Hong Kong and Australia (which factor the
Company estimates contributed to an approximately 2.3% reduction in net
sales), a reduction in sales volume in certain tourist related markets in
Latin America (which factor the Company estimates contributed to an
approximately 1.6% reduction in net sales) and the conversion of an
operation to a distributor in 2001 (which factor the Company estimates
contributed to an approximately 1.3% reduction in net sales).
13
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
Cost of sales
As a percentage of net sales, cost of sales was 39.7% for the third
quarter of 2001, compared with 37.1% for the third quarter of 2000, and 40.9%
for the nine months ended September 30, 2001, compared with 38.2% for the nine
months ended September 30, 2000. Excluding the worldwide professional products
line, the Plusbelle brand in Argentina and the Colorama brand in Brazil and
excluding $5.8 and $30.6 ($6.1 of which represents increased depreciation
recorded for the Phoenix facility - See Note 3) of additional consolidation
costs associated with the shutdown of the Phoenix and Canada facilities in the
third quarter and nine months ended September 30, 2001, respectively, which
are reflected in reported cost of sales, cost of sales as a percentage of net
sales was 37.7% for the third quarter of 2001, compared with 36.5% for the
third quarter of 2000 and 37.4% for the nine months ended September 30, 2001,
compared with 37.3% for the nine months ended September 30, 2000. The increase
in cost of sales as a percentage of net sales for the third quarter 2001, as
compared to the comparable 2000 period is due to a higher level of sales
incentives which increased to approximately 2.7% of net sales in the third
quarter of 2001 from approximately 0.3% in the third quarter of 2000,
partially offset by lower sales returns and allowances. Cost of sales as a
percentage of net sales for the nine months ended September 30, 2001, as
compared to the nine months ended September 30, 2000, showed improvements
resulting from lower sales returns and allowances, which were offset by a
higher level of sales incentives.
SG&A expenses
SG&A expenses were $169.9 for the third quarter of 2001, compared with
$193.0 for the third quarter of 2000 and $555.4 for the nine months ended
September 30, 2001, compared with $634.1 for the nine months ended September
30, 2000. Excluding the worldwide professional products line, the Plusbelle
brand in Argentina and the Colorama brand in Brazil and $1.2 and $6.9 of
additional consolidation costs associated with the shutdown of the Phoenix and
Canada facilities in the third quarter and nine months ended September 30,
2001, respectively, which are reflected in reported SG&A expenses, SG&A
expenses were $166.4 for the third quarter of 2001, compared with $188.6 for
the third quarter of 2000 and $539.6 for the nine months ended September 30,
2001, compared with $566.7 for the nine months ended September 30, 2000. The
decrease in ongoing SG&A expenses for the third quarter and nine months ended
September 30, 2001, as compared to the comparable 2000 periods, is due
primarily to the reduction of departmental general and administrative expenses
from $84.2 in the third quarter of 2000 to $68.7 for the third quarter of 2001
and from $261.6 for the nine months ended September 30, 2000 to $218.0 for the
nine months ended September 30, 2001 as a result of the Company's
restructuring efforts, partially offset by recognition of higher brand support
from $255.7 for the nine months ended September 30, 2000 to $266.3 for the
nine months ended September 30, 2001.
Restructuring costs
In the fourth quarter of 1999, the Company continued to restructure its
organization and began a new program in line with its original restructuring
plan developed in late 1998, principally for additional employee severance and
other personnel benefits and to restructure certain operations outside the
United States, including certain operations in Japan. In the first quarter of
2000, the Company recorded a charge of $9.5 relating to the 1999 restructuring
program that began in the fourth quarter of 1999. The Company continued to
implement the 1999 restructuring program during the second quarter of 2000
during which it recorded a charge of $5.1.
During the third quarter of 2000, the Company continued to re-evaluate
its organizational structure. As part of this re-evaluation, the Company
initiated a new restructuring program in line with the original restructuring
plan developed in late 1998, designed to improve profitability by reducing
personnel
14
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
and consolidating manufacturing facilities. The Company recorded a charge of
$13.7 in the third quarter of 2000 for programs begun in such quarter as well
as for programs previously commenced. The 2000 restructuring program focused
on the Company's plans to close its manufacturing operations in Phoenix,
Arizona and Mississauga, Canada and to consolidate its cosmetics production
into its plant in Oxford, North Carolina. The 2000 restructuring program also
includes the remaining obligation for excess leased real estate in the
Company's headquarters, consolidation costs associated with the Company
closing its facility in New Zealand, and the elimination of several domestic
and international executive and operational positions, both of which were
effected to reduce and streamline corporate overhead costs. In the first
quarter of 2001, the Company recorded a charge of $14.6 related to previous
restructuring programs, as well as the 2000 restructuring program, principally
for additional employee severance and other personnel benefits, relocation and
to consolidate worldwide operations. Additionally, in the second quarter of
2001, the Company continued to implement the 2000 restructuring program and
recorded a charge of $7.9, principally for additional employee severance and
other personnel benefits, relocation and other costs related to the
consolidation of worldwide operations. The Company continued to implement the
2000 restructuring program in the third quarter of 2001 and recorded a charge
of $3.0, principally for additional employee severance and other personnel
benefits and relocation. The Company anticipates that it will recognize
approximately $25 to $30 (including amounts recorded to date) of costs to
implement this program during 2001.
The Company anticipates annualized savings of approximately $23 to $25
relating to the restructuring charges recorded during the nine months ended
September 30, 2001.
Other expenses (income)
Interest expense was $36.5 for the third quarter of 2001 compared with
$54.4 for the third quarter of 2000 and $126.5 for the nine months ended
September 30, 2001 compared with $164.2 for the nine months ended September
30, 2000. The decrease in interest expense for the third quarter and nine
months ended September 30, 2001 as compared to the third quarter and nine
months ended September 30, 2000 is primarily due to the cancellation of the
Old REV Holdings Notes in the first quarter of 2001, the repayment of
borrowings under the Credit Agreement with the net proceeds from the
disposition of the worldwide professional products line, the Plusbelle brand
in Argentina and the Colorama brand in Brazil and by lower interest rates
under the Credit Agreement, partially offset by interest expense attributable
to the New REV Holdings Notes.
Sale of product line, brands and facilities
In July 2001, Products Corporation completed the disposition of its
subsidiary that owned and operated its manufacturing facility in Maesteg,
Wales, UK, including all production equipment. In connection with the
disposition the Company recognized a pre-tax and after-tax loss of $7.7 during
the third quarter of 2001.
In July 2001, Products Corporation completed the disposition of the
Colorama brand in Brazil. In connection with the disposition the Company
recognized a pre-tax and after-tax loss of $6.5, $6.3 of which was recorded in
the second quarter of 2001. Additionally, the Company recognized a pre-tax and
after-tax loss on the disposition of the Aoyama Property in Japan of $0.8
during the second quarter of 2001.
On May 8, 2000, Products Corporation completed the disposition of the
Plusbelle brand in Argentina. In connection with the disposition, the Company
recognized a pre-tax and after-tax loss of $3.2.
On March 30, 2000, Products Corporation completed the disposition of its
worldwide professional products line, including professional hair care for use
in and resale by professional salons, ethnic hair and
15
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
personal care products, Natural Honey skin care and certain regional toiletries
brands. In connection with the disposition, the Company recognized a pre-tax and
after-tax gain of $6.2.
Provision for income taxes
The provision for income taxes was $1.5 for the third quarter of 2001
compared with $2.2 for the third quarter of 2000 and $3.3 for the nine months
ended September 30, 2001 compared with $7.0 for the nine months ended
September 30, 2000. The decrease in the provision for income taxes for the
nine months ended September 30, 2001, as compared to the nine months ended
September 30, 2000, was attributable to adjustments to certain deferred tax
assets and higher taxes associated with the worldwide professional products
line in the first quarter of 2000 and lower taxable income in the nine months
ended September 30, 2001 in certain markets outside the United States.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash used for operating activities was $94.5 and $131.7 for the nine
months ended September 30, 2001 and 2000, respectively. The decrease in net
cash used for operating activities for the nine months ended September 30,
2001, compared with the nine months ended September 30, 2000 resulted
primarily from reduced utilization of working capital, partially offset by a
higher net loss in the nine months ended September 30, 2001.
Net cash provided by investing activities was $10.1 and $325.1 for the
nine months ended September 30, 2001 and 2000, respectively. Net cash provided
by investing activities for the nine months ended September 30, 2001 consisted
of net proceeds from the sale of the Company's Colorama brand in Brazil, the
Company's subsidiary in Maesteg, Wales, UK, the Aoyama Property in Japan and
the Phoenix facility, partially offset by capital expenditures. Net cash
provided by investing activities in the nine months ended September 30, 2000
consisted of proceeds from the sale of the Company's worldwide professional
products line and the Plusbelle brand in Argentina, partially offset by cash
used for capital expenditures and acquisition of technology rights.
Net cash used for financing activities was $10.1 and $193.2 for the nine
months ended September 30, 2001 and 2000, respectively. Net cash used for
financing activities for the nine months ended September 30, 2001 included the
repayment of borrowings under the Credit Agreement with the net proceeds from
the disposition of the Colorama brand in Brazil, payment of debt issuance
costs and repayment of the remaining portion of the Old REV Holdings Notes
with the capital contribution, partially offset by cash drawn under the Credit
Agreement and a capital contribution from an indirect parent to retire the Old
REV Holdings Notes. Net cash used for financing activities for the nine months
ended September 30, 2000 included repayments of borrowings under the Credit
Agreement with the net proceeds from the disposition of the worldwide
professional products line and the Plusbelle brand in Argentina and the
repayment of Products Corporation's Japanese yen-denominated credit agreement,
partially offset by cash drawn under the Credit Agreement.
In May 1997, Products Corporation entered into a credit agreement (as
subsequently amended, the "Credit Agreement") with a syndicate of lenders, whose
individual members change from time to time. As of September 30, 2001, the
Credit Agreement provided up to $471.1 and was comprised of five senior secured
facilities: $89.0 in two term loan facilities (the "Term Loan Facilities"), a
$300.0 multi-currency facility (the "Multi-Currency Facility"), a $32.1
revolving acquisition facility, which may also be used for general corporate
purposes (the "Acquisition Facility"), and a $50.0 special standby letter of
credit facility (the "Special LC Facility"). At September 30, 2001, Products
Corporation had $89.0 outstanding under the Term Loan Facilities, $252.3
outstanding under the Multi-Currency Facility, $32.1 outstanding under the
Acquisition Facility and $28.7 of issued but undrawn letters of credit under the
Special LC Facility. The Acquisition Facility was scheduled to be reduced by
$24.4 on December 31, 2001, but such scheduled
16
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
reduction was changed to $20.6 as a result of the commitment reduction due to
the sale of the Colorama brand. The balance of the Acquisition Facility, along
with the Term Loan Facilities, the Multi-Currency Facility and the Special LC
Facility mature in May 2002. In January 2001 (effective December 31, 2000),
Products Corporation and its bank lenders entered into an amendment to the
Credit Agreement, to (i) eliminate the interest coverage ratio and leverage
ratio covenants for 2001; (ii) add a minimum cumulative EBITDA covenant for
each quarter end during the year 2001; (iii) modify the definition of EBITDA
beginning with the quarterly period ended December 31, 2000; (iv) limit the
amount that Products Corporation may spend for capital expenditures; (v)
permit the sale of certain of Products Corporation's non-core assets; (vi)
permit Products Corporation to retain 100% of the Net Proceeds from such asset
sales; (vii) increase the "applicable margin" by 1/2 of 1%; and (viii) require
Products Corporation to provide a mortgage on its facility in Oxford, North
Carolina as security for its obligations under the Credit Agreement.
On February 12, 2001, REV Holdings issued $80.5 in principal amount of
its New REV Holding Notes, which were issued in exchange for a like principal
amount of REV Holdings' outstanding Old REV Holdings Notes. The New REV
Holdings Notes bear interest at 12% per year, payable semi-annually, and
mature on February 1, 2004. On March 15, 2001, an affiliate contributed $667.5
principal amount of Old REV Holdings Notes to REV Holdings, which were
delivered to the trustee for cancellation and contributed $22.0 in cash to REV
Holdings to retire the remaining Old REV Holdings Notes at maturity. Upon
cancellation, the indenture governing the Old REV Holdings Notes was
discharged.
The Company's principal sources of funds are expected to be cash flow
generated from operations (before interest), net proceeds from the sale of
certain non-core assets, borrowings under the Credit Agreement,
refinancings and advances under the Keepwell Agreement. The Credit Agreement,
Products Corporation's 8 5/8% Notes due 2008 (the "8 5/8% Notes"), Products
Corporation's 8 1/8% Notes due 2006 (the "8 1/8% Notes") and Products
Corporation's 9% Notes due 2006 (the "9% Notes") contain certain provisions
that by their terms limit Products Corporation's and/or its subsidiaries'
ability to, among other things, incur additional debt. The New REV Holdings
Notes contain certain provisions that by their terms limit REV Holdings'
ability to, among other things, incur additional debt. The Company's principal
uses of funds are expected to be the payment of operating expenses, working
capital, purchases of permanent displays and capital expenditure requirements,
payments to be made in connection with the Company's restructuring programs
referred to above, debt service payments and interest under the New REV
Holdings Notes.
The Company estimates that purchases of permanent displays for all of
2001 will be $40 to $50 and capital expenditures for all of 2001 will be $13
to $17. The Company estimates that purchases of permanent displays for all of
2002 will be $45 to $60 and capital expenditures for all of 2002 will be $15
to $25. The Company estimates that cash payments related to the Company's 2000
and 1999 restructuring programs and executive separation costs incurred in
1999 will be $60 to $80 for all of 2001. Pursuant to tax sharing agreements,
REV Holdings and Revlon, Inc. may be required to make tax sharing payments to
Mafco Holdings as if REV Holdings or Revlon, Inc., as the case may be, were
filing separate income tax returns, except that no payments are required by
Revlon, Inc. if and to the extent that Products Corporation is prohibited
under the Credit Agreement from making tax sharing payments to Revlon, Inc.
The Credit Agreement prohibits Products Corporation from making any tax
sharing payments other than in respect of state and local income taxes. REV
Holdings currently anticipates that, with respect to Revlon, Inc. as a result
of net operating tax losses and prohibitions under the Credit Agreement, and
with respect to REV Holdings as a result of the absence of business operations
or a source of income of its own, no cash federal tax payments or cash
payments in lieu of federal taxes pursuant to the tax sharing agreements will
be required for 2001.
17
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
Products Corporation enters into forward foreign exchange contracts and
option contracts from time to time to hedge certain cash flows denominated in
foreign currencies. Products Corporation had forward foreign exchange
contracts denominated in various currencies of approximately $14.4 and nil
(U.S. dollar equivalent) outstanding at September 30, 2001 and 2000,
respectively. Such contracts are entered into to hedge transactions
predominantly occurring within twelve months.
The Company expects that cash flows from operations, net proceeds from the
sale of certain non-core assets (or financial support from an affiliate, if such
asset sales are not completed on a timely basis), borrowings under the Credit
Agreement and advances under the Keepwell Agreement will be sufficient to enable
the Company to meet its anticipated cash requirements during 2001 including debt
service and expenses in connection with the Company's restructuring programs. In
addition, the Company anticipates that Products Corporation will refinance the
Credit Agreement before the first quarter of 2002 on terms that are satisfactory
to Products Corporation. Products Corporation issued a press release on November
6, 2001 reporting that it intends to refinance its existing Credit Agreement
with the proceeds from an offering of approximately $250 in principal amount of
senior secured notes due 2005 and an amended and restated secured credit
agreement providing for borrowings of approximately $325. There can be no
assurance that the refinancing will be consummated or if consummated as to
terms. The senior secured notes, which Products Corporation expects to offer,
would not be registered under the Securities Act of 1933, as amended. In
addition, there can be no assurance that the combination of cash flow from
operations, net proceeds from the sale of certain non-core assets (or from such
financial support), borrowings under the Credit Agreement and advances under the
Keepwell Agreement will be sufficient to meet the Company's cash requirements on
a consolidated basis. If the Company is unable to satisfy such cash requirements
from these sources or if Products Corporation is unable to refinance the Credit
Agreement, the Company could be required to adopt one or more alternatives, such
as reducing or delaying purchases of permanent displays, reducing or delaying
capital expenditures, delaying or revising restructuring programs, restructuring
indebtedness, selling additional assets or operations, selling its equity
securities, or seeking capital contributions or additional loans from affiliates
of the Company or selling additional shares of capital stock of Revlon, Inc.
Products Corporation has received a commitment from an affiliate that is
prepared to provide, if necessary, additional financial support to Products
Corporation of up to $40 on appropriate terms through December 31, 2001. There
can be no assurance that any of such actions could be effected, that they would
enable the Company and its subsidiaries to continue to satisfy their capital
requirements or that they would be permitted under the terms of the Company's
and its subsidiaries' various debt instruments then in effect. The Company, as a
holding company, will be dependent on distributions with respect to its
approximately 83% ownership interest in Revlon, Inc. from the earnings generated
by Products Corporation and advances under the Keepwell Agreement to pay its
expenses and to pay interest and the principal amount at maturity of the New REV
Holdings Notes. The terms of the Credit Agreement, the 8 5/8% Notes, the 8 1/8%
Notes and the 9% Notes generally restrict Products Corporation from paying
dividends or making distributions, except that Products Corporation is permitted
to pay dividends and make distributions to Revlon, Inc., among other things, to
enable Revlon, Inc. to pay expenses incidental to being a public holding
company, including, among other things, professional fees such as legal and
accounting, regulatory fees such as Securities and Exchange Commission (the
"Commission") filing fees and other miscellaneous expenses related to being a
public holding company and to pay dividends or make distributions in certain
circumstances to finance the purchase by Revlon, Inc. of its Class A Common
Stock in connection with the delivery of such Class A Common Stock to grantees
under the Revlon, Inc. Amended and Restated 1996 Stock Plan, provided that the
aggregate amount of such dividends and distributions taken together with any
purchases of Revlon, Inc. Class A Common Stock on the open market to satisfy
matching obligations under the excess savings plan may not exceed $6.0 per
annum.
The Company currently anticipates that cash flow generated from
operations will be insufficient to pay interest when due and the principal
amount at maturity of the New REV Holdings Notes. The Company currently
anticipates that it will be required to adopt one or more alternatives to pay
the principal amount at maturity of the New REV Holdings Notes, such as
refinancing its indebtedness, selling its equity securities
18
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
or the equity securities or assets of Revlon, Inc. or seeking capital
contributions or loans from its affiliates. There can be no assurance that any
of the foregoing actions could be effected on satisfactory terms, that any of
the foregoing actions would enable the Company to pay the principal amount at
maturity of the New REV Holdings Notes or that any of such actions would be
permitted by the terms of the New Indenture or any other debt instruments of
the Company and the Company's subsidiaries then in effect. REV Holdings has
entered into a Keepwell Agreement with GSB Investments Corp., one of its
affiliates, (the "Keepwell Agreement") pursuant to which GSB Investments Corp.
has agreed to provide REV Holdings with funds in an amount equal to any
interest payments due on the New REV Holdings Notes, to the extent that REV
Holdings does not have sufficient funds on hand to make such payments on the
applicable due dates. However, the Keepwell Agreement is not a guarantee of
the payment of interest on the New REV Holdings Notes. The obligations of GSB
Investments Corp. under the Keepwell Agreement are only enforceable by REV
Holdings, and may not be enforced by the holders of the New REV Holdings Notes
or the trustee under the New Indenture for the New REV Holdings Notes. The
failure of GSB Investments Corp. to make a payment to REV Holdings under the
Keepwell Agreement will not be an event of default under the New Indenture.
Further, the New Indenture has no requirement that REV Holdings maintain the
Keepwell Agreement. In addition, although REV Holdings has the right to
enforce the Keepwell Agreement, there can be no assurance that GSB Investments
Corp. will have sufficient funds to make any payments to REV Holdings under
the Keepwell Agreement or that it will comply with its obligations under the
Keepwell Agreement.
As of September 30, 2001, GSB Investments Corp. owned an aggregate of
42,949,525 shares, or approximately 32% of the common stock of Golden State
Bancorp. Inc. ("GSB"). At September 30, 2001, the last reported sale price of
GSB common stock on the New York Stock Exchange ("NYSE") was $30.40 per share.
All of these shares are currently pledged to secure obligations of GSB
Investments Corp. or affiliates of GSB Investments Corp. GSB Investments Corp.
has received five quarterly dividends of $0.10 per share, or an aggregate of
$21.7, since GSB commenced paying quarterly dividends in July 2000. If GSB
were to continue to pay quarterly dividends at this rate and GSB Investments
Corp. were to continue to own the same number of shares, GSB Investments Corp.
would have sufficient income from dividends paid on its GSB stock to make any
payments to REV Holdings that it might be required to make under the Keepwell
Agreement. However, GSB has only paid dividends at this rate since July 2000
and there can be no assurance that GSB will continue to pay dividends at this
rate, if at all, or that GSB Investments Corp. will continue to own its shares
of the common stock of GSB. If either GSB Investments Corp. or affiliates of
GSB Investments Corp. were to fail to comply with their respective obligations
that are secured by the pledge of the GSB common stock, the beneficiary of
such pledge could enforce its rights with respect to such collateral and could
deprive GSB Investments Corp. of its rights to receive dividends on such
pledged shares. If GSB Investments Corp. does not receive sufficient dividend
income from its GSB stock, it will be required to seek alternative sources of
funds in order to satisfy its potential obligations under the Keepwell
Agreement. On August 1, 2001, GSB Investments Corp. made a non-interest
bearing advance of $4.5 to REV Holdings under the Keepwell Agreement, which
was used to make the August 1, 2001 interest payment on the New REV Holdings
Notes.
EURO CONVERSION
As part of the European Economic and Monetary Union, a single currency
(the "Euro") will replace the national currencies of the principal European
countries (other than the United Kingdom) in which the Company conducts
business and manufacturing. The conversion rates between the Euro and the
participating nations' currencies were fixed as of January 1, 1999, with the
participating national currencies to be removed from circulation between
January 1, 2002 and June 30, 2002 and replaced by Euro notes and coinage.
During the transition period from January 1, 1999 through December 31, 2001,
public and private entities as well as individuals may pay for goods and
services using checks, drafts, or wire transfers denominated either in the
Euro or the participating country's national currency. Under the regulations
governing the transition to a single currency, there is a "no compulsion, no
prohibition" rule, which states
19
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
that no one can be prevented from using the Euro after January 1, 2002 and no
one is obliged to use the Euro before July 2002. In keeping with this rule,
the Company expects to begin using the Euro for invoicing and payments by the
end of the second quarter of 2002. Based upon the information currently
available, the Company does not expect that the transition to the Euro will
have a material adverse effect on the business or consolidated financial
condition of the Company.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has exposure to market risk both as a result of changing
interest rates and movements in foreign currency exchange rates. The Company's
policy is to manage market risk through a combination of fixed and floating
rate debt, the use of derivative financial instruments and foreign exchange
forward and option contracts. The Company does not hold or issue financial
instruments for trading purposes. The qualitative and quantitative information
presented in Item 7A of the Company's Annual Report on Form 10-K for the year
ended December 31, 2000 describes significant aspects of the Company's
financial instrument programs that have material market risk as of December
31, 2000. The following table presents the information required by Item 7A as
of September 30, 2001.
EXPECTED MATURITY DATE FOR YEAR ENDED SEPTEMBER 30, FAIR VALUE
-------------------------------------------------------------- SEPT. 30,
2001 2002 2003 2004 THEREAFTER TOTAL 2001
------ ------- ------- ------ ------------ ------- -----------
(US dollar equivalent in millions)
DEBT
- ---------------
Short-term variable rate (various currencies).... $ 30.3 $ 29.7 * $ 60.0 $ 60.0
Average interest rate (a) .................. 6.6% 8.6%
Short-term variable rate ($US) ................... 343.7 * 343.7 343.7
Average interest rate (a) .................. 6.6%
Long-term fixed rate ($US) $ 1,149.5 1,149.5 692.7
Average interest rate ...................... 8.6%
--------- --------- ---------- -------- -----------
Total debt** ..................................... $ 30.3 $ 373.4 $ 1,149.5 $1,553.2 $ 1,096.4
========= ========= ========== ======== ===========
AVERAGE ORIGINAL CONTRACT
CONTRACTUAL US DOLLAR VALUE FAIR VALUE
RATE NOTIONAL SEPT. 30, SEPT. 30,
FORWARD CONTRACTS $/FC AMOUNT 2001 2001
- ----------------- ---------- ------------ ------------ ------------
Buy Euros/Sell USD ............................ 0.9284 $ 0.5 $ 0.5 $ --
Sell British Pounds/Buy USD ................... 1.4437 3.7 3.6 (0.1)
Sell Australian dollars/Buy USD ............... 0.5272 4.9 5.3 0.4
Sell South African Rand/Buy USD ............... 0.1237 0.9 1.0 0.1
Buy British Pounds/Sell USD ................... 1.4360 1.8 1.8 --
Buy Australian dollars/Sell New Zealand dollars 1.2490 1.1 1.1 --
Buy British Pounds/Sell Euros ................. 0.6315 1.5 1.5 --
----------- ----------- -----------
Total forward contracts ....................... $ 14.4 $ 14.8 $ 0.4
=========== =========== ===========
- --------------------
(a) Weighted average variable rates are based upon implied forward rates from
the yield curves at September 30, 2001.
* Represents Products Corporation's Credit Agreement which matures
in May 2002.
** The New REV Holdings Notes are excluded from the table above since there is
no active trading market for the New REV Holdings Notes and therefore the
Company is unable to assess the fair market value at this time. The New REV
Holdings Notes mature on February 1, 2004 and have a face value of $80.5.
EFFECT OF NEW ACCOUNTING STANDARDS
In April 2001, the EITF reached a consensus on EITF 00-25, "Vendor Income
Statement Characterization of Consideration to a Purchaser of the Vendor's
Products or Services." The consensus addresses the Statement of Operations
classification of slotting fees, cooperative advertising arrangements and
buy-downs. The consensus will require that certain promotional payments that
are currently classified
20
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
in SG&A expenses be classified as a reduction of net sales. Although the
impact of EITF 00-25 on the consolidated financial statements is still being
evaluated, its adoption is expected to reduce both net sales and SG&A expenses
by equal and offsetting amounts. The adoption will not have any impact on the
Company's reported operating income, net loss, or net loss per common share.
The Company will adopt EITF 00-25 no later that January 1, 2002.
In July 2001, the FASB issued Statement No. 141, Business Combinations,
and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. Statement 141 also
specifies criteria that must be met in order for intangible assets acquired in
a purchase method business combination to be recognized and reported apart
from goodwill. Statement 142 will require that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of Statement
142. Statement 142 will also require that intangible assets with definite
useful lives be amortized over their respective estimated useful lives to
their estimated residual values, and reviewed for impairment in accordance
with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. The Company is required to adopt the
provisions of Statement 141 immediately and Statement 142 effective January 1,
2002.
As of the date of adoption, the Company expects to have unamortized
goodwill in the amount of approximately $186, and unamortized identifiable
intangible assets in the amount of approximately $13. Amortization expense
related to goodwill was $8.6 and $5.4 for the year ended December 31, 2000 and
the nine months ended September 30, 2001, respectively. Because of the
extensive effort needed to comply with adopting Statements 141 and 142, it is
not practicable to reasonably estimate the impact of adopting these Statements
on the Company's financial statements at the date of this report, including
whether any transitional impairment losses will be required to be recognized
as the cumulative effect of a change in accounting principle.
In August 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations. Statement 143 requires recording the fair market value
of an asset retirement obligation as a liability in the period in which a
legal obligation associated with the retirement of tangible long-lived assets
is incurred. The Statement also requires recording the contra asset to the
initial obligation as an increase to the carrying amount of the related
long-lived asset and to depreciate that cost over the life of the asset. The
liability is then increased at the end of each period to reflect the passage
of time and changes in the initial fair value measurement. The Company is
required to adopt the provisions of Statement 143 effective fiscal 2003 and
has not yet determined the extent of its impact, if any.
In October 2001, the FASB issued Statement No. 144, Accounting for
Impairment or Disposal of Long-Lived Assets. Statement 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The Statement also extends the reporting requirements to report separately as
discontinued operations, components of an entity that have either been
disposed of or classified as held for sale. The Company is required to adopt
the provisions of Statement 144 effective January 1, 2002 and has not yet
determined the extent of its impact, if any.
SUBSEQUENT EVENT
Products Corporation issued a press release on November 6, 2001 reporting
that it intends to refinance its existing Credit Agreement with the proceeds
from an offering of approximately $250 in principal amount of senior secured
notes due 2005 and an amended and restated secured credit agreement providing
for borrowings of approximately $325. There can be no assurance that the
refinancing will be
21
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
consummated or if consummated as to terms. The senior secured notes, which
Products Corporation expects to offer, would not be registered under the
Securities Act of 1933, as amended.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q for the quarter ended September 30, 2001
as well as other public documents and statements of the Company contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ materially from those discussed in such
forward-looking statements. Such statements include, without limitation, the
Company's expectations and estimates as to: the introduction of new products;
future financial performance; the effect on sales of the reduction of overall
U.S. customer inventories including the timing thereof; the effect on sales of
political and/or economic conditions, adverse currency fluctuations and
competitive activities; the Company's estimate of restructuring activities,
restructuring costs and benefits; the Company's plans with respect to the
charges, the cash cost and the annual savings resulting from plant shutdowns and
dispositions; the Company's expectation that its new trade terms for its U.S.
customers will increase consumption of its products, drive market growth, result
in more efficient ordering and shipping and reduce returns; the Company's
expectations regarding uses of funds including purchases of permanent displays
and capital expenditures; the availability of raw materials and components; the
Company's qualitative and quantitative estimates as to market risk sensitive
instruments; the Company's expectations about the effects of the transition to
the Euro; the Company's intent to pursue the sale of certain non-core assets;
the Company's expectation regarding sources of funds including cash flow from
operations, the availability of funds from currently available credit
facilities, net proceeds from the sale of certain non-core assets, capital
contributions or loans from affiliates or advances under the Keepwell Agreement
and the sale of additional assets or operations of the Company or additional
shares of Revlon, Inc. or the sale of equity securities of REV Holdings; the
Company's expectation that it will refinance its Credit Agreement before the
first quarter of 2002; Products Corporation's intent to refinance its existing
Credit Agreement with the proceeds from an offering of senior secured notes and
an amended and restated credit agreement; and the effect of the adoption of
certain accounting standards, including EITF 00-25. Statements that are not
historical facts, including statements about Products Corporation's beliefs and
expectations, are forward-looking statements. Forward-looking statements can be
identified by, among other things, the use of forward-looking language, such as
"believes," "expects," "estimates," "projects," "forecast," "may," "will,"
"should," "seeks," "plans," "scheduled to," "anticipates" or "intends" or the
negative of those terms, or other variations of those terms or comparable
language, or by discussions of strategy or intentions. Forward-looking
statements speak only as of the date they are made, and the Company undertakes
no obligation to update them. A number of important factors could cause actual
results to differ materially from those contained in any forward-looking
statement. In addition to factors that may be described in the Company's filings
with the Commission, including this filing, the following factors, among others,
could cause the Company's actual results to differ materially from those
expressed in any forward-looking statements made by the Company: (i)
difficulties or delays in developing and introducing new products or failure of
customers to accept new product offerings; (ii) changes in consumer preferences,
including reduced consumer demand for the Company's color cosmetics and other
current products; (iii) unanticipated costs or difficulties or delays in
completing projects associated with the Company's strategic plan; (iv) lower
than expected cash flow from operations, the inability to secure capital
contributions or loans from affiliates or advances under the Keepwell Agreement
or sell additional assets or operations of the Company or additional shares of
Revlon, Inc. or equity securities of REV Holdings or the unavailability of funds
under the Credit Agreement; difficulties or delays in or the inability to
refinance Products Corporation's Credit Agreement; (v) effects of and changes in
political and/or economic conditions, including inflation and monetary
conditions, and in trade, monetary, fiscal and tax policies in international
markets; (vi) actions by competitors, including business combinations,
technological breakthroughs, new products offerings and marketing and
promotional successes; (vii) combinations among significant customers or the
loss, insolvency or failure to pay debts by a significant customer or customers;
(viii) lower than expected sales as a result of the reduction of overall
22
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
U.S. customer inventories; (ix) difficulties, delays or unanticipated costs or
less than expected savings and other benefits resulting from the Company's
restructuring activities; (x) difficulties or delays in implementing, higher
than expected charges and cash costs or lower than expected savings from, the
shutdown, disposition and consolidation of manufacturing operations; (xi)
difficulties or delays in implementing or achieving the intended results of
the new trade terms including increased consumption, market growth and lower
returns or unexpected consequences from the implementation of the new trade
terms including the possible effect on sales; (xii) interest rate or foreign
exchange rate changes affecting the Company and its market sensitive financial
instruments; (xiii) difficulties, delays or unanticipated costs associated
with the transition to the Euro; (xiv) difficulties or delays in sourcing raw
materials or components; (xv) difficulties or delays in pursuing the sale of
one or more non-core assets, the inability to consummate such sales or to
secure the expected level of proceeds from such sales; and (xvi) the
unanticipated effects of the adoption of certain new accounting standards,
including EITF 00-25.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
On April 17, 2000, the plaintiffs in the six purported class actions
filed in October and November 1999 by each of Thomas Comport, Boaz Spitz,
Felix Ezeir and Amy Hoffman, Ted Parris, Jerry Krim and Dan Gavish
individually and allegedly on behalf of others similarly situated to them
against Revlon, Inc., certain of its present and former officers and directors
and the parent of Revlon, Inc., REV Holdings Inc. ("REV Holdings"), alleging
among other things, violations of Rule 10b-5 under the Securities Exchange Act
of 1934, filed an Amended Complaint, which consolidated all of the actions and
limited the alleged class period to the period from October 29, 1997 through
October 1, 1998 ("In Re Revlon, Inc. Securities Litigation"). In June 2000,
the Company moved to dismiss the Amended Complaint, which motion was denied in
substantial part in March 2001. The Company believes the allegations contained
in the Amended Complaint are without merit and intends to vigorously defend
against them.
A purported class action lawsuit was filed on September 27, 2000, in the
United States District Court for the Southern District of New York on behalf
of Dan Gavish, Tricia Fontan and Walter Fontan individually and allegedly on
behalf of all others similarly situated who purchased the securities of
Revlon, Inc., and REV Holdings, between October 2, 1998 and September 30, 1999
(the "Purported Class Period"). The complaint alleges that Revlon, Inc. and
certain of its present and former officers and directors and REV Holdings
violated, among other things, Rule 10b-5 under the Securities Exchange Act of
1934. On October 17, 2000 the court ordered that this lawsuit be consolidated
with the pending In Re Revlon, Inc. Securities Litigation. On October 27, 2000
the plaintiff moved for reconsideration of the October 17, 2000 consolidation
order. On August 21, 2001 the court granted the plaintiffs' motion for
reconsideration, and, therefore, this lawsuit will not be consolidated with
the In Re Revlon, Inc. Securities Litigation. The Company believes the
allegations contained in each of the complaints are without merit and intends
to vigorously defend against them.
23
REV HOLDINGS INC. AND SUBSIDIARIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
----------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(A) EXHIBITS - None
(B) REPORTS ON FORM 8-K - None
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
REV HOLDINGS INC.
Registrant
By:/s/ Todd J. Slotkin
-------------------
Todd J. Slotkin
Executive Vice President,
Chief Financial Office
and Chief Accounting Officer
Dated: November 14, 2001
24