10-Q 1 firstqtr01-10q.txt FORM 10-Q FOR THE QUARTER ENDED 03/31/01 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 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 0-21952 AMERICAN SAFETY RAZOR COMPANY (Exact name of registrant as specified in its charter) Delaware 54-1050207 -------- ---------- (State of incorporation) (I.R.S. Employer Identification Number) 240 Cedar Knolls Road, Suite 401, Cedar Knolls, New Jersey 07927 ---------------------------------------------------------------- (Address of principal executive offices, including zip code) (973) 753-3000 -------------- (Registrant's telephone number) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 2, 2001. Class Outstanding at May 2, 2001 ----- -------------------------- Common Stock, $.01 Par Value 12,110,349 AMERICAN SAFETY RAZOR COMPANY Index ----- Page Number ----------- Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets March 31, 2001 (Unaudited) and December 31, 2000 1 Condensed Consolidated Statements of Operations (Unaudited) Three months ended March 31, 2001 and March 31, 2000 3 Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three months ended March 31, 2001 and March 31, 2000 4 Condensed Consolidated Statements of Cash Flows (Unaudited) Three months ended March 31, 2001 and March 31, 2000 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk 20 Part II. Other Information Item 1. Legal Proceedings 20 Item 6. Exhibits and Reports on Form 8-K 20 Signatures 21 AMERICAN SAFETY RAZOR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

See accompanying notes. -1- AMERICAN SAFETY RAZOR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)

See accompanying notes. -2- AMERICAN SAFETY RAZOR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share data)

See accompanying notes. -3- AMERICAN SAFETY RAZOR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (In thousands) Three Months Ended March 31, 2001 2000 ------- ------- Net income (loss) $ 83 $(103) Other comprehensive loss: Foreign currency translation adjustments (857) (308) ------ ------ Comprehensive loss $(774) $(411) ===== ===== See accompanying notes. -4- AMERICAN SAFETY RAZOR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)

See accompanying notes. -5- AMERICAN SAFETY RAZOR COMPANY Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2001, are not necessarily indicative of the results that may be expected for the year ended December 29, 2001. The balance sheet at December 29, 2000 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant's Annual Report on Form 10-K for the year ended December 29, 2000. Effective December 30, 2000, the Company changed its fiscal year from a 52-53 week fiscal year ending on the Friday closest to December 31 to a 52-53 week fiscal year ending on the Saturday closest to December 31. The change in fiscal year did not have a material effect on the Company's financial position, results of operations or cash flows for the three months ended March 31, 2001. Certain prior period amounts have been reclassified to conform with the 2001 presentation. NOTE B - INVENTORIES Inventories consisted of: March 31, 2001 December 29, 2000 -------------- ----------------- (In thousands) Raw materials $27,525 $29,240 Work-in-process 5,302 5,110 Finished goods 22,309 22,810 Operating supplies 4,607 4,468 -------- -------- $59,743 $61,628 ======= ======= NOTE C - LONG TERM OBLIGATIONS On March 28, 2001, the Company amended its Credit Agreement which, among other things, modified the financial ratio requirements relating to the leverage, fixed charges and interest coverage ratios. These financial ratio requirements were modified to allow the Company to meet certain of the financial ratio requirements. In addition, the Company's principal stockholder has guaranteed $5.0 million of borrowings under the Company's existing revolving credit facility. On March 28, 2001, the Company entered into an additional revolving credit facility of $5.0 million which has been guaranteed by the principal stockholder. At March 31, 2001, the Company had approximately $9.3 million available for future borrowings under its revolving credit facilities. -6- NOTE D - NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes standards for accounting and disclosure of derivative instruments and requires the Company to recognize all derivatives on the balance sheet at fair value. This new standard, as amended by FAS 137 and FAS 138 was adopted by the Company on December 30, 2000. The Company's use of derivative instruments is limited to interest rate cap and swap agreements and foreign currency option and forward contracts. The Company has entered into an interest rate cap agreement and an interest rate swap agreement with a bank, which expire in October 2001, covering $56.3 million of its variable rate debt outstanding to manage its interest rate risk. The Company has also entered into foreign currency option and forward contracts, which expire in monthly amounts through August 2001, to manage its risk of foreign currency fluctuations. These derivatives are not designated as hedges. At December 30, 2000, the fair market value of the interest rate cap and swap agreements was an asset of approximately $6,000 and the fair market value of the foreign currency option contracts was a liability of approximately $302,000. At December 30, 2000, there were no foreign currency forward contracts outstanding. For the three months ended March 31, 2001, the Company recognized a net loss of approximately $145,000 related to the interest rate swap agreement which is included in interest expense in the consolidated statement of operations. For the three months ended March 31, 2001, the Company recognized a net gain of approximately $255,000 related to the foreign currency option and forward contracts which is included in selling, general and administrative expenses in the consolidated statement of operations. In May 2000, the Emerging Issues Task Force ("EITF") issued EITF No. 00-14, "Accounting for Certain Sales Incentives". EITF No. 00-14 addresses the recognition, measurement, and income statement classification of various sales incentives including discounts, coupons, rebates, and free products or services. EITF No. 00-14 requires a vendor to recognize discounts, coupons and rebate obligations as a reduction of revenue. The Company has historically followed the practice of recording the cost of discounts, coupons and rebates as a selling expense. The Company is required to adopt EITF No. 00-14 in the first quarter of 2002. At the time of adoption, the Company will reclassify prior quarters and prior year financial statements to conform to the new income statement classification. As the Company believes its current accounting practices relative to the timing and method of recognizing such costs is consistent with the consensus it is not expected that the adoption of the consensus will have any impact on the Company's financial position or results of operations. The Company is in the process of determining the amounts to be reclassified. In January 2001, the EITF reached a consensus on one of the issues currently under consideration within EITF Issue No. 00-22, "Accounting for Points and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to be Delivered in the Future". This consensus requires a vendor to recognize a rebate or refund obligation as a reduction of revenue based on a systematic and rational allocation of the costs of honoring rebates or refunds earned. The Company has historically followed the practice of recording the cost of such items as a selling expense. The Company adopted the consensus in the first quarter of 2001 relating to volume rebates and recorded approximately $608,000 of volume rebates as a reduction of revenue. The consolidated statement of operations for the three months ended March 31, 2000 was reclassified to conform to the new classification which resulted in volume rebates of approximately $669,000 being reflected as a reduction of revenue. As the Company's current accounting practices relative to the timing and method of recognizing such costs is consistent with the consensus, the adoption of the consensus did not have any impact on the Company's financial position or results of operations. -7- NOTE E - SEGMENT INFORMATION

Total Assets ------- March 31, 2001 -------- Razors and Blades $305,759 Cotton and Foot Care 52,912 Custom Bar Soap 29,353 -------- $388,024 ======== NOTE F - CONTINGENCIES During 1998, the Company purchased bleached cotton from an outside supplier for use in its pharmaceutical coil business. The Company converted this cotton from incoming bales into a coil, which was shipped to its pharmaceutical customers to be used as filler in bottles of oral dosage forms of pharmaceutical products to prevent breakage. During the period from March through November of 1998, the process by which the Company's supplier bleached this cotton was changed by introducing an expanded hydrogen peroxide treatment. Subsequent testing indicated varying levels of residual hydrogen peroxide in the cotton processed during this time period and the supplier in November 1998 reduced the levels of residual hydrogen peroxide in its bleaching process. The Company, to date, has received complaints from a number of customers alleging defects in the cotton supplied them during the period and asserting these defects may have led to changes in their products pharmaceutical appearance, and with respect to a limited number of products, potency. No lawsuits have been filed by any of these customers. The Company has received written notice of claims for damages in the aggregate amount of approximately $117.0 million. In addition, $113.0 million of this amount is for alleged lost profits from two customers, which lost profits have not been substantiated. It is possible that additional damage claims might be forthcoming. On March 2, 1999, at the request of the Food and Drug Administration, the Company notified all (numbering approximately 85) of its pharmaceutical cotton coil customers that it was withdrawing from the market those lots of cotton coil which may contain elevated levels of hydrogen peroxide. The Company has notified its supplier that, in the Company's view, the supplier is primarily responsible for damages, if any, that may arise out of this matter. At this time, the Company's supplier has agreed to be responsible for the cost of fiber, bleaching and freight of returned product, but has not agreed to be responsible for any other damages and has expressed an intention to assert defenses to the Company's claims. The Company's insurance carriers have been timely notified of the existence of the claim and have agreed to provide defense in a reservation of rights letter, but are continuing to evaluate whether coverage would apply to all aspects of the claims. The Company is advised by outside counsel that it has strong legal arguments that the aggregate amount of insurance available for these claims would be sufficient to cover the magnitude of the claims currently expressed. The Company also has been advised by its outside counsel that it has a number of valid defenses to potential customer claims as well as a third party claim against its supplier for damages, if any, incurred by the Company. However, management cannot at this time make a meaningful estimate of the amount or range of loss that could -8- result from an unfavorable outcome relating to this overall issue, and accordingly, there can be no assurance that the Company's exposure from this matter might not potentially exceed the combination of its insurance coverages and recourse to its supplier. It is therefore possible that the Company's results of operations or cash flows in a particular quarterly or annual period or its financial position could be significantly or adversely affected by an ultimate unfavorable outcome of this matter. NOTE G - SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION The Company's $69.3 million of 9 7/8% Series B Senior Notes due 2005 have been guaranteed, on a joint and several basis by certain domestic subsidiaries of the Company, which guarantees are senior unsecured obligations of each guarantor and will rank pari passu in right of payment with all other indebtedness of each guarantor. However, the guarantee of one of the guarantor subsidiaries ranks junior to its outstanding subordinated note. The following condensed consolidating financial information presents condensed consolidating financial statements as of March 31, 2001 and December 31, 2000, and for the three months ended March 31, 2001 and 2000, of American Safety Razor Company - the parent company, the guarantor subsidiaries (on a combined basis), the non- guarantor subsidiaries (on a combined basis), and elimination entries necessary to combine such entities on a consolidated basis. Separate financial statements and other disclosures concerning the guarantor subsidiaries are not presented because management has determined that such information would not be material to the holders of the 9 7/8% Series B Senior Notes. -9- Condensed Consolidating Balance Sheets (Unaudited) March 31, 2001

-10- Condensed Consolidating Balance Sheets December 29, 2000

-11- Condensed Consolidating Statements of Operations (Unaudited) Three Months Ended March 31, 2001

-12- Condensed Consolidating Statements of Operations (Unaudited) Three Months Ended March 31, 2000

-13- Condensed Consolidating Statements of Comprehensive Income (Unaudited) Three Months Ended March 31, 2001

Condensed Consolidating Statements of Comprehensive Income (Unaudited) Three Months Ended March 31, 2000

-14- Condensed Consolidating Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2001

-15- Condensed Consolidating Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2000

-16- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The following discussion and analysis of financial condition and results of operations is based upon and should be read in conjunction with the consolidated financial statements of the Company and notes thereto included in this Report and the Registrant's Annual Report on Form 10-K for the year ended December 29, 2000. Forward-Looking Statements Management's discussion and analysis of financial condition and results of operations and other sections of this Report contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend for the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding the Company's expected financial position, business and financing plans are forward-looking statements. Such forward- looking statements are identified by use of forward-looking words such as "anticipates," "believes," "plans," "estimates," "expects," and "intends" or words or phrases of similar expression. These forward-looking statements are subject to various assumptions, risks and uncertainties, including but not limited to, changes in political and economic conditions, demand for the Company's products, acceptance of new products, technology developments affecting the Company's products and to those discussed in the Company's filings with the Securities and Exchange Commission. Accordingly, actual results could differ materially from those contemplated by the forward-looking statements. Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000 Net Sales. Net sales for the three months ended March 31, 2001 and 2000, were $77.7 million and $76.5 million, respectively, an increase of $1.2 million, or 1.5%. Razors and Blades. Net sales of our razors and blades segment for the three months ended March 31, 2001 and 2000, were $50.4 million and $50.1 million, respectively, an increase of $0.3 million or 0.4%. Net sales of shaving razors and blades for the three months ended March 31, 2001 and 2000, were $35.2 million and $34.2 million, respectively, an increase of $1.0 million, or 2.8%. Net sales of domestic value branded shaving products increased 2.0%, primarily reflecting sales gains relating to the premium rubber grip and long handle disposable razors which was somewhat offset by reduced sales volume to certain customers due primarily to the timing of promotional programs. Net sales of domestic private label shaving products decreased 16.3% primarily reflecting a decline in promotional programs by a key customer. Net sales of shaving products in international markets increased 14.1% (net of a 6% negative impact of unfavorable exchange rates) reflecting stronger sales in most of the Company's markets. The increase results primarily from increased sales of the Tri-Flexxx(TM), long handle and welter weight disposable shaving products and from increased sales penetration in existing and new markets. Net sales of blades and bladed hand tools for the three months ended March 31, 2001 and 2000, were $11.1 million and $12.0 million, respectively, a decrease of $0.9 million, or 8.1%. The decrease primarily reflects demand softness and inventory reductions experienced in certain markets. Net sales of specialty industrial and medical blades for the three months ended March 31, 2001 and 2000, were $4.1 million and $3.9 million, respectively, an increase of $0.2 million, or 5.8%. Sales of specialty industrial products decreased 5.0%, as a result of reduced usage in certain markets. Sales of medical products increased 14.9% reflecting distribution gains. Cotton and Foot Care. Net sales of cotton and foot care products for the three months ended March 31, 2001 and 2000, were $21.1 million and $19.9 million, respectively, an increase of $1.2 million or 6.0%. The increase results primarily from an increase in promotional programs by a key customer which was somewhat offset by reduced sales -17- volume resulting from redesign of products by certain medical cotton customers. Custom Bar Soap. Net sales of the Company's custom bar soap products for the three months ended March 31, 2001 and 2000, were $6.2 million and $6.5 million, respectively, a decrease of $0.3 million or 4.3%. The decrease results primarily from decreased sales volume to several pharmaceutical/skin care customers including repackaging of products for one customer, which was somewhat offset by increased sales volume to several skin care/specialty customers. Gross Profit. Gross profit decreased $2.0 million to $22.4 million during the three months ended March 31, 2001, from $24.4 million for the three months ended March 31, 2000. As a percentage of net sales, gross profit was 28.9% for the three months ended March 31, 2001, and 31.9% for the three months ended March 31, 2000. Blade margins declined due primarily to changes in product mix, higher manufacturing overheads, higher depreciation expense related to capacity expansion projects and from the negative impact of unfavorable exchange rates. Cotton margins declined due primarily to changes in product mix and higher shipping costs which were somewhat offset by labor efficiencies and lower material costs. Operating and Other Expenses. Selling, general and administrative expenses were 20.6% of net sales for the three months ended March 31, 2001, compared to 24.5% for the three months ended March 31, 2000. The decrease primarily reflects a decrease in promotional spending for our shaving blade and cotton products and a decrease in legal expenses. Amortization of intangible assets was substantially unchanged at $1.1 million for the three months ended March 31, 2001 and $1.2 million for the three months ended March 31, 2000. Interest expense increased $0.5 million to $5.2 million for the three months ended March 31, 2001, from $4.7 million for the three months ended March 31, 2000, due primarily from additional borrowings under the Company's revolving credit facilities and additional interest expense relating to the interest rate swap agreement which were somewhat offset by a decrease in interest rates and lower debt outstanding under the Company's term loans. The Company's effective income tax rate was 53.1% for the three months ended March 31, 2001, versus 46.9% for the three months ended March 31, 2000, and varies from the United States statutory rate due primarily to nondeductible goodwill amortization and state income taxes, net of the federal tax benefit. Liquidity and Capital Resources The Company's primary sources of liquidity are cash flow from operations and borrowings under its revolving credit facilities. Net cash provided by operating activities amounted to $1.4 million for the three months ended March 31, 2001 and net cash used in operating activities amounted to $0.8 million for the three months ended March 31, 2000. Net cash provided by operating activities for the three months ended March 31, 2001 primarily reflects an increase in net income and changes in working capital accounts, primarily inventories, prepaid expenses and accrued expenses and other. Net cash used in investing activities related to capital expenditures of $3.3 million for the three months ended March 31, 2001. Net cash provided from financing activities resulted primarily from net borrowings of $2.1 million for the three months ended March 31, 2001. At March 31, 2001, the Company had approximately $9.3 million available for future borrowings under its revolving credit facilities. Management believes that the Company's cash on hand, anticipated funds from operations, and the amounts available to the Company under its revolving credit facilities will be sufficient to cover its working capital needs, capital expenditures, debt service requirements and tax obligations for at least the next 12 months. The Company's ability to fund operations, make capital expenditures and make scheduled principal and interest payments or to refinance the Company's indebtedness will depend upon future financial and operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, some of which are beyond the Company's control. -18- Market Risk The Company is exposed to various market risk factors such as fluctuating interest rates and changes in foreign currency rates. These risk factors can impact results of operations, cash flows and financial position. The Company manages these risks through regular operating and financing activities and periodically uses derivative financial instruments such as foreign exchange option and forward contracts and interest rate cap and swap agreements. These derivative instruments are placed with major financial institutions and are not for speculative or trading purposes. The following analysis presents the effect on the Company's earnings, cash flows and financial position as if the hypothetical changes in market risk factors occurred on March 31, 2001 and March 31, 2000. Only the potential impacts of hypothetical assumptions are analyzed. The analysis does not consider other possible effects that could impact the business. Interest Rate Risk At March 31, 2001, the Company carried $193.1 million of outstanding debt on its balance sheet, with $123.2 million of that total held at variable interest rates. The Company has entered into an interest rate cap agreement and an interest rate swap agreement with a bank covering $56.3 million of its variable rate debt outstanding to manage its interest rate risk. Holding all other variables constant, if interest rates hypothetically increased or decreased by 10%, for the three months ended March 31, 2001 and 2000, the impact on earnings, cash flow and financial position would not be material. In addition, if interest rates hypothetically increased or decreased by 10% on March 31, 2001, with all other variables held constant, the fair market value of our $69.3 million 9 7/8% Series B Senior Notes would increase or decrease by approximately $2.6 million. Foreign Currency Risk The Company sells to customers in foreign markets through foreign operations and through export sales from plants in the U.S. These transactions are often denominated in currencies other than the U.S. dollar. The primary currency exposures are the Euro, British Pound Sterling, Canadian Dollar and Mexican Peso. The Company limits its foreign currency risk by operational means, mostly by locating its manufacturing operations in those locations where it has significant exposures to major currencies. The Company has entered into currency option and forward contracts to partially offset the risk of foreign currency fluctuations. The value of these contracts at March 31, 2001 was not material to the Company's earnings, cash flow and financial position. New Accounting Standards In June 1998, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes standards for accounting and disclosure of derivative instruments and requires the Company to recognize all derivatives on the balance sheet at fair value. This new standard, as amended by FAS 137 and FAS 138 was adopted by the Company on December 30, 2000. The Company's use of derivative instruments is limited to interest rate cap and swap agreements and foreign currency option and forward contracts. The Company has entered into an interest rate cap agreement and an interest rate swap agreement with a bank, which expire in October 2001, covering $56.3 million of its variable rate debt outstanding to manage its interest rate risk. The Company has also entered into foreign currency option and forward contracts, which expire in monthly amounts through August 2001, to manage its risk of foreign currency fluctuations. These derivatives are not designated as hedges. At December 30, 2000, the fair market value of the interest rate cap and swap agreements was an asset of approximately $6,000 and the fair market value of the foreign currency option contracts was a liability of approximately $302,000. At December 30, 2000, there were no foreign currency forward contracts outstanding. For the three months ended March 31, 2001, the Company recognized a net loss of approximately $145,000 related to the interest rate swap agreement which is included in interest expense in the consolidated statement of operations. For the three months ended March 31, 2001, the Company recognized a net gain of approximately $255,000 related -19- to the foreign currency option and forward contracts which is included in selling, general and administrative expenses in the consolidated statement of operations. In May 2000, the Emerging Issues Task Force ("EITF") issued EITF No. 00-14, "Accounting for Certain Sales Incentives". EITF No. 00-14 addresses the recognition, measurement, and income statement classification of various sales incentives including discounts, coupons, rebates, and free products or services. EITF No. 00-14 requires a vendor to recognize discounts, coupons and rebate obligations as a reduction of revenue. The Company has historically followed the practice of recording the cost of discounts, coupons and rebates as a selling expense. The Company is required to adopt EITF No. 00-14 in the first quarter of 2002. At the time of adoption, the Company will reclassify prior quarters and prior year financial statements to conform to the new income statement classification. As the Company believes its current accounting practices relative to the timing and method of recognizing such costs is consistent with the consensus it is not expected that the adoption of the consensus will have any impact on the Company's financial position or results of operations. The Company is in the process of determining the amounts to be reclassified. In January 2001, the EITF reached a consensus on one of the issues currently under consideration within EITF Issue No. 00-22, "Accounting for Points and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to be Delivered in the Future". This consensus requires a vendor to recognize a rebate or refund obligation as a reduction of revenue based on a systematic and rational allocation of the costs of honoring rebates or refunds earned. The Company has historically followed the practice of recording the cost of such items as a selling expense. The Company adopted the consensus in the first quarter of 2001 relating to volume rebates and recorded approximately $608,000 of volume rebates as a reduction of revenue. The consolidated statement of operations for the three months ended March 31, 2000 was reclassified to conform to the new classification which resulted in volume rebates of approximately $669,000 being reflected as a reduction of revenue. As the Company's current accounting practices relative to the timing and method of recognizing such costs is consistent with the consensus, the adoption of the consensus did not have any impact on the Company's financial position or results of operations. Contingencies Refer to Note F - Contingencies to the Notes to Condensed Consolidated Financial Statements for a discussion of legal contingencies. Inflation Inflation has not been material to the Company's operations within the periods presented. Item 3. Quantitative and Qualitative Disclosures About Market Risk The information called for by this item is provided under the captions "Market Risk", "Interest Rate Risk" and "Foreign Currency Risk" under Part I, Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations of this Report. PART II, OTHER INFORMATION Item 1. Legal Proceedings The information called for by this item is provided in Note F - Contingencies to Notes to Condensed Consolidated Financial Statements under Part I, Item 1. - Financial Statements of this Report. Item 6. Exhibits and Reports on Form 8-K a. Reports on Form 8-K: No reports on Form 8-K have been filed during the quarter ended March 31, 2001. -20- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN SAFETY RAZOR COMPANY May 8, 2001 By /s/James D. Murphy ---------------- -------------------------------------- Date James D. Murphy President and Chief Executive Officer May 8, 2001 By /s/J. Andrew Bolt ----------------- -------------------------------------- Date J. Andrew Bolt Senior Vice President Chief Financial Officer -21-

AMERICAN SAFETY RAZOR CO 10-Q