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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, 1997 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, OH 44314-1519
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 753-4545.
P.O. Box 10002, 861 E. Tallmadge Ave., Akron, OH 44310
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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
----- -----
The number of shares outstanding of the issuer's classes of common stock as of
November 13 1997 is:
Common stock shares 1,936,755
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RVM INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
1997
-----------------------------
ASSETS September 30 March 31
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Current assets:
Cash and cash equivalents $ 537,664 $ 468,572
Receivables:
Trade, net of allowance for doubtful
accounts of $150,000 and $112,000
in September and March 7,372,452 6,506,008
Related party 283,364 120,008
Inventories 10,592,082 8,677,160
(Excess of replacement or current cost
over stated values was $1,996,000
and $1,955,000 in September and March)
Deferred income taxes 453,950 413,500
Other current assets 184,712 211,648
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Total current assets 19,424,224 16,396,896
Property, plant and equipment, net 20,080,717 19,021,289
Funds held by trustees for capital expenditures 2,627,615 2,762,242
Other assets 364,069 386,948
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Total assets $42,496,625 $38,567,375
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See accompanying notes to the consolidated financial statements.
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RVM INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS, Continued
1997
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LIABILITIES AND SHAREHOLDERS' EQUITY September 30 March 31
------------ ----------
Current liabilities:
Note payable - bank $ 0 $ 3,581,881
Accounts payable - trade 7,711,200 6,151,924
- related parties 772,445 382,338
Accrued expenses and liabilities:
Compensation 685,493 695,384
Product warranty 550,000 540,000
Income taxes 111,928 94,750
Other 844,363 987,843
Current portion of long-term debt:
- other 1,265,116 1,579,982
- related parties 604,650 201,549
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Total current liabilities 12,545,195 14,215,651
Long-term debt 7,681,968 7,880,369
Note payable - bank 11,407,361 6,358,179
Notes payable - related parties 3,426,350 3,829,451
Deferred income taxes 588,000 227,500
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Total liabilities 35,648,874 32,511,150
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Commitments and contingent liabilities
Shareholders' equity:
Common stock, $.01 par value; authorized shares,
3,000,000; issued 1,936,755 shares at September 30
and 1,934,255 shares at March 31 19,368 19,343
Additional capital 4,783,344 4,985,020
Retained earnings 2,045,039 1,051,862
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Total shareholders' equity 6,847,751 6,056,225
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Total liabilities and shareholders' equity $42,496,625 $38,567,375
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See accompanying notes to the consolidated financial statements.
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RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Six Months Ended September 30
-------------------------------
1997 1996
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Net sales $ 39,660,285 $ 31,275,771
Cost of sales 33,904,408 27,393,796
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Gross profit 5,755,877 3,881,975
Selling, general and administrative expenses 3,026,900 2,725,908
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Income from operations 2,728,977 1,156,067
Other income 43,270 37,889
Interest expense (755,559) (602,017)
Loss on disposal of equipment (1,729) (83,979)
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Income before income taxes and cumulative
effect of accounting change 2,014,959 507,960
Provision for income taxes 1,021,782 293,400
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Income before cumulative effect of
accounting change 993,177 214,560
Cumulative effect of accounting change 211,651 0
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Net income 781,526 214,560
Reclassification of undistributed net
loss of S-corporations 211,651 294,557
Treasury stock retired 0 (20,674)
Retained earnings, beginning of period 1,051,862 180,458
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Retained earnings, end of period $ 2,045,039 $ 668,901
============ ============
Pro forma income data:
Net income as reported $ 781,526 $ 214,560
Pro forma income tax benefit 77,691 108,986
Cumulative effect of accounting change 211,651 0
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Pro forma net income $ 1,070,868 $ 323,546
============ ============
Pro forma net income
per common share $ .55 $ .17
============ ============
See accompanying notes to the consolidated financial statements.
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RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Three Months Ended September 30
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1997 1996
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Net sales $ 20,794,869 $ 15,329,290
Cost of sales 18,076,341 13,373,252
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Gross profit 2,718,528 1,956,038
Selling, general and administrative expenses 1,503,189 1,311,225
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Income from operations 1,215,339 644,813
Other income 20,870 16,935
Interest expense (386,470) (290,000)
Loss on disposal of equipment (1,729) (83,979)
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Income before income taxes 848,010 287,769
Provision for income taxes 315,884 159,200
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Net income 532,126 128,569
Reclassification of undistributed net
loss of S-Corporations 0 153,819
Treasury stock retired 0 (20,674)
Retained earnings, beginning of period 1,512,913 407,187
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Retained earnings, end of period $ 2,045,039 $ 668,901
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Pro forma income data:
Net income as reported $ 532,126 $ 128,569
Pro forma income tax benefit 0 56,913
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Pro forma net income $ 532,126 $ 185,482
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Pro forma net income
per common share $ .27 $ .10
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See accompanying notes to the consolidated financial statements.
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RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended September 30
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1997 1996
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Cash flows from operating activities:
Net Income ........................................................ $ 781,526 $ 214,560
Adjustments to reconcile net income to net cash provided
from (used for) operating activities:
Depreciation and amortization ..................................... 741,931 697,892
Deferred income taxes ............................................. 320,050 20,000
Increase (decrease) on accrued product warranty ................... 10,000 (20,000)
Increase (decrease) in allowance for doubtful accounts ............ 38,000 70,000
Cumulative effect of accounting change ............................ 205,244 0
Loss on disposal of equipment ..................................... 1,729 83,979
Increase (decrease) in cash from changes in:
Receivables .................................................... (1,067,800) (297,640)
Inventories .................................................... (1,914,922) 536,644
Other assets ................................................... 29,788 88,768
Accounts payable ............................................... 1,949,383 (654,306)
Refundable and accrued income taxes ............................ 17,178 191,900
Accrued expenses and other current liabilities ................. (153,371) (282,185)
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Net cash provided from (used for) operating activities ......... 958,736 649,612
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Cash flows from investing activities:
Capital expenditures .............................................. (1,988,305) (2,162,916)
Investment of proceeds and income from long-term debt with trustees (67,924) (73,358)
Sale of investments and release of funds held by trustees ......... 202,551 1,856,333
Proceeds from disposal of equipment ............................... 0 18,166
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Net cash provided from (used for) investing activities ......... (1,853,678) (361,775)
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Cash flows from financing activities:
Payments on long-term debt ........................................ (513,267) (1,407,435)
Proceeds from (payments on) notes payable - bank, net ............. 1,467,301 (1,544,263)
Proceeds from notes and accounts payable to related parties ....... 0 2,718,447
Proceeds from exercise of stock options ........................... 10,000 0
Purchase of treasury stock ........................................ 0 (37,076)
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Net cash provided from (used for) financing activities ......... 964,034 (270,327)
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Net increase (decrease) in cash and cash equivalents ................. 69,092 17,510
Cash and cash equivalents at beginning of year ....................... 468,572 471,161
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Cash and cash equivalents at end of period ........................... $ 537,664 $ 488,671
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See accompanying notes to the consolidated financial statements.
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RVM INDUSTRIES, INC.
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. Certain amounts in the financial statements were
reclassified to conform to the 1997 presentation.
2. Earnings per common share are based on net income divided by the
weighted average number of common and common stock equivalent shares
outstanding. Loss per common share is based on net loss divided by the
weighted average number of common shares outstanding. The weighted
average number of common shares outstanding was 1,935,000 in 1997 and
1,943,525 in 1996.
3. Inventories consist of the following:
September 30, 1997 March 31, 1997
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Raw materials $6,046,277 $5,314,901
Work in process 1,193,563 430,650
Finished goods 3,352,242 2,931,609
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$10,592,082 $8,677,160
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The reserve to reduce the carrying value of inventories from current
cost to the LIFO basis amounted to approximately $1,996,000 at
September 30 and $1,955,000 at March 31.
4. On April 1, 1997, Albex and SABI changed their fiscal year ends from
December 31 to March 31 to conform with the March 31 year ends of RVM
and Ravens. $211,651 is the cumulative effect of this accounting change
and is equivalent to the net loss for Albex and SABI for the quarter
ended March 31, 1997. If the fiscal year ends had changed effective
April 1, 1996, net income for the six months ended September 30, 1996
would have decreased by $97,796. RVM's net income for the six months
ended September 30, 1997 includes a net loss of $258,077 for Albex and
SABI compared to a net loss of $294,557 for the six months ended
September 30, 1996. Albex and SABI were S-corporations until March 31,
1997. The undistributed net loss was reclassified from accumulated
deficit to additional capital.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
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5. Business Segment Information:
Ravens Albex SABI Eliminations Consolidated
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Six months ended September 30, 1997
-----------------------------------
Sales to customers $23,751,782 $ 9,838,816 $ 6,069,687 $39,660,285
Intersegment sales 0 3,310,275 (141) $ (3,310,134) 0
----------- ------------ ----------- ------------ -----------
Net sales $23,751,782 $ 13,149,091 $ 6,069,546 $ (3,310,134) $39,660,285
=========== ============ =========== ============ ===========
Income (loss) from operations $ 2,249,834 $ 57,679 $ 445,196 $ (23,732) $ 2,728,977
Six months ended September 30, 1996
-----------------------------------
Sales to customers $21,472,202 $ 3,734,446 $ 6,069,123 $31,275,771
Intersegment sales 0 2,355,739 1,836 $ (2,357,575) 0
----------- ------------ ----------- ------------ -----------
Net sales $21,472,202 $ 6,090,185 $ 6,070,959 $ (2,357,575) $31,275,771
=========== ============ =========== ============ ===========
Income (loss) from operations $ 1,154,245 $ (376,958) $ 369,044 $ 9,736 $ 1,156,067
Three months ended September 30, 1997
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Sales to customers $11,021,774 $ 6,643,612 $ 3,129,483 $20,794,869
Intersegment sales 0 1,350,188 0 $ (1,350,188) 0
----------- ------------ ----------- ------------ -----------
Net sales $11,021,774 $ 7,993,800 $ 3,129,483 $ (1,350,188) $20,794,869
=========== ============ =========== ============ ===========
Income (loss) from operations $ 931,466 $ 75,496 $ 200,041 $ 8,336 $ 1,215,339
Three months ended September 30, 1996
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Sales to customers $10,399,398 $ 1,862,900 $ 3,066,992 $15,329,290
Intersegment sales 0 1,163,075 1,733 $ (1,164,808) 0
----------- ------------ ----------- ------------ -----------
Net sales $10,399,398 $ 3,025,975 $ 3,068,725 $ (1,164,808) $15,329,290
=========== ============ =========== ============ ===========
Income (loss) from operations $ 649,488 $ (231,061) $ 214,960 $ 11,426 $ 644,813
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RVM INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1997
MATERIAL CHANGES IN FINANCIAL CONDITION
Cash from operating and financing activities was used mainly for capital
expenditures on Albex's aluminum billet casting facility in the six months ended
September 30, 1997. Working capital increased to $6,879,029 at September 30 from
$2,181,245 at March 31 due mainly to replacing short-term bank financing with
long-term financing. Accounts receivable-trade, inventories, and accounts
payable - trade increased mainly due to a higher level of sales in August and
September 1997 than in February and March 1997.
On September 30, 1997, the Company entered into a line of credit agreement with
FirstMerit Bank, N.A. ("FM") replacing the existing agreements. The agreement
provides for borrowings up to $15,000,000 based on eligible accounts receivable
and inventories and expires on August 31, 1999. Interest is at FM's prime rate
minus 1/4%. The agreement is collateralized by accounts receivable, inventory
and equipment.
On September 30, 1997, the Company and FM also entered into a $5,000,000 term
loan agreement for the financing of certain existing and to be acquired fixed
assets. Interest is at FM's prime rate. Repayment terms are interest only for
two years and principal plus interest for seven years. The Company borrowed
$1,800,000 under this agreement subsequent to September 30, 1997.
Jacob Pollock provided a $2,500,000 guarantee on the above loan agreements.
The Company could have borrowed approximately $1,373,000 more than the amount
owed FM at September 30, 1997. This amount is in addition to the $1,800,000
borrowing described above. Although no assurances are possible, the Company
believes that its cash resources, credit arrangements, and internally generated
funds will be sufficient to meet its operating and capital expenditure
requirements for existing operations and to service its debt in the next 12
months and foreseeable future. Cautionary statements: Demand for the Company's
products is subject to changes in general economic conditions and in the
specific markets in which the Company competes. The Company's liquidity could be
adversely affected if Albex is not successful in completing the casting facility
and generating sufficient sales of billet.
The Company's sales order backlog for new trailers was approximately $4,500,000
and $5,700,000 at September 30 and May 31, 1997, respectively. Sales orders
received in October and November exceed the average monthly sales recorded in
the six months ended September 30, 1997.
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MATERIAL CHANGES IN RESULTS OF OPERATIONS
Six Months Ended September 30, 1997 Compared to the
---------------------------------------------------
Six Months Ended September 30, 1996
-----------------------------------
Net sales increased 26.8% mainly due to increased volume of aluminum extrusion
sales by Albex. The gross profit margin increased to 14.5% from 12.4% due to
improvements at all of the subsidiaries. Ravens benefitted from higher sales and
the closure of the utility trailer division which generated losses in the prior
year. Albex increased sales and operating efficiencies in 1997 compared to 1996
when its production facility was relocated from Elizabeth, West Virginia to
Canton, Ohio. SABI increased its gross profit on the same level of sales by
concentrating on more profitable customers and lowering costs. Selling, general
and administrative expenses decreased to 7.6% from 8.7% of net sales as net
sales increased at a greater rate than selling, general and administrative
expenses. Interest expense increased mainly due to more debt outstanding during
the period ended September 30, 1997 versus the period ended September 30, 1996.
The provision for income taxes includes $261,000 for the establishment of
deferred income tax assets and liabilities as of April 1, 1997 when Albex and
SABI converted from S-corporations to C-corporations. The pro forma income tax
benefit is the amount that would have been recorded if Albex and SABI had been
taxed as C-corporations, based on the tax laws in effect during those periods.
See Note 4 to the consolidated financial statements for an explanation of the
cumulative effect of accounting change.
Three Months Ended September 30,1997 Compared to the
----------------------------------------------------
Three Months Ended September 30, 1996
-------------------------------------
Net sales increased 35.7% mainly due to increased volume of aluminum extrusion
sales by Albex. The gross profit margin increased to 13.1% from 12.8% due to the
same reasons described for the six month period. Selling, general and
administrative expenses decreased to 7.2% from 8.6% of net sales as net sales
increased at a greater rate than selling, general and administrative expenses.
Interest expense increased mainly due to more debt outstanding during the period
ended September 30, 1997 versus the period ended September 30, 1996.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
An annual meeting of shareholders was held on September 10, 1997 at which
time the Board of Directors as previously reported were re-elected or
continued unexpired terms. Jacob Pollock, holding 1,685,803 shares
representing 87.16% of the outstanding shares voted for the nominee.
1,725,803 affirmative votes were cast for the nominee and no negative votes
were cast.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Item
----------- ----
10(i) Loan Agreement and Promissory Note dated September 30,
1997 between the Registrant and FirstMerit Bank, N.A.
10(ii) Business Loan Agreement and Promissory Note dated
September 30, 1997 between the Registrant and
FirstMerit Bank, N.A.
10(iii) Commercial Guaranty dated September 30, 1997 between
Jacob Pollock and FirstMerit Bank, N.A.
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended
September 30,1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly 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/John J. Stitz
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John J. Stitz
Chief Financial Officer
Date: November 14, 1997
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