10-Q 1 b316652_10q.txt QUARTERLY REPORT UNITED STATES 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 PERIOD ENDED DECEMBER 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 333-66221 ------------------- R.A.B. HOLDINGS, INC. R.A.B. ENTERPRISES, INC. ------------------------------------------------------------- ------------------------------------------------------------- (Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter) DELAWARE DELAWARE ------------------------------------------------------------- ------------------------------------------------------------- (State or other jurisdiction of (State or other jurisdiction of incorporation or organization) incorporation or organization) 13-3893246 13-3988873 ------------------------------------------------------------- ------------------------------------------------------------- (I.R.S. Employer identification No.) (I.R.S. Employer identification No.)

444 Madison Avenue, New York, New York 10022 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 688-4500 --------------- N/A -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES

See notes to Condensed Consolidated Financial Statements -1- R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES

See notes to Condensed Consolidated Financial Statements -2- R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES

See notes to Condensed Consolidated Financial Statements -3- R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES

See notes to Condensed Consolidated Financial Statements -4- R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NOTE A - Basis of Presentation The condensed consolidated financial statements include the accounts of R.A.B. Holdings, Inc. ("Holdings") and its wholly-owned subsidiary, R.A.B. Enterprises, Inc. ("Enterprises") and its wholly-owned subsidiaries (collectively, the "Company"). Holdings is a holding company with no substantial assets or operations other than its investment in Enterprises. Enterprises is a holding company with no substantial assets or operations other than its investments in Millbrook Distribution Services Inc. ("Millbrook") and The B. Manischewitz Company, LLC ("Manischewitz"). These condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements as of March 31, 2001 and 2000 contained in the Company's Form 10-K filed with the Securities and Exchange Commission. The information related to March 31, 2001 contained herein has been derived from the Company's audited consolidated financial statements. Certain reclassifications have been made in the prior year financial statements to conform with the current year presentation. On November 1, 2000, Manischewitz acquired substantially all of the assets and operations of Guiltless Gourmet, Inc. ("Guiltless") for a purchase price of approximately $4.9 million, including transaction costs. Guiltless owned the second largest selling national brand and was a leader in the development of baked tortilla chips. On April 17, 2000, Millbrook acquired substantially all of the assets and operations of the Miller Buckeye Biscuit Company, Inc. ("Miller Buckeye") for a purchase price of approximately $17.6 million, including transaction costs. Miller Buckeye was a distributor of specialty foods, cookies, crackers and snacks to retail grocery and other retail establishments in Ohio, Pennsylvania, West Virginia and Western New York. On January 31, 2000, Millbrook acquired certain of the assets and operations of I. Epstein & Sons, Inc. ("Epstein") for a purchase price of approximately $15.4 million, including transaction costs. Epstein was a full service distributor of kosher and specialty food products, including its Season brand of canned fish, vegetables and other specialty food products. Concurrent with the acquisition, the management and ownership of the Season brand was assumed by Manischewitz. Pro forma historical operating results reflecting the Guiltless, Miller Buckeye and Epstein acquisitions have not been included herein as the impact of these acquisitions was not considered significant on a consolidated basis. On May 1, 1998, Enterprises acquired all of the outstanding interests of Manischewitz for approximately $126.2 million through the issuance of $120 million Senior Notes due 2005 bearing interest at 10.5% ("10.5% Notes") and the issuance by Holdings of $48 million Senior Notes due 2008 bearing interest at 13% ("13% Notes"). The 10.5% Notes are fully and unconditionally guaranteed on a joint and several basis by Millbrook and Manischewitz. Accordingly, as the combined financial statements of the subsidiaries guaranteeing the 10.5% Notes are substantially equivalent to the consolidated financial statements of Enterprises, no separate financial statements of Millbrook and Manischewitz are presented since management has determined that such information is not material. All significant intercompany transactions and balances are eliminated in consolidation. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full fiscal year. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of December 31, 2001, and the results of operations and cash flows for the periods ended December 31, 2001 and 2000. -5- R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) -------------------------------------------------------------------------------- NOTE B - Inventories Inventories are valued at the lower of cost or market. Cost is determined by the last-in, first-out ("LIFO") method. Inventories consisted of the following (in thousands): December 31, March 31, 2001 2001 ---------------- --------------- Raw materials $ 1,942 $ 1,730 Finished goods 77,447 70,825 ---------------- --------------- $ 79,389 $ 72,555 ================ =============== NOTE C - Related Party Transactions For each of the three month periods ended December 31, 2001 and 2000, the Company paid $502,500 and for each of the nine month periods ended December 31, 2001 and 2000, the Company paid $1,507,500 to an affiliated entity for management fees, reasonable services provided and expenses incurred on its behalf. NOTE D - Comprehensive (Loss) Income For the three month periods ended December 31, 2001 and 2000, Holdings' and Enterprises' comprehensive loss was ($1,634,000) and ($1,127,000) and ($2,090,000) and ($1,579,000), respectively, and for the nine month periods ended December 31, 2001 and 2000, Holdings' and Enterprises' comprehensive loss was ($8,749,000) and ($7,222,000) and ($5,033,000) and ($3,591,000), respectively. -6- R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) -------------------------------------------------------------------------------- NOTE E - Segment Reporting The following information is presented in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", which established standards for reporting information about operating segments in the Company's interim financial statements. For the three months ended December 31, 2000, the Corporate items include an adjustment to the previous quarter's intercompany sales elimination.

-7- R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Concluded) -------------------------------------------------------------------------------- NOTE F - Extraordinary Item - Early Extinguishment of Debt During the nine month period ended December 31, 2000, Enterprises repurchased approximately $18.8 million of its outstanding 10.5% Notes resulting in a gain of approximately $3.2 million, net of income taxes of approximately $2.1 million. NOTE G - New Accounting Pronouncements Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities" was issued in June 1998 and is effective for fiscal years beginning after June 15, 2000. SFAS No. 133 requires the recognition of all derivatives in the consolidated balance sheet as either assets or liabilities measured at fair value. The Company adopted SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, during the year ended March 31, 2001. The adoption of SFAS No. 133 has not had a material impact on the Company's financial position or overall trends in results of operations and has not resulted in significant changes to its financial risk management practices. Emerging Issues Task Force ("EITF") Issue No. 00-25 was finalized and is effective for fiscal years beginning after December 15, 2001. EITF No. 00-25 requires the reclassification of certain consideration paid to a reseller by a vendor as a reduction of income on the vendor's income statement. The Company adopted EITF No. 00-25 effective April 1, 2001. The adoption of EITF No. 00-25 did not have a material impact on the Company's overall trends in results of operations. SFAS No. 142 "Goodwill and Other Intangible Assets" was issued in June 2001 and is effective for fiscal years beginning after December 15, 2001. SFAS No. 142 requires goodwill and indefinite-lived intangible assets to be evaluated annually for impairment. It also will require that goodwill no longer be amortized. For the three and nine month periods ended December 31, 2001, goodwill amortization was $0.6 million and $1.9 million as compared to $0.6 million and $1.8 million for the three and nine month periods ended December 31, 2000. SFAS No. 143 "Accounting for Asset Retirement Obligations" was issued in August 2001 and is effective for fiscal years beginning after June 15, 2001. SFAS No. 143 establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued in October 2001 and is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets. The Company will adopt SFAS No. 142, 143 and 144 as each becomes effective. Management is currently evaluating the impact that these statements will have on the Company's financial statements. -8- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Revenues. Revenues for the three month period ended December 31, 2001 decreased $10.8 million or 6.3% to $161.6 million as compared to $172.4 million for the three month period ended December 31, 2000. Revenues for the nine month period ended December 31, 2001 decreased $49.7 million or 10.3% to $434.4 million as compared to $484.1 million for the nine month period ended December 31, 2000. Revenues include: (i) Millbrook's revenues of $150.4 million and $408.8 million for the three and nine month periods ended December 31, 2001 as compared to $159.9 million and $462.9 million for the three and nine month periods ended December 31, 2000; (ii) Manischewitz' revenues of $13.3 million and $30.7 million for the three and nine month periods ended December 31, 2001 as compared to $10.8 million and $26.2 million for the three and nine month periods ended December 31, 2000; and (iii) intersegment sales, which are eliminated in consolidation, of ($2.1) million and ($5.1) million for the three and nine month periods ended December 31, 2001 as compared to $1.7 million and ($5.0) million for the three and nine month periods ended December 31, 2000. Millbrook's revenues decreased $9.5 million and $54.1 million or 5.9% and 11.7% for the three and nine month periods ended December 31, 2001 as compared to the comparable periods of the prior year. The decrease in revenues for the three and nine month periods is principally due to decreased sales to certain customers as a result of several factors, including customer losses during the second half of the prior fiscal year, customer decisions to move toward self-distribution, industry consolidation and customer financial difficulties, the aggregate of which exceeded the growth of sales to certain other customers. Manischewitz' revenues increased $2.5 million and $4.5 million or 22.2% and 17.4% for the three and nine month periods ended December 31, 2001 as compared to the comparable periods of the prior year. The increase in revenues for the three and nine month periods are due to the following: (i) sales to new customer accounts gained as a result of the Guiltless Gourmet acquisition in November 2000 ($0.6 million and $4.8 million for the three and nine month periods); and (ii) increased sales of Manischewitz and Season brand products ($1.9 million and $0.4 million for the three and nine month periods) reduced by a gain on the sale of land in Israel ($0.7 million) during the nine months ended December 31, 2000. The sales increase for the three and nine month periods is principally due to the timing of the Jewish holiday of Passover. As the holiday begins approximately two weeks earlier this year, more Passover orders were shipped during the third quarter as compared to the comparable period of the prior year. Gross Profit. Gross profit for the three and nine month periods ended December 31, 2001 was $36.3 million and $105.5 million as compared to $40.7 million and $116.2 million for the three and nine month periods ended December 31, 2000, a decrease of $4.4 million and $10.7 million or 10.7% and 9.2%. As a percentage of revenues, the gross profit margin was 22.5% and 24.3% for the three and nine month periods ended December 31, 2001 as compared to 23.6% and 24.0% for the three and nine month periods ended December 31, 2000. -9- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The decrease in gross profit dollars and its impact on gross profit margin for the three and nine month periods are primarily due to the following: (i) decreased gross profit dollars associated with Millbrook's lower revenues ($5.2 million and $12.8 million for the three and nine month periods) and decreased gross profit margin for the three month period resulting from the shift in Millbrook's customer base from serviced to non-serviced customers (1.2%); partially offset by (ii) increased gross profit dollars associated with higher Manischewitz and Season sales ($0.4 million for the three month period and $0.3 million or 0.3% for the nine month period) reduced by the gain on the sale of land in Israel during the nine months ended December 31, 2000 (($0.7) million or (0.1%) for the nine month period); and (iii) increased gross profit dollars on sales to new customer accounts gained as a result of the Guiltless Gourmet acquisition in November 2000 ($0.3 million for the three month period and $2.5 million or 0.1% for the nine month period). Operating Expenses. Distribution and warehousing expenses for the three and nine month periods ended December 31, 2001 were $14.0 million and $41.6 million as compared to $15.1 million and $44.1 million for the three and nine month periods ended December 31, 2000. As a percentage of revenues, distribution and warehousing expenses decreased to 8.6% for the three months ended December 31, 2001 as compared to 8.8% for the comparable period of the prior year and increased to 9.6% for the nine month period ended December 31, 2001 as compared to 9.1% for the comparable period of the prior year. Distribution and warehousing costs for the three and nine month periods were impacted by the following: (i) lower headcount resulting from the closure of Millbrook's distribution center in Greenville, North Carolina and the consolidation of its Cincinnati, Ohio refrigerated facility into its Youngstown, Ohio distribution center; and (ii) lower transportation costs realized from cost reduction programs implemented by Millbrook's management to achieve more efficient routing and enhanced utilization of its fleet; partially offset by (iii) increased distribution costs associated with sales to new customer accounts gained as a result of the Guiltless Gourmet acquisition in November 2000. Selling, general and administrative expenses for the three and nine month periods ended December 31, 2001 were $19.2 million and $60.2 million, as compared to $22.8 million and $67.3 million for the three and nine month periods ended December 31, 2000. As a percentage of revenues, selling, general and administrative expenses decreased to 11.9% for the three month period ended December 31, 2001 as compared to 13.2% for the comparable period of the prior year and remained unchanged at 13.9% for the nine month periods ended December 31, 2001 and 2000. The decrease in selling, general and administrative costs for the three and nine month periods are principally due to the following: (i) lower headcount in Millbrook's salesforce due to reductions made during the nine month period ended December 31, 2001 directly related to customer losses; -10- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) (ii) lower headcount in Millbrook's general and administrative departments as a result of the consolidation in August 2000 and April 2001 of the Epstein and Miller Buckeye operations, respectively, which were acquired in the prior fiscal year; and (iii) lower headcount in Millbrook's selling, general and administrative functions realized from a cost reduction program implemented by Millbrook's management to streamline its workforce; partially offset by (iv) incremental compensation and related employee benefit costs resulting from the Guiltless Gourmet acquisition in November 2000. Amortization of intangibles was $1.1 million and $3.2 million for the three and nine month periods ended December 31, 2001 as compared to $1.0 million and $3.0 million for the three and nine month periods ended December 31, 2000. This increase in amortization is due to the Guiltless Gourmet acquisition in November 2000. Interest Expense. Interest expense for the three and nine month periods ended December 31, 2001 was $4.6 million (consisting of $0.8 million for Holdings and $3.8 million for Enterprises) and $14.5 million (consisting of $2.5 million for Holdings and $12.0 million for Enterprises) as compared to $5.3 million (consisting of $0.8 million for Holdings and $4.5 million for Enterprises) and $15.0 million (consisting of $2.4 million for Holdings and $12.6 million for Enterprises) for the three and nine month periods ended December 31, 2000. The decrease in interest expense for the three and nine months ended December 31, 2001 is primarily attributable to lower interest rates on the Company's revolving credit borrowings partially offset by higher levels of debt outstanding under the Company's Credit Agreement as a result of its acquisitions during the year ended March 31, 2001. Taxes. The benefit for income taxes for the three and nine month periods ended December 31, 2001 was $0.9 million and $5.1 million for Holdings and $0.5 million and $4.1 million for Enterprises as compared to $1.3 million and $4.8 million for Holdings and $1.0 million and $3.9 million for Enterprises for the three and nine month periods ended December 31, 2000. These benefits principally relate to the results of operations. Extraordinary Item - Early Extinguishment of Debt. The extraordinary gain on early extinguishment of debt for the nine month period ended December 31, 2000 was $3.2 million (net of income taxes of $2.1 million). This gain resulted from Enterprises' repurchase of approximately $18.8 million of its outstanding 10.5% Notes. Net Loss. As a result of the foregoing, the net loss for the three and nine month periods ended December 31, 2001 was $1.6 million and $8.8 million for Holdings and $1.1 million and $7.3 million for Enterprises as compared to $2.2 million and $5.1 million for Holdings and $1.7 million and $3.7 million for Enterprises for the three and nine month periods ended December 31, 2000. Impact of New Accounting Pronouncements. Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities" was issued in June 1998 and is effective for fiscal years beginning after June 15, 2000. SFAS No. 133 requires the recognition of all derivatives in the consolidated balance sheet as either assets or liabilities measured at fair value. The Company adopted SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, during the year ended March 31, 2001. The adoption of SFAS No. 133 has not had a material impact on the Company's financial position or overall trends in results of operations and has not resulted in significant changes to its financial risk management practices. -11- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Emerging Issues Task Force ("EITF") Issue No. 00-25 was finalized and is effective for fiscal years beginning after December 15, 2001. EITF No. 00-25 requires the reclassification of certain consideration paid to a reseller by a vendor as a reduction of income on the vendor's income statement. The Company adopted EITF No. 00-25 effective April 1, 2001. The adoption of EITF No. 00-25 did not have a material impact on the Company's overall trends in results of operations. SFAS No. 142 "Goodwill and Other Intangible Assets" was issued in June 2001 and is effective for fiscal years beginning after December 15, 2001. SFAS No. 142 requires goodwill and indefinite-lived intangible assets to be evaluated annually for impairment. It also will require that goodwill no longer be amortized. SFAS No. 143 "Accounting for Asset Retirement Obligations" was issued in August 2001 and is effective for fiscal years beginning after June 15, 2001. SFAS No. 143 establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued in October 2001 and is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets. The Company will adopt SFAS No. 142, 143 and 144 as each becomes effective. Management is currently evaluating the impact that these statements will have on the Company's financial statements. Financial Condition, Liquidity and Capital Resources Operations for the nine months ended December 31, 2001, excluding non-cash charges for depreciation and amortization, utilized cash of $0.9 million for Holdings and provided cash of $0.6 million for Enterprises. Operations for the nine months ended December 31, 2000, excluding the net gain on the early extinguishment of debt and non-cash charges for depreciation and amortization, utilized cash of $0.1 million for Holdings and provided cash of $1.2 million for Enterprises. During the nine month periods ended December 31, 2001 and 2000, other changes in assets and liabilities resulting from operating activities provided cash of $13.8 million for Holdings and $13.9 million for Enterprises and utilized cash of $14.5 million for Holdings and $12.6 million for Enterprises, respectively, resulting in net cash provided by operating activities of $12.9 million for Holdings and $14.5 million for Enterprises and net cash used in operating activities of $14.6 million for Holdings and $11.4 million for Enterprises, respectively. Investing activities, which principally consisted of the acquisitions of property and equipment and the acquisitions of Miller Buckeye and Guiltless Gourmet in the prior fiscal period, resulted in a use of cash of $1.9 million and $24.3 million for the nine month periods ended December 31, 2001 and 2000 for each of Holdings and Enterprises, respectively. During the nine month period ended December 31, 2001, financing activities, which principally consisted of $1.6 million of payments from the Interest Escrow Account by Holdings and repayments of $19.2 million under the Credit Agreement, resulted in a use of cash of $17.6 million for Holdings and $19.2 million for Enterprises. The reduction in outstanding borrowings under the Company's Credit Agreement was supplemented by the utilization of $7.2 million of cash surrender value available under Millbrook's deferred compensation arrangements. During the nine month period ended December 31, 2000, financing activities which principally consisted of the repurchase of $18.8 million of long-term debt for $13.0 million by Enterprises, offset by $3.3 million of payments from the Interest Escrow Account by Holdings and additional borrowings of $46.5 million under the Credit Agreement, provided cash of $36.8 million for Holdings and $33.5 million for Enterprises. -12- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Concluded) The primary sources of liquidity for Holdings and Enterprises are the cash flows from the operations of Millbrook and Manischewitz and borrowings under the Company's Credit Agreement. At December 31, 2001, Millbrook and Manischewitz had approximately $2.9 million of cash and approximately $17.9 million of available borrowing capacity under the Credit Agreement. The Company is currently in compliance with the covenants contained in the Credit Agreement and the indentures relating to its senior notes. From a distribution perspective, Millbrook's business continues to be impacted by industry consolidation of retail customers, customer decisions to move towards self-distribution and customer financial difficulties. Millbrook continues to implement its strategy of expanding the specialty food category while taking advantage of market opportunities in its health and beauty care and general merchandise categories. Further, Millbrook's management has instituted a number of cost reduction programs designed to streamline its organization to reduce its operating costs and better meet the demands of its changing markets. From a branded food products perspective, Manischewitz' operations are impacted by the amount of retail space devoted to its products and the consumer acceptance of those products. Although there can be no assurance, Holdings and Enterprises believe that its operating cash flows and borrowings under its Credit Agreement will be sufficient to meet its obligations and remain in compliance with its covenants. The ability of Holdings and Enterprises to meet those obligations and maintain compliance will depend on a number of factors, including those discussed above, general economic conditions and other factors beyond Holdings' and Enterprises' control. Effective October 30, 2001, the Company's Credit Agreement was amended to provide up to $10 million of additional availability and to extend the revolving credit facility to September 30, 2003. In conjunction with the amendment, Millbrook and Manischewitz provided mortgages on certain of its real property and pledged certain unencumbered fixtures and equipment, and the Company pledged the membership interests of Manischewitz. -13- ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to Item 7a of the Company's Form 10-K for the year ended March 31, 2001 filed with the Securities and Exchange Commission. ------------- The foregoing discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Additionally, written materials issued and oral statements made from time to time by Holdings and Enterprises may contain forward-looking statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and by their use of words such as "goals", "expects", "plans", "believes", "estimates", "forecasts", "projects", "intends" and other words of similar meaning. Execution of business and acquisition strategies, expansion of product lines and increase of distribution networks or product sales are areas, among others, whose future success may be difficult to predict. They are based on management's then-current information, assumptions, plans, expectations, estimates and projections regarding the food and wholesale distribution industries. However, such statements are not guarantees of future performance, and actual results and outcomes may differ materially from what is expressed depending on a variety of factors, many of which are outside of Holdings' and Enterprises' control. Given these uncertainties, current and prospective investors are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to update or revise any forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements herein to reflect future events or developments. Among the factors that could cause actual outcomes or results to differ materially from what is expressed in these forward-looking statements are changes in the demand for, supply of, and market prices of Holdings' and Enterprises' products, the actions of current and potential new competitors, changes in technology and economic conditions. -14- PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: a. Exhibits None b. No reports were filed on Form 8-K during the quarter for which this report is filed. -15- SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. R.A.B. HOLDINGS, INC. February 13, 2002 /s/ Richard A. Bernstein ---------------------------------- Richard A. Bernstein Chairman February 13, 2002 /s/ Steven M. Grossman ---------------------------------- Steven M. Grossman Chief Financial Officer R.A.B. ENTERPRISES, INC. February 13, 2002 /s/ Richard A. Bernstein ---------------------------------- Richard A. Bernstein Chairman February 13, 2002 /s/ Steven M. Grossman ---------------------------------- Steven M. Grossman Chief Financial Officer -16-

RAB HOLDINGS INC 10-Q