<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:
|_| Preliminary information statement |_| Confidential, for use by
the Commission Only (as
permitted by Rule
14c-5(d)(2))
|X| Definitive information statement
RVM INDUSTRIES, INC.
(Name of Registrant as Specified in Charter)
JOHN J. STITZ, RVM INDUSTRIES, 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| No fee required
|_| 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
RVM INDUSTRIES, INC.
P.O. BOX 10002
861 E. TALLMADGE AVENUE
AKRON, OH 44310
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 10, 1997
TO THE SHAREHOLDERS OF RVM INDUSTRIES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of RVM
Industries, Inc. (the "Company") for the fiscal year ended March 31, 1997 will
be held at Days Inn, 3150 W. Market Street, Fairlawn, Ohio 44333 on September
10, 1997 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 1, 1997 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 11, 1997
<PAGE> 3
RVM INDUSTRIES, INC.
INFORMATION STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 10, 1997
GENERAL INFORMATION
This Information Statement is being furnished to shareholders of RVM Industries,
Inc., a Delaware corporation (the "Company"), on or about August 11, 1997, 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 10, 1997 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 1, 1997 (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, 1,934,255 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
87.16% 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
1, 1997, 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) 87.16%
Common Stock 861 E. Tallmadge Avenue
Akron, Ohio 44310
</TABLE>
(1) Jacob Pollock has sole voting and investment power with respect to the
listed shares.
The following table shows the number of shares of the Company's Common Stock
beneficially owned directly or indirectly by each director and nominee, each
named executive officer and by all directors and executive officers of the
Company as a group as of August 1, 1997.
<TABLE>
<CAPTION>
TITLE OF NAME OF AMOUNT AND NATURE PERCENT
CLASS BENEFICIAL OWNER OF OF CLASS
BENEFICIAL OWNERSHIP
<S> <C> <C> <C>
Common Stock Jacob Pollock 1,685,803(2) 87.16%
Nicholas T. George 30,000(3) 1.55%
C. Stephen Clegg 0 0.00%
David A. Simia 253(2) 0.01%
Richard D. Pollock 40,000(3) 2.07%
All directors and 1,726,056 89.24%
officers as a group
(7 persons).
</TABLE>
(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.
No preferred stock is currently outstanding.
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<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>
Nicholas T. George 53 May 3, 1991 Attorney; has served as Secretary of
the Company since May 1991.
President of the law firm of Nicholas
T. George & Associates since 1979.
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:
Jacob Pollock 73 May 3, 1991 Chairman of the Board, Chief
(Term expires in Executive Officer, and Treasurer of
1999) the Company since May 1991.
Chief Executive Officer of Albex
Aluminum, Inc., Signs and Blanks,
Inc., and Ravens, Inc. 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>
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<PAGE> 6
<TABLE>
<S> <C> <C> <C>
Richard D. Pollock 41 May 3, 1991 President of the Company, effective
(Term expires in March 31, 1997. Vice President of
1998) J. Pollock & Co. since February
1990 and President of Albex
Aluminum, Inc. (formerly 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 46 May 3, 1991 President of Clegg Industries, Inc., a
(Term expires in 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.
</TABLE>
BOARD OF DIRECTORS
During the fiscal year ended March 31, 1997, the Company's Board of Directors
held four regular meetings and one special meeting. 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, 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
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<PAGE> 7
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, 1997
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, 1997.
The Board's Pension Committee is currently composed of Jacob Pollock, Chairman,
and Nicholas T. George. 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, 1997.
The Stock Option Committee consists of Jacob Pollock, Chairman, and Richard
Pollock. The Stock Option Committee is responsible for administering the RVM
Industries, Inc. Stock Option Plan. The Committee did not meet during the fiscal
year ended March 31, 1997.
EXECUTIVE OFFICERS
In July 1991, the Company hired Lowell P. Morgan to serve as President of
Ravens, Inc. (formerly Ravens Metal Products, Inc.). Mr. Morgan, 62, had
previously been employed by Ravens, Inc. from 1959-1983. During his former
tenure with Ravens, Inc., Mr. 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 of Ravens, Inc.
(formerly Ravens Metal Products, Inc.). On March 31, 1997, he became Vice
President of the Company. Mr. Stitz, 41, 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."
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<PAGE> 8
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING 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, 1997, 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, did not receive any cash or noncash
compensation in 1997, 1996 or 1995. The Company paid $428,000, $314,000 and
$250,000 in 1997, 1996 and 1995, respectively to J. Pollock & Company for
general management services.
The following table discloses compensation in excess of $100,000 awarded to,
earned by or paid to any executive officer during 1997 and 1996; no executive
officer of the Company, other than Jacob Pollock, as described above, received
compensation in excess of $100,000 during 1995.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION
(1)
<S> <C> <C> <C> <C>
Lowell P. Morgan 1997 $82,975 $20,836 $1,038
President, Ravens, Inc. 1996 $82,300 $21,945 $1,042
</TABLE>
(1) Amount contributed to Mr. Morgan's account in the Company's 401(k) plan.
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.
6
<PAGE> 9
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 services 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 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
PERFORMANCE GRAPH
The following line graph shows a comparison of cumulative total returns,
assuming reinvestment of dividends, for a hypothetical investment of $100 made
on March 31, 1992 in the common stock of the Company, the NASDAQ Composite Index
and an index of peer companies ("peer group") selected by the Company. The peer
group consists of the following companies: Dorsey Trailers, Inc., Featherlite
Mfg., Inc., Fruehauf Trailer Corp., Miller Industries, Inc./TN and Wabash
National Corp.
Companies in businesses related to Ravens, Inc. were selected for the peer group
because cumulative returns on the Company's common stock for the five years
ended March 31, 1997 are based solely on the performance of Ravens, Inc. and not
on the restated Company financial statements reflecting the acquisitions of
Albex Aluminum, Inc. and Signs and Blanks, Inc. on March 31, 1997. Management
believes that the large return in 1997 is due to J.C. Bradford & Co. making a
market in the Company's common stock (then Ravens Metal Products, Inc.)
beginning in May 1996. Prior to May 1996, the Company's common stock did not
actively trade, but a market maker quoted bid prices and traded shares
infrequently.
7
<PAGE> 10
<TABLE>
<CAPTION>
RVM NASDAQ PEER
INDUSTRIES, COMPOSITE GROUP
INC. INDEX
<S> <C> <C> <C>
3/31/92 100.00 100.00 100.00
3/31/93 100.00 114.96 82.43
3/31/94 1,000.00 124.09 103.87
3/31/95 2,500.00 138.04 111.04
3/31/96 1,875.00 187.42 76.18
3/31/97 13,750.00 208.33 88.80
</TABLE>
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<PAGE> 11
[GRAPH REPRESENTATION]
9
<PAGE> 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
J. Pollock & Company, wholly owned by Jacob Pollock, a Director and majority
shareholder of RVM, purchases materials and provides or contracts for certain
administrative services for the Company and charges the Company at its cost.
Such transactions totaled $348,417 in 1997. J. Pollock & Company provides
management services to the Company. The Company paid $428,000 in 1997 for these
services. $37,721 was owed at March 31, 1997.
The Company leases office and manufacturing space from a corporation in which
Richard Pollock and Bruce Pollock are shareholders. The leases are for five
years expiring December 31, 1999 at a monthly base rent of $8,000 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 approximately $114,000 in 1997. Richard Pollock
and Bruce Pollock are sons of Jacob Pollock.
The Company purchases aluminum materials from The Aluminum Warehouse, Inc., of
which Richard Pollock is a principal shareholder, totaling $54,593 in 1997.
$9,793 was owed at March 31, 1997.
The Company hired temporary personnel from Flex-Team, Inc., of which Jacob
Pollock is a principal shareholder, totaling $245,233 in 1997.
See Notes 2 and 5 to the consolidated financial statements regarding
acquisitions from and notes payable to related parties; the financial statements
are included in the 1997 Annual Report being delivered with this Information
Statement and also were filed as part of the Company's Annual Report on Form
10-K for its fiscal year ended March 31, 1997.
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 L.L.P.
served as the Company's independent public accountants for the fiscal year ended
March 31, 1997. Management of the Company wishes to reserve the right to
reevaluate this choice with regard to the current fiscal year, although Coopers
& Lybrand L.L.P. have not resigned or been terminated and the Company has no
definitive intention to change auditors at this time. A representative of
Coopers & Lybrand L.L.P. is not expected to be present at the Meeting.
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<PAGE> 13
SHAREHOLDERS' PROPOSALS
All proposals intended to be presented by a shareholder at the 1998 Annual
Meeting of the Company's Shareholders must be received by the Company no later
than June 11, 1998 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 1998 Annual Meeting of Shareholders.
The Company's 1997 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, 1997, as filed with the Securities and Exchange Commission, may
be obtained from the Company by following the procedure described in the 1997
Annual Report under the caption "Form 10-K."
By Order of the Board of Directors,
Nicholas T. George
Secretary
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[RVM LOGO]
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[ RVM LOGO ]
1997 ANNUAL REPORT
RVM INDUSTRIES, INC. - P.O. BOX 10002 - AKRON, OH 44310-0002 - (330) 630-4528
<PAGE> 15
[ RVM LOGO ]
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TO OUR SHAREHOLDERS:
We began a new era in fiscal 1997 with new potential for growth and success.
On March 31, 1997, the last day of our fiscal year, Ravens Metal Products, Inc.
changed its name to Ravens, Inc., formed a new holding company, RVM Industries,
Inc., and acquired two complementary businesses.
Joining Ravens, which had one of the best years in its 41-year history, was
Albex Aluminum, Inc. and Signs and Blanks, Inc. Bringing these companies
together made us larger, increasing annual sales by $20 million, and we believe,
more attractive to investors.
Ravens had its second-best sales year ever, accounting for 68 percent of
RVM's sales to customers. Ravens' 1997 sales were $41.6 million, up $1.4 million
from last year and just shy of the record $42 million posted in 1995. Income
from operations nearly tripled, rising to $2.4 million from $807 thousand.
Industry wide, trailer sales were off about 20 percent in 1997, making Ravens'
results even more impressive.
Ravens' profit rose because it improved manufacturing efficiencies in its
plants and did not have the relocation and start-up costs of the previous year,
when flatbed production was moved to a new plant in Kent, Ohio and the plant in
Jacksonville, North Carolina was converted to a dedicated dump manufacturing
facility. A one-time settlement of $390 thousand for termination of a pension
plan lowered earnings in 1997 but will eliminate expenses and cash contributions
in future years.
Ravens also benefitted from increased sales to fleets resulting from the
October introduction of the FleetHAWK, an aluminum flatbed trailer designed and
priced for fleet operations. In February, too late to impact 1997 sales, Ravens
entered a new market with the introduction of an aluminum flatbed body for
straight trucks used to deliver brick, stone, construction equipment and other
concentrated loads.
We also continued to grow our dealer base. We added dealers in the U.S. and
Canada, ending the year with 55 U.S. dealers and four Canadian dealers selling
Ravens flatbed and dump trailers, flatbed and dump bodies, and live floor
trailers.
Albex was organized in 1991 and, initially, all of its sales were to Ravens.
However, by obtaining new customers, Albex has reduced Ravens' portion of its
extrusion sales to about one-third. Albex makes custom and standard aluminum
extruded shapes for manufactures, fabricators and distributors in a broad range
of markets including transportation, building and construction, and consumer
durables.
In fiscal 1997, a decline in Albex's sales resulted from moving operations
to Canton, Ohio in the previous year. Sales to customers fell to $8.7 million
from $10.1 million because some customers questioned the company's ability to
deliver product during the move. Albex reported an operational loss of $908
thousand, which was a modest improvement over the previous year's $1.1 million
loss. The move is complete, and we are working hard to restore customer
confidence and obtain new customers.
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<PAGE> 16
[ RVM LOGO ]
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Over the last two years, Albex has invested more than $10 million to
position itself for long-term growth and stability. It purchased the Canton
property, relocated, and constructed a computer-controlled cast house that
produces high-quality aluminum billet. The cast house is complete, and Albex is
soliciting orders for billet. This year, Albex will invest approximately $2
million for material handling equipment that will enable it to recycle aluminum
scrap into billet. With Albex's ability to cast aluminum billet, recycle
aluminum scrap, provide a wide variety of extruded shapes, and deliver product
on short notice, we expect to be very competitive in the extrusion, billet and
scrap recycling markets.
Signs and Blanks' income from operations was $513 thousand, up from a loss
of $81 thousand in the previous year, and sales to customers were $11.3 million
versus $11.4 million in the previous year. Though sales were nearly level, the
company achieved profitability by lowering costs and concentrating on more
profitable customers.
Signs and Blanks has grown to become one of the five largest U.S.
manufacturers of aluminum blanks, and coated traffic, warning and street signs.
Its plant is fully-automated and includes a print shop for coating and silk
screening blanks. Approximately two-thirds of sales are blanks sold to
fabricators that print them, and one-third of sales are blank or printed signs
for government agencies.
We brought Ravens, Albex, and Signs and Blanks together in RVM Industries,
Inc. because they are complementary. All three specialize in manufacturing
aluminum products. All possess leading-edge manufacturing technology. All have
good growth potential. By creating a larger company with more products sold in
more markets, we believe we created a company that will be more attractive to
you and other investors.
/s/ Jacob "Jerry" Pollock
Jacob "Jerry" Pollock
Chairman and Chief Executive Officer
August 11, 1997
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<PAGE> 17
RVM INDUSTRIES, INC.
SELECTED FINANCIAL DATA
FOR THE YEARS ENDED MARCH 31
[ RVM LOGO ]
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<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales..................... $61,638,221 $61,793,870 $61,333,643 $42,569,932 $33,142,197
Income (loss) from
operations.................. 1,949,864 (5) (274,507) 2,624,801 1,375,988 689,199
Unusual (expense) income
items....................... (390,015)(6) 0 0 565,000(4) 0
Income (loss) before income
taxes and extraordinary
items....................... 586,401 (1,354,680) 2,215,896 1,626,830 361,294
Extraordinary items........... 0 0 0 0 531,032(2)
Net income (loss)............. 80,939 (1,465,653) 1,255,096 2,050,030 608,326
Pro forma net income (loss)
per common share:
Before extraordinary
items..................... $ .19 $ (.45) $ .72 $ 1.05 $ .45
Extraordinary items......... 0 0 0 0 1.20
-------------------------------------------------------------------------------------------
Total (1)................... $ .19 $ (.45) $ .72 $ 1.05 $ 1.65
===========================================================================================
Average number of shares used
in computation of per share
amounts (1)................. 1,938,140 1,943,525 1,943,525 1,943,525 442,348
Supplementary pro forma income
(loss) per share data:
Before extraordinary
items..................... $ .19 $ (.45) $ .73 $ 1.05 $ .11
Extraordinary items......... 0 0 0 0 .27
--------------------------------------------------------------------------------------------
Total (1)(3)................ $ .19 $ (.45) $ .73 $ 1.05 $ .38
============================================================================================
Number of shares used in
computation of supplementary
per share data (1).......... 1,938,140 1,938,140 1,938,140 1,938,140 1,938,140
Cash dividends declared per
common share................ $ 0 $ 0 $ 0 $ 0 $ 0
Total assets.................. 38,567,375 39,211,709 31,535,760 16,468,598 12,593,757
Total long-term obligations... 18,440,498 17,853,851 13,226,854 8,771,310 6,307,693
Working capital............... 2,326,244 2,008,050 3,005,724 4,471,922 1,229,297
Shareholders' equity
(deficit)................... 6,056,225 5,796,700 3,164,038 1,003,244 (246,034)
</TABLE>
- ---------------
(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 in 1993 on debt to Pollock which was converted
to equity in 1993 was added to income before extraordinary items in 1993 to
compute supplementary data.
(4) Gain of $470,000 from a life insurance policy on the previous Chairman of
the Company, Rodney E. Wilson, and a gain of $95,000 for the settlement of
all disputes and obligations with Mr. Wilson.
(5) Includes loss of $371,768 for impairment of long-lived assets.
(6) Loss on pension settlement.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
[ RVM LOGO ]
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LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $468,572 and $471,161 at March
31, 1997 and 1996, respectively. The Company could have borrowed approximately
$1,645,000 more on lines of credit at March 31, 1997.
Albex expects to incur capital expenditures in 1998 of approximately
$2,000,000 to complete an aluminum billet casting facility and related material
handling equipment at its plant to be financed by lines of credit and cash
provided from operating activities.
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. Cautionary statements: Demand for the Company's products is
subject to changes in general economic conditions and in the specific markets in
which the Company competes. The Company's liquidity could be adversely affected
if Albex is not successful in completing the casting facility and generating
sufficient sales of billet.
Based upon sales for early 1998 and a sales order backlog for new trailers
approximating $5,700,000 at May 31, 1997, the Company is projecting sufficient
sales to maintain profitability and meet debt covenants in 1998. However, see
the cautionary statements in the above paragraph which indicate items which
could adversely affect profitability. The order backlogs for the extrusion and
sign industries are not relevant due to the nature of the industries and
customers. These backlogs tend to be low and of short duration.
1997
- ----
Net cash provided from operating activities of $2,454,394 and $2,900,000
from a note payable to Jacob Pollock were used for capital expenditures, mainly
at the Albex facility, and to reduce other long-term debt. Working capital
increased to $2,326,244 at March 31, 1997 from $2,008,050 at March 31, 1996. As
discussed in Note 2 to the consolidated financial statements, the purchase
prices for Albex and SABI are not determinable until Albex's and SABI's earnings
for the year ended March 31, 2000 are known. The impact on the Company's
liquidity is not yet estimatable.
1996
- ----
Net cash used for operating activities of $594,296 and capital expenditures
at the Albex facility and at the Kent facility of Ravens were financed by the
proceeds of long-term debt, contributed capital from Pollock, and lines of
credit. Working capital decreased to $2,008,050 at March 31, 1996 from
$3,005,724 at March 31, 1995.
1995
- ----
Net cash provided from operating activities of $1,096,509 and borrowings
were used to finance capital expenditures, mainly for the Kent facility. Working
capital decreased to $3,005,724 at March 31, 1995 from $4,471,922 at March 31,
1994.
RESULTS OF OPERATIONS
Years Ended March 31, 1997 and 1996
- -----------------------------------
Gross profit increased 43.0% to $8,655,193 in 1997 from $6,051,726 in 1996,
and gross profit margin increased to 14.0% in 1997 from 9.8% in 1996 due to
improvements at all of the subsidiaries. Ravens and Albex did not have the
relocation and startup costs in 1997 that were incurred in 1996, and they began
to realize the cost savings and quality improvements resulting from the
construction of more efficient facilities. SABI increased its gross profit on
the same level of sales by concentrating on more profitable customers and
lowering costs. Gross profit at Ravens was adversely affected by losses at the
utility trailer division which was closed in 1997. In 1997, Albex recognized a
loss of $371,768 for the impairment of long-lived assets, mainly machinery and
equipment, and Ravens incurred a loss of $390,015 for the settlement of the
defined benefit pension plan for the former employees of the former Elizabeth,
West Virginia facility. See Note 7 to the consolidated financial statements for
a discussion of income taxes.
Years Ended March 31, 1996 and 1995
- -----------------------------------
Gross profit declined 26.0% to $6,051,726 in 1996 from $8,174,445 in 1995,
and gross profit margin declined to 9.8% in 1996 from 13.3% 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 of Ravens, 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. Albex relocated its production facility from Elizabeth, West
Virginia to Canton, Ohio in 1996. In addition to the relocation and startup
costs, some customers switched their business to competitors because of their
concern about maintaining an uninterrupted supply of extrusions.
Selling, general and administrative expenses increased to 10.2% from 9.0% of
net sales 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. Albex
incurred additional marketing expenditures to retain current customers and
obtain new customers as well as expenses related to the relocation of the Albex
facility. Interest expense increased mainly due to more debt outstanding during
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; however, 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.
ACCOUNTING PRONOUNCEMENT
RVM is required to implement Statement of Financial Accounting Standards No.
128, "Earnings per Share", in the third quarter of 1998. RVM expects that the
implementation of this pronouncement will not have a material impact on its
calculation of earnings per share.
5
<PAGE> 19
RVM INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND 1996
[ RVM LOGO ]
================================================================================
<TABLE>
<CAPTION>
ASSETS 1997 1996
---------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................... $ 468,572 $ 471,161
Receivables:
Trade, net of allowance for doubtful accounts of $112,000
and $103,000 in 1997 and 1996............................. 6,506,008 6,928,495
Related party............................................... 120,008 23,897
Inventories....................................................... 8,677,160 9,322,875
(Excess of replacement or current cost over stated values
was $1,955,000 and $2,051,000 in 1997 and 1996)
Refundable income taxes........................................... 0 42,639
Deferred income taxes............................................. 413,500 329,818
Other current assets.............................................. 211,648 450,323
---------------------------
Total current assets.................................... 16,396,896 17,569,208
Property, plant and equipment, net.................................. 19,021,289 16,698,911
Funds held by trustees for capital expenditures..................... 2,762,242 4,523,347
Other assets........................................................ 386,948 420,243
---------------------------
Total assets............................................ $38,567,375 $39,211,709
===========================
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable -- trade......................................... $ 6,151,924 $ 7,169,249
-- related parties.................................. 382,338 93,168
Accrued expenses and liabilities:
Compensation.................................................... 746,156 669,207
Product warranty................................................ 540,000 485,000
Income taxes.................................................... 94,750 11,851
Other........................................................... 937,071 824,830
Current portion of long-term debt................................. 5,218,413 6,307,853
---------------------------
Total current liabilities............................... 14,070,652 15,561,158
Long-term debt...................................................... 14,238,548 16,025,400
Notes payable -- related parties.................................... 3,974,450 1,381,000
Other............................................................... 0 275,293
Deferred income taxes............................................... 227,500 172,158
---------------------------
Total liabilities....................................... 32,511,150 33,415,009
---------------------------
Commitments and contingent liabilities
Shareholders' equity:
Common stock, $.01 par value; authorized shares, 3,000,000; issued
1,934,255 shares at March 31, 1997 and 1,943,525 shares at March
31, 1996........................................................ 19,343 19,435
Additional capital................................................ 4,985,020 5,812,469
Retained earnings................................................. 1,051,862 180,458
---------------------------
6,056,225 6,012,362
Unrecognized pension liability.................................... 0 (215,662)
---------------------------
Total shareholders' equity.............................. 6,056,225 5,796,700
---------------------------
Total liabilities and shareholders' equity.............. $38,567,375 $39,211,709
===========================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
6
<PAGE> 20
RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
[ RVM LOGO ]
================================================================================
<TABLE>
<CAPTION>
For the years ended March 31, 1997 1996 1995
- ------------------------------------------------------------ ----------------------------------------
<S> <C> <C> <C>
Net sales................................................... $61,638,221 $61,793,870 $61,333,643
Cost of sales............................................... 52,983,028 55,742,144 53,159,198
-------------------------------------------
Gross profit.............................................. 8,655,193 6,051,726 8,174,445
Selling, general and administrative expenses................ 6,333,561 6,326,233 5,549,644
Impairment of long-lived assets............................. 371,768 0 0
-------------------------------------------
Income (loss) from operations............................. 1,949,864 (274,507) 2,624,801
Other income................................................ 131,074 140,117 121,027
Interest expense............................................ (1,061,336) (1,070,684) (529,932)
Loss on pension settlement.................................. (390,015) 0 0
Loss on disposal of property, plant and equipment........... (43,186) (149,606) 0
-------------------------------------------
Income (loss) before income taxes......................... 586,401 (1,354,680) 2,215,896
Provision (benefit) for income taxes........................ 505,462 110,973 960,800
-------------------------------------------
Net income (loss)......................................... $ 80,939 $(1,465,653) $ 1,255,096
===========================================
Pro forma income data:
Net income (loss) as reported............................. $ 80,939 $(1,465,653) $ 1,255,096
Pro forma income tax expense (benefit).................... (295,937) (599,976) (151,200)
-------------------------------------------
Pro forma net income (loss)............................... $ 376,876 $ (865,677) $ 1,406,296
===========================================
Pro forma net income (loss) per common share.............. $ .19 $ (.45) $ .72
===========================================
</TABLE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Common Retained Unrecognized
Common Stock Additional Earnings Pension
Shares Amount Capital (Deficit) Liability Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994................. 7,769,392 $77,694 $3,057,547 $(1,845,346) $ (286,651) $1,003,244
Net income.............................. 1,255,096 1,255,096
Contributed capital..................... 813,200 813,200
Change in unrecognized pension
liability............................. 92,498 92,498
Reclassification of undistributed net
loss of S-corporations................ (491,008) 491,008 0
-------------------------------------------------------------------------------------
Balance at March 31, 1995................. 7,769,392 77,694 3,379,739 (99,242) (194,153) 3,164,038
Net loss................................ (1,465,653) (1,465,653)
Contributed capital..................... 4,119,824 4,119,824
Change in unrecognized pension
liability............................. (21,509) (21,509)
Reclassification of undistributed net
loss of S-corporations................ (1,745,353) 1,745,353 0
One-for-four reverse stock split........ (5,825,867) (58,259) 58,259 0
-------------------------------------------------------------------------------------
Balance at March 31, 1996................. 1,943,525 19,435 5,812,469 180,458 (215,662) 5,796,700
Net income.............................. 80,939 80,939
Change in unrecognized pension
liability............................. 215,662 215,662
Reclassification of undistributed net
loss of S-corporations................ (811,139) 811,139 0
Treasury stock purchased and retired.... (9,270) (92) (16,310) (20,674) (37,076)
--------------------------------------------------------------------------------------
Balance at March 31, 1997................. 1,934,255 $19,343 $4,985,020 $ 1,051,862 $ 0 $6,056,225
=====================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
7
<PAGE> 21
RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[ RVM LOGO ]
================================================================================
<TABLE>
<CAPTION>
For the years ended March 31, 1997 1996 1995
- -------------------------------------------------------------------- ------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................. $ 80,939 $(1,465,653) $1,255,096
Adjustments to reconcile net income (loss) to net cash provided
from (used for) operating activities:
Depreciation and amortization................................... 1,376,096 1,212,212 934,880
Deferred income taxes........................................... (28,340) 89,540 74,500
Increase (decrease) in accrued product warranty................. 55,000 60,000 175,000
Increase (decrease) in allowance for doubtful accounts.......... 9,000 6,000 (123,100)
Loss (gain) on disposition of property, plant and equipment..... 54,094 149,606 3,540
Impairment of long-lived assets................................. 371,768 0 0
Increase (decrease) in cash from changes in:
Receivables -- trade............................................ 413,488 1,209,221 (2,210,906)
Receivable -- related party..................................... (96,111) 5,934 (21,044)
Inventories..................................................... 645,715 (495,509) (4,746,130)
Other current assets............................................ 38,675 151,533 (138,780)
Other assets.................................................... 7,128 (15,352) 13,414
Accounts payable -- trade....................................... (1,017,325) 839,924 4,566,712
Accounts payable -- related parties............................. 289,170 (1,482,897) 460,323
Refundable and accrued income taxes............................. 125,538 (839,809) 737,407
Accrued expenses and other current liabilities.................. 189,190 48,162 193,289
Other long-term liabilities..................................... (275,293) (45,699) (170,190)
Unrecognized pension liability.................................. 215,662 (21,509) 92,498
------------------------------------------
Net cash provided from (used for) operating activities.......... 2,454,394 (594,296) 1,096,509
------------------------------------------
Cash flows from investing activities:
Capital expenditures.............................................. (3,820,601) (8,444,054) (4,968,664)
Grants (expended) received for capital expenditures............... (375,000) 375,000 0
Proceeds from disposal of property, plant and equipment........... 304,731 1,000 0
Investment of proceeds and income from long-term debt with
trustees........................................................ (166,957) (4,759,043) (4,971,845)
Sale of investments and release of funds held by trustees......... 1,928,062 3,725,096 1,482,445
------------------------------------------
Net cash provided from (used for) investing activities.......... (2,129,765) (9,102,001) (8,458,064)
------------------------------------------
Cash flows from financing activities:
Payments on long-term debt........................................ (1,585,217) (565,342) (200,331)
Proceeds from (payments on) notes payable -- bank, net............ (1,354,925) 3,641,539 3,593,676
Proceeds from notes and accounts payable to related parties....... 2,900,000 0 0
Payments on notes and accounts payable to related parties......... (250,000) (19,000) (1,953,791)
Proceeds from long-term debt, net of issuance costs............... 0 4,479,491 4,911,103
Purchase of treasury stock........................................ (37,076) 0 0
Contributed capital............................................... 0 2,217,047 813,200
-----------------------------------------
Net cash provided from (used for) financing activities.......... (327,218) 9,753,735 7,163,857
-----------------------------------------
Net increase (decrease) in cash and cash equivalents................ (2,589) 57,438 (197,698)
Cash and cash equivalents at beginning of year...................... 471,161 413,723 611,421
-----------------------------------------
Cash and cash equivalents at end of year............................ $ 468,572 $ 471,161 $ 413,723
=========================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
8
<PAGE> 22
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
[ RVM LOGO ]
================================================================================
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
REORGANIZATION:
On March 31, 1997, Ravens Metal Products, Inc. changed its name to Ravens,
Inc. ("Ravens") and effected a reorganization with RVM Industries, Inc. ("RVM")
pursuant to Section 251(g) of the Delaware General Corporation Law. Each holder
of the common stock of Ravens became the holder of an equal number of shares of
RVM, a newly created holding company. The holders of RVM common stock have
substantially the same rights that they had as holders of the common stock of
Ravens. RVM filed Form 8-B on March 31, 1997 to register the common stock shares
of RVM with the Securities and Exchange Commission. RVM is now a publicly held
holding company, and Ravens is a private company wholly owned by RVM.
ACQUISITIONS AND BASIS OF PRESENTATION:
On March 31, 1997, RVM purchased all of the common stock of Albex Aluminum,
Inc. ("Albex") and Signs and Blanks, Inc. ("SABI") which were S-corporations.
See Note 2. This is a business combination by entities under the common control
of Jacob Pollock ("Pollock"). The financial statements of prior years have been
restated to reflect the combination on an "as if pooling of interests" basis.
The undistributed net loss of the S-corporations was reclassified from
accumulated deficit to additional capital. All significant intercompany accounts
and transactions have been eliminated. References to "the Company" refer to RVM
and its subsidiaries: Ravens, Albex and SABI.
DESCRIPTION OF BUSINESS:
Ravens 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. and Canada. These principal products
are sold direct and through a nationwide network of dealerships. Ravens
currently has operating facilities in North Carolina, Ohio, and West Virginia.
Ravens also sells a wide variety of after-market parts for trucks and trailers,
including parts for its own trailers.
Albex manufactures and sells custom and standard aluminum extruded products
to manufacturers, fabricators, and distributors in the transportation, building
and construction, consumer durables, and other markets located mainly in the
midwestern portion of the U.S. Albex operates a production facility located in
Canton, Ohio.
SABI manufactures and sells aluminum blank and finished traffic control
signs to fabricators, distributors, and governmental agencies located throughout
the U.S. and Canada. Its production facility is in Akron, Ohio.
FISCAL YEAR:
The fiscal year of RVM and Ravens ends on March 31. References to 1997,
1996, etc. are for the years ended March 31, 1997, 1996, etc., respectively.
Albex's and SABI's fiscal year ends on December 31. Their financial statements
for the years ended December 31 were included in these consolidated statements
because undue expense and effort would have been required to prepare audited
financial statements through March 31. Significant intervening transactions and
events between January 1 and March 31 have been included in the financial
statements or disclosed in the notes to the financial statements. Albex incurred
a net loss of approximately $275,000 (unaudited) in the quarter ended March 31,
1997. This loss has not been included in the Consolidated Statements of
Operations.
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
approximately 60% and 69% of the inventories in 1997 and 1996, respectively, was
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.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is stated at cost. Grants received from state
and local governmental units are deducted in arriving at the carrying amount of
the respective assets. Major additions and betterments are capitalized while
maintenance and repairs which do not improve or extend the lives of the
respective assets are expensed currently. When property, plant and equipment is
retired or otherwise disposed of, the cost of the property, plant and equipment
is removed from the asset account, accumulated depreciation is charged with an
amount equivalent to the depreciation provided, and the difference is charged or
credited to income.
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. The estimated useful lives of
the assets for financial statement purposes are as follows:
<TABLE>
<S> <C>
Buildings and improvements...................... 31.5 to 40 years
Machinery and equipment......................... 3 to 20 years
Office equipment................................ 5 to 10 years
Vehicles........................................ 3 to 5 years
</TABLE>
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 1997 presentation.
2. ACQUISITIONS:
On March 31, 1997, RVM purchased all the issued and outstanding shares of
capital stock of Albex and SABI from Jacob Pollock, the owner of all of the
shares of Albex and SABI and an officer, director, and the largest shareholder
(holding 87.16% of the outstanding common stock) of RVM.
9
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS, continued
[ RVM LOGO ]
================================================================================
2. ACQUISITIONS, CONTINUED:
The purchase price of the Albex and SABI shares will be that dollar amount
equal to seven times the average earnings of Albex and SABI, computed for each
company, before interest and taxes (plus depreciation and amortization and less
capital expenditures) for the fiscal years ending March 31, 1999 and March 31,
2000, less all interest bearing debt, all determined in accordance with
generally accepted accounting principles (the "Albex and SABI Purchase Prices").
Neither the Albex Purchase Price nor the SABI Purchase Price can be
determined until the respective earnings of Albex and SABI for the fiscal year
ending March 31, 2000 are known. Payment of the respective Purchase Prices will
be recorded as dividends to Pollock at that time.
The Albex and SABI Purchase Prices each will be paid over a five-year term,
with interest thereon, at the rate of eight percent (8%) per annum, accruing
from and after July 1, 2000. In each case a payment of principal only will be
due on July 1, 2000, and a payment of principal and interest will be due on
August 1, 2000 and on the first day of each month thereafter, until both the
Albex Purchase Price (and all interest thereon) and the SABI Purchase Price (and
all interest thereon) have been paid in full.
3. INVENTORIES:
<TABLE>
<CAPTION>
March 31 1997 1996
--------------------------
<S> <C> <C>
Raw materials......................... $5,314,901 $5,020,045
Work in process....................... 430,650 648,286
Finished goods........................ 2,931,609 3,654,544
--------------------------
$8,677,160 $9,322,875
==========================
</TABLE>
The reserve to reduce the carrying value of inventories from current cost to
the LIFO basis amounted to approximately $1,955,000 and $2,051,000 at March 31,
1997 and 1996, respectively.
4. PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
March 31 1997 1996
--------------------------
<S> <C> <C>
Buildings and improvements.......... $ 6,716,255 $ 5,913,511
Machinery and equipment............. 11,117,062 7,545,376
Office equipment.................... 994,512 895,901
Vehicles............................ 434,317 421,119
Construction in progress............ 5,395,659 6,514,482
----------------------------
24,657,805 21,290,389
Less accumulated depreciation and
amortization...................... 6,022,428 4,977,390
----------------------------
18,635,377 16,312,999
Land................................ 385,912 385,912
----------------------------
$19,021,289 $16,698,911
============================
</TABLE>
Approximately $2,664,000 and $5,991,000 of capital expenditures were
incurred in 1997 and 1996, respectively, for a new production facility and
casting house in Canton, Ohio. These capital expenditures include capitalized
interest of $10,440 and $178,137 in 1997 and 1996, respectively.
In addition, during 1996, Albex received a grant from the State of Ohio
aggregating $375,000 which was deducted from the cost of purchased machinery and
equipment. This grant was required to be used for the purchase of machinery and
equipment to be used at the Canton, Ohio facility. The terms of the grant also
require Albex to employ a specified number of employees at this facility.
Approximately $233,000, $1,375,000 and $3,394,000 of capital expenditures
were incurred in 1997, 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.
Rent expense was approximately $238,000, $205,000 and $152,000 in 1997, 1996
and 1995, respectively.
5. NOTES PAYABLE AND LONG-TERM DEBT:
<TABLE>
<CAPTION>
March 31 1997 1996
----------------------------
<S> <C> <C>
City of Kent, Ohio (a).............. $ 4,450,000 $ 4,900,000
Line of credit -- Ravens (b)........ 6,358,179 6,707,986
Line of credit -- Albex (c)......... 2,426,937 2,885,279
Line of credit -- SABI (d).......... 1,154,944 1,701,719
Department of Development of the
State of Ohio (e)................. 2,311,105 2,500,000
State of Ohio Economic Development
Revenue Bonds (f)................. 1,840,000 2,115,000
Albex and SABI Purchase Prices (g)
Notes payable to related parties
(h)............................... 4,031,000 1,381,000
7% subordinated debentures, payable
in 2004, net of unamortized
discount of $55,252 and $62,730... 430,248 424,270
Other debt.......................... 428,998 1,098,999
-----------------------------
23,431,411 23,714,253
Less current portion................ 5,218,413 6,307,853
-----------------------------
$18,212,998 $17,406,400
=============================
</TABLE>
(a) City of Kent, Ohio Variable Rate Demand Industrial
Development Revenue Bonds due in annual principal payments of $450,000
in 1998 through 2001, $500,000 in 2002 through 2005, $150,000 in 2006
through 2008, and $100,000 in 2009 and 2010. Interest is payable
monthly and the rate varies weekly (3.80% and 3.70% at March 31, 1997
and 1996, respectively). Payment to bondholders is guaranteed by a
letter of credit in an amount equal to outstanding principal plus
specified interest ($4,537,781 at March 31, 1997) expiring December 15,
1998 issued by First National Bank of Ohio at a rate of 1% per annum
and collateralized by all equipment owned by Ravens and by the real
estate at the Kent facility and cross-collateralized with the lines of
credit described below. Proceeds from the loan agreement are held by a
trustee and released to Ravens for approved capital expenditures at the
Kent facility. $2,740,558 and $2,711,104 held by the trustee at March
31, 1997 and 1996, respectively, was invested in short-term commercial
paper and a money market fund.
(b) Line of credit for $8,000,000 is with First National Bank of
Ohio ("FNBO") and expires on August 31, 1998. Interest is payable
monthly at FNBO's prime rate (8.50% and 8.25% at March 31, 1997 and
1996, respectively) minus 0.5%.
(c) Line of credit for $4,500,000 is with FNBO and expires on
August 29, 1997. Interest is payable monthly at FNBO's prime rate
(8.50% and 8.25% at March 31, 1997 and 1996, respectively) plus 0.5%.
(d) Line of credit for $2,500,000 is with FNBO and expires on
January 31, 1998. Interest is payable monthly at FNBO's prime rate
(8.50% and 8.25% at March 31, 1997 and 1996, respectively).
(b,c,d) Borrowings on the lines of credit are based on eligible trade
receivables and inventories. The lines of credit are collateralized by
cash, accounts receivable, inventories, equipment and intangibles as
well as the real estate at the Kent facility and are
cross-collateralized with the letter of credit agreement described
above. There are 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 could
have borrowed approximately $1,645,000 more than the amount owed at
March 31, 1997.
(e) Chapter 166 direct loan payable to the Department of
Development of the State of Ohio, due in monthly installments of
$33,033 including interest at 3.0%, plus a monthly service fee of .02%.
The loan matures December 2002 and is collateralized by substantially
all machinery and equipment of Albex and the personal guarantee of
Jacob Pollock. Principal payments were deferred for the period August
1996 to February 1997. Payments have been adjusted for the period March
1997 to February 1998 in order to maintain the original maturity date.
(f) State of Ohio Economic Development Revenue Bonds. Interest of 5.6% is
payable semiannually on June 1 and December 1 of each year, plus a
10
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS, continued
[ RVM LOGO ]
================================================================================
5. NOTES PAYABLE AND LONG-TERM DEBT, CONTINUED:
monthly service fee of .02%. The bonds are subject to a mandatory semiannual
redemption schedule which requires monthly escrow payments of principal
amounting to $22,500. The bonds mature June 1, 2002 and are collateralized
by substantially all machinery and equipment of Albex and the personal
guarantee of Pollock.
(g) See Note 2.
(h) Albex is the obligor on a note payable to Pollock in the principal amount
of $2,900,000 ("Albex Note"), and SABI is the obligor on a note payable to
J. Pollock & Company, wholly owned by Pollock, in the principal amount of
$1,131,000 ("SABI Note"). Albex will repay the Albex Note, and SABI will
repay the SABI Note over a five-year term, with interest thereon, at the
rate of seven percent (7%) per annum, accruing from and after April 1,
1997. A payment of interest only on the Albex Note and on the SABI Note
will be due on May 1, 1997 and on the first day of each month thereafter
through December 1, 1997; a payment of principal in the amount of $48,333
and interest on the Albex Note and in the amount of $18,850 and interest
on the SABI Note will be due on January 1, 1998 and on the first day of
each month thereafter, until the principal amount (and all interest
thereon) of each Note has been paid in full; provided, however, that no
payment of principal on either Note will be due during the period that RVM
is making payments with respect to the Albex and SABI Purchase Prices.
However, interest will continue to accrue and be paid during any period in
which no principal payments are being made with respect to the Notes.
$1,381,000 was owed to J. Pollock & Company at March 31, 1996.
Payments with respect to the Albex and SABI Purchase Prices, the Albex
Note and the SABI Note are subordinated to the repayment of substantially
all other notes payable and long-term debt.
Maturities for the long-term debt are: 1998, $5,218,413; 1999, $8,228,219;
2000, $2,016,884; 2001, $1,993,888; 2002, $2,059,077; and thereafter,
$3,914,930.
6. 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. It is the opinion
of management of RVM 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, 1997 and 1996, Ravens was contingently liable as guarantor on
certain sales contracts of customers in the amount of approximately $454,000 and
$515,000, respectively, which are collateralized by the units sold. No reserve
for losses has been provided because Ravens has incurred an insignificant amount
of losses related to guaranteed sales contracts which generally have maturities
less than five years. Ravens guarantees 10-20% of the outstanding balance owed
to the finance company by the customers. Ravens recognizes revenue at the time
the trailers are sold.
The Company and certain other persons and business entities affiliated with
the Company have jointly and severally guaranteed approximately $1,840,000 of
State of Ohio Economic Development Revenue Bonds and approximately $2,311,000 of
State of Ohio "Section 166 Project Funds" borrowed by Albex.
7. INCOME TAXES:
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------
<S> <C> <C> <C>
Current:
Federal.................... $499,639 $ 14,064 $ 854,000
State...................... 34,163 7,369 32,300
-------------------------------------
533,802 21,433 886,300
Deferred..................... (28,340) 89,540 74,500
-------------------------------------
$505,462 $110,973 $ 960,800
=====================================
</TABLE>
The sources of temporary differences which make up the deferred tax balances
are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------
<S> <C> <C>
Depreciation and amortization.......... $(345,444) $(336,130)
Warranty............................... 215,028 184,426
Vacation............................... 57,057 49,427
Pension................................ (11,437) 29,163
Deferred interest and amortization of
discount on debentures............... 71,494 65,623
Allowance for doubtful accounts........ 29,865 32,322
Inventory.............................. 23,964 16,466
Federal and state tax loss
carryforwards........................ 86,011 91,262
Non-deductible accruals................ 59,730 0
Other.................................. (268) 25,101
------------------------
$ 186,000 $ 157,660
========================
</TABLE>
- ------------------------------------------------------------------
A reconciliation of the federal statutory income tax rate to the effective
rate follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statutory amount and rate....................... $486,190 34.0% $103,874 34.0% $ 939,091 34.0%
Effect of:
State taxes (net of utilization of tax loss
carryforwards).............................. 19,714 1.4 7,369 2.4 32,300 1.2
Non-deductible expenses....................... 5,917 0.4 5,606 1.8 5,121 0.2
Other......................................... (6,359) (0.5) (5,876) (1.9) (15,712) (0.6)
----------------------------------------------------------------------------
$505,462 35.3% $110,973 36.3% $ 960,800 34.8%
============================================================================
</TABLE>
The cumulative tax operating loss carryforward as of March 31, 1997 is
approximately $3,399,000. On May 3, 1991, there was a change in controlling
interest of the Company. Pursuant to the Internal Revenue Code ("IRC"), this
transaction significantly limits the ability of the Company to utilize the
remaining cumulative tax operating loss carryforward of approximately $3,399,000
which existed at the time of the ownership change. Management believes that 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 $216,000 of loss carryforwards subsequent to
March 31, 1997. The loss carryforwards expire in years through 2007.
In accordance with code section 368 of the IRC, for tax purposes, the
reorganization of RVM and Ravens represents a tax free exchange.
Albex and SABI (See Note 2) have calendar year ends, were operated as S-
corporations, and, as such, were not liable for federal or state income taxes.
Effective April 1, 1997, both Albex and SABI will no longer be treated as S-
corporations and will be subject to all corporate federal, state and local
income taxes. Accordingly, for informational purposes, the consolidated
statements of operations include unaudited pro forma adjustments for income
taxes which would have been recorded if Albex and SABI had been taxed as
C-corporations, based on the tax laws in effect during those periods.
11
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS, continued
[ RVM LOGO ]
================================================================================
7. INCOME TAXES, CONTINUED:
Unaudited pro forma income tax expense (benefit) for each of the periods
presented is as follows:
<TABLE>
<CAPTION>
Unaudited
---------------------------------------
1997 1996 1995
---------------------------------------
<S> <C> <C> <C>
Deferred provision
(benefit):
Federal.................. $(250,036) $(586,174) $(135,582)
State.................... (45,901) (13,802) (15,618)
---------------------------------------
Total.................... $(295,937) $(599,976) $(151,200)
=======================================
</TABLE>
The differences between unaudited pro forma income taxes at the federal
statutory income tax rate and unaudited pro forma income taxes are as follows:
<TABLE>
<CAPTION>
Unaudited
-------------------------------------------------------------------------------
1997 1996 1995
-------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statutory amount and rate..................... $(275,787) (34.0)% $(593,420) (34.0)% $(142,224) (34.0)%
Effect of:
State taxes (net of utilization of tax loss
carryforwards)............................ (22,415) (2.7) (9,167) (0.5) (10,337) (2.4)
Other....................................... 2,265 0.3 2,611 0.1 1,361 0.3
-------------------------------------------------------------------------------
$(295,937) (36.4)% $(599,976) (34.4)% $(151,200) (36.1)%
===============================================================================
</TABLE>
8. RETIREMENT PLANS:
Ravens has defined benefit pension plans covering hourly employees at its
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 funding policy is based on an actuarially
determined cost method allowable under statutory regulations.
Net pension cost for the years ended March 31, 1997, 1996 and 1995 is
comprised of, based on plan assets and obligations as of January 1, 1996, 1995
and 1994, respectively, the following components:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------
<S> <C> <C> <C>
Service costs -- benefits
earned during the year.... $ 16,859 $ 12,837 $ 14,286
Interest cost............... 126,110 120,887 117,246
Actual return on assets..... (167,314) (287,563) (33,042)
Net amortization and
deferral.................. 63,649 208,208 (40,528)
--------------------------------------
Net pension cost............ $ 39,304 $ 54,369 $ 57,962
======================================
</TABLE>
The funded status of the plans as of January 1, 1997 and 1996 is reconciled
to accrued pension cost on the balance sheet at March 31, 1997 and 1996 as
follows:
<TABLE>
<CAPTION>
1997 1996
------------------------
<S> <C> <C>
Accumulated benefit obligation,
including vested benefits of $494,952
and $1,745,869........................ $528,091 $1,778,148
Effect of future salary increases....... 0 0
------------------------
Projected benefit obligation............ 528,091 1,778,148
Plan assets at fair value, primarily
U.S. government obligations, fixed
income investments and equity
securities............................ 562,128 1,416,992
------------------------
Plan assets in excess of projected
benefit obligation.................... (34,037)
Projected benefit obligation in excess
of plan assets........................ 361,156
Unrecognized prior service cost......... (1,882) (2,509)
Unamortized transition liability........ (9,704) (17,345)
Unrecognized net gain (loss)............ 21,319 (215,662)
Unrecognized additional minimum
liability (A)......................... 0 235,516
------------------------
(Prepaid) accrued pension cost........ $(24,304) $ 361,156
========================
</TABLE>
(A) The unrecognized additional minimum liability included in accrued pension
cost was offset by an intangible asset of $19,854 and by a reduction in
shareholders' equity of $215,662 at March 31, 1996.
Significant assumptions used in determining net pension cost and related
pension obligations as of January 1, 1997, 1996 and 1995 are:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------
<S> <C> <C> <C>
Dover plan:
Discount rate......................... 7.75% 7.25% 8.25%
Expected long-term rate of return on
assets.............................. 8.00% 8.00% 8.00%
Elizabeth plan:
Discount rate......................... 7.25% 7.25% 8.25%
Expected long-term rate of return on
assets.............................. 8.00% 8.00% 8.00%
</TABLE>
Effective July 1, 1996, Ravens terminated the defined benefit pension plan
covering the former hourly employees at the former Elizabeth, West Virginia
facility. Ravens contributed approximately $460,000 to the plan and recorded a
settlement loss of $390,015 for the termination of the plan.
SABI participates in the GMP and Employers Pension Fund, a multi-employer
defined benefit pension plan, that covers all of its hourly bargaining unit
employees. Pension expense under this plan amounted to $19,020, $25,162 and
$20,561 in 1997, 1996 and 1995, respectively.
RVM has defined contribution plans covering salaried and non-union hourly
employees of the Company. The purpose of the plans are to provide financial
security during retirement by providing employees with an incentive to make
regular savings. Contributions of participating employees are matched on the
basis of the percentages specified in the respective plans. The cost of such
employer contributions approximated $28,110, $45,436 and $53,726 for 1997, 1996
and 1995, respectively.
9. EMPLOYEE STOCK OWNERSHIP PLAN:
Ravens terminated its noncontributory Employee Stock Ownership Plan covering
all salaried employees on December 31, 1993. In 1997, 9,270 shares of common
stock were purchased by Ravens from participants and retired in exchange for
$37,076.
12
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS, continued
[ RVM LOGO ]
================================================================================
10. SERIES PREFERRED STOCK:
RVM is authorized to issue 300,000 shares of series preferred stock, $.01
par value, none of which was issued as of March 31, 1997. 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.
11. 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 1,938,140 in 1997 and 1,943,525 in 1996 and 1995, 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. RVM is required to implement Statement of Financial Accounting Standards
No. 128, "Earnings per Share", in the third quarter of 1998. RVM expects that
the implementation of this pronouncement will not have a material impact on its
calculation of earnings per share.
12. RELATED PARTY TRANSACTIONS:
J. Pollock & Company, wholly owned by Jacob Pollock, a Director and majority
shareholder of RVM, purchases materials and provides or contracts for certain
administrative services for the Company and charges the Company at its cost.
Such transactions totalled $348,417, $236,357 and $7,140,191 in 1997, 1996 and
1995, respectively. J. Pollock & Company provides management services to the
Company. The Company paid $428,000, $314,000 and $250,000 in 1997, 1996 and
1995, respectively, for these services. $37,721 and $54,887 was owed at March
31, 1997 and 1996.
The Company leases office and manufacturing space from a corporation in
which Richard Pollock and Bruce Pollock are shareholders. The leases are for
five years expiring December 31, 1999 at a monthly base rent of $8,000 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 approximately $114,000, $113,000 and $111,000 in
1997, 1996 and 1995, respectively. Richard Pollock and Bruce Pollock are sons of
Jacob Pollock.
Nicholas T. George, a Director of RVM, 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 $19,500,
$32,300 and $32,100 to Nicholas T. George & Associates in 1997, 1996 and 1995,
respectively.
The Company purchased aluminum materials from The Aluminum Warehouse, Inc.,
of which Richard Pollock is a principal shareholder, totalling $54,593, $103,083
and $104,534 in 1997, 1996 and 1995, respectively. $9,793 and $38,287 was owed
at March 31, 1997 and 1996.
The Company hired temporary personnel from Flex-Team, Inc., of which Jacob
Pollock is a principal shareholder, totalling $245,233, $832,628 and $203,094 in
1997, 1996 and 1995, respectively.
See Notes 2 and 5 regarding acquisitions from and notes payable to related
parties.
13. STOCK OPTIONS:
RVM'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. The Company has
selected the disclosure-only option of Statement of Financial Accounting
Standards "SFAS" No. 123, "Accounting for stock-based Compensation". In
accordance with SFAS No. 123, RVM accounts for its Stock Option Plan in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and related Interpretations.
<TABLE>
<CAPTION>
Shares Stock
---------------- Option
1997 1996 Price
------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year... 10,000 10,250 $4.00
Granted.......................... 0 0 4.00
Exercised 0 0
Canceled......................... (0) (250) 4.00
------------------
Outstanding and exercisable at end
of year.......................... 10,000 10,000 4.00
==================
</TABLE>
All outstanding options expire on April 7, 1999.
14. ADVERTISING COSTS:
Advertising costs included in selling, general and administrative expense
were $198,653, $292,758 and $176,760 in 1997, 1996 and 1995, respectively.
15. 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 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.
16. 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 long-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 long-term debt at March 31, 1997 was estimated to approximate
the carrying amount reported in the balance sheets.
17. IMPAIRMENT OF LONG-LIVED ASSETS:
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of", the Company reviewed its assets associated with its production
facilities and determined that various assets would no longer be used in the
business. These assets consisted primarily of dies and various machinery and
equipment. Additionally, Albex reduced the value of certain equipment to better
reflect the estimate of future cash flows expected to result from the use of the
respective equipment and recorded an impairment loss of $371,768 during 1997.
18. SUPPLEMENTAL CASH FLOW INFORMATION:
(A) Cash payments for interest: 1997 -- $1,097,542; 1996 -- $796,936; and
1995 -- $524,927.
(B) Cash payments for income taxes: 1997 -- $408,264; 1996 -- $861,242; and
1995 -- $141,450.
(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. In 1996, a note payable to Jacob Pollock amounting
to $1,452,777 was converted to additional capital, and real estate was
contributed to the Company by Jacob Pollock with $450,000 recorded as
additional capital. In 1996, $200,000 was included in other current assets
as the amount to be received for the sale of real estate.
13
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS, continued
[ RVM LOGO ]
================================================================================
19. BUSINESS SEGMENTS:
Each of RVM's subsidiaries operates in one business segment. See Note 1 for
a description of the segments. Substantially all the assets are identifiable in
segments. Intersegment sales generally are priced at prevailing market prices.
<TABLE>
<CAPTION>
Ravens Albex SABI Eliminations Consolidated
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1997
Sales to customers.................. $41,652,421 $ 8,693,952 $ 11,291,848 $61,638,221
Intersegment sales.................. 0 4,495,653 2,774 $(4,498,427) 0
--------------------------------------------------------------------------
Net sales......................... $41,652,421 $ 13,189,605 $ 11,294,622 $(4,498,427) $61,638,221
==========================================================================
Income (loss) from operations....... $ 2,369,057 $ (907,807) $ 513,038 $ (24,424) $ 1,949,864
Depreciation and amortization....... 556,126 653,853 166,117 1,376,096
Capital expenditures................ 372,325 3,391,541 56,735 3,820,601
Identifiable assets................. 19,908,167 15,103,090 3,556,118 38,567,375
1996
Sales to customers.................. $40,238,755 $ 10,108,780 $ 11,446,335 $61,793,870
Intersegment sales.................. 0 4,324,623 9,102 $(4,333,725) 0
--------------------------------------------------------------------------
Net sales......................... $40,238,755 $ 14,433,403 $ 11,455,437 $(4,333,725) $61,793,870
==========================================================================
Income (loss) from operations....... $ 807,419 $ (1,085,599) $ (81,489) $ 85,162 $ (274,507)
Depreciation and amortization....... 519,290 529,118 163,804 1,212,212
Capital expenditures................ 1,588,445 6,839,349 16,260 8,444,054
Identifiable assets................. 21,830,801 12,959,743 4,421,165 39,211,709
1995
Sales to customers.................. $42,036,058 $ 8,341,645 $ 10,955,937 $61,333,640
Intersegment sales.................. 0 5,927,482 118,168 $(6,045,650) 0
--------------------------------------------------------------------------
Net sales......................... $42,036,058 $ 14,269,127 $ 11,074,105 $(6,045,650) $61,333,640
==========================================================================
Income (loss) from operations....... $ 2,955,391 $ (32,451) $ (243,010) $ (55,129) $ 2,624,801
Depreciation and amortization....... 390,813 368,864 175,203 934,880
Capital expenditures................ 3,588,977 1,316,786 62,901 4,968,664
Identifiable assets................. 19,259,513 6,900,996 5,375,251 31,535,760
</TABLE>
14
<PAGE> 28
[ RVM LOGO ]
================================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
RVM INDUSTRIES, INC.:
We have audited the accompanying consolidated balance sheets of RVM
Industries, Inc. and Subsidiaries as of March 31, 1997 and 1996 and the related
consolidated statements of operations, changes in shareholders' equity, and cash
flows for each of the three years in the period ended March 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
RVM Industries, Inc. and Subsidiaries as of March 31, 1997 and 1996 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 1997 in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Cleveland, Ohio
June 6, 1997
15
<PAGE> 29
[ RVM LOGO ]
================================================================================
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
RICHARD D. POLLOCK
Director
President
President of Albex Aluminum, Inc.
Vice President of J. Pollock & Company
C. STEPHEN CLEGG
Director
President of the private investment firm of Clegg Industries, Inc. and Chairman
of MidWest Spring Manufacturing Company, Inc. and Diamond Home Services, Inc.
LOWELL P. MORGAN
President of Ravens, Inc.
JOHN J. STITZ
Vice President
Chief Financial Officer of Ravens, Inc.
==================================================================
MARKET FOR THE COMPANY'S COMMON STOCK
AND RELATED SHAREHOLDER MATTERS
The Company's stock (trading symbol "RVMI") 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 RVM is that the stock did not
actively trade until J. C. Bradford & Co., Nashville, Tennessee, telephone
1-800-522-1927, began making a market in the common stock in May 1996. The
bid-ask quotation ranged from $4.00-$9.375 per share and was $4.50-$6.50 per
share on June 25, 1997.
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. RVM 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 25, 1997.
- ------------------------------------------------------------------
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: RVM Industries, Inc., P.O. Box 10002, Akron, OH 44310-0002.
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