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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 September 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
--- ---
There were 1,937,505 shares outstanding of the Registrant's common stock as of
November 4, 2000.
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
2000
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SEPTEMBER 30 MARCH 31
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ASSETS
Current assets:
Cash and cash equivalents $ 797,751 $ 793,122
Receivables:
Trade, net of allowance for doubtful accounts of
$119,097 and $128,000 at September 30 and March 31 8,118,739 10,889,445
Related party 77,161 147,826
Inventories
(Excess of replacement or current cost over stated values was
$1,985,000 and $2,066,000 at September 30 and March 31) 15,378,969 15,560,631
Refundable income taxes 698,358 0
Deferred income taxes 1,217,700 1,217,700
Assets held for sale 524,109 643,844
Other current assets 554,218 242,186
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Total current assets 27,367,005 29,494,754
Property, plant and equipment, net 23,773,894 23,737,525
Funds held by trustee for capital expenditures 232,413 227,801
Other assets 280,903 271,628
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Total assets $ 51,654,215 $ 53,731,708
============== =============
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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SEPTEMBER 30 MARCH 31
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 7,446,011 $ 7,467,524
- related parties 75,109 287,539
Accrued expenses and liabilities:
Compensation 591,504 731,352
Product warranty 1,000,969 1,076,447
Other 1,036,338 1,883,345
Current portion of long-term debt - other 1,211,939 2,264,855
- related parties 1,412,479 371,200
Long-term debt in default 23,595,090 0
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Total current liabilities 36,369,439 14,082,262
Note payable - bank 0 17,409,421
Long-term debt 4,005,159 9,433,316
Notes payable - related parties 2,331,600 2,715,850
Deferred income taxes 1,201,800 1,201,800
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Total liabilities 43,907,998 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 September 30, 2000
and at March 31, 2000 19,376 19,376
Additional capital 4,786,336 4,786,336
Retained earnings 2,940,505 4,083,347
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Total shareholders' equity 7,746,217 8,889,059
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Total liabilities and shareholders' equity $ 51,654,215 $ 53,731,708
=============== ==============
See accompanying notes to the consolidated financial statements
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30
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2000 1999
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Net sales $ 37,815,025 $ 47,407,220
Cost of sales 34,714,915 41,773,497
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Gross profit 3,100,110 5,633,723
Selling, general and administrative expenses 3,640,397 3,475,831
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Income (loss) from operations (540,287) 2,157,892
Other income (expense):
Other income 58,337 28,698
Interest expense (1,338,833) (939,581)
Gain (loss) on disposal of equipment 3,110 (32,414)
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Income (loss) before income taxes (1,817,673) 1,214,595
Provision for income taxes (benefit) (674,831) 448,671
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Net income (loss) $ (1,142,842) $ 765,924
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Basic and diluted earnings (loss) per share: $ (.59) $ .40
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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 - UNAUDITED
THREE MONTHS ENDED SEPTEMBER 30
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2000 1999
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Net sales $ 16,677,417 $ 23,281,281
Cost of sales 15,828,775 20,585,184
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Gross profit 848,642 2,696,097
Selling, general and administrative expenses 1,804,134 1,804,583
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Income (loss) from operations (955,492) 891,514
Other income (expense):
Other income 46,916 19,339
Interest expense (687,413) (475,162)
Gain (loss) on disposal of equipment 10,339 (15,205)
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Income (loss) before income taxes (1,585,650) 420,486
Provision for income taxes (benefit) (588,986) 154,646
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Net income (loss) $ (996,664) $ 265,840
============ ============
Basic and diluted earnings (loss) per share: $ (.51) $ .14
============ ============
See accompanying notes to the consolidated financial statements
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30
----------------------------------------
2000 1999
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Cash flows from operating activities:
Net income (loss)......................................................... $(1,142,842) $ 765,924
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization........................................... 1,175,146 1,152,660
Increase (decrease) in accrued product warranty......................... (75,478) 135,000
Increase (decrease) in allowance for doubtful accounts.................. (8,903) 14,500
Loss (gain) on disposal of equipment.................................... (3,110) 32,414
Increase (decrease) in cash from changes in:
Receivables ........................................................... 2,850,274 832,555
Inventories............................................................. 181,662 (2,358,948)
Other assets............................................................ (350,354) (41,486)
Accounts payable ...................................................... (233,943) 1,751,064
Refundable and accrued income taxes..................................... (754,174) 51,945
Accrued expenses and other current liabilities.......................... (579,678) 287,855
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Net cash provided by operating activities............................... 1,058,600 2,623,483
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Cash flows from investing activities:
Capital expenditures...................................................... (1,222,123) (2,482,563)
Proceeds from disposal of fixed assets.................................... 162,500 3,000
Investment of income earned on investment of proceeds from long-term
debt with trustee....................................................... (4,612) (8,444)
Sale of investments and release of funds held by trustee.................. 0 321,078
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Net cash provided by investing activities............................... (1,064,235) (2,166,929)
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Cash flows from financing activities:
Payments on long-term debt................................................ (385,427) (382,229)
Proceeds from (payments on) notes payable - bank, net..................... 608,597 (396,839)
Payments on long-term debt PPE Line....................................... (518,574) 0
Proceeds from notes and accounts payable to related parties............... 399,918 0
Payments on notes payable to related parties.............................. (94,250) (113,100)
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 financing activities............................... 10,264 209,832
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Net increase in cash and cash equivalents.................................... 4,629 666,386
Cash and cash equivalents at beginning of period............................. 793,122 328,490
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Cash and cash equivalents at end of period................................... $ 797,751 $ 994,876
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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 1,937,481 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:
September 30, 2000 March 31, 2000
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Raw materials $ 6,984,263 $ 9,867,007
Work in process 5,224,727 2,291,961
Finished goods 3,169,979 3,401,663
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$15,378,969 $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 $1,985,000 at September 30 and
$2,066,000 at March 31.
4. Business Segment Information:
RAVENS ALBEX SABI ELIMINATIONS CONSOLIDATED
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SIX MONTHS ENDED SEPTEMBER 30, 2000
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Sales to customers $22,398,472 $ 9,960,886 $ 5,455,667 $ 0 $37,815,025
Intersegment sales 0 2,054,305 0 (2,054,305) 0
----------- ----------- ----------- ------------ -----------
Net sales $22,398,472 $12,015,191 $ 5,455,667 $ (2,054,305) $37,815,025
=========== =========== =========== ============ ===========
Income (loss) from operations $ 706,028 $(1,337,770) $ 51,908 $ 39,547 $ (540,287)
SIX MONTHS ENDED SEPTEMBER 30, 1999
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Sales to customers $30,056,299 $12,127,385 $ 5,223,536 $ 0 $47,407,220
Intersegment sales 0 3,295,072 186 $ (3,295,258) 0
----------- ----------- ----------- ------------ -----------
Net sales $30,056,299 $15,422,457 $ 5,223,722 $(3,295,258) $47,407,220
=========== =========== =========== ============ ===========
Income (loss) from operations $ 2,639,173 $ (739,740) $ 262,191 $ (3,732) $ 2,157,892
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4. Business Segment Information (cont):
THREE MONTHS ENDED SEPTEMBER 30, 2000
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Sales to customers $ 9,540,738 $ 4,433,784 $ 2,702,895 $ 0 $16,677,417
Intersegment sales 0 768,682 0 (768,682) 0
----------- ----------- ----------- ------------ -----------
Net sales $ 9,540,738 $ 5,202,466 $ 2,702,895 $ (768,682) $16,677,417
=========== =========== =========== ============ ===========
Income (loss) from operations $ (307,704) $ (739,912) $ 52,577 $ 39,547 $ (955,492)
THREE MONTHS ENDED SEPTEMBER 30, 1999
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Sales to customers $14,701,490 $ 5,930,005 $ 2,649,786 $ 0 $23,281,281
Intersegment sales 0 1,345,230 0 (1,345,230) 0
----------- ----------- ----------- ------------ -----------
Net sales $14,701,490 $ 7,275,235 $ 2,649,786 $(1,345,230) $23,281,281
=========== ============ ============= =========== ===========
Income (loss) from operations $ 1,344,447 $(563,906) $110,026 $ 947 $ 891,514
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, 1998, the Company entered into a line of credit agreement
with FirstMerit Bank, N.A. (FM). 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 ending June 30, 2000. On
June 14, 2000, and August 4, 2000, the Company received a waiver of such
noncompliance from the lender. The Company was not in compliance with the
cash flow coverage and the minimum net worth covenants for the period
ending September 30, 2000 nor does the Company expect to be in compliance
for the next two quarters of the year. When default occurs, the lenders
can demand repayment of all amounts outstanding under the credit agreement
and otherwise pursue remedies available to them. Accordingly the entire
amount outstanding under the credit agreement is classified as a current
liability as of September 30, 2000. As of September 30, 2000 FM has not
demanded repayment of the entire amount outstanding under the credit
agreement and the Company is in the process of finding a new lender. At
September 30, 2000 the Company owed on the Albex and Knox notes to FM,
$5,577,072. The Company owed $18,018,018 under its $20,000,000 line of
credit with FM at September 30, 2000. See Management's Discussion and
Analysis of Material Changes in Financial Condition on page 10.
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 2000
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company had cash and cash equivalents of $797,751 and $793,122 at September
30, 2000 and March 31, 2000, respectively. The Company had borrowed $18,018,018
on the line of credit at September 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
does not expect to be in compliance for the next two quarters. The Company is in
the process of finding a new lender for both the $20,000,000 note and for the
two long-term notes, which are secured with certain assets at the Albex and Knox
facilities. On September 30, 2000, the company owed to FM on these notes
$5,577,072. The Company expects to replace the three notes with similar
arrangements with another lender by year-end March 31, 2001. FM and the company
have agreed in principle to an orderly transition to a new financial
institution.
Capital expenditures were approximately $322,000 and $1,222,000 for the quarter
and year to date. The major expenditures were: $109,000 at Ravens mainly for the
installation of environmental equipment at the Dover facility and miscellaneous
manufacturing equipment at the other Ravens facilities; $1,041,000 at Albex used
for the upgrading of the large extrusion press $413,000, production dies
$202,000, shipping and packaging department enlargement $168,000 and other
manufacturing equipment $258,000 and $71,000 at SABI, mainly for replacing
forklift trucks.
Account Receivables decreased $2,770,706 (25.6%) due mainly to lower sales at
Ravens and at Albex.
Inventories decreased from year-end by $181,662. Inventories have increased at
Albex $1,448,848 due to a combination of the improved manufacturing efficiencies
in the cast house which increased production and a cancellation of orders from
customers. Albex has adjusted the production schedule to further reduce
inventories. Ravens and SABI inventories have been reduced $1,251,177 and
$418,880 respectively, to support lower production and sales.
Current Liabilities decreased $593,626 before the adjustment for the FM notes.
As discussed above all of the FM notes totaling $23,595,090 have been classified
as current liabilities. The Company expects to have the FM notes replaced by
year-end.
The Company's sales order backlog for new trailers was approximately $3,313,000
and $4,627,000 at September 30 and June 30, 2000. Although no assurances are
possible, the Company believes that with the replacement of the FM notes, 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
SIX MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE
SIX MONTHS ENDED SEPTEMBER 30, 1999
Consolidated net sales decreased 20.2% with trailer sales at Ravens decreasing
25.5%, Albex sales to outside customers decreasing 22.1% and was partially
offset by higher sales at SABI of 4.4%. Gross profit margin decreased to 8.2%
from 11.9%. Selling, general and administrative expenses increased to 9.6% from
7.3%. Interest expense increased due to higher borrowings to support the
operations and fixed asset purchases. Overall the company had a net loss for the
six months of $1,142,842 compared to a net income of $765,924 for last year.
Ravens net sales decreased 25.5%. In the first six months 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 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 will increase. Partially offsetting the lower
unit sales was the higher selling prices obtained due to lower fleet sales.
Gross Profit decreased to 13.9% from 16.0% last year. Lower production volumes
increased manufacturing variances. Selling, general and administrative expense
increased to 10.7% of net sales from 7.2%, due mainly to the lower sales and
higher spending. Overall Ravens had a positive operating income. However, due to
the loss in volume, operating income was 73% lower than last year.
Albex net sales to customers other than to Ravens and SABI decreased 22.1%, 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 inter-company and sales to outside customers decreased slightly by 2.0%.
Gross Profit was a negative 4.4% compared to 0.5% last year. Selling, general
and administrative expenses were increased to 6.7% of sales from 5.3% last year
due mainly to lower sales. The operating loss at Albex increased by $598,030.
The operating loss increase was due to the much lower volumes in extrusion sales
which reduced extrusion gross profit dollars by 80% or $854,000. The gross
profit loss at the cast house, on approximately 2% lower volume, was 26% or
$255,000, lower than last year. As planned, the use of gas furnaces in the cast
house increased the reliability of the volume output and reduced operating cost.
The cast house at Albex has been adversely affected by the lowered overall
demand of extruded products and aluminum billet sales to customers. At the
current low volumes of production, the cast house cannot operate efficiently. In
the third quarter, the cast house production will be suspended until the volume
of production increase to a level in which the operation is efficient. Albex
will reduce overall operating cost for the short term and reduce inventory thus
improving cash flow. Currently, there is a worldwide surplus of aluminum billet
and management has developed alternative sources of supply for the extrusion
business.
SABI net sales increased by 4.4% due mainly from increased selling effort. Gross
profit margins decreased to 8.9% from 14.6% due to competitive conditions.
Selling, general and administrative costs decreased to 7.9% of net sales from
9.5% last year.
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THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 1999
Consolidated net sales decreased 28.4%, with trailer sales at Ravens decreasing
35.1%, Albex sales to outside customers decreasing 28.5% and was partially
offset by higher sales at SABI of 2.0%. Gross profit margin decreased to 5.1%
from 11.6%. Selling, general and administrative expenses increased to 10.8% from
7.8% of net sales. 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 $996,664 compared to a net income of $265,840 for last
year.
Ravens net sales decreased 35.1%. In the second quarter Ravens, as did the
industry, experienced a sharp decline in trailer sales from both dealer and
fleet customers. Ravens expects unit volume will not increase until there is a
decline in fuel prices and a leveling of interest rates. Partially offsetting
the lower unit sales was the higher selling prices obtained due to lower fleet
sales. Gross Profit decreased to 9.6% from 16.8% of net sales last year, due
mainly to the lower volume resulting in higher manufacturing cost. Selling,
general and administrative expense increased to 12.9% from 7.6%, due mainly to
the lower volume effecting the calculation and higher spending. Ravens had an
operating loss of $307,704 compared to an operating profit of $1,344,447 last
year.
Albex net sales to customers other than to Ravens and SABI decreased 28.5%, as
customer orders were cancelled or delayed. Intercompany orders from Ravens, that
proved volume for production, were also cancelled or delayed. Gross profit
margin decreased to a negative 6.7% from a negative 2.1% last year. Selling,
general and administrative expenses were increased to 7.5% of net sales from
5.6% last year due mainly to lower sales. The lower extrusion business sales to
Ravens and to outside customers caused gross profit to decrease $457,000 to
approximately a break even. Though the cast house operated at a loss at the
gross profit margin, the loss was $261,000 lower than last year on approximately
8% lower sales. The cast house production was shut down for one week and there
was a reduction in operating days from plan in order to reduce output to meet
the lower demand. As planned, the cast house improved the reliability of the
production output and reduced cost by using the new furnaces installed in
November 1999.
SABI net sales increased by 2.0% due mainly from increased selling effort. Gross
profit margins decreased to 8.9% from 14.4% due to competitive conditions.
Selling, general and administrative costs decreased to 6.9% from 10.3% due to a
reduction in selling cost.
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
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended
September 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.
--------------------
(Registrant)
By: /s/ James R. McCourt
---------------------
James R. McCourt
Chief Financial Officer
and Principal Accounting Officer
Date: November 14, 2000
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