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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 2000 Commission File
No. 0-1709
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RVM INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 31-1515410
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
753 W. Waterloo Road, Akron, Ohio 44314-1519
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 753-4545
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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There were 1,937,505 shares outstanding of the Registrant's common stock as of
August 5, 2000.
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
2000
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JUNE 30 MARCH 31
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ASSETS
Current assets:
Cash and cash equivalents $ 293,976 $ 793,122
Receivables:
Trade, net of allowance for doubtful accounts of
$126,657 and $128,000 at June 30 and March 31 8,102,133 10,889,445
Related party 111,540 147,826
Inventories
(Excess of replacement or current cost over stated values
was $2,027,000 and $2,066,000 at June 30 and March 31) 18,357,254 15,560,631
Refundable income taxes 91,697 0
Deferred income taxes 1,217,700 1,217,700
Assets held for sale 643,844 643,844
Other current assets 554,599 242,186
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Total current assets 29,372,743 29,494,754
Property, plant and equipment, net 24,053,516 23,737,525
Funds held by trustee for capital expenditures 230,454 227,801
Other assets 287,884 271,628
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Total assets $53,944,597 $53,731,708
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See accompanying notes to the consolidated financial statements.
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, Continued
2000
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JUNE 30 MARCH 31
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 8,510,045 $ 7,467,524
- related parties 318,588 287,539
Accrued expenses and liabilities:
Compensation 733,979 731,352
Product warranty 1,062,084 1,076,447
Other 2,265,467 1,883,345
Current portion of long-term debt - other 2,257,029 2,264,855
- related parties 516,200 371,200
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Total current liabilities 15,663,392 14,082,262
Note payable - bank 16,918,727 17,409,421
Long-term debt 8,903,496 9,433,316
Notes payable - related parties 2,514,300 2,715,850
Deferred income taxes 1,201,800 1,201,800
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Total liabilities 45,201,715 44,842,649
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Shareholders' equity:
Preferred stock, $0.01 par value; authorized shares,
300,000; none outstanding 0 0
Common stock, $0.01 par value; authorized shares,
3,000,000; issued and outstanding, 1,937,505 shares
at June 30, 2000 and at March 31, 2000 19,376 19,376
Additional capital 4,786,336 4,786,336
Retained earnings 3,937,170 4,083,347
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Total shareholders' equity 8,742,882 8,889,059
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Total liabilities and shareholders' equity $53,944,597 $53,731,708
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See accompanying notes to the consolidated financial statements
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30
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2000 1999
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Net sales $21,137,608 $24,125,939
Cost of sales 18,886,140 21,188,313
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Gross profit 2,251,468 2,937,626
Selling, general and administrative expenses 1,836,263 1,671,248
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Income from operations 415,205 1,266,378
Other income (expense):
Other income 11,421 9,359
Interest expense (651,420) (464,419)
Loss on disposal of equipment (7,229) (17,209)
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Income (loss) before income taxes (232,023) 794,109
Provision for income taxes (benefit) (85,845) 294,025
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Net income (loss) $ (146,178) $ 500,084
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Basic and diluted earnings per share: $ (0.08) $ 0.26
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See accompanying notes to the consolidated financial statements
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30
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2000 1999
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Cash flows from operating activities:
Net income (loss) ............................................ $ (146,178) $ 500,084
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization .............................. 589,096 567,110
Increase (decrease) in accrued product warranty ............ (14,363) 94,000
Increase (decrease) in allowance for doubtful accounts ..... (1,343) (7,000)
Loss on disposal of equipment .............................. 7,229 17,209
Increase (decrease) in cash from changes in:
Receivables ................................................ 2,824,941 115,338
Inventories ................................................ (2,796,623) (1,524,184)
Other assets ............................................... (343,354) (109,930)
Accounts payable ........................................... 1,073,571 2,604,173
Refundable and accrued income taxes ........................ (147,513) 271,159
Accrued expenses and other current liabilities ............. 440,565 148,750
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Net cash provided by (used in) operating activities ........ 1,486,028 2,676,709
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Cash flows from investing activities:
Capital expenditures ......................................... (900,131) (1,242,635)
Proceeds from disposal of fixed assets ....................... 2,500 3,000
Investment of income earned on investment of proceeds from
long-term debt with trustee ................................ (2,653) (4,844)
Sale of investments and release of funds held by trustee ..... 0 63,890
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Net cash provided by (used in) investing activities ........ (900,284) (1,180,589)
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Cash flows from financing activities:
Payments on long-term debt ................................... (537,646) (257,423)
Proceeds from (payments on) notes payable - bank, net ........ (490,694) (1,436,453)
Payments on notes payable to related parties ................. (56,550) (56,550)
Proceeds from long-term debt, net of issuance costs .......... 0 1,100,000
Proceeds from exercised stock options ........................ 0 2,000
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Net cash provided by (used in) financing activities ........ (1,084,890) (648,426)
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Net increase (decrease) in cash and cash equivalents ............ (499,146) 847,694
Cash and cash equivalents at beginning of period ................ 793,122 328,490
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Cash and cash equivalents at end of period ...................... $ 293,976 $ 1,176,184
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See accompanying notes to the consolidated financial statements.
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The information in this report reflects all adjustments, which are, in
the opinion of management, necessary for a fair statement of the
results for the interim periods presented for RVM Industries, Inc.
("the Company"). All adjustments other than those described in this
report are, in the opinion of management, of a normal and recurring
nature. These consolidated financial statements include the accounts of
RVM's wholly owned subsidiaries: Ravens, Inc. ("Ravens"), Albex
Aluminum, Inc. ("Albex") and Signs and Blanks, Inc ("SABI"). All
significant intercompany accounts and transactions have been
eliminated.
2. Basic earnings per share are based on net income divided by the
weighted average number of common shares outstanding. The weighted
average number of common shares outstanding was 1,937,505 in 2000 and
1,937,478 in 1999. Diluted earnings per share reflect the potential
dilution that could occur if all options or contracts to issue common
stock were issued or converted. Basic earnings per share for the
Company is the same as diluted earnings per share.
3. Inventories consist of the following:
June 30, 2000 March 31, 2000
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Raw materials $ 9,928,636 $ 9,867,007
Work in process 5,011,760 2,291,961
Finished goods 3,416,858 3,401,663
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$18,357,254 $15,560,631
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The reserve to reduce the carrying value of inventories from current
cost to the LIFO basis amounted to approximately $2,027,000 at June 30
and $2,066,000 at March 31.
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4. Business Segment Information:
RAVENS ALBEX SABI ELIMINATIONS CONSOLIDATED
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Three months ended June 30, 2000
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Sales to customers ................ $12,857,734 $5,527,102 $2,752,272 $ 0 $21,137,608
Intersegment sales ................ 0 1,285,623 0 (1,285,623) 0
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Net sales .................... $12,857,734 $6,812,725 $2,752,772 $(1,285,623) $21,137,608
=========== ========== ========== =========== ===========
Income (loss) from operations ..... $ 1,013,732 $ (597,858) $ (669) $ 0 $ 415,205
Three months ended June 30, 1999
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Sales to customers ................ $15,354,809 $6,197,330 $2,573,800 $ 0 $24,125,939
Intersegment sales ................ 0 1,949,892 136 (1,950,028) 0
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Net sales .................... $15,354,809 $8,147,222 $2,573,936 $(1,950,028) $24,125,939
=========== ========== ========== =========== ===========
Income (loss) from operations ..... $ 1,294,738 $ (175,834) $ 152,165 $ (4,691) $ 1,266,378
5. In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities,
as amended, which is required to be adopted in years beginning after
June 15, 2000. Because of the Company's minimal use of derivatives,
management does not anticipate that the adoption of the new Statement
will have a significant effect on earnings or the financial position of
the Company.
6. On September 30, 1999, the Company entered into a line of credit
agreement with FirstMerit Bank, N.A. The agreement provides for
borrowings up to $20,000,000 based on eligible accounts receivable and
inventories expiring on August 31, 2001. Interest is at FM's prime rate
minus1/4%. The agreement is collateralized by accounts receivable,
inventory, equipment, cash, intangibles and certain real estate. There
are covenants relating to the payment of dividends, acquiring treasury
stock, the creation of additional indebtedness, minimum tangible net
worth, and cash flow coverage. The Company was not in compliance with
the cash flow coverage covenant for the year ended March 31, 2000 and
for the cash flow coverage and minimum net worth covenant for the
quarter ended June 30, 2000. On June 14, 2000, and August 4, 2000, the
Company received a waiver of such noncompliance from the lender. The
Company expects to be in compliance with these covenants for the year
ended March 31, 2001. The Company owed $16,918,727 under this agreement
at June 30, 2000. The Company could have borrowed approximately
$1,767,445 more than the amount owed to FirstMerit June 30, 2000.
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 2000
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company had cash and cash equivalents of $293,976 and $793,122 at June 30,
2000 and March 31, 2000, respectively. The Company could have borrowed
approximately $1,767,445 more on the line of credit at June 30, 2000. As
discussed in footnote 6, in Notes to Consolidated Financial Statements, the
Company was not in compliance with the bank covenant on cash flow coverage and
minimum net worth covenant and received a waiver on August 4, 2000. The Company
expects to be in compliance with the covenant for the year ending March 31,
2001.
Capital expenditures for the first quarter were approximately $900,000. The
major expenditures were: $85,000 at Ravens mainly for the installation of
environmental equipment at the Dover facility and miscellaneous manufacturing
equipment at the other Ravens facilities; $800,000 at Albex used for the
upgrading of the large extrusion press $413,000, production dies $120,000, and
other manufacturing equipment $267,000.
Account Receivables decreased $2,787,312 (25.6%) due mainly to lower sales at
Ravens and at Albex.
Inventories increased from year-end by $2,796,623 (17.9%). The increase was
primarily at Albex $2,434,281 due to a combination of the improved manufacturing
efficiencies in the cast house which increased production and a cancellation of
orders from the trucking industries (see below).
Current Liabilities increased $1,581,130 mainly to support the increase in the
manufacturing operations at Albex and at SABI.
The Company's sales order backlog for new trailers was approximately $4,627,000
and $5,009,000 at June 30, and May 31, 2000. Although no assurances are
possible, the Company believes that its cash resources, credit arrangements, and
internally generated funds will be sufficient to meet its operating and capital
expenditure requirements for existing operations and to service its debt in the
next 12 months and foreseeable future. Cautionary statements: Demand for the
Company's products is subject to changes in general economic conditions and in
the specific markets in which the Company competes.
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MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended June 30, 2000 Compared to the
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Three Months Ended June 30, 1999
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Consolidated net sales decreased 12.4% with trailer sales at Ravens decreasing
16.3%, Albex sales to outside customers decreasing 10.8% and was partially
offset by higher sales at SABI of 6.9%. Gross profit margin decreased to 10.8%
from 12.2%. Selling, general and administrative expenses increased to 8.7% from
6.9%. Interest expense increased due to higher borrowings to support the
operations and fixed asset purchases. Overall the company had a net loss for the
quarter of $146,178 compared to a net income of $500,084 for last year.
Ravens net sales decreased 16.3%. In the first quarter Ravens, as did the
industry, experienced a sudden cancellation and push out of backlog units as
higher fuel and interest rates sharply decreased trailer sales. This resulted in
a sharp decrease in sale to and new orders from both dealer and fleet customers.
Until there is a decline in fuel prices and a leveling of interest rates, Ravens
does not expect the unit volume to increase. Partially offsetting the lower unit
sales was the higher selling prices obtained due to lower fleet sales. Gross
Profit increased to 17.0% from 15.2% last year, due mainly to higher selling
prices. Selling, general and administrative expense increased to 9.1% from 6.8%,
due mainly to higher spending and timing of expenditures between quarters.
Albex net sales to customers other than to Ravens and SABI decreased 10.8%, as
customer orders were cancelled or delayed. Intercompany orders from Ravens, that
provided volume for production, were also cancelled or delayed. At the cast
house a scheduled repair of a furnace decreased sales and production in April.
Higher priced aluminum billet was purchased to satisfy the April backlog. Gross
profit margin decreased to a negative 2.6% as outside purchases of material
lower volume and the repair of the furnace affected profitability. The cast
house, in May and June, significantly reduced the manufacturing cost per pound.
Selling, general and administrative expenses were increased to 6.2% from 5.0%
last year due mainly to lower sales.
SABI net sales increased to 6.9% due mainly from increased selling effort. Gross
profit margins decreased to 8.9% from 14.7% due to competitive conditions.
Selling, general and administrative costs increased to 8.9% from 8.8%.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this Form 10-Q are made pursuant to the safe
harbor provisions of Rule 175 promulgated under the Securities Act of 1933. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. Potential risks and
uncertainties include, but are not limited to: general business and economic
conditions; the financial strength of the industries which the company serves;
the competitive pricing environment within the markets which the Company serves;
labor disruptions; interruptions in the supply of raw materials and services; a
significant increase in the price of aluminum; continued availability of credit
from lenders and vendors; government regulations; and obsolescence of the
Company's products and manufacturing technologies.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Item
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27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended
June 30, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RVM INDUSTRIES, INC.
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(Registrant)
By: /S/ James R. McCourt
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James R. McCourt
Chief Financial Officer
and Principal Accounting Officer
Date: August 11, 2000
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