<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1998 Commission File
No. 0-1709
-----------------
RVM INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1515410
- ---------------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
753 W. Waterloo Road, Akron, Ohio 44314-1519
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 753-4545
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed from last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
There were 1,936,755 shares outstanding of the Registrant's common stock as of
August 14, 1998.
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RVM INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
1998
----------------------------------------------
JUNE 30 MARCH 31
------------------ ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 740,916 $ 846,128
Receivables:
Trade, net of allowance for doubtful accounts of $91,400 and $87,000 at
June 30 and March 31 10,451,719 10,174,104
Related party 176,756 222,657
Inventories
(Excess of replacement or current cost over stated values was
$1,959,000 and $1,996,000 at June 30 and March 31) 13,999,355 11,396,269
Refundable income taxes 158,106 453,815
Deferred income taxes 789,400 789,400
Other current assets 214,023 173,596
------------------ ------------------
Total current assets 26,530,275 24,055,969
Property, plant and equipment, net 22,566,837 21,676,483
Funds held by trustee for capital expenditures 2,037,865 2,277,935
Other assets 327,051 337,643
------------------ ------------------
Total assets $ 51,462,028 $ 48,348,030
================== ==================
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE> 3
RVM INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS, Continued
<TABLE>
<CAPTION>
1998
----------------------------------------------
JUNE 30 MARCH 31
------------------ ------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 8,761,921 $ 8,737,487
- related parties 79,100 59,775
Accrued expenses and liabilities:
Compensation 760,934 916,349
Product warranty 775,000 775,000
Other 633,664 891,828
Current portion of long-term debt - other 1,278,556 1,278,033
- related parties 806,200 806,200
------------------ ------------------
Total current liabilities 13,095,375 13,464,672
Note payable - bank 16,173,282 13,579,800
Long-term debt 9,649,807 9,337,439
Notes payable - related parties 2,966,700 3,023,250
Deferred income taxes 1,054,700 1,054,700
------------------ ------------------
Total liabilities 42,939,864 40,459,861
------------------ ------------------
Shareholders' equity:
Common stock, $0.01 par value; authorized shares, 3,000,000;
issued and outstanding, 1,936,755 shares at June 30 and
March 31 19,368 19,368
Additional capital 4,783,344 4,783,344
Retained earnings 3,719,452 3,085,457
------------------ ------------------
Total shareholders' equity 8,522,164 7,888,169
------------------ ------------------
Total liabilities and shareholders' equity $ 51,462,028 $ 48,348,030
================== ==================
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE> 4
RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
1998 1997
<S> <C> <C>
Net sales $ 21,006,285 $ 18,865,416
Cost of sales 17,692,988 15,737,143
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Gross profit 3,313,297 3,128,273
Selling, general and administrative expenses 1,853,929 1,614,635
---------- ------------
Income from operations 1,459,368 1,513,638
Other income (expense):
Other income 23,302 22,400
Interest expense (476,300) (369,089)
---------- ------------
Income before income taxes and cumulative effect
of accounting change 1,006,370 1,166,949
Provision for income taxes 372,375 705,898
---------- ------------
Income before cumulative effect of accounting
change 633,995 461,051
Cumulative effect of accounting change 0 211,651
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Net income $ 633,995 $ 249,400
================= =================
Basic and diluted earnings per share:
Income before cumulative effect of accounting
change $ .33 $ .24
Cumulative effect of accounting change 0 (.11)
---------- ------------
Net income $ .33 $ .13
================= =================
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE> 5
RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
-------------------------------------
1998 1997
----------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................................. $ 633,995 $ 249,400
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization............................................ 476,989 377,123
Deferred income taxes.................................................... 0 269,425
Increase (decrease) in allowance for doubtful accounts................... 4,400 43,292
Cumulative effect of accounting change................................... 0 205,244
Increase (decrease) in cash from changes in:
Receivables ............................................................ (236,115) (1,903,716)
Inventories.............................................................. (2,603,085) (312,990)
Other assets............................................................. (42,166) (12,366)
Accounts payable ....................................................... 43,757 910,042
Refundable and accrued income taxes...................................... 295,709 363,419
Accrued expenses and other current liabilities........................... (413,577) (53,705)
----------------- ----------------
Net cash provided by (used in) operating activities...................... (1,840,093) 135,168
----------------- ----------------
Cash flows from investing activities:
Capital expenditures....................................................... (1,355,012) (1,125,835)
Investment of income earned on investment of proceeds from long-term debt
with trustee............................................................. (23,905) (34,202)
Sale of investments and release of funds held by trustee................... 263,975 112,754
----------------- ----------------
Net cash provided by (used in) investing activities...................... (1,114,942) (1,047,283)
----------------- ----------------
Cash flows from financing activities:
Payments on long-term debt................................................. (283,386) (357,369)
Proceeds from (payments on) notes payable - bank, net...................... 2,593,482 1,644,477
Payments on notes payable to related parties............................... (56,550) 0
Proceeds from long-term debt, net of issuance costs........................ 596,277 0
----------------- ----------------
Net cash provided by (used in) financing activities...................... 2,849,823 1,287,108
----------------- ----------------
Net increase (decrease) in cash and cash equivalents.......................... (105,212) 374,993
Cash and cash equivalents at beginning of year................................ 846,128 468,572
-----------------
================
Cash and cash equivalents at end of year...................................... $ 740,916 $ 843,565
================= ================
</TABLE>
See accompanying notes to the consolidated financial statements.
5
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RVM INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. The information in this report reflects all adjustments, which are, in
the opinion of management, necessary for a fair statement of the
results for the interim periods presented for RVM Industries, Inc.
("the Company"). All adjustments other than those described in this
report are, in the opinion of management, of a normal and recurring
nature. These consolidated financial statements include the accounts of
RVM's wholly owned subsidiaries: Ravens, Inc. ("Ravens"), Albex
Aluminum, Inc. ("Albex") and Signs and Blanks, Inc ("SABI"). All
significant intercompany accounts and transactions have been
eliminated. Certain amounts in the 1997 financial statements were
reclassified to conform to the 1998 presentation.
2. Basic earnings per share is based on net income divided by the weighted
average number of common shares outstanding. The weighted average
number of common shares outstanding was 1,936,755 in 1998 and 1,934,255
in 1997. Diluted earnings per share reflect the potential dilution that
could occur if all options or contracts to issue common stock were
issued or converted. Basic earnings per share for the Company is the
same as diluted earnings per share.
3. Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 1998 March 31, 1998
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<S> <C> <C>
Raw materials $ 8,285,740 $ 7,233,712
Work in process 2,343,168 1,202,107
Finished goods 3,370,447 2,960,450
------------------ ---------------------
$ 13,999,355 $ 11,396,269
================== =====================
</TABLE>
The reserve to reduce the carrying value of inventories from current cost
to the LIFO basis amounted to approximately $1,959,000 at June 30 and
$1,996,000 at March 31.
4. On April 1, 1997, Albex and SABI changed their fiscal year ends from
December 31 to March 31 to conform with the March 31 year ends of RVM and
Ravens. A charge of $211,651 was recorded as the cumulative effect of an
accounting change reflecting the net loss for Albex and SABI for the
quarter ended March 31, 1997. Albex and SABI were S-corporations until
March 31, 1997. The undistributed net loss was reclassified from
accumulated deficit to additional capital.
6
<PAGE> 7
5. Business Segment Information:
------------------------------
<TABLE>
<CAPTION>
RAVENS ALBEX SABI ELIMINATIONS CONSOLIDATED
------------ ------------ ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Three months ended June 30, 1998
- ------------------------------------------
Sales to customers $12,827,043 $5,103,961 $3,075,281 $ 0 $21,006,285
Intersegment sales 0 2,680,434 376 (2,680,810) 0
------------ ------------ ------------- ------------- --------------
Net sales $12,827,043 $7,784,395 $3,075,657 $ (2,680,810) $21,006,285
============ ============ ============= ============= ==============
Income (loss) from operations $ 1,271,938 $ 125,937 $ 220,311 $ (158,818) $ 1,459,368
Three months ended June 30, 1997
- ------------------------------------------
Sales to customers $12,730,008 $3,195,204 $2,940,204 $ 0 $18,865,416
Intersegment sales 0 1,960,087 (141) (1,959,946) 0
------------ ------------ ------------- ------------- --------------
Net sales $12,730,008 $5,155,291 $2,940,063 $ (1,959,946) $18,865,416
============ ============ ============= ============= ==============
Income (loss) from operations $ 1,318,368 $ (17,817) $ 245,155 $ (32,068) $1,513,638
</TABLE>
6. The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), in the quarter ended June
30, 1998. SFAS 130 establishes standards for the reporting and display of
"comprehensive income" and its components, in addition to net income, in
the financial statements. Comprehensive income includes certain items
such as minimum pension liability adjustments, foreign currency
translation adjustments, and unrealized gains and losses from investing
and hedging activities. Reclassification of comparative financial
statements for earlier periods is required. Adoption of SFAS 130 did not
have an effect on the Company's financial statements for the periods
presented.
7
<PAGE> 8
RVM INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1998
MATERIAL CHANGES IN FINANCIAL CONDITION
Cash from borrowings was used mainly for capital expenditures on Albex's
aluminum billet casting facility and related aluminum scrap processing equipment
and Ravens' new building in Kent, Ohio and equipment to cut aluminum coil into
sheet. Working capital increased to $13,434,900 at June 30 from $10,591,297 at
March 31 due mainly to financing the increase in inventories with the long-term
line of credit. Raw materials inventories increased at Ravens by approximately
$2,000,000 mainly due to overstocking and were offset by a decrease of
approximately $900,000 at Albex. Work in process increased mainly due to Albex
producing billets classified as work in process rather than purchasing billets
classified as raw materials.
The Company could have borrowed approximately $1,126,000 more than the amount
owed on its line of credit at June 30, 1998. In addition, $1,958,854 was
available to be borrowed under a fixed asset line of credit.
Although no assurances are possible, the Company believes that its cash
resources, credit arrangements, and internally generated funds will be
sufficient to meet its operating and capital expenditure requirements for
existing operations and to service its debt in the next 12 months and
foreseeable future. Cautionary statements: Demand for the Company's products is
subject to changes in general economic conditions and in the specific markets in
which the Company competes. The Company's liquidity could be adversely affected
if Albex is not successful in completing the casting facility and generating
sufficient sales of billets.
The Company's sales order backlog for new trailers was approximately $7,000,000
at June 30, 1998 and $6,900,000 at May 31, 1998, the date discussed in Form 10-K
for the year ended March 31, 1998.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended June 30, 1998 Compared to the
------------------------------------------------
Three Months Ended June 30, 1997
--------------------------------
Net sales increased 11.3% mainly due to increased volume of aluminum extrusion
and billet sales by Albex. Albex's sales increase at lower margins than Ravens
and SABI was the principal cause of the consolidated gross profit margin
decreasing to 15.8% from 16.6%. Selling, general and administrative expenses
increased to 8.8% from 8.6% of net sales. Interest expense increased mainly due
to more debt outstanding during the 1998 period. The provision for income taxes
in the 1997 period includes $261,000 for the establishment of deferred income
tax assets and liabilities as of April 1, 1997 when Albex and SABI converted
from S-corporations to C-corporations. See Note 4 to the consolidated financial
statements for an explanation of the cumulative effect of accounting change.
Ravens' net sales increased .76% while income from operations decreased 3.5% and
the gross profit margin decreased from 18.3% to 18.0% due to operating expenses
increasing at a greater rate than sales.
8
<PAGE> 9
Albex's net sales to customers other than Ravens and SABI increased 59.7% and
income from operations increased by $143,754 as Albex gained customers and
increased operating efficiencies. Albex began producing billets for its
extrusion operation and customers during the 1997 period.
SABI's net sales increased 4.6% while income from operations decreased 10.1%
mainly due to a decline in the gross profit margin from 18.7% to 18.4% and
increased selling costs.
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Computer programs that
have time-sensitive software may recognize a date using "0" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, the inability to efficiently process transactions such as sales
invoices. The Company has assessed the impact of Year 2000 and formulated a plan
of action for each of its subsidiaries.
Ravens installed a new computer in March 1998 at a cost of approximately
$100,000 which was capitalized. In January 1998, Ravens retained a consulting
firm to assist it in selecting new enterprise software to replace the current
integrated manufacturing, inventory, and accounting software. Ravens selected
the new software in June 1998 and is currently formulating a plan for training
and implementation. Ravens expects to fully implement critical modules of the
new software prior to September 30, 1999. The cost to the software vendor for
acquiring and installing the new software is expected to be approximately
$500,000, the majority of which will be capitalized.
SABI will either purchase an upgrade to its software or purchase new software.
The cost is expected to be less than $50,000, the majority of which will be
capitalized.
Albex's software is Year 2000 compliant.
The above expenditures are expected to be paid with internally generated cash
and with borrowings. The Company does not have vendor or customer interfaces
that require modifications. In 1999, the Company will review the efforts
undertaken by its vendors to become Year 2000 compliant to ensure that its
operations are not adversely affected.
The costs and dates on which the Company believes that it will complete the Year
2000 modifications are based on management's best estimates, which were derived
utilizing assumptions of future events, including the continued availability of
necessary hardware, software, and personnel for implementation and training,
third party modification plans, and other factors. There can be no guarantee
that these estimates will be achieved, and actual results could differ
materially from those anticipated.
9
<PAGE> 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Item
----------- ----
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended
June 30, 1998.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
RVM INDUSTRIES, INC.
--------------------------
(Registrant)
By: /S/ John J. Stitz
----------------------
John J. Stitz
Chief Financial Officer
and Principal Accounting Officer
Date: August 14, 1998
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 740,916
<SECURITIES> 0
<RECEIVABLES> 10,719,875
<ALLOWANCES> 91,400
<INVENTORY> 13,999,355
<CURRENT-ASSETS> 26,530,275
<PP&E> 30,564,280
<DEPRECIATION> 7,997,443
<TOTAL-ASSETS> 51,462,028
<CURRENT-LIABILITIES> 13,095,375
<BONDS> 28,789,789
0
0
<COMMON> 19,368
<OTHER-SE> 8,502,796
<TOTAL-LIABILITY-AND-EQUITY> 51,462,028
<SALES> 21,006,285
<TOTAL-REVENUES> 21,029,587
<CGS> 17,692,988
<TOTAL-COSTS> 17,692,988
<OTHER-EXPENSES> 1,853,929
<LOSS-PROVISION> 8,100
<INTEREST-EXPENSE> 476,300
<INCOME-PRETAX> 1,006,370
<INCOME-TAX> 372,375
<INCOME-CONTINUING> 633,995
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 633,995
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
