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, 2001 Commission File
No. 0-1709
---------------
RVM INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1515410
- ----------------------------------------- ----------------------
(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 4, 2002.
1
RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
2001
------------------------------
DECEMBER 31 MARCH 31
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,044,229 $ 1,108,115
Receivables:
Trade, net of allowance for doubtful accounts of $5,000 $26,000 at
December 31 and March 31 791,004 1,058,590
Related party 0 20,836
Inventories 1,450,794 1,252,591
Other current assets 24,286 11,624
Net assets of discontinued operation-Ravens 1,745,111 16,010,629
Current assets of discontinued operation-Albex 21,790 5,584,947
------------ ------------
Total current assets 5,077,214 25,047,332
Property, plant and equipment, net 569,845 681,026
Other assets 6,687 6,687
Deferred income taxes (17,944) (13,464)
Non-current assets of discontinued operation-Albex 1,250,000 12,038,946
------------ ------------
Total assets $ 6,885,802 $ 37,760,527
============ ============
See accompanying notes to the consolidated financial statements (unaudited).
2
RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited), Continued
2001
----------------------------------------------
DECEMBER 31 MARCH 31
------------------ ------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 1,861,680 $ 1,595,481
- related parties 25,557 8,432
Accrued expenses and liabilities 178,378 256,746
Deferred income taxes (17,944) (13,464)
Current portion of long-term debt 5,620,253 6,150
Debt in default - 23,099,500
Current liabilities of discontinued operation-Albex 3,359,103 4,563,446
------------------ ------------------
Total current liabilities 11,027,027 29,516,291
Long-term debt 11,831 431,364
Long term debt in default 419,018
Notes payable - related parties 527,800 527,800
Non-current liabilities of discontinued operation-Albex 2,640,556 2,640,539
------------------ ------------------
Total liabilities 14,626,234 33,115,994
------------------ ------------------
Shareholders' equity:
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 December 31, 2001 and at March 31, 2001 19,376 19,376
Additional capital 5,311,336 4,786,336
Retained deficits (13,071,144) (161,179)
------------------ ------------------
Total shareholders' equity (7,740,432) 4,644,533
------------------ ------------------
Total liabilities and shareholders' equity $ 6,855,802 $ 37,760,527
================== ==================
See accompanying notes to the consolidated financial statements (unaudited).
3
RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
NINE MONTHS ENDED DECEMBER 31
--------------------------------------
2001 2000
----------------- ----------------
Net sales $ 6,107,499 $ 7,371,305
Cost of sales 5,644,164 6,733,160
------------ ------------
Gross profit 463,335 638,145
Selling, general and administrative expenses 472,362 617,407
------------ ------------
(Loss) income from operations (9,027) 20,738
Other income (expense):
Other income (4,914) 46,517
Interest expense (29,447) (87,243)
------------ ------------
(Loss) income before income taxes (43,388) (19,988)
Provision for income taxes - 7,378
------------ ------------
(Loss) income from continuing operations (43,388) (12,610)
Discontinued operations:
Loss from discontinued operations of Albex, net of income
tax benefit of $1,030,874 in 2000 (2,262,525) (1,749,097
Estimated loss on disposal of Albex, (5,898,919)
(Loss) gain from discontinued operations of Ravens, net of
income tax expense of $38,286 in 2000 (1,868,763) (65,140)
Estimated loss on disposal of Ravens (2,851,000) -
------------ ------------
Net loss (12,924,595) (1,826,847)
============ ============
Per share data:
Basic and diluted earnings (loss) per share:
Continuing operations $ (0.02) $ (0.01)
Discontinued operations (6.65) (0.93)
------------ ------------
$ (6.67) $ (0.94)
============ ============
See accompanying notes to the consolidated financial statements (unaudited).
4
RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
THREE MONTHS ENDED DECEMBER 31
---------------------------------------------
2001 2000
-------------------- ------------------
Net sales $ 1,736,760 $ 1,915,638
Cost of sales 1,551,546 1,760,474
-------------------- ------------------
Gross profit 185,214 155,164
Selling, general and administrative expenses 163,539 186,300
-------------------- ------------------
(Loss) income from operations 21,675 (31,136)
Other income (expense):
Other income (expense) (6,467) 6,500
Interest expense (9,832) (25,893)
-------------------- ------------------
(Loss) income before income taxes 5,376 (50,529)
Provision for income taxes - 18,689
-------------------- ------------------
(Loss) income from continuing operations 5,376 (31,840)
Discontinued operations:
Loss from discontinued operations of Albex, net of income
tax benefit of $184,202 in 2000 (508) (313,640)
Estimated gain (loss) on disposal of Albex 1,449,451 -
Loss from discontinued operations of Ravens, net of
income tax expense of $198,816 in 2000 (501,856) (338,525)
Estimated loss on disposal of Ravens (516,000) -
-------------------- ------------------
Net income, (loss) 436,463 (684,005)
==================== ==================
Per share data:
Basic and diluted earnings (loss) per share:
Continuing operations $ 0.00 $ (0.02)
Discontinued operations 0.23 (0.33)
-------------------- ------------------
$ 0.23 $ (0.35)
==================== ==================
See accompanying notes to the consolidated financial statements (unaudited).
5
RVM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
NINE MONTHS ENDED DECEMBER 31
----------------------------------------
2001 2000
-------------------- -----------------
Cash flows from operating activities of continuing operations:
Net (loss) income from continuing operations.............................. $ (43,388) $ (12,610)
Adjustments to reconcile net (loss) income to net cash provided by
operating activities of continuing operations:
Depreciation and amortization........................................... 126,765 145,560
Loss on Sale of Fixed Assets............................................ 6,467
Increase (decrease) in cash from changes in:
Receivables ........................................................... 266,405 (12,784)
Inventories............................................................. (198,204) 570,222
Other assets............................................................ (8,501)
Accounts payable ...................................................... 266,405 (122,747)
Accrued expenses and other current liabilities.......................... (68,969) 56,717
-------------------- -----------------
Net cash provided by operating activities of continuing operations...... 355,481 615,857
-------------------- -----------------
Cash flows from investing activities of continuing operations:
Capital expenditures...................................................... (20,498) (77,290)
-------------------- -----------------
Proceeds from sale of fixed assets...................................... 0 912,800
Proceeds from sale of Ravens............................................ 14,418,000 0
Proceeds from Sale of Albex fixed assets................................ 4,250,000 0
Net cash used by investing activities of continuing operations.......... 18,647,502 835,510
-------------------- -----------------
Cash flows from financing activities of continuing operations:
Payments on long-term debt................................................ (5,817,602) (1,896,218)
Proceeds on long-term debt................................................ 750,000 -
Payments on notes payable - bank, net..................................... (12,411,834) (2,353,509)
Payments and proceeds notes payable to related parties.................... 0
Contributed capital majority stockholder.................................. 525,000 675,042
-------------------- -----------------
Net cash used by financing activities of continuing operations.......... (16,954,436) (3,574,685)
-------------------- -----------------
Cash flows provided (used) in continuing operations.......................... 2,048,547 (2,123,318)
Cash flows provided (used) by discontinued operations........................ (2,112,433) 2,211,019
Net (decrease) increase in cash and cash equivalents......................... (63,886) 87,701
Cash and cash equivalents at beginning of period.............................. 1,108,115 793,122
-------------------- -----------------
Cash and cash equivalents at end of period.................................... $1,044,229 $ 880,823
==================== =================
See accompanying notes to the consolidated financial statements (unaudited).
6
RVM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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. As of March 31, 2001 and through December 31, 2001, the
Company was in violation of certain of its covenants related to
FirstMerit Bank, N.A. ("FirstMerit") debt in the total amount of
$3,470,253. The current default rendered this debt callable and as a
result, the debt was classified as a current liability on the balance
sheet at March 31, 2001. The loan agreements with FirstMerit bank were
amended on October 3, 2001, establishing a maturity date of March 31,
2002 for all of the FirstMerit debt (see Note 4 for additional terms of
amendment). Accordingly, this debt has been classified as a current
liability as of December 31, 2001. In addition, the Company is in
default of other long-term debt of $2,150,000 resulting from the
default on the FirstMerit letter of credit. The current default of
other long-term debt of $2,150,000 renders the debt callable and as a
result, the debt has been classified as a current liability on the
balance sheet. The Company is in default on payment of interest and
principle of debentures in the amount of $419,018. These along with the
Company's Board of Directors decision to shutdown Albex and sell the
operations of Ravens 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 as a discontinued operation in the accompanying
unaudited consolidated financial statements for all periods presented.
The estimated loss on disposal of discontinued operations of Albex 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. For the nine months
ended December 31,2001 the loss amounted to $5,898,919.
On December 19, 2001, the Company sold Albex extrusion building,
machinery and equipment to a non-related investor. The cash received
from that sale was used to pay down secured debt.
7
3. DISCONTINUED OPERATIONS (CONTINUED)
The loss from operations for Albex for each period are presented below:
Three Months Ended December Nine Months Ended
30 December 30
2001 2000 2001 2000
------------------ ------------------ ------------------- ------------------
Net sales $ 209,123 $3,720,297 $7,150,173 $ 13,681,183
Operating loss 508 497,842 2,262,525 2,779,971
Income tax benefit - 184,202 - 1,030,874
------------------ ------------------ ------------------- ------------------
Loss from operations 313,640 2,262,525 1,749,097
Estimated (gain) loss on disposal
(1,449,451) - 5,898,919 -
------------------ ------------------ ------------------- ------------------
Net loss (gain) $(1,448,943) $ 313,640 $8,161,444 $ 1,749,097
================== ================== =================== ==================
On November 14, 2001, the Company sold the operating assets and
liabilities of Ravens. Accordingly, the results of operations for
Ravens have been presented as a discontinued operation in the
accompanying unaudited consolidated financial statements for all
periods presented. The estimated loss of disposal of discontinued
operations of Ravens has been determined based on management's
estimated loss on the sale of Ravens' operations, severance costs, and
other costs incurred to sell the operations of Ravens. For the nine
months ended December 31, 2001 the loss amounted to $2,851,000.
The loss from operations for Ravens' for each period are presented
below:
Three Months Ended December 31 Nine Months Ended
December 31
2001 2000 2001 2000
--------------------------------------- ------------------ -----------------
Net sales $2,793,477 $9,540,738 $ 13,995,914 $ 22,398,472
Operating loss (income) 501,856 307,686 1,868,763 (745,609)
Income tax (expense) - (160,473) - (172,878)
--------------------------------------- ------------------ -----------------
Loss (income) from operations 501,856 273,192 1,868,763 (273,385)
Estimated loss on disposal 516,000 - 2,851,000 -
--------------------------------------- ------------------ -----------------
Net loss (income) $1,017,856 $ 273,192 $ 4,719,763 $ (273,385)
======================================= ================== =================
The current and non-current assets and liabilities of Albex have been
classified appropriately on the unaudited consolidated balance sheet at
December 31, 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.
The net assets of Ravens have been classified as a current asset.
8
4. FINANCIAL OBLIGATIONS
On October 3, 2001, FirstMerit bank amended the Company's revolving
note agreement. The amended agreement extends the maturity of the
revolving note from August 31, 2001 to March 31, 2002, increases the
interest rate from FirstMerit's prime rate to FirstMerit's prime rate
plus .75%, and amends the maximum outstanding balance of revolving
loans to $11.0 million; however, when the Company sells the operations
of Ravens, the maximum revolving loans available shall not exceed $9.0
million. On October 3, 2001, FirstMerit bank amended the Company's
fixed asset term note agreement. The amended agreement reduces the
maturity from September 30, 2006 to March 31, 2002 and increases the
interest rate from FirstMerit's prime rate to 7.75%. Monthly payments
will be made to FirstMerit calculated on a fifteen-year amortization at
7.75%. On July 3, 2001, the Company entered into a $750,000 short-term
note with FirstMerit bank. Interest is 9.0% and the note matured on
August 2, 2001. On October 3, 2001, FirstMerit bank amended the
Company's short-term note agreement. The amended agreement extends the
maturity from August 2, 2001 to March 31, 2002.
The amendment on October 3, 2001 also established new guarantees and
mortgages, documented FirstMerit's consent to the sale of Ravens and
SABI and the liquidation of Albex, and established new covenants.
5. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) 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.
6. INVENTORIES
Inventories consist of the following:
December 31, 2001 March 31, 2001
------------------------- --------------------
Raw materials $ 909,956 $ 704,427
Work in process - -
Finished goods 540,839 548,164
------------------------- --------------------
$1,450,795 $1,252,591
========================= ====================
9
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 ceases upon
adoption of SFAS 142, which for the Company will be April 1, 2002. The
Company does not anticipate that the adoption of the new statement will
have a significant effect on earnings or the financial position of the
Company.
In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets." SFAS 144 is
effective for fiscal year beginning after December 15, 2001 or fiscal
year beginning April 1, 2002 for the Company. SFAS 144 addresses
financial accounting and reporting for the impairment of long-lived
assets and for long-lived assets to be disposed of. The Company is
currently evaluating the impact of SFAS 144.
On April 1, 2001, the Company adopted Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended (SFAS 133).
SFAS 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 and therefore
there was not any impact on the Company's financial position and
results of operations and cash flows.
The Company and Albex, in August 2001, were named in a wrongful death
and intentional tort claim. The defendants and their insurance
companies believe in the strength of their defenses and intend to asset
them if a trial is necessary. In cases like this where there are many
underlying facts that are disputed it is difficult to predict a
favorable or unfavorable outcome. If the plaintiff prevails against the
Company, liability is significant, and a jury will have broad
discretion to fix the amount of damages it awards for both compensatory
and punitive damages.
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.
10
RVM INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DECEMBER 31, 2001
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company had cash and cash equivalents of $1,044,229 and $1,108,115 at
December 31, 2001 and March 31, 2001, respectively. The Company and FirstMerit
Bank on October 3, 2001 agreed to amend the loan agreements in order for the
company to complete the sale of the Ravens and the Albex assets. The line of
credit, secured by the Company's accounts receivable and inventory, was extended
from August 31, 2001 to March 31, 2002; the maximum loan limit is $ 11,000,000
and the interest rate is prime plus 0.75% per annum. The maximum loan limit
amount decreases to $9,000,000 on November 15, 2001. The Company owed $1,627,917
on the line of credit at December 31, 2001. The term note with FirstMerit that
is secured by certain pieces of machinery, equipment, property, of Albex, the
due date was amended from September 30, 2006 to March 31, 2002. The amortization
of the loans remains at fifteen years and the interest is fixed at 7.75% per
annum. FirstMerit entered into a short-term note with the Company providing a
$750,000 fixed term loan, at a fixed interest rate of 9.0% per annum, and
monthly interest only payments that are due March 31, 2002. The Company owed
$1,842,336 on the two term loans as of December 31, 2001. Mr. Jacob Pollock, the
principle stockholder of the Company increased his personal guarantee for the
two FirstMerit loans from $2,500,000 to $3,250,000.
The proceeds from the sale of certain assets of Albex and the sale of all the
assets net of assumed liabilities of Ravens was used to fund operating expenses
to close down those businesses and to reduce substantially the secured debt and
the line of credit.
In December 2001, Mr. Jacob Pollock resolved a liability of Albex that he had
personally guaranteed for $525,000. The company recorded Mr. Pollock's payment
of the liability as paid in capital.
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.
Account Receivables (SABI only) of $792,185 reflect a decrease from year-end of
$126,765 resulting from lower sales.
Inventories (SABI only) of $ 1,450,794 increased from year-end by $198,204.
Inventories have increased due to the combination of mix of sales and
availability of lower cost material.
Current Assets of discontinued businesses of Ravens and of Albex reflect the
liquidation of Albex Accounts Receivables and Inventory due to the close down of
the business and the sale of Ravens assets.
The reduction of the value of the non current assets of discontinued business
results mainly from the estimated loss on sale of the fixed assets of Albex cast
house equipment and building, and from the sale of the extrusion business
building and equipment.
11
Accounts Payable (SABI only) of $1,861,680 increased $266,200 and reflected the
increase in extended payment terms provided by suppliers.
Current portion of long-term debt, debt in default, and current liabilities of
discontinued operations netted were lower. The cash received from the sale of
Ravens assets and the transfer of certain liabilities to the purchaser and the
sale of Albex extrusion fixed assets was used to pay down the debt and to reduce
liabilities of the Company.
Although no assurances are possible, the Company believes that the current
financing with FirstMerit will allow SABI to function as a going concern.
The Company believes that the sale of the assets and certain liabilities of SABI
will be completed in the near future. The Company believes that the sale of
these assets along with the completion of the sale of the remaining assets of
Albex are required to pay down the debt owed to FirstMerit that is due March 31,
2002. The only alternative is to arrange new financing. The Company believes
that the potential sale of the SABI assets and liabilities and the sale of Albex
asset will generate enough cash to pay down most of the senior secured debt.
However certain unsecured vendors (mainly at Albex) will not be paid. As the
Company winds down the operations, its shares will have little or no value to
the stockholders and it is unlikely that the Company will pay the debt to
related parties.
12
Nine Months Ended December 31, 2001 Compared to the
---------------------------------------------------
Nine Months Ended December 31, 2000
-----------------------------------
Consolidated net sales, which represent SABI only, were $6,107,499 or $1,263,806
(17.1%) lower than last year. Closing non-profitable sales offices in
Pennsylvania and North Dakota and the general slowdown of the economy caused the
lower sales. Gross Profit as a percent of net sales decreased to 7.6% from 8.7%,
due mainly to mix of product and higher material cost. Selling and General
Administrative costs were reduced 23.5% to $473,362. Other income was lower than
last year due to a one time workers compensation grant received last year. SABI
loss for the six-month period was $(43,388) compared to a loss of $(12,610) in
the comparable period last year.
The Company completed the sale of Ravens assets and certain liabilities to
Fontaine Trailer Company. The transaction was completed on November 14, 2001.
The company recorded an estimated $2,851,000 loss on the disposition of Ravens
that includes a loss on the sale of the assets and the cost incurred to sell
Ravens. The continuing losses at Ravens due to the severe downturn in truck
trailer sales and the inability to find long term replacement financing resulted
in the Company's decision to sell Ravens. The Company utilized the cash
generated from the sale of Ravens to reduce secured party debt and for cost
associated with the sale of the company.
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
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
improve. 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 a
$5,898,919 provision for the estimated losses from operations during the phase
out period and managements estimate of losses related to the write down of
impaired property plant and equipment.
The Company sold to a non-related investor, Albex extrusion building and the
machinery and equipment. The transaction was completed December 19, 2001. The
company has signed a letter of intent to sell the cast house building and all of
the equipment to a non-related third party. The sale is expected to be complete
by March 31, 2002.
Three Months Ended December 31, 2001 Compared to the
----------------------------------------------------
Three Months Ended December 31, 2000
------------------------------------
Consolidated net sales, which represent SABI only, were $1,736,760 or 9.3% lower
than last year. Closing non-profitable sales offices in Pennsylvania and North
Dakota and the general slowdown of the economy caused the lower sales. Gross
Profit as a percent of net sales increased to 10.6% from 8.1%, due mainly to mix
of product and lower material cost. Selling and General Administrative costs
were reduced 12.2% to $163,539. Other income was lower than last year due to a
loss on sale of fixed assets. SABI's profit for the three-month period was
$5,376 compared to a loss of $(31,840) in the comparable period last year.
Ravens incurred an additional $501,856 of operating loss for the third quarter.
Continuing low demand for the flat bed trailer suppressed sales and resulted in
the loss. The continuing losses at Ravens due to the severe downturn in truck
trailer sales and the inability to find long term replacement financing resulted
in the Company's decision to sell Ravens. The Company revised the estimate of
the loss on the sale of Ravens in the third quarter
13
by $516,000 due mainly to higher legal and professional costs associated with
the sale of the company. The Company utilized the cash generated from the sale
of Ravens to reduce secured party debt.
The Albex operating loss increased minimally due to the completion of the
closing of the facility in October, four months ahead of plan. Mr. Jacob Pollock
the majority stockholder of RVM Industries settled a liability to a non-related
third party that he had personally guaranteed for $525,000. The Company recorded
the payment as paid in capital. The additional $1,471,000 forgiven on the
liability was recorded as a reduction in the loss on disposal of Albex assets.
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.
14
PART II. OTHER INFORMATION
Item 1. Legal Disclosures
The Company and Albex, in August 2001, were named in a wrongful death
and intentional tort claim. The defendants and their insurance
companies believe in the strength of their defenses and intend to asset
them if a trial is necessary. In cases like this where there are many
underlying facts that are disputed it is difficult to predict a
favorable or unfavorable outcome. If the plaintiff prevails against the
Company, liability is significant, and a jury will have broad
discretion to fix the amount of damages it awards for both compensatory
and punitive damages.
Item 5. Other Information
The Company's outside independent accountants as required by Reg. S-X
Rule 10-01(d) did not review the enclosed unaudited financial
statements.
James R. McCourt has resigned as of February 8, 2002 as the Company's
Chief Financial Officer and Principal Accounting Officer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Item
----------- ----
(b) Reports on Form 8-K:
A Form 8-K was filed on August 10, 2001 describing the closing of
the Albex Aluminum Subsidiary.
A Form 8-K was filed on November 21, 2001 describing the sale of the
Ravens Assets.
A Form 8-K was filed on December 21, 2001 describing the resignation
of the Company's auditor.
SIGNATURES
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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/ Jacob Pollock
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Jacob Pollock
Principal Financial Officer
and Principal Accounting Officer
Date: February 13, 2002
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