U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM ------------ TO ------------
Commission file number 0-5887
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RTI INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
NEW YORK 11-2163152
---------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 3048, 301 Antone, Sunland Park, New Mexico 88063
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(505) 589-5431
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section l3 or l5(d) of the Exchange Act during the past 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[ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
May 7, 1997 - 1,481,166 shares of common stock
----------- ---------
Transitional Small Business Disclosure Form Yes No [x]
1 of 11
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
RTI INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
ASSETS (UNAUDITED)
----------------------------------- ----------- -----------
<S> <C> <C>
Current:
Cash and cash equivalents $1,270,579 $2,578,180
Accounts receivable, net of allowance
for doubtful accounts of $1,100 in 1997 581,482 --
Restricted deposits -- 482,944
Due from affiliated company 124,695 --
Inventories 1,118,236 --
Prepaid expenses and Other 126,171 27,760
Other current assets 13,350 --
---------- ----------
TOTAL CURRENT ASSETS 3,234,513 3,088,884
Property, plant and equipment,
net of accumulated depreciation and
amortization 846,132 476,235
Goodwill (Note 2) 1,367,390 --
Note receivable 55,000 670,000
Other assets 169,118 9,565
---------- ----------
TOTAL ASSETS $5,672,153 $4,244,684
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 2 of 11
<PAGE>
RTI INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED)
- ------------------------------------ ------------- -------------
<S> <C> <C>
CURRENT:
Accounts payable $ 486,285 $ 19,811
Current portion of long term debt 47,525 --
Accrued expenses 213,857 74,433
------------ ------------
TOTAL CURRENT LIABILITIES 747,667 94,244
Long-term debt, net of current portion
and discount of $16,500 and $22,000 252,175 265,000
Other liabilities (Notes 3 and 4) 943,688 970,935
------------ ------------
TOTAL LIABILITIES 1,943,530 1,330,179
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.05 par value -
shares authorized 2,000,000;
issued and outstanding: none -- --
Common stock, $.08 par value -
shares authorized 15,000,000;
issued and outstanding, 1,481,182 118,495 88,094
Additional paid-in capital 17,104,624 16,053,542
Deficit (13,494,496) (13,227,131)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,728,623 2,914,505
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,672,153 $ 4,244,684
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 11
<PAGE>
RTI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1997 1996
---------- ----------
REVENUES
Net sales $ 217,537 --
Rental income 20,928 --
----------- -----------
TOTAL REVENUES 238,465 --
COST OF SALES 324,883 --
----------- -----------
GROSS PROFIT (LOSS) (86,418) --
OPERATING EXPENSES:
Selling, general and administrative
expenses 232,359 30,077
Product development 12,756 --
Expenses of Rockaway Industrial
Park, including interest expense
of $5,500 in 1997 and 1996 8,094 21,257
----------- -----------
LOSS FROM OPERATIONS (339,627) (51,334)
OTHER INCOME (EXPENSE):
Loss from discontinued operations (427) (35,152)
Reserve for environmental investigation
and remediation -- (480,000)
Environmental insurance settlement -- 580,000
Other interest income (expense) 33,988 (68,419)
Other income 38,744 11,580
----------- -----------
NET LOSS $ (267,322) $ (43,325)
=========== ===========
NET LOSS PER SHARE $ (.22) $ (.04)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,199,083 1,076,887
=========== ===========
See accompanying notes to consolidated financial statements.
Page 4 of 11
<PAGE>
RTI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: -- --
Net loss $ (267,322) $ (43,325)
----------- -----------
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 30,550 209,237
Allowance for doubtful accounts 1,100 --
Discount of note payable 5,500 5,500
(Increase) decrease in:
Accounts receivable (467,672) (3,453)
Restricted deposits 482,944 --
Due from affiliate (124,695) --
Inventories (527,614)
Prepaid expenses and other 2,235 (15,464)
Increase (decrease) in:
Accounts payable 379,370 55,356
Accrued expenses 30,315 11,268
Other liabilities (27,247) 480,000
----------- -----------
TOTAL ADJUSTMENTS (215,214) 742,444
----------- -----------
NET CASH PROVIDED BY (USED BY)
OPERATING ACTIVITIES (482,536) 699,119
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (187,974) (306,097)
Reduction in notes receivable 615,000 --
Purchase of business, net of cash acquired (663,038) --
Purchases of other assets (159,553) --
----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (395,565) (306,097)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on short-term loans (850,000) (200,000)
Payments on long term debt -- (187,847)
Payments on other liabilities -- (28,329)
Proceeds from sale of preferred stock -- 236,000
Proceeds from sale of common stock 420,500 --
Payments for fractional shares
of common stock -- (55)
----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (429,500) (180,231)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (1,307,601) 212,791
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,578,180 77,631
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,270,579 $ 290,422
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5 of 11
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 1997 and 1996, and for
the three months then ended is unaudited)
1. BASIS OF PRESENTATION
In the opinion of management of RTI Inc. (with its Subsidiaries, the
"Company"), the accompanying unaudited consolidated financial statements include
all adjustments necessary to present fairly, in all material respects, the
Company's financial position as of March 31, 1997, its results of operations and
its cash flows for the three months ended March 31, 1997 and 1996. Results of
operations for the three month period ended March 31, 1997 are not necessarily
indicative of the results to be expected for the year ending December 31, 1997.
Information included in the consolidated balance sheet as of December
31, 1996 has been derived from the Company's audited consolidated financial
statements in its Annual Report on Form 10-KSB for the year ended December 31,
1996, to which reference is made. Certain information included in the audited
consolidated financial statements and related notes prepared in accordance with
generally accepted accounting principles may have been condensed or omitted.
2. NEW OPERATIONS
With its acquisition of the business of Quality Air Inc. on February
24, 1997, the Company is now engaged in the manufacture, marketing and selling
of residential coolers and of central air conditioning equipment. The
acquisition cost has been allocated first to identifiable assets, with the
remainder of the purchase price assigned to goodwill, representing mainly the
cost price of patents and patent pending, which will be amortized over 15 years.
3. ROCKAWAY INDUSTRIAL PARK
The Company owns a 248 acre parcel of land ("Parcel I") in Rockaway,
New Jersey (47 acres of which have been leased to SteriGenics International),
that is contiguous to a 15 acre operating parcel that is the site of an
irradiation processing facility leased to SteriGenics International("Parcel II"
and, with Parcel I, the "Rockaway Industrial Park"). Since 1985, the Company has
been seeking a buyer for Parcel I. However, the Company's ability to sell Parcel
I is impaired until the completion of an
Page 6 of 11
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 1997 and 1996, and for
the three months then ended is unaudited)
environmental cleanup and remediation program (Note 4), and its ability to
recover its net investment of $50,000 in 201 acres of Parcel I is impaired by
unpaid outstanding property taxes for the years 1993, 1994, 1995, and 1996
totaling $196,373, which have been accrued in the financial statements under
"Other liabilities".
4. ENVIRONMENTAL INVESTIGATION AND REMEDIATION
As a result of engineering tests that commenced in 1981, the New Jersey
Department of Environmental Protection (the "DEP") issued a directive in 1986
ordering a remedial investigation and feasibility study (the "Study") designed
to determine the nature and extent of contamination on the Rockaway Industrial
Park property. The Company agreed to pay the costs of the Study and entered into
an Administrative Consent Order with the DEP. In 1989, the DEP issued a Second
Directive to pay for an additional environmental study and DEP oversight costs.
In 1993, the Company entered into an Administrative Consent Order ("ACO") with
the DEP. Cost reimbursement to the DEP under the ACO includes applicable DEP
expenditures beginning July 1, 1982 and future DEP oversight costs. In August
1996, the Company made a payment of $575,000 to the DEP as full settlement of
all outstanding claims asserted under the ACO. The Company subsequently paid
additional claims by the DEP for oversight costs through October 31, 1996 (Notes
4 and 6).
In April 1996, the DEP responded to the Company's petition to change
the Remedial Action Work Plan under the Record of Decision, and advised the
Company that a pilot test of the CleanOx remediation program, undertaken by the
Company on its Rockaway property, was not considered conclusive. In September
1996, the Company completed a second CleanOx test, which reduced the
contamination, but did not result in remediation of the groundwater. On March 7,
1997, the DEP reaffirmed its requirement that the Company comply with the ROD,
but allowed the Company to take a well water sampling in May 1997 to determine
the longer term impact of the CleanOx remediation effort.
The Company has also been named a respondent in environmental
proceedings relating to a New Jersey disposal site ("Nascolite") to which the
Company shipped a small amount of materials in 1978. The Company has signed a
settlement agreement with the EPA requiring the payment of $32,247 in settlement
of the EPA's Nascolite claims, which payment was made on May 9, 1997.
Page 7 of 11
<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 1997 and 1996, and for
the three months then ended is unaudited)
As a result of ongoing remediation and DEP involvement in these
matters, there can be no assurances that the cleanup, remediation, and DEP
oversight accruals will represent the Company's ultimate liability.
Environmental accruals at March 31,1997 were as follows:
Current ("Accrued expenses"):
Nascolite Site $ 32,247
Long-term ("Other liabilities"):
Groundwater remediation 747,315
---------
Total $ 779,562
=========
5. DISCONTINUED OPERATIONS
On August 8, 1996, the Company sold to SteriGenics International the
assets and liabilities related to its irradiation business, except for its
Rockaway facility, which was leased for six years to SteriGenics International.
Results from irradiation operations are shown as "Loss from discontinued
operations".
6. STATEMENT OF CASH FLOWS
Supplemental disclosures of cash flow information are as follows:
Three months ended March 31,
1997 1996
----------- -----------
Interest paid $ 362 $62,497
Income taxes paid - 5,499
Page 8 of 11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 AND
1996.
Net sales for the period from February 24 to March 31, 1997, were
$217,537, which did not include any air conditioner sales. In the first quarter
of 1996, the company did not record any sales, because of the elimination of
sales from discontinued operations. Rental income reflects the lease income from
the Company's former irradiation facility in Rockaway, New Jersey.
Cost of sales of $324,883 in the 1997 period reflected the
inefficiencies caused by the preparations to shift manufacturing capacity from
coolers to air conditioners. In first quarter of 1996, there was no cost of
sales after elimination of the costs of the discontinued business. Product
development costs totaled $12,756 in the period ended March 31, 1997; there were
no such costs in 1996.
Selling, general and administrative expenses of $232,359 for the first
quarter of 1997 included the costs of setting up the sales and marketing of the
new central air conditioner that will be manufactured, starting in the second
quarter of this year. In the first quarter of last year, the Company had
expenses of $30,077 not related to the discontinued business.
Expenses of Rockaway Industrial Park were $8,094 in the first quarter
of 1997, as compared with $21,257 in the same period last year, when the Company
incurred consulting expenses.
Because of the costs described above, the Company incurred a loss from
operations of $339,627 in the first quarter of 1997. This compares with an
operating loss of $51,334 for the same period last year.
Other income for the three months ended March 31, 1997 consisted mainly
of interest income of $33,988 on the cash received from the sale of its
irradiation business, and $38,744 from additional funds received, as the result
of a litigation settlement made in 1995. In the first quarter of 1996, the
Company had a net loss of $35,152 from discontinued operations, interest expense
of $68,419 and received an environmental insurance settlement of $580,000, of
which $480,000 was reserved for future environmental remediation costs.
Page 9 of 11
<PAGE>
The net loss of $267,322 or 22 cents per share for the first quarter
compares with a loss of $43,325 or 4 cents per share a year earlier.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1997, the Company spent $1,132,511 in its
new operations, and invested in the acquisition of the new business ($863,063),
in fixed assets ($187,974) and in other assets ($159,553) related to this
business.
Net cash provided by financing activities of $420,500 resulted from the
sale of 145,000 common shares of the Company in a private placement at $2.90 net
per share.
At March 31, 1997, the Company had $1.3 million in cash and equivalent,
which the Company expects to invest in its new air conditioning business during
the second quarter.
The air conditioning business is highly seasonal, increasing the
requirements for capital in the summer months. The Company may need working
capital or fixed asset financing, but does not have any credit lines at this
time. The Company is negotiating for such financing, but there can be no
assurance that the Company will be successful in its negotiations. If the
Company can not obtain any such financing, it may have to limit its inventories
and accounts receivable, and hence its sales, to levels that can be self-
financed.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no new legal proceedings during the quarter
ended March 31, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K/A during the
quarter. It was dated February 24, 1997 and reported the
consummation of the acquisition of the business of Quality Air Inc.
An Amendment No.1 to this Current Report was filed with the
Securities and Exchange Commission on May 9, 1997. It contained a
Pro Forma Condensed Consolidated Balance Sheet of the Company as of
December 31, 1996.
Page 10 of 11
<PAGE>
SIGNATURE
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.
RTI INC.
Date: May 9, 1997 By: /s/ THEO W. MULLER
--------------
Theo W. Muller
Chief Executive Officer
(Principal Executive, Financial
and Accounting Officer)
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE REGISTRANT'S UNAUDITED CONSOLIDATED
BALANCE SHEET AS OF MARCH 31, 1997 AND UNAUDITED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000081699
<NAME> RTI INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,270,579
<SECURITIES> 0
<RECEIVABLES> 581,482
<ALLOWANCES> 1,100
<INVENTORY> 1,118,236
<CURRENT-ASSETS> 3,234,513
<PP&E> 2,544,482
<DEPRECIATION> 1,698,350
<TOTAL-ASSETS> 5,672,153
<CURRENT-LIABILITIES> 747,667
<BONDS> 270,500
0
0
<COMMON> 118,495
<OTHER-SE> 17,104,624
<TOTAL-LIABILITY-AND-EQUITY> 5,672,153
<SALES> 217,537
<TOTAL-REVENUES> 238,465
<CGS> 324,883
<TOTAL-COSTS> 578,092
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 362
<INCOME-PRETAX> (267,322)
<INCOME-TAX> 0
<INCOME-CONTINUING> (266,895)
<DISCONTINUED> (427)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (267,322)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
