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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 December 31, 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
February 2, 2001.
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
2000
-------------------------
DECEMBER 31 MARCH 31
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ASSETS
Current assets:
Cash and cash equivalents $ 880,823 $ 793,122
Receivables:
Trade, net of allowance for doubtful accounts of $67,139 and
$128,000 at December 31 and March 31 5,450,654 10,889,445
Related party 70,533 147,826
Inventories
(Excess of replacement or current cost over stated values was
$1,901,000 and $2,066,000 at December 31 and March 31) 13,150,405 15,560,631
Refundable income taxes 1,096,861 0
Deferred income taxes 1,217,700 1,217,700
Assets held for sale 90,843 643,844
Other current assets 410,897 242,186
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Total current assets 22,368,716 29,494,754
Property, plant and equipment, net 23,771,245 23,737,525
Funds held by trustee for capital expenditures 207,156 227,801
Other assets 250,120 271,628
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Total assets $46,597,237 $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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DECEMBER 31 MARCH 31
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 6,901,518 $ 7,467,524
- related parties 813,325 287,539
Accrued expenses and liabilities:
Compensation 445,343 731,352
Product warranty 891,122 1,076,447
Other 1,112,040 1,883,345
Current portion of long-term debt - other 1,253,854 2,264,855
- related parties 0 371,200
Long-term debt in default 20,373,759 0
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Total current liabilities 31,790,961 14,082,262
Note payable - bank 0 17,409,421
Long-term debt 3,230,253 9,433,316
Notes payable - related parties 3,312,010 2,715,850
Deferred income taxes 1,201,800 1,201,800
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Total liabilities 39,535,024 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 December 31, 2000 and at March 31, 2000 19,376 19,376
Additional capital 4,786,336 4,786,336
Retained earnings 2,256,501 4,083,347
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Total shareholders' equity 7,062,213 8,889,059
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Total liabilities and shareholders' equity $46,597,237 $53,731,708
=========== ===========
See accompanying notes to the consolidated financial statements
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31
-----------------------------
2000 1999
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Net sales $ 49,914,886 $ 68,734,884
Cost of sales 46,314,051 60,513,300
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Gross profit 3,600,835 8,221,584
Selling, general and administrative expenses 5,271,802 5,310,544
Gain on sale of impaired machinery and equipment (317,000)
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Income (loss) from operations (1,353,967) 2,911,040
Other income (expense):
Other income 76,939 32,285
Interest expense (1,580,000) (1,486,431)
Loss on disposal of equipment (46,357) (44,703)
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Income (loss) before income taxes (2,903,385) 1,412,191
Provision for income taxes (benefit) (1,076,538) 521,976
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Net income (loss) $ (1,826,847) $ 890,215
============ ============
Basic and diluted earnings (loss) per share: $ (.94) $ .46
============ ============
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 DECEMBER 31
------------------------------
2000 1999
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Net sales $ 12,099,861 $ 21,327,664
Cost of sales 11,599,136 18,739,803
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Gross profit 500,725 2,587,861
Selling, general and administrative expenses 1,631,405 1,834,713
Gain on sale of impaired machinery and equipment (317,000)
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Income (loss) from operations (813,680) 753,148
Other income (expense):
Other income 18,602 3,587
Interest expense (241,167) (546,850)
Loss on disposal of equipment (49,467) (12,289)
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Income (loss) before income taxes (1,085,712) 197,596
Provision for income taxes (benefit) (401,303) 73,305
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Net income (loss) $ (684,409) $ 124,291
============ ============
Basic and diluted earnings (loss) per share: $ (.35) $ .06
============ ============
See accompanying notes to the consolidated financial statements
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31
-----------------------------
2000 1999
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Cash flows from operating activities:
Net income (loss) ....................................................... $(1,826,847) $ 890,215
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ......................................... 1,756,424 1,769,576
Increase (decrease) in accrued product warranty ....................... (185,325) 175,985
Increase (decrease) in allowance for doubtful accounts ................ (45,958) 2,500
Loss (gain) on disposal of equipment .................................. (290,207) 44,703
Increase (decrease) in cash from changes in:
Receivables ........................................................... 5,562,041 1,153,449
Inventories ........................................................... 2,410,226 (2,973,103)
Other assets .......................................................... (188,762) (111,571)
Accounts payable ...................................................... (490,300) 1,058,903
Refundable and accrued income taxes ................................... (1,152,677) 116,688
Accrued expenses and other current liabilities ........................ (1,001,498) 106,730
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Net cash provided by operating activities ............................. 4,547,117 2,234,075
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Cash flows from investing activities:
Capital expenditures .................................................... (1,818,177) (3,089,084)
Proceeds from disposal of fixed assets .................................. 912,800 18,000
Investment of income earned on investment of proceeds from long-term debt
with trustee .......................................................... (8,034) (9,713)
Sale of investments and release of funds held by trustee ................ 28,679 321,077
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Net cash used in investing activities ................................. (884,732) (2,759,720)
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Cash flows from financing activities:
Payments on long-term debt .............................................. (1,118,419) (1,187,268)
Proceeds from (payments on) notes payable - bank, net ................... (2,353,509) 929,688
Payments on long-term debt PPE Line ..................................... (777,799) (178,575)
Proceeds from notes and accounts payable to related parties ............. 753,590 0
Payments on notes payable to related parties ............................ (78,548) (169,650)
Proceeds from long-term debt, net of issuance costs ..................... 0 1,614,220
Proceeds from exercised stock options ................................... 0 2,000
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Net cash provided by and used in financing activities ................. (3,574,685) 1,010,415
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Net increase in cash and cash equivalents .................................. 87,700 484,770
Cash and cash equivalents at beginning of period ........................... 793,122 328,490
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Cash and cash equivalents at end of period ................................. $ 880,823 $ 813,260
=========== ===========
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 1,937,496 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:
December 31, 2000 March 31, 2000
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Raw materials $ 5,053,880 $ 9,867,007
Work in process 3,683,411 2,291,961
Finished goods 4,413,114 3,401,663
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$ 13,150,405 $ 15,560,631
============== ==============
The reserve to reduce the carrying value of inventories from current cost
to the LIFO basis amounted to approximately $1,901,000 at December 31 and
$2,066,000 at March 31.
4. Business Segment Information:
RAVENS ALBEX SABI ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
Nine months ended December 31, 2000
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Sales to customers $ 28,862,398 $ 13,692,696 $ 7,359,792 $ 0 $ 49,914,886
Intersegment sales 0 2,893,395 11,513 (2,904,908) 0
------------ ------------ ------------ ------------ ------------
Net sales $ 28,862,398 $ 16,586,091 $ 7,371,305 $ (2,904,908) $ 49,914,886
============ ============ ============ ============ ============
Income (loss) from operations $ 254,323 $ (1,668,627) $ 20,790 $ 39,547 $ (1,353,967)
Nine months ended December 31, 1999
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Sales to customers $ 42,308,535 $ 18,633,580 $ 7,792,769 $ 0 $ 68,734,884
Intersegment sales 0 4,621,085 215 $ (4,621,300) 0
------------ ------------ ------------ ------------ ------------
Net sales $ 42,308,535 $ 23,254,665 $ 7,792,984 $ (4,621,300) $ 68,734,884
============ ============ ============ ============ ============
Income (loss) from operations $ 3,450,300 $ (875,476) $ 314,937 $ 21,279 $ 2,911,040
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4. Business Segment Information (cont):
RAVENS ALBEX SABI ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
Three months ended December 31, 2000
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Sales to customers $ 6,463,926 $ 3,731,810 $ 1,904,125 $ 0 $ 12,099,861
Intersegment sales 0 839,090 11,513 (850,603) 0
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Net sales $ 6,463,926 $ 4,570,900 $ 1,915,638 $ (850,603) $ 12,099,861
============ ============ ============ ============ ============
Income (loss) from operations $ (451,705) $ (330,857) $ (31,118) $ 0 $ (813,680)
Three months ended December 31, 1999
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Sales to customers $ 12,252,236 $ 6,506,195 $ 2,569,233 $ 0 $ 21,327,664
Intersegment sales 0 1,326,013 0 (1,326,013) 0
------------ ------------ ------------ ------------ ------------
Net sales $ 12,252,236 $ 7,832,208 $ 2,569,233 $ (1,326,013) $ 21,327,664
============ ============ ============ ============ ============
Income (loss) from operations $ 811,127 $ (135,736) $ 52,746 $ 25,011 $ 753,148
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 minus 1/4%. 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 and December 31, 2000 nor does the Company expect
to be in compliance for the next quarter. 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 December 31, 2000. As of December 31, 2000 FM has not
demanded repayment of the entire amount outstanding under the credit
agreement; however, the Company is in the process of finding a new lender.
At December 31, 2000 the Company owed on the Albex and Knox notes to FM,
$5,317,847. The Company owed $15,055,912 under its $20,000,000 line of
credit with FM at December 31, 2000. See Management's Discussion and
Analysis of Material Changes in Financial Condition on page 10.
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7. On October 1, 2000, the Albex Note Payable and the SABI Note Payable both
to Jacob Pollock were amended.
The Albex Note Payable balance due to Mr. Pollock at March 31, 2000 was
$2,465,000. Mr. Pollock advanced Albex an additional $303,508 that was used
for capital expenditures. This amount was included into the note. Mr.
Pollock forgave all interest on the note from October 1, 1998 to September
31, 2000, and cancelled interest due on the note from October 1, 2000 to
March 31, 2001. Interest will be accrued for but not paid from April 1,
2001 to March 31, 2002. Principal payments had been suspended from October
1, 1998 until December 31, 2000, and will continued to be deferred until
April 1, 2002. Principal and interest owed at April 1, 2002 will be made
over the next 60 months with an interest rate of 7% per annum.
The SABI Note Payable balance due to Mr. Pollock at September 1, 2000 was
$527,800. Principle payments on the note were suspended from September 1,
2000 until March 31, 2002. Interest due on the note was cancelled from
October 1, 2000 until April 1, 2001. Interest will be accrued for but not
paid from April 1, 2001 until March 31, 2002. Principle and interest owed
at April 1, 2002 will be made over the next 60 months with an interest rate
of 7% per annum.
Total interest forgiven by Mr. Pollock on both the Albex and SABI notes to
December 31, 2000 was $389,000.
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DECEMBER 31, 2000
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company had cash and cash equivalents of $880,823 and $793,122 at December
31, 2000 and March 31, 2000, respectively. The Company had borrowed $15,055,912
on the line of credit at December 31, 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 quarter. 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 December 31, 2000, the company owed to FM on these notes $5,317,847. 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 $596,000 and $1,818,000 for the quarter
and year to date. The major expenditures for the year were: $174,000 at Ravens
mainly for the installation of environmental equipment at the Dover facility and
miscellaneous manufacturing equipment at the other Ravens facilities; $1,566,000
at Albex used for the upgrading of the large extrusion press $408,000,
production dies $314,000, shipping and packaging department enlargement $558,000
and other manufacturing equipment $258,000 and $77,000 at SABI, mainly for
replacing forklift trucks.
Account Receivables decreased from year-end by $5,438,791 (50.0%) due mainly to
lower sales at Ravens and at Albex.
Inventories decreased from year-end by $2,410,226. Inventories have decreased at
Ravens by $1,417,983, Albex by $422,731, and SABI by $570,222 due to the
combination of reduced sales and management programs.
Current Liabilities decreased $2,665,060 before the adjustment for the FM notes.
As discussed above all of the FM notes totaling $20,373,759 have been classified
as current liabilities. The Company expects to have the FM notes replaced by
year-end.
Notes Payable Related Parties increased by $596,160. On October 1, 2000, Mr.
Jacob Pollock revised his notes payables to defer principal payments (see
footnote 7 in Notes to Consolidated Financial Statement) from October 1, 2000
until March 31, 2002 on the Albex Note and from September 1, 2000 to March 31,
2002 on the SABI Note.
The Company's sales order backlog for new trailers was approximately $2,011,851
and $4,627,000 at December 31 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
Nine Months Ended December 31, 2000 Compared to the
---------------------------------------------------
Nine Months Ended December 31, 1999
-----------------------------------
Consolidated net sales decreased 27.4% with trailer sales at Ravens decreasing
31.8%, Albex sales to outside customers decreasing 28.7% and at SABI of 5.4%.
Gross profit margin decreased to 7.2% from 12.0%. Selling, general and
administrative expenses increased to 10.6% from 7.7%. Interest expense increased
due to higher borrowings to support the operations and fixed asset purchases.
Overall the company had a net loss for the nine months of $1,826,847 compared to
a net income of $890,215 for last year.
Ravens net sales decreased 31.8%. In the first nine 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 sales 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. Gross Profit decreased to 12.7%
from 16.0% last year, due mainly to the lower volume resulting in higher
manufacturing costs. Selling, general and administrative expense increased to
11.8% of net sales from 7.2%, due mainly to the lower sales. Overall Ravens had
a positive operating income. However, due to the loss in volume, operating
income was 92% lower than last year.
Albex net sales to customers other than to Ravens and SABI decreased 28.7%, as
customer orders were cancelled or delayed. Intercompany orders from Ravens, that
provided volume for production, were also cancelled or delayed. Gross Profit was
a negative 4.5% compared to 1.5% last year. Selling, general and administrative
expenses increased to 7.5% of net sales from 5.3% last year due mainly to lower
sales. The operating loss at Albex was caused by the lower sales of extrusion.
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 was 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. As previously disclosed, during the third quarter,
the cast house production was suspended until the volume of production increases
to a level in which the operation is efficient. Albex has reduced 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 decreased by 5.4% due mainly to reduced demand for product in the
third quarter. Gross profit margins decreased to 8.7% from 13.9% due to
competitive conditions. Selling, general and administrative costs decreased to
8.4% of net sales from 9.9% last year due mainly to cost reduction programs.
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Three Months Ended December 31, 2000 Compared to the
----------------------------------------------------
Three Months Ended December 31, 1999
------------------------------------
Consolidated net sales decreased 43.3%, with trailer sales at Ravens decreasing
47.2%, Albex sales to outside customers decreasing 41.6% and at SABI by 25.4%.
Gross profit margin decreased to 4.1% from 12.1%. Selling, general and
administrative expenses increased to 13.5% from 8.6% of net sales, however,
overall expenses were 11% lower than last year. Interest expense decreased due
to related party notes restructuring of interest for the fiscal year. Overall
the company had a net loss for the quarter of $684,409 compared to a net income
of $124,291 for last year.
Ravens net sales decreased 47.2%. In the third 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 further reduction in interest rates. Gross Profit
decreased to 8.8% from 16.0% of net sales last year, due mainly to the lower
volume resulting in higher manufacturing cost. Selling, general and
administrative expense increased to 15.8% from 9.4%, however overall costs were
reduced by $130,821. Ravens had an operating loss of $451,705 compared to an
operating profit of $811,127 last year.
Albex net sales to customers other than to Ravens and SABI decreased 41.6%, 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 4.9% from 3.6% last year. Selling, general and
administrative expenses were increased to 9.3% of net sales from 5.3% last year
due mainly to lower sales. The lower extrusion business sales to Ravens and to
outside customers caused gross profit to decrease. The cast house reduced cost
and the suspension of production reduced the operating loss from last year. The
company sold the majority of the assets held for sale. The sale resulted in a
$317,000 gain on sale of impaired machinery and equipment that was expensed in
the fourth quarter of the last fiscal year.
SABI net sales decreased 25.4% due mainly from the severe winter weather
conditions in the country requiring more attention by the government agencies to
road maintenance rather than traffic or street sign replacement. Gross profit
margins decreased to 8.1% from 12.6% due to competitive conditions. Selling,
general and administrative costs decreased to 9.7% from 10.5% 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:
None filed
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended
December 31, 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: February 14, 2001
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