<PAGE> 1
SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary information statement / / Confidential, for use by the
Commission Only (as permitted
by Rule 14c-5(d)(2))
/X/ Definitive information statement
</TABLE>
RAVENS METAL PRODUCTS, INC.
(Name of Registrant as Specified in Charter)
JOHN J. STITZ, RAVENS METAL PRODUCTS, INC., P.O. BOX 10002,
861 E. TALLMADGE AVENUE, AKRON, OHIO 44310; (330) 630-4528
(Name of Person(s) Filing the Information Statement)
Payment of filing fee (check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), or 14c-5(g).
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
<PAGE> 2
RAVENS METAL PRODUCTS, INC.
P.O. BOX 10002
861 E. TALLMADGE AVENUE
AKRON, OH 44310
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 12, 1996
TO THE SHAREHOLDERS OF RAVENS METAL PRODUCTS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Ravens Metal
Products Inc. (the "Company") for the fiscal year ended March 31, 1996 will be
held at Days Inn, 3150 W. Market Street, Fairlawn, Ohio 44333 on September 12,
1996 at 10:00 a.m. Eastern Standard Time for the following purposes:
1. To elect one (1) person as a director of the Company for a
term of three years; and
2. To transact such other business as may properly come before
the Annual Meeting and any adjournments thereof.
The directors have set the close of business on August 2, 1996 as the record
date for the Annual Meeting. Shareholders of record at the close of business on
the record date have the right to receive notice of and to vote at the Annual
Meeting and any adjournments thereof. Management of the Company is not
soliciting proxies in connection with the Annual Meeting and shareholders are
requested NOT to send proxies to the Company.
Nicholas T. George
Secretary
Akron, Ohio
August 12, 1996
<PAGE> 3
RAVENS METAL PRODUCTS, INC.
INFORMATION STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 12, 1996
GENERAL INFORMATION
This Information Statement is being furnished to shareholders of Ravens Metal
Products, Inc., a Delaware corporation (the "Company"), on or about August 12,
1996, in connection with the Annual Meeting of Shareholders of the Company, to
be held at Days Inn, 3150 W. Market Street, Fairlawn, Ohio 44333 at 10:00 a.m.
Eastern Standard Time on September 12, 1996 and at any adjournment thereof
(the "Meeting"). The Company's principal executive offices are located at 861 E.
Tallmadge Avenue, Akron, Ohio 44310; telephone (330) 630-4528.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY
VOTING SECURITIES AND RECORD DATE
Only shareholders of record at the close of business on August 2, 1996 (the
"Record Date") have the right to receive notice of and to vote at the Meeting
and any adjournment thereof. As of the Record Date, 1,943,525 shares of the
Company's $.01 par value common stock (the "Common Stock") were issued and
outstanding. There were no shares of preferred stock of the Company issued and
outstanding as of the Record Date, and there are presently no such shares issued
and outstanding. Each shareholder of record is entitled to one vote for each
share held.
Under Delaware law and the Company's Certificate of Incorporation and By-Laws,
if a quorum is present at the meeting, the nominee for election as a director
who receives the greatest number of votes cast for the election of a director at
the Meeting by the shares present and entitled to vote will be elected as a
director. An abstention from voting any share with respect to the election of
the nominee for director will have the practical effect of a vote against the
nominee. A broker non-vote with respect to any share will not effect the
election of a director, since the share is not considered present for voting
purposes. Jacob Pollock can ensure the election of the nominee by voting his
shares in favor of the nominee's election. (See "Vote of Principal Shareholder,"
below). One-third of the outstanding shares of the Common Stock is required to
be present in person or by proxy at the Meeting to constitute a quorum for the
transaction of business.
VOTE OF PRINCIPAL SHAREHOLDER
Jacob Pollock, Chairman of the Board and Chief Executive Officer, who owns
86.74% of the Common Stock, has advised the Company that he intends to vote his
shares for the election of the nominee for director. Accordingly, the required
vote is assured, and it is expected that the nominee will receive the necessary
votes for election.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The only owner of record or holder, to the knowledge of the Company as of August
2, 1996, of more than 5% of the Company's Common Stock is set forth in the
following table:
<TABLE>
<CAPTION>
Name and
Title of Address of Amount and Nature of Percent
Class Beneficial Owner Beneficial Ownership of Class
- ----- ---------------- -------------------- --------
<S> <C> <C> <C>
Jacob Pollock 1,685,803(1) 86.74%
Common Stock 861 E. Tallmadge Avenue
Akron, Ohio 44310
<FN>
(1) Jacob Pollock has sole voting and investment power with respect to the
listed shares.
</TABLE>
The following shows the ownership of the Company's Common Stock beneficially
owned directly or indirectly by each director and nominee, and by all directors
and officers of the Company as a group as of August 2, 1996:
<TABLE>
<CAPTION>
Title of Name of Amount and Nature of Percent
Class Beneficial Owner Beneficial Ownership of Class
- ----- ---------------- -------------------- --------
<S> <C> <C> <C>
Common Stock Jacob Pollock 1,685,803(2) 86.74%
Nicholas T. George 30,000(3) 1.54%
C. Stephen Clegg 0 0.00%
David A. Simia 253(2) 0.01%
Richard D. Pollock 40,000(3) 2.06%
All directors and 1,726,056 88.81%
officers as a group
(7 persons).
<FN>
(2) Each person has sole voting and investment power with respect to the listed
shares.
(3) 30,000 shares are held in an irrevocable trust for the benefit of Richard
Pollock's children. Richard Pollock and Nicholas T. George, as co-trustees,
equally share voting and investment power with respect to these shares. The
remaining 10,000 shares listed for Richard Pollock are owned by his spouse; Mr.
Pollock disclaims beneficial ownership of these shares.
</TABLE>
No preferred stock is currently outstanding.
2
<PAGE> 5
PROPOSAL NO. 1
ELECTION OF DIRECTOR
One (1) director is to be elected at the Meeting to serve for a term of three
(3) years or until his successor is elected and qualified.
The following information is furnished with respect to the proposed nominee for
election who is now a director of the Company and has agreed to serve a
three-year term if re-elected:
<TABLE>
<CAPTION>
Name Age Director Principal Occupation;
- ---- --- Since Business Experience
----- & Other Directorships
---------------------
<S> <C> <C> <C>
Jacob Pollock 71 May 3, Chairman of the Board, Chief
1991 Executive Officer, and Treasurer of the
Company since May 1991. Chairman
of the Board and President of J. Pollock
& Co., a company principally engaged
in the sale of aluminum, private
investment and consulting, since April
1989. Chief Executive Officer of
Barmet Aluminum Corporation from
1949-1989. Director of Mid-West
Spring Manufacturing Company, Inc.,
Diamond Home Services, Inc. and
several nonpublic companies.
</TABLE>
3
<PAGE> 6
Each of the following individuals is a member of the Board of Directors, whose
present term of office will continue beyond the Meeting for the period
indicated:
<TABLE>
<CAPTION>
Name Age Director Principal Occupation;
- ---- --- Since Business Experience
----- & Other Directorships
---------------------
<S> <C> <C> <C>
Richard D. Pollock 40 May 3, 1991 Vice President of J. Pollock & Co.
(Term expires in since February 1990 and President
1998) of Wirt Aluminum Co. since May
1991. Prior to joining J. Pollock &
Co. he was employed for more than
5 years as Vice President and then
President of Barmet Aluminum
Corporation, an aluminum company.
Richard Pollock is the son of Jacob
Pollock.
C. Stephen Clegg 45 May 3, 1991 President of Clegg Industries, Inc.,
(Term expires in a private investment firm founded by
1998) C. Stephen Clegg in September 1988
for the purpose of enabling certain
investors to make equity investments
in leveraged buy out transactions.
Served as Managing Director of AEA
Investors, Inc., a firm involved in
organizing business mergers,
acquisitions and leveraged buyouts
from 1978-1988. He has been a
Director of Birmingham Steel
Corporation since January 1985 and is
presently Chairman of the Board of
Mid-West Spring Manufacturing
Company, Inc. and Diamond Home
Services, Inc.
Nicholas T. George 51 May 3, 1991 Attorney; has served as Secretary of
(Term expires the Company since May 1991.
in 1997) President of the law firm of Nicholas
T. George & Associates since 1979.
Director of Summit Bank since
1990.
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
David A. Simia 54 May 3, 1991 Certified Public Accountant; has
(Term expires served as Assistant Secretary and
in 1997) Assistant Treasurer of the Company
since May 1991. Has served as Vice
President, Finance of J. Pollock &
Co. since September 1989 and as
Vice President of Wirt Aluminum
Co. since May 1991. Partner with
Kopperman & Wolf, CPAs from
1983-1989 and Touche Ross & Co.,
CPAs from 1976-1983.
</TABLE>
BOARD OF DIRECTORS
During the fiscal year ended March 31, 1996, the Company's Board of Directors
held four regular meetings and no special meetings. Each director, except C.
Stephen Clegg, attended at least 75% of all meetings of the Board and all
committees on which he served during the fiscal year. Mr.
Clegg attended only one meeting.
The Company has a standing Audit Committee of the Board of Directors, currently
composed of Richard Pollock, Chairman, David Simia, and Nicholas T. George.
Functions of the Audit Committee include recommending the independent public
accountants to be engaged by the Company, approving the scope of the audit
performed by the independent public accountants, reviewing with the independent
public accountants the financial statements and their accompanying report, and
reviewing the Company's system of internal controls. The Audit Committee held
one meeting during the fiscal year ended March 31, 1996.
The Board of Directors does not have a standing Nominating Committee. The
functions of a nominating committee are performed by the Board of Directors as a
whole.
The Company's Board of Directors has a standing Compensation Committee composed
of Jacob Pollock, Chairman, and C. Stephen Clegg. The Compensation Committee did
not meet during the fiscal year ended March 31, 1996.
The Board's Pension & ESOP Committee is currently composed of Jacob Pollock,
Chairman, Nicholas T. George and David Simia. Functions of this committee
include administration of the plans and recommending amounts of contributions by
the Company to the plans. The Committee met once during the fiscal year ended
March 31, 1996.
The Stock Option Committee consists of Jacob Pollock, Chairman, and Richard
Pollock. The Stock Option Committee is responsible for administering the Ravens
Metal Products, Inc. Stock Option Plan. The committee met once during the fiscal
year ended March 31, 1996.
5
<PAGE> 8
EXECUTIVE OFFICERS
In July 1991, the Company hired Lowell P. Morgan to serve as President. Mr.
Morgan, 61, had previously been employed by the Company from 1959-1983. During
his former tenure with the Company, Morgan served as an officer and director for
many years. Subsequently, he was Product Manager for East Manufacturing
Corporation from 1983-1990 and Vice President of Travis Body and Trailer, Inc.
from 1990-1991. All his former employers manufactured truck trailers.
In July 1991, John J. Stitz was hired as Chief Financial Officer. Mr. Stitz, 40,
is a Certified Public Accountant and has a Master of Business Administration
degree from The Wharton School of the University of Pennsylvania. He served as
Chief Financial Officer of Environmental Tectonics Corporation, a manufacturer,
from 1988-1989, and as Assistant to the Chairman of Strick Companies, a
manufacturer and lessor of truck trailers, in 1990. He was employed by Coopers &
Lybrand, CPAs, from 1978-1984.
These two executive officers serve at the pleasure of the Board of Directors
without specific terms of office. All other executive officers are directors;
information concerning these persons appears above under the caption "Proposal
No. 1, Election of Directors."
SECTION 16 COMPLIANCE
Based solely upon a review of copies of Forms 3, 4 and 5 furnished to the
Company during or with respect to the fiscal year ended March 31, 1996, the
Company is not aware of any person subject to Section 16 of the Securities
Exchange Act of 1934 with respect to the Company who failed to file on a timely
basis reports required by Section 16(a) during the most recent fiscal year or
prior fiscal years.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Jacob Pollock, Chief Executive Officer, has not received any cash or noncash
compensation since acquiring control of the Company on May 3, 1991. Effective
April 1, 1994, the Company entered into a management agreement whereby J.
Pollock & Company provides general management services for an annual management
fee of $150,000 payable in monthly installments of $12,500.
The following table discloses compensation in excess of $100,000 awarded to,
earned by or paid to any executive officer during the fiscal year ended March
31, 1996; no executive officer of the Company, other than Jacob Pollock,
received compensation in excess of $100,000 during the fiscal years ended March
31, 1995 and 1994:
6
<PAGE> 9
<TABLE>
<CAPTION>
Name and Principal All Other
Position Year Salary Bonus Compensation(1)
- ------------------ ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Lowell P. Morgan 1996 $82,300 $21,945 $1,042
President
<FN>
(1) Amount contributed to Mr. Morgan's account in the Company's 401(k) plan.
</TABLE>
In 1993, the Company adopted a Stock Option Plan which provides for the granting
of options to acquire up to 50,000 shares of the Company's common stock. The
Plan authorizes the granting of incentive stock options to employees of the
Company and nonqualified stock options to employees, officers and directors,
whether or not on the Company's payroll or otherwise paid for services. The Plan
provides that the option price shall not be less than 100% of the current market
price of the stock on the date of the grant and that the term of the option
shall be fixed at the date of the grant. The Plan terminates on July 7, 2003.
Jacob Pollock and Richard Pollock are not eligible to participate in the Stock
Option Plan.
In 1995, Lowell P. Morgan and David A. Simia were each granted options to
purchase 2,500 shares of common stock and C. Stephen Clegg and Nicholas T.
George were each granted options to purchase 250 shares of common stock. The
options have an exercise price of $4.00 per share and expire on April 7, 1999.
Directors of the Company are paid $1,000 for Board of Directors meetings which
they attend. Additional compensation is not paid for committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors consists of Jacob
Pollock, Chief Executive Officer, and C. Stephen Clegg. Mr. Pollock is a
Director and Mr. Clegg is Chairman of the Board of Directors of Mid-West Spring
Manufacturing Company, Inc. and Diamond Home Services, Inc., public companies,
and Globe Building Products, Inc., a nonpublic company. Mr. Pollock is a member
of the Compensation and Benefits Committee of the Board of Directors of Mid-West
Spring Manufacturing Company, Inc.
REPORT OF COMPENSATION COMMITTEE
The Company has not provided compensation for services performed by Jacob
Pollock, except pursuant to the management agreement with J. Pollock & Company
described above. Mr. Pollock hopes that the value of his shareholdings in the
Company will increase. The Committee has not formulated policies for
compensation to Mr. Pollock or other executive officers which relate
compensation to corporate performance. The compensation of each executive
officer is
7
<PAGE> 10
determined by negotiation between the executive officer and Mr. Pollock subject
to the approval of the Committee and the Board of Directors.
By: Jacob Pollock, Chairman
C. Stephen Clegg
A performance graph has not been provided because it has not been established
that there has been a cumulative total shareholder return on the Company's
common stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 14, 1995, the Company entered into a supply agreement expiring on
August 14, 2002 with Wirt Aluminum Co. (formerly Wirt Metal Products, Inc.)
("Wirt"), pursuant to which the Company has the right to purchase from Wirt, at
competitive prices up to 60% of the Company's requirements for aluminum
extrusions manufactured to the Company's specifications and used by the Company
in the manufacture of its aluminum truck and utility trailers. Jacob Pollock
("Pollock") is a Director of the Company and owns approximately 86.7% of the
common stock of the Company and owns 75% of Wirt. His wife owns 25% of Wirt.
Richard Pollock, a Director of the Company, is the President of Wirt. The
Company purchased aluminum extrusions totalling $4,618,400 in 1996 from Wirt of
which $425,000 was owed Wirt at March 31, 1996. The Company sold aluminum scrap
to Wirt in 1996 totalling $177,089 of which $12,531 was owed to the Company at
March 31, 1996.
The company and certain other persons and business entities affiliated with the
Company and Wirt have jointly and severally guaranteed approximately $2,115,000
of State of Ohio Economic Development Revenue Bonds (Ohio Enterprise Bond Fund)
Series 1995-2 (Wirt Aluminum co.) and approximately $2,500,000 of State of Ohio
"Section 166 Project Funds".
J. Pollock & Company, wholly owned by Pollock, purchases materials and provides
or contracts for certain administrative services for the Company and charges the
Company at its cost. Such transactions totalled $99,164 in 1996 of which $21,772
was owed at March 31, 1996. J. Pollock & Company provided general management
services in 1996 for an annual management fee of $150,000 payable in monthly
installments of $12,500.
The Company leases office space from a corporation in which Richard Pollock and
Bruce Pollock are shareholders. The lease is for five years expiring December
31, 1996 at a monthly base rent of $1,500 with annual increases determined by
the change in the Consumer Price Index, plus the Company's share of utilities,
real estate taxes, insurance, and property maintenance. The Company paid $25,546
in 1996. Richard Pollock and Bruce Pollock are sons of Jacob Pollock.
The Company purchased aluminum materials from The Aluminum Warehouse, Inc., of
which Richard Pollock owns 40% and a trust for the benefit of Bruce Pollock and
the children of Richard
8
<PAGE> 11
Pollock owns 60%, totalling $103,083 in 1996, of which $10,984 was owed at March
31, 1996. Nicholas T. George, a Director of the Company, is the trustee of the
trust.
The Company hired and paid for temporary personnel from Flex-Team, Inc., of
which Pollock is a principal shareholder, totalling $613,882 in 1996.
The Company purchased and paid for raw materials from Signs & Blanks, Inc.,
wholly owned by Pollock, totaling $7,892 in 1996.
Management believes that amounts incurred by the Company for the above
transactions are reasonable in light of market conditions.
INDEPENDENT PUBLIC ACCOUNTANTS
No independent public accountants have yet been selected or recommended to the
shareholders because the Company desires to maintain flexibility regarding the
choice of auditors. Under the Company's by-laws and Certificate of
Incorporation, the authority to select the Company's independent public
accountants is reserved to the Board of Directors. Coopers & Lybrand served as
the Company's independent public accountants for the fiscal year ended March 31,
1996. Management of the Company wishes to reserve the right to reevaluate this
choice with regard to the current fiscal year, although Coopers & Lybrand have
not resigned or been terminated and the Company has no definitive intention to
change auditors at this time. A representative of Coopers & Lybrand is not
expected to be present at the Meeting.
SHAREHOLDERS' PROPOSALS
All proposals intended to be presented by a shareholder at the 1997 Annual
Meeting of the Company's Shareholders must be received by the Company no later
than June 13, 1997 at the Company's offices addressed to P.O. Box 10002, Akron,
Ohio 44310-0002, for inclusion in the Company's proxy material or information
statement for the 1997 Annual Meeting of Shareholders.
The Company's 1996 Annual Report is being delivered to shareholders with this
Information Statement. A copy of the Company's Form 10-K for the fiscal year
ended March 31, 1996, as filed with the Securities and Exchange Commission, may
be obtained from the Company by following the procedure described in the 1996
Annual Report under the caption "Form 10-K."
By Order of the Board of Directors,
Nicholas T. George
Secretary
9
<PAGE> 12
[RAVENS LOGO]
1996 ANNUAL REPORT
Ravens Metal Products, Inc. - P.O. Box 10002 - Akron, OH 44310-0002 - (330)
630-4528
<PAGE> 13
RAVENS [LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO OUR SHAREHOLDERS:
With new products and new manufacturing capabilities coming on line, fiscal
1996 was a year of transition for Ravens. We brought our new Kent plant on line,
but we had to work through a challenging learning curve as our new employees
gained experience and got production up to speed. We introduced two new
products, but trumpeting them to the marketplace resulted in increased selling
expenses. Coupled with a general decline in the trailer industry, these and
other events caused our financial performance to slip below our record-setting
1995 results.
Fiscal 1996 ended on a positive note, however. Countering an industry-wide
decline in trailer shipments, third and fourth-quarter sales were records for
their respective periods. In fact, fourth quarter sales were the highest ever
recorded in any quarter, and that helped us end the year with the second-best
sales mark in our 40-year history. Fiscal '96 sales were $40.2 million, a 4.3
percent decline from the preceding record year.
Though sales were good, earnings fell. In addition to production delays at
Kent and increased selling costs for our new products, the general trailer
industry decline led to reduced margins on fleet sales. We also suffered losses
at our two-year old utility trailer division and increased interest expense from
higher debt. The cumulative results of these and other factors were a 28.1
percent decline in gross profit and an 89.2 percent drop in net earnings, from
$1.8 million last year to $194,538 in fiscal '96. Earnings per share fell from
$0.93 to $0.10.
The earnings per share figures are adjusted for the one-for-four reverse
stock split effected in December 1995. With the goals of raising the bid price
of our stock and promoting more active trading, we reduced the number of shares
of outstanding common stock from 7.7 million to 1.9 million. This action
resulted in a new stock trading symbol, "RVMP". Also, as described on the last
page of this annual report, J. C. Bradford & Co. began making a market for our
stock in May 1996. Initial indications are that the price of the stock and
trading activity have increased.
We have said before that our objective is to build a company that is
successful and profitable over the long haul, thereby creating shareholder
value. In fiscal 1996, with our new products, new manufacturing capabilities and
the reverse stock split, we made notable advances toward this objective.
We cannot overstate the importance of the new Kent plant to our long term
future. It is a state-of-the-art manufacturing facility for state-of-the-art
flatbed trailers and provides the capacity we need to pursue fleet sales, which
is a key component of our growth plan. Though the cost to profitability was high
in fiscal 1996, the Kent plant startup and introduction of our new Eclipse II
flatbed trailers are behind us, and we are poised to capitalize on the increased
efficiencies of the new facility.
2
<PAGE> 14
RAVENS [LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Building the new Kent plant made it possible for us to convert the
Jacksonville, N.C. plant to a dedicated dump trailer and body manufacturing
facility, and our fourth quarter sales record was led by strong sales of dump
trailers and bodies. It also gave us capacity in Jacksonville for new product
development, and we designed and manufactured our new live-floor trailer for the
solid waste industry and other markets.
Our live-floor trailers load and unload material with moving floors rather
than hoists, have more capacity than trailers equipped with hoists, and can be
used where dump trailers cannot, like inside solid waste processing facilities
where ceiling bay heights may be restrictive, and on the soft uneven ground of
landfills. Additionally, like the Eclipse II, they are made of aluminum and
weigh significantly less than comparable composite and steel trailers, giving
operators the competitive advantage of extra hauling capacity. Aluminum trailers
last longer, require less maintenance and have a higher resale value than steel
and composite trailers.
We believe our aluminum trailers offer the best value to many operators. We
also believe that the investments we made in our new trailers and our plants
will enhance our competitive position in the marketplace and enable Ravens to
remain a leader.
In fiscal 1996, earnings were impacted as we reinvested in our business to
position Ravens for the future. Though industry analysts forecast that flatbed
and dump trailer shipments will be moderately below the record-setting sales
years of 1995 and 1994, we are working hard to generate sufficient new business
with fleets and our new products to counter the expected downturn.
/s/ Jacob "Jerry" Pollock
Jacob "Jerry" Pollock
Chairman and Chief Executive Officer
August 12, 1996
3
<PAGE> 15
RAVENS METAL PRODUCTS, INC.
SELECTED FINANCIAL DATA
FOR THE YEARS ENDED MARCH 31 RAVENS [LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales...................................... $40,238,755 $42,036,058 $25,114,351 $19,921,093 $14,593,834
Income (loss) from operations.................. 807,419 2,955,391 1,213,445 1,004,701 (217,808)
Unusual income items........................... 0 0 565,000 0 0
Income (loss) before income taxes and
extraordinary items.......................... 305,511 2,762,033 1,605,868 683,985 (640,002)
Extraordinary items............................ 0 0 0 531,032(2) 0
Net income (loss).............................. 194,538 1,801,233 2,029,068 931,017 (640,002)
Net income (loss) per common share:
Before extraordinary items................... $ .10 $ .93 $ 1.04 $ 0.90 $ (2.62)
Extraordinary items.......................... 0 0 0 1.20 0
---------------------------------------------------------------------------
Total (1).................................... $ .10 $ .93 $ 1.04 $ 2.10 $ (2.62)
===========================================================================
Average number of shares used in computation of
per share amounts (1)........................ 1,943,525 1,943,525 1,943,525 442,348 244,431
Supplementary income (loss) per share data:
Before extraordinary items................... $ .10 $ .93 $ 1.04 $ .27 $ (.26)
Extraordinary items.......................... 0 0 0 .27 0
---------------------------------------------------------------------------
Total (1)(3)................................. $ .10 $ .93 $ 1.04 $ .54 $ (.26)
===========================================================================
Number of shares used in computation of
supplementary per share data (1)............. 1,943,525 1,943,525 1,943,525 1,943,525 1,943,525
Cash dividends declared per common share....... $ 0 $ 0 $ 0 $ 0 $ 0
Total assets................................... 21,886,535 19,405,237 8,420,275 7,168,679 5,477,552
Total long-term obligations.................... 12,397,447 10,047,807 3,575,599 4,264,463 1,582,877
Working capital/(deficit)...................... 5,900,027 3,682,967 2,568,807 1,424,402 (3,550,207)
Shareholders' equity (deficit)................. 3,440,090 3,267,061 1,373,330 (496,442) (2,948,236)
<FN>
- ---------------
(1) All per share amounts and number of shares have been restated to reflect a one-for-four reverse stock
split effected on December 26, 1995.
(2) Gain of $144,032 from retirement of subordinated debentures and $387,000 from utilization of
tax loss carryforwards.
(3) Interest expense of $114,370 and $128,281 in 1993 and 1992, respectively, on debt to Pollock
which was converted to equity in 1993 was added to income and deducted from loss before
extraordinary items in 1993 and 1992, respectively, to compute supplementary data.
</TABLE>
4
<PAGE> 16
RAVENS [LOGO]
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $441,890 and $394,019 at March
31, 1996 and 1995, respectively. The Company could have borrowed approximately
$1,140,000 more than the $6,707,986 owed to the bank at March 31, 1996 on a line
of credit which expires on August 31, 1997.
The Company intends to use the remaining proceeds from the City of Kent,
Ohio industrial development revenue bonds and internally generated cash to
construct a 60,000 square foot building at the Kent facility and purchase
equipment to cut aluminum coil into sheets for its own use and for related and
unrelated customers; however, the Company has not begun this project.
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 the
foreseeable future.
Based upon historical patterns and projections by truck trailer industry
analysts, record demand for truck trailers in 1995 and 1996 peaked, and a
decrease in truck trailer demand is projected in 1997. The Company is increasing
its efforts to offset a projected decline in trailer industry sales by selling
more flatbed trailers to fleets. The Kent facility was built and the Eclipse II
flatbed trailer was introduced in 1996, among other competitive reasons, to make
the Company's aluminum flatbed trailer more attractive to fleets who might
otherwise purchase composite or steel trailers.
Based upon sales for early 1997, a sales order backlog approximating
$5,000,000 at May 31, 1996, and a moderate downturn in the truck trailer
industry, the Company is projecting sufficient sales to maintain profitability
and meet its debt covenants in 1997.
1996
- ----
Net cash used for operating activities was $1,864,230 with significant uses
being an increase in inventories due mainly to the startup of the Kent facility
and payment of income taxes. Capital expenditures include approximately
$1,375,000 for the Kent facility which commenced production of flatbed trailers
in June 1995. Capital expenditures were financed with proceeds from the
industrial development revenue bonds and increase in note payable -- bank. Bank
borrowings were used to finance the net cash used for operating activities.
Working capital increased to $5,900,027 at March 31, 1996 from $3,682,967 at
March 31, 1995.
1995
- ----
Net cash provided from operating activities was $685,289. Increases in
receivables, inventories and accounts payable were primarily due to increased
sales and manufacturing activity. The increase in accrued income taxes was due
to the Company owing income taxes, having utilized net operating loss
carryforwards and generating taxable income. $4,900,000 of industrial
development revenue bonds were issued for a building, improvements to the
existing building, and equipment at the Kent facility. Approximately $2,900,000
of cash was used for capital expenditures for the Kent facility. Working capital
increased to $3,682,967 at March 31, 1995 from $2,568,807 at March 31, 1994.
1994
- ----
Cash flow provided from operating activities of $1,235,508 in 1994 included
$500,000 of life insurance proceeds received upon the death of the previous
Chairman of the Company, Rodney E. Wilson. Increases in receivables, inventories
and accounts payable were due to increased sales and manufacturing activity. The
increase in accrued pension costs and unrecognized pension liability was due
mainly to a decrease in the assumed discount rate from 8.0% to 7.25%. The cash
provided from operations was used to reduce debt and for capital expenditures
for improvement of the Company's facilities and the startup of the utility
trailer facility.
RESULTS OF OPERATIONS
Years Ended March 31, 1996 and 1995
- -----------------------------------
Gross profit declined 28.1% to $4,512,444 in 1996 from $6,276,019 in 1995
and gross profit margin declined to 11.2% in 1996 from 14.9% in 1995 mainly due
to the startup of the Kent facility, conversion of the Jacksonville, North
Carolina facility to a dedicated dump trailer and body manufacturing facility,
losses at the utility trailer division, and a decline in demand for trailers
leading to reduced margins on fleet sales. The startup of production in Kent
resulted in higher costs because new employees were gaining experience and
production levels during most of 1996 were below the level needed to cover
overhead costs.
Selling, general and administrative expenses increased to 9.2% from 7.9% of
net sales as net sales decreased while expenses increased 11.6% mainly due to
increased marketing expenditures for the introduction of the Eclipse II flatbed
trailer and live-floor trailer and for the utility trailer division which began
the production and sale of utility, snowmobile, and personal watercraft trailers
during the year ended March 31, 1995. Interest expense increased mainly due to
more debt outstanding during the period 1996 versus 1995.
A one-for-four reverse stock split was effected on December 26, 1995 in
order to increase the market price of the common stock to promote more active
trading; although, there can be no assurance that an active market for the
common stock will develop merely because of an increase in the price of each
share. All per share amounts and number of shares have been restated to reflect
the reverse stock split.
Years Ended March 31, 1995 and 1994
- -----------------------------------
Net sales increased 67.4% to $42,036,058 in 1995 from $25,114,351 in 1994
and income from operations increased 143.6% to $2,955,391 from $1,213,445
primarily due to an increase in volume in existing products, as the economy and
transportation industry continued at a strong level, and the Company's ability
to increase its manufacturing volume.
Gross profit margin declined to 14.9% in 1995 from 17.8% in 1994 due to the
startup of the utility trailer facility and increased sales of trailers to
fleets, which generally pay lower margins, and the subsequent sales of trade-in
trailers which are generally sold at lower margins than new trailers. Selling,
general and administrative expense declined to 7.9% from 13.0% of net sales as
net sales increased at a higher rate than expenses. In addition, 1994 expense
included approximately $150,000 for bad debt expense, primarily for one
dealership, which was reversed in 1995 due to collections and deemed
collectibility of the balance due the Company. 1994 expense also included
approximately $270,000 of legal and professional fees to successfully litigate
certain claims. See Note 8 to the financial statements for a discussion of
income taxes.
5
<PAGE> 17
RAVENS METAL PRODUCTS, INC. RAVENS [LOGO]
BALANCE SHEETS
MARCH 31, 1996 AND 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1996 1995
---------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................... $ 441,890 $ 394,019
Receivables:
Trade, net of allowance for doubtful accounts of $85,000 and
$60,000 in 1996 and 1995.................................. 4,678,629 4,438,799
Inventories....................................................... 6,356,353 4,502,357
(Excess of replacement or current cost over stated values
was $2,051,000 and $2,087,000 in 1996 and 1995)
Refundable income taxes........................................... 42,639 0
Deferred income taxes............................................. 329,818 334,100
Other current assets.............................................. 99,696 104,061
---------------------------
Total current assets.................................... 11,949,025 9,773,336
Property, plant and equipment, net.................................. 6,984,989 5,896,806
Funds held by trustee for capital expenditures...................... 2,711,104 3,489,400
Other assets........................................................ 241,417 245,695
---------------------------
Total assets............................................ $21,886,535 $19,405,237
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable -- trade......................................... $ 3,942,899 $ 3,727,288
Accrued liabilities:
Compensation.................................................... 560,763 521,787
Product warranty................................................ 485,000 425,000
Income taxes.................................................... 11,851 809,021
Other........................................................... 394,520 403,962
Current installments on term debt................................. 653,965 203,311
---------------------------
Total current liabilities............................... 6,048,998 6,090,369
Note payable -- bank................................................ 6,707,986 3,781,556
Term debt........................................................... 5,287,010 5,934,529
Accrued pension costs............................................... 230,293 244,822
Deferred income taxes............................................... 172,158 86,900
---------------------------
Total liabilities....................................... 18,446,445 16,138,176
---------------------------
Commitments and contingent liabilities
Shareholders' equity:
Common stock, $.01 par value; authorized 3,000,000 shares at March
31, 1996 and 10,000,000 shares at March 31, 1995; issued
1,943,525 shares at March 31, 1996 and 7,769,392 shares at March
31, 1995........................................................ 19,435 77,694
Additional capital................................................ 3,419,732 3,361,473
Retained earnings................................................. 216,585 22,047
---------------------------
3,655,752 3,461,214
Unrecognized pension liability.................................... (215,662) (194,153)
---------------------------
Total shareholders' equity.............................. 3,440,090 3,267,061
---------------------------
Total liabilities and shareholders' equity.............. $21,886,535 $19,405,237
===========================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
<PAGE> 18
RAVENS METAL PRODUCTS, INC. RAVENS [LOGO]
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the years ended March 31, 1996 1995 1994
- ----------------------------- -------------------------------------------
<S> <C> <C> <C>
Net sales........................................................... $40,238,755 $42,036,058 $25,114,351
Cost of sales....................................................... 35,726,311 35,760,039 20,642,318
-------------------------------------------
Gross profit...................................................... 4,512,444 6,276,019 4,472,033
Selling, general and administrative expenses........................ 3,705,025 3,320,628 3,258,588
-------------------------------------------
Income from operations............................................ 807,419 2,955,391 1,213,445
Other income........................................................ 114,129 124,567 118,226
Interest expense.................................................... (616,037) (317,925) (290,803)
Unusual income items................................................ 0 0 565,000
-------------------------------------------
Income before income taxes........................................ 305,511 2,762,033 1,605,868
Provision (benefit) for income taxes................................ 110,973 960,800 (423,200)
-------------------------------------------
Net income........................................................ $ 194,538 $ 1,801,233 $ 2,029,068
==========================================
Net income per common share......................................... $ 0.10 $ 0.93 $ 1.04
===========================================
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
for the years ended March 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Unearned
Common Retained Employee Unrecognized
Common Stock Additional Earnings Benefits Pension
Shares Amount Capital (Deficit) ESOP Liability Total
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1993.... 7,769,392 $77,694 $3,361,473 $(3,808,254) $(39,989) $ (87,366) $ (496,442)
Net income................. 2,029,068 2,029,068
Change in unearned employee
benefits -- ESOP......... 39,989 39,989
Change in unrecognized
pension liability........ (199,285) (199,285)
--------------------------------------------------------------------------------------------------
Balance at March 31, 1994.... 7,769,392 77,694 3,361,473 (1,779,186) 0 (286,651) 1,373,330
Net income................. 1,801,233 1,801,233
Change in unrecognized
pension liability........ 92,498 92,498
--------------------------------------------------------------------------------------------------
Balance at March 31, 1995.... 7,769,392 77,694 3,361,473 22,047 0 (194,153) 3,267,061
Net income................. 194,538 194,538
Change in unrecognized
pension liability........ (21,509) (21,509)
One-for-four reverse stock
split.................... (5,825,867) (58,259) 58,259 0
--------------------------------------------------------------------------------------------------
Balance at March 31, 1996.... 1,943,525 $19,435 $3,419,732 $ 216,585 $ 0 $ (215,662) $3,440,090
==================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
<PAGE> 19
RAVENS METAL PRODUCTS, INC. RAVENS [LOGO]
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the years ended March 31, 1996 1995 1994
- ----------------------------- -----------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 194,538 $1,801,233 $ 2,029,068
Adjustments to reconcile net income to net cash provided from
(used for) operating activities:
Depreciation and amortization................................... 519,290 390,813 351,076
Deferred income taxes........................................... 89,540 74,500 (516,700)
Contribution to the ESOP returned to Company as repayment
of promissory note............................................ 0 0 39,989
Deferred compensation arrangement............................... 0 0 (150,011)
Increase (decrease) in accrued product warranty................. 60,000 175,000 25,000
Increase (decrease) in provision for losses on accounts
receivable.................................................... 25,000 (115,000) 140,000
Loss (gain) on disposition of property, plant and equipment..... 4,606 0 (724)
Increase (decrease) in cash from changes in:
Receivables..................................................... (264,830) (1,797,183) (359,521)
Inventories..................................................... (1,853,996) (2,079,520) (600,593)
Other current assets............................................ 4,365 (11,182) 15,137
Accounts payable -- trade....................................... 215,611 1,492,437 634,330
Refundable and accrued income taxes............................. (839,809) 737,407 71,614
Accrued and other current liabilities........................... 29,534 113,553 (429,814)
Accrued pension costs........................................... (14,529) (201,360) 157,356
Unrecognized pension liability.................................. (21,509) 92,498 (199,285)
Other............................................................. (12,041) 12,093 28,586
------------------------------------------
Net cash provided from (used for) operating activities.......... (1,864,230) 685,289 1,235,508
------------------------------------------
Cash flows from investing activities:
Capital expenditures.............................................. (1,588,445) (3,588,977) (298,768)
Proceeds from disposal of fixed assets............................ 0 0 7,488
Investment of proceeds and income from industrial development
revenue bonds with trustee...................................... (164,769) (4,971,845) 0
Sale of investments and release of funds held by trustee.......... 943,065 1,482,445 0
------------------------------------------
Net cash provided from (used for) investing activities.......... (810,149) (7,078,377) (291,280)
------------------------------------------
Cash flows from financing activities:
Payments on term debt............................................. (204,180) (106,288) (238,454)
Proceeds from (payments on) note payable -- bank, net............. 2,926,430 1,585,516 (687,394)
Proceeds from industrial development revenue bonds, net of
issuance costs.................................................. 0 4,701,794 0
------------------------------------------
Net cash provided from (used for) financing activities.......... 2,722,250 6,181,022 (925,848)
------------------------------------------
Net increase (decrease) in cash and cash equivalents................ 47,871 (212,066) 18,380
Cash and cash equivalents at beginning of year...................... 394,019 606,085 587,705
------------------------------------------
Cash and cash equivalents at end of year............................ $ 441,890 $ 394,019 $ 606,085
==========================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
<PAGE> 20
RAVENS METAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS RAVENS [LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS:
Ravens Metal Products, Inc. (the "Company") designs, manufactures, and sells
aluminum truck trailers and bodies, including dump trailers, dump bodies and
flatbed trailers used in the highway transportation industry throughout the U.S.
with a small amount of sales in Canada. These principal products are sold direct
and through a nationwide network of dealerships. The Company currently has
operating facilities in North Carolina, Ohio, and West Virginia. The Company
also sells a wide variety of after-market parts for trucks and trailers,
including parts for its own trailers.
FISCAL YEAR:
The Company's fiscal year ends on March 31. References to 1996, 1995, etc.
are for the years ended March 31, 1996, 1995, etc., respectively.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS:
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
INVENTORIES:
Inventories are carried at the lower of cost or market. The cost of
substantially all inventories is determined under the last-in, first-out (LIFO)
method with the cost of the remainder of the inventories determined under the
first-in, first-out (FIFO) method.
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization of property, plant and equipment, including
assets under capital lease obligations, are computed using the straight-line
method based on the estimated useful lives of the assets. Accelerated
depreciation methods are used for tax purposes.
Property, plant and equipment which has become fully depreciated or
amortized is retained in the accounts as long as it is used in the Company's
operations. Property, plant and equipment disposed of is removed from the asset
and related allowance accounts at the amounts included therein. Profit or loss
on such dispositions is included in the statements of operations. Repairs and
maintenance costs are charged to expense as incurred.
DEBT DISCOUNT AND EXPENSE:
Debt discount and expense are amortized on a straight-line basis, which does
not differ materially from the interest method, by charges to expense over
periods from date of issue to date of maturity.
PRODUCT WARRANTY COSTS:
Anticipated costs related to product warranty are expensed when the products
are sold.
REVENUE RECOGNITION:
Sales and related cost of sales for trailers are recorded when the trailers
are available for pick-up or delivery as ordered. Sales and related cost of
sales for goods and services other than trailers are recorded when goods are
shipped and services are rendered to customers.
ADVERTISING COSTS:
Costs incurred for producing and communicating advertising are expensed when
incurred.
INCOME TAXES:
The Company provides for income taxes based upon earnings reported for
financial statement purposes. Deferred tax assets and liabilities are
established for temporary differences between financial statement and tax
accounting bases using currently enacted tax rates in effect for the years in
which the differences are expected to reverse. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in the provision for
income taxes in the period that includes the enactment date. A valuation
allowance is established for any deferred tax asset for which realization is not
likely.
RECLASSIFICATIONS:
Certain amounts in previously issued financial statements were reclassified
to conform to the 1996 presentation.
NEW ACCOUNTING PRONOUNCEMENTS:
During 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards "SFAS" No. 121 -- "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of". The adoption of SFAS
No. 121 had no significant effect on the financial statements.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123 -- "Accounting for Stock-Based Compensation" effective for transactions
entered into after December 15, 1995. The Company has adopted the disclosure-
only option of SFAS No. 123. The adoption of this standard did not have a
material impact on the financial statements.
2. UNUSUAL INCOME ITEMS:
On June 30, 1993, the Company reached a settlement with the previous
Chairman of the Company, Rodney E. Wilson, of all disputes and obligations. The
settlement resulted in a gain to the Company of approximately $95,000.
Mr. Wilson died on July 25, 1993. The Company realized a gain of
approximately $470,000 ($500,000 of proceeds less $30,000 of cash surrender
value previously recorded) from a life insurance policy on Mr. Wilson.
3. INVENTORIES:
<TABLE>
<CAPTION>
March 31 1996 1995
---------------------------
<S> <C> <C>
Raw materials......................... $3,858,163 $2,775,219
Work in process....................... 484,620 338,140
Finished goods........................ 2,013,570 1,388,998
---------------------------
$6,356,353 $4,502,357
===========================
</TABLE>
Approximately 93% and 89% of total inventories at March 31, 1996 and 1995,
respectively, were valued on a LIFO basis. The reserve to reduce the carrying
value of inventories from current cost to the LIFO basis amounted to
approximately $2,051,000 and $2,087,000 at March 31, 1996 and 1995,
respectively.
4. PROPERTY, PLANT AND EQUIPMENT, AT COST:
<TABLE>
<CAPTION>
March 31 1996 1995
---------------------------
<S> <C> <C>
Buildings and improvements............ $5,289,865 $4,559,504
Machinery and equipment............... 3,216,704 2,700,812
Office equipment...................... 676,376 575,697
Automotive equipment.................. 399,258 281,982
---------------------------
9,582,203 8,117,995
Less accumulated depreciation
and amortization.................... 2,859,626 2,438,289
---------------------------
6,722,577 5,679,706
Land.................................. 262,412 217,100
---------------------------
$6,984,989 $5,896,806
===========================
</TABLE>
Approximately $1,375,000 and $3,394,000 of capital expenditures were
incurred in 1996 and 1995, respectively, for a new production facility in Kent,
Ohio. These capital expenditures include capitalized interest expense net of
capitalized interest income of $58,951 and $64,238 in 1996 and 1995,
respectively.
9
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS, continued
RAVENS [LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. PROPERTY, PLANT AND EQUIPMENT, AT COST, CONTINUED:
Rent expense was approximately $50,000, $32,000 and $26,000 in 1996, 1995
and 1994, respectively.
5. NOTES PAYABLE:
On June 26, 1995, the Company entered into a loan and security agreement
with First National Bank of Ohio ("FNBO"). The agreement provides for borrowings
under a line of credit up to $8,000,000 based on eligible accounts receivable
and inventories and expires on August 31, 1997. Interest is at FNBO's prime rate
(8.25% at March 31, 1996) minus 1/2%. The Company could have borrowed
approximately $1,140,000 more than the $6,707,986 owed to FNBO at March 31,
1996.
The agreement is collateralized by cash, accounts receivable, inventories,
equipment and intangibles as well as the real estate at the Kent facility. The
agreement is cross-collateralized with the reimbursement agreement described in
Note 6 and contains covenants relating to the payment of dividends, acquiring
treasury stock, the creation of additional indebtedness, minimum tangible net
worth, and cash flow coverage. The Company was not in compliance with the cash
flow coverage covenant at March 31, 1996. FNBO waived the covenant violation
through March 31, 1996. Based upon its projections for 1997, the Company
believes that it will comply with these covenants. If the Company does not
comply with these covenants, it will be required to seek a waiver of
noncompliance or amendment to the agreement in order to continue borrowing under
the agreement and to avoid potential acceleration of repayment of the
borrowings.
Prior to June 26, 1995, the Company had a loan and security agreement with
PNC Bank, National Association ("PNC"). Interest was at PNC's prime rate (9% at
March 31, 1995) plus 1%.
6. TERM DEBT:
<TABLE>
<CAPTION>
March 31 1996 1995
---------------------------
<S> <C> <C>
City of Kent,Ohio (a)................. $4,900,000 $4,900,000
7% subordinated debentures, payable in
2004, net of unamortized discount of
$62,730 and $70,176................. 424,270 417,824
6% loan, payable in monthly
installments through 2001 (b)....... 22,444 26,043
4% promissory note, payable in monthly
installments through 2001 (b)....... 62,054 72,656
Variable prime rate promissory note,
payable in monthly installments
through 2001 (b).................... 34,650 41,317
4% promissory note, payable in
quarterly installments through
2000 (c)............................ 72,000 90,000
Variable rate loan, payable in monthly
installments through 1999 (c)....... 225,557 290,000
7% promissory notes, payable in
annual installments through 1998 to
sellers of real estate at the
Kent facility...................... 200,000 300,000
---------------------------
5,940,975 6,137,840
Less current installments............. 653,965 203,311
---------------------------
$5,287,010 $5,934,529
===========================
</TABLE>
(a) On December 12, 1994, the Company entered into a loan agreement with the
City of Kent, Ohio dated December 1, 1994 pursuant to which the Company
borrowed $4,900,000 for capital expenditures for the Kent facility. The loan
agreement requires annual principal payments of $450,000 in 1997 through
2001, $500,000 in 2002 through 2005, $150,000 in 2006 through 2008, and
$100,000 in 2009 and 2010.
In connection with the loan, the City of Kent issued and sold $4,900,000 of
its City of Kent, Ohio Variable Rate Demand Industrial Development Revenue
Bonds, Series 1994 (Ravens Metal Products, Inc. Project). The Company's
interest and principal payments will be used to satisfy obligations to the
bondholders. Payment to bondholders is guaranteed by a letter of credit in
an amount equal to outstanding principal plus specified interest ($4,996,660
at March 31, 1996) expiring December 15, 1996 issued by First National Bank
of Ohio at a rate of 1% per annum and collateralized by all equipment owned
by the Company and by the real estate at the Kent facility and
cross-collateralized with the line of credit as described in Note 5. The
interest rate on the bonds varies weekly and was 3.70% and 4.35% at March
31, 1996 and 1995, respectively. Proceeds from the loan agreement are held
by a trustee and released to the Company for approved capital expenditures
at the Kent facility. $2,711,104 and $3,489,400 held by the trustee at March
31, 1996 and 1995, respectively, was invested in short-term commercial paper
and a money market fund.
(b) These borrowings are collateralized by the Parkersburg, West Virginia
facility.
(c) These borrowings are collateralized by the Jacksonville, North Carolina
facility. The variable rate loan is at the bank's prime rate (8.25% and 9%
at March 31, 1996 and 1995, respectively) plus 1%.
Maturities for the term debt are: 1997, $653,965; 1998, $654,674; 1999,
$555,367; 2000, $523,900; 2001, $474,465; and thereafter, $3,078,604.
7. COMMITMENTS AND CONTINGENT LIABILITIES:
Various claims, lawsuits, and complaints arising in the ordinary course of
business have been filed or are pending against the Company or may arise in the
future involving allegations of negligence, product defects, breach of warranty,
and breach of contract, among other allegations. Some of the foregoing matters
involve or may involve compensatory or punitive damages in very large amounts.
Litigation is subject to many uncertainties, the outcome of individual litigated
matters is not predictable with assurance, and it is possible that some of the
foregoing matters could be decided unfavorably to the Company. Although the
liability, if any, associated with these matters was not determinable at March
31, 1996, it is the opinion of management of the Company that all such matters
are adequately accrued for or are adequately covered by insurance or, if not so
covered, are without merit or are of such kind, or involve such amounts, as
would not have a significant effect on the financial position and results of
operations and cash flows of the Company if disposed of unfavorably.
At March 31, 1996 and 1995, the Company was contingently liable as guarantor
on certain sales contracts of customers in the amount of approximately $515,000
and $499,000, respectively, which are collateralized by the units sold. No
reserve for losses has been provided because the Company has incurred an
insignificant amount of losses related to guaranteed sales contracts which
generally have maturities less than five years. The Company guarantees 10-20% of
the outstanding balance owed to the finance company by the customers. The
Company recognizes revenue at the time the trailers are sold.
The Company and certain other persons and business entities affiliated with
the Company and Wirt Aluminum Co. ("Wirt") have jointly and severally guaranteed
approximately $2,115,000 of State of Ohio Economic Development Revenue Bonds
(Ohio Enterprise Bond Fund) Series 1995-2 (Wirt Aluminum Co.) and approximately
$2,500,000 of State of Ohio "Section 166 Project Funds".
10
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS, continued
RAVENS [LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. INCOME TAXES:
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
Current:
Federal.................... $ 14,064 $854,000 $ 84,000
State...................... 7,369 32,300 9,500
Deferred..................... 89,540 74,500 (516,700)
---------------------------------------
$110,973 $960,800 $(423,200)
=======================================
</TABLE>
The sources of temporary differences which make up the deferred tax balances
are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------
<S> <C> <C>
Depreciation and amortization.......... $(336,130) $(313,287)
Warranty............................... 184,426 161,585
Vacation............................... 49,427 47,085
Pension................................ 29,163 58,464
Deferred interest and amortization of
discount on debentures............... 65,623 62,908
Allowance for doubtful accounts........ 32,322 22,812
Inventory.............................. 16,466 38,082
Federal and state tax loss
carryforwards........................ 91,262 100,373
Other.................................. 25,101 69,178
--------------------------
$ 157,660 $ 247,200
==========================
</TABLE>
A reconciliation of the federal statutory tax rate to the effective rate
follows:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statutory amount and rate....................... $103,874 34.0% $939,091 34.0% $ 545,995 34.0%
Effect of:
State taxes (net of utilization of tax loss
carryforwards).............................. 7,369 2.4 32,300 1.2 9,500 0.6
Non-deductible expense........................ 5,606 1.8 5,121 0.2 1,779 0.1
Taxable life insurance proceeds............... 0 0.0 0 0.0 (159,848) (10.0)
Reversal of deferred tax valuation
allowance................................... 0 0.0 0 0.0 (661,038) (41.1)
Benefit from utilization of federal tax loss
carryforwards............................... 0 0.0 0 0.0 (222,546) (13.9)
Provision for alternative minimum tax......... 0 0.0 0 0.0 84,000 5.2
Other......................................... (5,876) (1.9) (15,712) (0.6) (21,042) (1.3)
-----------------------------------------------------------------------------
$110,973 36.3% $960,800 34.8% $(423,200) (26.4)%
=============================================================================
</TABLE>
The cumulative tax operating loss carryforward as of March 31, 1996 is
approximately $3,423,000. On May 3, 1991, there was a change in the controlling
interest of the Company. Pursuant to the Internal Revenue Code, this transaction
significantly limits the ability of the Company to utilize the remaining
cumulative tax operating loss carryforward of approximately $3,423,000 which
existed at the time of the ownership change. Management believes the Company
will, at a minimum, be able to utilize annually tax operating loss carryforwards
of approximately $24,000 until expiration of these losses which would result in
the utilization of $240,000 of loss carryforwards subsequent to March 31, 1996.
The tax loss carryforwards expire in years through 2007.
A full valuation allowance was required for the first three quarters in 1994
under SFAS No. 109 -- "Accounting for Income Taxes" primarily due to uncertainty
regarding the utilization of future deductible temporary differences and federal
and state tax loss carryforwards. As a result of completion of two years of
profits, after three years of losses totalling $6,675,065, an increase in the
Company's sales order backlog from approximately $2,500,000 in the first three
quarters of 1994 to approximately $9,800,000 at May 31, 1994, and projected
results for 1995, the valuation allowance of $516,700 was eliminated as of March
31, 1994 due to the expected realizability of the deferred income tax assets.
11
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS, continued
RAVENS [LOGO]
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9. RETIREMENT PLANS:
The Company has defined benefit pension plans covering hourly employees at
the Company's service facility in Dover, Ohio and former hourly employees at the
former Elizabeth, West Virginia facility. The plans provide benefits of
specified amounts for each year of service. The Company's funding policy is
based on an actuarially determined cost method allowable under statutory
regulations.
Net pension cost for the years ended March 31, 1996, 1995 and 1994 is
comprised of, based on plan assets and obligations as of January 1, 1995, 1994
and 1993, respectively, the following components:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Service costs -- benefits
earned during the year..... $ 12,837 $ 14,286 $ 10,812
Interest cost................ 120,887 117,246 108,499
Actual return on assets...... (287,563) (33,042) (81,581)
Net amortization and
deferral................... 208,208 (40,528) 9,435
--------------------------------------
Net pension cost........... $ 54,369 $ 57,962 $ 47,165
======================================
</TABLE>
The funded status of the plans as of January 1, 1996 and 1995 is reconciled
to accrued pension cost on the Company's balance sheet at March 31, 1996 and
1995 as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------
<S> <C> <C>
Accumulated benefit obligation,
including vested benefits of
$1,745,869 and $1,477,571........... $1,778,148 $1,501,980
Effect of future salary increases..... 0 0
---------------------------
Projected benefit obligation.......... 1,778,148 1,501,980
Plan assets at fair value, primarily
U.S. government obligations, fixed
income investments and equity
securities.......................... 1,396,367 1,098,606
---------------------------
Projected benefit obligation in excess
of plan assets...................... 381,781 403,374
Unrecognized prior service cost....... (2,509) (3,136)
Unamortized transition liability...... (17,345) (24,986)
Unrecognized net loss................. (215,662) (194,153)
Unrecognized additional minimum
liability (A)....................... 235,516 222,275
---------------------------
Accrued pension cost................ $ 381,781 $ 403,374
===========================
</TABLE>
(A) The unrecognized additional minimum liability included in accrued pension
cost was offset by an intangible asset of $19,854 and $28,122 and by a
reduction in shareholders' equity of $215,662 and $194,153 at March 31, 1996
and 1995, respectively.
Significant assumptions used in determining net pension cost and related
pension obligations as of January 1, 1996, 1995 and 1994 are:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------
<S> <C> <C> <C>
Discount rate........................... 7.25% 8.25% 7.25%
Expected long-term rate of return on
assets................................ 8.0 8.0 8.0
</TABLE>
Effective July 1, 1996, the Company will terminate the defined benefit
pension plan covering the former hourly employees at the former Elizabeth, West
Virginia facility. The Company will contribute approximately $250,000 so that
there are sufficient plan assets to pay the benefit obligations.
The Company also has a defined contribution plan covering salaried and non-
union hourly employees. The purpose of this plan is to provide financial
security during retirement by providing employees with an incentive to make
regular savings. Effective January 1, 1994, employee contributions of not more
than 1% of employee pre-tax compensation are matched by the Company. The cost of
such company contributions approximated $11,337, $15,470 and $3,696 for 1996,
1995 and 1994, respectively.
10. EMPLOYEE STOCK OWNERSHIP PLAN:
Effective January 1, 1984, the Company established a noncontributory
Employee Stock Ownership Plan (ESOP) covering all salaried employees. Employer
contributions and participant forfeitures vest 20% for each year of service with
full vesting after five years of service. Distributions are made to participants
upon the earlier of termination of employment or retirement. During 1984, the
Company loaned $399,989 to the ESOP pursuant to a promissory note agreement. The
ESOP purchased 94,115 shares with the proceeds from the loan. The promissory
note was at an interest rate of 9% per year and was payable in annual
installments of $40,000, including principal and interest, through 1994. Annual
contributions to the ESOP and expense recorded was $39,989 for 1994. The Company
has received a favorable determination for termination of the ESOP effective
December 31, 1993 from the Internal Revenue Service. Distributions will be made
to participants in 1997.
11. SERIES PREFERRED STOCK:
The Company is authorized to issue 300,000 shares of series preferred stock,
$.01 par value, none of which was issued as of March 31, 1996. The features of
the preferred stock may vary, among other things, as to the rate of dividend,
conversion privilege and liquidation rights, based upon the resolution of the
Board of Directors at the time of issuance.
12. EARNINGS (LOSS) PER COMMON SHARE AND
REVERSE STOCK SPLIT:
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. Weighted average number of common shares outstanding
was 1,943,525 in 1996, 1995 and 1994, adjusted for a one-for-four reverse stock
split effected on December 26, 1995. All per share amounts and number of shares
have been restated to reflect the reverse stock split.
13. SUPPLEMENTAL CASH FLOW INFORMATION:
(A) Cash payments for interest: 1996 -- $572,094; 1995 -- $310,190; and
1994 -- $614,541.
(B) Cash payments for income taxes: 1996 -- $861,242; 1995 -- $141,450; and
1994 -- $17,500.
(C) Noncash investing and financing activities: In 1995, $300,000 of the
purchase price of the real estate in Kent, Ohio was financed by a note
payable to the sellers.
14. RELATED PARTY TRANSACTIONS:
On August 14, 1995, the Company entered into a supply agreement expiring on
August 14, 2002 with Wirt Aluminum Co. (formerly Wirt Metal Products,
Inc.)("Wirt"), pursuant to which the Company has the right to purchase from
Wirt, at competitive prices, up to 60% of the Company's requirements for
aluminum extrusions manufactured to the Company's specifications and used by the
Company in the manufacture of its aluminum truck and utility trailers. Jacob
Pollock ("Pollock") is a Director of the Company and owns approximately 86.7% of
the common stock of the Company and is a principal shareholder of Wirt. Richard
Pollock, a Director of the Company, is the President of Wirt.
The Company purchased aluminum extrusions totalling $4,618,400, $5,795,355
and $2,733,866 in 1996, 1995 and 1994, respectively, from Wirt. The Company owed
Wirt $425,000 and $738,901 at March 31, 1996 and March 31, 1995 for these
purchases. The Company sold aluminum scrap to Wirt in 1996, 1995 and 1994
totalling $177,089, $197,602 and $54,089, respectively, of which $12,531 and
$19,140 was owed to the Company at March 31, 1996 and 1995. See Note 7.
J. Pollock & Company, wholly owned by Pollock, purchases materials and
provides or contracts for certain administrative services for the Company and
charges the Company at its cost. Such transactions totalled $99,164, $187,626
and $69,193 in 1996, 1995 and 1994, respectively, of which $21,772 and $45,791
was owed at March 31, 1996 and 1995. Effective April 1, 1994, the Company
entered into a management agreement whereby J. Pollock & Company provides
general management services for an annual management fee of $150,000 payable in
monthly installments of $12,500.
12
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS, continued
RAVENS [LOGO]
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14. RELATED PARTY TRANSACTIONS, CONTINUED:
The Company leases office space from a corporation in which Richard Pollock
and Bruce Pollock are shareholders. The lease is for five years expiring
December 31, 1996 at a monthly base rent of $1,500 with annual increases
determined by the change in the Consumer Price Index, plus the Company's share
of utilities, real estate taxes, insurance, and property maintenance. The
Company paid $25,546, $23,550 and $22,513 in 1996, 1995 and 1994, respectively.
Richard Pollock and Bruce Pollock are sons of Jacob Pollock.
Nicholas T. George, a Director of the Company, is a member of the law firm
of Nicholas T. George & Associates which is counsel to Jacob Pollock, J. Pollock
& Company, and the Company. The Company incurred legal fees approximating
$1,300, $25,000 and $246,000 to Nicholas T. George & Associates in 1996, 1995
and 1994, respectively.
The Company purchased aluminum materials from The Aluminum Warehouse, Inc.,
of which Richard Pollock is a principal shareholder, totalling $103,083 and
$104,534 in 1996 and 1995. $10,984 was owed at March 31, 1996.
The Company hired temporary personnel from Flex-Team, Inc., of which Pollock
is a principal shareholder, totalling $613,882 and $120,799 in 1996 and 1995, of
which $0 and $51,106 was owed at March 31, 1996 and 1995.
The Company purchased and paid for raw materials from Signs & Blanks, Inc.,
wholly owned by Pollock, totalling $7,892 and $117,042 in 1996 and 1995.
15. STOCK OPTIONS:
The Company's 1993 Stock Option Plan provides for the granting of options to
acquire up to 50,000 shares of the Company's common stock. The Plan authorizes
the granting of incentive stock options to employees of the Company and
nonqualified stock options to employees, officers and directors, whether or not
on the Company's payroll or otherwise paid for services. The Plan provides that
the option price shall not be less than 100% of the current market price of the
stock on the date of the grant, that the option is exercisable when granted, and
that the term of the option shall be fixed at the date of the grant and shall
not exceed ten years. The Plan terminates on July 7, 2003.
<TABLE>
<CAPTION>
Shares Stock
----------------- Option
1996 1995 Price
-------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year... 10,250 0 $4.00
Granted.......................... 0 10,750 4.00
Exercised........................ 0 0
Canceled......................... (250) (500) 4.00
------------------
Outstanding and exercisable at end
of year.......................... 10,000 10,250 4.00
==================
</TABLE>
All outstanding options expire on April 7, 1999.
16. ADVERTISING COSTS:
Advertising costs included in selling, general and administrative expense
were $256,276, $124,052 and $94,499 in 1996, 1995 and 1994, respectively.
17. CONCENTRATIONS:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of accounts receivable. The
Company performs ongoing credit evaluations of its customers and does not
usually require collateral. The Company maintains a reserve for potential credit
losses.
The Company's largest customer accounted for approximately 11% of the
Company's gross sales in 1996. No sales to any one customer accounted for more
than 10% of gross sales in 1995 or 1994.
The principal raw material used by the Company is aluminum. The Company
purchases aluminum from several suppliers and believes that there are ready
supplies of aluminum available for its needs at acceptable prices. A significant
increase in the price or an interruption in the supply of aluminum could have a
material adverse effect on the Company's operating results.
In April 1996, hourly employees at the Kent, Ohio flatbed trailer
manufacturing facility elected to be represented by the International
Association of Bridge, Structural and Ornamental Iron Workers, AFL-CIO. The
Company is negotiating the terms of an initial contract but cannot predict the
outcome of such negotiations.
18. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts reported in the balance sheets for cash and cash
equivalents, accounts receivable, funds held by trustee for capital
expenditures, note payable, and accounts payable approximate their fair market
values.
The fair value of the Company's term debt was estimated using quoted market
rates for similar debt or a discounted cash flow analysis based upon the
Company's estimated incremental borrowing rates for similar types of debt. The
fair value of the term debt at March 31, 1996 was estimated to approximate the
carrying amount reported in the balance sheets.
13
<PAGE> 25
RAVENS [LOGO]
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- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
RAVENS METAL PRODUCTS, INC.:
We have audited the accompanying balance sheets of Ravens Metal Products,
Inc. as of March 31, 1996 and 1995 and the related statements of operations,
changes in shareholders' equity (deficit), and cash flows for each of the three
years in the period ended March 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ravens Metal Products, Inc.
as of March 31, 1996 and 1995 and the results of its operations and its cash
flows for each of the three years in the period ended March 31, 1996 in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Akron, Ohio
June 4, 1996
14
<PAGE> 26
RAVENS [LOGO]
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- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
JACOB POLLOCK
Director
Chairman of the Board
Chief Executive Officer
Treasurer
Chairman and President of J. Pollock & Company, a company
principally engaged in the sale of aluminum, private investment,
and consulting.
NICHOLAS T. GEORGE
Director
Secretary
President in law firm of Nicholas T. George & Associates
DAVID A. SIMIA
Director
Assistant Treasurer and Assistant Secretary
Vice President of J. Pollock & Company and Wirt Aluminum Co.
RICHARD D. POLLOCK
Director
President of Wirt Aluminum Co.
Vice President of J. Pollock & Company
C. STEPHEN CLEGG
Director
President of the private investment firm of Clegg Industries, Inc.
and Chairman of Mid-West Spring Manufacturing Company, Inc.
and Diamond Home Services, Inc.
LOWELL P. MORGAN
President
JOHN J. STITZ
Chief Financial Officer
Vice President
----------------------------------------------------------------------
----------------------------------------------------------------------
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
The Company's stock (trading symbol "RVMP") is traded
over-the-counter and reported on the OTC Bulletin Board and on "pink
sheets" which are published periodically. The best knowledge and
belief of the Company is that the stock has not actively traded during
the last two years. The Company is aware that a small number of
transactions occurred between $.40 and $8.50 per share. J. C.
Bradford & Co., Nashville, Tennessee, Telephone 1-800-522-1927, began
making a market in the common stock in May 1996. Their bid-ask
quotation on June 10, 1996 was $8.00-$10.00 per share.
The Company has not paid dividends in the last two years and is
restricted from paying dividends by its loan agreements. Payment of
dividends is within the discretion of the Company's Board of Directors
and will depend on, among other factors, earnings, capital
requirements and the operating and financial condition of the Company.
The Company does not presently intend to pay dividends in the future.
There were approximately 4,000 holders of record of the
Company's common stock as of June 10, 1996.
---------------------------------------------------------------------
FORM 10-K
A copy of the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission (without exhibits) may be
obtained without charge by writing to: Chief Financial Officer, Ravens
Metal Products, Inc., P.O. Box 10002, Akron, OH 44310-0002.
15
<PAGE> 27
RAVENS [LOGO]
