<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             -----------------------
                                    FORM 10-K

 (Mark One)
 [X]              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                                       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 : 333-4520
            --------------------------------------------------------
                               RACI HOLDING, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                     <C> 
                  DELAWARE                                           51-0350929
(State or other jurisdiction of incorporation or        (I.R.S. Employer Identification No.)
                organization)
</TABLE>

                               870 REMINGTON DRIVE
                                  P.O. BOX 700
                       MADISON, NORTH CAROLINA 27025-0700
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (336) 548-8700

              (Registrant's telephone number, including area code)
            --------------------------------------------------------
        Securities registered pursuant to Section 12(b) of the Act: NONE

        Securities registered pursuant to Section 12(g) of the Act: NONE

         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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

         Yes  [X]          No  [ ]

         As of March 17, 1999, the registrant had outstanding 760,000 shares of
Class A Common Stock, par value $.01 per share and 0 shares of Class B Common
Stock, par value $.01 per share.



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                         TABLE OF CONTENTS TO FORM 10-K
                         -------------------------------

<TABLE>
      <S>                                                                                        <C> 
      PART I..................................................................................... 3
         ITEM 1. BUSINESS........................................................................ 3
         ITEM 2. PROPERTIES......................................................................12
         ITEM 3. LEGAL PROCEEDINGS...............................................................13
         ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................14

     PART II.....................................................................................15
         ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                        STOCKHOLDER MATTERS......................................................15
         ITEM 6. SELECTED FINANCIAL DATA.........................................................16
         ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS.......................................18
         ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                            MARKET RISK..........................................................31
         ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.....................................32
         ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                        ACCOUNTING AND FINANCIAL DISCLOSURE......................................56

     PART III....................................................................................57
         ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............................57
         ITEM 11. EXECUTIVE COMPENSATION.........................................................59
         ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                          MANAGEMENT.............................................................63
         ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................63


     PART IV.....................................................................................65
         ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
                          ON FORM 8-K............................................................65
</TABLE>



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<PAGE>   3

                                     PART I

ITEM 1.  BUSINESS

         RACI Holding, Inc. ("Holding") and its wholly-owned subsidiary
Remington Arms Company, Inc. ("Remington"), are Delaware corporations organized
in 1993 at the direction of Clayton, Dubilier & Rice, Inc. ("CD&R"), a private
investment firm, to acquire (the "Acquisition") substantially all the assets and
business of Sporting Goods Properties, Inc. ("Sporting Goods") as well as
certain other assets of E. I. du Pont de Nemours and Company ("DuPont" and
together with Sporting Goods, the "Sellers") used in connection with the
marketing of fishline and fishline accessories (collectively, the "Business").
Unless the context otherwise requires, the term "Company" means, with respect to
periods prior to the Acquisition, the Business conducted by the Sellers, and
with respect to periods after the Acquisition, Holding and its subsidiaries,
including Remington.

         Founded in 1816, the Company is engaged in the design, manufacture and
sale of sporting good products for the hunting/shooting sports and related
markets. The Company's product lines consist of firearms, ammunition and
hunting/gun care accessories sold under the Remington(R) name and other labels,
fishing products sold under the Stren(R) name and other labels and clay targets.

         Certain market share and competitive position data contained in this
report is based on the most recent data published by the National Sporting Goods
Association ("NSGA"), American Sports Data Incorporated ("ASD") and the Sports
Markets Research Group ("SMRG"). The Company believes that such data is
inherently imprecise and may not accurately reflect the Company's market shares
for more recent periods, but is generally indicative of its relative market
share and competitive position.

         The following sets forth the Company's sales for its aggregated
operating segments for the periods shown (See Note 19 to the Company's
consolidated financial statements for the year ended December 31, 1998 appearing
elsewhere in this report):

<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31,  
                                   -----------------------------------------------
                                    1998                1997                1996
                                    ----                ----                ----

<S>                                <C>                <C>                 <C> 
Hunting/Shooting Sports            $ 328.8            $  328.8            $  342.3
Other (a)                             51.9                52.4                48.1
                                   -------            --------            --------

Total Sales                        $ 380.7            $  381.2            $  390.4
                                   =======            ========            ========
</TABLE>

------------------------
(a)  Consists of fishing products, accessories, clay targets and commercial
     powdered metal product ("PMP") parts.

HUNTING/SHOOTING SPORTS

         Remington is the only domestic manufacturer of both firearms and
ammunition and, according to NSGA, was the largest U.S. manufacturer of
shotguns and rifles in 1997. The Company enjoys a domestic market leadership
position for many of its firearms product lines and is one of the three major
manufacturers in the domestic ammunition market. According to ASD, as of 1997,
approximately 26 million people in the United States enjoy shooting sports,
including approximately 16 million who hunt annually. Overall, the market for
hunting-related products is a large, mature market that the Company believes
generally will remain relatively flat, at least in the near future. Total
domestic consumer expenditures in this market for 1997 was estimated by NSGA to
be $1.7 billion.

         The Company believes that a number of trends currently exist that are
potentially significant to the hunting/shooting sports market. First, the
Company believes that the development of rural property in many locations has
curtailed or eliminated access by hunters to private and public lands. However,
the Company also believes that the number of private hunting facilities is
increasing, as is the availability of alternatives to traditional hunting
activities, such as sporting clays and shooting games that simulate hunting, and
that these trends may help offset increasing restrictions on access and land
use. Second, environmental issues, such as concern about lead in the
environment, may also adversely affect the industry. See "-- Environmental
Matters." The Company has developed a line of shotshells that use steel shot
instead of the industry standard lead shot, and that are intended to reduce the
amount of lead being



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<PAGE>   4

introduced into the environment and to appeal not only to the shooter legally
required to use steel shot, but also to the environmentally concerned shooter.
Third, the Company believes that safety issues may affect sales of firearms,
ammunition and other shooting-related products; in the northeastern United
States, for example, some communities permit hunters to use only shotguns (which
have a shorter average range than rifles) for deer hunting in order to minimize
the possibility of shooting accidents in more densely populated areas. The
Company markets specialized ammunition, its Premier(R) Copper Solid(TM) sabot
slug, that is intended for use in a shotgun but that is designed to give hunters
the accuracy and effectiveness of a rifle. Additionally, the Company believes
that the current trend, or the consumer perception thereof, toward firearms
regulatory proposals and municipal handgun litigation could adversely affect the
firearms and ammunition market. The Company produces firearms and ammunition
that are generally used by hunters and sporting enthusiasts, does not produce
"assault weapons" as defined in the federal law enacted in 1994, nor handguns,
although it does produce handgun ammunition, and has no significant sales
through gun shows.

         Although the Company believes that these trends have not had a material
adverse effect on its business in the past, there can be no assurance that they
will not do so in the future, or that industry sales of firearms, ammunition and
other shooting-related products will not decline. See "--Regulation."

Products

         The Company's Hunting/Shooting Sports product offerings include a
comprehensive line of recreational shotguns and rifles, sporting ammunition and
ammunition reloading components. During its 182-year history, the Company has
introduced its versions of the metallic centerfire cartridge (1867), the
auto-loading shotgun (1905), the repeating centerfire rifle (1906), the
pump-action shotgun (1907) and the bolt-action centerfire rifle (1921), all of
which became standards in the industry.

         The Company produces and markets a broad selection of shotguns and
rifles under the Remington brand name. The Company's goal has been to market a
combination of general-purpose firearms together with more specialized products
that embody Remington's emphasis on value, performance and design. In addition,
the Company produces custom-made shotguns and rifles in the custom shop at its
Ilion facility.

         In 1997, according to NSGA, the Company had the largest share of the
U.S. retail shotgun market based on sales volume, at approximately 39%, with its
nearest competitor holding a market share of approximately 15%. The Company
produces numerous variations of shotguns. The Company's most popular shotguns,
the Model 1100(TM) and Model 11-87(TM) auto-loading and the Model 870(TM)
pump-action, range in retail list price from approximately $230 to $900.
Remington shotguns are offered in versions that are marketed to both the novice
and the experienced gun owner. Specialty shotguns focus on the deer and turkey
hunting markets, recreational and competitive clay target shooting and various
law enforcement applications.

         Remington was also the largest brand of rifles in the United States in
1997 based on sales volume, according to NSGA, with a market share of
approximately 27%, with its nearest competitor holding a market share of
approximately 17%. The Company's most popular rifles are the Model 700(TM),
Model Seven(TM), Model 7400(TM) and Model 7600(TM) centerfire rifles and the
family of Model 597(TM) rimfire rifles. To appeal to a broad range of shooters,
the Company manufactures these rifles in a wide variety of calibers,
configurations and finishes. The Company presently manufactures three types of
centerfire rifles: bolt-action, pump-action and auto-loading. In addition, the
Company produces bolt-action, pump-action and auto-loading .22 caliber rimfire
rifles. The Company's bolt-action Model 700 rifle is a standard in the industry,
and the Company has versions utilizing stainless steel barrels and synthetic
stocks for weather durability. Retail list prices for the Company's most popular
rifles range from approximately $130 to $800.

         In the ammunition market, the Company believes it is one of the largest
brands in the United States, with a market share according to management's
estimate of approximately 21% based on 1997 sales dollars. The Company designs,
manufactures and markets a complete line of sporting ammunition products,
including shotgun shells, metallic centerfire ammunition for use in rifles and
handguns and .22 caliber rimfire ammunition. The Company also produces and
markets sporting ammunition components used by smaller ammunition manufacturers,
as well as by private consumers engaged in the practice of reloading centerfire
cases or shotgun shells.



                                       4
<PAGE>   5

         The Company distributes its ammunition products primarily under the
brand names Remington, Peters(R) and UMC(R), through firearms dealers, sporting
goods stores and mass merchandisers. In general, Remington branded products
compete in both the middle and high performance categories, while the UMC and
Peters brands are used for popularly priced ammunition.

         In recent years the Company introduced a number of new ammunition
product lines intended to satisfy the trend towards more specialized, high
performance products. Typical of Remington's introductions is the STS(TM), a
premium quality shotshell for clay target shooting. In addition, the Company is
committed to maintaining a leadership position in the design and manufacture of
products that address hunting and shooting regulations focusing on environmental
issues, and introduced the Disintegrator(TM), a lead-free frangible pistol
ammunition that breaks into small pieces upon impact, for practice shooting and
training.

         In recognition of market needs, in 1998, Remington introduced a number
of new rifle and shotgun ammunition products, including a line of bullets with
improved muzzle velocity and accuracy, and a new line of high velocity
Nitro-Steel(TM) waterfowl shotshells providing improved performance in an
environmentally-friendly steel load.

Service and Warranty

         The Company supports service and repair facilities for all of its
firearms products in order to meet the service needs of its distributors,
customers and consumers nationwide. Effective January 1, 1999, new Remington
firearms products purchased in North America are warranted to the original
purchaser, to be free from defects in material and workmanship for a period of
two years from the registered date of purchase. Prior to January 1, 1999, the
Company had no express consumer warranty program for firearms products, but
honored an implied warranty similar to the new express warranty. The number of
service and warranty claims received by the Company annually in the past was not
material. The Company believes that any cost resulting from this program will
not be material to its financial condition or results of operations.

Manufacturing

         The Company currently manufactures its Hunting/Shooting Sports products
at three plants, located within the United States. The Company's facility in
Ilion, New York manufactures shotguns, rifles, powdered metal parts and
accessories such as extra barrels, and also houses a portion of the Company's
gunsmith repair services, its custom gun shop, the Remington Country Store and
the Remington Museum. The Company's facility in Mayfield, Kentucky manufactures
rimfire rifles. The Company's facility in Lonoke, Arkansas manufactures loaded
ammunition and ammunition components.

         To manufacture its various firearm models, the Company utilizes a
combination of parts manufactured from raw materials at the Ilion and Mayfield
facilities or components purchased from independent manufacturers. Prior to
assembly, purchased parts may be modified through several secondary processes,
such as metal removal, joining, heat treating, forming and coloring.
Manufactured parts, including many of the basic metal component parts of the
firearms manufactured by the Company, are produced from raw materials via the
processes of material removal, finishing, heat treating and forming using metal
and plastic injection molding techniques. Quality control processes are employed
throughout the production process, utilizing specifically tailored testing
procedures and analyses. The Company believes that its manufacturing safety
record is excellent.

         The manufacturing of ammunition at Lonoke consists of four major
production areas: Primer, Centerfire, Shotshell and Rimfire. In the Primer area,
ingredients are manufactured on site utilizing two separate precipitation
processes and then combined with fuels and binders to form primer mixture. The
Centerfire operation consists of bullet manufacture, shell manufacture, priming,
loading and packaging. The Shotshell operation consists of shot manufacture,
head manufacture, body manufacture, assembly and priming, loading and packaging.
Lead shot is manufactured by pouring molten lead through a screen, forming lead
spheres which solidify as they fall over 100 feet into a cushion of water. The
other components of a shotshell are made by forming from brass strip, brass
plated steel and polyethylene hulls and wads via several stamping and extrusion
processes. The Rimfire operation consists of shell manufacture, priming, loading
and packaging. Several continuous rotary machines form shells, insert bullets
and add smokeless powder. Throughout the various processes, Company technicians
continuously monitor and test the velocity, pressure and accuracy levels of the
ammunition. The Company believes that its manufacturing safety record is among
the best in the U.S. ammunition market.



                                       5
<PAGE>   6

Supply of Raw Materials

         To manufacture its various products, the Company utilizes numerous raw
materials, including steel, lead, brass, plastics and wood, as well as
manufactured parts purchased from independent manufacturers. For a number of the
Company's raw materials, it relies on one or a few suppliers. The Company's
requirements for carbon steel, stainless steel, brass strip and walnut gun stock
blanks are each currently being met by a single vendor. Generally, the Company
has had satisfactory, long-term relationships with these suppliers. The Company
has purchase contracts with certain of these suppliers for periods ranging from
one to seven years with no commitment to purchase specified quantities, but no
formal contracts with others. Although alternative vendors could be found for
brass strip, carbon steel, stainless steel and walnut gun stock blanks, any
disruption in the Company's relationships with any of these vendors or
reductions in the production of the material supplied could, in each case,
adversely affect the Company's ability to obtain an adequate supply of the
material. The Company believes that it has a good relationship with each of
these vendors and does not currently anticipate any material shortages or
disruptions in supply from these vendors.

         Three companies in the United States and Canada produce smokeless
powder, which is an indispensable component in the ammunition manufactured and
sold by the Company. The Company currently purchases powder from each of these
three suppliers. The Company believes that any two of these three companies
could supply substantially all of the Company's powder requirements. However,
given the complex formulae and production processes involved in manufacturing
the powder mixtures used by the Company, obtaining powder from sources other
than these three companies may not be feasible.

         The Company purchases a number of stamped parts from one vendor. While
alternative vendors can be found to replace this supplier, any disruption in the
Company's relationship with this supplier could result in substantial
expenditures for tooling. The Company believes that it has a good relationship
with its current supplier and does not currently anticipate any material
shortages or disruptions in supply of these stamped parts.

         Alternative sources, many of which are foreign, exist for each of these
materials from which the Company could obtain such raw materials. Nonetheless,
the Company does not currently have significant supply relationships with any of
these alternative sources and cannot estimate with any certainty the length of
time that would be required to establish such a supply relationship, or the
sufficiency of the quantity or quality of materials that could be so obtained.
In addition, the Company may incur additional costs in sourcing raw materials
from alternative producers.

         The price and availability of raw materials are affected by a wide
variety of interrelated economic and other factors, including alternative uses
of materials and their components, changes in production capacity, energy prices
and governmental regulations. Industry competition and the timing of price
increases by suppliers limits to some extent the ability of the Company and
other industry participants to pass raw material cost increases on to customers.

         The Company uses commodity options and futures contracts to hedge
against the risk of increased prices for raw materials. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources -- Financial Instruments."

ALL OTHER PRODUCT LINES

         According to ASD, as of 1997, approximately 50 million people
participated in fishing activities. Fishing is considered an inexpensive sport
that can be enjoyed by people of widely varying ages, skills and abilities. The
Company distributes a range of monofilament fishline, terminal tackle and
accessories under the brand name Stren, offering eight families of fishline for
the recreational fisherman. The Company also markets a limited line of fishing
accessories, including tools, knives, terminal tackle and lure accessories. The
SMRG estimates that the U.S. retail market for recreational fishline was
approximately $75 million in 1997, of which the Company has a 27% market share
based on sales dollars.

         The Company purchases most of the fishline it requires for its product
lines from DuPont under a supply agreement, which is automatically renewed
annually unless either party notifies the other of its intent to terminate. Any
disruption in the Company's relationship with DuPont, or reductions in fishline
production by DuPont, could adversely



                                       6
<PAGE>   7

affect the Company's ability to obtain an adequate supply of fishline on terms
favorable to the Company. Alternative sources, many of which are foreign, exist
from which the Company could obtain such supply. Although the Company currently
has supply relationships with some of these alternative sources, the Company
cannot estimate with any certainty the sufficiency of the quantity or quality of
materials that could be so obtained. In addition, the Company may incur
additional costs in sourcing raw materials from alternative producers.

         Remington produces a complete line of clay targets for use in trap and
skeet shooting activities, marketed under the Blue Rock(R) brand name. The
Company's clay targets are manufactured at two facilities located at Ada,
Oklahoma and Findlay, Ohio. Targets are manufactured from a mixture of limestone
and pitch. The mixture is fed into a continuous motion press that forms the
target, and once formed, the target is cooled and painted.

         The Company also markets hunting and shooting accessories (including
safety and security products, parts, care products, belts, clips and protective
cases for firearms and folding and collectible knives) and commercial powdered
metal parts for the automotive and firearms industries. The Company has licensed
third parties to manufacture and market sporting and outdoor products. See
"--Licensing."

MARKETING AND DISTRIBUTION

         The Company's products are distributed throughout the United States and
in over 60 other countries. In the United States, Remington products are
distributed primarily through a network of wholesalers and retailers who
purchase the product directly from the Company for resale predominantly to gun
dealers and end users, respectively. The end users include sportsmen, hunters,
target shooters, gun collectors, and law enforcement and other government
organizations.

         The Company's products are marketed primarily through manufacturer's
sales representatives. In 1998, approximately 64% of the Company's revenues
consisted of sales made through five manufacturer's sales representative groups
who market principally to wholesalers, dealers and regional chains. Such sales
representatives are prohibited from selling competing goods from other
manufacturers and are paid variable commissions based on the product sold. The
customers to which the sales representatives market the Company's products are
authorized to carry specified types of Remington products for a non-exclusive
one-year term, though not all carry the full range of products. These customers
generally carry broader lines of merchandise than do the mass merchandisers and
are less seasonal in sales. While the wholesalers, dealers and regional chains
are currently experiencing a trend toward consolidation, the Company does not
believe that this trend will materially adversely affect the Company's sales or
profitability.

         The Company's in-house sales force markets the Company's product lines
directly to national accounts (consisting primarily of mass merchandisers) and
to federal, state and local government agencies. Approximately 19% of the
Company's total net revenues and approximately 18% of the Company's
Hunting/Shooting Sports revenues in 1998 consisted of sales made to a national
account, Wal-Mart Stores, Inc. ("Wal-Mart"). National accounts generally provide
convenient access for hunting and shooting consumers to the Company's products
but carry a more limited array of products and are more seasonal in sales. The
Company's sales to Wal-Mart are not governed by a written contract between the
parties. Although the Company believes its relationship with Wal-Mart is good,
the loss of this customer or a substantial reduction in sales to this customer
could adversely affect the Company's financial condition or results of
operations. During 1996, changes in the inventory management practices and
purchasing patterns of several key customers, including Wal-Mart, had a material
effect on the Company's financial results and cash flows. See "Management's
Discussion of Financial Condition and Results of Operations--Overview--Business
Trends and Initiatives." No other single customer comprises greater than or
equal to 10% of sales. No material portion of the Company's business is subject
to renegotiation of profits or termination of contracts at the election of a
governmental purchaser.

         Foreign sales were approximately 7% for 1998 and 8% for both 1997 and
1996 of the Company's total revenues. Hunting/Shooting Sports foreign sales were
approximately 8% for 1998 and 9% for both 1997 and 1996 of the Company's
Hunting/Shooting Sports total revenues. Company sales personnel and
manufacturer's sales representatives market to foreign distributors generally on
a nonexclusive basis and for a one-year term. Remington also has a wholly-owned
subsidiary, Remington International, Ltd., which is a foreign sales corporation.



                                       7
<PAGE>   8

         Most of the Company's firearms products that are generally used during
the fall hunting season have been sold pursuant to a "dating" plan which allows
the purchasing distributor to buy the products commencing at the beginning of
the Company's dating plan year, and pay for them on extended terms. Discounts
are offered for early payment under this plan. In the first quarter of each
dating plan year, the Company receives orders from its customers, which are
designated as firm by such customers, although the Company may permit
adjustments in outstanding unfilled orders. The Company also follows industry
practice in canceling most firearms orders from its distributors that remain
unfilled at the end of each dating plan year. The Company maintains a dating
plan relating to ammunition that offers discounts for payment prior to the
Company's usual 90-day payment period. For further discussion of seasonality and
related matters, see "Management's Discussion of Financial Condition and Results
of Operations -- Purchasing Patterns; Seasonality." The backlog of unfilled
total company orders was approximately $55.0 million as of November 30, 1998,
compared to $37.0 million in the prior year. The backlog of unfilled
Hunting/Shooting Sports orders was approximately $53.0 million as of November
30, 1998, compared to $35.0 million in the prior year.

RESEARCH AND DEVELOPMENT

         The Company maintains a research and development program, with
approximately 50 employees assigned to these efforts as of December 31, 1998.
New products and improvements to existing products are developed based upon the
perceived needs and demands of consumers, as well as successful products
introduced to the market by the Company's competitors. The Company's research
and development program involves an in-house team of engineers, draftsmen,
product testers and marketing managers using tools such as computer-assisted
design and a variety of consumer research techniques. Research and plant
technical staff then collaborate to produce an experimental prototype, ensuring
that products and manufacturing processes are concurrently designed. Following a
successful prototype, a pilot run is commenced to ensure that plant personnel
and equipment can manufacture the product efficiently. The Company has
introduced several new products employing innovations in design and
manufacturing, including the new 3 1/2" Model 870 Express(R) Super Magnum(TM)
shotgun, the Model 597 family of auto-loading rimfire rifles and the Model 700
muzzle-loading black powder rifle. The Company has also directed its research
efforts to developing lead-free primer mixes and steel shot shotshells as well
as lead-free frangible pistol ammunition, to reflect trends toward products that
address environmental concerns.

         Research and development expenditures for the continuing operations of
the Company in 1998, 1997 and 1996 amounted to approximately $7.3 million, $7.4
million and $10.2 million, respectively.

PATENTS AND TRADEMARKS

         The Company's operations are not dependent to any significant extent
upon any single or related group of patents. The Company does not believe that
the expiration of any of its patents will have a material adverse effect on the
Company's financial condition or its results of operations. The Company's
operations are not dependent upon any single trademark other than the Remington
word mark, the Remington logo mark, and, to a lesser extent, the Stren mark.
Some of the trademarks used by the Company, however, are identified with and
important to the sale of the Company's products. Some of the more important
trademarks used by the Company, all of which are owned by the Company, are:
Remington, the Remington scroll logo, Stren, Core-Lokt(R) (jacketed centerfire
bullets), Express (long range shotshells), Power Piston(R) (shotshell wads),
Premier(R) (the Company's highest quality ammunition), Copper Solid (solid
copper slugs), Golden Saber(TM) (high performance jacketed hollow point bullets
for pistols/revolvers), Nitro-Steel (high powered steel shotshells), UMC
(popularly priced ammunition, in a limited line of popular specifications),
Leadless(TM) (reduced lead-releasing bullets), Nitro-27(R) (handicap trap
loads), Model 700 (a family of bolt-action centerfire rifles), Model 1100 and
Model 11-87 (families of auto-loading shotguns), Model 7600 (a family of
pump-action centerfire rifles), Model 7400 (a family of auto-loading centerfire
rifles), Model 870, including the Wingmaster(R) and the Express (a family of
pump-action shotguns) and Model 597 (a family of .22 caliber rimfire rifles).
The Company believes it has adequate policies and procedures in place to protect
its intellectual property.

         The Company owns the Remington marks (and registrations thereof) for
use in its firearms and ammunition product lines, as well as for certain related
products associated with hunting, wildlife and the outdoors. The Company does
not own, but has the right to use, the Remington mark with respect to certain
other products marketed by it (the "Ancillary Products"), including certain
hunting knives and other merchandising items, pursuant to the Trademark



                                       8
<PAGE>   9

Settlement Agreement, dated December 5, 1986 (the "Trademark Settlement
Agreement"), between the Company and Remington Products, Inc. ("RPI"). The
Trademark Settlement Agreement resulted from the settlement of certain
litigation between the Company and RPI over the use of the Remington mark on
products marketed by both parties. RPI is not affiliated with Remington,
Holding, DuPont or Sporting Goods and was not involved with the Acquisition. The
Trademark Settlement Agreement provided for the formation of Remington Licensing
Corporation ("RLC"), the capital stock of which is owned equally by the Company
and Remington Products Company LLC ("RPC") as successor to RPI, which also holds
as transferee RPI's interest in respect of the Trademark Settlement Agreement.
RLC owns the Remington marks in the United States with respect to products of
mutual interest to the Company and RPC, and licenses such marks on a
royalty-free basis to the Company and RPC for products in their respective
markets. The Trademark Settlement Agreement does limit, however, the Company's
ability to expand the use of the Remington mark into product areas claimed by
RPC, particularly personal care products. The Trademark Settlement Agreement is
currently relevant primarily to the Company's U.S. operations, but does provide
for cross-licensing between the Company and RPC outside the United States. The
Trademark Settlement Agreement also provides that, if certain bankruptcy or
insolvency-related events occur with respect to either of RLC's shareholders,
such shareholder may be contractually required to sell such shareholder's RLC
stock to RLC or RLC's other shareholder at its book value or, under certain
circumstances, at fair market value. While in some cases such requirement may
not be enforceable under the U.S. Bankruptcy Code, such a purchase from the
Company could provide RPC with greater leverage over RLC's licensing
relationship with the Company with respect to Ancillary Products.

         The Company does not own any patents or other intellectual property
with respect to the manufacture of the nylon monofilament fishline products that
it markets and distributes. The Company purchases most of its fishline
requirements under a supply agreement with DuPont. See "--All Other Product
Lines."

LICENSING

         The Company licenses the Remington mark to certain companies that
manufacture and market products that complement the Company's product line.
Currently, the Remington mark is licensed for use on, among other things,
sporting and outdoor apparel, caps, tents, backpacks, sleeping bags, leather
products, non-prescription sun/safety eyeglasses, leisure furniture, tree
stands, playing cards and certain other nostalgia/novelty goods. The Company
strives to ensure that the quality, image and appeal of these licensed products
are consistent with the high-quality image of its core products. These licenses
generally grant an exclusive right to sell a specific product category, with the
standard term being five years. Licenses increase the market recognition of the
Remington trademark and enhance the Company's ability to market core products.
Licensing facilitates new cross-marketing promotional opportunities and
generates income. Certain of the Company's licensing efforts are carried out
under terms established in the Trademark Settlement Agreement described above.

COMPETITION

         The markets in which the Company operates are highly competitive.
Competition is based primarily on quality of products, product innovation,
price, and customer service and support. Product image, quality and innovation
are the dominant competitive factors in the firearms industry, with price the
dominant factor in the ammunition industry.

         The Company's competitors vary according to product line. Certain of
these competitors are subsidiaries of large corporations with substantially
greater financial resources than the Company. The Company's shotgun products
compete primarily with products offered by O. F. Mossberg & Sons, Inc., USRAC
(which produces Winchester firearms) and Browning (both owned by the Walloon
regional government of Belgium). According to NSGA, during 1997, these
competitors comprised approximately 33% of the shotgun market. The Company's
rifles compete primarily with products offered by Sturm, Ruger & Co., Inc.,
Marlin Firearms Co., USRAC, Savage Arms, Inc. and Browning. According to NSGA,
during 1997, these competitors comprised approximately 54% of the rifle market.
In the ammunition market, the Company competes primarily with the Winchester
unit of Olin Corporation, and the Federal Cartridge Co. and CCI units of Blount,
Inc. The Company's fishing line products compete primarily with products offered
by Berkley, Inc. and JWA Fishing & Marine.

         The Company believes that it competes effectively with all of its
present competitors. However, there can be no assurance that the Company will
continue to do so, and the Company's ability to compete could be adversely
affected by its leveraged condition.



                                       9
<PAGE>   10

SEASONALITY

         During 1998 and 1997, the Company's sales have been moderately
seasonal, with higher sales during the third quarter, and lower sales during the
other quarters, principally due to the need to meet customer requirements for
ammunition and, to a lesser extent, firearms, during the primary hunting season.
The Company follows the industry practice of selling firearms pursuant to a
"dating" plan allowing the customer to buy the products commencing at the
beginning of the Company's dating plan year. The Company believes that this
dating plan has partially offset the seasonality of the Company's business by
shifting some firearms sales to the first quarter. The Company believes that
sales in 1996 experienced increased seasonality due in part to a shift in the
timing of consumer demand related to regulation and changes in its ammunition
prepayment program. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Purchasing Patterns; Seasonality."

REGULATION

         The purchase of firearms is subject to federal, state and local
governmental regulation. The basic federal laws are the National Firearms Act
and the Federal Firearms Act, which were originally enacted in the 1930s and
which have been amended from time to time. Federal laws generally prohibit the
private ownership of fully automatic weapons and place certain restrictions on
the interstate sale of firearms unless certain licenses are obtained. The
Company does not manufacture fully automatic weapons. The Company possesses
valid federal licenses for all of its owned and leased sites to manufacture
and/or sell firearms and ammunition.

         Various bills have been introduced in Congress in recent years to
repeal the ban on semi-automatic assault weapons and large-capacity ammunition
feeding devices; the likelihood of their passage is uncertain. The Brady Handgun
Violence Prevention Act of 1993 (the "Brady Bill") was extended to shotguns and
rifles in November 1998. The extension of the Brady Bill mandates a national
system of instant background checks for all firearms buyers, operated by the
Federal Bureau of Investigation and state governments, that replaces the system
of checks on handgun buyers that has been in place at the state and local level
since February 1994. The Company does not produce handguns (generally defined as
a firearm that has a short stock and is designed to be held and fired by the use
of a single hand), or any firearm included on the list of "assault weapons"
that was part of anti-crime legislation enacted by Congress in 1994.

         In addition, bills have been introduced in Congress in the past several
years that would affect the manufacture and sale of handgun ammunition,
including bills to regulate the manufacture, importation and sale of any
projectile that is capable of penetrating body armor, to impose a tax and import
controls on bullets designed to penetrate bullet-proof vests, to prohibit the
manufacture, transfer or importation of .25 caliber, .32 caliber and 9mm handgun
ammunition, to increase the tax on handgun ammunition, to impose a special
occupational tax and registration requirements on manufacturers of handgun
ammunition, and to drastically increase the tax on certain handgun ammunition,
such as 9mm, .25 caliber, and .32 caliber bullets. Certain of these bills would
apply to handgun ammunition of the kind produced by the Company, and
accordingly, if enacted, could have a material adverse effect on the business of
the Company. The Company believes that existing regulations applicable to
handgun ammunition have not had such an effect.

         State and local laws and regulations vary significantly in the level of
restrictions they place on gun ownership and transfer. Some states have recently
enacted, and others are considering, legislation restricting or prohibiting the
ownership, use or sale of certain categories of firearms and ammunition. Many
states currently have mandatory waiting period laws for handguns in effect.
Currently, however, there are few restrictive state regulations applicable to
handgun ammunition. The Company's current firearm and ammunition products
generally are not subject to current state restrictions on ownership, use or
sale of certain categories of firearms and ammunition, and generally would not
be subject to any known proposed state legislation relating to regulation of
"assault weapons."

         The Company believes that existing federal and state legislation
relating to the regulation of firearms and ammunition has not had a material
adverse effect on its sales of these products from 1996 through 1998. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." However, there can be no assurance that the regulation of firearms
and ammunition will not become more restrictive in the future and that any such
development would not have a material adverse effect on the business of the
Company. In addition, regulatory proposals, even if never enacted, may affect
firearms or ammunition sales as a result of consumer perceptions.



                                       10
<PAGE>   11

EMPLOYEES

         As of December 31, 1998, the Company employed approximately 2,300
full-time employees of whom nearly 2,070 were engaged in manufacturing,
approximately 180 in sales and general administration and approximately 50 in
research and development. An additional work force of temporary employees is
engaged during peak production schedules.

         The United Mine Workers of America ("UMWA") represent hourly employees
at the Company's plant in Ilion, New York. The collective bargaining agreement
with UMWA was renegotiated effective September 1997 for a five-year period
expiring in September 2002. The Company also has a labor agreement with Local
2021 of the United Automobile, Aircraft and Agricultural Implement Workers of
America, U.A.W., which represents hourly employees at the Company's plant in
Findlay, Ohio, which agreement is terminable by either party on notice.
Employees at the Company's Lonoke, Arkansas, Mayfield, Kentucky and Ada,
Oklahoma facilities are not represented by unions. There have been no
significant interruptions or curtailments of operations due to labor disputes
since prior to 1968 and the Company believes that relations with its employees
are satisfactory.

ENVIRONMENTAL MATTERS

         The Company has in place programs that monitor compliance with various
federal, state and local environmental regulations. In the normal course of its
manufacturing operations, the Company is subject to occasional governmental
proceedings and orders pertaining to waste disposal, air emissions and water
discharges into the environment. The Company believes that it is in compliance
with applicable environmental regulations in all material respects, and that the
outcome of any such proceedings and orders will not have a material adverse
effect on its business.

         The Company also has directed research efforts to developing more
environmentally safe products, resulting in the addition of steel shot
shotshells to its product line for hunters and the introduction of steel target
shooting ammunition and lead-free frangible pistol ammunition.

         The Company has not been identified by any state or federal regulatory
authorities as a potentially responsible party with respect to any sites under
any applicable state or federal environmental regulations. The Sellers retained
liability for environmental losses and liabilities relating to the ownership or
operation of the Business prior to December 1, 1993 (the "Closing") that,
together with liabilities relating to product liability cases and claims arising
from occurrences prior to the Closing and disclosed to the Company, exceed a
maximum aggregate amount (the "Cap"), which was exhausted in 1997, as discussed
under "Legal Proceedings." Based on information known to the Company, the
Company does not expect current environmental regulations or environmental
proceedings and claims to have a material adverse effect on the results of
operations or financial condition of the Company. However, it is not possible to
predict with certainty the impact on the Company of future environmental
compliance requirements or of the cost of resolution of future environmental
proceedings and claims, in part because the scope of the remedies that may be
required is not certain, liability under federal environmental laws is joint and
several in nature, and environmental laws and regulations are subject to
modification and changes in interpretation. There can be no assurance that
environmental regulation will not become more burdensome in the future and that
any such development would not have a material adverse effect on the Company.

THE ACQUISITION

         In connection with the Acquisition on December 1, 1993 under the asset
purchase agreement (the "Asset Purchase Agreement") among Remington, Sporting
Goods, and DuPont, Remington assumed (i) certain specified liabilities,
including certain trade payables and contractual obligations of Sporting Goods,
(ii) financial responsibility up to the Cap, for certain product liability
claims relating to disclosed occurrences prior to the Closing and for
environmental claims relating to the operation of the Business prior to the
Closing and (iii) liabilities for product liability claims relating to
occurrences after the Closing, except for claims involving discontinued
products. All other liabilities relating to or arising out of the operation of
the Business prior to the Closing are excluded liabilities (the "Excluded
Liabilities") which the Sellers retained and with respect to which the Sellers
have certain obligations to indemnify Remington, as discussed below.



                                       11
<PAGE>   12

         The Asset Purchase Agreement requires the Sellers to indemnify
Remington and its affiliates for inaccuracies in the representations and
warranties made in the Asset Purchase Agreement (environmental matters being
addressed separately), for the Sellers' failure to comply with covenants made in
the Asset Purchase Agreement, and in respect of the Excluded Liabilities, which
include, among other liabilities, certain tax liabilities and certain employee
and retiree compensation and benefit liabilities. Subject to certain exceptions,
the Sellers' indemnification obligation with respect to inaccuracies in their
representations and warranties is subject to a deductible of $1.5 million and is
limited to individual claims that exceed $25,000. The Sellers' overall liability
in respect of their representations and warranties, covenants and the Excluded
Liabilities, excluding environmental liabilities and certain product liability
matters of the Company, is limited to an amount equal to the $299.8 million cash
portion of the adjusted purchase price for the Acquisition plus $25.0 million.
With certain exceptions, the Sellers' representations and warranties in the
Asset Purchase Agreement expired 18 months after the Closing, and all claims for
indemnification with respect thereto under the Asset Purchase Agreement were to
have been asserted within 30 days of such expiration. The Company made claims
for such indemnification involving product liability issues within such time
period. See "Legal Proceedings."

         Under the Asset Purchase Agreement, Remington's financial
responsibility for all environmental liabilities relating to the ownership or
operation of the Business prior to the Closing, and for liabilities relating to
any product liability claims arising from occurrences prior to the Closing, was
limited to the Cap, which has been fully utilized. The Sellers retained all
liabilities in respect of such environmental and product liability matters in
excess of such amount, as well as for all claims relating to discontinued
products, and are required to indemnify Remington with respect thereto. The
Sellers are also required to indemnify Remington for certain other
product-related claims for economic loss. In addition, the Sellers agreed in
1996 to indemnify Remington against a portion of certain product liability costs
involving shotguns and arising from occurrences on or prior to November 30,
1999. These indemnification obligations of the Sellers relating to product
liability and environmental matters (subject to a limited exception) are not
subject to any survival period limitation, deductible or other dollar threshold
or cap. The Sellers and Remington are also party to separate agreements setting
forth agreed procedures for the management and disposition of environmental and
product liability claims and proceedings relating to the operation or ownership
of the Business prior to the Closing, and are currently engaged in the joint
defense of certain product liability claims and proceedings. See "Legal
Proceedings."

ITEM 2.  PROPERTIES

         The Company's manufacturing operations are currently conducted at five
owned facilities. The following table sets forth certain information regarding
each of these facilities:

<TABLE>
<CAPTION>
                                                                                          SQUARE FEET
       PLANT                                           PRODUCT                          (IN THOUSANDS)
------------------                  --------------------------------------------        --------------

<S>                                 <C>                                                 <C> 
Ilion, New York                     Shotguns; centerfire and rimfire rifles                  1,000
Lonoke, Arkansas                    Shotshell; rimfire and centerfire ammunition               750
Mayfield, Kentucky                  Rimfire rifles                                              44
Findlay, Ohio                       Clay targets                                                40
Ada, Oklahoma                       Clay targets                                                21
</TABLE>

         The Company believes that these facilities are suitable for the
manufacturing conducted therein and have capacities appropriate to meet existing
production requirements. The Lonoke, Ilion and Mayfield facilities each contain
enclosed ranges for testing firearms and ammunition.

         The Company's headquarters and related operations are conducted in an
office building owned by the Company in Madison, North Carolina. Research and
development is conducted at a facility owned by the Company in Elizabethtown,
Kentucky. All of the real property owned by the Company has been mortgaged to
secure the Company's obligations under the Company's senior bank credit
agreement, as amended, (the "Credit Agreement"). The Company also leases or
contracts for services from various warehouses and is a party to a leasing
arrangement involving a facility operated by a Company contractor.



                                       12
<PAGE>   13

ITEM 3.  LEGAL PROCEEDINGS

         Pursuant to the Asset Purchase Agreement, the Sellers retained
liability for, and are required to indemnify the Company against, (1) all
product liability cases and claims (whenever they may arise) involving
discontinued products and (2) all product liability cases and claims involving
products that had not been discontinued as of the Closing ("extant products")
and relating to occurrences that took place prior to the Closing. The Company
assumed financial responsibility, up to the Cap, for certain product liability
cases disclosed to the Company and arising prior to the Closing. The Cap was
exhausted in 1997, and the Sellers retained liability for, and are required to
indemnify the Company against, all such disclosed product liability occurrences
and such environmental liabilities in excess of the Cap. This indemnification
obligation of the Sellers is not subject to any survival period limitation.
Prior to the Acquisition, the Sellers were self-insured for product liability
obligations of the Business, with excess insurance coverage available at $50.0
million per occurrence. Except for certain cases and claims relating to shotguns
as described below and except for all cases and claims relating to discontinued
products, the Company generally bears financial responsibility for product
liability cases and claims relating to occurrences after the Closing.

         Since December 1, 1993, the Company has maintained insurance coverage
for product liability claims subject to certain self-insured retentions both on
a per-occurrence basis and in the aggregate for personal injury or property
damage relating to occurrences arising after the Closing. The Company believes
that its current product liability insurance coverage for personal injury and
property damage is adequate for its needs. The Company's current product
liability insurance policy provides for a self-insured retention of $0.5 million
per occurrence, with an aggregate annual limit of $7.0 million for liability
indemnity and defense and other expenses combined, and aggregate annual
sublimits of $4.5 million for indemnity and $4.5 million for expenses. The
current policy has a batch clause endorsement, which in general provides that if
a batch of firearms were to be defective, the Company's liability for expenses
and damages related to the entire batch would be capped at the amount of
self-insured retention for a single occurrence. The current policy excludes from
coverage any pollution-related liability. The current policy period runs from
December 1, 1998 through November 30, 2000.

         The Company and the Sellers are engaged in the joint defense of product
liability litigation involving Remington brand firearms and Company ammunition
products. As of December 31, 1998, 31 such cases were pending, primarily
alleging defective product design or manufacture, or failure to provide adequate
warnings, all of which are individual actions alleging personal injury. Many of
these cases seek punitive as well as compensatory damages. Of these pending
individual cases, approximately nine involve either discontinued products or
pre-Closing occurrences, for which the Sellers retained liability and are
required to indemnify the Company. The remaining approximately 22 of the pending
cases involve post-Closing occurrences for which the Company bears
responsibility under the Asset Purchase Agreement; the Sellers have some
responsibility for the costs of six of these cases involving certain shotguns,
as described below. The Company has previously disposed of a number of other
cases involving post-Acquisition occurrences by settlement.

         The cases filed during 1998 include Wright, et al. v. Golden, et al.
("Wright"), and Herring, et al. v. Sporting Goods Properties, Inc., et al.
("Herring"), wrongful death cases involving the March 24, 1998 schoolyard
shooting in Jonesboro, Arkansas filed in Craighead County, Arkansas state court.
One of the guns allegedly used was a Remington Model 742(TM) rifle. As to
Remington, the plaintiffs allege that the Model 742 was defective because it did
not come with a trigger lock or other mechanism to prevent unauthorized use and
because of an alleged failure to warn the owner of the gun of the danger of its
theft. Because the Model 742 is a discontinued product, the Sellers are
responsible for the costs associated with the defense of this action, and
Sporting Goods (as manufacturer of the Model 742) has been substituted for
Remington as the appropriate defendant.

         The figures listed above do not include Joe Luna, et al. v. Remington
Arms Company, Inc. and E. I. du Pont de Nemours and Company et al. ("Luna"),
which was filed in 1989 in Texas district court in Jim Wells County. The
plaintiffs sought certification of a class consisting of all Texas owners,
allegedly 400,000 in number, of Model 700 bolt-action rifles. In June 1996, the
district court certified for class treatment the limited issues of whether the
Model 700 fire control system is "defective" and, if so, the "cost of repair."
This ruling was reversed on appeal. Remington was not named as a defendant until
July 1996, and was not a party to the appeal, although the appellate courts'
decisions should govern class action claims against Remington as well. The
Sellers' obligations with respect to Luna include a



                                       13
<PAGE>   14

requirement that they indemnify the Company against claims for economic loss
involving Model 700 rifles shipped prior to the end of May 1997. Claims
involving Model 700 rifles shipped thereafter would be the Company's
responsibility and, to the extent that they do not involve personal injury or
property damage, would not be covered by the Company's product liability
insurance.

         As a manufacturer of shotguns and rifles, the Company has not been
named in recent actions brought by certain municipalities against handgun
manufacturers and sellers. The Company has been advised, however, that in one
such case, a motion to intervene was filed seeking to name certain unidentified
"ammunition manufacturers" as additional defendants. The motion has not been
heard, or scheduled to be heard.

         The representations and warranties in the Asset Purchase Agreement
expired 18 months after the Acquisition, with certain exceptions, and claims for
indemnification with respect thereto were to be made within 30 days of such
expiration. The Company made claims for such indemnification involving product
liability issues within that time period. In 1996, the Company and the Sellers
agreed that the Sellers would assume financial responsibility for a portion of
the costs relating to product liability claims and cases involving certain
shotguns manufactured prior to mid-1995 and based on occurrences arising prior
to November 30, 1999, and that any claims the Company and the Sellers may have
against each other under the Asset Purchase Agreement relating to shotguns
(excluding various indemnification rights and the allocation of certain costs
under the Cap) would be released. Any claims between the Company and the Sellers
relating to other product liability issues remain open.

         Because the Company's assumption of financial responsibility for
certain product liability cases and claims involving pre-Acquisition occurrences
was limited to the amount of the Cap, with the Sellers retaining liability in
excess of the Cap and indemnifying the Company in respect thereof, and because
of the Company's accruals with respect to such cases and claims, the Company
believes that product liability cases and claims involving occurrences arising
prior to the Acquisition are not likely to have a material adverse effect upon
the financial condition or results of operations of the Company. In addition,
although it is difficult to forecast the outcome of litigation, the Company does
not believe, in light of relevant circumstances (including the current
availability of insurance for personal injury and property damage with respect
to cases and claims involving occurrences arising after the Acquisition, its
accruals for the uninsured costs of such cases and claims and the Sellers'
agreement to be responsible for a portion of certain post-Acquisition
shotgun-related product liability costs, as described above), that the outcome
of all pending post-Acquisition product liability cases and claims will be
likely to have a material adverse effect upon the financial condition or results
of operations of the Company. Nonetheless, in part because of the uncertainty as
to the nature and extent of manufacturer liability for personal injury due to
alleged product defects, there can be no assurance that the Company's resources
will be adequate to cover future product liability occurrences, cases or claims,
in the aggregate, or that such a material adverse effect will not result
therefrom. Because of the nature of its products, the Company anticipates that
it will continue to be involved in product liability litigation in the future.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matter was submitted to a vote of the Company's shareholders during
the fourth quarter of 1998.



                                       14
<PAGE>   15

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         There is no established public trading market for either Holding's or
Remington's common stock. Prior to 1997, the only holder of Holding's Common
Stock was The Clayton & Dubilier Private Equity Fund IV Limited Partnership
("C&D Fund IV"). On August 25, 1997 Holding filed a registration statement on
Form S-8 with the Securities and Exchange Commission to register 12,500 shares
of Class A Common Stock ("Common Stock"), par value $.01 per share, of Holding
for issuance in accordance with the RACI Holding, Inc. Director Stock Purchase
Plan. As of December 31, 1998, a total of 10,000 shares of Class A Common Stock
had been issued to four directors. See "Security Ownership of Certain Beneficial
Owners and Management." The only holder of Remington's common stock is Holding.
No dividends have been paid by Holding on its shares of Common Stock nor does
Holding expect to pay dividends on its Common Stock in the foreseeable future.
As Holding has no separate operations, its ability to pay dividends is dependent
upon the extent to which it receives dividends or other funds from Remington.
The declaration and payment of future dividends, if any, will be at the sole
discretion of the Board of Directors of the respective company, subject to the
restrictions set forth in the Credit Agreement and the indenture for its
subordinated notes ("Indenture"), which currently restrict the payment of cash
dividends to shareholders, and restrictions, if any, imposed by other
indebtedness outstanding from time to time. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources," "--Credit Agreement" and "--Notes" and Note 14 to the Company's
consolidated financial statements for the year ended December 31, 1998 appearing
elsewhere in this report.



                                       15
<PAGE>   16

ITEM 6.  SELECTED FINANCIAL DATA

         The following table sets forth certain selected financial information
derived from the Company's consolidated financial statements as audited by its
independent accountants, PricewaterhouseCoopers LLP, for the five-year period
ended December 31, 1998. The table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the Company's consolidated financial statements and related
notes and other financial information included elsewhere in this report.

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                       -----------------------------------------------------
                                                       1998        1997         1996        1995        1994
                                                       ----        ----         ----        ----        ----
STATEMENT OF OPERATIONS DATA:                               (Dollars in Millions, Except Per Share Data)

<S>                                                   <C>         <C>         <C>          <C>         <C> 
Sales (a)  ................................           $380.7      $381.2      $ 390.4      $427.0      $417.7
Gross Profit (b)...........................            121.7       111.3        108.7       134.3       123.5
Operating Expenses (b).....................             74.5        78.7         94.8        92.8        87.1
Restructuring and Nonrecurring Items.......             (0.3)         --          9.6          --          --
Operating Profit...........................             47.5        32.6          4.3        41.5        36.4
Interest Expense...........................             19.2        23.6         25.1        21.5        20.6
Profit (Loss) before Income Taxes..........             28.3         9.0        (20.8)       20.0        15.8
Net Income (Loss)..........................             17.2         5.5        (13.8)       11.5         9.4
Basic Income (Loss) Per Common Share.......            22.63        7.33       (18.40)      15.33       12.53
Diluted Income (Loss) Per Common Share.....            22.26        7.33       (18.40)      15.33       12.53
Ratio of Earnings to Fixed Charges (c).....              2.5x        1.4x         0.2x        1.9x        1.8x
 
OPERATING AND OTHER DATA:
EBITDA (d).................................           $ 64.2      $ 52.2      $  29.4      $ 56.0      $ 68.0
EBITDA Margin (d) (e)......................             16.9%       13.7%         7.5%       13.1%       16.3%
Depreciation and Amortization (f)..........           $ 15.9      $ 15.1      $  13.9      $ 11.7      $ 10.4
Other Non-cash Charges (g).................              1.1         3.7           --          --        16.8
Nonrecurring and Restructuring Items (h)...             (0.3)        0.8         11.2         2.8         4.4
Ratio of EBITDA to Interest Expense (d)....              3.7x        2.4x         1.3x        2.8x        3.6x
Consolidated Fixed Charge Coverage
   Ratio (i)...............................              3.4x        2.2x         0.7x        2.4x        3.1x
Capital Expenditures.......................           $  8.5      $  5.8      $  22.5      $ 18.9      $  9.3
Cash flows provided by (used in):
   Operating Activities....................             61.0        55.9         (2.7)      (12.5)       48.8
   Investing Activities....................             (8.5)       (5.8)       (22.5)      (17.5)      (16.2)
   Financing Activities....................            (48.2)      (59.1)        33.4       (10.5)       (9.7)

BALANCE SHEET DATA (END OF PERIOD):
Working Capital............................           $ 91.1      $108.2      $ 136.1      $125.0      $131.3
Total Assets...............................            354.5       380.7        435.0       404.4       403.3
Total Debt (j).............................            146.9       195.0        253.1       213.2       219.8
Shareholders' Equity.......................            103.5        86.3         79.8        93.6        82.1
</TABLE>

(a)  Sales are presented net of federal excise taxes.  Excise taxes were $31.5 
     million, $31.0 million, $31.7 million, $36.0 million and $33.7 million for 
     the years ended December 31, 1998, 1997, 1996, 1995 and 1994, respectively.

(b)  Property and payroll taxes of $6.6 million, $7.4 million and $7.1 million
     for the years ended December 31, 1996, 1995 and 1994, respectively, have
     been reclassified from operating expenses to cost of goods sold to conform
     with the current presentation format.

(c)  For purposes of computing this ratio, earnings consists of earnings before
     income taxes and fixed charges, excluding capitalized interest. Fixed
     charges consist of interest expense, capitalized interest, amortization of
     discount on indebtedness and one-third of rental expense (the portion
     deemed representative of the interest factor). Earnings were inadequate to
     cover fixed charges for the year ended December 31, 1996 by $21.0 million.



                                       16
<PAGE>   17

(d)  EBITDA as presented is calculated in accordance with the definition of that
     term contained in the Company's Credit Agreement, and may not be comparable
     to similar measures reported by other companies. Generally, the Credit
     Agreement defines EBITDA to consist of net income (loss) adjusted to
     exclude cash interest expense, income tax expense, depreciation,
     amortization, non-cash expenses and charges, gain or loss on sale or
     write-off of assets, and extraordinary, unusual or nonrecurring gains,
     losses, charges or credits, and defines interest expense as cash interest.
     EBITDA, and the Ratio of EBITDA to Interest Expense, are presented to
     facilitate a more complete analysis of the Company's financial performance,
     by adding back non-cash and nonrecurring items to operating income, as an
     indicator of the Company's ability to generate cash to service debt and
     other fixed obligations. Investors should not rely on EBITDA as an
     alternative to operating income or cash flows, as determined in accordance
     with generally accepted accounting principles, as an indicator of the
     Company's operating performance, liquidity or ability to meet cash needs.
     See "Management's Discussion and Analysis of Financial Condition and
     Results of Operations" for further discussion of the Company's operating
     income and cash flows.

(e)  Represents EBITDA as a percentage of revenues.

(f)  Excludes amortization of deferred financing costs of $2.0 million, $1.7
     million, $1.6 million, $1.5 million and $1.7 million in 1998, 1997, 1996,
     1995 and 1994, respectively, which is included in interest expense.

(g)  Non-cash charges consist of the following: (1) for 1998, a pension accrual
     of $0.4 million and a $0.7 million loss on disposal of assets, (2) for
     1997, a pension accrual of $3.2 million and a $0.5 million loss on disposal
     of assets and (3) for 1994 an Acquisition-related inventory charge of $16.8
     million.

(h)  Nonrecurring and restructuring expenses excluded in calculating EBITDA 
     consist of the following: (1) for 1998, nonrecurring legal charge of $0.4
     million and restructuring accrual adjustments of $(0.7) million; (2) for
     1997, $0.8 million of unusual and nonrecurring charges; (3) for 1996, $4.9
     million in restructuring charges, a $4.7 million nonrecurring charge
     related to resolving a dispute with the Sellers, and $1.6 million for
     corporate relocation and employee retraining; (4) for 1995, $2.8 million in
     nonrecurring charges for computer system implementation and $1.0 million
     for corporate relocation, net of a $1.0 million nonrecurring research and
     development-related benefit; and (5) for 1994, $2.3 million for relocating
     and consolidating the Company's research and development function, $1.8
     million in nonrecurring charges for computer system implementation, and
     $0.3 million for discontinuing the Company's apparel business.

(i)  The Consolidated Fixed Charge Coverage Ratio is a financial measure used in
     the Indenture to determine when the Company can incur certain kinds of new
     debt and engage in certain other transactions. It measures the ratio of (a)
     the sum of Consolidated Net Income, Consolidated Interest Expense,
     Consolidated Income Tax Expense and Consolidated Non-Cash Charges
     (including depreciation, amortization and other non-cash charges) deducted
     in computing Consolidated Net Income (Loss), all determined in accordance
     with GAAP, to (b) the sum of Consolidated Interest Expense and cash
     dividends paid, if any, on any Preferred Stock, as each of these terms is
     defined in the Indenture. Generally, the principal difference between the
     Ratio of EBITDA to Interest Expense and the Consolidated Fixed Charge
     Coverage Ratio arises from the exclusion of nonrecurring and restructuring
     expenses in calculating EBITDA.

(j)  Total debt consists of long-term debt, current portion of long-term debt 
     and capital lease commitments.



                                       17
<PAGE>   18

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The following discussion and analysis should be read in conjunction
with the "Selected Financial Data" and the Company's consolidated financial
statements and related notes and the other financial information appearing
elsewhere in this report.

OVERVIEW

General

         The following discussion and analysis relates to Holding, its
subsidiary Remington, and Remington's wholly-owned subsidiary, Remington
International, Ltd., on a consolidated basis. Holding has virtually no
operations and its only significant asset is its investment in Remington.

         The Company's business is classified as one aggregated operating
segment, and its revenues are derived primarily from sales of hunting/shooting
sports and related products. This reportable segment accounted for approximately
86% of the Company's sales in both 1998 and 1997 and 88% in 1996. Other Company
product lines include firearm-related accessories, clay targets and fishline and
related products.

Business Trends and Initiatives

         The Company believes that several of its key customers instituted
tighter inventory control practices to reduce inventory levels during 1996. The
Company also believes that during 1997 additional key customers began to
institute tighter inventory control practices by delaying purchases until
product was needed to fill orders. This continued shift in customer buying
patterns resulted in a modest softness in demand for the Company's products
during 1996 and 1997. Although tighter inventory control practices have caused,
and are likely to continue to cause, the Company to experience liquidity and
working capital requirements to meet customers' shorter lead time order
requirements, management believes that during 1998 demand stabilized as
customers' inventories reached their targeted levels.

         The Company began its 1997 sales plan year on December 1, 1996 rather
than on January 1, 1997. This change in the sales plan year extended the
qualifying period for the early order or "dating" plan by one month to include
December orders which, the Company believes, had the effect of reducing orders
for firearms products in the first quarter of 1997. The 1998 and 1999 sales plan
year began on December 1, 1997 and 1998, respectively.

         Although the Company believes that consumer concerns about regulation
have not had a significant market influence for its firearms and ammunition
products from 1996 through 1998, there can be no assurance that the regulation
of firearms and ammunition will not become more restrictive in the future and
that any such development would not adversely affect these markets. See
"Business--Regulation" and "Legal Proceedings."

         In light of market constraints on sales growth opportunities and the
Company's liquidity and working capital needs, the Company continues to focus on
increasing profitability by increasing brand name awareness, introducing new
products and containing costs. In 1996, the Company undertook a number of cost
containment initiatives, strengthened the management team and improved operating
efficiencies at the manufacturing facilities. The majority of the benefits from
the 1996 restructuring initiatives were realized in 1997. During 1998 the
Company's management team continued to focus on controlling costs and will
continue to review all aspects of the Company's operations with a view towards
managing costs in response to competitive pressures.



                                       18
<PAGE>   19

RESULTS OF OPERATIONS

         The following table shows, for the periods indicated, the percentage
relationships to sales of certain selected financial data. Management's
discussion and analysis of the Company's results of operations compares 1998 to
1997 results, and 1997 to 1996 results.

<TABLE>
<CAPTION>
                                                         Year Ended       Year Ended      Year Ended
                                                        December 31,     December 31,    December 31,
                                                            1998             1997           1996(1)
                                                            ----             ----           -------

<S>                                                     <C>              <C>             <C>
Sales                                                       100%             100%             100%

Cost of Goods Sold                                           68               71               72

Gross Profit                                                 32               29               28

Operating Expenses                                           20               20               24

Restructuring and Nonrecurring Items                          0                0                3

Operating Profit                                             12                9                1

Net Income (Loss)                                             5                1               (4)
</TABLE>


         (1) Property and payroll taxes of $6.6 million have been reclassified
from operating expenses to cost of goods sold to conform with the current
presentation format.

Year Ended December 31, 1998 as Compared to Year Ended December 31, 1997  

         Sales. Sales for the year ended December 31, 1998 of $380.7 million,
were flat compared to 1997 sales of $381.2 million. Hunting/Shooting Sports
sales were $328.8 million for both the years ended December 31, 1998 and 1997.
Firearms sales of $170.7 million for the year ended December 31, 1998 increased
$1.2 million from 1997. The Company believes the increase was primarily the
result of increased volume due to successful new product introductions, such as
the 3 1/2" Model 870 Express Super Magnum shotgun, and favorable pricing
partially offset by a shift in the mix of firearms sold. Firearms sales for 1997
were also affected by the change in the Company's 1997 sales plan year, which
adversely impacted first quarter sales as discussed above. Ammunition sales of
$158.1 million for the year ended December 31, 1998 decreased $1.2 million from
1997. The decrease in ammunition sales was primarily due to a slight decrease in
volume across all ammunition categories partially offset by favorable pricing.

         Overall sales of all other products, including fishline, accessories,
targets and powdered metal products, decreased $0.5 million, or less than 1%, to
$51.9 million from 1997 sales of $52.4 million, primarily as a result of lower
knife sales.

         Cost of Goods Sold. Cost of goods sold for 1998 was $259.0 million, a
decrease of $10.9 million, or 4%, from $269.9 million for 1997. This decrease
was principally due to favorable commodity prices, a favorable mix of lower-cost
firearm products, lower volumes of accessory products and reductions in other
manufacturing costs (including reductions in pension expense, due to prior plan
amendments and portfolio performance, and the absence in 1998 of certain
nonrecurring and start-up costs incurred in 1997). As a percentage of sales,
cost of goods sold decreased to 68% in 1998 from 71% in 1997, due primarily to
the reductions in commodity prices, price increases in firearms and ammunition
and a favorable mix of higher margin firearms products.

         Gross Profit. Gross profit was $121.7 million for 1998, an increase of
$10.4 million, or 9%, from a gross profit of $111.3 million in 1997. The
increase in gross profit was primarily due to the favorable commodity prices,
the more favorable mix of higher margin firearms products and the increased
prices on the Company's firearms and ammunition products discussed above,
partially offset by lower sales volume in the Company's ammunition and accessory
business.



                                       19
<PAGE>   20

         Operating Expenses. Operating expenses consist of selling, general and
administrative expenses, research and development expense and other expense.
Operating expenses for 1998 were $74.5 million, a decrease of $4.2 million, or
5%, from $78.7 million for 1997.

         Selling, general and administrative expenses for 1998 were $64.6
million, a decrease of $4.3 million, or 6%, from $68.9 million for 1997. The
decrease between the two periods was primarily attributable to lower marketing
communications, distribution and product liability expenses. There was no bad
debt expense, net of recoveries, in 1998 compared to $0.4 million during 1997.
Selling, general and administrative expenses decreased to 17% of sales in 1998
from 18% of sales in 1997 primarily as a result of the reduction in costs
discussed above.

         Research and development expenses were $7.3 million for 1998, a $0.1
million, or 1%, decrease from $7.4 million in 1997.

         Restructuring and Nonrecurring Items. During 1998 the Company recorded
a nonrecurring legal charge of $0.4 million related to a proposed transaction
that was not consummated, and reduced the accrued restructuring charge by $0.7
million reflecting lower than expected severance expenses of $0.1 million, lease
costs of $0.3 million and other expenses of $0.3 million.

         Operating Profit. Operating profit increased to $47.5 million for 1998,
an increase of $14.9 million from 1997's operating profit of $32.6 million.
Operating profit increased primarily as a result of the increase in gross profit
and the decrease in operating expenses discussed above.

         Interest Expense. Interest expense for the year ended December 31, 1998
was $19.2 million, a decrease of $4.4 million, or 19%, from the 1997 level of
$23.6 million. The decrease in interest expense between periods was principally
due to a reduction in average outstanding debt on the Company's revolving credit
facility (the "Revolving Credit Facility") and lower term debt levels resulting
from scheduled debt repayments and, to a lesser extent, the reduction in the
interest rate from 10% to 9.5%, effective June 23, 1997, on the 9.5% Senior
Subordinated Notes due 2003, Series B (the "New Notes") as a result of the
completion of the Exchange Offer (as defined below).

         Net Income. Net income for 1998 was $17.2 million, an increase of $11.7
million from 1997 net income of $5.5 million, as a result of the factors
discussed above.

Year Ended December 31, 1997 as Compared to Year Ended December 31, 1996  

         Sales. Sales for the year ended December 31, 1997 were $381.2 million,
a decrease of $9.2 million, or 2%, from 1996 sales of $390.4 million.
Hunting/Shooting Sports sales decreased $13.5 million, or 4%, to $328.8 million
for the year ended December 31, 1997 from $342.3 million in 1996. Firearms sales
decreased 7%, to $169.5 million for the year ended December 31, 1997 from $182.1
million in 1996. The Company believes the decrease was primarily the result of
customers' tighter inventory management practices that created a modest softness
in demand for firearms products partially offset by increased prices. Firearms
sales for 1997 were also affected by the change in the Company's 1997 sales plan
year, which adversely impacted first quarter sales as discussed above.
Ammunition sales for 1997 were $159.3 million, a decrease of $0.9 million, or
less than 1%, from 1996 sales of $160.2 million. The decrease in ammunition
sales was primarily due to a slight change in the mix of products sold.

         Sales of fishing products increased in 1997 from 1996, primarily due to
increased sales volumes as a result of better product placement and the
introduction of new products. Sales of accessory products also increased in 1997
in comparison to the prior year, primarily due to higher sales volumes resulting
from new product introductions.

         Cost of Goods Sold. Cost of goods sold for 1997 was $269.9 million, a
decrease of $11.8 million, or 4%, versus $281.7 million for 1996. This decrease
resulted principally from the corresponding decrease in sales discussed above
combined with lower manufacturing costs. The Company's manufacturing costs were
lower than the prior year primarily as a result of management's emphasis on
controlling costs and improving efficiencies coupled with the positive effects
of lead and copper price decreases on the cost of raw materials in the
ammunition business. These reductions in manufacturing costs were partially
offset by start-up costs at the Company's facility in Mayfield. Cost of goods 
sold as a percentage of sales decreased between the two periods to 71% in 1997 
from 72% in 1996.



                                       20
<PAGE>   21

         Gross Profit. Gross profit was $111.3 million for 1997, an increase of
$2.6 million, or 2%, from 1996 gross profit of $108.7 million. The increase in
gross profit was primarily due to lower manufacturing costs as previously
discussed and increased prices on the Company's firearms products, partially
offset by lower sales volume in the Company's firearms business and, to a lesser
extent, start-up costs at the Mayfield facility.

         Operating Expenses. Operating expenses consist of selling, general and
administrative expense; research and development expense; and other expense.
Operating expenses for 1997 were $78.7 million, a decrease of $16.1 million, or
17%, from $94.8 million for 1996 primarily for the reasons set forth below.
Property and payroll taxes of $6.6 million for 1996 have been reclassified from
operating expenses to cost of goods sold to conform with the current
presentation format.

         Selling, general and administrative expenses for 1997 were $68.9
million, a decrease of $13.0 million, or 16%, from $81.9 million for 1996.
Licensing income of $2.3 million for 1997 and $0.9 million for 1996 have been
reclassified from other expense, net to selling, general and administrative
expense to conform with the current presentation format. The decrease between
the two periods was primarily attributable to lower expenditures as a result of
the restructuring in 1996 and 1997, tighter controls over discretionary spending
during 1997, a reduction in bad debt expense and reduced product liability
expense. Bad debt expense in 1997 was lower than 1996 due to improved credit
procedures and favorable collection of accounts receivable with significant
recoveries of previously reserved receivables. Selling, general and
administrative expenses decreased to 18% of sales in 1997 from 21% of sales in
1996 primarily as a result of the reduction in costs discussed above.

         Research and development expenses were $7.4 million for 1997, a $2.8
million, or 27% decrease from $10.2 million in 1996. The decrease in research
and development expenses was primarily a result of a more focused approach
toward spending on research and development activities.

         Restructuring and Nonrecurring Items. The Company recorded charges for
restructuring in 1996 of $4.9 million. The restructuring was undertaken to
reduce production levels, plant overhead expenses and other costs to correspond
with current sales volumes and to reorganize the Company's international
marketing efforts. The charges incurred include estimated costs for employee
severance and other benefits of $3.2 million, lease costs of $0.7 million and
other expenses of $1.0 million.

         In December 1996, the Company and the Sellers resolved questions that
had been raised by the Sellers concerning certain product liability related
costs that the Company had allocated to the Cap or that were billed to cases for
which the Sellers assumed responsibility under the Asset Purchase Agreement and
accordingly the Company recorded a nonrecurring charge of $4.7 million. See
"Legal Proceedings."

         Operating Profit. Operating profit increased to $32.6 million for 1997,
an increase of $28.3 million from 1996's operating profit of $4.3 million,
primarily as a result of the factors discussed above. Excluding the
restructuring charge of $4.9 million and the nonrecurring charges of $4.7
million from 1996, operating profit increased $18.7 million from 1996.

         Interest Expense. Interest expense for the year ended December 31, 1997
was $23.6 million, a decrease of $1.5 million, or 6%, from the 1996 level of
$25.1 million. The decrease in interest expense was primarily due to lower term
debt levels resulting from scheduled debt repayments, and to a lesser extent,
lower average borrowings on the Revolving Credit Facility under its Credit
Agreement and a reduction in the interest rate on the New Notes.

         Net Income/(Loss). Net income for 1997 was $5.5 million, an increase of
$19.3 million from 1996 net loss of $13.8 million. However, excluding the
restructuring and nonrecurring charges from 1996 results, net income for 1997
increased $13.5 million over the 1996 net loss of $8.0 million. The increase in
net income was due primarily to the factors discussed above.

TAXES

         The Company's balance sheet as of December 31, 1998 includes net
deferred tax assets in the amount of $17.3 million. See Note 16 to the Company's
consolidated financial statements for the year ended December 31, 1998 appearing
elsewhere in this report. Excluding the $13.6 million of deferred tax assets
related to postretirement benefits, the Company must generate approximately $9.2
million in future taxable income to realize the deferred tax assets. The
postretirement benefits asset is not expected to reverse for approximately 20
years. Management expects that the Company will generate sufficient taxable
income in future periods to fully utilize all deferred tax assets. Accordingly,
the Company has not established a valuation allowance against the net deferred
tax assets.



                                       21
<PAGE>   22

         The Company's effective tax rates for 1998 and 1997 were 39.1% and
39.0%, respectively. These rates were higher than the Federal statutory rate
principally due to the impact of state income taxes and certain non-deductible
expenses. The Company's effective tax rate for 1996 was 33.7% which approximates
the Federal statutory rate.

         Holding and Remington file a consolidated return for Federal income tax
purposes. As a result of the Acquisition, the Company's Federal income tax basis
for its assets approximates the fair market value of those assets on the
Acquisition date. The excess of the sum of the adjusted purchase price, assumed
liabilities and capitalizable and deductible acquisition costs over the
aggregate tax basis of such assets will generally be amortizable over 15 years
and deductible for Federal income tax purposes. Such amortization deductions,
other deductions resulting from the adjusted tax basis for such assets and
deductions for interest on the Company's indebtedness will reduce the Company's
taxable income for periods after the Acquisition.

PURCHASING PATTERNS; SEASONALITY

         The Company's firearms products that are generally used during the fall
hunting season may be purchased under an early order or "dating" plan. Under the
dating plan, the Company allows a distributor to purchase these products
commencing in December (the start of the Company's dating plan year) and to pay
for them on extended terms. Discounts are offered for early payment under this
plan. Discounts amounting to $6.3 million, $3.6 million and $4.6 million were
given in 1998, 1997 and 1996, respectively. The Company believes that allowing
extended payment terms for early orders helps to level out the demand for these
otherwise seasonal products throughout the year. Historically, use of the dating
plan has had the effect of shifting some firearms sales from the second and
third quarters to the first quarter. The Company believes that the dating plan
helps facilitate a more efficient manufacturing schedule. Use of the dating
plan, however, also results in significant deferral of collection of accounts
receivable until the latter part of the year.

         The Company had a separate program in 1996, now discontinued, that
provided an incentive to prepay for ammunition purchases prior to shipment.
While the Company believes that allowing both extended payment terms for early
orders and discounts for prepayment helps to level out the demand for these
otherwise seasonal products throughout the year, the Company discontinued the
ammunition prepayment program effective with the 1997 sales year in response to
competitive actions. The Company is selling the majority of its ammunition
products on terms of 90 days or less and offering discounts for earlier
payments. Effective with the 1998 sales year, an early order program was
instituted which allows customers an additional 30 days to pay for ammunition
purchased prior to April 1st of each year.

         As a result of the seasonal nature of the Company's sales, combined
with the Company's dating plan billing practices, the Company's working capital
financing needs generally have significantly exceeded cash provided by
operations during the first half of the year, until its deferred accounts
receivable were collected in the third and fourth quarters. As a result, the
Company's working capital financing needs tend to be greatest during the spring
and summer months, decreasing during the fall and reaching their lowest point
during the winter. See "Business -- Seasonality."

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

         The Company's operating activities provided cash of $61.0 million for
the year ended December 31, 1998 primarily as a result of net income adjusted
for non-cash items and improved management of working capital. Inventories
decreased $18.3 million to $71.7 million and accounts payable increased $5.5
million primarily as a result of the Company's ongoing working capital
management program to help maximize cash from operations. Net cash used in
investing activities in 1998 was $8.5 million, consisting of capital
expenditures for maintenance of operations and improvement projects concentrated
on enhancing the efficiency of existing facilities. Net cash used in financing
activities in 1998 was $48.2 million, primarily resulting from $21.5 million in
principal payments on outstanding indebtedness (including capital leases), a net
repayment of $19.9 million on the Revolving Credit Facility and a repurchase of
approximately $6.8 million of the New Notes (see "--Notes"). Cash flow from
operating activities for the year ended December 31, 1998 was sufficient to fund
the Company's capital expenditure program, scheduled principal payments on
outstanding indebtedness and a significant reduction in amounts outstanding
under the Revolving Credit Facility.



                                       22
<PAGE>   23

         The Company's operating activities provided cash of $55.9 million for
the year ended December 31, 1997 primarily as a result of net income adjusted
for non-cash items and improved management of working capital. Accounts
receivable decreased $14.8 million to $56.3 million and inventories decreased
$11.9 million to $90.0 million primarily as a result of the Company's ongoing
working capital management program to help maximize cash from operations. Net
cash used in investing activities in 1997 was $5.8 million consisting of capital
expenditures for maintenance of operations and improvement projects concentrated
on enhancing the efficiency of existing facilities as well as investment in the
Company's new manufacturing facility in Mayfield, Kentucky. Net cash used in
financing activities in 1997 was $59.1 million, primarily resulting from
principal payments on outstanding indebtedness and a net repayment on the
Revolving Credit Facility.

         Net cash used in operating activities for the year ended December 31,
1996 was $2.7 million, resulting primarily from elimination of the Company's
ammunition prepayment program as discussed above, nonrecurring cash payments
(consisting primarily of $4.7 million for the relocation of the Company's
corporate headquarters and $1.5 million in restructuring costs) and an increase
in inventories. These uses of cash were substantially offset by extended payment
terms that the Company negotiated with many of its major suppliers in 1996 that
increased accounts payable $18.3 million. Net cash used in investing activities
in 1996 was $22.5 million, principally consisting of investments in property and
facilities in Mayfield and Elizabethtown, Kentucky and Madison, North Carolina.
Net cash provided by financing activities in 1996 was $33.4 million, primarily
resulting from increased revolving credit borrowings of $49.6 million offset in
part by $15.0 million in principal payments on term loan borrowings under the
Company's Credit Agreement.

Working Capital  

         Working capital decreased to $91.1 million at December 31, 1998 from
$108.2 million at December 31, 1997 primarily as a result of the Company's
ongoing working capital management program to help maximize cash from
operations. This program includes maintaining inventory levels in line with
sales projections and increased focus on management of accounts payable. As of
December 31, 1998 inventories were $71.7 million, an $18.3 million reduction
from the December 31, 1997 ending balance.

Capital Expenditures

         Capital expenditures were $8.5 million, $5.8 million and $22.5 million
in 1998, 1997 and 1996, respectively. The capital expenditures in 1998 were
principally for maintenance of operations and improvement projects concentrated
on enhancing the efficiency of existing facilities, including computer system
upgrades. The Company anticipates that capital expenditures in 1999 will be
approximately $14.0 million, principally for maintenance of operations and
improvement projects. The Company expects to fund capital expenditures primarily
from operational cash flow.

Liquidity

         The Company incurred substantial indebtedness in connection with the
Acquisition. As of December 31, 1998, the Company had outstanding approximately
$146.9 million of indebtedness, consisting of approximately $92.9 million ($93.2
million face amount) in the New Notes, $50.0 million in term loan borrowings, no
revolving credit borrowings under the Credit Agreement, $3.5 million in capital
lease obligations and $0.5 million of other long-term debt. As of December 31,
1998 the Company also had aggregate letters of credit outstanding of $3.6
million.

         At present, the principal sources of liquidity for the Company's
business and operating needs are internally generated funds from its operations
and revolving credit borrowings under the Credit Agreement. The Company believes
that it will be able to meet its debt service obligations and fund its operating
requirements with cash flow from operations and revolving credit borrowings
prior to the maturity of the Revolving Credit Facility, although no assurance
can be given in this regard. In addition, the Company has implemented certain
programs and initiatives in order to improve cash flow from operations. See
"--Cash Flows." The Company expects that it will have to replace the Revolving
Credit Facility and refinance any outstanding amounts thereunder upon its
maturity on December 31, 2000. No assurance can be given that the Company will
be able to obtain such a replacement working capital facility or refinance such
amounts on terms acceptable to the Company.



                                       23
<PAGE>   24

Financial Instruments

         The Company has only limited involvement with financial instruments and
does not use them for trading purposes. Financial instruments, which are a type
of financial derivative instrument, are used to manage well-defined interest
rate and commodity price risks. The criteria to qualify for hedge accounting are
that the instrument must be related to an asset, liability, firm commitment or
anticipated transaction that is probable and whose characteristics and terms
have been identified. In addition, the investment must reduce the risks of
commodity price movements or change the character of the interest rate.

         The Company employs various strategies, including call options, zero
cost collars and futures swaps to hedge the price risk related to firm
commitments and anticipated purchases of lead and copper to be used in the
manufacturing process. The Company buys call options for an up front fee for the
right to purchase a specified amount of metal at a pre-determined price and
date. On occasion, zero cost collars are created by selling put options for
quantities and timing identical to the call options, which in effect pay for the
call options. These put options give a third party the right to sell to the
Company a specified amount of metal at a price which is below the call option
price on a pre-determined date. This zero cost collar results in no up front fee
and insures that the Company can purchase a specified amount of metal within a
specified price range on a pre-determined date. Futures swaps are a commitment
to purchase a given amount of metal at an agreed upon price on a future date
with a settlement between the contract price and the market price at the
expiration of the contract. Hedging gains and losses are offset against purchase
price variances on physical purchases of the commodities.

         The amount of premiums paid for commodity contracts outstanding at
December 31, 1998, 1997 and 1996 was $0.7 million, $0.6 million and $1.3
million, respectively. At December 31, 1998, 1997 and 1996, the market value of
the Company's outstanding contracts relating to firm commitments and anticipated
purchases up to one year from the respective balance sheet date was $0.1
million, $0.2 million and $1.2 million, respectively. As of December 31, 1998
and 1997, hedging losses related to closed commodity futures contracts of $0.2
million were included in inventory. There were no hedging losses included in
inventory at December 31, 1996. See Note 18 to the Company's consolidated
financial statements for the year ended December 31, 1998 appearing elsewhere in
this report.

         The estimated value of the Company's debt at December 31, 1998 was
$147.0 million compared to a carrying value of $146.9 million. The estimated
value of the Company's debt at December 31, 1997 was $192.4 million compared to
a carrying value of $195.0 million.

         The Company was not a party to any interest rate cap, hedging or other
protection arrangements with respect to its variable rate indebtedness as of
December 31, 1998 or December 31, 1997. The Company had two interest rate cap
agreements that expired in June 1996. Prior to their termination, these caps had
reduced the potential impact of increases in interest rates on approximately 50%
of the Company's variable rate term loan debt under the Credit Agreement. See
Note 18 to the Company's consolidated financial statements for the year ended
December 31, 1998 appearing elsewhere in this report.

Credit Agreement

         The Company is currently party to the Credit Agreement with The Chase
Manhattan Bank ("Chase"), Union Bank of Switzerland ("UBS") and certain other
lenders, which was initially entered into in connection with the Acquisition.
The Credit Agreement provides for a term loan facility (the "Term Loans"),
originally in an aggregate principal amount of $130.0 million, in addition to
the Revolving Credit Facility. Both facilities have a final maturity of December
31, 2000. Up to $40.0 million of Revolving Credit Facility availability may be
used for standby and commercial letters of credit. In addition, for at least 30
consecutive days of each 12-month period commencing on December 1, outstanding
amounts under the Revolving Credit Facility are limited to $60.0 million or
less.

         The obligations under the Credit Agreement are guaranteed by Holding
and are secured by a pledge of the Company's capital stock and by pledges of and
security interests in substantially all the Company's property and assets. The
Credit Agreement contains various default provisions and affirmative and
negative covenants, including a negative pledge with respect to the Company's
unencumbered assets, and certain financial covenants that require the Company to
meet certain financial ratios and tests. Since September 1995, the Company has
obtained five amendments to its Credit



                                       24
<PAGE>   25

Agreement, which, among other things, modified (i) the minimum earnings, minimum
interest coverage ratio and net worth covenants to decrease the required levels,
(ii) the maximum debt to earnings ratio covenant to increase the permissible
debt levels, (iii) the capital expenditure covenant, initially to increase but
ultimately to reduce the permissible levels of capital expenditures and (iv) the
limitation on optional payments to permit the repurchase of up to $25.0 million
of the New Notes under certain conditions. As of December 31, 1998, the Company
was in compliance in all material respects with the financial covenants under
the Credit Agreement.

         In accordance with the Credit Agreement, the Company made scheduled
principal payments on the Term Loans thereunder of $18.2 million in 1998, $18.2
million in 1997 and $13.6 million in 1996. The Credit Agreement requires the
Company to make further quarterly principal payments on the Term Loans
thereunder (after pro rata reduction for certain prepayments and subject to
further pro rata or other reduction, if any, in the future) in an aggregate
amount of approximately $22.7 million in 1999 and $27.3 million in 2000 with all
remaining amounts then outstanding under the Credit Agreement to be repaid on
December 31, 2000. The Credit Agreement also requires the Company to make
mandatory prepayments on the Term Loans thereunder annually, in an amount equal
to 50% of the Company's Excess Cash Flow (as defined therein) for the preceding
fiscal year. Any such prepayment will result in a pro rata reduction in all
subsequently scheduled principal payments on such Term Loans, except that any
such payment made within the 12 months prior to the date on which an installment
or other payment of principal is scheduled to be paid on the Term Loans may, at
the option of the Company, be applied first to such installment or other
payment. The Company did not have Excess Cash Flow for the years ended December
31, 1998, 1997 or 1996 and accordingly no such prepayment is required in 1999
nor was a prepayment made in 1998 or 1997.

         Loans under the Credit Agreement generally bear interest, at the
Company's option, at a variable rate equal to either (i) the rate that is the
highest of the administrative agent's prime rate, or certain alternative rates,
in each case plus up to 1.25% per annum, or (ii) the rate at which certain
Eurodollar deposits are offered in the interbank Eurodollar market plus up to
2.50% per annum. The interest rate on the Company's Credit Agreement borrowings
can be reduced by 0.25% to 1.0% per annum from the levels originally in effect
if the Company meets certain financial ratios, based on EBITDA and consolidated
interest expense, for the four quarters most recently ended. Once reduced, such
interest rate can also be increased up to the original levels if the Company no
longer meets the financial ratios making it eligible for the interest rate
reduction. During 1998, the interest rate was reduced by 0.75% per annum as a
result of the Company's improved financial performance. The weighted average
interest rate for borrowings under the Term Loan was 8.0% per annum in 1998 and
8.2% per annum in 1997. The weighted average interest rate for borrowings under
the Revolving Credit Facility was 8.3% in 1998 and 8.4% in 1997.

         As noted above, the Credit Agreement was amended as of September 23,
1998 to permit the Company to expend up to $25.0 million toward the repurchase
of the New Notes. See "--Notes" and Note 11 to the Company's consolidated
financial statements for the year ended December 31, 1998 appearing elsewhere in
this report.

Notes

         In connection with the Acquisition, the Company issued $100.0 million
aggregate principal amount of its 9.5% Senior Subordinated Notes due 2003,
Series A (the "Old Notes" together with the New Notes, the "Notes"). On June 23,
1997, the Company completed its offer to exchange (the "Exchange Offer") up to
$100.0 million aggregate principal amount of Remington's New Notes for a like
principal amount of Remington's issued and outstanding Old Notes. All of the Old
Notes were exchanged for New Notes. The interest rate on the Notes was 10% per
annum from April 30, 1994 until June 22, 1997, the day before the date of
consummation of the Exchange Offer, and is currently 9.5% per annum. The
reduction in interest payments was $0.5 million per year. Interest on the Notes
is payable semi-annually and principal is payable at maturity on December 1,
2003.

         During December 1998, the Company repurchased approximately $6.8
million of the New Notes at an average price of 98.7% of the face value on the
open market with cash from operations. Additionally, as of March 17, 1999, the
Company has repurchased approximately $3.8 million of the New Notes at an
average price of 99.8% of the face value on the open market with cash from
operations. These repurchases had no material impact on the Company's results of
operations. From time to time, the Company may continue to repurchase additional
amounts of the New Notes on the open market, subject to the $25.0 million
aggregate repurchase limit set forth in the amended Credit Agreement.



                                       25
<PAGE>   26

PRODUCT LIABILITY

         For information concerning product liability cases and claims involving
the Company, see "Legal Proceedings." Because the Company's assumption of
financial responsibility for certain product liability cases and claims
involving pre-Acquisition occurrences was limited to the amount of the Cap,
which has been exhausted, with the Sellers retaining liability in excess of the
Cap and indemnifying the Company in respect thereof, and because of the
Company's accruals with respect to such cases and claims, the Company believes
that product liability cases and claims involving occurrences arising prior to
the Acquisition are not likely to have a material adverse effect upon the
financial condition or results of operations of the Company. In addition,
although it is difficult to forecast the outcome of litigation, the Company does
not believe, in light of relevant circumstances (including the current
availability of insurance for personal injury and property damage with respect
to cases and claims involving occurrences arising after the Acquisition, the
Company's accruals for the uninsured costs of such cases and claims and the
Seller's agreement to be responsible for a portion of certain post-Acquisition
shotgun-related costs), that the outcome of all pending post-Acquisition product
liability cases and claims will be likely to have a material adverse effect upon
the financial condition or results of operations of the Company. Nonetheless, in
part because of the uncertainty as to the nature and extent of manufacturer
liability for personal injury due to alleged product defects, there can be no
assurance that the Company's resources will be adequate to cover future product
liability occurrences, cases or claims, in the aggregate, or that such a
material adverse effect will not result therefrom. Because of the nature of its
products, the Company anticipates that it will continue to be involved in
product liability cases and claims in the future.

         Since December 1, 1993, the Company has maintained insurance coverage
for product liability claims for personal injury or property damage relating to
occurrences after the Closing, subject to certain self-insured retentions both
on a per-occurrence basis and in the aggregate. The current insurance policy
extends through November 30, 2000. Based on actual defense and disposition costs
incurred by the Company and Sporting Goods with respect to product liability
cases and claims in recent years, management estimates that the Company's
liability for product liability cases and claims relating to occurrences during
1998 will be in the range of $2.0 million to $7.0 million, and that the
liability for product liability cases and claims relating to occurrences during
1997 and 1996 will be in the range of $3.1 million to $7.0 million, and $4.5
million to $9.0 million, respectively, per year. Management estimates that the
amount of the self-insured retention accrued each year will be paid out over the
following three to five years. The Company charged $2.0 million, $4.3 million
and $5.7 million of payments for product and environmental liabilities
(including pre-Acquisition occurrences which were subject to the Cap) in the
years ended December 31, 1998, 1997 and 1996, respectively, against the amounts
previously accrued.

YEAR 2000 COMPLIANCE

         The year 2000 issue is the result of programming code that was written
to use only two digits to define calendar year dates. As a result, computers,
software and other equipment that include such programming code could fail to
operate or to produce correct results.

         In 1995, the Company completed the first phase of replacing its
computer systems with an enterprise-wide, fully-integrated system from SAP
America, Inc., that, upon implementation, will handle accounts payable, accounts
receivable, general ledger, fixed assets, sales and distribution, plant
maintenance and certain manufacturing systems. This system will eliminate most
stand-alone legacy systems and result in all facilities operating within the
same application software package. The new system accommodates the dating
changes necessary to permit correct recording of dates for the year 2000 and
later years. Systems that will not be replaced with the SAP software include
human resources and payroll, which are already year 2000 compliant.

         The Company has also commenced a year 2000 project to address the
Company's remaining systems, including both information technology and
non-information technology systems. The work plan developed by the Company has
four phases: site analysis, site assessment, testing and implementation. In the
site analysis phase, which has been completed, the Company identified primary
areas of concern such as software, networks, products, production equipment,
trucking, telecommunications, customers, vendors, and other third parties such
as banks and government agencies to be evaluated. Appropriate people at the
Company's various facilities were asked to rank these areas at their facility as
critical, which might include a single source supplier, somewhat critical, such
as a preferred supplier, or not critical, where several alternatives are
available.



                                       26
<PAGE>   27

         The site assessment phase, which consisted of on-site visits to
determine which of the previously-identified areas of concern needed to be
addressed at each facility, was completed for all facilities, for both
information technology and non-information technology systems. The surveying of
significant third parties, including major customers, and suppliers of raw
materials, parts and services was completed in November 1998 and responses were
received throughout December 1998. The Company has identified 70 customers,
representing approximately 80% of its 1998 sales, from whom it requested
information on their year 2000 compliant status. The Company also contacted 380
vendors, which supply approximately 90% of the raw materials and finished goods
used by the Company, as well as banks, health care and service providers. Based
on unfavorable responses or lack of response, the Company is in the process of
evaluating whether the possible inability of customers, vendors or other third
parties to continue to do business without interruption could have a material
adverse effect on the Company's business, financial condition or results of
operations. The Company completed the site assessment phase in February 1999.
The Company expects to have formulated a plan for seeking alternative business
partners, if necessary, by the end of the second quarter of 1999.

         The Company continues to test systems at all of its facilities. Key
non-information technology systems, including microcontrollers used in plant
operations, are being tested with post-1999 dates. The testing of existing
equipment will be completed by the end of March 1999 for both information
technology systems and non-information technology systems. Once information has
been received from customers with whom the Company does business electronically,
the Company will begin transaction testing utilizing electronic data
interchange. The Company expects to complete transaction testing of third
parties in mid-1999.

         In the implementation phase, the Company will replace non-compliant
systems with tested compliant systems. The Company has begun implementing year
2000 compliant information technology and non-information technology systems at
all of its facilities and expects to have the implementation phase completed,
with conversion of the final manufacturing facility to the SAP software at the
end of July 1999. The Company estimates that with respect to its information
technology systems that were not replaced by the installation of the SAP
software, it has completed approximately 60% of the reprogramming or replacement
necessary to upgrade these systems to be year 2000 compliant. With respect to
non-information technology systems, the Company estimates that it has completed
approximately 80% of the upgrades necessary to render such systems year 2000
compliant. The Company expects to have completed implementation of all remaining
systems by the end of July 1999. The Company's telecommunications systems have
been upgraded and are year 2000 compliant.

         Due to the implementation of the new computer system, costs related
specifically to year 2000 compliance, including allocation of internal salaries
and related costs, are estimated to be less than $1.0 million. The Company
estimates that it has spent less than $0.2 million on the year 2000 project.
Costs of this project have been satisfied from the Company's cash flows and have
been expensed as incurred except for hardware, which has been capitalized.
Accordingly, the Company does not expect that the cost of year 2000 compliance
will be material to its financial condition or results of operations.

         While the Company currently believes its year 2000 project addresses
its material areas of concern, the failure to correct a material year 2000
problem could result in an interruption in, or a failure of, certain normal
business activities or operations. Such failures could materially and adversely
affect the Company's results of operations, liquidity and financial condition.
Due to the general uncertainty inherent in the year 2000 problem, resulting in
part from the uncertainty of the year 2000 readiness of third-party suppliers
and customers, the Company is unable to determine at this time whether the
consequences of year 2000 failures could have a material impact on the Company's
results of operations, liquidity or financial condition. The year 2000 project
is expected to significantly reduce the Company's level of uncertainty about the
year 2000 problem and, in particular, about the year 2000 compliance and
readiness of its significant business partners. The Company believes that, with
the implementation of new business systems and completion of the project as
scheduled, the possibility of significant interruptions of normal operations
should be reduced. The Company has not yet adopted any formal contingency plan
in the event the Company is not able to complete its year 2000 project in a
timely manner. However, if significant risks are identified, the Company intends
to develop a contingency plan as deemed necessary at that time. In the event the
Company does not complete all phases of its year 2000 project by December 31,
1999, the most likely worst case scenario would be that suppliers would not be
able to supply materials and that certain manufacturing accounting functions at
the Ilion facility would have to be processed outside of the SAP software until
the SAP software was functional at that site.



                                       27
<PAGE>   28

         The discussion of the Company's efforts and expectations relating to
year 2000 compliance are forward-looking statements and should be read in
conjunction with the Company's disclosures under the heading: "Information
Concerning Forward-Looking Statements." The Company's ability to achieve year
2000 compliance and the costs associated therewith could be adversely impacted
by, among other things, the availability of resources, the ability of customers,
vendors or third parties to achieve year 2000 compliance and unanticipated
problems in the testing and implementation phases of its year 2000 project.

ADOPTION OF NEW ACCOUNTING STANDARDS

         Statement of Financial Accounting Standards ("SFAS") No. 129,
"Disclosure of Information about Capital Structure," became effective and was
adopted by the Company in 1998 and had no effect on the information currently
reported by the Company.

         SFAS No. 130, "Reporting Comprehensive Income," became effective and
was adopted by the Company in 1998. This statement establishes standards for
reporting and display of comprehensive income and its components in the
financial statements. The Company had no comprehensive income during the periods
reported herein.

         SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," became effective and was adopted by the Company for the year ended
December 31, 1998. This statement requires public business enterprises to report
certain information about operating segments in complete sets of financial
statements of the enterprise and in condensed financial statements of interim
periods issued to shareholders. Comparative disclosures that include prior
period information have been restated to conform with the provisions of this
statement.

         SFAS No. 132, "Employers' Disclosure about Pensions and Other
Postretirement Benefits," became effective and was adopted by the Company in
1998. This statement standardizes the disclosure requirements for pensions and
postretirement benefits and required changes in disclosures of benefit
obligations and fair values of plan assets. Comparative disclosures that include
prior period information have been restated to conform with the provisions of
this statement.

STATEMENT OF ACCOUNTING STANDARDS NOT YET ADOPTED

         In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 requires entities to recognize all derivative instruments on the balance
sheet at their fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. This statement is effective for all fiscal
quarters for the fiscal years beginning after June 15, 1999. The Company
anticipates that, due to its limited use of derivative instruments, the adoption
of SFAS No. 133 will not have a significant effect on the Company's financial
condition or results of operations.

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

         The statements contained in this report (other than the Company's
consolidated financial statements and other statements of historical fact) are
forward-looking statements, including, without limitation, (i) the statements in
"Business--Hunting/Shooting Sports" concerning the Company's belief that (a) the
markets for hunting-related products such as shotguns, rifles and ammunition
will generally remain relatively flat at least in the near future; (b) the
number of private hunting facilities is increasing, as is the availability of
alternatives to traditional hunting activities, and that these trends may offset
increasing restriction on access and land use; (c) safety issues may affect
sales of firearms, ammunition and other shooting-related products; (d) any costs
resulting from the warranty program effective January 1, 1999 will not have a
material impact on its financial condition or results of operations; and (e) the
current trend, or the consumer perception thereof, toward firearms regulatory
proposals and municipal handgun litigation



                                       28
<PAGE>   29
 could adversely affect the firearms and ammunition market; (ii) the statement
in "Business--Marketing and Distribution" that the Company does not believe that
the trend toward consolidation among wholesalers, dealers and regional chains
will materially adversely affect the Company's sales or profitability; (iii) the
statement in "Business--Patents and Trademarks" that the Company does not
believe the expiration of any of its patents will have a material adverse effect
on the Company's financial conditions or results of operations; (iv) the
statements in "Business--Regulation" concerning the Company's belief that 
(a) certain bills introduced in Congress affecting the manufacture and sale of
handgun ammunition, if enacted, could have a material adverse effect on the
business of the Company and (b) regulatory proposals, even if never enacted, may
affect firearms or ammunition sales as a result of consumer perceptions; (v) the
statement in "Business--Environmental Matters" concerning the Company's belief
that the outcome of any governmental proceedings and orders pertaining to
environmental compliance will not have a material adverse effect on its
business; (vi) other statements as to management's or the Company's expectations
and beliefs presented in "Business;" (vii) the statements in "--Results of
Operations--Business Trends and Initiatives" concerning (a) the Company's belief
that the tighter inventory control practices are likely to continue to cause the
Company to experience increased liquidity and working capital requirements, (b)
management's belief that demand has stabilized as customers' inventories have
reached their targeted levels, and (c) the Company's belief that consumer
concerns about regulation will not be a significant market influence in the near
term; (viii) the statements in "--Taxes" that (a) the Company expects that the
postretirement benefits asset will not reverse for approximately 20 years and
(b) management expects the Company will generate sufficient taxable income in
future periods to fully utilize all deferred tax assets; (ix) the statements in
"--Liquidity and Capital Resources--Capital Expenditures" that (a) the Company
anticipates that capital expenditures for 1999 will be approximately $14.0
million and (b) the Company expects to fund capital expenditures primarily from
operational cash flow; (x) the statements in "--Liquidity and Capital
Resources--Liquidity" concerning (a) the Company's belief that it will be able
to meet its debt service obligations and fund its operating requirements with
cash flow from operations and revolving credit borrowings prior to the maturity
of the Revolving Credit Facility and (b) the Company's expectation that it will
have to replace the Revolving Credit Facility and refinance any outstanding
amounts thereunder upon its maturity on December 31, 2000; (xi) the statement in
"--Liquidity and Capital Resources--Notes" that, from time to time, the Company
may continue to repurchase additional amounts of the New Notes on the open
market, subject to the $25.0 million aggregate repurchase limit in the amended
Credit Agreement; (xii) the statements in "--Product Liability" concerning (a)
the Company's belief that product liability cases and claims involving
occurrences arising prior to the Acquisition are not likely to have a material
adverse effect upon the financial condition or results of operations of the
Company, (b) the Company's belief that the outcome of all pending
post-Acquisition product liability cases and claims will not have a material
adverse effect upon the financial condition or result of operations of the
Company and (c) management's estimates concerning the Company's liability for
product liability cases and claims relating to occurrences arising during 1998,
1997 and 1996 and the time period during which the amount of the Company's self
insured retention will be paid out; (xiii) the statements in "--Year 2000
Compliance" concerning (a) the functions that will be handled by the SAP
software and such software's expected replacement of most stand-alone legacy
systems, (b) the Company's completion dates for the Company's evaluation of
third party responses and formulation of a plan for seeking alternative business
partners, (c) the Company's expectation as to when testing and implementation of
information technology and non-information technology systems will be completed,
(d) the Company's expectation that the cost of year 2000 compliance will not be
material to its financial condition or results of operations, (e) the Company's
belief that its year 2000 project addresses its material areas of concern, (f)
the Company's expectation that the year 2000 project will significantly reduce
the Company's level of uncertainty about the year 2000 problem, (g) the
Company's belief that the implementation of new business systems and the
completion of the year 2000 project will reduce the possibility of significant
interruptions of normal operations and (h) the Company's identification of the
most likely worst case scenario; (xiv) other statements as to management's or
the Company's expectations and beliefs presented in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations;" (xv)
the statements in "Legal Proceedings" concerning (a) the Company's anticipation
that because of the nature of its products, it will continue to be involved in
product liability cases and claims in the future, (b) the Company's belief that
its current product liability insurance coverage for personal injury and
property damage is adequate for its needs, (c) the Company's belief that
appellate courts' decision in Luna should govern class action claims against
Remington, (d) the Company's belief that product liability cases and claims
involving occurrences arising prior to the Acquisition are not likely to have a
material adverse effect upon the financial condition or results of operations
and (e) the Company's belief that the outcome of all pending post-Acquisition
product liability cases and claims will not be likely to have a material adverse
effect upon the financial conditions or results of operations of the Company and
(xvi) other statements as to management's or the Company's expectations and
beliefs presented in "Legal Proceedings."



                                       29
<PAGE>   30

         Forward-looking statements are made based upon management's current
expectations and beliefs concerning future developments and their potential
effects upon the Company. There can be no assurance that future developments
will be in accordance with management's expectations or that the effect of
future developments on the Company will be those anticipated by management. The
following important factors, and those important factors described elsewhere in
this report (including, without limitation, those discussed in
"Business--Hunting/Shooting Sports," "--Marketing and Distribution," "--Patents
and Trademarks" and "--Environmental Matters" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview," "--Taxes,"
"--Liquidity and Capital Resources," "--Product Liability," "--Year 2000
Compliance" and "Legal Proceedings"), or in other Securities and Exchange
Commission filings of the Company, could affect (and in some cases have
affected) the Company's actual results and could cause such results to differ
materially from estimates or expectations reflected in such forward-looking
statements.

-    The Company's ability to make scheduled payments of principal or interest
     on, or to refinance its obligations with respect to its indebtedness and to
     comply with the covenants and restrictions contained in the instruments
     governing such indebtedness will depend on its future operating performance
     and cash flow, which are subject to prevailing economic conditions,
     prevailing interest rate levels, and financial, competitive, business and
     other factors beyond its control including the responses of competitors,
     changes in customer inventory management practices, changes in customer
     buying patterns, regulatory developments and increased operating costs.

-    The degree to which the Company is leveraged could have important  
     consequences to the holders of the New Notes, including the following: (i)
     the Company's ability to obtain additional financing for working capital or
     other purposes in the future may be limited; (ii) a substantial portion of
     the Company's cash flow from operations will be dedicated to the payment of
     principal and interest on its indebtedness, thereby reducing funds
     available for operations; (iii) certain of the Company's borrowings will be
     at variable rates of interest, which could cause the Company to be
     vulnerable to increases in interest rates and (iv) the Company may be more
     vulnerable to economic downturns and be limited in its ability to withstand
     competitive pressures.

-    The Company's ability to meet its debt service and other obligations will
     depend in significant part on customers purchasing the Company's products
     during the fall hunting season. Notwithstanding the Company's cost
     containment initiatives and continuing management of costs, a decrease in
     demand during the fall hunting season for the Company's higher priced,
     higher margin products would require the Company to further reduce costs or
     increase its reliance on borrowings under the Company's Revolving Credit
     Facility to fund operations. No assurance can be given that the Company
     would be able to reduce costs or increase its borrowings sufficiently to
     adjust to such a reduction in demand.

-    Because of the nature of its products, the Company anticipates that it will
     continue to be involved in product liability litigation in the future. The
     Company's ability to meet its product liability obligations will depend
     (among other things) upon the availability of insurance, the adequacy of
     Company accruals, the Seller's ability to satisfy their obligations to
     indemnify the Company against certain product liability cases and claims
     and Seller's agreement to be responsible for certain post-Acquisition
     shotgun related costs.

-    The Company's sales revenues have been adversely affected by changes in
     inventory management practices at several of its key customers. In
     addition, changes in customer buying patterns at certain key customers have
     increased the seasonality of the Company's sales of certain higher priced,
     higher margin products.

-    The Company faces significant competition. The Company's competitors vary
     according to product line. Certain of these competitors are subsidiaries of
     large corporations with substantially greater financial resources than the
     Company. There can be no assurance that the Company will continue to
     compete effectively with all of its present competition, and the Company's
     ability to so compete could be adversely affected by its leveraged
     condition.

-    Sales made to Wal-Mart Stores, Inc. ("Wal-Mart") accounted for
     approximately 19% of the Company's total net revenues in 1998. The
     Company's sales to Wal-Mart are not governed by a written contract between
     the parties. In the event that Wal-Mart were to significantly reduce or
     terminate its purchases of firearms and/or ammunition from the Company, the
     Company's financial condition or results of operations could be adversely
     affected.



                                       30
<PAGE>   31

-    The Company utilizes numerous raw materials, including steel, lead, brass,
     plastics and wood, as well as manufactured parts, that are purchased from
     one or a few suppliers. In addition, the Company purchases most of the
     fishline it requires for its product lines from DuPont under a supply
     agreement that was renewed in January 1997 with subsequent addendums, and
     is automatically renewed annually until notice by either party. Any
     disruption in the Company's relationship with these suppliers could
     increase the cost of operations.

-    The purchase of firearms is subject to federal, state and local
     governmental regulation. Regulatory proposals, even if never enacted, may
     affect firearms or ammunition sales as a result of consumer perceptions.
     While the Company does not believe that existing federal and state
     legislation relating to the regulation of firearms and ammunition has had a
     material adverse effect on its sales from 1996 through 1998, no assurance
     can be given that more restrictive regulations, if proposed or enacted,
     will not have a material adverse effect on the Company in the future.

         While the Company periodically reassesses material trends and
uncertainties affecting the operations and financial condition in connection
with its preparation of Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in its quarterly and annual
reports, the Company does not intend to review or revise any particular
forward-looking statement referenced in this report in light of future events.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Certain of the Company's financial instruments are subject to market
risks, including interest rate risk. The Company was not a party to any interest
rate cap or other protection arrangements with respect to its $50.0 million of
variable rate indebtedness as of December 31, 1998. The Company uses commodity
futures contracts to hedge against the risk of increased prices for lead and
copper to be used in the manufacture of the Company's products. At December 31,
1998, the market value of the Company's outstanding contracts relating to firm
commitments and anticipated purchases up to one year from the respective balance
sheet date was $0.1 million. The Company believes that a near-term change in
commodity prices will not materially impact the consolidated financial position,
results of operations, future earnings, fair value or cash flows of the Company.
Additionally, the Company believes it does not have a material exposure to
fluctuations in foreign currencies. The Company does not hold or issue financial
instruments for trading purposes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources--Financial Instruments" and Note 18 to the Company's consolidated
financial statements for the year ended December 31, 1998 appearing elsewhere in
this report.



                                       31
<PAGE>   32

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                        REPORT OF INDEPENDENT ACCOUNTANTS


To The Board of Directors and Shareholders of RACI Holding, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, cash flows, and shareholders' equity
present fairly, in all material respects, the financial position of RACI
Holding, Inc. and subsidiaries (the "Company") at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statements presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.


/s/ PricewaterhouseCoopers LLP

Greensboro, North Carolina
March 2, 1999



                                       32
<PAGE>   33

                       RACI HOLDING, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                  (Dollars in Millions, Except Per Share Data)

<TABLE>
<CAPTION>
                                                             DECEMBER 31,  December 31,
                                                                 1998          1997
                                                             ------------  ------------

<S>                                                          <C>           <C> 
ASSETS
Current Assets
Cash and Cash Equivalents                                      $   4.9       $   0.6  
Accounts Receivable Trade - net of allowances                                          
      of $3.3 and $5.2, respectively                              63.0          56.3  
Inventories                                                       71.7          90.0  
Supplies                                                          10.6          12.7  
Prepaid Expenses and Other Current Assets                          9.6           9.3  
Deferred Income Taxes                                             15.3          16.2  
                                                               -------       -------
  Total Current Assets                                           175.1         185.1

Property, Plant and Equipment - net                               86.3          92.0
Intangibles and Debt Issuance Costs - net                         88.7          93.1
Deferred Income Taxes                                              2.0           6.2
Other Noncurrent Assets                                            2.4           4.3
                                                               -------       -------
  TOTAL ASSETS                                                 $ 354.5       $ 380.7
                                                               =======       =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable                                               $  28.2       $  22.7
Short-Term Debt                                                    0.9           1.0
Current Portion of Long-Term Debt                                 24.9          21.5
Product and Environmental Liabilities                              3.1           3.2
Other Accrued Liabilities                                         26.9          28.5
                                                               -------       -------
  Total Current Liabilities                                       84.0          76.9

Long-Term Debt                                                   122.0         173.5
Retiree Benefits                                                  35.6          34.8
Product and Environmental Liabilities                              9.4           9.2
                                                               -------       -------
  Total Liabilities                                              251.0         294.4
                                                               -------       -------

Commitments and Contingencies                                                

Shareholders' Equity
Class A Common Stock, par value $.01; 1,250,000 shares
   authorized, 760,000 issued and outstanding                       --            --
Class B Common Stock, par value $.01; 1,250,000 shares
   authorized, none issued and outstanding                          --            --
Paid in Capital                                                   76.0          76.0
Retained Earnings                                                 27.5          10.3
                                                               -------       ------- 
      Total Shareholders' Equity                                 103.5          86.3
                                                               -------       -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                     $ 354.5       $ 380.7
                                                               =======       =======
</TABLE>


         The accompanying notes are an integral part of these consolidated
financial statements.



                                       33
<PAGE>   34

                       RACI HOLDING, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations
                  (Dollars in Millions, Except Per Share Data)

<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                            --------------------------------------
                                              1998          1997 (1)      1996 (1)
                                            ---------      ---------     ---------

<S>                                         <C>            <C>           <C> 
Sales (2)                                   $   380.7      $   381.2     $   390.4

Cost of Goods Sold                              259.0          269.9         281.7
                                            ---------      ---------     ---------

   Gross Profit                                 121.7          111.3         108.7

Selling, General and Administrative
  Expenses                                       64.6           68.9          81.9

Research and Development Expense                  7.3            7.4          10.2

Other Expenses, net                               2.6            2.4           2.7

Restructuring and Nonrecurring Items             (0.3)            --           9.6
                                            ---------      ---------     ---------

    Operating Profit                             47.5           32.6           4.3

Interest Expense                                 19.2           23.6          25.1
                                            ---------      ---------     ---------

    Profit (Loss) before Income Taxes            28.3            9.0         (20.8)

Provision (Benefit) for Income Taxes             11.1            3.5          (7.0)
                                            ---------      ---------     ---------

     Net Income (Loss)                      $    17.2      $     5.5     $   (13.8)
                                            =========      =========     =========

Per Share Data:

     Basic Income (Loss) Per Share          $   22.63      $    7.33     $  (18.40)
                                            =========      =========     =========
     Diluted Income (Loss) Per Share        $   22.26      $    7.33     $  (18.40)
                                            =========      =========     =========
</TABLE>


(1)    Certain reclassifications were made to the prior period's financial
       information to conform with the current presentation format.

(2)    Sales are presented net of Federal Excise Taxes of $31.5, $31.0 and 
       $31.7, respectively.

         The accompanying notes are an integral part of these consolidated
financial statements.



                                       34
<PAGE>   35

                       RACI HOLDING, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                              (Dollars in Millions)

<TABLE>
<CAPTION>
                                                                                                Year Ended December 31,           
                                                                                          ------------------------------------    
                                                                                            1998          1997          1996      
                                                                                          --------      --------      --------    
<S>                                                                                       <C>           <C>           <C>         
Operating Activities                                                                                                              
Net Income (Loss)                                                                         $   17.2      $    5.5      $  (13.8)   
Adjustments to reconcile Net Income (Loss) to Net Cash                                                                            
  provided by (used in) Operating Activities:                                                                                     
     Restructuring                                                                            (0.7)           --           3.4    
     Depreciation                                                                             13.5          12.7          11.5    
     Amortization                                                                              4.4           4.1           4.0    
     Loss on disposal of Property, Plant and Equipment                                         0.7           0.5           0.4    
     Provision for Retiree Benefits                                                            0.8           2.9           3.1    
     Provision (Benefit) for Deferred Income Taxes                                             5.1           5.0          (4.8)   
     Changes in Operating Assets and Liabilities:                                                                                 
         Accounts Receivable Trade - net                                                      (6.7)         14.8          (0.7)   
         Inventories                                                                          18.3          11.9          (4.6)   
         Supplies                                                                              2.1           1.2           1.5    
         Prepaid Expenses and Other Current Assets                                            (0.3)          1.4          (3.0)   
         Other Noncurrent Assets                                                               1.9           1.3          (1.0)   
         Accounts Payable                                                                      5.5         (10.2)         18.3    
         Customer Prepayments                                                                   --          (0.2)         (7.8)   
         Product and Environmental Liabilities                                                 0.1           0.4           7.7    
         Income Taxes Payable                                                                   --            --          (5.4)   
         Other Accrued Liabilities                                                            (0.9)          6.4          (7.8)   
     Payments for Assumed Pre-Acquisition Product and Environmental Liabilities                 --          (1.8)         (3.7)   
                                                                                          --------      --------      --------    
    Net Cash provided by (used in) Operating Activities                                       61.0          55.9          (2.7)   
                                                                                          --------      --------      --------    
                                                                                                                                  
Investing Activities                                                                                                              
Purchase of Property, Plant and Equipment                                                     (8.5)         (5.8)        (22.5)   
                                                                                          --------      --------      --------    
    Net Cash used in Investing Activities                                                     (8.5)         (5.8)        (22.5)   
                                                                                          --------      --------      --------    
                                                                                                                                  
Financing Activities                                                                                                              
Proceeds from Revolving Credit Facility                                                      174.2         163.8         416.3    
Principal Payments on Revolving Credit Facility                                             (194.1)       (202.9)       (366.7)   
Proceeds from Issuance of Long-Term Debt                                                        --           0.8           2.5    
Principal Payments on Long-Term Debt                                                         (21.5)        (20.8)        (15.0)   
Repurchase of Senior Subordinated Notes                                                       (6.7)           --            --    
Proceeds from Short-Term Debt                                                                  1.0           1.0           1.3    
Principal Payments on Short-Term Debt                                                         (1.1)         (1.2)         (4.6)   
Proceeds from Issuance of Common Stock                                                          --           1.0            --    
Debt Issuance Costs                                                                             --          (0.8)         (0.4)   
                                                                                          --------      --------      --------    
    Net Cash (used in) provided by Financing Activities                                      (48.2)        (59.1)         33.4    
                                                                                          --------      --------      --------    
                                                                                                                                  
Increase (Decrease) in Cash and Cash Equivalents                                               4.3          (9.0)          8.2    
Cash and Cash Equivalents at Beginning of Period                                               0.6           9.6           1.4    
                                                                                          --------      --------      --------    
Cash and Cash Equivalents at End of Period                                                $    4.9      $    0.6      $    9.6    
                                                                                          ========      ========      ========    
                                                                                                                                  
Supplemental Cash Flow Information: 
     Cash Paid during the Year for:                                                                
         Interest                                                                         $   18.0      $   22.2      $   24.0    
         Income Taxes                                                                     $    6.8      $    1.3      $    6.1    
     Noncash Activities:                                                                                                          
         Capital Lease Obligations Incurred                                               $     --      $    1.0      $    2.7    
</TABLE>  

         The accompanying notes are an integral part of these consolidated
financial statements.



                                       35
<PAGE>   36

                       RACI HOLDING, INC. AND SUBSIDIARIES
                 Consolidated Statement of Shareholders' Equity
                    (Dollars in Millions, Except Share Data)

<TABLE>
<CAPTION>
                                                                    Total
                                         Paid-in      Retained   Shareholders'
                                         Capital      Earnings      Equity
                                         -------      --------     --------

<S>                                      <C>          <C>        <C>   
BALANCE, DECEMBER 31, 1995               $  75.0      $  18.6      $   93.6

      Net Loss                                          (13.8)        (13.8)
                                         -------      -------      --------

BALANCE, DECEMBER 31, 1996                  75.0          4.8          79.8

      Net Income                                          5.5           5.5
      Issuance of 10,000 Shares of
        Class A Common Stock to
        non-employee directors               1.0                        1.0
                                         -------      -------      --------

BALANCE, DECEMBER 31, 1997                  76.0         10.3          86.3

      Net Income                                         17.2          17.2
                                         -------      -------      --------

BALANCE, DECEMBER 31, 1998               $  76.0      $  27.5      $  103.5
                                         =======      =======      ========
</TABLE>


         The accompanying notes are an integral part of these consolidated
financial statements.



                                       36



<PAGE>   37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


NOTE 1 - BASIS OF PRESENTATION

         The accompanying consolidated financial statements of RACI Holding,
Inc. ("Holding") include the accounts of its subsidiary, Remington Arms Company,
Inc. ("Remington") and Remington's wholly owned subsidiary, Remington
International, Ltd. (together with Remington and Holding, the "Company").
Holding has no material assets other than its investment in Remington. All
intercompany accounts and transactions have been eliminated in consolidation.

         Certain reclassifications were made to the prior year's financial
information to conform with the current presentation format.

NOTE 2 - DESCRIPTION OF THE BUSINESS

         The Company is engaged in the design, manufacture and sale of sporting
goods products for the hunting/shooting sports and related markets. The
Company's product lines consist of firearms, ammunition, and hunting/gun care
accessories, sold under the Remington name and other labels, fishing products
sold under the Stren name and other labels and clay targets.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents:

         Cash and cash equivalents include demand deposits with banks and highly
liquid investments with remaining maturities, when purchased, of three months or
less.

Inventories:

         Inventories are stated at the lower of cost or market. The cost of
inventories is determined by the first-in, first-out ("FIFO") method.

Supplies:

         The cost of supplies is determined by the average cost method.

Property, Plant and Equipment:

         Property, plant and equipment are stated at cost. Depreciation is
determined on a straight-line basis over the estimated lives of the assets. The
estimated useful lives are principally 20 to 40 years for buildings and
improvements, and 5 to 15 years for machinery and equipment. Maintenance and
repairs are charged to operations; replacements and betterments are capitalized.
Computer hardware and software costs under capital leases are amortized over the
term of the lease. The cost and related accumulated depreciation applicable to
assets sold or retired are removed from the accounts and the gain or loss on
disposition is recognized in income.

         Interest is capitalized in connection with the construction of major
facilities. The capitalized interest is recorded as part of the asset to which
it relates and is amortized over the asset's useful life. No interest cost was
capitalized in 1998. Approximately $0.2 of interest cost was capitalized in both
1997 and 1996.

Intangibles and Debt Issuance Costs:

         Intangibles, consisting primarily of goodwill and trade names, are
amortized on a straight-line basis over their estimated useful lives of 40
years. Debt issuance costs are being amortized over the life of the related
debt.


                                       37

<PAGE>   38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


Management assesses goodwill for impairment whenever facts and circumstances
indicate that the carrying amount may not be fully recoverable. To analyze
recoverability, management projects undiscounted future cash flows over the
remaining life of the goodwill. If these projected cash flows are less than the
carrying amount of the goodwill, an impairment loss would be recognized,
resulting in a writedown of goodwill with a corresponding charge to income. The
impairment loss would be measured based upon the difference between the carrying
amount of the goodwill and the present value of future cash flows. The Company
uses a discount rate equal to its average cost of funds to discount the expected
future cash flows.

Financial Instruments:

         The Company has only limited involvement with financial instruments and
does not use them for trading purposes. Financial instruments, which are a type
of financial derivative instrument, are used to manage well-defined commodity
price and interest rate risks and are considered hedges when certain criteria
are met. The criteria to qualify for hedge accounting are that the instrument
must be related to an asset, liability, firm commitment or anticipated
transaction that is probable and whose characteristics and terms have been
identified. In addition, the investment must reduce the risks of commodity price
movements or change the character of the interest rate.

         Premiums paid for purchased interest rate cap agreements are amortized
to interest expense over the term of the agreements. Unamortized premiums are
included in prepaid expenses and other current assets on the balance sheet.
Amounts receivable under interest rate cap agreements are accrued as a reduction
of interest expense. Gains and losses on commodity futures contracts qualifying
as hedges are deferred and recognized as a component of the cost of acquiring
the related inventory. Market values of financial instruments were estimated
based on quoted market prices, where available, or on current rates offered to
the Company for debt with similar terms and maturities. Unless otherwise
disclosed, the fair value of financial instruments approximates their recorded
values.

Income Taxes:

         The Company accounts for income taxes in accordance with the method
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes", which requires recognition of deferred tax assets
and liabilities based on the difference between the financial reporting and tax
bases of assets and liabilities, applying tax rates applicable to the year in
which the differences are expected to reverse. A valuation allowance is recorded
when it is more likely than not that the deferred tax asset will not be
realized.

Product Liability:

         The Company provides for estimated defense and settlement costs related
to product liabilities when it becomes probable that a liability has been
incurred and reasonable estimates of such costs are available. The Company
maintains insurance coverage for product liability claims, subject to certain
policy limits and to certain self-insured retentions for personal injury or
property damage relating to occurrences arising after December 1, 1993 (the
"Closing"). The current insurance policy extends through November 30, 2000.
Product liabilities are not recorded net of recoveries that are probable of
realization. At December 31, 1998, 1997 and 1996, no recoveries have been
recorded.

Revenue Recognition:

         Sales, net of an estimate for discounts, returns and allowances, and
related cost of sales are included in income when goods are shipped to the
customer.

Advertising and Promotional Costs:

         Advertising and promotional costs are expensed as incurred. In 1998,
1997 and 1996 advertising and promotional costs totaled $15.0, $17.2 and $18.3,
respectively.


                                       38
<PAGE>   39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


Self-Insurance:

         The Company is self-insured for elements of its employee benefit plans
including, among others, medical, workers' compensation and elements of its
property and liability insurance programs, but limits its liability through
stop-loss insurance and annual plan maximum coverage limits. Self-insurance
liabilities are based on claims filed and estimates for claims incurred but not
yet reported.

Pension and Postretirement:

         Unrecognized prior service costs are being amortized over the estimated
remaining service lives of employees. The unrecognized net gain or loss
resulting from changes in the amount of either the projected benefit obligation
or plan assets from experience different from that assumed are amortized over
five years.

Use of Estimates:

         The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Adoption of New Accounting Standards:

         SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," became effective and was adopted by the Company for the year ended
December 31, 1998. This statement requires public business enterprises to report
certain information about operating segments in complete sets of financial
statements of the enterprise and in condensed financial statements of interim
periods issued to shareholders. The adoption of SFAS No. 131 did not affect
results of operations or financial position but did affect the disclosure of
segment information.

         SFAS No. 132, "Employers' Disclosure about Pensions and Other
Postretirement Benefits," became effective and was adopted by the Company in
1998. This statement standardizes the disclosure requirements for pensions and
postretirement benefits and required changes in disclosures of benefit
obligations and fair values of plan assets. Comparative disclosures that include
prior period information have been restated to conform with the provisions of
this statement.

Statement of Accounting Standards Not Yet Adopted:

         In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 requires entities to recognize all derivative instruments on the balance
sheet at their fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. This statement is effective for all fiscal
quarters for the fiscal years beginning after June 15, 1999. The Company
anticipates that, due to its limited use of derivative instruments, the adoption
of SFAS No. 133 will not have a significant effect on the Company's financial
condition or results of operations.

NOTE 4 - RESTRUCTURING AND NONRECURRING ITEMS

         The Company recorded charges for restructuring in 1996 of $4.9. The
restructuring was necessary to reduce production levels, plant overhead
expenses, corporate administrative expense and other costs to correspond with
current sales volumes and to reorganize the Company's international marketing
efforts. The company-wide plan resulted in reductions of approximately 325
salaried and hourly (including bargaining unit) employees during 1996. The
charges incurred included estimated costs for employee severance and other
benefits of $3.2, lease costs of $0.7 and other expenses of $1.0. The remaining
balance is expected to be eliminated by the end of 1999.


                                       39

<PAGE>   40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


         Components of the restructuring provision recorded in 1996 and utilized
through December 31, 1998 are as follows:

<TABLE>
<CAPTION>
                                         Severance and
                                          Termination       Lease          Other
                                           Benefits         Costs         Expenses        Total
                                          ---------         -----         --------       -------
       <S>                                <C>              <C>            <C>            <C>
       Original Provision                   $  3.2         $  0.7         $  1.0         $  4.9
       Payments in 1996                       (1.3)          (0.1)          (0.1)          (1.5)
                                            ------         ------         ------         ------
       Balance, December 31, 1996              1.9            0.6            0.9            3.4
       Payments in 1997                       (1.7)          (0.1)          (0.5)          (2.3)
                                            ------         ------         ------         ------
       Balance, December 31, 1997              0.2            0.5            0.4            1.1
       Payments in 1998                         --           (0.2)            --           (0.2)
       Reserve Adjustments in 1998            (0.1)          (0.3)          (0.3)          (0.7)
                                            ------         ------         ------         ------
       Balance, December 31, 1998           $  0.1         $   --         $  0.1         $  0.2
                                            ======         ======         ======         ======
</TABLE>

         During 1998 the Company reduced the accrued restructuring charge by
$0.7, as disclosed in the table above, reflecting lower than expected expenses.
Additionally, during 1998 the Company recorded a nonrecurring legal charge of
$0.4 related to a proposed transaction that was not consummated.

         In 1996, the Company and one of DuPont's subsidiaries ("Sporting Goods
Properties, Inc.," and together with E. I. du Pont de Nemours and Company
("DuPont"), the "Sellers") resolved certain questions that had been raised by
the Sellers concerning certain product liability related costs for which the
Sellers assumed responsibility under an asset purchase agreement (the "Asset
Purchase Agreement"). As a result of this agreement, the Company recorded a
nonrecurring charge of $4.7 in 1996. See Notes 2 and 15.

NOTE 5 - CONCENTRATIONS OF CREDIT RISK

         Concentrations of credit risk with respect to trade accounts receivable
are generally diversified, except as noted below, due to the large number of
customers comprising the Company's customer base. The Company reviews a
customer's credit history before extending credit and establishes an allowance
for doubtful accounts based upon factors surrounding the credit risk of specific
customers, historical trends and other information. There was no bad debt
expense, net of recoveries, in 1998. During 1997 and 1996 bad debt expense was
$0.4 and $1.9, respectively.

         The Company's cash and cash equivalents are invested in high-quality
securities placed with institutions with high credit ratings. This investment
policy limits the Company's exposure to concentrations of credit risk.

         Sales to the Company's largest customer approximated 19%, 20% and 18%
of sales in 1998, 1997 and 1996, respectively.

NOTE 6 - INVENTORIES

         At December 31, Inventories consist of the following:

<TABLE>
<CAPTION>
                                             1998         1997
                                            ------       ------
            <S>                             <C>          <C>
            Raw Materials                   $10.7        $13.9
            Semi-Finished Products           17.4         20.0
            Finished Products                43.6         56.1
                                            -----        -----
                      Total                 $71.7        $90.0
                                            =====        =====
</TABLE>



                                       40
<PAGE>   41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


NOTE 7 - PROPERTY, PLANT AND EQUIPMENT

         At December 31, Property, Plant and Equipment consist of the following:

<TABLE>
<CAPTION>
                                                   1998           1997
                                                  ------         ------
          <S>                                     <C>            <C>
          Land                                    $  1.5         $  1.5
          Building and Improvements                 23.1           23.0
          Leased Assets                              7.9            7.9
          Machinery and Equipment                  103.0           97.4
          Construction in Progress                   4.6            2.9
                                                  ------         ------
               Subtotal                            140.1          132.7
          Less: Accumulated Depreciation           (53.8)         (40.7)
                                                  ------         ------
               Total                              $ 86.3         $ 92.0
                                                  ======         ======
</TABLE>

NOTE 8 - INTANGIBLES AND DEBT ISSUANCE COSTS

         At December 31, Intangibles and Debt Issuance Costs consist of the
following:

<TABLE>
<CAPTION>
                                                   1998           1997
                                                  ------         ------
          <S>                                     <C>            <C>
          Intangibles                             $ 95.9         $ 95.9
          Debt Issuance Costs                       13.0           13.3
                                                  ------         ------
                Subtotal                           108.9          109.2
          Less: Accumulated Amortization           (20.2)         (16.1)
                                                  ------         ------
                    Total                         $ 88.7         $ 93.1
                                                  ======         ======
</TABLE>

NOTE 9 - OTHER ACCRUED LIABILITIES

         At December 31, Other Accrued Liabilities consist of the following:

<TABLE>
<CAPTION>
                                                  1998         1997
                                                 ------       -------
          <S>                                    <C>          <C>
          Marketing                               $ 8.6        $ 9.5
          Health Costs                              6.2          6.4
          Compensation                              5.5          4.0
          Restructuring                             0.2          1.1
          Other                                     6.4          7.5
                                                  -----        -----
                    Total                         $26.9        $28.5
                                                  =====        =====
</TABLE>

NOTE 10 - RETIREE BENEFITS

Pension Plans:

         The Company sponsors a defined benefit pension plan (the "Plan").
Additionally a supplemental defined benefit pension plan (the "SERP") was
adopted January 1, 1998. Under the provisions of SFAS No. 132, the disclosure
requirements for the Plan and the SERP have been combined.

         Change in Benefit Obligation:

<TABLE>
<CAPTION>
                                                    1998            1997
                                                   -------         ------
          <S>                                      <C>            <C>
          Benefit Obligation at Beginning of Year   $64.1          $54.9
          Service Cost                                4.2            4.1
          Interest Cost                               4.5            4.3
          Amendments/SERP                             0.5           (1.6)
          Actuarial  Loss                             2.8            2.6
          Benefits Paid                              (0.7)          (0.2)
                                                    -----          -----
          Benefit Obligation at End of Year         $75.4          $64.1
                                                    =====          =====
</TABLE>




                                       41
<PAGE>   42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


          Change in Plan Assets:

<TABLE>
<CAPTION>
                                                                   1998            1997
                                                                  ------          ------
          <S>                                                     <C>             <C>
          Fair Value of Plan Assets at Beginning of Year          $ 63.4          $ 56.4
          Actual Return on Plan Assets                               7.0             7.2
          Employer Contribution                                       --              --
          Plan Participants' Contribution                             --              --
          Benefits Paid                                             (0.7)           (0.2)
                                                                  ------          ------
          Fair Value of Plan Assets at End of Year                $ 69.7          $ 63.4
                                                                  ======          ======

          Net Amount Recognized:
                                                                   1998            1997
                                                                  ------          ------
          Funded Status                                           $ (5.7)         $ (0.7)
          Unamortized Prior Service Cost                            (2.9)           (3.6)
          Unrecognized Net Actuarial Gain                           (4.8)           (8.1)
          Accrued Benefit Cost/SERP                                 (0.1)             --
          Accrued Benefit Liability/SERP                            (0.4)             --
          Intangible Asset/SERP                                      0.4              --
                                                                  ------          ------
          Accrued Pension Liability                               $(13.5)         $(12.4)
                                                                  ======          ======
</TABLE>

           Components of Net Periodic Pension Cost:

<TABLE>
<CAPTION>
                                                                   1998            1997        1996
                                                                  ------          ------      ------
          <S>                                                     <C>             <C>         <C>
          Service Cost                                            $  4.2          $  4.1      $ 4.9
          Interest Cost                                              4.5             4.3        4.2
          Expected Return on Assets                                 (7.0)           (7.2)      (1.1)
          Net Amortization and Deferral                             (0.2)            2.0       (5.0)
                                                                  ------          ------      -----
          Net Periodic Pension Cost                               $  1.5          $  3.2      $ 3.0
                                                                  ======          ======      =====

          Actuarial Assumptions:
             Discount Rate                                           6.8%            7.3%
             Long-Term Rate on Assets                                8.5%            8.5%
             Rate of Compensation Increase                           4.0%            3.5%
</TABLE>

         Under the Asset Purchase Agreement, DuPont was required to transfer
funds to the Plan in an amount equal to the actuarial present value of the
projected pension benefit obligation as of December 1, 1993 related to
transferred employees. In 1996, the Company and DuPont agreed to a final
settlement of $42.6, including interest. The difference between the final
settlement and the amount estimated by management is being treated as an
adjustment to plan assets resulting from experience different from that assumed,
and accordingly will be amortized into income over a five-year period in
accordance with the Company's policy for recording pension costs.

Savings Plans:

         The Company sponsors a qualified defined contribution plan and matches
50% of a participant's contributions up to a maximum of 6% of a participant's
compensation. All employees hired after May 31, 1996 are also eligible for a
discretionary contribution. The Company's contribution to this plan was $1.3 in
1998 and $1.4 in each of 1997 and 1996.

         Effective January 1, 1998, the Company adopted a non-qualified defined
contribution plan. The Company's matching contribution was not material during
1998.



                                       42
<PAGE>   43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


Postretirement Benefit Plan:

         The Company sponsors an unfunded postretirement defined benefit plan
which provides certain employees and their covered dependents and beneficiaries
with retiree health and welfare benefits.

         Change in Benefit Obligation:

<TABLE>
<CAPTION>

                                                                1998              1997
                                                               -------           -------
          <S>                                                  <C>               <C>
          Benefit Obligation at Beginning of Year              $   6.8           $   8.6
          Service Cost                                             0.4               0.5
          Interest Cost                                            0.5               0.6
          Plan Participants' Contributions                          --                --
          Amendments                                                --              (2.4)
          Actuarial (Gain) Loss                                    0.6              (0.4)
          Benefits Paid                                           (0.1)             (0.1)
                                                               -------           -------
          Benefit Obligation at End of Year                    $   8.2           $   6.8
                                                               =======           =======

          Accrued Benefit Cost:
                                                                1998              1997
                                                               -------           -------
          Funded Status                                        $  (8.2)          $  (6.8)
          Unrecognized Net Actuarial Gain                         (4.2)             (5.6)
          Unrecognized Prior Service Cost                         (9.1)            (10.0)
                                                               -------           -------
          Accrued Postretirement Benefit Obligation            $ (21.5)          $ (22.4)
                                                               =======           =======
</TABLE>

           Components of Net Periodic Benefit Cost:

<TABLE>
<CAPTION>
                                                                1998              1997              1996
                                                               -------           -------           -------
          <S>                                                  <C>               <C>               <C>
          Service Cost                                         $   0.4           $   0.5           $   0.9
          Interest Cost                                            0.5               0.6               0.9
          Net Amortization and Deferral                           (1.6)             (1.4)             (1.3)
                                                               -------           -------           -------
          Net Periodic Benefit (Income) Cost                   $  (0.7)          $  (0.3)          $   0.5
                                                               =======           =======           =======
</TABLE>

         To determine the accumulated postretirement benefit obligation, (1) the
assumed discount rate used was 6.8% and 7.3% at December 31, 1998 and 1997,
respectively; (2) the assumed health care trend rate was 8.3% and 7.8%, for 1997
and 1998, respectively, declining gradually to 5.0% in 2007 and remain at that
level thereafter and (3) the assumed dental benefit rate was 5.1% for 1997 and
thereafter. The average assumed salary increase rate was age-related for both
1998 and 1997.

         A one-percentage-point increase and decrease in the assumed health care
cost trend rates would increase and decrease, respectively, the accumulated
postretirement benefit obligation by approximately $0.2 as of December 31, 1998
and the effect on total of service and interest cost components would be
immaterial.

         The Company also provides certain severance benefits. At December 31,
1998 and 1997, the accumulated postemployment benefit obligation and the annual
periodic cost of these obligations was not significant.



                                       43
<PAGE>   44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


NOTE 11 - DEBT

         Short-Term debt consists of unsecured, fixed interest rate agreements
for financing insurance premiums. The interest rate under these agreements was
5.6% and 6.1% at December 31, 1998 and 1997, respectively.

         Long-Term Debt at December 31, consist of the following:

<TABLE>
<CAPTION>
                                                         1998             1997
                                                        -------          -------
          <S>                                           <C>              <C>
          Credit Agreement:
             Term Loans                                 $  50.0          $  68.2
             Revolving Credit Facility                     --               19.9
          9.5% Senior Subordinated Notes due 2003          92.9             99.6
          Capital Lease Obligations (Note 12)               3.5              5.3
          Other                                             0.5              2.0
                                                        -------          -------
                Subtotal                                $ 146.9          $ 195.0
          Less: Current Portion                            24.9             21.5
                                                        -------          -------
                Total                                   $ 122.0          $ 173.5
                                                        =======          =======
</TABLE>

         The Company has a credit agreement, as amended, with certain lending
institutions (the "Credit Agreement") that provides for aggregate borrowings of
$280.0, including a term loan facility of $130.0 (the "Term Loans") and a
revolving credit facility of $150.0 (the "Revolving Credit Facility"). All
borrowings under the Credit Agreement are guaranteed by Holding, and are
collateralized by substantially all of the assets of the Company. The Company
may borrow up to $150.0 (including certain letters of credit) under the
Revolving Credit Facility through 2000, provided that such borrowings are
reduced for a period of 30 consecutive days of each 12-month period commencing
on December 1 to $60.0 or less. The weighted average interest rate for
borrowings under the Term Loans was 8.0% per annum in 1998 and 8.2% per annum in
1997. The weighted average interest rate for borrowings under the Revolving
Credit Facility was 8.3% in 1998 and 8.4% in 1997. The Company is not currently
a party to any interest rate cap, hedging or other protection arrangements with
respect to its variable rate indebtedness. Commitment fees of 0.5% are payable
on the average daily unused portion of the Revolving Credit Facility. At
December 31, 1998, the Company had $2.5 in letters of credit and no borrowings
outstanding with the remaining $147.5 of the Company's Revolving Credit Facility
available for borrowing. At December 31, 1997, the Company had $4.8 in letters
of credit and $19.9 of borrowings outstanding with the remaining $125.3 of the
Company's Revolving Credit Facility available for borrowing. Borrowings under
the Revolving Credit Facility are classified as long-term as the Company has the
intent and ability, supported by the terms of the Credit Agreement, to maintain
amounts outstanding through the year 2000.

         The Credit Agreement requires the Company to make further quarterly
principal payments on the Term Loans thereunder in an aggregate amount of
approximately $22.7 in 1999 and $27.3 in 2000 with all remaining amounts then
outstanding under the Credit Agreement to be repaid on December 31, 2000. The
Credit Agreement also requires the Company to make mandatory prepayments on the
Term Loans thereunder annually, in an amount equal to 50% of the Company's
Excess Cash Flow (as defined therein) for the preceding fiscal year. Any such
prepayment will result in a pro rata reduction in all subsequently scheduled
principal payments on such Term Loans, except that any such payment made within
the 12 months prior to the date on which an installment or other payment of
principal is scheduled to be paid on the Term Loans may, at the option of the
Company, be applied first to such installment or other payment. The Company did
not have Excess Cash Flow for the years ended December 31, 1998, 1997 and 1996
and accordingly no such prepayment is required in 1999, nor was any such
prepayment made in 1998 and 1997.

         Loans under the Credit Agreement generally bear interest, at the
Company's option, at a variable rate equal to either (i) the rate that is the
highest of the administrative agent's prime rate, or certain alternative rates,
in each case plus up to 1.25% per annum, or (ii) the rate at which certain
Eurodollar deposits are offered in the interbank Eurodollar market plus up to
2.50% per annum. Upon the Company's delivery to the Credit Agreement's
administrative agent of the Company's quarterly financial statements the
interest rate on the Company's Credit Agreement borrowings can be reduced by
0.25% to 1.0% per annum from levels in effect at December 31, 1994 if the
Company has met certain



                                       44
<PAGE>   45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


financial ratios, based on earnings before interest, taxes, depreciation and
amortization ("EBITDA") and consolidated interest expense, for the four quarters
then ended. Once reduced, such interest rate can also be increased up to the
original levels if the Company no longer meets the financial ratios making it
eligible for interest rate reduction. During 1998, the interest rate was reduced
0.75% as a result of the Company's improved financial performance. At December
31, 1998, the Company was in compliance in all material respects with the
financial covenants under the Credit Agreement.

         Mandatory prepayments of borrowings may also be required under the
Credit Agreement upon the occurrence of any of the following: certain changes in
control, the sale of a class of equity securities, the issuance or sale of a
class of debt securities or redeemable preferred stock, the incurrence of
indebtedness not permitted by the Credit Agreement, certain sales of assets
other than in the normal course of business and any receipt of certain insurance
or litigation proceeds relating to the loss of or damage to any assets in
amounts exceeding $5.0.

         The Company's 9.5% Senior Subordinated Notes (the "Notes"), in an
original aggregate $100.0 principal amount, mature on December 1, 2003. The
Notes are redeemable at the option of the Company, in whole or in part, any time
on or after December 1, 1998. The redemption price ranges from 104.5% of the
principal amount in 1998 to 101.5% in the year 2000. In the event of a change in
control, the Notes may be redeemed at the option of the Company for the
principal amount plus applicable interest and premium at that date. The Notes,
issued by Remington, are subordinate to borrowings under the Credit Agreement
and are fully and unconditionally guaranteed on a subordinated basis by Holding.
See Note 22 for Holding's Condensed Consolidating Financial Data. The Notes are
not collateralized by any of the Company's assets. On June 23, 1997 the Company
completed its offer to exchange (the "Exchange Offer") up to $100.0 aggregate
principal amount of Remington's registered 9.5% Senior Subordinated Notes due
2003, Series B (the "New Notes") for a like principal amount of Remington's
issued and outstanding 9.5% Senior Subordinated Notes due 2003, Series A (the
"Old Notes"). All of the Old Notes were exchanged for New Notes. The interest
rate on the Notes was 10% per annum from April 30, 1994 until June 22, 1997, the
day before the date of consummation of the Exchange Offer, and is currently 9.5%
per annum. The reduction in interest payments was $0.5 per year. The original
issue discounts on the Notes of $0.6 are being amortized at 9.6% per annum. As
of December 31, 1998, the total accumulated amortization was $0.4.

         The Credit Agreement was amended as of September 23, 1998 to permit the
Company to expend up to $25.0 toward the repurchase of the New Notes. During
December 1998, the Company repurchased approximately $6.8 of the New Notes on
the open market with cash from operations. The Company repurchased the New Notes
at an average price of 98.7% of the face value on the open market, and the
transaction had no material impact on its results of operations. From time to
time, the Company may continue to repurchase additional amounts of the New Notes
on the open market, subject to the $25.0 aggregate repurchase limit set forth in
the amended Credit Agreement.

         The indenture for the Notes and the Credit Agreement contain various
restrictions on the Company's ability to incur debt, pay dividends and enter
into certain other transactions. In addition, the Credit Agreement contains
certain requirements with respect to minimum working capital, net worth and
earnings levels, as well as minimum ratios regarding profitability and interest
expense. Under the Credit Agreement, dividends by Remington to Holding are not
to exceed $1.0 annually unless for certain specific purposes, as defined in the
Credit Agreement.

         The Company also had additional letters of credit outstanding of $1.1,
as of both December 31, 1998 and 1997.

         The aggregate payments of long-term debt outstanding at December 31,
1998, for the next three years are $24.9, $28.8, and $0.3, respectively. No
payments are due in the fourth year. The Notes, with a maturity value of $92.9
as of December 31, 1998, are due in the fifth year.



                                       45
<PAGE>   46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


NOTE 12 - LEASES

         Future minimum lease payments under capital leases and operating
leases, together with the present value of the net minimum capital lease
payments at December 31, 1998, are as follows:

<TABLE>
<CAPTION>
                                                                              Capital        Operating
                                                                              Leases          Leases
                                                                              ------          ------
                <S>                                                           <C>             <C>
                Minimum Lease Payments for Years
                Ending December 31:
                   1999                                                        $  2.1         $  0.6
                   2000                                                           1.3            0.5
                   2001                                                           0.3            0.4
                   2002                                                             -            0.2
                   2003                                                             -            0.2
                                                                               ------         ------
                       Total Minimum Lease Payments                               3.7         $  1.9
                Less:  Amount representing interest                               0.2         ======
                                                                               -----
                       Present Value of Net Minimum Lease Payments             $  3.5
                                                                               ======
</TABLE>

NOTE 13 - SHAREHOLDERS' EQUITY

          Holding has authorized 2,500,000 shares of Common Stock, consisting of
1,250,000 shares of Class A Common Stock, par value $.01 per share, and
1,250,000 shares of Class B Common Stock, par value $.01 per share. The Class A
Common Stock is voting stock and the Class B Common Stock is non-voting stock.
None of the Class B Common Stock has been issued. No dividends have been paid by
the Company on its shares of common stock nor does the Company expect to pay
dividends on its common stock in the foreseeable future. The declaration and
payment of future dividends, if any, will be at the sole discretion of the Board
of Directors of the Company, subject to the restrictions set forth in the
Company's Credit Agreement and the indenture for its subordinated notes, which
currently restrict the payment of cash dividends to shareholders, and
restrictions, if any, imposed by other indebtedness outstanding from time to
time.

NOTE 14 - STOCK PURCHASE AND OPTION PLANS

         As of December 31, 1996, the Company had reserved 132,380 shares of the
Class A Common Stock, par value $.01 per share, of Holding ("Common Stock") for
issuance in accordance with the terms of the Amended and Restated RACI Holding,
Inc. Stock Option Plan (the "Option Plan"), the RACI Holding, Inc. Stock
Purchase Plan (the "Purchase Plan") and the RACI Holding, Inc. 1994 Directors'
Stock Plan (the "1994 Directors' Plan"). On July 22, 1997 the Board of Directors
of Holding adopted the RACI Holding, Inc. Director Stock Purchase Plan (the
"1997 Directors' Plan") and reserved an additional 12,500 shares of the Class A
Common Stock, par value $.01 per share, of Holding for issuance thereunder. As
of December 31, 1998, 10,000 shares of Class A Common Stock have been issued
under the 1997 Directors' Plan and no shares of Common Stock have been issued
under the Option Plan, Purchase Plan or 1994 Directors' Plan. As of December 31,
1998, the Company has 134,880 shares of Class A Common Stock reserved for
issuance, of which 96,915 shares remain available for grant, under the above
mentioned plans.




                                       46
<PAGE>   47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


         The Option Plan provides for the grant of options (the "Options") which
are generally exercisable in three equal annual installments, beginning on the
second anniversary of the date of grant, subject to the continued employment of
any employee optionholder. The vesting of Options may be accelerated upon the
occurrence of certain events specified in the Option Plan, as amended, including
a change in control as defined therein. Options not exercised will expire on the
tenth anniversary of the date of grant. The following is a summary of stock
option activity:

<TABLE>
<CAPTION>
                                                                                 Number of Shares
                                                                                 ($100 Per Share)
                                                                                ------------------
         <S>                                                                    <C>
         Unexercised options outstanding at December 31, 1995                         35,905
         Forfeited                                                                    (5,490)
         -----------------------------------------------------------------------------------------
         Unexercised options outstanding at December 31, 1996                         30,415
         Forfeited                                                                      (125)
         Granted                                                                      12,850
         -----------------------------------------------------------------------------------------
         Unexercised options outstanding at December 31, 1997                         43,140
         Forfeited                                                                    (5,175)
         -----------------------------------------------------------------------------------------
         Unexercised options outstanding at December 31, 1998                         37,965
                                                                                      ======
         Price Range $100  (Weighted-average contractual life of 6.9 years)
         -----------------------------------------------------------------------------------------
         Exercisable options -
         December 31, 1996                                                                 0
                                                                                      ======
         December 31, 1997                                                            11,614
                                                                                      ======
         December 31, 1998                                                            20,907
                                                                                      ======
         ----------------------------------------------------------------------- -----------------
</TABLE>

         The Company has adopted the disclosure-only provision of SFAS No. 123
"Accounting for Stock-Based Compensation." Accordingly, since options have been
granted at an option exercise price equal to the estimated fair value of the
underlying Common Stock, no compensation expense has been recognized with
respect to grants of stock options granted to date. Had compensation expense for
such option grants been recognized under SFAS No. 123 based on the fair value of
such options at the grant dates thereof in 1997, the Company's net earnings and
earnings per share on a pro forma basis would have been as follows:

<TABLE>
<CAPTION>
                                                            1998      1997     1996
                                                            ----      ----     ----
             <S>                                            <C>       <C>     <C>
             Net Income / (Loss ) - as reported             $17.2     $5.5    $(13.8)
             Net Income / (Loss ) - pro forma                17.1      5.4     (13.9)
             Income / (Loss) Per Share - as reported        22.63     7.33     (18.40)
             Income / (Loss) Per Share - pro forma          22.50     7.20     (18.53)
             Value of Option Grant Per Share                 n/a     20.97       n/a
</TABLE>

         For purposes of the foregoing the fair value of each option grant is
estimated as of the date of grant using a modified-Black Scholes Option Model
with the following weighted average assumptions for 1997:

<TABLE>
             <S>                                  <C>
             Risk free interest rate                 6.0%
             Dividend yields                         0.0%
             Volatility factor                       0.0%
             Expected option life                 4.0 years
</TABLE>

NOTE 15 - COMMITMENTS AND CONTINGENCIES

         The Company has various purchase commitments, approximating $4.0 for
1999, $0.2 for 2000, $0.2 for 2001, $0.1 for 2002, and none for 2003, for
services incidental to the ordinary conduct of business. Such commitments are
not at prices in excess of current market prices. In addition, the Company is
required to pay a minimum termination fee




                                       47
<PAGE>   48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


of $0.5 should there be a termination prior to the close of one of the
agreements. The Company has purchase contracts with certain raw materials
suppliers, for periods ranging from one to seven years with no commitment to
purchase specified quantities, but no formal contracts with others, however such
contracts had no significant impact on the financial condition or results of
operations during the reportable periods.

         Effective January 1, 1999 new Remington firearms products purchased in
North America are warranted, to the original purchaser, to be free from defects
in material and workmanship for a period of two years from the registered date
of purchase. The Company believes that the impact from this program will not be
material to its financial condition or results of operations.

         Pursuant to the Asset Purchase Agreement, the Sellers retained
liability for, and are required to indemnify the Company against, (1) all
product liability cases and claims (whenever they may arise) involving
discontinued products and (2) all product liability cases and claims involving
products that had not been discontinued as of the Closing ("extant products")
and relating to occurrences that took place prior to the Closing. The Company
assumed financial responsibility, up to a maximum aggregate amount (the "Cap"),
for certain product liability cases disclosed to the Company and arising prior
to the Closing. The Cap was exhausted in 1997, and the Sellers retained
liability for, and are required to indemnify the Company against, all such
disclosed product liability occurrences and such environmental liabilities in
excess of the Cap. This indemnification obligation of the Sellers is not subject
to any survival period limitation. Prior to the Acquisition, the Sellers were
self-insured for product liability obligations of the Business, with excess
insurance coverage available at $50.0 per occurrence. Except for certain cases
and claims relating to shotguns as described below and except for all cases and
claims relating to discontinued products, the Company generally bears financial
responsibility for product liability cases and claims relating to occurrences
after the Closing.

         Since December 1, 1993, the Company has maintained insurance coverage
for product liability claims subject to certain self-insured retentions both on
a per-occurrence basis and in the aggregate for personal injury or property
damage relating to occurrences arising after the Closing. The Company believes
that its current product liability insurance coverage for personal injury and
property damage is adequate for its needs. The Company's current product
liability insurance policy provides for a self-insured retention of $0.5 per
occurrence, with an aggregate annual limit of $7.0 for liability indemnity and
defense and other expenses combined, and aggregate annual sublimits of $4.5 for
indemnity and $4.5 for expenses. The current policy has a batch clause
endorsement, which in general provides that if a batch of firearms were to be
defective, the Company's liability for expenses and damages related to the
entire batch would be capped at the amount of self-insured retention for a
single occurrence. The current policy excludes from coverage any
pollution-related liability. The current policy period runs from December 1,
1998 through November 30, 2000.

         The Company and the Sellers are engaged in the joint defense of product
liability litigation involving Remington brand firearms and Company ammunition
products. As of December 31, 1998, 31 such cases were pending, primarily
alleging defective product design or manufacture, or failure to provide adequate
warnings, all of which are individual actions alleging personal injury. Many of
these cases seek punitive as well as compensatory damages. Of these pending
individual cases, approximately nine involve either discontinued products or
pre-Closing occurrences, for which the Sellers retained liability and are
required to indemnify the Company. The remaining approximately 22 of the pending
cases involve post-Closing occurrences for which the Company bears
responsibility under the Asset Purchase Agreement; the Sellers have some
responsibility for the costs of six of these cases involving certain shotguns,
as described below. The Company has previously disposed of a number of other
cases involving post-Acquisition occurrences by settlement.

         The cases filed during 1998 include Wright, et al. v. Golden, et al.
("Wright"), and Herring, et al. v. Sporting Goods Properties, Inc., et al.
("Herring"), wrongful death cases involving the March 24, 1998 schoolyard
shooting in Jonesboro, Arkansas filed in Craighead County, Arkansas state court.
One of the guns allegedly used was



                                       48
<PAGE>   49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


a Remington Model 742(TM) rifle. As to Remington, the plaintiffs allege that the
Model 742 was defective because it did not come with a trigger lock or other
mechanism to prevent unauthorized use and because of an alleged failure to warn
the owner of the gun of the danger of its theft. Because the Model 742 is a
discontinued product, the Sellers are responsible for the costs associated with
the defense of this action, and Sporting Goods Properties, Inc. (as manufacturer
of the Model 742) has been substituted for Remington as the appropriate
defendant.

         The figures listed above do not include Joe Luna, et al. v. Remington
Arms Company, Inc. and E. I. du Pont de Nemours and Company et al. ("Luna"),
which was filed in 1989 in Texas district court in Jim Wells County. The
plaintiffs sought certification of a class consisting of all Texas owners,
allegedly 400,000 in number, of Model 700 bolt-action rifles. In June 1996, the
district court certified for class treatment the limited issues of whether the
Model 700 fire control system is "defective" and, if so, the "cost of repair."
This ruling was reversed on appeal. Remington was not named as a defendant until
July 1996, and was not a party to the appeal, although the appellate courts'
decisions should govern class action claims against Remington as well. The
Sellers' obligations with respect to Luna include a requirement that they
indemnify the Company against claims for economic loss involving Model 700
rifles shipped prior to the end of May 1997. Claims involving Model 700 rifles
shipped thereafter would be the Company's responsibility and, to the extent that
they do not involve personal injury or property damage, would not be covered by
the Company's product liability insurance.

         As a manufacturer of shotguns and rifles, the Company has not been
named in recent actions brought by certain municipalities against handgun
manufacturers and sellers. The Company has been advised, however, that in one
such case, a motion to intervene was filed seeking to name certain unidentified
"ammunition manufacturers" as additional defendants. The motion has not been
heard, or scheduled to be heard.

         The representations and warranties in the Asset Purchase Agreement
expired 18 months after the Acquisition, with certain exceptions, and claims for
indemnification with respect thereto were to be made within 30 days of such
expiration. The Company made claims for such indemnification involving product
liability issues within that time period. In 1996, the Company and the Sellers
agreed that the Sellers would assume financial responsibility for a portion of
the costs relating to product liability claims and cases involving certain
shotguns manufactured prior to mid-1995 and based on occurrences arising prior
to November 30, 1999, and that any claims the Company and the Sellers may have
against each other under the Asset Purchase Agreement relating to shotguns
(excluding various indemnification rights and the allocation of certain costs
under the Cap) would be released. Any claims between the Company and the Sellers
relating to other product liability issues remain open.

         Because the Company's assumption of financial responsibility for
certain product liability cases and claims involving pre-Acquisition occurrences
was limited to the amount of the Cap, with the Sellers retaining liability in
excess of the Cap and indemnifying the Company in respect thereof, and because
of the Company's accruals with respect to such cases and claims, the Company
believes that product liability cases and claims involving occurrences arising
prior to the Acquisition are not likely to have a material adverse effect upon
the financial condition or results of operations of the Company. In addition,
although it is difficult to forecast the outcome of litigation, the Company does
not believe, in light of relevant circumstances (including the current
availability of insurance for personal injury and property damage with respect
to cases and claims involving occurrences arising after the Acquisition, its
accruals for the uninsured costs of such cases and claims and the Sellers'
agreement to be responsible for a portion of certain post-Acquisition
shotgun-related product liability costs, as described above), that the outcome
of all pending post-Acquisition product liability cases and claims will be
likely to have a material adverse effect upon the financial condition or results
of operations of the Company. Nonetheless, in part because of the uncertainty as
to the nature and extent of manufacturer liability for personal injury due to
alleged product defects, there can be no assurance that the Company's resources
will be adequate to cover future product liability occurrences, cases or claims,
in the aggregate, or that such a material adverse effect will not result
therefrom. Because of the nature of its products, the Company anticipates that
it will continue to be involved in product liability litigation in the future.



                                       49
<PAGE>   50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


         The Company does not expect current environmental regulations to have a
material adverse effect on the results of operations and has not been identified
by regulatory authorities as a potentially responsible party. However, the
Company's liability for future environmental remediation costs is subject to
considerable uncertainty due to the complex, ongoing and evolving process of
identifying the necessity for, and generating cost estimates for, remedial work.
Furthermore, there can be no assurance that environmental regulations will not
become more restrictive in the future.

NOTE 16 - INCOME TAXES

                  The provision (benefit) for income taxes consists of the
         following components:

<TABLE>
<CAPTION>
                                       1998              1997              1996
                                       ----              ----              ----
                <S>                 <C>               <C>               <C>
                Federal:
                     Current        $     5.5         $    (1.2)        $    (2.2)
                     Deferred             4.5               4.5              (4.6)
                State:
                     Current              0.5              (0.3)               -
                     Deferred             0.6               0.5              (0.2)
                                    ---------         ---------         ---------
                                    $    11.1         $     3.5         $    (7.0)
                                    =========         =========         =========
</TABLE>

         The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:

<TABLE>
<CAPTION>
                                                                              1998             1997
                                                                              ----             ----
                <S>                                                         <C>              <C>
                Deferred tax assets:
                     Accrued employee and retiree benefits                  $   17.6         $   16.6
                     Product, environmental and other liabilities                7.4              7.0
                     Receivables and inventory                                   2.2              2.8
                     Tax credits                                                 5.6              3.3
                Net operating losses                                               -              6.1
                                                                            --------         --------
                                                                                32.8             35.8
                                                                            --------         --------
                Deferred tax liabilities:
                    Property, plant and equipment                              (11.9)           (10.6)
                    Intangibles                                                 (3.6)            (2.8)
                                                                            --------         --------
                                                                               (15.5)           (13.4)
                                                                            --------         --------
                Net deferred tax assets                                     $   17.3         $   22.4
                                                                            ========         ========
</TABLE>

         The Company has not established a valuation allowance against the net
deferred tax assets as it is more likely than not that the assets will be fully
utilized against future taxable income.

         At December 31, 1998 the Company has the following carryforwards for
tax purposes:

<TABLE>
                <S>                                    <C>      <C>
                Alternative minimum tax credit         $5.1     No Expiration
                State tax credits                      $0.2     Expires 2007
                Research and development tax credit    $0.1     Expires 2010
                Research and development tax credit    $0.2     Expires 2011
</TABLE>


         The following is a reconciliation of the statutory federal income tax
rate to the Company's effective income tax rates:

<TABLE>
<CAPTION>
                                                  1998      1997      1996
                                                  ----      ----      ----
                <S>                               <C>       <C>      <C>
                Federal statutory rate            35.0%     35.0%    (35.0)%
                State income taxes, net of
                     Federal benefits              3.8       2.0      (2.8)
                Nondeductible expenses             1.9       6.3       2.8
                Other                             (1.6)     (4.3)      1.3
                                                  ----      ----     -----
                Effective income tax rate         39.1%     39.0%    (33.7)%
                                                  ====      ====     =====
</TABLE>



                                       50
<PAGE>   51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


NOTE 17 - RELATED PARTY TRANSACTIONS

         The Clayton & Dubilier Private Equity Fund IV Limited Partnership ("C&D
Fund IV"), which owns 750,000 shares of the 760,000 shares of Class A Common
Stock outstanding, or 98.7%, is a private investment fund managed by Clayton,
Dubilier & Rice, Inc. ("CD&R"). CD&R receives an annual fee for management and
financial consulting services provided to the Company and reimbursement of
related out-of-pocket expenses. Fees and out-of-pocket expenses paid to CD&R
were $0.5, $0.5 and $0.4 in 1998, 1997 and 1996, respectively.

NOTE 18 - FINANCIAL INSTRUMENTS

         The estimated value of the Company's debt at December 31, 1998 was
$147.0 compared to a carrying value of $146.9. The estimated value of the
Company's debt at December 31, 1997 was $192.4 compared to a carrying value of
$195.0.

         The Company employs various strategies, including call options, zero
cost collars and futures swaps to hedge the price risk related to firm
commitments and anticipated purchases of lead and copper to be used in the
manufacturing process. The Company buys call options for an up front fee for the
right to purchase a specified amount of metal at a pre-determined price and
date. On occasion, zero cost collars are created by selling put options for
quantities and timing identical to the call options, which in effect pay for the
call options. These put options give a third party the right to sell to the
Company a specified amount of metal at a price which is below the call option
price on a pre-determined date. This zero cost collar results in no up front fee
and insures that the Company can purchase a specified amount of metal within a
specified price range on a pre-determined date. Futures swaps are a commitment
to purchase a given amount of metal at an agreed upon price on a future date
with a settlement between the contract price and the market price at the
expiration of the contract. Hedging gains and losses are offset against purchase
price variances on physical purchases of the commodities. The amount of premiums
paid for commodity contracts outstanding at December 31, 1998, 1997 and 1996 was
$0.7, $0.6 and $1.3, respectively. At December 31, 1998, 1997 and 1996, the
market value of the Company's outstanding contracts relating to firm commitments
and anticipated purchases up to one year from the respective balance sheet date
was $0.1, $0.2 and $1.2, respectively. As of December 31, 1998 and 1997 hedging
losses related to closed commodity futures contracts of $0.2 were included in
inventory. There were no hedging losses included in inventory at December 31,
1996.

         The Company was not a party to any interest rate cap or other
protection arrangements with respect to its variable rate indebtedness as of
December 31, 1998, 1997 or 1996.

NOTE 19 - SEGMENT INFORMATION

         The Company's business is classified into one aggregated reportable
segment, Hunting/Shooting Sports, which designs, manufactures and markets
recreational shotguns and rifles, sporting ammunition and ammunition reloading
components. These products are sold primarily to wholesalers and retailers,
mainly through manufacturer's sales representatives. The classification All
Other includes the manufacture and marketing of clay targets, and the marketing
of hunting/gun care accessories, fishing products and powdered metal products.
The type of customer and distribution method are similar for substantially all
of the Company's products.

         The Company primarily evaluates the performance of its segments and
allocates resources to them based on EBITDA. The chief operating decision maker
is the President and Chief Operating Officer. Reportable segments were
separately identified based on segment revenue, EBITDA and assets. The firearms
and ammunition operations are aggregated because of similarity in nature of
product, manufacturing process and the regulatory environment, in addition to
the type of customer and distribution method. During 1998, revenue for the
Hunting/Shooting Sports segment accounted for 86% of consolidated revenue. The
Company has no material intersegment revenue.



                                       51
<PAGE>   52

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


Information on Segments:

<TABLE>
<CAPTION>
                                                                   1998        1997         1996
                                                                   ----        ----         ----
         <S>                                                    <C>           <C>          <C>
         Net Sales:
              Hunting/Shooting Sports                           $   328.8     $ 328.8      $ 342.3
              All Other                                              51.9        52.4         48.1
                                                                ---------     -------      -------
                   Consolidated Net Sales                       $   380.7     $ 381.2      $ 390.4
                                                                =========     =======      =======

         EBITDA:
              Hunting/Shooting Sports                           $    55.0     $  43.7      $  23.5
              All Other                                               9.2         8.5          5.9
                                                                ---------     -------      -------
                   Consolidated EBITDA                          $    64.2     $  52.2      $  29.4
                                                                =========     =======      =======

         Assets:
              Hunting/Shooting Sports                           $   195.4     $ 208.7      $ 236.5
              All Other                                             159.1       172.0        198.5
                                                                ---------     -------      -------
                   Consolidated Assets                          $   354.5     $ 380.7      $ 435.0
                                                                =========     =======      =======

         Capital Expenditures:
              Hunting/Shooting Sports                           $     6.5     $   4.6      $  18.0
              All Other                                               2.0         1.2          4.5
                                                                ---------     -------      -------
                   Consolidated Capital Expenditures            $     8.5     $   5.8      $  22.5
                                                                =========     =======      =======

Net Sales by Product Line:
                                                                   1998        1997          1996
                                                                   ----        ----          ----
         Firearms                                               $   170.7     $ 169.5      $ 182.1
         Ammunition                                                 158.1       159.3        160.2
                                                                ---------     -------      -------
            Hunting/Shooting Sports                                 328.8       328.8        342.3
            All Other                                                51.9        52.4         48.1
                                                                ---------     -------      -------
                Net Sales                                       $   380.7     $ 381.2      $ 390.4
                                                                =========     =======      =======

Reconciliation of Reportable Segments:
                                                                   1998        1997         1996
                                                                   ----        ----         ----
         Consolidated EBITDA                                    $    64.2     $  52.2      $  29.4

         Less:  Interest Expense                                     19.2        23.6         25.1
                Depreciation and Amortization (1)                    15.9        15.1         13.9
                Other Noncash Charges                                 1.1         3.7           -
                Nonrecurring and Restructuring Items                 (0.3)        0.8         11.2
                                                                 --------     -------      -------
                                                                     35.9        43.2         50.2
                                                                 --------     -------      -------
         Consolidated Income (Loss) from Continuing
             Operations Before Taxes                             $   28.3     $   9.0      $ (20.8)
                                                                 ========     =======      =======
</TABLE>

(1) Excludes amortization of deferred financing costs of $2.0, $1.7 and $1.6 in
    1998, 1997 and 1996, respectively, which was included in interest expense.

Geographic Information:

<TABLE>
<CAPTION>
                                                                   1998        1997         1996
                                                                   ----        ----         ----
         <S>                                                    <C>           <C>          <C>
        
         Net Sales:
              Domestic                                           $  353.0     $ 351.4      $ 358.3
              Foreign                                                27.7        29.8         32.1
                                                                 --------     -------      -------
                   Consolidated Net Sales                        $  380.7     $ 381.2      $ 390.4
                                                                 =========    =======      =======
</TABLE>



                                       52
<PAGE>   53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


         Of the Company's total net sales in 1998, 1997 and 1996, approximately
19%, 20% and 18%, respectively, consisted of sales made to a single customer. Of
the Company's Hunting/Shooting Sports revenues in 1998, 1997 and 1996
approximately 18%, 20% and 17%, respectively, consisted of sales made to a
single customer. The Company's sales to this customer are not governed by a
written contract between the parties. Although the Company believes its
relationship with this customer is good, the loss of this customer or a
substantial reduction in sales to this customer could adversely affect the
Company's financial condition or results of operations. No other single customer
comprises greater than or equal to 10% of sales.

NOTE 20 - QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
           1998                                                              Quarter
           ----                                            ---------------------------------------------
                                                             First      Second      Third     Fourth      Total
           <S>                                              <C>        <C>        <C>         <C>       <C>
           Sales                                            $  89.0    $  90.9    $ 114.9     $  85.9   $ 380.7
           Gross Profit                                        28.7       31.5       34.6        26.9     121.7
           Net Income                                           3.7        4.6        6.4         2.5      17.2
           Basic Income Per Share                              4.87       6.05       8.42        3.29     22.63
           Diluted Income Per Share                            4.79       5.95       8.28        3.24     22.26
</TABLE>

<TABLE>
<CAPTION>
           1997                                                              Quarter
           ----                                            ---------------------------------------------
                                                              First      Second     Third     Fourth      Total
           <S>                                              <C>         <C>       <C>         <C>       <C>
           Sales                                            $  88.5     $ 85.9    $ 125.4     $  81.4   $ 381.2
           Gross Profit                                        24.5       25.2       36.6        25.0     111.3
           Net Income (Loss)                                   (1.3)      (1.0)       6.8         1.0       5.5
           Basic and Diluted Income(Loss)Per Share            (1.73)     (1.34)      9.07        1.33      7.33

</TABLE>

NOTE 21 - INCOME (LOSS)  PER SHARE

      The basic and diluted income (loss) per share was determined as follows:

<TABLE>
<CAPTION>
                                                                   1998        1997        1996
                                                                   ----        ----        ----
<S>                                                              <C>         <C>         <C>
Basic Income (Loss) Per Share
      Net Income (Loss) Available to Common Shareholders         $   17.2    $    5.5    $   (13.8)
      Weighted Average Common Shares                              760,000     750,438      750,000
          Basic Income (Loss) Per Share                          $  22.63    $   7.33    $  (18.40)

Diluted Income (Loss) Per Share
      Net Income (Loss) Available to Common Shareholders         $   17.2    $    5.5    $   (13.8)
      Weighted Average Common Shares                              760,000     750,438      750,000
      Effect of Outstanding Options                                12,655           -            -
      Weighted Average Common Shares and Dilutive Potential
      Common Stock                                                772,655     750,438      750,000
          Diluted Income (Loss) Per Share                        $  22.26    $   7.33    $  (18.40)

          Options Outstanding at December 31,                      37,965      43,140       30,415
</TABLE>

         Based on an independent evaluation, the estimated fair value of the
Company's Common Stock at December 31, 1998 was $200 per share. Based on an
estimated fair value at December 31, 1997 of $100 per share, the estimated
average price during 1998 was $150 per share. During 1997 and 1996 there was no
effect of outstanding options due to the options' exercise price of $100 being
equal to the estimated fair value of the common shares during both years.



                                       53
<PAGE>   54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


NOTE 22 - FINANCIAL POSITION AND RESULTS OF OPERATIONS OF HOLDING AND REMINGTON

         The following condensed consolidating financial data provides
information regarding the financial position and results of operations of
Holding and its wholly owned subsidiary, Remington including Remington's wholly
owned subsidiary Remington International, Ltd. Separate financial statements of
Holding are not presented because management has determined that they would not
be material to holders of the Company's public securities, Remington's 9.5%
Senior Subordinated Notes due 2003. Further, the Notes are fully and
unconditionally guaranteed by Holding.

                       RACI HOLDING, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATING BALANCE SHEETS
                                December 31, 1998

<TABLE>
<CAPTION>
                                                                                                    RACI
                                                                                                HOLDING, INC.
                                               HOLDING      REMINGTON       ELIMINATIONS      AND SUBSIDIARIES
                                               -------      ---------       ------------      ----------------
<S>                                          <C>           <C>              <C>               <C>
ASSETS
Current Assets                               $         -   $     175.1      $         -       $        175.1
Receivable from Remington                            0.9             -              0.9                    -
Noncurrent Assets                                  102.6         179.4            102.6                179.4
                                             ------------  -----------      -----------       --------------
        Total Assets                         $     103.5   $     354.5      $     103.5       $        354.5
                                             ===========   ===========      ===========       ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities                          $         -   $      84.0      $         -       $         84.0
Payable to RACI Holding, Inc.                          -           0.9              0.9                    -
Noncurrent Liabilities                                 -         167.0                -                167.0
Shareholders' Equity                               103.5         102.6            102.6                103.5
                                             -----------   -----------      -----------       --------------
       Total Liabilities and
           Shareholders' Equity              $     103.5   $     354.5      $     103.5       $        354.5
                                             ===========   ===========      ===========       ==============
</TABLE>

                       RACI HOLDING, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATING BALANCE SHEETS
                                December 31, 1997

<TABLE>
<CAPTION>
                                                                                                   RACI
                                                                                                HOLDING, INC.
                                              HOLDING        REMINGTON        ELIMINATIONS    AND SUBSIDIARIES
                                              -------        ---------        ------------    ----------------
<S>                                         <C>              <C>              <C>             <C>
ASSETS
Current Assets                              $        -        $  185.1         $        -        $     185.1
Receivable from Remington                          1.0              -                 1.0                  -
Noncurrent Assets                                 85.3           195.6               85.3              195.6
                                            ----------        --------         ----------        -----------
     Total Assets                           $     86.3        $  380.7         $     86.3        $     380.7
                                            ==========        ========         ==========        ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities                         $        -        $   76.9         $        -        $      76.9
Payable to RACI Holding, Inc.                        -             1.0                1.0                  -
Noncurrent Liabilities                               -           217.5                  -              217.5
Shareholders' Equity                              86.3            85.3               85.3               86.3
                                            ----------        --------         ----------        -----------
     Total Liabilities and
          Shareholders' Equity              $     86.3        $  380.7         $     86.3        $     380.7
                                            ==========        ========         ==========        ===========
</TABLE>



                                       54
<PAGE>   55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)


                       RACI HOLDING, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                        RACI
                                                                                                    HOLDING, INC.
                                             HOLDING            REMINGTON      ELIMINATIONS       AND SUBSIDIARIES
                YEAR ENDED                   -------            ---------      ------------       ----------------
            DECEMBER 31, 1998
            -----------------
<S>                                          <C>                <C>             <C>                 <C>
Sales                                        $      -           $   380.7       $      -            $    380.7
Gross Profit                                        -               121.7              -                 121.7
Equity in Income of Subsidiary                   17.2                   -           17.2                     -
Net Income                                       17.2                17.2           17.2                  17.2

                YEAR ENDED
            DECEMBER 31, 1997
            -----------------
Sales                                        $      -           $   381.2       $      -            $    381.2
Gross Profit                                        -               111.3              -                 111.3
Equity in Income of Subsidiary                    5.5                   -            5.5                     -
Net Income                                        5.5                 5.5            5.5                   5.5

                YEAR ENDED
            DECEMBER 31, 1996
            -----------------
Sales                                        $      -           $   390.4       $      -            $    390.4
Gross Profit                                        -               108.7              -                 108.7
Equity in Loss of Subsidiary                    (13.8)                  -          (13.8)                    -
Net Loss                                        (13.8)              (13.8)         (13.8)                (13.8)
</TABLE>






                                       55

<PAGE>   56


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.


                                      56
<PAGE>   57


                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The names, ages and positions of the directors and executive officers
of Remington as of March 17, 1999 are set forth below. Each of the directors of
Remington is also a director of Holding. Messrs. Hendrix, Millner and Little
serve as executive officers in the same capacities with Holding as they do with
Remington, and Mr. Grecco serves as Corporate Secretary and Vice President of
Holding. All directors are elected annually and hold office until their
successors are elected and qualified, or until their earlier removal or
resignation.

<TABLE>
<CAPTION>
Name                                   Age     Position
-------------------------              ---     -----------------------------------------------------------------
<S>                         <C>        <C>     <C>
Leon J. Hendrix, Jr.        (a)(b)(d)   57     Director, Chairman and Chief Executive Officer
B. Charles Ames             (c)         73     Director
Michael G. Babiarz                      33     Director
Stephen D. Bechtel, Jr.     (a)(b)      73     Director
Bobby R. Brown              (a)(b)(c)   66     Director
Richard A. Gilleland        (b)(c)(d)   54     Director
Richard E. Heckert          (b)(d)      75     Director
Hubbard C. Howe             (a)         70     Director
Joseph L. Rice, III         (a)         67     Director
H. Norman Schwarzkopf       (b)         64     Director
Thomas L. Millner           (a)(b)      45     Director, President and Chief Operating Officer
James B. Ackley                         59     Vice President - Research and Development
Ronald H. Bristol, II                   36     Vice President, General Manager - Firearms
Paul L. Cahan                           57     Vice President, General Manager - Ammunition
Robert L. Euritt                        64     Vice President - Human Resources and Customer Service
Samuel G. Grecco                        45     Vice President - Business Development and Corporate Secretary
Mark A. Little                          51     Vice President, Chief Financial Officer and Controller
Arthur W. Wheaton                       57     Vice President, General Manager - Worldwide Sales
</TABLE>

         (a)  Member, Executive Committee
         (b)  Member, Public Policy Committee
         (c)  Member, Audit Committee
         (d)  Member, Compensation Committee

         Each officer of the Company is elected by the Board of Directors to
hold office until the next succeeding annual meeting of the Board of Directors.

         None of the Company's officers has any family relationship with any
director or other officer. "Family relationship" for this purpose means any
relationship by blood, marriage or adoption, not more remote than first cousin.

         The business experience during the past five years of each of the
directors and executive officers listed above is as follows:

        Leon J. (Bill) Hendrix, Jr. has been a director of Remington and Holding
since September 1994, and became Chairman and Chief Executive Officer in
December 1997. Mr. Hendrix joined CD&R prior to 1994 as a principal. Mr. Hendrix
currently serves as a director of Keithley Instruments, NACCO Industries, Inc.
and Cambrex Corp. He is also a director of Riverwood International Corporation,
and its parents RIC Holding, Inc. and Riverwood Holding, Inc., a corporation in
which an investment partnership managed by CD&R has an investment.

         B. Charles Ames was elected to the Boards of Directors of Remington and
Holding in December 1997. Mr. Ames is a professional employee, and since prior
to 1994 has been a principal of CD&R and a general partner of Clayton & Dubilier
Associates IV Limited Partnership ("Associates IV"), the general partner of C&D
Fund IV. Mr. Ames is also a director of Schulte GmbH & Co. KG, and its parent
CDRB Holding AG, and a director and Chairman of the Board of Riverwood
International Corporation, and its parents RIC Holding, Inc. and Riverwood
Holding, Inc., corporations in which an investment partnership managed by CD&R
has an investment. Mr. Ames serves on the Boards of Directors of The Progressive
Corporation and the M.A. Hanna Company.





                                       57
<PAGE>   58


         Michael G. Babiarz was elected to the Boards of Directors of Remington
and Holding in October 1998. He has been a principal of CD&R since prior to
1994. Mr. Babiarz currently serves as a director of North American Van Lines,
Inc.

         Stephen D. Bechtel, Jr. has been a director of Remington and Holding
since March 1994. Since prior to 1994 Mr. Bechtel has been Chairman Emeritus of
Bechtel Corp. and of Bechtel Group, Inc., both of which are engineering and
construction companies. Mr. Bechtel had been Chairman of Fremont Investors, Inc.
(previously named Fremont Group, Inc.), a management investment company and
Sequoia Ventures, Inc., an investment company from prior to 1994 until May 1995.
Mr. Bechtel has been Chairman Emeritus of Fremont Investors, Inc. and Sequoia
Ventures, Inc. since June 1995, and Chairman Emeritus of Fremont Group, L.L.C.
since April 1996.

         Bobby R. Brown has been a director of Remington and Holding since prior
to 1994. From prior to 1994 to January 1995, and from July 1997 to January 1998,
Mr. Brown was President, and from prior to 1994 to January 1996, and from July
1997 to January 1998 was Chairman and Chief Executive Officer of CONSOL Inc. and
CONSOL Energy Inc., the parents of Consolidation Coal Company, a coal mining
company. Mr. Brown was the Chairman of CONSOL Inc. and its parent CONSOL Energy
Inc. from prior to 1994 to February 1999. Mr. Brown also serves as a director
of CONSOL Inc. and CONSOL Energy Inc.

         Richard A. Gilleland has been a director of Remington and Holding since
March 1994. Mr. Gilleland is now President of Tyco Healthcare Group, a medical
supplies company. He was Chairman and Chief Executive Officer of Physicians
Resource Group, Inc., which provides management services to physicians and
clinics, from December 1997 to October 1998 and President and Chief Executive
Officer of AMSCO International, Inc., a manufacturer of medical products, from
July 1995 to July 1996. From prior to 1994 to July 1995, Mr. Gilleland was
Chairman, President and Chief Executive Officer of Kendall International, Inc.,
a manufacturer of hospital supplies. Mr. Gilleland currently serves as a
director of DePuy Orthopedics and Tyco International, Ltd. Mr. Gilleland
provides advisory and consulting services to CD&R relating to investments and
investment opportunities in healthcare-related industries.

         Richard E. Heckert has been a director of Remington and Holding since
March 1994. Mr. Heckert served as a director of DuPont from prior to 1994 to
April 1994 and a director of The Seagram Company, Ltd. from prior to 1994 to
April 1995. From prior to 1994 to May 1995, he served on the International
Committee of L'Air Liquide. Mr. Heckert served as a member of the International
Advisory Council of the Broken Hill Proprietary Company (BHP) from prior to 1994
to October 1994, and was a director of Marsh & McLennan Companies Inc., from
prior to 1994 until 1996.

         Hubbard C. Howe has been a director of Remington and Holding since
prior to 1994, and was Chairman and Chief Executive Officer of Remington and
Holding from prior to 1994 until December 1997. Mr. Howe served as Vice Chairman
from February 1994 to November 1997, and as Chairman from prior to 1994 to
February 1994, of Nu-kote International, Inc., a printing supplies manufacturer,
and its parent, Nu-kote Holding, Inc., a corporation in which an investment
partnership managed by CD&R previously had an investment. Mr. Howe has served as
Chairman and as a director since prior to 1994 of A.P.S., Inc., a distributor of
automotive replacement parts, and its parent, APS Holding Corporation in which
an investment partnership managed by CD&R has an investment. From March 1997
until January 1998, Mr. Howe served as the interim Chief Executive Officer of
APS Holding Corporation and A.P.S., Inc. On February 2, 1998, A.P.S., Inc. and
several of its direct and indirect subsidiaries filed voluntary petitions for
relief under Chapter 11 of the U.S. Bankruptcy Code with the United States
Bankruptcy Court for the District of Delaware. Mr. Howe currently serves as a
director of Phoenix Packaging, Inc. He is also a director of Riverwood
International Corporation, and its parents RIC Holding, Inc. and Riverwood
Holding, Inc., a corporation in which an investment partnership managed by CD&R
has an investment. Mr. Howe is a principal of CD&R.

         Joseph L. Rice, III has been a director of Remington and Holding since
prior to 1994. Since 1998, Mr. Rice has been Chairman of CD&R, which he joined
in 1978 and is a general partner of Associates IV. From prior to 1994 to 1995 he
served as President and from 1995 to 1998 he served as Chairman and Chief
Executive Officer of CD&R. Mr. Rice is also a director of Uniroyal Holding,
Inc., a corporation in which an investment partnership managed by CD&R has an
investment; Dynatech Corporation, a corporation in which an investment
partnership managed by CD&R has an investment and Schulte GmbH & Co. KG, and its
parent CDRB Holding AG, corporations in which an investment partnership managed
by CD&R has an investment.



                                       58
<PAGE>   59


         H. Norman Schwarzkopf has been a director of Remington and Holding
since September 1995. General Schwarzkopf retired in August 1991 following a
long and distinguished career in the U.S. Army. From prior to 1994 to 1995 he
served as a commentator for CBS and from 1995 to 1998 as a commentator for NBC.
He currently serves as a director of Borg-Warner Security Corporation, Kuhlman
Corporation and USA Network, Inc. and is a member of the University of Richmond
Board of Trustees.

         Thomas L. Millner became President and Chief Operating Officer of
Remington in May 1994. Mr. Millner has been a director of Remington and Holding
since June 1994. From prior to 1994 to May 1994, Mr. Millner served as President
and Chief Executive Officer of The Pilliod Cabinet Company, a furniture
manufacturer. Prior to January 31, 1994, an investment partnership managed by
CD&R had an investment in Pilliod Holding Company, the parent of The Pilliod
Cabinet Company. Mr. Millner currently serves on the board of directors of
Stanley Furniture Co., Inc., The Atlanta Belting Co. and Old London Foods, Inc.

         James B. Ackley joined Remington in March 1996 as Vice
President-Research and Development. From prior to 1994 until joining the
Company, Mr. Ackley was the Chief Executive Officer for the Joint Service Small
Arms Program and Executive Program Manager with the U.S. Defense Department.

         Ronald H. Bristol, II joined Remington in June 1995 as Vice President -
Operations, and in December 1997 became Vice President, General Manager -
Firearms. From prior to 1994 to June 1995, Mr. Bristol was a Manager with Arthur
Andersen & Co.

         Paul L. Cahan joined Remington in March 1995 as Vice President -
Ammunition and in December 1997 became Vice President, General Manager -
Ammunition. From prior to 1994 until joining the Company, Mr. Cahan was director
of Steel Tooling Operations with Kennametal, Inc., a leading manufacturer of
tooling and supplies for the metalworking and mining industries.

         Robert L. Euritt joined Remington in September 1994 as Vice President -
Human Resources and in December 1997 became Vice President - Human Resources and
Customer Service. From prior to 1994 until joining the Company, Mr. Euritt was
Senior Vice President - Human Resources for Goody Products, a haircare products
company.

         Samuel G. Grecco became Vice President-Business Development and
Planning in September 1996 and became Vice President - Business Development and
Corporate Secretary in December 1996. From prior to 1994 until June 1996 he was
Vice President, Controller and Treasurer of the Company. From June 1996 until
September 1996 he was Vice President and Controller of the Company.

         Mark A. Little joined Remington in July 1996 as Director of Planning
and Business Development. In September 1996, he became Vice President,
Controller and in June 1997, he became Vice President, Chief Financial Officer
and Controller. From prior to 1994 until joining Remington, Mr. Little held the
position of Executive Vice President of Finance, Chief Financial Officer of The
Pilliod Cabinet Company, now named Pilliod Furniture, Inc.

         Arthur W. Wheaton became Vice President - Sales and Marketing in
December 1996 and in December 1997, he became Vice President, General Manager -
Worldwide Sales. From March 1995 until December 1996 he was Vice President -
Corporate Marketing. From March 1994 until March 1995 he was Vice President.
From prior to 1994 to March 1994, Mr. Wheaton held the position of Director -
Marketing and Sales. Mr. Wheaton is Chairman of the Board of Directors of the
Sporting Arms and Ammunition Manufacturer's Institute, and serves on the Board
of Directors of the National Shooting Sports Foundation, the Wildlife Management
Institute and Congressional Sportsman Foundation.

ITEM 11.   EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

         Members of the Board of Directors of Remington and Holding who are not
employees of the Company or CD&R (each, an "Eligible Director") receive a per
meeting fee of $1,000 for each Remington board and committee meeting attended
and an annual retainer of $20,000. An additional per meeting fee of $1,000 is
paid to the chairman of each committee. Members of the Board of Directors of
Holding do not receive any additional compensation for their



                                       59
<PAGE>   60


services in such capacity. All directors are reimbursed for reasonable travel
and lodging expenses incurred to attend meetings. Each Eligible Director was
also eligible to participate in the RACI Holding, Inc. 1994 Directors' Stock
Plan (the "1994 Directors' Plan") under which a director could forego part or
all of the annual retainer and meeting fee payable to him for calendar years
1995-1997 in exchange for shares of Holding's Common Stock. The number of
shares payable is determined by dividing (i) the amount of cash retainer fees
foregone with respect to services provided during a calendar year by (ii) the
greater of (x) the fair market value of a share of Common Stock as of the last
day of such calendar year and (y) $100. As of the date of this report, no Common
Stock has been issued under this Plan, although it is expected that shares of
Common Stock will be issued in the near future. The 1994 Directors' Plan
terminated in 1998. Effective July 1, 1997 under the RACI Holding, Inc. Director
Stock Purchase Plan (the "1997 Directors' Plan"), the Company offered each
Eligible Director the opportunity to purchase up to 2,500 shares of Common Stock
at a purchase price per share of $100. The 1997 Directors' Plan extends until
July 1, 2002. As of the date of this report, 10,000 shares of Common Stock have
been issued under the 1997 Directors' Plan.

COMPENSATION OF EXECUTIVE OFFICERS

         The following table summarizes the compensation paid by Remington to
each person who served as its Chief Executive Officer during 1998 and to each of
the Company's four other most highly compensated executive officers (the "Named
Executive Officers") during or with respect to the 1996, 1997 and 1998 fiscal
years for services in all capacities rendered to the Company for such fiscal
years.


<TABLE>
<CAPTION>
                                       SUMMARY COMPENSATION TABLE
                                       --------------------------
                                                                                            LONG TERM
                                                                                          COMPENSATION
                                                                                          ------------
                                                                                             AWARDS
                                                                                             ------
                                                         ANNUAL COMPENSATION                   (G)              (I)
                                                         -------------------  (E)          SECURITIES        ALL OTHER
                 (A)                    (B)      (C)          (D)        OTHER ANNUAL      UNDERLYING      COMPENSATION
     NAME AND PRINCIPAL POSITION       YEAR   SALARY($)    BONUS($)     COMPENSATION($)    OPTIONS(#)           ($)
     ---------------------------       ----   ---------    --------     ---------------    ----------           ---
<S>                                    <C>    <C>          <C>          <C>                <C>              <C>
Leon J. Hendrix, Jr................... 1996       --          --              --               --               --
   Chairman and Chief Executive        1997       --          --              --               --               --
   Officer (1)                         1998       --          --              --               --               --
Thomas L. Millner..................... 1996    337,512     270,000            --               --            8,651(2)
   President and Chief Operating       1997    350,016     437,500            --               --            8,951(2)
   Officer                             1998    376,260     462,000            --               --            8,951(2)
Robert L. Euritt...................... 1996    150,000      80,000(3)      39,328(4)           --            1,125(5)
   Vice President-Human Resources      1997    152,500     165,000         36,818(4)           500           4,575(5)
    and Customer Service               1998    165,000     158,400         37,853(4)           --            4,800(5)
Mark A. Little........................ 1996    68,750(6)     --               --               --            1,925(2)
   Vice President, Chief Financial     1997    152,500     165,000            --              1,000          6,176(2)
    Officer and Controller             1998    165,000     158,400            --               --            8,651(2)
Ronald H. Bristol, II................. 1996    133,333      50,000         17,993(7)           --            2,125(5)
   Vice President, General Manager     1997    145,000     162,525            --              1,500          4,350(5)
    -Firearms                          1998    165,000     157,700            --               --            4,800(5)
</TABLE>

(1)  Mr. Hendrix is a principal of CD&R and received no compensation directly
     from Remington for his services as Chairman and Chief Executive Officer.
     Mr. Hendrix has served in this capacity since December 1997. Remington pays
     CD&R an annual fee (amounting to $400,000 in each of 1998, 1997 and 1996)
     for management consulting services (see "Certain Relationships and Related
     Transactions" below) which include Mr. Hendrix's services as Chairman and
     Chief Executive Officer.

(2)  Amount reflects premiums paid by the Company for a Disability Insurance
     Policy and Remington's matching contributions on behalf of the Named
     Executive Officer to the Remington Savings and Investment Plan.

(3)  Amount reflects incentive bonus paid in connection with such Named
     Executive Officer's relocation to the Company's North Carolina
     headquarters.



                                       60
<PAGE>   61


(4)  Amount reflects reimbursements for temporary living expenses incurred by
     the Named Executive Officer.

(5)  Reflects Remington's matching contributions on behalf of the Named
     Executive Officer to the Remington Savings and Investment Plan.

(6)  The Named Executive Officer was employed for a partial year.

(7)  Amount reflects reimbursements for moving expenses incurred by the Named
     Executive Officer in connection with the Named Executive Officer's
     relocation to the North Carolina headquarters.

<TABLE>
<CAPTION>
                  AGGREGATED OPTION EXERCISES AND FY-END OPTION VALUE TABLE
                  ---------------------------------------------------------

                                                                    NUMBER OF SECURITIES
                                                                   UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED
                                                                          OPTIONS AT              IN-THE-MONEY OPTIONS
                           SHARES ACQUIRED                                  FY-END                       AT FY-END
NAME                       ON EXERCISE (#)  VALUE REALIZED ($)   EXERCISABLE/UNEXERCISABLE     EXERCISABLE/UNEXERCISABLE(1)
----                       ---------------  ------------------   -------------------------     ----------------------------
<S>                        <C>              <C>                  <C>                           <C>
Leon J. Hendrix, Jr.              --               --                       --                               --
Thomas L. Millner                 --               --                  5,000 / 2,500                 500,000 / 250,000
Robert L. Euritt                  --               --                  1,227 / 1,113                 122,700 / 111,300
Mark A. Little                    --               --                    333 / 667                    33,300 / 66,700
Ronald H. Bristol, II             --               --                    583 / 1,292                  58,300 / 129,200
</TABLE>

(1)      Calculated based on a per share price of Holding Common Stock of $200,
         the estimated fair value as of December 31, 1998, less the exercise
         price of $100.

PENSION AND RETIREMENT PLAN

         The Remington Arms Company, Inc. Pension and Retirement Plan was
established effective December 1, 1993 to provide retirement income and survivor
benefits to Remington's employees and their beneficiaries through a tax
qualified program. Pension benefits under the Pension and Retirement Plan are
limited in accordance with the provision of the Internal Revenue Code of 1986,
as amended (the "Code"), governing tax qualified pension plans. The Company has
adopted a Supplemental Pension Plan effective January 1, 1998 (the "Supplemental
Plan" and, together with the Pension and Retirement Plan, the "Pension Plans")
that provides for payment to participants of retirement benefits equal to the
excess, if any, of 2% of the participant's average monthly pay multiplied by
such participant's years of service over the amount actually earned by such
participant under the Pension and Retirement Plan. Each of the Named Executive
Officers (other than Mr. Hendrix) is eligible to participate in the Pension
Plans. Benefits under the Supplemental Plan are not pre-funded; such benefits
are paid by the Company when due.

         Retirement benefits under the Pension Plans are generally based on an
employee's years of benefit service and highest final average compensation.
Generally, an employee's benefit service under the Pension Plans includes all of
his service with Remington and his service, if any, with DuPont prior to the
Closing. DuPont service is not recognized for benefit accrual or early
retirement eligibility, however, in the case of eligible employees who elected
to retire from DuPont and commence receiving retirement income from the DuPont
retirement plan in connection with the Acquisition. Retirement benefits are
generally paid in annuity form, for life, commencing at the employee's 65th
birthday, although longer service employees may elect to commence receiving
retirement income at an earlier age.

<TABLE>
<CAPTION>
    Salary and                        Estimated Annual Retirement Benefits Based on Service of
50% of Incentive           -------------------------------------------------------------------------------
   Compensation            15 Years         20 Years          25 Years          30 Years          35 Years
------------------         --------         --------          --------          --------          --------
<S>                        <C>              <C>               <C>               <C>               <C>               <C>
       175,000               52,500           70,000            87,500          105,000           122,500
       200,000               60,000           80,000           100,000          120,000           140,000
       225,000               67,500           90,000           112,500          135,000           157,500
       250,000               75,000          100,000           125,000          150,000           175,000
       300,000               90,000          120,000           150,000          180,000           210,000
       400,000              120,000          160,000           200,000          240,000           280,000
       450,000              135,000          180,000           225,000          270,000           315,000
       500,000              150,000          200,000           250,000          300,000           350,000
       550,000              165,000          220,000           275,000          330,000           385,000
</TABLE>



                                       61
<PAGE>   62



         The above table illustrates the estimated annual amounts payable under
the Pension Plans, including the Supplemental Plan, in the form of a straight
life annuity to employees retiring at age 65 in 1998. Compensation recognized
under the Pension Plans generally includes an employee's average compensation
for the three consecutive year period in the employee's final ten years of
service for which such compensation was the highest. Compensation for this
purpose includes overtime, shift differentials and 50% of any incentive
compensation award. Compensation does not include awards and payments under any
other special compensation plans, payments for severance, relocation or other
special payments.

         The years of benefit service and average monthly pay (expressed as an
annual amount), recognized as of December 31, 1998, under the Pension Plans for
each eligible Named Executive Officer are as follows:

<TABLE>
<CAPTION>
                                                      
          Name               Years of Service         Average Pay
          ----               ----------------         -----------
<S>                          <C>                      <C>
Thomas L. Millner                  4.6                  $549,500
Robert L. Euritt                   4.3                  $209,700
Mark A. Little                     2.5                  $204,700
Ronald H. Bristol, II              3.5                  $209,500
</TABLE>

         Mr. Hendrix is not a participant in the Pension Plans.

EXECUTIVE EMPLOYMENT AGREEMENTS

         In June 1998, the Company entered into Executive Employment Agreements
with each of the Named Executive Officers, except Mr. Hendrix. Under the
agreements, Messrs. Millner, Euritt, Little and Bristol receive the annual base
salaries, bonuses and other benefits set forth in the Summary Compensation
Table. The agreements also provide continued employment terms and severance
terms if employment is terminated under certain conditions. In the event of a
termination of the Named Executive Officer's employment by the Company without
"cause" (as defined in the agreement) or by such Named Executive Officer for
"good reason" (as defined in the agreement), the Named Executive Officer will
receive his base salary (as defined in the agreement) for the longer of one year
or the period from such date of termination through the end of the term, and a
portion of incentive compensation that would have been payable for the calendar
year in which his employment terminates. Messrs. Millner and Little's agreements
have terms of three years and two years, respectively, and Messrs. Euritt and
Bristol's agreements each have terms of one year. The agreements also contain
certain noncompetition and nonsolicitation provisions and provide for the
termination of previously existing employment and severance agreements and
arrangements.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The Board of Directors of the Company established a Compensation
Committee to review all compensation arrangements for executive officers of the
Company. The individuals serving on the Compensation Committee during 1998 were
Richard A. Gilleland, Chairman, Leon J. Hendrix, Jr. and Richard E. Heckert. Mr.
Hendrix has served as Chairman and Chief Executive Officer of the Company since
December 1997. Mr. Hendrix is also a principal of CD&R. CD&R receives an annual
fee for management and financial consulting services to the Company, including
Mr. Hendrix's services as Chairman and Chief Executive Officer of the Company,
and reimbursement of out-of-pocket expenses. The consulting fees paid to CD&R
were $400,000 for each of 1996, 1997 and 1998. The consulting fees to be paid to
CD&R may not exceed $500,000 per year under the terms of the Credit Agreement
and the Indenture unless certain requirements are met. Such consulting fees will
be reviewed on an annual basis. Holding and the Company have also agreed to
indemnify the members of the boards employed by CD&R and CD&R against certain
liabilities incurred under the federal securities laws, other laws regulating
the business of the Company and certain other claims and liabilities with
respect to their services for Holding and the Company. Prior to joining the
Compensation Committee, Mr. Heckert served as Chairman of the Board and Chief
Executive Officer of DuPont from May 1986 to April 1989, and also served as a
director of DuPont from April 1989 to April 1994.




                                       62
<PAGE>   63


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Holding owns all of the outstanding common stock (par value $.01 per
share) of Remington. Each share of common stock is entitled to one vote. The
following table sets forth the beneficial ownership, as of March 17, 1999, of
Common Stock by each director of Holding, by all directors and executive
officers of Holding as a group, by each Named Executive Officer, and by each
person who owns beneficially more than five percent of the outstanding shares of
Common Stock:

<TABLE>
<CAPTION>
                                                                               NUMBER               PERCENT
NAME OF BENEFICIAL OWNER                                                      OF SHARES            OF CLASS
------------------------                                                      ---------            --------
<S>                                                                           <C>                  <C>
The Clayton & Dubilier Private Equity Fund IV Limited Partnership (1)          750,000                96.0
B. Charles Ames (2)                                                                 --                --
Michael G. Babiarz (2)                                                              --                --
Leon J. Hendrix, Jr. (2)                                                            --                --
Hubbard C. Howe (2)                                                                 --                --
Joseph L. Rice, III (2)                                                             --                --
Stephen D. Bechtel                                                               2,500                 *
Bobby R. Brown                                                                   2,500                 *
Richard A. Gilleland                                                             2,500                 *
Richard E. Heckert                                                               2,500                 *
H. Norman Schwarzkopf                                                               --                --
Thomas L. Millner (3)                                                            5,000                 *
Robert L. Euritt (3)                                                             1,227                 *
Mark A. Little (3)                                                                 333                 *
Ronald H. Bristol, II (3)                                                          583                 *
Executive officers and directors as a group(4)(5)                              771,426                98.8
*Less than 1%
</TABLE>

(1)  Clayton & Dubilier Associates IV Limited Partnership ("Associates IV") is
     the general partner of The Clayton & Dubilier Private Equity Fund IV
     Limited Partnership ("C&D Fund IV") and by virtue of such status may be
     deemed to be the beneficial owner of the shares owned by C&D Fund IV.
     Associates IV has the power to direct C&D Fund IV as to the voting and
     disposition of shares held by C&D Fund IV. No person controls the voting
     and dispositive power of Associates IV with respect to the shares owned by
     C&D Fund IV. Associates IV expressly disclaims beneficial ownership of the
     shares owned by C&D Fund IV. The business address for each of C&D Fund IV
     and Associates IV is 270 Greenwich Avenue, Greenwich, Connecticut 05830.

(2)  Does not include shares owned by C&D Fund IV.

(3)  Represents shares that may be acquired upon exercise of options.

(4)  C&D Fund IV owns 750,000 of the shares of Common Stock included herein.
     Messrs. Ames and Rice are general partners of Associates IV. Messrs.
     Hendrix and Howe withdrew as general partners of Associates IV as of May
     1998 but retain an economic interest in the shares owned by C&D Fund IV by
     virtue of their status as withdrawn general partners of Associates IV.

(5)  Includes 11,426 shares that may be acquired upon exercise of vested options
     held by the executive officers as a group.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CD&R AND C&D FUND IV

         C&D Fund IV, which currently is Holding's largest shareholder, is a
private investment fund managed by CD&R. Amounts contributed to C&D Fund IV by
its limited partners are invested at the discretion of the general partner in
equity or equity-related securities of entities formed to effect leveraged
buy-out transactions and in the equity



                                       63
<PAGE>   64


of corporations where the infusion of capital coupled with the provision of
managerial assistance by CD&R can be expected to generate returns on investments
comparable to returns historically achieved in leveraged buy-out transactions.
The general partner of C&D Fund IV is Associates IV. Leon J. Hendrix, Jr., a
principal of CD&R, is a director and currently serves as Chairman and Chief
Executive Officer of Remington and Holding. Joseph L. Rice, III and B. Charles
Ames are principals of CD&R, general partners of Associates IV, and directors of
Remington and Holding. Hubbard C. Howe and Michael G. Babiarz are principals of
CD&R and directors of Remington and Holding. Donald J. Gogel and Joseph L. Rice,
III are the sole stockholders of CD&R. Richard A. Gilleland provides advisory
and consulting services to CD&R relating to investments and investment
opportunities in healthcare-related industries and is a director of Remington
and Holding.

         CD&R receives an annual fee for management and financial consulting
services provided to the Company and reimbursement of out-of-pocket expenses,
pursuant to a consulting agreement among Holding, the Company and CD&R. Such
services include helping the Company to establish effective banking, legal and
other business relationships, and assisting management in developing and
implementing strategies for improving the operational, marketing and financial
performance of the Company. In addition, CD&R has agreed to furnish the services
of Mr. Hendrix to serve as Chairman and Chief Executive Officer of the Company
and Holding as a part of the services provided pursuant to that consulting
agreement. Mr. Hendrix's compensation from CD&R is established without regard to
the extent of particular services provided by Mr. Hendrix to the Company. The
number of CD&R employees, and the amount of time spent by them, working with a
particular portfolio company varies from time to time with the scope and type of
services provided. The consulting fees paid to CD&R were $400,000 for each of
1998, 1997 and 1996. The consulting fees to be paid to CD&R may not exceed
$500,000 per year under the terms of the Credit Agreement and the Indenture
unless certain requirements are met. Such consulting fees will be reviewed on an
annual basis and will be calculated with reference to the size and complexity of
the Company's business, the type and magnitude of the advisory and management
consulting services being provided, the fees being paid to CD&R by other
companies for which it provides such services and the fees charged by other
managers with comparable organizations for similar services provided to
companies in which investment funds managed by such managers have invested.

         The Company paid fees to the law firm of Debevoise & Plimpton during
1998 for legal services rendered. Franci J. Blassberg, Esq., a member of
Debevoise & Plimpton, is married to Joseph L. Rice, III, a director of the
Company and a general partner of Associates IV.

         CD&R, C&D Fund IV, Holding and the Company have entered into an
indemnification agreement, pursuant to which Holding and the Company have agreed
to indemnify CD&R, C&D Fund IV, Associates IV and their respective directors,
officers, partners, employees, agents and controlling persons against certain
liabilities arising under the federal securities laws, other laws regulating the
business of the Company and certain other claims and liabilities.

         C&D Fund IV currently owns 98.7% of the outstanding Common Stock. C&D
Fund IV and Holding have entered into a registration rights agreement that,
among other things, provides C&D Fund IV and will provide certain other Holding
equity holders with certain registration rights with respect to their Common
Stock.

STOCK OPTION AND PURCHASE PLANS

         As of December 31, 1996, the Company had reserved 132,380 shares of the
Common Stock for issuance in accordance with the terms of the Amended and
Restated RACI Holding, Inc. Stock Option Plan (the "Option Plan"), the RACI
Holding, Inc. Stock Purchase Plan (the "Purchase Plan") and the 1994 Directors'
Plan. On July 22, 1997 the Board of Directors of Holding adopted the 1997
Directors' Plan and reserved an additional 12,500 shares of the Common Stock,
par value $.01 per share, of Holding for issuance thereunder. As of December 31,
1998, 10,000 shares of Common Stock have been issued under the 1997 Directors'
Plan and no shares of Common Stock have been issued under the Option Plan,
Purchase Plan or 1994 Directors' Plan. As of December 31, 1998, the Company has
134,880 shares of Common Stock reserved for issuance of which 96,915 shares
remain available for grant under the above mentioned plans.

         At December 31, 1998 options to purchase 37,965 shares of Common Stock
were outstanding, at a per share exercise price of $100, of which 20,907 options
were exercisable.



                                       64
<PAGE>   65


                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(A) LIST OF EXHIBITS.

<TABLE>
<CAPTION>
DESCRIPTION
-----------

<S>      <C>
2.1      Asset Purchase Agreement, dated as of November 24, 1993, among
         Remington Arms Company, Inc., formerly named RACI Acquisition
         Corporation ("Remington"), E.I. du Pont de Nemours and Company
         ("DuPont") and Sporting Goods Products, Inc., formerly named Remington
         Arms Company, Inc. ("Sporting Goods"); previously filed as Exhibit 2.1
         to Registration Statement No. 333-4520, 333-4520-01 under the
         Securities Act of 1933, as amended, filed May 3, 1996, and herein
         incorporated by reference.

2.2      Understanding and Agreement Regarding Product Liability Litigation,
         dated as of June 1, 1996 between DuPont and Remington; previously filed
         as Exhibit 2.2 to Amendment No. 2 to Registration Statement No.
         333-4520, 333-4520-01 under the Securities Act of 1933, as amended,
         filed April 23, 1997, and herein incorporated by reference.

2.3      Non-Competition Agreement, dated as of December 1, 1993, among DuPont,
         Sporting Goods and Remington; previously filed as Exhibit 2.3 to
         Registration Statement No. 333-4520, 333-4520-01 under the Securities
         Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
         reference.

2.4      Product Liability Services and Defense Coordination Agreement, dated as
         of December 1, 1993, among DuPont, Sporting Goods and Remington;
         previously filed as Exhibit 2.4 to Registration Statement No. 333-4520,
         333-4520-01 under the Securities Act of 1933, as amended, filed May 3,
         1996, and herein incorporated by reference.

2.5      Environmental Liability Services Agreement, dated as of December 1,
         1993, between DuPont and Remington; previously filed as Exhibit 2.5 to
         Registration Statement No. 333-4520, 333-4520-01 under the Securities
         Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
         reference.

3.1      Certificate of Incorporation of RACI Holding, Inc. ("Holding"), dated
         October 21, 1993, as amended on June 21, 1995; previously filed as
         Exhibit 3.1 to Registration Statement No. 333-4520, 333-4520-01 under
         the Securities Act of 1933, as amended, filed May 3, 1996, and herein
         incorporated by reference.

3.2      By-Laws of Holding, as amended and restated on December 16, 1997;
         previously filed as Exhibit 3.2 to Annual Report on Form 10-K, filed
         March 30, 1998, and herein incorporated by reference.

4.1      Specimen of Holding Class A Common Stock Certificate; previously filed
         as Exhibit 4.1 to Annual Report on Form 10-K, filed March 30, 1998, and
         herein incorporated by reference.

4.2      Specimen of Holding Class B Common Stock Certificate; previously filed
         as Exhibit 4.2 to Annual Report on Form 10-K, filed March 30, 1998, and
         herein incorporated by reference.

4.3      Indenture, dated as of November 30, 1993 (the "Indenture"), among
         Remington, First Trust National Association, as Trustee, and Holding,
         as Guarantor, with respect to Remington's 9.5% Senior Subordinated
         Notes due 2003 (the "Notes"); previously filed as Exhibit 4.1 to
         Registration Statement No. 333-4520, 333-4520-01 under the Securities
         Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
         reference.
</TABLE>



                                       65
<PAGE>   66


<TABLE>
<S>      <C>
4.4      Purchase Agreement, dated November 19, 1993, among Remington, Holding,
         Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
         ("Merrill Lynch"), and CS First Boston Corporation ("First Boston" and,
         together with Merrill Lynch, the "Initial Purchaser"); previously filed
         as Exhibit 4.2 to Registration Statement No. 333-4520, 333-4520-01
         under the Securities Act of 1933, as amended, filed May 3, 1996, and
         herein incorporated by reference.

4.5      Registration Rights Agreement, dated as of November 30, 1993, among
         Remington, Holding and the Initial Purchasers; previously filed as
         Exhibit 4.3 to Registration Statement No. 333-4520, 333-4520-01 under
         the Securities Act of 1933, as amended, filed May 3, 1996, and herein
         incorporated by reference.

4.6      Credit Agreement, dated as of November 30, 1993, among Remington, the
         lenders named therein, The Chase Manhattan Bank, N.A., Chemical Bank
         ("Chemical"), and Union Bank of Switzerland, as co-agents, and
         Chemical, as administrative agent (the "Administrative Agent");
         previously filed as Exhibit 4.4 to Registration Statement No. 333-4520,
         333-4520-01 under the Securities Act of 1933, as amended, filed May 3,
         1996, and herein incorporated by reference.

4.7      First Amendment, dated as of September 29, 1995, to the Credit
         Agreement referred to as Exhibit 4.6 above; previously filed as Exhibit
         4.5 to Registration Statement No. 333-4520, 333-4520-01 under the
         Securities Act of 1933, as amended, filed May 3, 1996, and herein
         incorporated by reference.

4.8      Second Amendment, dated as of March 29, 1996, to the Credit Agreement
         referred to as Exhibit 4.6 above; previously filed as Exhibit 4.6 to
         Registration Statement No. 333-4520, 333-4520-01 under the Securities
         Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
         reference.

4.9      Third Amendment, dated as of June 28, 1996, to the Credit Agreement
         referred to as Exhibit 4.6 above; previously filed as Exhibit 4.7 to
         Amendment No. 1 to Registration Statement No. 333-4520, 333-4520-01
         under the Securities Act of 1933, as amended, filed January 10, 1997,
         and herein incorporated by reference.

4.10     Fourth Amendment, dated as of December 30, 1996 to the Credit Agreement
         referred to as Exhibit 4.6 above; previously filed as Exhibit 4.8 to
         Amendment No. 1 to Registration Statement No. 333-4520, 333-4520-01
         under the Securities Act of 1933, as amended, filed January 10, 1997,
         and herein incorporated by reference.

4.11     Fifth Amendment, dated as of September 23, 1998 to the Credit Agreement
         referred to as Exhibit 4.6 above; previously filed as Exhibit 4 by the
         Company in its Form 10-Q for the quarter ended September 30, 1998, and
         herein incorporated by reference.

4.12     Borrower Stock Pledge Agreement, dated as of November 30, 1993, between
         Remington and the Administrative Agent; previously filed as Exhibit 4.7
         to Registration Statement No. 333-4520, 333-4520-01 under the
         Securities Act of 1933, as amended, filed May 3, 1996, and herein
         incorporated by reference.

4.13     Borrower Stock Pledge Agreement, dated as of March 30, 1996, between
         Remington and the Administrative Agent; previously filed as Exhibit
         4.10 to Amendment No. 1 to Registration Statement No. 333-4520,
         333-4520-01 under the Securities Act of 1933, as amended, filed January
         10, 1997, and herein incorporated by reference.

4.14     Borrower Security Agreement, dated as of November 30, 1993, between
         Remington and the Administrative Agent; previously filed as Exhibit 4.8
         to Registration Statement No. 333-4520, 333-4520-01 under the
         Securities Act of 1933, as amended, filed May 3, 1996, and herein
         incorporated by reference.
</TABLE>



                                       66
<PAGE>   67


<TABLE>
<S>      <C>
4.15     Borrower Patent and Trademark Security Agreement, dated as of November
         30, 1993, between Remington and the Administrative Agent; previously
         filed as Exhibit 4.9 to Registration Statement No. 333-4520,
         333-4520-01 under the Securities Act of 1933, as amended, filed May 3,
         1996, and herein incorporated by reference.

4.16     Holding Stock Pledge Agreement, dated as of November 30, 1993, between
         Holding and the Administrative Agent; previously filed as Exhibit 4.10
         to Registration Statement No. 333-4520, 333-4520-01 under the
         Securities Act of 1933, as amended, filed May 3, 1996, and herein
         incorporated by reference.

4.17     Holding Guarantee, dated as of November 30, 1993, by Holding to the
         Administrative Agent; previously filed as Exhibit 4.11 to Registration
         Statement No. 333-4520, 333-4520-01 under the Securities Act of 1933,
         as amended, filed May 3, 1996, and herein incorporated by reference.

4.18     Sublease, dated as of March 1, 1987, between S&K Industries, Inc., as
         lessor, and Remington as assignee of DuPont, as lessee (agreement to
         furnish such sublease to the Securities and Exchange Commission upon
         its request); previously filed as Exhibit 4.17 to Annual Report on Form
         10-K, filed March 30, 1998, and herein incorporated by reference.

10.1     Filed as Exhibit 2.1.

10.2     Filed as Exhibit 2.2.

10.3     Filed as Exhibit 2.3.

10.4     Filed as Exhibit 2.4.

10.5     Filed as Exhibit 2.5.

10.6     Filed as Exhibit 4.4.

10.7     Filed as Exhibit 4.5.

10.8     Filed as Exhibit 4.6.

10.9     Filed as Exhibit 4.7.

10.10    Filed as Exhibit 4.8.

10.11    Filed as Exhibit 4.9.

10.12    Filed as Exhibit 4.10.

10.13    Filed as Exhibit 4.11.

10.14    Filed as Exhibit 4.12.

10.15    Filed as Exhibit 4.13.
</TABLE>


                                       67

<PAGE>   68


<TABLE>
<S>      <C>
10.16    Filed as Exhibit 4.14.

10.17    Filed as Exhibit 4.15.

10.18    Filed as Exhibit 4.16.

10.19    Filed as Exhibit 4.17.

10.20    Registration and Participation Agreement, dated as of November 30,
         1993, between Holding and The Clayton & Dubilier Private Equity Fund IV
         Limited Partnership (the "C&D Fund"); previously filed as Exhibit 10.14
         to Registration Statement No. 333-4520, 333-4520-01 under the
         Securities Act of 1933, as amended, filed May 3, 1996, and herein
         incorporated by reference.

10.21    Stock Subscription Agreement, dated as of November 30, 1993, between
         Holding and the C&D Fund; previously filed as Exhibit 10.15 to
         Registration Statement No. 333-4520, 333-4520-01 under the Securities
         Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
         reference.

10.22    Indemnification Agreement, dated as of November 30, 1993, among
         Remington, Holding, Clayton, Dubilier & Rice, Inc. and the C&D Fund;
         previously filed as Exhibit 10.16 to Registration Statement No.
         333-4520, 333-4520-01 under the Securities Act of 1933, as amended,
         filed May 3, 1996, and herein incorporated by reference.

10.23    RACI Holding, Inc. 1994 Directors' Stock Plan, adopted on June 2, 1994;
         previously filed as Exhibit 10.18 to Registration Statement No.
         333-4520, 333-4520-01 under the Securities Act of 1933, as amended,
         filed May 3, 1996, and herein incorporated by reference.

10.24    RACI Holding, Inc. Stock Purchase Plan, adopted on June 2, 1994;
         previously filed as Exhibit 10.19 to Registration Statement No.
         333-4520, 333-4520-01 under the Securities Act of 1933, as amended,
         filed May 3, 1996, and herein incorporated by reference.

10.25    Amended and Restated RACI Holding, Inc. Stock Option Plan, adopted as
         of July 17, 1995; previously filed as Exhibit 10.20 to Registration
         Statement No. 333-4520, 333-4520-01 under the Securities Act of 1933,
         as amended, filed May 3, 1996, and herein incorporated by reference.

10.26    Amendment No. 1, effective as of July 22, 1996, to the Amended and
         Restated RACI Holding, Inc. Stock Option Plan referred to as Exhibit
         10.25 above; previously filed as Exhibit 10.25 to Amendment No. 1 to
         Registration Statement No. 333-4520, 333-4520-01 under the Securities
         Act of 1933, as amended, filed January 10, 1997, and herein
         incorporated by reference.

10.27    Form of Management Stock Option Agreement; previously filed as Exhibit
         10.21 to Registration Statement No. 333-4520, 333-4520-01 under the
         Securities Act of 1933, as amended, filed May 3, 1996, and herein
         incorporated by reference.

10.28    RACI Holding, Inc. Director Stock Purchase Plan, adopted on July 22,
         1997; previously filed as Exhibit 10.1 by the Company in its Form 10-Q
         for the quarter ended September 30, 1997, and herein incorporated by
         reference.

10.29    Form of Director Stock Subscription Agreement; previously filed as
         Exhibit 10.2 by the Company in its Form 10-Q for the quarter ended
         September 30, 1997, and herein incorporated by reference.
</TABLE>


                                       68
<PAGE>   69


<TABLE>
<S>      <C>
10.30    RACI Holding, Inc. Director Stock Option Plan, adopted on July 22,
         1996; previously filed as Exhibit 10.27 to Amendment No. 1 to
         Registration Statement No. 333-4520, 333-4520-01 under the Securities
         Act of 1933, as amended, filed January 10, 1997, and herein
         incorporated by reference.

10.31    Consulting Agreement, dated as of December 1, 1993, among Holding,
         Remington and Clayton, Dubilier & Rice, Inc.; previously filed as
         Exhibit 10.28 to Amendment No. 2 to Registration Statement No.
         333-4520, 333-4520-01 under the Securities Act of 1933, as amended,
         filed April 23, 1997, and herein incorporated by reference.

10.32    Loan-Out Agreement, dated as of December 1, 1993, among Holding,
         Remington and Clayton, Dubilier & Rice, Inc.; previously filed as
         Exhibit 10.29 to Amendment No. 2 to Registration Statement No.
         333-4520, 333-4520-01 under the Securities Act of 1933, as amended,
         filed April 23, 1997, and herein incorporated by reference.

10.33    Loan-Out Agreement, dated as of December 16, 1997, among Holding,
         Remington and Clayton, Dubilier & Rice, Inc.; previously filed as
         Exhibit 10.32 to Annual Report on Form 10-K, filed March 30, 1998, and
         herein incorporated by reference.

10.34    Form of Executive Employment Agreement.

10.35    Remington Supplemental Pension Plan, effective January 1, 1998.

10.36    Remington Supplemental Savings Plan, effective January 1, 1998.

12.1     Computation of Ratio of Earnings to Fixed Charges.

21.1     List of Subsidiaries.

23.1     Consent of PricewaterhouseCoopers LLP as Independent Accountants of the
         Registrant.

27       Financial Data Schedule.

99.1     Reconciliation of Income (Loss) from Operations to EBITDA.
</TABLE>

(B) FINANCIAL STATEMENT SCHEDULES.

         Financial statement schedules of the Company are not required, are
immaterial or have been disclosed in the notes to the financial statements and
therefore have been omitted.

(C) REPORTS ON FORM 8-K.

         During the quarter ended December 31, 1998, the Company filed no
reports on Form 8-K.





                                       69
<PAGE>   70



                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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 as of March 30, 1999.

                               RACI HOLDING, INC.

                               By:  /s/ Leon J. Hendrix, Jr.
                                    ---------------------------------
                                        Leon J. Hendrix, Jr.
                               Chairman, Chief Executive Officer and Director

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 30, 1999.

<TABLE>
<S>                                <C>
   /s/ Leon J. Hendrix, Jr.        Chairman, Chief Executive Officer and Director
-----------------------------      (Principal Executive Officer)
     Leon J. Hendrix, Jr.


     /s/ Thomas L. Millner         Director, President and Chief Operating Officer
-----------------------------
       Thomas L. Millner


      /s/ Mark A. Little           Vice President, Chief Financial Officer and Controller
-----------------------------      (Principal Financial and Accounting Officer)
        Mark A. Little


      /s/ B. Charles Ames          Director
-----------------------------
        B. Charles Ames


    /s/ Michael G. Babiarz         Director
-----------------------------
      Michael G. Babiarz


  /s/ Stephen D. Bechtel, Jr.      Director
-----------------------------
    Stephen D. Bechtel, Jr.


      /s/ Bobby R. Brown           Director
-----------------------------
        Bobby R. Brown


   /s/ Richard A. Gilleland        Director
-----------------------------
     Richard A. Gilleland


    /s/ Richard E. Heckert         Director
-----------------------------
      Richard E. Heckert


      /s/ Hubbard C. Howe          Director
-----------------------------
        Hubbard C. Howe


    /s/ Joseph L. Rice, III        Director
-----------------------------
      Joseph L. Rice, III


   /s/ H. Norman Schwarzkopf       Director
-----------------------------
     H. Norman Schwarzkopf
</TABLE>

         SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.

         No annual report or proxy material has been sent to security holders.




                                       70
<PAGE>   71


                                  EXHIBIT INDEX
                FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1998


<TABLE>
<CAPTION>
EXHIBIT NO.                              DESCRIPTION
-----------                              -----------

<S>     <C>
2.1     Asset Purchase Agreement, dated as of November 24, 1993, among Remington
        Arms Company, Inc., formerly named RACI Acquisition Corporation
        ("Remington"), E.I. du Pont de Nemours and Company ("DuPont") and
        Sporting Goods Products, Inc., formerly named Remington Arms Company,
        Inc. ("Sporting Goods"); previously filed as Exhibit 2.1 to Registration
        Statement No. 333-4520, 333-4520-01 under the Securities Act of 1933, as
        amended, filed May 3, 1996, and herein incorporated by reference.

2.2     Understanding and Agreement Regarding Product Liability Litigation,
        dated as of June 1, 1996 between DuPont and Remington; previously filed
        as Exhibit 2.2 to Amendment No. 2 to Registration Statement No.
        333-4520, 333-4520-01 under the Securities Act of 1933, as amended,
        filed April 23, 1997, and herein incorporated by reference.

2.3     Non-Competition Agreement, dated as of December 1, 1993, among DuPont,
        Sporting Goods and Remington; previously filed as Exhibit 2.3 to
        Registration Statement No. 333-4520, 333-4520-01 under the Securities
        Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
        reference.

2.4     Product Liability Services and Defense Coordination Agreement, dated as
        of December 1, 1993, among DuPont, Sporting Goods and Remington;
        previously filed as Exhibit 2.4 to Registration Statement No. 333-4520,
        333-4520-01 under the Securities Act of 1933, as amended, filed May 3,
        1996, and herein incorporated by reference.

2.5     Environmental Liability Services Agreement, dated as of December 1,
        1993, between DuPont and Remington; previously filed as Exhibit 2.5 to
        Registration Statement No. 333-4520, 333-4520-01 under the Securities
        Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
        reference.

3.1     Certificate of Incorporation of RACI Holding, Inc. ("Holding"), dated
        October 21, 1993, as amended on June 21, 1995; previously filed as
        Exhibit 3.1 to Registration Statement No. 333-4520, 333-4520-01 under
        the Securities Act of 1933, as amended, filed May 3, 1996, and herein
        incorporated by reference.

3.2     By-Laws of Holding, as amended and restated on December 16, 1997;
        previously filed as Exhibit 3.2 to Annual Report on Form 10-K, filed
        March 30, 1998, and herein incorporated by reference.

4.1     Specimen of Holding Class A Common Stock Certificate; previously filed
        as Exhibit 4.1 to Annual Report on Form 10-K, filed March 30, 1998, and
        herein incorporated by reference.

4.2     Specimen of Holding Class B Common Stock Certificate; previously filed
        as Exhibit 4.2 to Annual Report on Form 10-K, filed March 30, 1998, and
        herein incorporated by reference.

4.3     Indenture, dated as of November 30, 1993 (the "Indenture"), among
        Remington, First Trust National Association, as Trustee, and Holding, as
        Guarantor, with respect to Remington's 9.5% Senior Subordinated Notes
        due 2003 (the "Notes"); previously filed as Exhibit 4.1 to Registration
        Statement No. 333-4520, 333-4520-01 under the Securities Act of 1933, as
        amended, filed May 3, 1996, and herein incorporated by reference.
</TABLE>



                                       71
<PAGE>   72


<TABLE>
<S>     <C>
4.4     Purchase Agreement, dated November 19, 1993, among Remington, Holding,
        Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
        ("Merrill Lynch"), and CS First Boston Corporation ("First Boston" and,
        together with Merrill Lynch, the "Initial Purchaser"); previously filed
        as Exhibit 4.2 to Registration Statement No. 333-4520, 333-4520-01 under
        the Securities Act of 1933, as amended, filed May 3, 1996, and herein
        incorporated by reference.

4.5     Registration Rights Agreement, dated as of November 30, 1993, among
        Remington, Holding and the Initial Purchasers; previously filed as
        Exhibit 4.3 to Registration Statement No. 333-4520, 333-4520-01 under
        the Securities Act of 1933, as amended, filed May 3, 1996, and herein
        incorporated by reference.

4.6     Credit Agreement, dated as of November 30, 1993, among Remington, the
        lenders named therein, The Chase Manhattan Bank, N.A., Chemical Bank
        ("Chemical"), and Union Bank of Switzerland, as co-agents, and Chemical,
        as administrative agent (the "Administrative Agent"); previously filed
        as Exhibit 4.4 to Registration Statement No. 333-4520, 333-4520-01 under
        the Securities Act of 1933, as amended, filed May 3, 1996, and herein
        incorporated by reference.

4.7     First Amendment, dated as of September 29, 1995, to the Credit Agreement
        referred to as Exhibit 4.6 above; previously filed as Exhibit 4.5 to
        Registration Statement No. 333-4520, 333-4520-01 under the Securities
        Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
        reference.

4.8     Second Amendment, dated as of March 29, 1996, to the Credit Agreement
        referred to as Exhibit 4.6 above; previously filed as Exhibit 4.6 to
        Registration Statement No. 333-4520, 333-4520-01 under the Securities
        Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
        reference.

4.9     Third Amendment, dated as of June 28, 1996, to the Credit Agreement
        referred to as Exhibit 4.6 above; previously filed as Exhibit 4.7 to
        Amendment No. 1 to Registration Statement No. 333-4520, 333-4520-01
        under the Securities Act of 1933, as amended, filed January 10, 1997,
        and herein incorporated by reference.

4.10    Fourth Amendment, dated as of December 30, 1996 to the Credit Agreement
        referred to as Exhibit 4.6 above; previously filed as Exhibit 4.8 to
        Amendment No. 1 to Registration Statement No. 333-4520, 333-4520-01
        under the Securities Act of 1933, as amended, filed January 10, 1997,
        and herein incorporated by reference.

4.11    Fifth Amendment, dated as of September 23, 1998 to the Credit Agreement
        referred to as Exhibit 4.6 above; previously filed as Exhibit 4 by the
        Company in its Form 10-Q for the quarter ended September 30, 1998, and
        herein incorporated by reference.

4.12    Borrower Stock Pledge Agreement, dated as of November 30, 1993, between
        Remington and the Administrative Agent; previously filed as Exhibit 4.7
        to Registration Statement No. 333-4520, 333-4520-01 under the Securities
        Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
        reference.

4.13    Borrower Stock Pledge Agreement, dated as of March 30, 1996, between
        Remington and the Administrative Agent; previously filed as Exhibit 4.10
        to Amendment No. 1 to Registration Statement No. 333-4520, 333-4520-01
        under the Securities Act of 1933, as amended, filed January 10, 1997,
        and herein incorporated by reference.

4.14    Borrower Security Agreement, dated as of November 30, 1993, between
        Remington and the Administrative Agent; previously filed as Exhibit 4.8
        to Registration Statement No. 333-4520, 333-4520-01 under the Securities
        Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
        reference.
</TABLE>




                                       72
<PAGE>   73


<TABLE>
<S>     <C>
4.15    Borrower Patent and Trademark Security Agreement, dated as of November
        30, 1993, between Remington and the Administrative Agent; previously
        filed as Exhibit 4.9 to Registration Statement No. 333-4520, 333-4520-01
        under the Securities Act of 1933, as amended, filed May 3, 1996, and
        herein incorporated by reference.

4.16    Holding Stock Pledge Agreement, dated as of November 30, 1993, between
        Holding and the Administrative Agent; previously filed as Exhibit 4.10
        to Registration Statement No. 333-4520, 333-4520-01 under the Securities
        Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
        reference.

4.17    Holding Guarantee, dated as of November 30, 1993, by Holding to the
        Administrative Agent; previously filed as Exhibit 4.11 to Registration
        Statement No. 333-4520, 333-4520-01 under the Securities Act of 1933, as
        amended, filed May 3, 1996, and herein incorporated by reference.

4.18    Sublease, dated as of March 1, 1987, between S&K Industries, Inc., as
        lessor, and Remington as assignee of DuPont, as lessee (agreement to
        furnish such sublease to the Securities and Exchange Commission upon its
        request); previously filed as Exhibit 4.17 to Annual Report on Form
        10-K, filed March 30, 1998, and herein incorporated by reference.

10.1    Filed as Exhibit 2.1.

10.3    Filed as Exhibit 2.2.

10.3    Filed as Exhibit 2.3.

10.4    Filed as Exhibit 2.4.

10.5    Filed as Exhibit 2.5.

10.6    Filed as Exhibit 4.4.

10.7    Filed as Exhibit 4.5.

10.8    Filed as Exhibit 4.6.

10.9    Filed as Exhibit 4.7.

10.10   Filed as Exhibit 4.8.

10.11   Filed as Exhibit 4.9.

10.12   Filed as Exhibit 4.10.

10.13   Filed as Exhibit 4.11.

10.14   Filed as Exhibit 4.12.

10.15   Filed as Exhibit 4.13.
</TABLE>



                                       73
<PAGE>   74

<TABLE>
<S>     <C>
10.16   Filed as Exhibit 4.14.

10.17   Filed as Exhibit 4.15.

10.18   Filed as Exhibit 4.16.

10.19   Filed as Exhibit 4.17.

10.20   Registration and Participation Agreement, dated as of November 30, 1993,
        between Holding and The Clayton & Dubilier Private Equity Fund IV
        Limited Partnership (the "C&D Fund"); previously filed as Exhibit 10.14
        to Registration Statement No. 333-4520, 333-4520-01 under the Securities
        Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
        reference.

10.21   Stock Subscription Agreement, dated as of November 30, 1993, between
        Holding and the C&D Fund; previously filed as Exhibit 10.15 to
        Registration Statement No. 333-4520, 333-4520-01 under the Securities
        Act of 1933, as amended, filed May 3, 1996, and herein incorporated by
        reference.

10.22   Indemnification Agreement, dated as of November 30, 1993, among
        Remington, Holding, Clayton, Dubilier & Rice, Inc. and the C&D Fund;
        previously filed as Exhibit 10.16 to Registration Statement No.
        333-4520, 333-4520-01 under the Securities Act of 1933, as amended,
        filed May 3, 1996, and herein incorporated by reference.

10.23   RACI Holding, Inc. 1994 Directors' Stock Plan, adopted on June 2, 1994;
        previously filed as Exhibit 10.18 to Registration Statement No.
        333-4520, 333-4520-01 under the Securities Act of 1933, as amended,
        filed May 3, 1996, and herein incorporated by reference.

10.24   RACI Holding, Inc. Stock Purchase Plan, adopted on June 2, 1994;
        previously filed as Exhibit 10.19 to Registration Statement No.
        333-4520, 333-4520-01 under the Securities Act of 1933, as amended,
        filed May 3, 1996, and herein incorporated by reference.

10.25   Amended and Restated RACI Holding, Inc. Stock Option Plan, adopted as of
        July 17, 1995; previously filed as Exhibit 10.20 to Registration
        Statement No. 333-4520, 333-4520-01 under the Securities Act of 1933, as
        amended, filed May 3, 1996, and herein incorporated by reference.

10.26   Amendment No. 1, effective as of July 22, 1996, to the Amended and
        Restated RACI Holding, Inc. Stock Option Plan referred to as Exhibit
        10.25 above; previously filed as Exhibit 10.25 to Amendment No. 1 to
        Registration Statement No. 333-4520, 333-4520-01 under the Securities
        Act of 1933, as amended, filed January 10, 1997, and herein incorporated
        by reference.

10.27   Form of Management Stock Option Agreement; previously filed as Exhibit
        10.21 to Registration Statement No. 333-4520, 333-4520-01 under the
        Securities Act of 1933, as amended, filed May 3, 1996, and herein
        incorporated by reference.

10.28   RACI Holding, Inc. Director Stock Purchase Plan, adopted on July 22,
        1997; previously filed as Exhibit 10.1 by the Company in its Form 10-Q
        for the quarter ended September 30, 1997, and herein incorporated by
        reference.

10.29   Form of Director Stock Subscription Agreement; previously filed as
        Exhibit 10.2 by the Company in its Form 10-Q for the quarter ended
        September 30, 1997, and herein incorporated by reference.
</TABLE>



                                       74
<PAGE>   75


<TABLE>
<S>     <C>
10.30   RACI Holding, Inc. Director Stock Option Plan, adopted on July 22, 1996;
        previously filed as Exhibit 10.27 to Amendment No. 1 to Registration
        Statement No. 333-4520, 333-4520-01 under the Securities Act of 1933, as
        amended, filed January 10, 1997, and herein incorporated by reference.

10.31   Consulting Agreement, dated as of December 1, 1993, among Holding,
        Remington and Clayton, Dubilier & Rice, Inc.; previously filed as
        Exhibit 10.28 to Amendment No. 2 to Registration Statement No. 333-4520,
        333-4520-01 under the Securities Act of 1933, as amended, filed April
        23, 1997, and herein incorporated by reference.

10.32   Loan-Out Agreement, dated as of December 1, 1993, among Holding,
        Remington and Clayton, Dubilier & Rice, Inc.; previously filed as
        Exhibit 10.29 to Amendment No. 2 to Registration Statement No. 333-4520,
        333-4520-01 under the Securities Act of 1933, as amended, filed April
        23, 1997, and herein incorporated by reference.

10.33   Loan-Out Agreement, dated as of December 16, 1997, among Holding,
        Remington and Clayton, Dubilier & Rice, Inc.; previously filed as
        Exhibit 10.32 to Annual Report on Form 10-K, filed March 30, 1998, and
        herein incorporated by reference.

10.34   Form of Executive Employment Agreement.

10.35   Remington Supplemental Pension Plan, effective January 1, 1998.

10.36   Remington Supplemental Savings Plan, effective January 1, 1998.

12.1    Computation of Ratio of Earnings to Fixed Charges.

21.1    List of Subsidiaries.

23.1    Consent of PricewaterhouseCoopers LLP as Independent Accountants of the
        Registrant.

27      Financial Data Schedule.

99.1    Reconciliation of Income (Loss) from Operations to EBITDA.
</TABLE>











                                       75