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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, 2001 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 13, 2001.
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
2001
-----------------------------------------
JUNE 30 MARCH 31
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ASSETS
Current assets:
Cash and cash equivalents $ 924,306 $ 714,166
Receivables:
Trade, net of allowance for doubtful accounts of $88,191 and $100,199
at June 30 and March 31 3,940,210 3,918,358
Related party 25,629 20,836
Inventories
(Excess of replacement or current cost over stated values was
$1,918,000 and $1,911,000 at June 30 and March 31) 7,434,600 9,031,944
Refundable income taxes 856,570 (7,545)
Deferred income taxes, net of valuation allowance of $633,918 and
$413,869 at June 30 and March 31 274,204 274,204
Other current assets 328,798 207,803
Current assets of discontinued operations 4,496,323 5,978,896
------------ ------------
Total current assets 18,280,640 20,138,662
Property, plant and equipment, net 11,079,596 11,320,568
Other assets 206,977 204,429
Non-current assets of discontinued operations 5,538,478 12,038,946
------------ ------------
Total assets $ 35,105,691 $ 43,702,605
============ ============
See accompanying notes to the condensed consolidated financial statements (unaudited).
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited), Continued
2001
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JUNE 30 MARCH 31
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 6,252,839 $ 5,632,934
- related parties 193,733 146,290
Accrued expenses and liabilities:
Compensation 359,516 304,729
Product warranty 756,870 845,107
Interest 81,205 65,265
Other 393,556 520,744
Current portion of long-term debt - other 6,256 6,150
- related parties -- --
Long-term debt in default 3,697,971 3,779,948
Current liabilities of discontinued operations 24,909,483 23,882,998
------------ ------------
Total current liabilities 36,651,429 35,184,165
Long-term debt 431,402 431,364
Notes payable - related parties 527,800 527,800
Deferred income taxes 274,204 274,204
Non-current liabilities of discontinued operations 2,640,539 2,640,539
------------ ------------
Total liabilities 40,525,374 39,058,072
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Shareholders' equity (deficit):
Preferred stock, $0.01 par value; authorized shares, 300,000; none
outstanding -- --
Common stock, $0.01 par value; authorized shares, 3,000,000; issued and
outstanding, 1,937,505 shares at June 30, 2001 and at March 31, 2001
19,376 19,376
Additional capital 4,786,336 4,786,336
Retained (deficit) (10,225,395) (161,179)
------------ ------------
Total shareholders' equity (deficit) (5,419,683) 4,644,533
------------ ------------
Total liabilities and shareholders' equity (deficit) $ 35,105,691 $ 43,702,605
============ ============
See accompanying notes to the condensed consolidated financial statements
(unaudited)
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
THREE MONTHS ENDED JUNE 30
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2001 2000
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Net sales $ 9,070,284 $ 15,610,506
Cost of sales 8,486,092 13,180,875
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Gross profit 584,192 2,429,631
Selling, general and administrative expenses 1,097,139 1,416,568
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(Loss) income from operations (512,947) 1,013,063
Other income (expense):
Other (expense) income (1,191) 11,421
Interest expense (66,040) (188,595)
------------ ------------
(Loss) income before income taxes (580,178) 835,889
Provision for income taxes -- 309,282
------------ ------------
(Loss) income from continuing operations (580,178) 526,607
Discontinued operations:
Loss from operations of Albex Aluminum, net of income tax
benefit of $395,127 in 2000 (1,138,038) (672,785)
Estimated loss on disposal of Albex Aluminum, including
provision of $1,414,000 for operating losses during
phase-out period (8,346,000) --
------------ ------------
Net (loss) (10,064,216) (146,178)
============ ============
Per share data:
Basic and diluted (loss) earnings per share
Continuing operations $ (0.30) $ 0.27
Discontinued operations (4.89) (0.35)
------------ ------------
$ (5.19) $ (0.08)
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See accompanying notes to the condensed consolidated financial statements
(unaudited)
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
THREE MONTHS ENDED JUNE 30
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2001 2000
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Cash flows from operating activities:
Net (loss) income from continuing operations .............................. $ (580,178) $ 526,607
Adjustments to reconcile net (loss) income from continuing operations to
net cash provided by operating activities:
Depreciation and amortization ........................................... 252,448 274,920
Increase (decrease) in allowance for doubtful accounts .................. (12,000) 12,000
Increase (decrease) in cash from changes in:
Receivables-trade ....................................................... (9,852) 1,584,256
Receivables-related parties ............................................. 2,492 (1,951)
Inventories ............................................................. 1,597,344 (362,342)
Other assets ............................................................ (123,543) (198,258)
Accounts payable-trade .................................................. 619,907 360,491
Accounts payable-related parties ........................................ 53,862 17,398
Accrued expenses and other current liabilities .......................... (169,264) 426,189
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Net cash provided by operating activities of continuing operations ...... 1,631,216 2,639,310
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Cash flows from investing activities:
Capital expenditures ...................................................... (11,475) (98,323)
Investment of proceeds from long-term debt with trustees and income
earned on investment of proceeds ........................................ -- (2,653)
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Net cash (used for) investing activities of continuing operations ....... (11,475) (100,976)
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Cash flows from financing activities:
Payments on long-term debt ................................................ (81,833) (90,568)
Payments on notes payable--bank, net ...................................... -- (2,307,579)
Proceeds (payments) on notes payable to related parties, net .............. 18,056 (56,550)
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Net cash (used for) financing activities of continuing operations ....... (63,777) (2,454,697)
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Cash flows provided by continuing operations ................................. 1,555,964 83,637
Cash flows (used in) discontinued operations ................................. (1,378,123) (582,783)
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Increase (decrease) in cash and cash equivalents ............................. 177,841 (499,146)
Cash and cash equivalents at beginning of period ............................. 714,166 651,537
----------- -----------
Cash and cash equivalents at end of period ................................... $ 892,007 $ 152,391
=========== ===========
See accompanying notes to the condensed consolidated financial statements
(unaudited).
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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1. BASIS OF PRESENTATION
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. GOING CONCERN OF THE COMPANY
The accompanying unaudited consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of
business. The Company is in violation of certain of its covenants
related to FirstMerit Bank, N.A. ("FirstMerit") debt in the total
amount of $17,256,661. The current default renders the debt callable
and as a result, the debt has been classified as a current liability on
the balance sheet. In addition, the Company was in default of other
long-term debt resulting from this default on the FirstMerit letter of
credit. This debt amounted to $3,840,228 and has also been classified
as a current liability on the balance sheet. These raise substantial
doubt as to the Company's ability to continue as a going concern for a
reasonable period of time.
3. DISCONTINUED OPERATIONS
In August 2001, the Company's Board of Directors approved a plan to
shutdown Albex. Accordingly, the results of operations for Albex have
been presented within discontinued operations in the accompanying
unaudited consolidated financial statements for all periods presented.
The estimated loss on disposal of discontinued operations of
$8,346,000, recorded during the three months ended June 30, 2001, has
been determined based on management's estimated loss related to the
write-down of impaired property plant and equipment and estimated
losses from operations during the phase-out period.
The losses from operations for each period are presented below:
Three Months Ended
June 30, 2001 June 30, 2000
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Net sales $4,333,641 $5,527,102
Operating loss 744,136 597,858
Income tax benefit -- 395,127
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Loss from operations 1,138,038 672,785
Estimated loss on disposal 8,346,000 --
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$9,484,038 $ 672,785
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3. DISCONTINUED OPERATIONS (CONTINUED)
The current and non-current assets and liabilities of Albex have been
classified appropriately on the unaudited consolidated balance sheet at
June 30, 2001 and March 31, 2001 based on the timing and the amount of
anticipated net proceeds related to the sale of the assets of Albex.
4. EARNINGS (LOSS) PER SHARE
Basic earnings (lost) per share are based on net income (loss) divided
by the weighted average number of common shares outstanding. The
weighted average number of common shares outstanding was 1,937,505 in
2001 and 2000. 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.
5. INVENTORIES
Inventories consist of the following:
June 30, 2001 March 31, 2001
---------------- ------------------
Raw materials $3,870,775 $4,103,275
Work in process 281,645 510,098
Finished goods 3,282,180 4,418,571
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$7,434,600 $9,031,944
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The reserve to reduce the carrying value of inventories from current
cost to the LIFO basis amounted to approximately $1,918,000 at June 30
and $1,911,000 at March 31.
6. BUSINESS SEGMENT INFORMATION
Historically the Company's reportable segments were three wholly owned
subsidiaries: Ravens, Albex, and SABI. As described in Note 3, the
Company is reporting its subsidiary, Albex, as discontinued operations.
The following table summarizes the Company's continuing operations by
the two wholly owned subsidiaries, or segments:
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6. BUSINESS SEGMENT INFORMATION (CONTINUED)
RAVENS SABI ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
Three months ended June 30, 2001
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Sales to customers $ 6,694,866 $ 2,375,418 $ 0 $ 9,070,284
Intersegment sales 0 0 0 0
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Net sales $ 6,694,866 $ 2,375,418 $ 0 $ 9,070,284
============ ============ ============ ============
Income (loss) from operations $ (510,620) $ (2,327) $ 0 $ (512,947)
============ ============ ============ ============
Three months ended June 30, 2000
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Sales to customers $ 12,857,734 $ 2,752,772 $ 0 $ 15,610,506
Intersegment sales 0 0 0 0
------------ ------------ ------------ ------------
Net sales $ 12,857,734 $ 2,752,772 $ 0 $ 15,610,506
============ ============ ============ ============
Income (loss) from operations $ 1,013,732 $ (669) $ 0 $ 1,013,063
============ ============ ============ ============
7. ACCOUNTING PRONOUNCEMENTS
In July, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS 141 requires that the purchase method be used for all
business combinations initiated after June 30, 2001. SFAS 142 requires
that goodwill no longer be amortized to earnings, but instead be
reviewed for impairment. The amortization of goodwill ceased upon
adoption of SFAS 142, which for the Company will be April 1, 2002. The
Company is currently evaluating the impact of SFAS 142.
On April 1, 2001, the Company adopted Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended (FAS 133).
FAS 133, requires the Company to recognize all derivative financial
instruments on the balance sheet at fair value. The Company does not
utilize derivative financial instruments; therefore, there was no
impact upon adoption.
8. CONTINGENT LIABILITIES
The Company, Albex and an unrelated party were defendants in a wrongful
death and employer intentional tort claim. In July 2001, the plaintiff,
the Company, and the Company's insurance carriers settled this claim
within the limits of the Company's insurance policies. Therefore there
was not any impact on the Company's financial position and results of
operations and cashflows.
The Company is also involved in other claims and litigation arising in
the ordinary course of business. Management expects that the outcome of
such claims will not have a material adverse effect on the Company's
financial position and results of operations and cash flows.
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RVM INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 2001
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company had cash and cash equivalents of $924,306 and $714,166 at June 30,
2001 and March 31, 2001, respectively. As discussed in footnote 2, in Notes to
the Consolidated Financial Statements, the Company was not in compliance with
the bank covenant on cash flow coverage and minimum net worth. The Company owes
FirstMerit as of June 30 2001, $12,458,715 on the $20,000,000 note secured by
all the Company's inventory and receivables and $4,797,946 on two long term
notes secured by certain fixed assets at Albex and Ravens.
The Company has been unable to obtain waivers of the covenant violations or
renew its letter of credit with the bank. The current default renders the debt
callable and as a result, the debt has been classified as a current liability on
the balance sheet. In addition, the FirstMerit default of this debt resulted in
the letter of credit and other long-term debt totaling $3,840,228 to be in
default. This debt has also been classified as a current liability on the
balance sheet. As such, there is doubt about the Company's ability to continue
to operate as a going concern.
The Company has agreed in principle with FirstMerit to extend the line of credit
and the letter of credit. The Company expects to have a signed agreement in
August 2001.
The financial statements in this document have been prepared on a going concern
basis, which contemplates, the realization of assets and liabilities in the
normal course of business. The financial statements do not include any
adjustments relating to the recoverability and classification of assets carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.
Capital expenditures were $11,475 for the quarter. Management has initiated
tight controls for cash expenditures until sales have returned to historical
levels.
Account Receivables decreased from year-end by $9,852 (0.2%) which indicates
that sales continue to be at the same low level as experienced in the previous
three quarters.
Inventories decreased from year-end by $1,597,344. Inventories have decreased at
Ravens by $1,665,871 and increased at SABI by $68,527 due to the combination of
reduced sales and management programs.
Accounts Payable increased $619,907. The increase was mainly at SABI reflecting
extended payment terms provided by suppliers.
The Company's sales order backlog for new trailers was approximately $1,320,000
at July 30, 2001 and $1,700,000 at May 31 2001. Although no assurances are
possible, the Company believes that with the replacement of the FirstMerit
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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Three Months Ended June 30, 2001 Compared to the
------------------------------------------------
Three Months Ended June 30, 2000
--------------------------------
Consolidated net sales decreased 41.9%, with trailer sales at Ravens decreasing
47.9%, and at SABI by 13.7%. Gross profit margin decreased to 6.4% from 15.5%.
Selling, general and administrative expenses increased to 12.1% from 9.1% of net
sales; however, overall expenses were 22.5% lower than last year. Interest
expense decreased due to the lower interest rates and the reduction in our line
of credit borrowings. Overall the Company had a loss for the quarter from
continuing operations of $580,178 compared to a net income of $526,607 for last
year.
Ravens net sales decreased 47.9%. This is the fourth consecutive quarter that
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 further decline in fuel prices, in interest rates and that
financial institutions ease credit policies to increase credit available to
small business. Gross Profit decreased to 6.6% from 17.0% of net sales for the
quarter due mainly to the lower volume resulting in higher manufacturing cost.
Selling, general and administrative expense increased to 14.5% from 9.1%;
however overall costs were reduced by $204,470 from last year. Ravens had an
operating loss of $525,234 compared to an operating profit of $1,013,748 last
year.
SABI net sales decreased 13.7% 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 6.0% from 8.9% due to competitive conditions. Selling,
general and administrative costs decreased to 6.1% from 8.9% due to a reduction
in selling cost.
The Company announced the close down of Albex on August 10, 2001. Albex had
continuing losses due to the steep decline in the truck trailer market and also
due to the overall decline in the manufacturing segment in the country. The
Company expected Albex to continue the significant losses for the next few
quarters before the overall economy and especially the truck trailer market
would increase. The Company could not continue to fund continuing losses at
Albex from the cash flow of the other businesses. The Company will liquidate the
assets of Albex and use the proceeds to reduce secured debt. The Company
recorded an $8,346,000 provision for the estimated losses from operations during
the phase out period and managements estimated losses related to the write down
of impaired property plant and equipment.
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
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months
ended June 30, 2001.
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
------------------------------------
James R. McCourt
Chief Financial Officer
and Principal Accounting Officer
Date: August 20, 2001
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